What is Indra? Our Strategic Plan Transport & Defence (T&D) Minsait (IT) Annex 1: Last quarterly results

Transcription

1 December 2018

2 This presentation has been produced by Indra for the sole purpose expressed therein. Therefore, neither this presentation nor any of the information contained herein constitutes an offer sale or exchange of securities, invitation to purchase or sale shares of the Company or any advice or recommendation with respect to such securities. Its content is purely for information purposes and the statement it contains may reflect certain forward-looking statements, expectations and forecasts about the Company at the time of its elaboration. These expectations and forecasts are not in themselves guarantees of future performance as they are subject to risks, uncertainties and other important factors beyond the control of the Company that could result in final results materially differing from those contained in these statements. The Company does not assume any obligation or liability in connection with the accuracy if the mentioned estimations and is not obliged to update or revise them. This document contains information that has not been audited. In this sense, this information is subject to, and must be read in conjunction with, all other publicly available information. This disclaimer should be taken into consideration by all the individuals or entities to whom this document is targeted and by those who consider that they have to make decisions or issue opinions related to securities issued by Indra. 2

3 What is Indra? Our Strategic Plan Transport & Defence (T&D) Minsait (IT) Annex 1: Last quarterly results

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5 Indra at the core Leading worldwide provider of proprietary solutions in niche areas Leading Digital company in Spain and LatAm 3.0Bn Revenues 2017 >140 Countries > Employees 1 What is Indra? 5

6 Sales 2017 Energy & Industry Transport & Traffic Air Traffic Management systems and Communications, Navigation and Surveillance systems Transport: Revenue Collection, Control & Enforcement, Operational Systems and Safety & Signalling Defence & Security Air Defence & Border Surveillance Electronic Warfare: Airborne, Naval and Land Platforms Simulation Satellite Communications 20% 19% T&D 17% 16% (IT) 8% 20% Energy: generation, distribution and commercial management solutions Industry: Retail and Airlines management solutions Financial Services Payment systems & Payment processing platform Insurance and banking core systems Operations transformation and process efficiency services Digital (20% of total Minsait sales) Business consulting Digital solutions Cybersecurity Public Admin & Healthcare Comprehensive offer on Electoral processes Educational and justice management systems Healthcare management platform Telecom & Media Operations and business support systems New media and digital television solutions 1 What is Indra? 6

7 Sales 2017 Employees % % 46% % Spain America Europe Asia, Middle East & Africa (AMEA) 77

8 18,7% Sociedad Estatal de Participaciones Industriales S.E.P.I (*) 49,2% Others 10,5% Corporación Financiera Alba (*) (*) Board of Directors representation CNMV data. Identified shareholders with a position in excess of 3% 3,2% Schroders 4,1% Norges Bank 4,9% 9,4% Fidelity Management Research T. Rowe Price Associates 1 What is Indra? 8

9 FY14 FY15 FY16 FY17 Order Intake ( M) 3,013 2,651 2,744 3,248 Revenues ( M) 2,938 2,850 2,709 3,011 EBITDA ( M) EBIT margin 6.9% (2) 1.6% (1) 6.0% 6,5% Net profit Reported ( M) -92 (3) -641 (3) NWC (DoS) 81 (3) 30 (3) 5-1 FCF ( M) Net Debt ( M) (1) Before non-recurrent items of 687M (2) Before non-recurrent items of 246M (3) After non-recurrent items 1 What is Indra? 9

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11 Ongoing deep operational issues Resulting in high financial stress Non reliable analytical accounting and lack of control of onerous projects 718 M write-offs in 2015 Difficulties to understand root causes and underlying issues Profitability de-prioritisation Growth driven by low value added services Cost overruns in some contracts resulting from aggressive growth Expensive delivery model Lack of focus on cost efficiency Heavy corporate structure Non optimal production pyramid management Cash management decoupled from business activities Excessive working capital requirements Excessive risk assumption in commercial bids Some products at too early stage, generating onerous projects Contractual and legal conditions without enough self-protection Cash flow draining -164 M 1H15 accumulated FCF High debt generating difficulties on external financing 825 M 1H15 Net Debt 5.9x 1H15 Net Debt / EBITDA 2 Our Strategic Plan 11

12 Healthy P&L and balance sheet Much more reliable balance sheet after write-offs Sustainable cash generation FCF accumulated LTM ( M) Net debt on the lowest point since 2015 peak Net Debt / EBITDA LTM (Times) Recurring EBIT LTM ( M) 7.2%* Includes 78 M cash cost from personnel optimisation plan in 2015, and 51 M in * x 1.6% 6.5% x 1.2x* Dec 15 Dec 17 Jun 15 Dec 15 Jun 16 Dec 16 Jun 17 Dec 17 Jun 15 Dec 15 Jun 16 Dec 16 Jun 17 Dec 17 * Indra Stand Alone 2 Our Strategic Plan 12

