MTU Aero Engines AG

Good morning, ladies and gentlemen. Welcome to our conference call for the preliminary full year results 2018.

Reiner Winkler, CEO will present the highlights 2018 to you. Peter Kameritsch, CFO, will give more detailed overview into our business segments.

Before we jump into the Q&A session, Reiner will give you an update on the outlook for 2019. I would like to remind you that you find the final set of restated 2017 IFRS15 numbers on our website on the financial reports.

Let me now hand over to Reiner for the business highlights of 2018.

Yeah. Thank you, Michael and welcome also from my side.

Let me start with the key highlights. In 2018, passenger traffic was up 6.5% and therefore well above the historical average.

For 2019, passenger traffic is expected to rise again by 6%, supported by a global -- growing global economy. Our main focus in 2018 was certainly the ramp up of the GTF engine program.

We met all delivery milestones and nearly doubled production. We are also well positioned to support further production rate increases.

The third aircraft application, the Embraer E2 jet entered into service. The GTF will have a great future, proven by more than 2000 engine orders and commitments in 2018.

In total, we have collected nearly 10000 GTF engine orders so far. We also have positive news in our business jet division.

End of September, the first Gulfstream G500 was handed over to its owner. Additionally, the PW800 was chosen by Dassault Aviation as the exclusive power plant for the new Falcon 6x.

The most exciting topic at the moment is certainly the next European fighter engine. A few days ago, we announced the partnership with Safran to jointly build the engine for the next generation combat aircraft.

We will be in charge of the low and high pressure compressor as well as the low pressure turbine. In addition to that, we will have the lead in the aftermarket activities.

A technology and demonstrated program is scheduled to start by mid of this year, the new European fighter as you know, fighter aircraft is expected to enter into service by 2040 [ph]. Some weeks ago, the German Ministry of Defense announced its intention to replace 33 tranche 1 Eurofighter jets with new ones.

In addition, there is further potential to replace around 90 aircraft. These campaigns could secure the issued production well into the next decade.

In 2018, we have seen a strong demand for our aftermarket activities. Spare parts and MRO sales increased much stronger than originally expected, especially older engine platforms surprised to the upside.

In our MRO segment, we are very pleased with the continuous high workload in all our shops worldwide. In 2018, we collected USD4.5 billion of campaigns wins for our independent MRO business, more than we expected a couple of months ago when we held our Investor and Analyst Day in London.

Biggest contributors were contracts for the narrow body engine type CFM56 and V2500. Based on the high visibility coming from our strong order book, we gradually expand capacity in our MRO shops and optimize our service portfolio.

We have already begun with the expansion of our MRO shops in Berlin and Zhuhai. For example, MTU maintained Zhuhai is in the process of expanding its capacity by 50% for the second time in less than 10 years.

Capacity will be increased from 300 to 450 shop visits per year by 2021. In addition, we extended our 50-50 joint venture contract with China Southern Airlines by 20 years to 2051 in November.

An important key factor to secure future growth is definitely our on you TTF MRO shop in Poland, a 50-50 joint venture with Lufthansa Technik. Construction is already underway.

This facility will be the world’s most efficient maintenance shop for narrowbody engines and will be operational by 2020. It will have a capacity of more than 400 shop visits per year.

2018 was an excellent year for MTU with new record levels in terms of revenues and EBIT. Also, our order book stands at a new record level of nearly EUR80 billion, supported by strong order intake for our commercial OEM and also MRO business.

Based on the good results, we would propose a dividend of EUR2.85 per share at this year's annual general meeting on April 11, of course subject to approval by the supervisory board. This reflects an increase of EUR0.55 compared to last year.

Let's have a short look on the key financials. Revenues were up by 17% to more than EUR4.5 billion, driven by strong commercial OE business and aftermarket business.

The group EBIT adjusted increased also by 17% to EUR671 million, resulting in an EBIT margin of 14.7%. Net income adjusted of EUR479 million, resulting in earnings per share of EUR9.29 showed more or less the same growth rate.

And as expected, free cash flow grew stronger than net income adjusted, coming in at EUR203 million or 42% cash conversion rates. How does this compare to our latest guidance?

We exceeded revenues by around EUR170 million, mainly due to higher work scopes in the MRO business and a slightly favorable US dollar FX rate. EBIT adjusted of EUR671 million and net income were both slightly above our latest guidance.

