Safran S.A.

Jean-Paul Herteman - Chairman & CEO Ross McInnes - Deputy CEO, Finance Marc Ventre - Deputy CEO, Operations

Christophe Menard - Kepler Cheuvreux Andrew Gollan - Berenberg Robert Stallard - Royal Bank of Canada Celine Fornaro - Bank of America Merrill Lynch Christian Laughlin - Bernstein Olivier Brochet - Credit Suisse Agnes Blazy - CM-CIC Securities Tristan Sanson - Exane BNP Paribas

Okay, good morning, everybody, whether being there in Paris or being with us online. Very happy to be with you and once again to present you figures and facts about a very good year of Safran.

What can we say regarding 2014? It's a combination of two big things, first one being truly, deeply investing to prepare our future.

I mean executing key strategic engine development programs such like LEAP, Silvercrest, the new family of helicopter turbines, at the same time capturing new opportunities such like participation in the engine of the new Boeing 777X as well as equipment on the new Airbus A330neo investing at historical peak level, both in R&D and in industrial capital expenditure to meet both new programs and a ramp-up in production both for engine equipment and other things. And so 2014 has been a very particular year, very intense in the preparation of our future.

And nevertheless we have been happy to deliver very good figures. Revenues up almost 7%, adjusted recurring operating income up 17.4%, even above our guidance.

Net income has been growing only by 4.6%, but you have to keep in mind that in 2013 we had the effect of a non-recurring sale of participation that led to a significant boost in profitability. And if we don't take that into account the growth of net profit 2013 to 2014 has been 17% as well.

We propose to increase dividend to €1.20 per share. And last but not least, even we, as I said before, went into exceptionally high level of capital expenditure and corporate finance R&D.

We nevertheless have been able to generate €740 million of free cash flow and the debt is still at a very reasonable level of €1.5 billion Let's go a little bit looking in the past, even though the most interesting thing would be the future. You see this year, just another year of growth in profitability, in dividend and you see also the level of investments, both R&D and CapEx has been multiplied by - if we compare to 2010 by 2.4 just like recurring income and dividends.

And nevertheless the cash flows still remain at a very significant level. And we'll discuss further on about the perspective on the future which are still very, very positive.

Okay, if we look at more details. Development of aircraft engine, LEAP, first flight of LEAP and flying test bed.

A lot of ground tests, developing well, very well. Market share is above 70%.

We logged up to 8500 of orders by the end of 2014. And at the same time, we still have a backlog of current classic, CFM56 at above 4500.

So very positive trends for the next coming years. Of course we had to invest a lot.

Part of LEAP is totally out of the shell, brand-new technologies such as 3-D composite fan blades. As you know we have putting two brand-new plants, one in the U.S.

and one in east of France and operations are starting very well, Silvercrest for Dassault 5X as well as Cessna Citation, first flight as well and the flight tests are going very well. Helicopter turbines, even though as you know, the volumes of original equipment deliveries, especially with our first customer Airbus helicopter are going down for the short to medium term, we nevertheless invest very significantly to renew and extend our portfolio.

On the smallest engine, the Arrius, we had the first flight of the new version, Boeing, the new small helicopter Bell 505 Jet Ranger X and this is going very well. And we also have entry into service and certification of two new versions of Arrius and Arriel for existing and upgrade of the Airbus helicopters model.

In the front line of our helicopter turbine portfolio, we have a new product, Arrano. And Arrano has started its first ground tests early last year and it has been just announced by our customer, Airbus Helicopters, that Arrano will power their new X4 on a single source basis.

On the other side of our range, Makila, powering the Airbus helicopter, EC225. We have a new upgrade version that has been running on ground and that will be certified end of this year.

So very, very busy year in terms of investment for the future in helicopter turbines. Bigger plane, 777X, we have a share of 11% of the GE9X which will power on a single-source basis this 777X.

And Aircelle, our nacelle company, has been selected by Boeing to supply exhaust systems for this airplane. First time in our history that we do provide a nacelle component to the Boeing Company.

A330neo selected by Airbus to supply the nacelle of the A330neo which is powered by a new Rolls-Royce Trent 7000 engine. And while commercial momentum is still very, very strong in civil aviation, traffic has been growing 5.9%, almost 6% last year, IATA is expecting something around 7%.

So we still are growing twice faster than GDP, even maybe a little bit more than that. Backlog is strong, new orders intense or sales campaigns are very active, so, so far so good, very confident.

And in the same time we see a solid growth in services that, as you know, are a very important contributor to our operating profitability. We have been up 11.3% in the civil proportion of the market, well in line with our guidance.

And the fact that the airlines are to some extent less under pressure because of the drop in oil price is probably a positive for the future growth of services and not negative for future growth of original equipment. Defense is bearing reasonably well under a difficult environment, not to say more.

We made the choice to keep at a high level the R&D investment to keep some type of technological differentiation in this complex world of defense. Security back to growth in profitability and maintained leadership position, especially in the U.S.

which is a key market for that. And interesting enough is that we see evidence of new rising up of big orders regarding advanced ID or border control systems.

We now have got a very high rate in our 10-year deal with Chile for ID. We have a new program on ID in Slovakia, a very big one in partnership with AOI in Egypt for 10 years, full digital ID.