13 More relevant weight of high value solutions Minsait, our new transformational vehicle, already launched and is currently up to speed We have a stronger proprietary product portfolio We have a strong pipeline in T&D We strengthened our commercial position internationally We were able to acquire Tecnocom and are on our way to make a successful integration Gaining scale, positioning and complementing our product portfolio T&D solutions remained predominantly high value IT high value solutions increased their relative weight Launched in January 2016 and already growing more than the rest of IT ~300 M sales 100% Digital, ~2,700 FTEs E.g. Cyber Defence and Air Defence solutions E.g. Developed ERTMS technology in Safety in Transport E.g. IT solutions are more standardised and packaged 4.9 Bn in T&D (2.3 Bn in Defence & Security, 0.9 Bn in ATM and 1.7 Bn in Transport) New references in Ecuador in Defence & Security, Middle East in ATM, UK in Transport E.g. Payment processing solution of Tecnocom has reinforced Indra's Financial Services portfolio 30.5 M in cost synergies targeted Note: ERTMS (European Rail Traffic Management System) 2 Our Strategic Plan 13

14 We had internal issues Unexpected large restructuring needs in Brazil and Transport (~300 M and ~90 M impact on EBIT respectively in ) Slower than planned portfolio rotation Exit from onerous projects took longer than expected Difficulties to capture the full potential of efficiency and off-shoring opportunities without growing in IT Longer than expected cultural transformation challenge Management focus on both turnaround and growth at the same time has been difficult... and the macro environment did not help Lower than forecasted economic growth in LatAm Real GDP growth (%) Real World Bank 2015 Forecast Lower than forecasted oil prices resulting in lower than expected GDP growth and T&D investments Brent Price ($/barrel) st ID ~15$/barrel gap average Real US Energy Information Administration 2015 forecast Sources: EIA Annual Energy Outlook 2015; real data from World Bank (for GDP growth 2016 estimate, 2017 projection) 2 Our Strategic Plan 14

15 01 New Specialised Operating Model Greater focus, accountability, agility and flexibility Product Portfolio Evolution Segmented Commercial Processes Healthy sales growth 04 Ongoing Productivity Upgrades Margin enhancement 2 Our Strategic Plan 15

16 Indra Corporate functions + shared services Increased management focus and accountability Businesses split facilitates specialisation (e.g. more focused international commercial activity) Split allows for clearer accountabilities Increased agility and time-to-market Simplified management structure within the new division Decision-making and execution processes will be faster and better suited to each single business needs Improved strategic flexibility Easier potential alliances, joint-ventures and M&A T&D Minsait ~ Operational synergies Corporate services will continue to be shared to leverage the scale effect and without losing synergies Economies of scale within the T&D and the IT business (in Offering Development, Cross-Selling and Production) will be totally captured 2 Our Strategic Plan 16

17 Product Portfolio Evolution Segmented Commercial Processes Ongoing Productivity Upgrades Invest to reinforce those products where we already have a leading position Apply digital technologies to further position our offering in the smart ecosystem Complement selectively our proprietary products portfolio to sell complete end-to-end solutions Increase commercial intensity with strong incentives and systematic tools Apply a segmented commercial approach with new more specialised profiles Establish alliances / JVs for commercial acceleration in selected geographies Deploy Lean manufacturing, Lean IT production and apply Automation Extend scope of our Global Business Services and rationalise our indirect costs base Intensify our Pyramid management and Delayering Optimise procurement 2 Our Strategic Plan 17

18 2016 (1) CAGR (2) Revenues ( M) 3,121 Low single digit EBIT ( M) 180 >10% (p.a. growth) E E Total Cash Flow ( M) ~610 (3) [~ 775m since First Investors Day] (6) CAPEX ( M) (4) Other uses ( M) (5) Restructuring Plan 129 Tecnocom acquisition 191 Onerous projects ~145 Deleverage (consensus end FY17) ~40 Continue deleveraging Reinstate dividend policy Selective bolt-on acquisitions 1. Pro-forma values including full consolidation from Tecnocom 2. Organic growth. Constant exchange rates as of 2016 (average FX in 2016) 3. Includes the estimated CF generated in E, excluding the estimated impact from the cash outflows from Tecnocom acquisition (191 M), headcount plans (129 M), onerous projects (~145 M) and the accumulated CAPEX in the period 4. Accumulated CAPEX in the E and E period respectively 5. The uses of the cash flow generated in the E period are contingent upon fulfilment of the Strategic Plan 6. Includes the FCF generated in the period according to Indra s definition, excluding CAPEX and the last part of the pending cash outflows associated with the headcount reduction plan in Spain (~40 M) 2 Our Strategic Plan 18

19 Revenues 2016 CAGR 1 (16-20) T&D Defence & Security 599 M Mid to high single digit Excluding 2018 Eurofighter revenues fall ATM 270 M Mid single digit Transport 355 M Mid to high single digit IT IT 1,897 M 2 Low single digit 1. Organic growth. Constant exchange rates as of 2016 (average FX in 2016). 2. Proforma including full 2016 revenues from Tecnocom Source: Indra 2 Our Strategic Plan 19

20 Increased level of CapEx in Total CapEx ( M) to accelerate growth while migrating to high value Invest to reinforce those products where we already have a leading position x1.5 x2 increase M Apply digital technologies to further position our offering in the smart ecosystem M Complement selectively our proprietary products portfolio to sell complete end-to-end solutions Amortisation will increase due to: Finalisation and commercial launch of proprietary products Larger CapEx Tecnocom Purchase Price Allocation 2 Our Strategic Plan 20