And the free cash flow was in the expected range. Let me know hand over to Peter for a more detailed look into the business segments.

Yes. Thank you, Rainer and also hello from my side to everybody.

First, let's have a look into our OEM division. Total OEM revenues grew 17% to EUR2 billion.

Commercial revenues increased 24% to $1.6 billion. In US dollars, it was even up 30%.

Within that, organic OE sales were up 30%, mainly driven by nearly doubling of GTF outputs, partly offset as expected by falling V2500 deliveries. In Q4, we saw an organic growth year of roughly 40%.

Organic spare parts sales were up in the low teens as expected. Key drivers here as you know were the V2500 and the two engine programs like the CF680 and the PW2000.

In Q4, spare parts were also up in the low teens. Military revenues were slightly down by 3% to EUR431 million.

EBIT adjusted increased by 14% to EUR431 million, resulting in a margin of 21.2%, mainly driven by the above mentioned business mix. Let's now switch to the commercial MRO segment.

Total MRO revenues were up 23% to EUR2.8 billion, which again is a new all-time high. US dollar MRO revenues were up 28%.

This is the third year in a row with US dollar revenue growth north of 20%. Key revenue drivers here were the V2500, CF34 and CF6 engines.

GTF retrofit shop visits were performed as planned. Our lease and asset management business at MLS in the Netherlands contributed to the strong performance as well.

EBIT adjusted increased by 23% to EUR240 million, resulting in a more or less flat EBIT margin of 8.6%. So now let me hand back to Rainer for our outlook 2019.

Yeah. Thank you, Peter.

Looking in 2019, the assumptions for our revenue drivers remain unchanged. So military revenues are expected to be up by 10%, mainly driven by fighter engines.

Commercial OE will be up in the low teens, mainly driven by a further ramp up of the GTF, but also by the positive fleet development of the GEnx and new business jet programs. Commercial spares are expected to be up mid to high single digit, main driver will be again the V2500 and the mature engine programs are expected to remain stable.

Commercial MRO will grow high single digit organically. Reported IFRS revenues are expected to remain stable due to a change in the invoicing process of V2500, MRO work at MTU, Zhuhai.

And here please refer to Peter's part of our November Investor and Analyst Day presentation for more details. These above mentioned effects should result in group revenues of around EUR4.7 billion, assuming an average US dollar FX rate of around 115.

The EBIT adjusted margin is expected to reach around 15.5%. This is broadly in line with 2018, assuming equal treatment of V2500 invoicing from MTU, Zhuhai to IAE.

Net income is expected to grow in line with EBIT and the cash conversion rate should be in the range of 50% to 60%. So thank you very much for your attention and we are now ready to answer your questions.

Sure. Thank you and good morning, everyone.

Just one question for me around GTF deliveries and your targets for 2019. Can you just comment a bit on the production environment and the challenges that you're seeing with respect to balancing engines that are destined to go on wing for A320neos versus spare engines and others that need to go to the fleet and how you think about any changes to phasing delivery phasing throughout the quarters this year compared to say the last couple of years and any sort of bottlenecks you're seeing in the supply chain?

Yeah, Christian. I mean, what we expect is that we are going to increase GTF deliveries by roughly 30% 2019 versus 2018, but we do not split it out spare engines, lease engines versus installed engines.

So that will be a question which would have to be answer by the OEM, but I don’t have with me here.

Okay. Great.

And anything industrially you're seeing in the supply chain with respect to bottlenecks or things like that or have challenges kind of dissipated year-on-year?

I mean I will pass towards the 63 rate per month, which was communicated by Airbus, that is quite safe. So we can do that, so we don't see bottlenecks in our universe at least.

Yes. Good afternoon, everyone.

I would have two question please. The first one would be on the R&D trajectory in 2019, both in terms of spending and capitalized R&D.

And actually more broadly, if you could provide some indication of the key areas of spending that you see going forward. The second question would be to ask if you have seen anything particular, below the free cash line because it came to me as a bit of a surprise, that net debt was actually up in 2018.

So anything that you saw around customer financing or payments related to the shareholder program participation that would be very helpful?

