Safran reported adjusted revenue of €15,781m (+1.6% year-on-year, +3.9% on an organic basis). Adjusted recurring operating income was €2,404m (+5.4%). After one-off items totalling €(18)m, adjusted profit from operations was €2,386m.
The adjusted recurring operating margin of 15.2% improved by 50 basis points compared to 2015. Adjusted net income – Group share (continuing and discontinued operations) at €1,804m rose 21.7%, to €1,804m.
Civil aftermarket growth was 6.9% in US$ terms in 2016 driven by CFM56, GE90 engines spares and services. Civil aftermarket had a strong finish to 2016 with 12.5% growth in Q4.
2016 was marked by the closing of Airbus Safran Launchers (ASL), the sale of Morpho Detection to Smiths Group plc and the start of exclusive negotiations for the sale of identity and security businesses to Advent International.
Engines
Looking at the group’s different business segments, orders and commitments were received for 1,801 LEAP engines during the year, taking total LEAP orders and commitments to more than 12,200, as of February 2017. The CFM56 booked orders for 876 engines in 2016.
Revenue was €9,391m (+0.8%). Excluding the scope effect related to the equity accounting of Safran's 50% share of ASL (space propulsion contributed €410m to OE propulsion revenue in H2 2015), growth would have been 5.4%. On an organic basis, Propulsion revenue rose 4.9%, driven by civil OE and service business on both civil and military programmes.
Overall service revenue in Propulsion was up 7.3% in € terms and represents a 57% share of revenue in the year. Recurring operating income, at 19.0% of revenue, was €1,786m compared to €1,833m (19.7% of revenue) in 2015.
Equipment
The Aircraft Equipment segment reported revenue of €5,145m (+4.1%). On an organic basis, revenue was up 3.5%. Service revenue represented 31.8% of sales, almost 2 percentage points more than in 2015. Equipment OE sales increased by 1.4%. Services grew 10.5% thanks to continuing momentum in carbon brakes aftermarket business and higher nacelle service activity (including initial provisioning with A320neo-LEAP airline customers). Recurring operating income was €567m (+21.7%).
Defence
Revenue was down 2.2%, at €1,238m. In Optronics, the end of the contribution of the FELIN programme and lower sales of sighting systems were partially offset by higher volumes of infrared goggles and the start-up of the contribution of the Patroller tactical UAV programme.
Contracts signed in 2016 included the Patroller tactical UAV programme for the French army, LTLM II portable optronics equipment for the US armed forces and a further order for AASM guidance kits for the French defence procurement agency (DGA).
2017
For 2017, on a full year basis, Safran expects its reported adjusted revenue to grow in the range 2% to 3%. Excluding the effect of the equity accounting of Airbus Safran Launchers (ASL) from 1st July 2016, revenue growth is expected to be in the low to mid-single digits. Adjusted recurring operating income is expected to be close to the 2016 level. Free cash flow is expected to be above 45% of recurring operating income.
Safran is currently in the midst of exclusive negotiations for an acquisition of Zodiac Aerospace through an agreed public offer of €29.47 per share and a subsequent merger on the basis of 0.485 Safran shares for one Zodiac Aerospace share. The completion of the tender offer is expected by the end of the 4th quarter 2017 and completion of the merger is expected early 2018.