YEAR-END REPORT 2017 16 February, 2018 Håkan Buskhe, President and CEO Magnus Örnberg, EVP and CFO
2 MARKET DEVELOPMENT High global spending on defence and security Geopolitical tensions and improving economic conditions driving factors for increased spending Global defence spending in 2018 expected to increase vs 2017 The US and Europe expected to grow defence budgets Several European countries estimated to meet the NATO target of 2 per cent of GDP spending on defence in 2018 Next generation technologies in focus Cyber security
3 HIGHLIGHTS 2017 MARKET High interest globally in Saab offering Asia 18% Order bookings Africa 2% Australia, etc 6% Sweden 45% Order backlog Asia 12% Africa 1% Australia, etc 2% Sweden 37% Several strategic partnerships formed to strengthen local market position Offers US, based production capability for T-X trainer aircraft, if Boeing/Saab selected* Latin America 3% North America 9% RoE 17% Latin America 35% North America 4% RoE 9% Slovakia became first customer to deploy the Carl- Gustaf M4 System Australia pointed to Saab for Combat Management Systems (CMS) in future Naval platforms *Saab together with Boeing are competing to win the tender process to supply the United States Air Force with an advanced trainer aircraft
4 HIGHLIGHTS 2017 PERFORMANCE Strong order bookings, increase of 41 per cent y-o-y* Strengthened sales and operating income All business areas improved sales Improved operating margin Good cash flow; strong balance sheet Taken a step towards our long-term operating margin target of 10 per cent *Year-over-year
5 HIGHLIGHTS 2017 INNOVATION 23 per cent of sales invested in R&D Succesful first flight Gripen E in June; supersonic flight in October Order for New Generation anti-ship missile system from Sweden (FMV*) Saab Digital Air Services, provide remote digital air traffic control to further airports in Sweden Order for delivery of a Special Purpose Ship for Signal Intelligence (SIGINT) to Sweden *The Swedish Defence Material Administration
ORDERS RECEIVED IN 2017 6
7 FINANCIAL HIGHLIGHTS YEAR-END 2017 BSEK 35 30 25 20 Order Bookings 30.8 +41% 21.8 BSEK 120 100 80 Order Backlog 107.6 106.8 15 60 10 40 5 20 0 FY 2016 FY 2017 0 FY 2016 FY 2017 BSEK 35 Sales +10% 30 28.6 25 20 15 31.4 BSEK 3 Operating Income 2,5 2.2 2 1.8 1,5 10 1 5 0,5 EBIT-margin 6.3 6.9 0 FY 2016 FY 2017 0 FY 2016 FY 2017
8 CONTINUED EFFICIENCY IMPROVEMENT Continuously focus on efficient project execution Digitalisation drives efficiency improvements Automation IT-infrastructures Aligned organisational setup Focus on improved cash conversion Shorten lead-times
9 OUTLOOK STATEMENT 2018 Sales growth in 2018 is expected to be in line with Saab s long-term goal: annual organic growth of 5 per cent. The operating margin in 2018, excluding material nonrecurring items, is expected to improve compared to 2017, bringing Saab a further step closer to its financial goal: an operating margin of 10 per cent over a business cycle.
10 LONG-TERM FINANCIAL GOALS Focus on areas with strong market position MARKET Strengthen position in areas with growth possibilities Local partnerships 5% Organic sales growth averaging 5 per cent annually over a business cycle. PERFORMANCE Project execution Operational excellence and portfolio mgt Continuoulsy develop leaders and employees 10% Operating margin after depreciation and amortisation (EBIT) of at least 10 per cent annually over a business cycle. INNOVATION Further strengthen core technology areas Invest in research and development Diversity drives innovation >30% Equity/assets ratio of over 30 per cent.