Regarding R&D, we expect -- company expects R&D to rise slightly in 2019 versus 2018 and that has to do with the performance improvement program of the new engines of the PW1100 engine. I think we have already spoken about that on our Capital Markets Day and that will be capitalized.

So we also see slight increase in capitalization of R&D. Regarding net debt, yes, you are right.

I mean, the one thing is obviously we had an FX effect in net debt. So as you know, I mean, the program liabilities are all in US dollars and they are have to be valued by the spot rate, so we have the spot rate move to 114 at the end.

So that moved up the program participation liabilities and we have also included one deferred, one deferred acquisition payment for our business jet engine into our net debt figure that was magnitude $30 million.

Just two questions. One on rate 17, understood from Airbus last week that the supply chain was a constraint to them going to rate 17 at the beginning of the next cycle, appreciate your thoughts, is MTU available to support rate 17 from 2020 to 2023.

I mean we always said, if we have a little bit of, let's say, time to prepare ourselves, we can do the rate 63 in 2021 and also I would say with another year or 2 years, yes, it would be able also to go to rate 17.

And the dividend growth up more than 20% year on year, would you actually expect a further increase in the dividend over the next few years, given the improving cash generation?

I mean we said that I think several times that I mean our target range for payout ratio is 30% to 40% and if you base the payout ratio on net income adjusted as we do, we are currently at 31% and we will move that up in the next year, two years to what 40%.

I have two questions basically. First of all on GTF, on the ramp up, can you give us a qualitative update about the remaining, let's say issues and critical elements for which you see or might see on your way to achieve guidance in 2019 and give us maybe a bit of a, yeah, an idea about the financial impact of the remaining schedule to retrofits without maybe putting it down on specific numbers, but just to get a better feeling how we should think about it?

And the second part is about CapEx, could you please remind me about the split of your CapEx guidance for the year 2019, ’20, let's say in terms of nature, amount and timing, how should we think about that, has there anything changed compared to November?

I mean, in 2019, we expect in OE as Reiner just said, I mean, growth in the low teens in the major drivers here, a further ramp of the GTF engines as I said, I mean, roughly 30% volume wise and that growth will be little bit offset by falling V2500 deliveries. I mean we still delivered in 2018 roughly 200 V2500s and that will drop to a very low number in 2019.

So overall I mean regarding OE volumes, I wouldn't see a major risk for 2019. Regarding CapEx, it hasn't changed that much to what we said on our Capital Markets Day in November.

So there is nothing new on that one.

Can you just remind me about the incremental delta going forward to have something in mind with 200 million, is that correct?

Yeah. Something in that ballpark.

Yeah.

So my questions are a bit boring, I'm sorry. Just a bit technical, so the first one, just on your slide 11, the updated hedge portfolio, it just looks like the amount that you need to hedge in 2020 is higher than you'd previously told us, is that because you changed your assumptions on organic growth.

Would that be a fair interpretation?

I mean we always -- when we do a new planning, we assess the US dollar exposure and that's what the basis -- that is the basis then for our, for our hedge book and now we have the EUR700 million hedged, $700 million hedged in 2020, which is 40%. And we are -- we have a little bit of flexible hedge model as you know and currently we are a little bit at the low end of our percentage, because I mean as you also know, the markups for forwards are extremely high due to the interest spreads between US dollars and euros.

Okay. Second one, just coming back on this net debt issue, because I was also surprised on it, just wanted to check, the loans to third parties fell, was that just because you sold on some vendor financing and you got cash in or did you actually write something off?

No, I mean, on the net debt figure, I have to go through that slide, one moment.

In slide 19.

So where you saw -- I mean, you see what we adjust in our free cash flow number is the repayment of loans, which we gave to our customers, so-called sales finance and that corresponds to the loans to third parties. You see that moves from roughly 130 to 60 and that is the repayment which we do adjust in our free cash flow number.

The loans from third parties, that is rather cash flow neutral restructuring. So we – in the past, these were prepayments and at the end of contracts, sometimes, you have to pay back prepayments to our customers, but maybe in 12 months and then that moves from a prepayment to a financial liability.

We had that also at the end 2017, the 18 million, yeah.

So the money you got in from selling down the loan to third party, did that just pay down the financial liabilities, the third line on this slide, you just moved the money from one place to another?

Yes.

Okay. Now, that’s fine.