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22 Defence & Security Air Traffic Management Transport Expected CAGR (%) Expected CAGR (%) Air Defence 3% Border Surveillance 6% Electronic Warfare 4% Air Traffic Management 3% Expected CAGR (%) Revenue Collection 8% Control & Enforcement 6% The smart segment of all these solutions is growing over 20% Simulation 4% Satellite Communications >10% Communications, Navigation, Surveillance 5% Operational Systems >10% Safety & Signalling >10% Sources: Markets and markets, Indra Analysis All our clients are facing the digital transformation of their operations 3 Transport & Defence (T&D) 22

23 m Transport 1, (26%) Transport Revenue Collection Control & Enforcement Operational systems Safety & Signalling ATM 278 (23%) ATM Defence & Security 596 (50%) Defence & Security ATM systems Communications Navigation Surveillance 2017 Air Defence & Border Surveillance Electronic Warfare Simulation Satellite Communications Indra is a global reference in many of these technological niche markets 3 Transport & Defence (T&D) 23

24 Geopolitical uncertainty is increasing amidst growing security threats "The events that shaped 2016 added a new sense of urgency and determination to see Europe delivering on its potential in defence" European Defence Agency 2016 Annual Report "Cyber threats are becoming more common, sophisticated and damaging ( ) In 2016 NATO experienced an average of 500 incidents per month an increase of roughly 60% over 2015" NATO Cyber Defence Factsheet, May 2017 Indra's home market in Spain is launching a new investment cycle Strong R&D programs launched by 2015 will be progressing into production phase Additionally, new R&D programs starting Indra's accessible geographies will grow Revitalised NATO push for 2% GDP defence expenditure European Defence Fund investing up to 5.5 Bn/year Global Defence procurement (ex North America), $Bn % +3% CAGR Europe +13% CAGR LatAm "Effective border security is key to the effective implementation of counter-terrorism measures" UN, % CAGR Middle East & Africa +6% CAGR Asia Pacific Note: NATO (North Atlantic Treaty Organisation). UN (United Nations). Source: IHS Jane's Defence Budgets 2017 And Security market gaining relevance linked to an increase in border control and surveillance 3 Transport & Defence (T&D) 24

25 Existing long-term high volume programs are still in progress + There have been significant developments linked with the new Spanish investment cycle Eurofighter A400M NH Tiger Integrated frigate mast 90 M in R&D phase F x Vehicle systems 28 M in R&D phase ~350 M in production phase ~500 M in production phase Systems (e.g. DIRCM) and simulation Systems (e.g. CAS) and aftermarket Electronic warfare system Santiago SST Space surveillance radar Sustainment, sales and export opportunities Future upgrades of main subsystems (e.g. radar, DASS) ~350 M project, not including associated platforms 15 M R&D ~340 M production project, with EU funding Note: DASS (Defensive Aids Sub-System). DIRCM (Directional Infrared Counter Measures). CAS (Close Air Support). SST (Space Surveillance & Tracking) 3 Transport & Defence (T&D) 25

26 Air Defence Electronic Warfare Airborne Platforms Eurofighter A400M C-295 F/A-18 Chinook CH53 Tigre Cougar F1 NH90 P3 B707 Naval Platforms BPE BAC BAM F100 F105 S70 FFG F122 K130 U212/214 T-209 OPV Land based Border Surveillance Military Simulation Satellite Communications Eurofighter A400M A330 MRTT F-18 AV-8B Tiger Seahawk NH90 Wildcat Chinook Cougar H135 H225 H175 H145 A320 B737 Naval Land based BPE BAC BAM F100 F105 FFG S70 S80 F122 K130 U212 U214 T-204 AWD ASW OPV 3 Transport & Defence (T&D) 26

27 PRODUCT PORTFOLIO EVOLUTION Stronger Solutions Further standardise our solutions applying a product-based approach, instead of a tailor-made approach Enhance existing offering applying disruptive digital technologies, with analytics, IoT (e.g. Big Data in Border Control) Complete current offering to sell end-to-end solutions and integrated suites leveraging proprietary products (e.g. SIMBA Suite) Further develop our Cyber Defence solution strengthening its positioning (e.g. reinforcing our Cyber Range) with extended applications Adopt a sustainment approach positioning our offering along the whole life cycle and leveraging existing installed assets base Leverage our advanced existing offering, adapting it to modernise 3rd party legacy systems (e.g. T54 Optronics) while positioning in new products and service models Prospect new emerging segments (e.g. anti-uav systems or UAV/USV platforms) Extend our as-a-service offering adopting more flexible per-use pricing models (e.g. flying hours training in Simulation) and offering alternative financing structures Note: USV (Unmanned Surface Vehicle) Tier 1 position in attractive segments Increased value added to the client Accelerated growth We will gradually grow our CapEx in our product portfolio in 3 years 3 Transport & Defence (T&D) 27

28 SEGMENTED COMMERCIAL PROCESSES Specific commercial action plans per solution and strengthened alliances with platform integrators Strengthened commercial action in target geographies Specific action plans (e.g. Borders, Simulation) Special focus on markets with high potential Europe, as extended home market Strengthen existing + new alliances with platform integrators END USER Specific LatAm countries (e.g. Colombia, Ecuador) Asia, Middle East and Oceania Develop strategic alliances with local partners Air Naval Land Offering our full portfolio Gaining recurrence Approach Aftermarket where local installed base and recurrence have enough scale for a sustainable business We already identified a solid pipeline (~2.3 Bn) to sustain future growth 3 Transport & Defence (T&D) 28

