OUR COMMITMENTS INTO ACTION

ANNUAL REPORT 2018 02-03ANNUAL REPORT 2018

LEGEND

Latécoère is a tier 1 partner to Interconnection Systems major international aircraft Aerostructures manufacturers (Airbus, Embraer, Dassault, Boeing and Bombardier), Partners in all segments of the aeronautical market (commercial, regional, corporate and military aircraft),

specialising in two fields: AROUND HEADQUARTERS • Aerostructures: fuselage sections and doors. Toulouse • Interconnection systems: Toulouse Montredon

onboard wiring, electrical Colomiers harnesses, avionics bays and Labège equipment & systems. Gimont €659.2 4,958 million in revenue Employees

Of which 58% is from Aerostructures 13 business Countries

And 42% from Interconnection Systems business Boeing Bombardier CANADA CONTENTS Seattle

04-05 16-19 Laval Thales USA CHAIRMAN’S HUMAN RESSOURCES Safran MESSAGE AND CSR Cabin Garden Grove 06-07 20-21 HAD SOUALEM RETROSPECTIVE AEROSTRUCTURES MEXICO 08-09 22-23 VISION INTERCONNECTION SYSTEMS 10-11 HERMOSILLO 24-25 STRATEGIC

PROJECT CHANGE BRAZIL MANAGEMENT 12 -13 26-27 INNOVATION AND R&T AN EXPANDED OFFER 14-15 Embraer FINANCIAL RESULTS

Latécoère thanks all the collaborators who took part in the production of this annual report and, more broadly, in the achievements of 2018. Latécoère - Publication Director: Thierry Mahé Publishing Manager: Bertrand Lamarque Conception and realization: Photo credits: Arnaud Spani PROFILE

A STRONG INDUSTRIAL FOOTPRINT In direct proximity to its customers, the Group has developed its presence around the world and has production sites in 13 countries. In 2018, Latécoère opened two new plants in France and Bulgaria, and began EUROPE constructing a site in India. The Latécoère Group is currently the world leader in avionics racks and aircraft doors, in second position for electrical harnesses, and one of AIRBUS the leading European fuselage manufacturers. ATR

Dassault Aviation HAMBURG

STELIA Aerospace

UNITED KINGDOM

Bristol GERMANY

CZECH REPUBLIC FRANCE PRAGUE

Mérignac

Liposthey Le Crès Vitrolles

EUROPE BULGARIA Nagoya Mitsubishi

JAPAN TUNISIA INDIA MORROCO

Belagavi

FOUCHANA-CHARGUIA

PLOVDIV

Embraer JACAREI 04-05ANNUAL REPORT 2018

A GROUP BOLSTERED BY NEW STRENGTHS

As a leading partner of major international aircraft manufacturers, Latécoère produced satisfactory results in 2018, thanks in particular to its implementation of the Transformation 2020 Plan. Optimistic about the future, Pierre Gadonneix looks back on the efforts taken since 2016 that are now bearing fruit.

Punctuated by encouraging results and strong, organic growth, 2018 was an important year for Latécoère – a year of transition. Thanks to the action undertaken since 2016 and the launch of the Transformation 2020 Plan, the company has been profoundly reshaped and modernised. I would like to take this opportunity to recognise the commitment of our teams! We are now driving forward in both of our divisions. The positive sales momentum that began in 2017 continued through 2018, as reflected in the Build-to- Print contracts recently secured with new customers, key stakeholders in their field. The 3.1 % organic growth recorded this year reflects the Group’s ability to better serve its customers with the right technology, and underlines its ability to invest in innovative solutions while producing at competitive prices.

In 2018, the transformation of the Aerostructures Division continued. New manufacturing facilities, with a strong focus on the industry of the future, were commissioned in order to further strengthen our competitive advantage. The Interconnection Systems Division also recorded strong growth after signing long-term contracts with new customers and securing new projects. This new momentum will enable the Group to fully capitalise on its potential and sustain profitable growth.

In 2019, the final investments of the Transformation 2020 Plan will be made. Our new production “ In 2019, we will make the last significant capacities and enhanced competitiveness bring us investments in our Transformation 2020 to the fore to successfully complete the next round Plan: a plan that adapts our company of programs scheduled for the 2020-2025 period. We are therefore confident about the future and to meet the challenges of the sector – in our ability to secure new contracts. on all levels – in order to better meet our customers’ requirements in terms The Board of Directors and its Chairman fully support the development strategy defined by of deadlines, costs and quality. the management team through ongoing dialogue Pierre Gadonneix, with shareholders, investors and the company’s Chairman of the Board representative bodies. CHAIRMAN’S MESSAGE

BOARD OF DIRECTORS

Pierre Gadonneix CHAIRMAN OF THE BOARD OF DIRECTORS Independent Director Chairman of the Strategic Committee and Member of the Appointments and Compensation Committee Company : EDF – Honorary Chairman