And then just last one, you know you got the accounting changes you told us amount back at the CMD, just what is the starting number for OEM sales we should use now in ’18. Maybe I've missed it somewhere, is there a pro forma number you've given us, because we thought?

We’re going to do that with Q1 19, restatements for 2018 and it will basically reduce OEM revenues. You're going to see lower OEM revenues and corresponding higher margin for the OEM division.

Okay. All right.

We'll wait for Q1.

Hi. Thanks for taking my questions.

I've got a couple if I may. One is around cash, I mean, obviously, you’ve seen a bit of a headwind year-on-year from CapEx from increasing working capital, which is put you sort of around the lower end of the range in terms of cash conversion.

Can you maybe call out any specific drivers that we should think about when we're thinking about modeling 2019 in terms of CapEx and working capital? Clearly, there may have been quite a skew of engines towards the latter end of the year, this year, which may not recur to the same extent, so any kind of additional clarity you could give us around that would be great?

And secondly, would you mind giving a bit more detail on the leasing asset management business, you mentioned in the Netherlands, what the actual contribution from that or contribution to growth from that was during the year?

I mean, regarding cash flow, I mean, we give a range for free cash flow for a reason because cash flow is always a bit more volatile compared to earnings obviously. So, yeah, so 42% is within our range, which we gave the 40% to 50%.

So, I mean, the major driver, I mean, if you look at the cash flow statement, we have definitely a strong growth in working capital and that is, I mean the one part is FX obviously, working capital is always US dollar based and as you know, FX rates moved from one 120 to 115. So overall, throughout the year, that is no Q4 impact throughout the year.

That was of – yeah, mid to high single digit, euro number on working capital. And the other two elements are obviously, I mean, the pure volume.

I mean, we have now, MRO division grew in 3 years more than 20% and it will grow further in 2019 and also on the OEM, in the OEM division, I mean, we further ramp up our volumes in 2019 and at the end of 2018, you have already, I mean, the spare parts in the MRO division, the work in process in the MRO division, also the work in process in the OEM division, which supports the further growth in 2019. So, I mean, having a little bit lower working capital at the end of ’18, but being not able to deliver in 2019 is also not an option.

So, I think the answer is FX, the one hand side and the strongly growing volume in both divisions on the other side. I mean that's no big surprise on the CapEx side I would say.

And on the leasing business? Yeah.

Leasing business. Yeah.

It’s roughly contributing around $200 million and it was growing by roughly 30% last year.

And sorry, that's a revenue contribution?

Yes. Revenue -- profit would be defined.

Yeah. I mean, what sort of profit contribution does that equate to?

I mean what we can say, I think it's fair that asset – lease and asset management business has more than the average MRO margin regarding EBIT. So it's more than less, I mean, it's more than 8.6%.

Thanks you very much. So, yeah, I would have three questions basically.

So the first one would again be on working capital where we obviously have seen quite an increase in inventories and receivables, how much of that is actually FX related in the end and how much growth around about?

I mean if you look at the receivables, it's all US dollar based. And as I said, I mean, the overall working capital impact was, as I said before, mid to high single digit number, euro number.

That's the FX effect, but not only on receivables, on the whole working capital.

On the total? Okay.

Yes.

Second one on free cash flow, the adjustments were fairly significant change to 2017 and also to what we reported for the first nine months of ’18. So overall coming out at 55.7 million, what -- I haven't seen any split with reporting today, what was behind that quite strong move?

We got back the money from customers, which we – where we did sales finances, so they paid back and this is our policy. We adjust the sales financing.

So when we give money to customers as a sales finance, we adjust it and we will get back the money we adjusted also.

So basically – yes, so the difference is basically sales financing?

Yeah.

That’s where it comes from. Okay.

Perfect. And the last one on, I mean, this is certainly quite a current topic, but Brexit is basically happening next month, so could you remind us on your key scenarios and also how you will potentially be impacted?

Maybe in general, we have a very limited impact from Brexit what we see as of today and we have only a few suppliers. So based in UK, we have no interior location in UK.

And as you know, our supply chain is also based on the multiple sources worldwide, so actually directly MTU. I would say, there's a very limited impact, but on the other side, I mean, if Airbus, as you know, they have their plan for the brings in the UK.

