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Article Excerpt
JOHN STEWART, VP INVESTOR RELATIONS, FINMECCANICA: Good morning, ladies and gentlemen. Thank you very much. And thank you for turning out in good numbers for this 2008 annual results presentation. Welcome to all of you. And I'm sorry that we're slightly out of the city, but venues are quite hard to come by for these results presentations. So, we are -- today, we are at The Lanesborough and not so close to some of your offices.
We will start as usual with the presentation with Mr. Guarguaglini, who'll give a short introduction, summary of the 2008 results and some overview of the prospects. Then we'll pass to Mr. Alessandro Pansa, the CFO and General Manager, for the financial and business review. And then, as usual, it will be Mr. Guarguaglini who will take you through the prospects, the outlook and the strategy for Finmeccanica going forwards over the next few years.
This conference -- this results presentation is, as usual, being webcast live. And at the end we will be taking questions, both from the floor and from the webcast. Thank you very much and I'll hand you over to Mr. Guarguaglini.
PIER FRANCESCO GUARGUAGLINI, CHAIRMAN & CEO, FINMECCANICA: Good morning to everyone. I will present, as usual, the first few things. As you know, we maintained our strategy. And we delivered, during the last year, good results because we strengthened our global position. Now the revenues are around EUR15b. This means [past] DRS that the revenue are EUR14.5b.
The international orders are good now. They represented more than 60%. The EBITA margin has increased by 7.8% to 8.7%.
And we still invest in technology, around 20 -- 12%. And we created value because the EVA is going to be last year EUR380m.
At the same time, we maintain our strategy. As you know, we want to strengthen our global position. We want to invest in innovation because, in order to be competitive, we must be up to date all our product. And we are looking for enlarging our presence outside Italy, UK and US in order to create value.
And next slide. And, as you know, the main important fact in 2008 was the acquisition of DRS, because this strengthened our three pillars, especially in US. And despite the financial market turmoil, to finance the acquisition, we obtained the bridge loan, we raised share capital and, finally, we issue a EUR1b bond.
Now, let me conclude this short presentation by telling you that against the current backdrop of financial crisis and slowdown in the real economy, we respond now to strengthen some of the key aspects, mainly regarding the fact that we want to enlarge our geographical diversification. We want to focus of our strategic pillars. But, at the same time, we want to have a financial discipline and rigor, through a selective investment policy, because it's clear at this time we want to continue to invest. But, at the same time, we want to be sure that the investment will produce efficiency, produce a new market. This at the end in order to have also in this period a good cash flow generation.
Thank you very much.
ALESSANDRO PANSA, CO-GENERAL MANAGER & CFO, FINMECCANICA: Might I have, please? (Spoken in Italian). Good morning, ladies and gentlemen. There we are. Yes.
As Mr. Guarguaglini has said a few minutes ago, I think that we believe that the 2008 results of Finmeccanica can be considered, because they are considered by managers and those who made the most efforts in order to achieve these kind of results, are significantly satisfactory, positive with respect to what we believe is going on in the world, also with respect to the guidance, the targets we set out for last year.
The revenue was up 12%, 8% of which was organic. And the EBITA was up 25%, 20% was organic and EUR1.3b is the EBITA which is higher than 8% in terms of [EBIT] margins.
The net profit EUR621m, with -- it had a significant increase of 19%. But even more important was the fact that earning per shares adjusted for the share capital increase, which took place between October, November of last year, has moved up 27% to EUR1.39 per share.
This is what is giving us the possibility to propose to the shareholders' meeting of Finmeccanica, a payment of the EUR0.41 per share in terms of dividends. Which, like-to-like, has to be compared with EUR0.37 with respect to the last year, if you want to adjust the one of the last year for the share capital increase. And, therefore, with an increase of 11% in terms of dividends, with a total expense by -- of Finmeccanica of EUR236m.
The economic value added is EUR380m, up 67%. And the return on investment is 21.4%, which is still significantly higher than our weighted average cost of capital which, unfortunately, but predictably, has increased over this period, the last year, and has moved for [8.58%] to [9.7%] this year accordingly with increasing debt and to increase risk premia which is now contemplated in the valuation of the industrial companies given with -- due to this very bad time.
The free operating cash flow is EUR469m and was, with respect to the guidance of EUR110m, if I remember correctly, with respect of EUR375m of 2008, while our debt is a little bit less than EUR344 -- EUR3.4b, which, of course, is [incomparable] with the one of 2007, due to the fact that this has moved accordingly to the financial needs connected with the DRS acquisition.
The debt is -- the financial debt is EUR3.3. After that, we have repaid EUR1.2b of debt, thanks to the share capital increase proceeds which took place in November 2007.
