Paris - The Board of Directors of Safran (Euronext Paris: SAF), under the Chairmanship of Ross McInnes, at their meeting in Paris on February 14, 2024, adopted and authorized the publication of Safran's financial statements and adjusted income statement for the full-year period ended December 31, 2023.
Foreword
All figures in this press release represent adjusted data, except where noted. Please refer to the definitions and reconciliation between full-year 2023 consolidated income statement and adjusted income statement. Please refer to the definitions contained in the footnotes and in the Notes on page 10 of this press statement.
Organic variations exclude changes in scope and currency impacts for the period.
CEO Olivier Andries said: 'Safran delivered outstanding results meeting or exceeding guidance, with revenues up 22%, recurring operating income up 31%, and free cash flow generation above expectations. This excellent performance was notably driven by the continued recovery of the commercial aftermarket. Our teams have demonstrated remarkable agility, significantly increasing deliveries despite a challenging supply chain environment and successfully facing inflationary pressures.
For 2024, we will continue our revenue and profit growth trend, ramping-up deliveries further and increasing services to meet customer demand. We remain committed to our capital allocation strategy by deploying our strong balance sheet towards organic investment, targeted M&A, share buybacks and 2023 dividend distribution at EUR2.20 per share.'
Full-year 2023 results
Revenue
2023 revenue stood at EUR23,199 million, up by 23.6% on an organic basis (+21.9% compared to 2022), benefiting from Safran's strategic positioning on growing narrowbody markets. Air traffic continued its recovery through 2023 with global narrowbody ASK capacity gradually improving to 105% (on average) of 2019 (Q4 2023 at 108% of Q4 2019). In addition, in a context of production ramp-up, revenue growth was led by both OE and services. Each of our three divisions achieved a substantial revenue growth rate.
In 2023, change in scope was EUR(13) million1. Currency impact of EUR(312) million reflects a negative translation impact of USD revenues, with an average EUR/$ spot rate of 1.08 in 2023 (1.05 in 2022). EUR/$ hedge rate in 2023 stood at 1.13 (1.15 in 2022).
As for organic revenue per division:
Propulsion achieved outstanding growth of 26.7% thanks to robust civil activity through the year.
In a buoyant market, civil aftermarket increased by 32.9% (in $) mainly driven by a solid demand for CFM56 spare parts and by LEAP rate per flight hour (RPFH) contracts. Meanwhile, spare parts revenue for high thrust engines increased but at a slower pace.
OE revenue was boosted by LEAP deliveries reaching 1,570 units, compared to 1,136 in 2022 (396 units in Q4 2023). This represents a solid step-up in production (+38%) in a challenging supply chain environment. For military engine activities, revenue was down year-over-year driven by lower M88 deliveries as planned, and services.
Finally, helicopter engine activities posted slight growth as OE and services revenue growth was hampered by supply chain shortages.
Equipment & Defense was up by 17.3% supported by both narrowbody and widebody programs, although constrained by supply chain difficulties. Aftermarket services, driven by increased traffic, grew in all businesses, in particular for nacelles and landing systems including carbon brakes.
OE sales registered a 13.4% increase year over year with higher volumes in landing gears (A320neo, 787) and electrical systems (787, A320neo, 737MAX) as well as in Avionics (FADEC for LEAP). Nacelles deliveries decreased due to downward revised demand. In defense activities, growth was notably led by guidance systems and JIM multifunction infrared binoculars.
Aircraft Interiors revenue was up by 32.8%, a robust growth with four consecutive quarters above 30% but still 23% below 2019 level. The division recorded strong orders, demonstrating the growth potential of this market.
Aftermarket services strongly improved both for Cabin (mainly spare parts) and Seats (notably with US and Middle East airlines) with air traffic recovery.
OE sales increased in all activities. Cabin was led mainly by Custom Cabin and Floor to Floor activities. Seats OE growth was driven by Economy class seat deliveries (Z400 and Z600 for several airlines) while Business class seat deliveries were down year-on-year (983 units in 2023 vs 1,704 in 2022) notably because of transitory testing and certification delays. However, Business class seat deliveries were up sequentially in Q4 (+199 units vs. Q3 2023).
1 Divestment of Pioneer Aerospace in April 2022, Arresting Systems in June 2022 and Cargo & Catering in May 2023. Acquisition of Orolia in July 2022 and Thales Aeronautical Electrical Systems activities in October 2023.