So if they can’t assemble aircraft anymore, they also need no engines for that, but that's an indirect impact, but no really direct impact for us.

So you don't have any critical suppliers in the UK so forth?

No.

Potentially single source, et cetera. Okay, fair enough.

First question on the older engines, you mentioned that it had a good result in 2018 and that you expect it to moderate in 2019. Is that forecast based on the advanced bookings you've seen or is that just some conservatism after a strong result?

The older engine programs, I would say, I mean, what we see in the CF680 and the PW2000 is that, I mean, that more of these engines move more to from the passenger aircraft to freight aircraft and obviously as in north, freighter aircraft are operated less intensive compared to passenger aircraft. So overall, we expect no further growth here and that's true for the 757 with the PW2000 for the CF680 on that old 747 and 767.

So I think after the most surprising year 2018 for these two engine programs, I think we expect these two engine programs to develop rather in a flattish way. So no further growth here.

And then secondly on cash deployment, you mentioned about taking the dividend up to 40%. But what's your latest thoughts on whether a share buyback could be appropriate?

I mean as said on our Capital Markets Day, I mean we have our target leverage ratio around 1.0 net debt to EBITDA. And I mean our cash flow is expected to improve over the next year, substantially towards a high double digit cash conversion rate.

So first thing is, we're going to move up the payout ratio towards the 40% and then when we have additional headroom, we are going to – or we intend to do a share buyback. So -- but that won't happen, if you do the math in 2019, that is something maybe for 2020 or in following years.

Can I just ask three maybe slightly basic questions? First, I guess over the last sort of 3, 4 months, there have been signs, I mean, widely in the global economy of slowing activity level.

In terms of what you see day to day, week to week, spare parts demand, work scopes, are you seeing any changes in behavior of the airline customer base. Sorry, go ahead.

No. We don't see any fundamental change in the behavior.

As Peter mentioned, we saw very strong V2500 program last year and also the older programs contributed more revenues than we expected and actually also we see no change in that behavior, definitely not.

Great. Next one was, can you just remind us, in terms of when you expect the peak negative gross profit contribution from GTF, is that in the second half of this year guys, when the sort of the low point, if you will of their contribution from GTF and then it gets better from then on.

Let me see. In absolute terms, the most negative gross profit contribution in 2018 than 2019, so in 2019, volumes rise, but the margin gets better.

So in absolute terms, has been this zer0, ’19 to ’18.

Okay. So zero in ‘19 against ‘18 and then in absolute terms that, when you said the reducing in 2020 and beyond.

Yes.

Yes. That's clear.

Great. Thank you.

And then last one, just thinking about commercial MRO and you touched earlier on, on the expenses in Berlin and Zhuhai. And obviously [indiscernible] When we sort of look a little bit towards the end of fiscal year 2019, are we at limit in terms of shop loads unit capacity across commercial MRO or is there still a little bit more headroom in 2020 before we get the expansions completed at Zhuhai, Berlin and EME area?

I mean all the shops are actually at full capacity, running at full capacity. So we need these expansions.

Berlin will be available very shortly. Zhuhai also was in 2019 and EME would be also available and of 2019.

So I think then we have enough capacity.

And [Technical Difficulty] can you just remind us of the capacity increases at those?

I mean, it depends on the different locations. I mean, in Zhuhai, it's roughly 40% to 50% additional capacity.

The EME will start, I think at the end, they will have also 400, 450 shop visit capacity, but they will start, I would guess, next year with some 50 to 100 shopper, 50 shoppers in 2020.

I mean, this is going to be a ramp up. You have to industrialize the GTF shoppers at that location and it takes some years to reach full capacity obviously in EME.

And as long as we don't have the full capacity at EME, we're going to do the GTF retrofits or the GTF shop visits in our Hannover facility. Yeah.

And guys, just forgive my memory, with Berlin, can you remind me where we are in capacity today and then when we finished the expansion at the end of this year?

The expansion in Berlin is not really helpful, it's a logistics center. So it’s directly related to shop visits, but overall, I would expect to maybe 30%, 40% more shop visits in Berlin.

Hi, everyone. Thanks for taking my question.

I've got two please. The first one is, [indiscernible] growth in ‘19, just how are you guys concerned about freight traffic slowing down, especially we've got your CF6 exposure.