29 New Eurofighter modernisations and sales (e.g. Spain, Germany, Belgium) New European fighter (FCAS) Exports related to F110 technology Euro MALE UAV F110 8x8 future exports New European programs (under the European Defence Action Plan) Note: FCAS (Future Combat Air System). OCCAR (Organisation Conjointe de Coopération en matière d'armement) 3 Transport & Defence (T&D) 29

30 Increase of air passenger traffic worldwide Passenger traffic (RPKs Bn) % Increase of flying aircrafts worldwide Aircrafts in service worldwide (k) % drivers of sustained demand for ATM systems Maintenance and replacement of legacy systems Very long development cycles, high client loyalty Innovative technology to solve aerospace congestion (e.g. Europe) Potential new ATM systems operators Already ~400 airports under construction or planned for Note: RPKs (Revenue per kilometre). Source: Boeing Market Outlook ; Markets and markets; Global airport construction review, CAPA Expected stable ~4% growth in the ATM market 3 Transport & Defence (T&D) 30

31 Indra has a leading position globally in Control Centres, Navigation and Surveillance Indra provides reliable end-to-end solutions to operators in the ATM market ATM Control Centres with Advanced Automation Systems (itec and managair) Providing reliable technology for the key critical systems of the ATM business Highly sophisticated and reliable technology Increased demand of cyber-secure technology CNS Navigation with Instrument Landing Systems (ILS) Surveillance with Secondary Radars (MSSR) Being a leading reference as a supplier providing end-to-end solutions Developing long lasting relationships with international reference clients Enaire in Spain 35 years DFS in Germany 20 years inats n the UK 10 years 3 Transport & Defence (T&D) 31

32 itec by Indra Europe has a challenge in air traffic management due to air traffic congestion and the fragmentation of aerospace Coflight Coopans Other potential itec partners In 2004 Eurocontrol, the European Commission and a selection of industrial partners took the lead to solve this issue and increase interoperability Indra is one of the key industrial partners of SESAR 7 European countries have already joined the itec Alliance along with Indra to fulfil present and future SESAR requirements, and +20 countries still pending to adopt a decision Note: SESAR (Single European Sky ATM Research) 3 Transport & Defence (T&D) 32

33 ~200 Control Centres Indra ATM business is present in 176 countries ~1,700 Instrument Landing Systems (ILS) ~400 Secondary Radars (MSSR) Note: Most significant countries with Indra's presence highlighted 3 Transport & Defence (T&D) 33

34 PRODUCT PORTFOLIO EVOLUTION Keep evolving leading products in current segments with technological updates Expanding into new segments to complement Indra's offering Develop leading Cybersecurity technology, fulfilling latent demand Successfully evolve itec with the future requirements of the Single European Sky, leading the SESAR interoperability Evolve CNS products and service model (e.g. GBAS) to maintain the technological and commercial leading position Grow on aftermarket leveraging our significant asset base of ~200 control centres, ~1700 ILS and ~400 radars installed Further develop remote towers to be a reference supplier, leveraging SESAR Indra already has leading technology installed (e.g. Norway) Note: ILS (Instrument Landing System). GBAS (Ground Based Augmentation Systems). ADS B (Automatic dependent surveillance broadcast). SESAR (Single European Sky ATM Research) We will gradually grow our CapEx in our product portfolio in 3 years 3 Transport & Defence (T&D) 34

35 SEGMENTED COMMERCIAL PROCESSES Leader in LatAm and Europe Strong positioning America Europe Africa Middle East Asia Pacific LatAm is a very strong Indra market, but still with important opportunities to come Further expand itec and continue growing with other CNS technologies Potential upside to continue growing, entering new countries Indra's recent successful projects allows us to continue growing Continue capturing opportunities in a fast growing market Multination program (ATM and CNS) for COCESNA countries Key relationships with Enaire (Spain), NATS (UK) and DFS (Germany) 20 years supplying ATM and CNS systems to Morocco Countrywide Advanced ATM systems in Oman Coverage of ~60% of China's aerospace Note: COCESNA (Central American Corporation for Air Navigational Services). ATM (Advanced automation systems for Air Traffic Management), CNS (Communications, Navigation and Services), ILS (Instrument Landing System) 3 Transport & Defence (T&D) 35

36 Change of cycle in infrastructure investment and therefore increased technology demand Changed trend in Spanish infrastructure investment -4% growth % growth % growth in global investment for Transport infrastructure expected until 2025 Transport infrastructure technology demand increased by New investment cycle Need for maintenance and upgrade of already existing infrastructure + Change in infrastructure operating models are generating additional opportunities Increased demand for intelligent systems adapting to the coming trend of Smart Transport Requiring mobility, interconnectivity and real time steering More flexible asset management demand is requiring new systems More efficient and scalable New opportunities for private players, as public administrations are externalising their operations and sharing risks (PPPs) +10% expected growth (+20% for Smart Transport) Source: Oxford Economics, Assessing the global transport infrastructure market Indra has the perfect mix: transport business know-how, proprietary products and digital capabilities 3 Transport & Defence (T&D) 36