And this is a big program. And we have a new program with United Arab Emirates on border control etcetera, etcetera., So back on growth in security, that's good news.

And we still continue to make some targeted acquisitions to upgrade our portfolio. We recently bought up a bright start-up company with very advanced technology regarding cyber security and that type of things.

The name of it is Dictao. Okay, preparing the future has a cost, so you see the profile of R&D, self-funded R&D and total R&D.

We have been picking up in 2014 and we forecast some type of decrease for the next coming year as the big, big programs, like LEAP and Silvercrest are passing through the maximum expense period. Figures but also people.

We, by the way, now are about 69,000 people in Safran worldwide. We have been increasing the workforce by about 2200 people last year.

And half of the growth has been international; half this growth has been in France. We made significant structural investment.

I think about the new corporate university close to Paris. We may have about 40% of the employees, Jean-Luc, who has less than four years' experience with Safran.

So it's very critical for us to add them to be well integrated into the Company and the university is key to that. In another field, we have been investing in corporate research center close to Saclay which as you know is a world-class science and technology area close to Paris.

And we will be joined by a few research institutes from university or institutions and it will be really a world-class innovation and technology center that will reinforce what we already do in R&D in our different companies. The total level of R&D investment is about €400 million which is pretty high.

So we not only prepare LEAP, Silvercrest, the business for the next years, but we also already prepare the business 10 to 20 years from now; that's the way a company like Safran should be managed. We have been taking an initiative in the very specific domain of launch vehicles, where we joined our force together with Airbus to create a single corporate entity able to compete and provide Europe with an autonomous access to space, even in the current times and this has been a two-step process.

The Phase 1 which is a program management company, is already in production. The company is chaired by Marc Ventre and the CEO is Gerard Chameau from Airbus.

And we have been lucky enough, but it's not luck, it's a lot of work, to be granted a contract of development of a new launch vehicle, a new family of launch vehicle, named Ariane 6, by the European Space Agency at the end of 2014. The second step will be a fully integrated corporate entity that will allow us to make all the synergy and get the flexibility and reactivity that we need to have in this specific market field.

I give the floor to Ross for the detailed figures.

Thank you. Well, to start off, good morning to everyone in Paris and to the 90-odd telephone listeners in London.

I'll kick off with slide 16 to underline the foreign exchange volatility which has been a characteristic of this year, although it doesn't - you wouldn't think it when you look at the first line, because the average spot rate of $1.33 is the same for both years. But in the meantime, as you'll see at the bottom part of the graph of this slide, we've been from $1.38 at the end of last year to $1.37 in the first half of the year and to $1.21 at close.

So there's very significant volatility. I'll talk about that on the revenue line, where it had some impact as we went through our quarterlies.

But the main rate which affects our profitability was the hedge rate which was improved which went on $1.28 to $1.26. And the benefits of our hedging policy are very clear, because the average rate over the year would have been $1.33.

We were able to achieve churn profits out at a $1.26 rate. Back to that on the next slide.

There is the usual table which takes us from our statutory data to the adjusted data. Now the figures which Jean-Paul, my colleagues and I will be commenting on are the adjusted data on the right-hand side for this graph.

The statutory data contain the impact of the foreign - the mark to market of our foreign exchange portfolio. That's been an element of significant volatility which is why we ignore it in our adjusted data.

At the end of June 2014 the value of our portfolio was a positive €700 million and at the end of December 2013, the value was a positive €700 million and went up to €900 million in June and at the end of the year, based on the $1.21 spot rate, the value of the portfolio was a negative €1.2 million. And that's the swing of €1.9 million which you see in the column which is deferring hedging loss.

The record was a few years ago. In the first half of 2010 the swing was approximately €1.8 million as opposed to the €1.9 million, you've just seen for the full year.

Why is this? It's because at the end of 2013 on the statutory accounts you - our hedge portfolio was roughly at $1.26 and the spot rate had gone in the year 2013 from $1.32 to $1.38, so our hedge portfolio had positive value.

In 2014 the spot went from $1.38 at the beginning of the year, to $1.21 at the end of 2014. Our hedge portfolio improved to a value of somewhere around $1.24.

Therefore, you have negative value. That is spread over the life, both the gains and the losses, are spread over the years in which we'll actually be having the turnover and booking these hedge rates.

Nevertheless, it's a significant impact in our statutory accounts. You'll see the same thing in at least one of our other comparables for roughly the same reasons, although the sterling/euro couple behaved somewhat differently from the sterling - the euro/dollar couple.

On the next slide, we'll now concentrate on adjusted accounts. A reminder that in our 2013 figures were restated no huge differences, but it was to make us compatible with IFRS11 rules on accounting for joint ventures and joint undertakings.

We'll talk about recurring operating income and revenue in some detail later. One-off items, €107 million.

The two largest ones concerned a €52 million charge related to a decision by Bombardier to pause the Learjet 85 program which meant that we wrote off approximately €38 million of development costs which we had on the balance sheet. And the rest were other various assets which we also wrote off pending the future of this program.

The other significant element in there were a variety of restructuring charges, approximately €36 million, in the security business in order for our SIM card business to improve its competitivity and also as we adjusted our industrial processes in the helicopter area, we are planning to close our facility in North America, Turbomeca and that occasioned a restructuring charge. We'll now move to the full income statement.