Research & Development
Total R&D, including R&D sold to customers, reached EUR1,818 million, compared with EUR1,540 million in 2022.
Self-funded R&D expenses before tax credits were up 19% at EUR1,216 million in 2023 including:
Development expenses at EUR618 million (EUR548 million in 2022);
Research & Technology (R&T) self-funded expenses at EUR598 million (EUR471 million in 2022) mainly geared towards decarbonization through the RISE (Revolutionary Innovation for Sustainable Engines) technology development program.
The impact on recurring operating income of expensed R&D was EUR993 million (EUR826 million in 2022), with both higher capitalized R&D and related amortization, and representing, as in 2022, 4.3% of sales.
Recurring operating income
In 2023, recurring operating income reached EUR3,166 million, +31.5% (+27.2% organic) driven by Propulsion activities. It includes scope changes of EUR(9) million and a favorable currency impact of EUR111 million.
Operating margin stood at 13.6% of sales, up 100bps on the 2022 margin (12.6% in 2022).
Per division:
Propulsion recurring operating income reached EUR2,390 million, +39.8% (+35.2% organic). Operating margin stood at 20.1%, up by 2.1pts, supported by strong civil aftermarket activity benefitting from higher spare parts sales for CFM56 while the growing share of LEAP RPFH contracts, recognized today at zero profit, weighed on margin growth.
On the OE side, the division was supported by a high portion of LEAP spare engine deliveries throughout the year. As planned, lower M88 deliveries had a negative impact compared to 2022.
Helicopter engines profitability was slightly down in 2023.
Equipment & Defense recurring operating income stood at EUR992 million, +13.5% (+8.7% organic). At 11.2% of sales, operating margin decreased by 0.4pt. In spite of robust services growth across all activities, the margin has been impacted by inflation and challenges in the supply chain.
Aircraft Interiors posted a recurring operating loss of EUR(116) million, representing an improvement of EUR24 million from 2022, +17.1% (+30% organic).
Leveraging on its manufacturing footprint optimization, Cabin activities reached breakeven in 2023 supported by a robust growth in services and to a lesser extent by OE deliveries.
Seats reached breakeven in Q4 2023 with efforts on the industrialization process starting to bear fruit. On a yearly basis, the positive contribution from services was more than offset by losses from OE activities.
Net income
In 2023, non-cash one-off items were EUR(511) million of which impairment charges for several programs and EUR(327) million of goodwill impairment in Aircraft Interiors reflecting late execution in the turnaround.
Net income was EUR2,028 million in 2023 (basic EPS of EUR4.85 and diluted EPS of EUR4.70), up by 72%, compared with EUR1,178 million in 2022 (basic EPS of EUR2.76 and diluted EPS of EUR2.68).
This includes:
Financial income of EUR174 million, including positive financial interests of EUR112 million (returns on cash investments exceed cost of debt) and EUR66 million exchange revaluation of positions in the balance sheet;
Tax expense of EUR(724) million (25.6% apparent tax rate).
The reconciliation between 2023 consolidated income statement and adjusted income statement is provided and commented in the Notes on page 11.
Free cash flow
Free cash flow of EUR2,945 million was driven by the increase in cash flow from operations, the favorable working capital change and higher capital expenditures of EUR(1,325) million (EUR(879) million in 2022) directed notably towards production capacity and low carbon initiatives.
The favorable working capital evolution (EUR758 million) reflects significant customer advance payments, primarily related to Rafale export contracts, as well as growing deferred income from LEAP rate per flight hour service contracts, partly offset by increasing inventories.
Net debt and financing
As of December 31, 2023, Safran's balance sheet exhibits a EUR374 million net cash position (vs. net cash of EUR14 million as at December 31, 2022), as a result of a strong free cash flow generation, and including the dividend payment (of which EUR564 million to shareholders of the parent company on 2022 fiscal year) and share repurchases (EUR1,535 million).
Cash and cash equivalent stood at EUR6,676 million, stable compared to the end of December 2022 (EUR6,687 million).
On February 9, 2024, Safran reimbursed with cash-in-hand the $505 million matured last tranche of USPP notes issued in 2012. On April 11, 2024, a EUR200 million Euro Private Placement will also mature.
Dividend
For fiscal year 2023, a dividend2 payment of EUR2.20 per share will be proposed to the shareholders' vote at the Annual General Meeting on May 23, 2024. It represents an increase of 63% over the prior year dividend amount (EUR1.35) and an usual 40% payout ratio on the adjusted net income excluding the goodwill depreciation for Cabin and Seats (EUR327 million). It demonstrates Safran's confidence and commitment to regular shareholder returns.