37 Externally, drop of the national market in Spain linked to public investment Infrastructure investment in Spain (US$ Bn) CAGR '10-'14-10% Brent price ($/barrel) CAGR '14-'17 4% CAGR '17-'30 2% and economic slowdown in countries highly dependent on oil prices ~15$/barrel gap average 2017 Real US Energy Information Administration 2015 forecast Internally, management issues identified Lack of focus and high risk assumed implementing excessively tailormade solutions in international unfamiliar environments Weak control and risk management during projects execution. ~90M impact on EBIT due to restructuring needs and expected ~ 1/5 of sales at 0% margin in 2017 Opportunity cost: commercial activity focused on solving existing issues with clients instead of expanding the business Sources: Oxford Economics. EIA Annual Energy Outlook 2015; real data from World Bank. Our Transport business did not evolve as quickly as the market demanded 3 Transport & Defence (T&D) 37

38 New organisation and team New structure and external talent recruited for top management positions Reinforced clients and competitors view Product Portfolio Evolution Portfolio rationalisation and development of more standardised and packaged solutions Evolve proprietary products, strengthening our position in the Smart Transport market by taking them to the next technological step by gradually growing CapEx Segmented Commercial Processes Ongoing Productivity Upgrades Potential upsides New governance model (e.g. new organisation, new profiles, increased specialisation) Improved commercial processes (e.g. competitors intelligence, KPIs and incentives) New commercial plans on existing clients and prioritised geographies Restructured organisation and new team already in charge New operational plan improving control and risk management Opportunity to become an international reference in rail Safety & Signalling (ERTMS) beyond the local market Note: ERTMS (European Rail Traffic Management System) 3 Transport & Defence (T&D) 38

39 Mova Consulting Mova Collect Mova Traffic Mova Protect Mova Experience Mova Comms Mova Care 1.Consulting and Planning for Transport and Infrastructures 2.Design Engineering for Transport Infrastructure. 3.Construction Engineering for Transport Infrastructure 4.Project Management Services 5.Operations Consulting 1.Ticketing 2.Toll 3.Back Office 1.Planning & Optimization Systems 2.Bus Control Systems 3.Rail Control Systems 4.ITS Control Systems 5.Tunnels Control Systems 6.Airports Control Systems 7.Ports Control Systems 8.Design and Building of Control Centers 9.Transport Control Terminals 1.Safety 2.Enforcement 3.Video surveillance 4.Cybersecurity 5.On-board systems 1.Information and Publicity for passengers 2.Entertainment 3.Digital User Experience 1.Communications 2.IoT Platforms 3.IT Transport Infrastructure 1.Infrastructure O&M 2.Technology O&M 3.Transportation Services O&M 4.New operation models 3 Transport & Defence (T&D) 39

40 Mova Consulting Mova Collect Mova Traffic Mova Protect Mova Experience Mova Comms Mova Care Algiers Airport Project and supervision of the construction of the new terminal of the Int. Airport Riyadh ticketing AFC system for public transport in Riyadh Urban Tunnels Control Centre Tunnel control centre in London ASFA-D High-end solution for rail safety in Spain Kenia Airport Operations Integration of all the land operations High Speed Mecca-Medina Most complex project in the Middle East Port Community System National Port Network Panama Canal Expansion of the canal, a reference in technology and security systems Electronic Toll Management in Texas Integrated tolling operation High Speed Control Centre Rail Traffic Control Systems Sidney Trains Intelligent video surveillance technology Renfe High Speed Systems Equipos embarcados y entretenimiento ITS Colombia Systems for control and radiocommunications for the Bogotá- Villavicencio highway T-Mobilitat Greater integration of collection and Contactless Note: ASFA-Digital (Safety & Signalling System) 3 Transport & Defence (T&D) 40

41 PRODUCT PORTFOLIO EVOLUTION Consolidate Indra's positioning in the traditional segment Increase recurrence and profitability Evolve existing product portfolio to capture opportunities in the Smart Transport ecosystem Position in the rapidly growing and fragmented smart transport market Culmination of our investment in ERTMS Our goal is to become the Spanish big player in the international safety market Note: ERTMS (European Rail Traffic Management System) We will gradually grow our CapEx in our product portfolio in 3 years 3 Transport & Defence (T&D) 41

42 SEGMENTED COMMERCIAL PROCESSES New governance model New selective Commercial Plans Product managers focused on pre-sales activities Key account managers structured according to our 4 solutions, clients and geographies Specialised profiles per client and geography with stronger commercial skills New KPIs and incentives Focused commercial efforts geographically Consolidate existing presence assuring recurrence clients in Europe, LatAm, Middle East and Asia Pacific Gain additional penetration in US, Canada, UK and Nordic Countries Product portfolio taxonomy Client segmentation and prioritisation +Volume +Profitability +Recurrence 3 Transport & Defence (T&D) 42

43 ONGOING PRODUCTIVITY UPGRADES 1 Lean & Automation Full end-to-end Lean approach, applying automation at the core of our operations. Make vs buy optimisation 2 3 Building Blocks Delayering & Efficiency Gain agility and improve the time to market applying shared engineering and manufacturing capabilities Reduce management layers and Increase the interaction between commercial, manufacturing and delivery ~10%/15% increase in efficiency between 2020 vs Transport & Defence (T&D) 43