Once again, profit from operations, recurring operating income will be detailed later in my presentation. The first two items before coming down to the last line, the net financial income or expense, negative €165 million.

As usual, most of those are non-cash items which link to the foreign exchange impact on dollar provisions and the actualization of the non-interest-bearing liability which we have for reimbursable advances. The cash element was only €42 million, same as last year.

Our average gross debt was about €3 billion throughout the year. Net debt at the end of the year was €1.5 billion and the cost of debt was basically unchanged at 2.27%.

Therefore, the cash element was very, very similar to last year. The income tax expense which we booked on the basis of our adjusted profits dropped slightly to just under 29% thanks to reduced tax base at our Belgian subsidiary Techspace Aero, where we were able to deduct from our operating profit the cost of patents, of developing patents which are used to generate the turnover and that operating profit.

And that enabled us to bring down the effective tax rate below 29%. We generally guide for a tax rate in the 30% to 32% range.

And finally, the profit attributable to owners, our owners, are €1.248 billion which is the plus 5% which I talked about earlier - which is that - which Jean-Paul talked about earlier which is that on which we based the dividend, stressing that last year, as you see on the left-hand column there we had the €131 million gain from the disposal of the Ingenico shares which we don't have in 2014. And if you ex that out of the comparison, it's as Jean-Paul said, plus 17% net income rise On the revenue table, it's useful as I comment on this table if you refer to slides 45 and 44 which talk about the quantities produced in our major aerospace programs and also the split between services and OEM in our propulsion and equipment business.

But first of all, you will see on page 45 the significant volume increases. CFM56, record level at 1560 production rate; high thrust engines up 11% in terms of volumes.

That's the GE90 but also the buildup in the GEnx engine on which we have - our Techspace have a small but extremely good participation. I'll go right - you'll see the spectacular increase in the 787 landing gear.

That's the buildup of the 787. And helicopter turbines, the third line from the top, down 11%.

That's as we had announced last year the softness in the volumes which we sell to Airbus helicopter. I would stress as you look at our profitability - I'm referring to slide 44 as I talk about slide 20.

I would remind you, in the case of helicopter turbines, that profitability is largely linked to the service business as opposed to the OEM. Another point to bear in mind as we look at revenue is what is on slide 44 at the back of your packs.

In the case of propulsion, services increased by over 11% and OE by 4%. That drives the profitability significantly.

In equipment, we have a healthy rate of increase in the services turnover, 7.6% as the carbon brakes business and the services business on the nacelles and landing gear builds up with the installed fleet. But the rhythm at which the OE is growing is much faster.

We talked about the 787 and that will be followed by the A350 shortly. So we have a 9% increase in OE and that explains that although the margin in our equipment business is progressing, it's now close, as we'll see, to 10%, it is not progressing as fast as it has in the propulsion business.

Back to the other parts of slide 20, you'll see the very small currency impact. It was significant in the other direction during the first half of the year.

But that was all netted out by the increase in the relative value of the dollar versus the euro. A reminder that we do still have some negative translation impact in countries such as Chile, India and Brazil, where you can't hedge the transaction impact and of course, we don't hedge our translation impact.

The impact of acquisitions, the main one in there versus last year were the extra eight months of our extremely profitable RRTM acquisition in the helicopter engine business, where we bought up the 50% stake of our partner Rolls-Royce. If we move to slide - following slide 21, in recurring operating income significant currency impact.

That's the improvement in the hedge rate from $1.28 to $1.26 and very healthy €200 million organic growth. Some of the reasons were covered in Jean-Paul's introduction and I'll talk about them as we look at the detail of each of the operating divisions.

The results by activity is on slide 23 and I'll then come back to R&D in a second. On slide 23, you'll see the improvement in margins in most of our businesses with the exception of defense.

In security, margins went from 8.1% to 8.8%, in equipment up to 9.6% and reaching a record high in propulsion, 20%. Slide number 22 is on R&D and as I talk to them, you might also refer in the back of the package to slides 42 and 43 which give you the detail of the R&D by activity and also back to slide 11 which was mentioned by Jean-Paul which shows the rhythm of our R&D spend.

I'll concentrate on the main figures on slide 22 at this point which show you that the total funds - the total self-funded cash R&D went up to €1.4 billion as we increased our expenditure and accelerated our expenditure in particular on the LEAP. You'll notice that the gross capitalized R&D has decreased, as we had announced, in particular because we decided to fully expense R&D on the Silvercrest starting on April 1, 2014 and you can expect that trend on capitalized R&D to continue to decrease.

The result of that is that the P&L impact of the existing - of the R&D which we did spend increased very significantly, in other words, to €211 million. So when you'll see earlier that we've increased recurring operating profits by €300 million, that's despite having €200 million of extra R&D going through the P&L.

That gives you a good idea of the underlying strength of the business. The main areas of expenditure in R&D were as we had announced, the Silvercrest and the LEAP and beginning expenditure on the - continuing expenditure on the A350, albeit at a more modest level, of course, than on the big propulsion programs.

Slide 24, we go to some detail on individual activities. I mentioned the 20% recurring operating margin in the propulsion business which benefited from the strong civil aftermarket, notably CFM56 and high thrust engines with a very high contribution from the second generation and now the first generation CFM56 make up about 15% of the spare sales.