BOARD MEMBERS

Yannick Assouad Jeremy Honeth Isabelle Azemard Claire Dreyfus-Cloarec CEO DIRECTOR INDEPENDENT INDEPENDENT DIRECTOR Member of the Strategic Company: Apollo Global DIRECTOR AND LEAD DIRECTOR Committee Management Chairman of the Appointments Chairman of the Audit Company: Latécoère and Compensation Committee and Risks Committee and Member of the Appointments and Compensation Committee

Matthew Glowasky Chantal Genermont Alexander Nathalie Stubler DIRECTOR DIRECTOR Humphreys INDEPENDENT Member of the Audit and Company: Enedis DIRECTOR DIRECTOR Risks Committee and of the Company: Apollo Global Member of the Audit Strategic Committee Management and Risks Committee and Company: Monarch of the Strategic Committee Alternative Capital Company: Transavia France

Christophe Villemin Valérie Boyer DIRECTOR DIRECTOR Member of the Appointments REPRESENTING and Compensation Committee THE EMPLOYEE and of the Strategic SHAREHOLDERS Committee Company: Latécoère Company: Apollo Global Management 06-07ANNUAL REPORT 2018

© BlackSky Satellites BlackSky END OF 2018. Latécoère, through its Interconnection Systems branch is selected by LeoStella to supply 2 018 harnesses for BlackSky’s new-generation small satellites that will enable users of BlackSky services to benefit from innovative, cutting-edge A look back at some of the measurement tools. The first smallsats whose harnesses will news that marked 2018. have been manufactured by Latécoère will be put into orbit from 2019.

Global 7500 Bombardier JANUARY. Latécoère was chosen by STELIA Aerospace to manufacture

HIGHLIGHTS the overwing emergency exit doors for the Global 7500, one of Bombardier’s largest business jets. The build-to-print contract involves several of the Group’s Aerostructures sites, including the 4.0 plant in Toulouse and the Hermosillo plant in Mexico.

© Mitsubishi Aircraft Corporation

© Bombardier RETROSPECTIVE

Beluga XL Airbus JULY. The first BelugaXL completed its maiden flight in Toulouse. Teams from © Airbus both Latécoère divisions participated in producing the aircraft – on the one hand in manufacturing the pressure bulkhead separating the cockpit from the cargo area; on the other in designing, manufacturing and installing the front and rear electrical harnesses.

Falcon 8X Dassault OCTOBER. The Falcon 8X was certified for its enhanced flight vision system. The aircraft is equipped with Latécoère baggage hold doors, tail fuselage sections and EWIS harnesses. © Dassault Aviation

KC-46 Boeing DECEMBER. Latécoère’s Aerostructures branch secured the contract for manufacturing aft access doors for Boeing’s refuelling tankers.

MRJ Mitsubishi Aircraft MID-SEPTEMBER. The first © Mitsubishi Aircraft Corporation harness was installed on the Mitsubishi Regional Jet (MRJ) by Mitsubishi Aircraft in Nagoya, in the presence of Latécoère teams. Since 2017, the Interconnection Systems Division has been working on the design, development, manufacture and installation of EWIS, with a view to certifying the aircraft.

© Boeing 08-09ANNUAL REPORT 2018

A RESTRUCTURED COMPANY WITH THE MEANS TO ACHIEVE ITS GOALS

Since taking over as CEO of Latécoère in 2016, Yannick Assouad has driven a profound and meticulous transformation of the company. Changes are still underway, but the Group is already unrecognisable – as are the attitudes of its teams. A look back at the year’s key events and prospects for growth.

What are your thoughts on 2018? It was a year of transition characterised by major investments, particularly in our industrial facilities, to make them more productive and innovative. We now have very efficient production sites, particularly in countries where costs are competitive, but also in France with our new Toulouse 4.0 plant. For certain products we have a competitive We are implementing digitalisation at the very core advantage, such as Boeing 787 doors, for which the of our industrial facilities. While it is not easy, it is a very margins that were initially rather negative are now constructive step for the future. We have also taken improving gradually. From an operational point of the opportunity to introduce stricter requirements view, our Aerostructures Division had to deal with regarding staff safety – constant vigilance is key. the defection of a major supplier, but 2018 was Our Transformation 2020 Plan is progressing nonetheless the starting point of a commercial as planned, as are reductions to our cost base. revival for both of our divisions. VISION