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45 In 2015 digital was an emerging business, today it is on the CEO main agenda "CIOs now have a unique opportunity, but they must 'flip' their information, technology, value and people leadership practices to deliver on the digital promise" Digitalisation is a direct driver for value Top 5 most valued companies Market conditions are expected to be favourable Expected average annual growth 1 55% Technology is the 2nd most cited priority for CEOs after growth 42% of CEOs say "digital first" or "digital to core" is their company digital business posture NASDAQ 100 outperformed S&P500 by 17 p.p. since our first IDay in % 16% 11% Cyber IoT Cloud AI Source: Market and markets, Gartner, International Data Corporation (IDC), BCG Perspectives 1. Cyber CAGR, IoT CAGR, Cloud CAGR, AI CAGR 4 Minsait (IT) 45

46 M EBIT +58 M EBIT * Pending write-offs Brazil s losses Heavy cost structure Limited standardisation of proprietary products and disperse portfolio Lack of control and proliferation of onerous projects (*) 2017 displayed data includes Tecnocom consolidation since April 18th, 2017 No additional significant write-offs Brazil s business turnaround achieved (EBIT Margin of 4.7% in 1H18 vs -3.6% in 1H17) Leaner cost structure Rationalised portfolio and structured product offering Increased control and tracking due to an improved analytical accounting and reduction of onerous projects 4 Minsait (IT) 46

47 Despite of our progress, we faced challenges in a difficult macro context resulting in lower sales than expected Harder restructuring, needing greater focus and efforts than expected Longer and more difficult transition to exit from onerous projects High impact of non profitable sales lost (Brazil) Focus on healthy growth, instead of growth at any cost Lower growth in Latin America where Indra has high exposure Delayed public contracts due to lack of government during several quarters in Spain IT revenues ( M) 2,500 1,621 1,500 1,573 Slower mix change towards high value Market evolved from generating digital needs for our clients..to be the highly demanded topic Low commodity prices and oil crisis limiting GDP growth in key markets * Cultural change is not immediate (*) 2017 Indra Stand Alone 4 Minsait (IT) 47

48 Minsait commercial brand for Indra Portfolio enhancement Reinforced control and delivery model Selective Acquisitions Launched in 2016, focused on digital transformation Transformation trigger of our move to high value Now becomes the brand for our whole IT division Rationalisation and standardisation of our product portfolio easing implementation Creation of a new set of value propositions tackling all challenges derived from required business transformations of our clients Migration of our products to Cloud New product delivery model with specialised centres of excellence Increased control in tender offering process Closer monitoring of less profitable projects Sharp reduction in the number of unprofitable projects Consolidated leadership in Spain and LaTam with high complementarity Payment Processing solution to enhance our product portfolio Operating synergies delivered as expected. Restructuring process is over Reinforcement of Digital and Proprietary Products Improves our time-to-market Completes our end-to-end offering 4 Minsait (IT) 48

49 PRODUCT PORTFOLIO EVOLUTION Products Modular suite of products (under the brand Onesite), leveraging open ecosystems and a strong set of strategic alliances Combination of on-premise and cloud offering, with increasing focus on As-A-Service models Value propositions for all Industries Minsait end-to-end set of solutions to transform businesses: From strategy/ideation, implementation & transformation to operations Concrete value propositions aiming to generate impact through business and technology (legacy & new) transformation Services Set of capabilities and expertise that, combined, make up Minsait value propositions From strategy & management consulting to IT & digital consulting, ERP consulting, cybersecurity & operations 4 Minsait (IT) 49

50 PRODUCT PORTFOLIO EVOLUTION A set of value proposition in 4 main domains Advanced customer relationship delivery models to all the different industries Energy & Industry m 1, ( 26% ) Oil & Gas Utilities Airlines Industry... New products, services and business models Advanced technologies, processes and operations Financial Services Telecom & Media 605 ( 33% ) Banking Insurance Business protection solutions Public Administrations & Health 236 ( 13% ) 506 ( 28% ) Media Telecom Elections Health Public Sector Minsait (IT) 50

51 PRODUCT PORTFOLIO EVOLUTION Digital (20% of IT sales) Business Consulting Digital Consulting and Technology ERP Consulting Cybersecurity Operations We open up new paths in the strategic definition and transformation of our clients businesses We create differential experiences and state-of-the-art generation solutions that drive our clients businesses We optimize and evolve key processes through leading business management solutions We preserve our clients assets and digital identity creating secure client experiences We manage our clients operations through a differential approach 4 Minsait (IT) 51

52 PRODUCT PORTFOLIO EVOLUTION Energy & Industry Oil & Gas Refining Transportation Safety & Environment Utilities Generation Distribution Commercialization Airlines Revenue accounting Multi-channel reservation Payments Industry Manufacturing Assets Workforce Financial Services Telecom & Media Banking Digital bank B2B relations Opening accounts Telecom Advanced analytics Customer s experience Insurance Complete platform Integral solution for the sales forces Multi-channel tools Media Corporate Services Customers & channels Operations Public Administrations & Health Elections Electoral solutions Digital Democrazy Protection Public Sector Taxes Justice E-goverment Health Management system B2B processes Network 4 Minsait (IT) 52