So that is dwindling as the second generation increase very, very substantially, 11.3% increase in our key indicator which Jean-Paul talked about. The only area where volumes were down were really helicopter engines.

We've talked about that, but the service business continued to grow by over 8%, in particular, thanks to the addition of the RRTM business. You'll notice also the higher expense to R&D which I talked about which went from €246 million to €386 million in the propulsion business, a very significant increase which there again you see on page 43.

They are the main elements underpinning the remarkable performance of the propulsion business. Now to equipment, you'll see the speed of the - the rate of increase in revenue there which increases by 8% above the rate of increase in the propulsion business and the mix which I mentioned between service and OE.

And the combination of that has enabled us to bring our margins up to 9.6%, although we are continuing to invest very significantly in our wheels and above all in the brakes business, where we now have an installed base on the brakes business which has grown to 6,800 aircraft. I remind you that when we - that requires significant investment because we basically give away the initial set and therefore rely on the future stream of revenue from the braking business.

And we'll be very selective on what we've invested in targeting for very good IRRs to ensure future profitability. As we make investments that goes through that cost to cash and P&L impact at the beginning Defense, resilience I think is the best way to describe it with solid growth in avionics with good volumes in inertial navigation and infrared seekers.

A slight decline in electronics, particularly with the end of FELIN program, as announced. A very good order book in defense which shows that the expenditure on R&D which we're devoting to this business which is very significant as you can see from the R&D pages on slides 42/43 we're devoting above 10% of revenue to R&D expenditure in order to make sure that we have the right products as defense orders pick up.

And indeed they have substantially increased, the order book substantially increased in 2014. It's probably fair to consider the current level of just under 6% to be a low point.

The security business, recurring operating income increased by 11%, but in fact organically, that's a 25% increase because security is where you get some of the translation impact in some of the currencies I mentioned, such as Chile and others. Three areas there.

The SIM card business continues to suffer from some pricing pressure. That's why we concentrated a lot of our restructuring costs on that business and that is at breakeven plus.

The other businesses have confirmed very strong growth, in particular, the identification business, with a number of very significant contracts from the past which are now producing a very healthy P&L impact and a strong order book for future years. Very good continued margins in our detection business which are very much in the - well above the 15% range and the identification business is in the 10% range.

So there the combination of those margins bring us to the level of margin of 8.8% because of the impact of the SIM cards. But growth is clearly back in the identification business and our efforts on cost-cutting and restructuring are bearing fruit.

A few words on foreign exchange, probably more than usual on this topic, given the volatility which I mentioned earlier. Our foreign exchange hedge book has both increased and improved.

Last time we talked to the market, the annual exposure was estimated at $6.5 billion to $7 billion a year. We've now revised that annual exposure to $7.3 billion to $8 billion which reflects the strength we foresee in the next few years in our dollar business.

This exposure is the result of course of the mismatch which is structurally part of Safran's life. We have therefore taken advantage of the lowering of the euro over the last few weeks to improve and increase our hedge portfolio, as you see there, with 2015 and 2016 virtually fully hedged at $1.25.

And we are well on the way to achieving a hedge portfolio at $1.25 for 2017 and we started to hedge 2018 achieving $1.18 and our target for that year is $1.21. I would remind you that all of the current spot rate is in the $1.13 to $1.14 level.

If you were to do a forward today for 2018 or 2019 you'd probably pay $1.20, $1.21 and therefore, we feel that if over as we say in the bottom of this page, we want to take advantage of the euro/dollar spot rate to lower our hedge rate in 2018/2020 and we feel that a target in the $1.21, $1.20 area over that period would be very satisfactory. Bear in mind that we price all our business, our projects at $1.35.

Therefore, the difference between $1.20 and $1.35 gives you a natural uplift to about 12%. The impact year on year, it's been very significant over the past few years.

It was for the dollar, it was about €80 million this year, €100 million all told, because of the other elements in our hedge portfolio, sterling and Canadian dollar. But this year it'll come down a bit because we're going to improve by $0.01.

It's worth saying that if we look at our improvement, the hedge rate has contributed about 5% of the improvement in 2013/2014 but that'll be down to 2.5% which means that as you look at our guidance, you should bear in mind that the tailwind from foreign exchange will ease, but it is at levels at which we are happy with in terms of the profitability of the business and our visibility for the next few years. Free cash flow, starting with adjusted net profit.

We reintroduced the elements of depreciation and amortization. Those of you who look at our accounts with care will note a good increase in the level of provisions which shows you that the results we are showing you have been achieved with a great deal of conservatism in how we plan for future costs of meeting our obligations to our customers so that comes back into the cash flow.

The others positive line is largely the difference between the tax we account for and the tax we actually pay. We account for over €500 million in taxes, but only pay in cash taxes something under - something of the order of €279 million.

The difference comes back into the cash flow. Change in working capital.

As we've said before that we are preparing for significant increases - continued increases in the rates at which we produce a lot of our aerospace equipment and of course in preparing for the LEAP will require more working capital in coming years. CapEx, tangible assets, that's the industrial consequence of the increases in rates we've talked about and the capitalization of intangible assets is the R&D, plus other things such as software and industrialization processes.

