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Electronics, Defence & Security Systems

Electronics, Defence & Security Systems

The 2016 financial year was characterised by a good commercial performance and a considerable improvement in profitability, with the ROS recording double digit figures for the first time, as a result of benefits from actions aimed at the efficiency improvement and enhancement of industrial processes, as well as of the recovery of profits in some business areas, thus confirming the positive performance that was already recorded during 2015.

New orders. The commercial performance remained particularly positive, with a book-to-bill higher than 1.2 for the second consecutive year. The new orders gained in 2016 were substantially in line with 2015, which was also characterised by a significantly high number of acquisitions, without taking account of the effect of a different GBP/Euro exchange rate. This was due in particular to the acquisition of the contracts for air support to Typhoon aircraft for the British Ministry of Defence and for the supply of radar and communication systems for Typhoon aircraft for Kuwait, both of which in the Airborne & Space Systems Division. Among the main orders gained in 2016 are the contract for the supply of an air space surveillance and protection system for the Qatar Armed Forces in the Land & Naval Defence Electronics Division, the new air traffic control centre for the international airport of Kuala Lumpur in the Security & Information Systems Division and, as regards DRS, the contract for the supply of ENVG III (Enhanced Night Vision Goggle) vision goggles for the US Army.

Revenues. The negative impact of the GBP/Euro exchange rate and the slight decline recorded by DRS as a result of the review of the business perimeter were partially offset by higher volumes associated with the start of operations for some major orders that had been gained in the Security & Information Systems Division during 2015.

EBITA. There was a sharp improvement compared to the same period in 2015, mainly as a result of the benefits arising from efficiency improvement and cost curbing actions and of a gradual recovery in industrial profitability within the Security & Information Systems Division, as well as of the confirmation of good levels of profitability recorded in the other Divisions. As regards DRS, lower profitability associated with a mix of activities that focused on low-margin development programmes such as ORP (Ohio Replacement Programme) and MFoCS (Mounted Family of Computing Systems) were partially offset by structure cost savings.

Outlook. In 2017 it is expected that production volumes and the level of profitability achieved in 2016 will remain substantially stable, despite pressures on margins due to fierce competition in the target markets, a reduced contribution from major and profitable programmes being completed and the major challenges associated with contracts being performed. This will be achieved thanks to the benefits arising from streamlining and improving the efficiency of industrial processes, as well as to a more sound and profitable portfolio than in the past, also as a result of reviewed business perimeters.

The Key Performance Indicators of DRS are provided below in US dollars and €:

DRS (USDmil.) 20161,9231,7531287.3%1669.5%
DRS (USDmil.) 20152,0221,8051267.0%1689.3%
DRS (USDmil.) 20161,7371,5841167.3%1509.5%
DRS (USDmil.) 20151,8221,6271147.0%1529.3%

Average exchange rate €/USD: 1.1069 (2016) and 1.10951 (2015).