53 PRODUCT PORTFOLIO EVOLUTION Energy & Industry Financial Services Telecom & Media Public Administrations & Health We are leaders in energy industry solutions for the transmission and distribution grid We are leaders in card processing in Spain and America We reduce costs through a new billing model for Telefonica We make a difference in the management of more than 400 electoral processes We developed, together with Repsol, a solution for early detection of hydrocarbon spill We create the first fully digital bank in Argentina We guarantee optimized communications for Vivo, using more than 33,000 km of fiber optic We are experts in technology solutions used to manage electoral processes We improve the competitiveness of the nº1 airline in Brazil We help private banks during their transition with our platform We help customers port their number, with processes adapted to the customer and country We drive the implementation of the new home medical assistance concept We build the new online sales channel for a leading retailer in optical services (ecommerce) Transforming the core insurance industry from customer s perspective We improve the customer s experience optimizing the back office We are helping the Regional Government of Andalusia in its digital transformation 4 Minsait (IT) 53

54 Business Analytics // Big Data // Robotics // Automation // Artificial Intelligence PRODUCT PORTFOLIO EVOLUTION 4 Minsait (IT) 54

55 SEGMENTED COMMERCIAL PROCESSES Spain Prioritise portfolio mix shift towards digital, while maintaining market positioning on traditional services LatAm Grow profitably and sustainably while expanding Minsait and seizing transformation opportunities Rest of the world Base growth on our proprietary products and strategic alliances Leverage vertical specialised teams to accelerate high value migration Use Minsait as trigger of end-to-end projects for digital transformation Emphasise co-leading digital initiatives and businesses to accelerate migration to high value and build references Actively commercialise (push) more efficient digitalised traditional offering taking advantage of transformation 4 Minsait (IT) Leverage specialised global teams of our products Launch Minsait commercially in key countries Take advantage of growth opportunities (SAP in I&R, payments solutions) Proactively pursue big transformational deals with dedicated teams (e.g. externalisations in Banking) Seek for more efficient digitalised traditional projects (e.g. directly implement Outsourcing in Cloud) End-to-end value propositions Proprietary products Leverage global teams specialised in proprietary products e.g. Energy distribution solution (InGrid), payment processing solutions, Hotel Management solution Explore third party channels Establish new alliances to expand the reach of our products (e.g. Microsoft's Azure) 55

56 ONGOING PRODUCTIVITY UPGRADES 1 Lean & Automation Apply full end-to-end Lean approach, fostering a culture of continuous improvement and placing automation at the core of our operations 2 Delayering 3 Pyramid Optimisation Reduce management layers to increase agility and accountability while maximising efficiency Reshape our production and delivery pyramid ~1.5-2pp induced direct margin increase by Global Production Increase off-shoring by leveraging our existing capabilities in Latin America 4 Minsait (IT) 56

57 LatAm accelerated growth Seasonal Electoral Processes Accelerated digital transformation 4 Minsait (IT) 57

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59 1 2 9M18 order intake kept growing above revenues (+8% vs +6% in local currency). Backlog grew by +9% and surpassed 4bn. 3 Revenues up +6% (local currency). Transport revenues up +42% in 3Q M18 EBITDA totaled 183m (+7% vs 9M17). EBITDA Margin improved to 8.4% in 9M18 and to 9.4% in 3Q18. 9M18 EBIT reached 115m vs 124m in 9M17. EBIT Margin was 5.3% vs 5.8% in 9M17. Excluding Tecnocom restructuring (first-half) and the CNMC fine of 13.5m (third quarter), EBIT would have reached 142m and EBIT Margin would have improved to 6.5% in 9M18. FCF generation amounted to -46m in 9M18 (vs 44m in 9M17), affected by the seasonality of the third quarter and the difficult comparison vs 3Q17. 7 Net debt/ebitda LTM remained stable at 2.5x vs 9M17. Ex acquisitions, it would have decreased to 1.4x. 8 Indra maintains its 2018 guidance (Revenues, EBIT and FCF pre working capital). 59

60 9M18 Sales Growth Reported +3% Local Currency +6% 3Q18 Sales Growth Reported -4% Local Currency -1% m m 60

61 Order Intake ( m) Local Currency / Reported Revenues ( m) Local Currency / Reported 2,351 +8% / +5% 2,466 2,116 +6% / +3% 2,174 Spain 46% +15% 1,074 1,233 50% 47% +13% 985 1,112 51% 22% % / +4% 547 America 22% 22% % / -8% % 19% 13% % / -18% % / +5% 319 Europe 15% AMEA 13% 17% 14% % / +1% % / -12% % 12% 9M17 9M18 9M17 9M18 61

62 9M18 EBIT and Margin 3Q18 EBIT and Margin 5,8% -0,5pp 5,3% 6,3% -0,3pp 6,0% 124-6,9% ,2% 42 9M17 EBIT ( m) 9M18 EBIT ( m) 1.2pp impact 3Q17 EBIT ( m) 3Q18 EBIT ( m) 1.9pp impact 9M18 EBIT and Margin excluding the impacts of Tecnocom rest. and CNMC fine 3Q18 EBIT and Margin excluding the impact of CNMC fine 6.2% 0.3pp 6.5% 6.3% 1.6pp 7.9% 7.5% % 56 9M17 EBIT* ( m) 9M18 EBIT ( m) * 9M17 EBIT excluding the impact of Tecnocom restructuring costs 3Q17 EBIT (m ) 3Q18 EBIT (m ) 62