And also looking into Q4, what were the key drivers of the good margin performance of your commercial MRO business?

In commercial MRO, it's more or less, for the year, the same margin compared to 2017. So we are at 8.5, 8.6 EBIT margin.

So that's what we see in the current FX environment as an achievable margin in that business. And remember that I mean 50%, 60% of MRO revenues come without any EBIT contribution, which is just the passing through of spare parts.

Of course, you always have a certain volatility in the quarterly margin in the MRO division that comes, I mean, from the accounting. So we need to generate POC revenues in the MRO.

It comes without, with zero or very limited margin and then you do final invoicing of shop visits. Then you realize -- then you have the full EBIT contribution of that business.

So that's why the -- you have always a customer and an engine mix so that drives the volatility in the MRO margin. The fourth quarter in the MRO business was particularly strong due to the fact that we did a lot of final invoicing there at the MRO division.

I think the aftermarket, no, we are not concerned about that. I mean, passenger traffic is still above the average, which is expected for the coming years, so healthy environment and also for the mature engines, I would like to refer to what Peter said, you have to have in mind that also some of the CF6 have been converted into freighters, so not the engine, but the aircraft so we still see for the CF6, stable revenue contributions for this year and also for next year.

Just wanted some clarifications please, my questions have been addressed by a number of people. On the working capital, you've got obviously the ramp up going on and high volume growth in MRO trends.

And so, can you just give us a little bit of an idea beyond this year, just slightly medium term, in terms of how we should be thinking about the working capital and when will we see that turning positive, if that's going to be the case within the next three years? On free cash flow, just you mentioned the ForEx impact a couple of times, can you put a number on that as an adjustment?

And then the third one is just on R&D. I know you've given a little bit of help in the Capital Markets Day, but when will that likely peak and then where does it go from there, once it's peaked, will it be broadly flat going forward, how should we be thinking about that as a percentage of sales, going forward, R&D to sales.

R&D to sales, we don't think about R&D as a percentage of sales. I mean, obviously, I mean we are going have a slight increase of R&D in 2019 versus 2018 and that comes from the performance improvement program of the PW1100, which we will capitalize also -- capitalized R&D will move up a little bit and then over the next year, I mean R&D will rather go down year-by-year, obviously because I mean all the different engine progress enter into the market.

So the different versions of the GTF and then the latest engine program entry into service will be extending 2020, 2021 and then the base development will go to zero and then you have always post certification engineering, but that is on a lower level. So as I said, I mean, it will move down gradually over the next years and sales will increase.

So the percentage will be substantially lower in some years. So, but I can’t quantify that because I mean we don't think about R&D as a percentage of sales.

Let me ask that in another way, if I'm looking at the R&D number, how do I break that down into the components? What are the various components of what you call R&D?

So clearly, you've got jigs and fixtures that you’re using that are probably test engines, which go into that number, then there's the employee cost, what are the main components and?

The main components, but I won't give you a split of that. It’s obviously the engineers, so the hours of the engineers, that is a component.

Then you have obviously payments for R&D, which the OEM does and we have to share that according to our program share, but there is a second component and then you have a third component that is material. So, we have to contribute our parts and our modules for flight test engines.

So flight test programs absolve also R&D. So these are the three parts of R&D costs and some of these are capitalized, some of these are expensed.

Okay. Well, payments for the OEM I think is often given in the notes, isn’t it, when you take on a program share.

So I guess the bulk of the cost is engineering man hours, is that the way to think about this?

And material. As I said, I mean when you do fight test campaign, you have to have 10 or 20 engines, because you have to support maybe 3 or 4 flight test aircraft and that is also -- you have to contribute your parts and modules in the flight test engines and that is also part of R&D.

Okay. That's helpful.

Thank you. And the other clarifications, working capital trends and when it might -- when you might actually get some working capital coming out of the business, so it becomes a positive number.

Yeah. Working capital, I mean, we have a strongly growing business.

I wouldn't expect that we -- I mean apart from prepayments, obviously, you can have -- when you sign export contracts for Eurofighter or what -- you can have a year where you have an inflow of prepayments and that obviously reduces also now working capital, that is a special effect that would say, but normal working capital will go up slightly over the next years, but not with that high number again. Not -- in 2018, EUR300 billion, but also, I mean looking on the MRO side of the business, we don't expect 20% or 25% growth again in the MRO division for 2019 and that also helps obviously.