The result of that is we were able to achieve free cash flow of €740 million which is 35% which is where we said we would be. And, as we say in the press statement, that was despite payment delays of €186 million from a government customer.

The result of all that in the debt position, you will find a lot of things we have talked about the cash flow, the working capital, the total R&D, the dividends, including the €0.56 which we paid in December and an interim dividend ahead of the final dividend which we'll propose to the AGM at the end of April. Acquisitions and others.

The major acquisition was of course the Eaton cockpit business which we acquired - a cockpit and electrical distribution business which we acquired in early 2014. And the other element in the acquisitions was actually the impact on the balance sheet of a dollar private placement which is a 10- to 12-year instrument which is valued in dollars.

And of course, when the rate of the dollar versus the euro increases, that counts as increased debt. Bear in mind that in front of that we have dollar assets and dollar revenues which is what justifies having dollar debt.

I'll go very quickly over gross debt and liquidity because the long and short of it is that given that we're - we don't have a high level of debt, we're extremely liquid. The balance sheet highlights tells you a lot of what we've told you about before.

The operating working capital increase by a bit more from the net working capital in part because net working capital which is €111 million includes other items such as taxes and so on. Page 34, our customer financial guarantees have remained very stable.

And before handing the floor back to Jean-Paul, I'd like to recap on some of the figures we have talked about. We said that the P&L impact of the R&D was an extra €211 million.

The level of provisions leaving aside the dollar and other impacts went up over €100 million - €120 million. And besides that, we increased our operating income - recurring operating income by €300 million which shows you the strength of the business on the business today and the future underlying figures we've just showed.

And on the cash front, although R&D was up about €175 million in cash versus 2013, we had some payment delays from our customers which were up €100 million. Besides that and the significant investments we're making for the future, we ex-state delays, we actually made 44% cash flow as the percentage of operating income.

Jean-Paul, back to you.

Thank you, Ross. Just a few words about the future.

First, equity shareholding breakdown did not change a lot. A slight increase in free float.

Our profile of dividends and continuing our ratio of payout of 40%. 2015, very confident for another very good year, based on our healthy increase in original equipment deliveries for civil aircraft, solid growth in civil aftermarket services.

Self-funded R&D decreasing a little bit. And while the industrial capital expenditure will stay about the plateau at €700 million which is a very high level plateau, confirmation of profitable growth in the security business and of course our Safran Plus continuous improvement plan will continue to provide the net competitiveness improvement.

So the outlook would be in terms of revenue growth in the high single digits based on an average rate of U.S. dollar at $1.20.

We should take some assumption on that. Adjusted recurring operating income to increase in the low double digits at a hedge rate of U.S.

dollar of $1.25 to the euro which is not an assumption but as Ross has explained this is something that we are fully confident on. Free cash flow to be somewhere in between 35% to 45% of the recurring income subject to the usual uncertainties of the advance payment or may I say, late payment.

And so in one word, very strong confidence for the medium to long term because of the CFM franchise which is assured to be very strong for the next decade. CFM56 first and after that LEAP start really would be a success as big or maybe even bigger than CFM56 has been.

Good visibility medium to long term-wise provided on the euro to dollar hedging rate. And also the investment we made in the equipment, the positive trends in security that gives us a very high level of confidence to continue growing in terms of revenues, but most importantly in terms of operating profit and net profit.

For 2015 and beyond, it would be another team to present these good figures next time. But the story will look I'm sure quite the same.

Thank you. And now we have time for Q&A.

And maybe, Peter, we'll start with a couple of questions from the room in Paris and after that we give the word then to questions on the line.

I have got three questions. The first one is linked to the rumors concerning the ramp-up of production from Airbus of 250 aircraft per month in 2017.

Are you fully prepared to this type of increase, should it arise at the time you are transitioning to LEAP. My second question is fuel burn savings from LEAP.

I think two years ago, Marc Ventre was telling us that the 15% fuel burn saving could be exceeded at some stage by 2020. Is it still the case?

And then my third question is linked to security and the SIM card issues. The fact that you are restructuring the SIM card, what does it mean in terms of future profitability of this sub-division and for the division as a whole?

I think a few years ago you were targeting above 10% EBIT margin in security. You are not far, but what could be the timing of it?

Thank you.

Okay. Production plans from Airbus, the best thing is to ask Airbus.

For sure, that's true there are talks about further increasing production rates. It looks like the market is there or the demand is there, 6% per year growth, 7% next year and there are some rather old airplanes to be replaced.

If that would be confirmed by the airframer, we will be ready to supply even if the level of investment is, as you have seen, pretty high. And we don't anticipate any significant showstopper, but it will be a very intensive year in terms of industrial ramp up and transition from a model to another one.

But we are well prepared to that. And it's a type of issue you like to have when you run an industry and company.

Fuel burn saving on LEAP, the current LEAPs are designed for 15%. There are room for improvement in the long term, but we are 100 - 200% focused on delivering the first generation of LEAP and we'll see in the future what we will have to do more.

SIM cards, we do restructure a lot and we still have of course a target of security profitability above 10%, yes, for sure. And we are well on track.

Christophe Menard, Kepler Cheuvreux. Just two questions.