63 T&D 9M18 Order Intake ( m) Local Currency / Reported 9M18 Revenues ( m) Local Currency / Reported % / -4% % / +21% % 359-0% / -1% % 50% 408-4% / -5% % / -4% % 50% 50% 52% % / +42% % 9M17 9M18 3Q18 Revenues ( m) Local Currency / Reported 9M17 9M % / +0% 259 Defence & Security Transport & Traffic 49% 51% % / -8% % / +8% % 55% 3Q17 3Q18 63

64 T&D 9M18 EBIT ( m) 3Q18 EBIT ( m) % % 33 9M17 9M18 3Q17 3Q18 9M18 EBIT Margin (%) 3Q18 EBIT Margin (%) 13.0% -0.2pp 12.8% 14.0% -1.4pp 12.6% 9M17 9M18 3Q17 3Q18 64

65 MINSAIT (IT) 9M18 Revenues ( m) Local Currency / Reported 9M18 Order Intake ( m) Local Currency / Reported 26% 1, % / +7% +27% / +22% 1, % 27% 1, % / -3% +25% / +19% 1, % 33% 27% % / +10% % / -10% % 23% 32% 31% 11% % / +17% % / -44% % / +2% 177 9M17 9M18 Energy & Industry Financial Services PPAA & Healthcare Telecom & Media 39% 18% 11% 13% 24% 31% 32% 13% % / +4% 178 9M17 9M18 3Q18 Revenues ( m) Local Currency / Reported 478-2% / -5% % / +15% % / +4% % / -30% % / -6% 57 13% 30% 34% 24% 13% 3Q17 3Q18 65

66 MINSAIT (IT) 9M18 Operating Margin 1 3Q18 Operating Margin M17 Op. Margin ( m) 9M18 Op. Margin ( m) 3Q17 Op. Margin ( m) 3Q18 Op.Margin ( m) 9M18 EBIT and Margin 3Q18 EBIT and Margin 1.4% -0.3pp 1.1% 2.1% +0.1pp 2.2% M17 EBIT ( m) 9M18 EBIT ( m) 3Q17 EBIT ( m) 3Q18 EBIT ( m) 1. EBIT before Other Operating Income & Expenses, which includes: staff reorganization, integration and acquisition costs, fines, amortization of intangible assets (PPA from acquisitions) and equity based compensation. 66

67 MINSAIT (IT) (local currency) Order Intake Revenues EBIT EBIT Margin BRAZIL 9M17 9M18 Variation 586,8 740,5 +26% 569,1 609,5 +7% -11,6 31,1 NA -2.0% 5.1% +7.1pp Costs Synergies 1 Lean & Automation 2 Delayering 3 Pyramid Optimisation 4 Global Production Apply full end-to-end Lean approach, fostering a culture of continuous improvement and placing automation at the core of our operations Reduce management layers to increase agility and accountability while maximising efficiency Reshape our production and delivery pyramid Increase off-shoring by leveraging our existing capabilities in Latin America PLAN IT m 1m 0m 24m 41m 42m 9M18 11m 13m 67

68 Quarterly FCF ( m) FY15-50m FY16 184m FY17 186m 9M18-46m Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18-55 Accumulated FCF LTM ( m) OPERATING FCF BEFORE WC ( m) % H15 9M15 FY15 1Q16 1H16 9M16 FY16 1Q17 1H17 9M17 FY17 1Q18 1H18 9M18 9M17 9M18 68

69 Net Debt Bridge Cash Flow ( m) Includes ACS acquisition (c. 40m) FCF = -46m 69

70 Net Working Capital (DoS) Restated* 9M18 *2017 restated for IFRS 15 and IFRS 9 70

71 837 (173) Net Debt ( m) 700 (187) 666 (187) (187) (187) Net Debt (Factoring) (1) 3Q15 4Q15 3Q16 3Q17 3Q18 6,6x 5,4x Net Debt/EBITDA LTM (Times) 3,1x 2,5x 2,5x 1.4x ND/ EBITDA LTM ND/ EBITDA LTM Ex Acquisitions Payments 3Q15 4Q15 3Q16 3Q17 3Q18 (1) Non-recourse factoring 71

72 Gross and Net Debt Structure 1,543m 858m Corporate Bonds Convertible Bonds 402 9M18 % total 2017 % total L/T Debt 1,338 87% 1,016 79% S/T Debt % % Gross Debt 1, % 1, % Cost of Gross Debt 2.1% 2.2% Cash & Others 858 n.m. 699 n.m. Net Debt 686 n.m. 588 n.m. Cost of Net Debt 3.4% 3.0% R+D Loans Bank Loans EIB 1 Loans Gross Debt Gross Debt Maturity Profile ( m) Other available credit facilities: 190m 187 Factoring Cash & Cash Equivalents m 686 Net Debt and above 3 1. European Investment Bank.2. Including 156m Convertible Bond 3. Including 246m Convertible Bond with 2023 maturity and 298m Corporate Bond with 2024 maturity 72

73 Investor Relations Avenida de Bruselas, Alcobendas Madrid Spain T