Saab’s interim results demonstrated strong progression towards its full-year targets although earnings were slightly below market expectations. The company continues to invest heavily in its major platforms for future growth and while order intake levels in the first half were more back to normal, future backlog development is expected. The overall positive momentum for global defence and security spending should support this ambition. Backlog execution with improved mix and modest efficiency improvements should support the targets of 5% organic growth and a move towards a 10% margin in the coming years.
H1 results show good progress
Organic sales growth of 23% and a 66% rise in operating profit, with margins expanding 120bp to 4.4% in H116, suggest SAAB AB ser. B (LON:0GWL) is well on course to achieve FY16 guidance. Management reiterated expectations for at least 5% organic sales growth with a similar operating margin to the 7% achieved in FY15. This was despite an increase in expensed R&D relating to the T-X development programme with Boeing (NYSE:BA). The backlog decline was modest in the first half, with order intake improved by around 10% excluding Kockums’ SEK8.6bn A26 submarine order booked in H115. The cash performance was also strong, aided by strong customer milestone receipts and advances with net debt falling to SEK405m at the half year.
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