Finally, and I think it was something to say more importantly, we still have been able to reach an order intake of EUR17.6b, which is well above the revenues of the year. More than half of this military, afford a certain degree of stability. And our backlog now is EUR43b, which, of course, is equivalent to almost three years of production. And I'd like to let you know that the predictability of our -- for our figures is such that we have already 82%, at the moment close to 90% of our 2009 revenues already covered [listed] by the present backlog. And 62% of the 2010 revenues are already covered, listed by the present backlog. And we expect that by the end of 2009 or close to 80% of the 2010 [backlog] will be already covered. Even 2011 has been covered for almost 50%, between 40% and 50%. And I think that that's some meaning.
These figures, of course, implies a certain consolidation of DRS, which is consolidation for two months and eight days, given that the Company entered in the Finmeccanica perimeter on October 22, 2008. And therefore, these figures have a certain -- imply a certain contribution of DRS which is the one you can see on the left side of the slide. EUR551m of revenues and EUR51m of EBITA, EUR16m of profit, EUR26m of free operating cash flow, EUR251m of orders. The pro forma figures for 2008, I say pro forma because DRS at this year have not closed the year as of December 31, but the pro forma figures for 2008 implies an EBITA of EUR262m and the revenues EUR2.6b before the (inaudible) 10% margins and EUR50m of cash flow against EUR63m of net profit.
What is the 2008 -- what has been in 2008? 2008 has been a year where we have been able to maintain a certain significant growth of the earning per shares, even if we adjusted for our share capital increase. And you can see how it has moved from 2006, [where it was] 2006, 2007 and 2008. And we also have been able to maintain a certain significant increase in dividend per shares, 28%, 31%, 37%, 41%. Which, to a certain extent, we believe is part of the very ordered and financially disciplined management of the Company.
We obviously believe that more than being a sign of the good state of health of the Company, the payment of the growing dividend is a sign of the way -- of the financial discipline which aspire the Management of the Company itself.
The amount of money which is implied with payment of dividends, is much less important than single reductions of dividends or an increase -- or reduction -- or in working capital or investments so and so forth. But it's a clear sign of the fact that the Company's able to achieve its goal and to maintain its guidance, what the Company promise at the beginning of the year, say, the guidance for the previous years.
So, I think that the way in which you can interpret the dividends we are going to pay is nothing but the sign that there is a certain consistency in the financial management of Finmeccanica, which is even more important keeping into account that we have experienced a not very true -- quiet period, from a financial viewpoint, following the DRS acquisition, which has implied, for us, the triggering of several financial deals. And we have been able to maintain, to strengthen the financial equilibrium of the Group in a very difficult period for -- in environmental terms.
Even the P&L, as you can see previously, is giving us a certain level of satisfactions. The return on invested capital is doing the same things. Economic value added have increased significantly. And this is basically due to the capability that we had to maintain the working capital as a significant controlled level. And which means that we are still able to manage our ordinary business in a proper way. We could do more and we will do more. But, I think, we can already [sufficient] satisfied about that. And the return on invested capital, which has increased 2.5 percentage points per year between 2007 and 2008, is another sign of how we have been able to maintain a streamlined balance sheet from this viewpoint.
If we have a streamlined balance sheet, this can be interpreted through, basically, -- through two basic ways.
The first one is the famous or infamous if you want, discussions about the certain development of expenditure, which has been one of the main issues of several road shows and discussions with analysts, investors in the last years.
To make the long story short, I would like to let you know that in 2008, Finmeccanica has invested a little bit less, not a lot, but a little bit less, EUR21m less in R&D. EUR1.809b, EUR850 of which funded by the customer, EUR422m funded by the Government. We have been able to increase over EUR60m of the Government funds from this viewpoint, and EUR537m expended, EUR40m less than we did in the last year. Of which, of this EUR537m, you might see that EUR290m has been charged to the P&L of 2008 and EUR247m has been capitalized. Has been capitalized EUR39m less than we did in 2007.
Therefore, if we want to see what has been the opening balance sheet of 2008, it has been at EUR1,016m. We have accounted the -- depreciated -- accounted the depreciation for EUR130m and other EUR26m of write-offs of what we call non-performing assets. Therefore, we have capitalized EUR91m of R&D. And the final -- and the closing balance sheet for 2008 in terms of R&D EUR1,107m.
So, you see that there has not been any significant change with respect to the previous years. In fact, we increased -- in the operating margins we have been able to increase the return on invested capital, as I showed you before.
The second issues concerning the balance sheets are debt and equity. Finmeccanica started the 2008 with EUR1.158b of net debt. We have generated EUR469m of operating cash flow in 2008. And we have paid, with respect to the shareholder resolution for 2007 balance sheet (inaudible) financials EUR187m of dividends. But we paid, also, EUR2.3b....
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