Okay. That's excellent.

And can you help us with the currency impact in the adjustments you've done on the net debt?

Currency, I mean, in the net debt, we have a currency effect, but we didn't adjust that. So net debt, I mean, we have in the program participation liabilities that are US dollar liabilities in that.

For example, the liability for the higher program shaft of the V2500, that is the major part of the program liability, that is the US dollar liability and when you move the spot rate from 120 to 115, then in euros, this liability moves up and that increases your net debt figure, your reported net debt figure, but we don't report something like an adjusted net debt or so.

Okay. I suppose my friend David and I are going to have a wonderful time looking through the notes to the account, which I believe it – you’re doing that end of the month or?

I have read that already. And one week, it was annual report, it's great.

We will be available at the 26 and happy to answer any questions you might have after this week end.

That's fantastic. I very much look forward to the 26.

Mark it in your calendar.

Yes. Good afternoon, everyone.

Just two quick questions if I may. The first one would be on pre-delivery for concession payments that could have been made in 2018, that we should be aware of in terms of a change year-on-year and also how you're thinking about that for 2019.

What do you mean by concessions payments, Celine?

Like if – when Airbus have a choice on its aircraft platform of engines, you may have a timing difference between what they get from the airline, what they transfer to you and what you get back?

I can’t quantify that.

Okay. I understand this, but it's just, has there probably been an effect?

No special effect from that.

Okay. Despite the big increase in delivery?

Yeah.

Okay. And then anything on the military side from a prepayment perspective or?

No, not yet.

And your guidance for 2019 doesn’t assume any?

Well might be, yeah, but it's – you cannot include that in your guidance. So it's quite -- what happens on Eurofighter, we’re not in the driver seat, so that is very unclear what happens there.

So you don't assume it in your 2019 guidance?

No.

Okay. And then my final question, my second question would be, in terms of the delivery profiles for the GTF, how the year is looking like for you at the moment compared to last year in terms of Q4 weight, or Q2, Q3 weight?

No. I mean, deliveries, I mean, we are going to ramp the deliveries throughout the year 2019.

So it’s going to be in that gradual increase quarter-over-quarter normally I would say from today's point of view.

But it's not back end loaded, it’s continuously growing.

Yes, good afternoon. Thank you very much for taking the question.

Three quick questions on my side. I saw first this morning, you may have talked to the press and you were saying that, sorry the NMA engine, you could offer the NMA engine even if there are two engine options, is it, I mean, did I read well, and what -- I thought you were more looking at an interest from a single source perspective, so if you could elaborate on this?

And the two other questions are A380 interruption, did you, in your accounts, take an impairment to any intangible or is it still to come? And the last question is on the military side, whether you're seeing any impact from the Saudi band sort of say on weapon exports on your Eurofighter sales, I mean here essentially MRO, not of course OE?

Christophe, the A380 is easy. We haven’t capitalized anything, so there's no impairment for GP7000 assets or whatsoever.

So, I mean, it was clear for us, for quite a while that there won’t be any GP7000 or A380 anymore. So the whole order book for us, so there is – for us, not a big issue.

Coming to the other questions, I mean, what I said this morning on the NMA, if Boeing will make a decision to launch the aircraft, it would be more, as you know right, I mean, it’s a simple calculation, it’s more attractive to have a single source and I said, if they would go for dual source, we have to look very careful, and what I said, I could not exclude that we will not do it also, even with two engines. So it could be also mix and, but we have to look into the business details and if it’s a case, business case or not, but it’s definitely too early to make a statement on that.

I mean you know the market size and sure, it would be more attractive if it’s a single source selection. But I mean, it’s by nature.

Regarding Saudi, actually, we are not affected by these stop of from the German government. I think we, first of all, I have to say, all the business we do in Saudi Arabia is fully in line with the German federal government’s politic principle regarding export, so we are in line.

It’s – what we do actually is mainly – it’s only maintenance, so aftermarket business, which is also covered by European joint programs. As you know, it’s an order and Eurofighter and we have global project licenses for these programs, so that we actually are going to deliver our parts and services.

Thank you. Bye-bye.

Bye-bye.