Can you tell us about the commercial momentum that Latécoère is enjoying? After the trials of recent years, Latécoère is now geared up and ready to draw on its recovered force. I aim to strengthen the Group’s position in its key markets. When it comes to Interconnection Systems, the Group is already the market leader for avionics racks and in second position for onboard wiring. In the Aerostructures Division, this revival is not as stark in the absence – for the time being – of new major programs, but a number of notable successes were achieved in 2018. A feeling of renewed pride can be felt among employees. design a new aircraft that breaks with previous What challenges will Latécoère face in 2019? models. Latécoère is hoping to generate growth from To ensure that aircraft manufacturers and their these future platforms; aeronautics is growing twice partners continue to turn to Latécoère, we must as fast as global GDP. These new programs are pursue investment in our own products and therefore vital in ensuring the expansion of air traffic. strengthen our capacity for innovation. This is particularly true for the Interconnection Systems Apart from these industrial challenges, branch, which is currently experiencing technological what challenges will you be facing tomorrow? revolutions, such as the transition from copper Environmental protection is one of our major cabling to fibre optics for data. Our main asset, concerns. By the end of 2019, Latécoère should be shared by both divisions, is the expertise of our one of the first intermediate-sized enterprises to design offices. Highly skilled in their respective fields, measure its global carbon footprint and then take our teams are involved in everything from design corrective action to reduce it. More broadly, in 2018, to testing and certification, which is rare. the Group initiated in-depth work to build a solid It is more complex, however, on the Aerostructures and coherent CSR strategy, offering a 360° view of side, mainly due to the large number of competitors. the risks and challenges of sustainable development. While the Group is the world’s leading independent Target action plans will be associated with it and door manufacturer, this is not the case for fuselage undertaken from 2019. Such an approach is essential sections. This is why we are investing in new for a forward-looking Group that intends to support materials, particularly composite materials, in order the major changes in the aeronautics sector. to be at the forefront of innovation.

How can you foster growth in a consolidating sector? In the Interconnection Systems market, there are many attractive related fields, such as power supply, EXECUTIVE COMMITTEE lighting and optics. These are technological niches, where Latécoère could grow through acquisitions. In the Aerostructures market, competition is fiercer, CEO with significant investments in design and tooling. Yannick Assouad Looking to the future of aviation, Latécoère will have HUMAN RESOURCES to participate in consolidating the sector. Hervé Blanchard This is because the aeronautics industry is consolidated horizontally rather than vertically, FINANCE just like Esterline was bought out by TransDigm Sébastien Rouge and Zodiac Aerospace by Safran. Few synergies are produced, the objective for the buyer being to OPERATIONS add new productions to their portfolio. This is Thierry Mootz precisely what gives them bargaining power and, above all, resistance to pressure on prices. INNOVATION AND R&T Serge Bérenger

What are you expecting from the next round AEROSTRUCTURES of aeronautical programs? Emmanuel Rémy Current societal trends point to new generations of aircraft. It remains to be seen when they will arrive: INTERCONNECTION SYSTEMS in 2020, 2021 or 2025? Aircraft manufacturers are Denis Bretagnolle waiting for this opportune moment when enough progress will have been made in technology to 10 -11ANNUAL REPORT 2018

Presented on 7 June 2016, the Transformation 2020 plan initiated the strategic repositioning of the Latécoère Group. The plan aims to prepare the Group for the next round of aeronautical programs, scheduled for 2020-2025, by gaining a competitive edge and renewing its investment capacity. The strategy is bearing fruit as Latécoère begins a new phase of improvements to its operational performance. TRANSFORMATION­ 2020

The new 4.0 plant in Toulouse Montredon. STRATEGIC PROJECT

RADICAL OVERHAUL OF LATÉCOÈRE’S Investments for the Transformation 2020 plan INDUSTRIAL SET-UP amount to 130 million euros. 65% of that has been spent so far, and 48% of the cost Following an initial phase of restructuring its financial and human resources (2015-2016) and redeploying reductions that the plan is expected to deliver its industrial set-up, the launch of the second wave had been achieved by the end of 2018.” of the Transformation 2020 plan in 2017 saw the Thierry Mootz, Chief Operating Officer optimisation of administrative and production processes, a review of Latécoère’s supplier portfolio, and an effort to bring purchasing costs under control. From 2015, a large number of industrial transfers were carried out within the Aerostructures (787 doors, Rafale T56, and F7X air inlet) and sites. For example, its Montpellier site now specialises Interconnection Systems divisions. These relocations in space applications, while batch production and redistributed production among European sites, manufacturing are now based in Toulouse. introducing automation wherever possible, and Sites located abroad have been specialised best-cost countries where, thanks to better labour according to customer proximity and to maximise costs, essential manual processes can be carried out. the division’s competitiveness. Latécoère was thus able to optimise its sites. A new plant is scheduled to open in India in 2019 Investments were made and two plants opened and the sites in Tunisia will be merged into a single in 2018. factory as of late 2019. The first, in Toulouse, is used to manufacture Finally, Latécoère will open its new head office in elementary metal parts for aircraft doors and fuselage the centre of Toulouse by mid-2020. In particular, sections. This Industry 4.0 plant is a real technology this will bring together all the administrative and trove: connected, digitalised and automated. Nearly support functions currently spread across several 45 million euros have been invested in the site over sites in the Toulouse area, including design offices 3 years. and innovation. The second, in Plovdiv, Bulgaria, is used for small- scale assembly by the Aerostructures Division. The industrial site will receive around 15 million euros BECOMING THE INDUSTRY REFERENCE in investment over 3 years. Latécoère will continue to improve its competitiveness by cutting internal costs, optimising purchasing STRATEGIC REPOSITIONING and internalising the manufacture of critical parts, while relying on its international presence and “In addition to improving competitiveness, the pursuing digitalisation. Transformation 2020 plan aims to consolidate and This strategy of proximity to customers coupled optimise the Group’s production sites and, as far as with a dynamic approach to innovation will enable possible, achieve greater proximity to our customers,” it to enter new market segments. explains Thierry Mootz. Many products have been It is largely thanks to the Transformation 2020 plan relocated over the last three years. For example, the that the Group is set to become the reference in both entire production of Boeing 787 doors has moved Aerostructures and Interconnection Systems. from Toulouse to Mexico (compared with 50% previously), and the manufacturing of Embraer E1 and E2 doors will soon be relocated to Brazil. Similarly, the manufacturing of small door sub-assemblies has been transferred from Prague to the new plant in Plovdiv, Bulgaria. The Interconnection Systems Division has also redistributed products among its various production 12-13ANNUAL REPORT 2018

