Cassidian's global vision

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EADS defence arm Cassidian's financial performance was on track in 2011, notwithstanding a major restructuring effort and the austerity measures being introduced in its European home markets France, Germany, Spain and the UK.

Cassidian reported reduced revenues of €5.8 billion ($7.6 billion) and orders worth €4.1 billion for 2011, representing falls of 2% and 3% respectively against 2010. More notable were the 28% decline in earnings before interest and taxes - down to €331 million - and 8% reduction in orders backlog, to €15.5 billion.

RESTRUCTURING EFFORT

"Numbers are numbers, but sometimes they need interpretation," says chief executive Stefan Zoller. "Last year we turned the company upside down, and what we delivered was ahead of plan."

Restructuring the company is a major undertaking. Savings of €161 million were achieved in 2011 and a further €1 billion is targeted in 2014. Measures adopted last year resulted in associated costs of €38 million, while undisclosed programme changes sapped a further €34 million from earnings.

eurofighter tails, katsuhiko tokunaga/eurofighter

 © Katsuhiko Tokunaga/Eurofighter

Eurofighter remains key, with India still a target

In its annual results document, EADS also identified its defence unit's contribution as having been "burdened by a significant increase in research and development" spending - a factor Zoller says will be critical to its future business success.

Cassidian allocated €275 million to R&D activities in 2011, marking a €24 million rise over 2010 and a 64% upturn since it spent €168 million in 2007.

Zoller notes that the company's home customers now expect industry to self-fund R&D work. "With the Eurofighter, we will develop the [active electronically scanned array] radar and other elements, and the nations will come in later," he says. But with Europe to remain cash-strapped, he believes such work could increasingly be conducted with international partners.

"We have gone from national to European consolidation, but now the austerity plan means that all of Europe together cannot sustain the technology base, even if we share. So either Europe buys from elsewhere, or we have to share the development of new technologies beyond Europe.

"What we lose in the home markets must be compensated on the global market - it's a new equation," Zoller says. "We have to go where the business is."

Asia and the Middle East represent the strongest current opportunities, and Cassidian is now established in 10 nations outside its European homes. "We invest a lot in market proximity and customer intimacy," Zoller says. One such example is India, where it is to provide technical support on domestic projects, while also retaining some hope of securing a Eurofighter Typhoon order.

"Our target over the next five years is to have a 50:50 share in global versus domestic revenues," says chief financial officer Gerlinde Honold. Revenues from the global sector have already risen from 22% of business in 2007 to 31% last year. More must be done, however, as just 7% of the company's workforce is currently based outside of Europe.

For now, Eurofighter remains a key programme, with Cassidian having received an €840 million contract in late March to support aircraft flown by Germany and Spain for the next five years.

The company's figures for 2012 will also benefit from a major contract for MBDA Mica air-to-air missiles signed by India early this year. Zoller says its provision of control stations for NATO's Alliance Ground Surveillance system will be worth "a couple of hundred million" euros through a deal likely to be confirmed in May.

UNMANNED SETBACK

The last financial year brought a personal blow for Zoller, with the halting of development work on the Talarion medium-altitude, long-endurance unmanned air system after a major investment lasting several years.

Talarion attracted interest, but crucially no state funding, from Germany, Italy and Turkey. But Zoller is holding on to his dream of eventually seeing a common European system advance, with an industrial share for all partners - including France and the UK.

"We may see a little bit of a delay," he says. "But overall a one-European solution would be good news, with a bigger scale and bigger numbers." Pointing to his company's lengthy R&D activity on the Talarion, he adds: "We have spent so much money, time and effort in the last 10 years to get where we are. That is why I am quite positive."