The first one is on the economic compensation for the launchers. What does it mean in 2015 and possibly 2016?

Do you have to pay some cash to Airbus and what is the timing? And the second question is on the services in aircraft equipment.

You --correct me if I'm wrong, but I understand that you had an acceleration in services in aircraft equipment in Q4. And is it the trend that we should retain for the next quarters, i.e.

servicing aircraft equipment really growing or picking up in growth at above 7% or 6%?

I'll take the first - second question and regarding the timing of the payment of the compensation to Airbus, Ross will give you more details. Our equipment services business is characterized by a lower ratio of services to original equipment than any of our competitors.

Not because we are bad in services, but just because we have been investing so much in new equipment for new programs that the growth in the original equipment is stronger than the growth in services. So on the long term, it's absolutely sure that our ratio of service business versus original equipment business will go up and up.

Now you mentioned the trend on the last quarter. Well, don't extrapolate.

There is some volatility quarter to quarter and I could not recommend you to extrapolate. But the trend will be positive anyhow.

Regarding the compensation to Airbus, we still have to incorporate and consolidate the full single corporate entity. We are into the process of talks with the union and employees representatives.

So the schedule is not frozen at the weak level, but nevertheless we have an idea of the timing of the payments.

Yes, I would refer you to page 6 of the statement where we give some details. So in the background, Jean-Paul mentioned in his introduction that this deal is crucial for the future of civil aerospace industry in Europe and we wanted to secure that.

It's key financially first and also it's a great R&D off-spin. So for each of the two parties to stay as they were, although it wouldn't have been harmful in the short term was not a good long-term option.

So bringing both together, there's two things for Safran. It secures in the long term the interests of both parties, but it also gives us a short-term increased stake in what is an attractive existing civil and military business.

And as we valued from our point of view - Airbus might have a different perspective. But from our point of view, the economic compensation which we shall recognize for Airbus to the tune of €800 million - I'll come back on timing later - the way we look at that is we've compared what the EBIT of our existing activities on their own are in 2014 and which would be on our own projections in 2016 to what the EBIT of 50% of the EBIT of the joint undertaking would be in 2014 and will according to our plans in 2016.

And the way we look at it and that's how we justified the deal to our Board and to ourselves is that that compensation represents about 9 times that differential. So we're paying €800 million in order to acquire 50%, a differential - 50% versus staying alone.

Once again that's looked at from the perspective of Safran's shareholders as to why we're doing it that way. And why - and 6 to 7 times, our projections for the business in 2015 is the delta.

In other words, 6 to 7 times the increased EBIT which we think we'll be entitled to on the basis of our projections for the joint undertaking versus what it would have been if we had stayed on our own. So it's a strategic deal, but it's also one which is attractive in the short term.

Now why 2016 is because as Jean-Paul mentioned in the first half of the answer, throughout 2015 we're going to cross a certain number of hurdles. The actual timing at which we'll arrive at the closing is uncertain.

So we've used 2016 because it's likely to be the first full year in operations of the joint undertaking, therefore, it made sense to look at 2014 and 2016. Once again we're doing that on the basis of our estimates and it's what underpinned our logic.

I think Jean-Paul there - timing uncertain, sometime in 2015. Hence, we are using 2016 as the basis for justifying the value.

I think Jean-Paul there are 109 people on the phone in London. No more questions from here?

Then we have 109 people in a red phone box in London. It sounds like a lot.

Andrew Gollan from Berenberg. A rather predictable question I suppose about margin progression.

Ross, you described aerospace propulsion as a remarkable performance and we saw a 20% margin in the year despite high investments and despite increasing provisions. Can you just help us a little bit again on the evolution as we look forward?

Even in 2016 we have continued very high volumes of CFM56. We have investment intensity reducing slightly.

Should we expect a further expansion in the current year? And I guess related to that and it's a part cash flow question, the working capital requirements as we look forward over the next couple of years the ramp, that obviously forms part of your answer, but you can just frame that up in a sort of a short-term outlook as to what we can expect.

When I was at school, 20 was the best mark you could get and we're at 20%. And therefore over the next two or three years as we transition to LEAP, we have said that we are going to be very cautious on our accounting.

We're going to have some production costs which will be above the norm. That's mainly for 2017 but there could be a bit of it in 2016.

And therefore at this point we're not willing to give an indication of what those margins might be in 2016, 2017, 2018 until we have a tighter grip on what it will be. But you can assume we'll be conservative which is why we have said that we think the very, very high teens for our propulsion business represents something which is likely to be realistic over that period.

In the very short term for 2015, you have our guidance for the year and I don't think we need to go into any greater detail than that. We'll do it gradually as the year unfolds.

Regarding cash, clearly in 2015 we're going to be continuing to invest in CapEx. Our outlook as you see is based on a reduction of €100 million - €150 million in the R&D cash expense and a significant reduction in what is activated on the balance sheet, what is capitalized.

And we're going to continue to spend about €700 million on CapEx and you can assume that will continue in 2015 and probably a bit of 2016 because that's what we're building up for. And the working capital requirement will be significant.

Significant meaning €200 million or €300 million probably as we go into the full LEAP production. But bear in mind that's going to happen at a time when all the other drivers in terms of cash flow are extremely positive which is why we think we can increase our cash flow from operations yet again in 2015 and beyond that.