2 Ex-date : May 28, 2024 ; Record date: May 29, 2024 ; Dividend payment: May 30, 2024
Share repurchase programmes
2023
In 2023, Safran purchased EUR1.5 billion worth of its own shares in several tranches (11.2 million shares):
2027 OCEANEs: 7.1 million shares (on top of 2.4 million shares repurchased in 2022), finalizing the hedging of the potential dilution related to those convertible bonds;
For delivery of shares under long term incentive plans and free share grants: 2.1 million shares;
2028 OCEANEs: 2 million shares (out of c.4 million) to start hedging the potential dilution of this convertible bond.
At end 2023, Safran owns 13.7 million treasury shares (3.2% of capital).
2024 onwards
In 2024, Safran started a new tranche of share buyback to complete the hedging of the potential dilution related to the 2028 convertible bonds and for long term incentive plans: Safran intends to acquire up to EUR450 million worth of shares from January 16, 2024 and no later than March 1, 2024, if market permits as the maximum purchase price authorized on May 25, 2023 by the shareholders' General Meeting is set at EUR175.
As announced in July 2023, Safran will then launch a EUR1 billion share buyback for cancellation; this buyback is expected to be carried out during 2024 and 2025.
Full-year 2024 outlook
Safran expects to achieve for full-year 2024 (at current perimeter, adjusted data):
Revenue around EUR27.4 billion;
Recurring operating income close to EUR4.0 billion;
Free cash flow around EUR3.0 billion, subject to payment schedule of some advance payments.
This outlook is based notably, but not exclusively, on the following assumptions:
LEAP engine deliveries: up by 20-25%;
Civil aftermarket revenue (in USD): up by around 20%;
* EUR/$ spot rate of 1.10;
* EUR/$ hedge rate of 1.12.
The main risk factor remains the supply chain production capabilities.
Currency hedges
The hedge book amounts to $54 billion in December 2023, compared to $50.5 billion in October 2023.
2023: actual hedge rate of $1.13, for a net exposure of $10.4 billion.
2024 is hedged: targeted hedge rate is $1.12, for an estimated net exposure of $12.0 billion.
2025 to 2027 are hedged: targeted hedge rate between $1.12 and 1.14, for an estimated net exposure of $13.0 billion.
2028 is partially hedged: $3 billion hedged out of an estimated net exposure of $13.0 billion.
FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements relating to Safran, which do not refer to historical facts but refer to expectations based on management's current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance, or events to differ materially from those included in such statements. These statements or disclosures may discuss goals, intentions and expectations as to future trends, synergies, value accretions, plans, events, results of operations or financial condition, or state other information relating to Safran, based on current beliefs of management as well as assumptions made by, and information currently available to, management. Forward-looking statements generally will be accompanied by words such as 'anticipate,' 'believe,' 'plan,' 'could,' 'would,' 'estimate,' 'expect,' 'forecast,' 'guidance,' 'intend,' 'may,' 'possible,' 'potential,' 'predict,' 'project' or other similar words, phrases or expressions. Many of these risks and uncertainties relate to factors that are beyond Safran's control. Therefore, investors and shareholders should not place undue reliance on such statements. Factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: uncertainties related in particular to the economic, financial, competitive, tax or regulatory environment; the risks that the new businesses will not be integrated successfully or that the combined company will not realize estimated cost savings and synergies; Safran's ability to successfully implement and complete its plans and strategies and to meet its targets; the benefits from Safran's plans and strategies being less than anticipated; the risks described in the Universal Registration Document (URD).
The foregoing list of factors is not exhaustive. Forward-looking statements speak only as of the date they are made. Safran does not assume any obligation to update any public information or forward-looking statement in this document to reflect events or circumstances after the date of this document, except as may be required by applicable laws.
USE OF NON-GAAP FINANCIAL INFORMATION
This document contains supplemental non-GAAP financial information. Readers are cautioned that these measures are unaudited and not directly reflected in the Group's financial statements as prepared under International Financial Reporting Standards and should not be considered as a substitute for GAAP financial measures. In addition, such non-GAAP financial measures may not be comparable to similarly titled information from other companies.
Contact:
Catherine Malek
Safran
catherine.malek@safrangroup.com
Armelle Gary
Safran
+33 1 40 60 82 46
armelle.gary@safrangroup.com
SAFRAN 