FINANCIAL UPDATE 11
12 SUMMARY 2017 Strong order backlog; good level of medium-sized order bookings Continued strong sales growth, sales increase in all business areas Strengthened operating margin; Dynamics, airborne surveillance operations and support business good margin development Good cash flow, with large milestone payments related to large projects received Balance sheet strong
13 FINANCIAL KEY DATA MSEK FY 2017 FY 2016 Change Order Bookings 30,841 21,828 41 Order Backlog 106,849 107,606-1 Sales 31,394 28,631 10 Operating Income 2,155 1,797 20 operating margin, % 6.9 6.3 Net Income 1,438 1,175 22 Operational Cash Flow 1,388 2,603 Free Cash Flow 852 2,359
14 ORDER BACKLOG Order Backlog Duration BSEK 31 Dec 2017 31 Dec 2016 31 Dec 2015 2018 25.0 2017 24.5 2016 21.8 2019 20.0 2018 17.0 2017 15.9 2020 17.0 2019 13.5 2018 12.3 2021 17.0 2020 15.8 2019 11.7 2021-27.8 2020-36.8 2019-52.1 Total 106.8 Total 107.6 Total 113.8
15 ORDER SIZE DISTRIBUTION 50 000 45 000 40 000 35 000 3,5 3 2,5 FY 2017 35% Large Orders Small Orders* MSEK 30 000 25 000 20 000 2 1,5 15 000 10 000 5 000 0 1 0,5 0 65% Small orders* Large orders Book-to-bill ratio** *Small orders = <MSEK 100 **Book-to-bill ratio calculated as 12 months rolling
16 ORDER BOOKINGS & BACKLOG PER BA BSEK BSEK 10 8 6 4 2 0 40 60 30 20 10 0 Order Bookings Aeronautics Dynamics Surveillance S&S IPS Kockums FY 2016 FY 2017 Order Backlog Aeronautics Dynamics Surveillance S&S IPS Kockums FY 2016 FY 2017 Significant orders within the Airborne Early Warning and Control Segment Kockums signed contract for modification and upgrading of Swedish Corvettes Dynamics received orders for Next Generation Light Anti-Tank Weapon System (NLAW) Continued support and maintenance of Gripen C/D involving several business areas Good level of medium sized orders
17 SALES PER BUSINESS AREA 9 000 8 000 7 000 +2% +5% +22% 6 000 +7% MSEK 5 000 4 000 +12% 3 000 2 000 1 000 0 +17% Aeronautics Dynamics Surveillance S&S IPS Kockums FY 2016 FY 2017 Sales increase in all business areas Dynamics delivering growth from record high order backlog Support & Services had strong growth in airborne surveillance operations Combitech, part of IPS, delivered strong growth
18 OPERATING INCOME PER BUSINESS AREA 800 700 600 500 MSEK 400 300 200 100 EBIT Margin 7.5 6.6 9.1 10.9 5.9 7.4 8.9 10.9 3.7 3.4 5.8 5.8 0 Aeronautics Dynamics Surveillance S&S IPS Kockums FY 2016 FY 2017 Substantial growth in operating income and margin for Dynamics, Support and Services and Surveillance Higher activity level in operations related to airborne surveillance systems Support business strong profitability Lower operating earnings related to Gripen C/D due to changed projectmix
19 CASH FLOW 2017 4 000 3 000 Change in Working Capital MSEK Cash Flow from Operating Activities before Changes in Working Capital 3,593 2 000 Change in Working Capital -73 MSEK 1 000 0 Cash Flow from Operating Activities before Changes in Working Capital Investing Activities Tax and Other Financial Items Acquisitions and Sale of Subsidiaries and Other Financial Assets Investing Activities -2,132 Operational Cash Flow 1,388 Tax and Other Financial Items -356-1 000 Acquisitions and Sale of Subsidiaries and Other Financial Assets -180-2 000 Free Cash Flow 852
20 FINANCIAL POSITION MSEK Net Liquidity (+) / Net Debt (-), 31 December 2016-1,836 Cash Flow from Operating Activities 3,164 Change in Net Pension Obligation -222 Net Investments -2,132 32% Equity/Assets Ratio Dividend -559 Currency Impact, Unrealised Results from Financial Investments and Acquisition of operations -249 Net Liquidity (+) / Net Debt (-), 31 December 2017-1,834 Net Pension Obligation, 31 December 2017 2,646 Total Interest-Bearing Assets, 31 December 2017-468 Liquidity 344 133 Equity per Share (SEK)
21 FOCUS 2018 Continued focus on execution of large projects project management Build order backlog in selected areas Drive efficiency improvements throughout the organisation Functional and operational excellence
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