Jean-Paul, I was wondering if I could ask you about aftermarket guidance for 2015. It's modestly lower than what you initially forecasted for 2014 and yet the trends appear to quire positive.

Are there some negative factors that we're missing here or is this just you're naturally conservative given it's a low visibility market.

Regarding CFM, there is a structural tailwind which is that the - we still have a strong decline in first gen aftermarket, about minus 30% in 2013 and a strong headwind - so a strong decline in first gen, a strong growth in second gen. And now the balance as of 2014 is a little bit less than 20% of the total of first gen and a little bit more than 80% of second gen.

And as the scissor effect will continue, the weight of the decline in third gen will be lower and lower. But it's not only made of CFM.

As we mentioned before, we had a very exceptional high year in aftermarket services regarding high thrust engines, especially GE90 and this is not expected to continue on the same rate on the medium to long term. So that's the reason why we have that type of guidance of around 10%, lower 10%.

Okay. And as a follow-up question, I was wondering if I could ask about your acquisition policy and whether you'll be continuing to look for small bolt-on acquisitions in maybe security or equipment.

I think your question is what about targeted acquisition in --

That's right. In either the equipment or maybe the security division.

It didn't come through. Could you may be repeat it?

Sure. I was wondering if you could give us an update on your acquisition strategy and whether you'll be looking for further bolt-on acquisitions in the equipment or the security group.

If there are some opportunities that make sense, business and strategy wise, we have the balance sheet able to sustaining some acquisition. But it's based on existing - availing some opportunity.

Don't see a big, big spot on the radar screen and no current plans. But still very open to whatever could make sense and strengthen our panel of technology in equipment and security which is already pretty strong, but who knows.

I've got two questions if I may. The first one would be when I look at the drop-through of what your organic sales growth has translated into organic profit growth in 2014, it's actually much better than what you had in 2013.

So if you put that on the ratio, it's 24% against 21% in 2013. So that's really good and I suppose it's related to some aftermarket growth, good aftermarket growth in propulsion.

Now because the aftermarket growth rate in 2015 is going to be 10%, pretty close to the one you've had this year, should we expect a similar level of drop-through in terms of organic growth going into organic profit growth? That would be my first question.

Translation of volume growth into profitability growth. Well, all-in-all, it's included in our 2015 guidance.

Keep in mind that we had in the last year some contribution, very significant contribution to the operating profit through the improvement of the hedge of the dollar to euro rate and this will not have the same strength at all for the next coming year. So when you modelize, if you make a model of what we can draw from our internal profitability, what we can draw from our growth in volume, keep in mind that the impact from FX would not be the same for the next coming year that it has been in the last five years.

Second question?

And the second question would be looking at the inventory turns that you reported for 2014 against 2013, that's actually slightly better than 2013 which is good news. And I was wondering what we should think of for 2015 as you start moving to the LEAP transition.

And if the inventory--

I'm sorry, but there's something wrong with the line because the initial part of the question was systematically translated. So could you, i.e.

the operator do something about it? And, Celine, bear with us and could you repeat your question because we missed the beginning of it.

So the beginning of the question, hopefully it'll give some time for it to start. So basically looking at the inventory turns that you have reported in 2014 against 2013, there was a small improvement which is good news in 2014.

And I was wondering how we should think about that for 2015 and probably mid-term as you guys transition into the LEAP and if 2014 was slightly better actually than what you had anticipated. And what helped that inventory turn number.

Thank you.

You're right to point out inventory turn improved despite a certain headwind in foreign exchange because some of the inventories are in dollars and you might have a lot of dollar inventory at the end of the year. I think you can expect our inventory turn to improve although our working capital need will increase.

But the inventory turn will improve because a lot of our turnover growth is coming from spares and spares are less consumers of inventory than a business where we're building up construction to build OEM rigs.

Just two questions on the civil aftermarket from me please. One is have you started to see any impact in shop visit bookings for the older first generation CFM engines as a result of lower fuel costs?

Or just if you could discuss changes or a change in trend that you've seen around scope of repair on some of those older engines, that would be the first question. And then the second one, also if you could just comment on the rough level of spare parts pricing achieved in 2014, that's across CFM, GE90 and the whole catalog please.

Thanks.

Do we see any impact on lower fuel price and the business of services to first gen? No.

We continue to see a decline in services business for first gen CFM56, both in terms of number of shop visits and revenue and spare parts. And in opposition to that we continue to see growth in - on second gen CFM56 engine.

It's too early to draw any medium- to long-term conclusion from that I think seriously. The change of the behavior of airlines will or cannot be anticipated from the last three or four months.

We plan for continuing growth on second gen and a continuing decline on first gen.

Okay, thanks. And pricing?

I'm sorry, the line cut out. I didn't hear if there was a response or not.

I will have two questions please. The first one on cash tax, can you give us an idea of how it is going to trend in the future compared to the P&L tax amount please?

And the second question is on services in helicopters. You've insisted on the profitability of that business.

Looking at the CapEx cuts in the oil and gas industry, can you give us a sense of the trend for that business? And how much of the total services activity that you do that it represents and if there is any impact on it to be expected from the sanctions in Russia?

Thank you.

Okay, cash tax versus P&L tax, that's for you, Ross.

Broadly stable, maybe a slight increase this year because as I mentioned in my introduction this year we got a double benefit from the Belgian tax base ruling where we were able to deduct from our profit some of the profit made on revenue made in our in-house developed R&D. And as that covered 2013 and 2014 there was a double impact in 2014.

So in 2015, we'll just have the single-year impact. So you can assume a slight increase in cash taxes.

Regarding oil and gas helicopter operators, the share of oil and gas operators in the services business of Turbomeca is about 15% of the total services. So, yes, we do anticipate some decline in this business by around maybe 10% to 15% of this 15%.

And our guidance for 2015 and medium-term plan is based on that.

Speak up please.

Agnes Blazy at CM-CIC Securities. I have three questions.

First I would like to know if it's the first time you mentioned the €800 million compensation for Airbus. And I thought it was €500 million as said at the Analyst Day in London at the beginning of December and I remember when you negotiate, there is no compensation.

So could you explain a little bit more the inflation of the cash out for this operation? Second one about Arianespace, is there any project to buy back the minorities of this company and what could be the strategy for that?

And last thing, a suggestion. You published the adjusted to restated, could you in the further year publish also the statutory to statutory to help those who vote in the AGM, just to have a global geo publication.

Okay, regarding the €800 million compensation I believe Ross made a deep explanation about the assessment of that volume. Keep in mind for those of you who have in mind the global business figures in civil launch services activity that we are undertaking, it is not only dealing with civil.

It would have make absolutely no industrial sense to do that civil only. So it's both military and civil space and launch vehicle businesses and the military side which is as you can explain to a large classified, is pretty significant.

So don't be worried about the level of €800 million. Arianespace minorities, we are in the process to try to acquire the - first of all, the share owned by the French state who's the French Space Agency in Arianespace and that's the current plan.

The last question is typically for you, Ross.

I get the difficult one. In fact, in the consolidated statutory data after which is mentioned on page 17 you'll find the comparable in the brochure which is on the Internet site which shows the statutory data.

Last year the statutory profit was €1.4 billion, but don't forget that included a very positive valuation of our foreign exchange portfolio because the value of the foreign exchange portfolio at the end of December was a positive €700 million which explains why we had a €1.4 billion statutory result. This year it's the other way.

But if we look back over the last eight quarters, the amount has gone from minus €1.8 billion to plus €900 million to minus €1.2 billion. It shows the absurdity of mark to market in an industrial company, but I think everyone knows that which is why we look at adjusted data.

But the statutory data is there for those who have trouble getting to sleep.

So it's Tristan from Exane. I have three quick questions please.

The first one is on the overdue payments €186 million in Q4 2014. I just wanted to understand whether your guidance for 2015 cash flow is including a normalization of your government payments and so a tailwind from €186 million or whether you assume that you will still have difficulties in 2015.

The second question is on the provision that you booked in 2014 so €231 million if I see your free cash flow on this ratio. I understand that in H1 you had a fairly important level of provision coming from services to be rendered but not on CFM, so I suspect it was more on helicopter service contracts.

Is it still the case that the large increase we have in provision in H2 is still on maintenance contracts, but not on CFM or are we starting to book specially LEAP provisions there? And the last one is I wanted to understand where you stand in the modernization process of your facilities.

You rebuilt, upgraded a lot of facilities in the past two, three years. What are your plans for the next 2, 3 years?

Thank you.

The government delays are all - most of them are paid fairly quickly in the year. So it's not a risk in terms of the quality of the debtor.

One of the reasons we give you a range for our cash flow at 35% to 45% is because in a lumpy business such as defense you can have big variations in terms of the customer advances and delays. So no, we have not made any specific assumptions in our guidance as to what government delays have been.

If you track back our public statements two years ago, they were €160 million. They've been as low as €30 million, for this year at €186 million.

So it's very hard to give an informed estimate. Your question on provisions, you should bear in mind and Note 20 of our balance sheet gives you the detail of our provisions.

But of course the balance sheet is based on statutory - on the statutory figures. And in that increase of provisions, not all of it is operating, some of it is financial because a lot of provisions are in dollar as they would be.

And therefore you'll see in the Note 20 there's about €100 million which is linked to the dollar increase in the value of those provisions and also some interest rate elements which is why when I talked about the increase in provisions which was driving, underpinned the operating income, I mentioned a lower figure in €120 million range because some of it is financial and not operating. But yes, we are consistently conservative in our performance warranties, in our services to be rendered and we will continue to be as our turnover grows.

Our turnover grew by as you saw close to 7%, but our overall level of provisions is growing at by close to 10%. That's an indication of that they're operating provisions, not just financial.

And regarding our industrial investment and upgrade plans, I'll give the floor to Marc for more details.

Yes as you mentioned, we've done significant improvements in modernizing our production facilities and this has yielded to significant improvement in productivity in these sites. We will of course continue.

It's part of our continuous improvement plan. And there is a special item which we'll also start to look at which is big data.

And big data will partly be used to improve our industrial processes and that's one of the reasons why we created Safran Analytics just at the beginning of this year.

Thank you, Mark. I'm being told there is no other question in London.

Do we have a last, last question here in Paris? No?

Thank you and all the best.