Though its transformation plan, Latécoère has once again given itself the means to innovate. Upstream of Research and Development (R&D), responsible for designing new products, Research and Technology (R&T) enables the Group to determine the potential value of each new technology and to invest in numerous projects according to a dual approach combining partnership and foresight, and focused on the challenges facing the aeronautics sector. ACCELERATING GROWTH

New avionics rack Corail, unveiled in 2018. INNOVATION AND R&T

A WIDE-REACHING APPROACH PURSUING THE COMPOSITES AND ADDITIVE MANUFACTURING ROADMAP In 2018, Latécoère allocated 2 % of its turnover to R&T. From product design and prototype manufacturing As a large-scale demonstrator of the cabin access to testing and qualification, the various programs function, the ASGARD project breaks with the usual initiated by R&T are then managed by R&D. Latécoère design of aircraft doors, thanks to a dual process also supports its clients upstream in the development and product approach. Backed by the DGAC, of systems and products, whether by total or partial “the ASGARD program will enable Latécoère self-financing, through external financing by to consolidate its position as an independent leader participating in calls for projects initiated by various in this aerostructure system by providing our regional, national or European organisations. customers with value”, adds Serge Bérenger. The Group also invests in measures to support With regard to materials and processes, the Group collaborative industrial innovation. This wide-reaching has stepped up its composites activity, in particular approach aims to bring both branches to the fore through its management of the ELCOCOS project, when it comes to innovation. which aims to manufacture aircraft doors using out-of-autoclave technology for Airbus Defence & Space, as part of the European Clean Sky 2 program.

CONNECTIVITY

We aim to bring FLIGHT CONNECTIVITY: The objective is twofold: both branches to the fore CONTRIBUTING TO on the one hand, to improve DEFINING STANDARDS the passenger experience by when it comes to innovation.” providing the same quality In September 2018, Latécoère of connectivity both in flight Director of Innovation and R&T Serge Bérenger, joined the Seamless Air and on the ground, on high- Alliance consortium, created by speed, low-latency networks; Airbus, Airtel, Delta, OneWeb on the other, to reduce the and Sprint, to share its costs of acquiring, installing expertise in flight connectivity and operating data access and participate in the infrastructure. Li-Fi: THE COMMUNICATION OF TOMORROW development of new standards. AT AN ALTITUDE OF 35,000 FEET

Light Fidelity (Li-Fi) – an emerging technology that transfers data using common LED light bulbs – LIA is revolutionising optical data transmission technologies for avionics and aircraft cabins. BIRTH OF THE LATÉCOÈRE From quality improvement Although still relatively uncommon, it is a INNOVATION AWARDS and potential for new product development to cost reduction breakthrough innovation that will transform how Internal competitions have and HSE impact, various criteria on-board data is transmitted and therefore enhance long been held at Latécoère have been chosen to analyse the passenger experience. “Latécoère is exploring to encourage innovation and and evaluate competition this new avenue with the support of the French civil initiative within production proposals. Two initiatives have plants. But now, for the first been awarded: the first for aviation authority (DGAC), in partnership with SMEs time, the competition has its contribution to automating and start-ups,” explains Serge Bérenger, Director been opened up at Group the production of electrical of Innovation and R&T. level. 2018 saw the creation harnesses (Interconnection Integrating communication technology into of the Latécoère Innovation Systems Division); the aerostructures is another project initiated by the Awards. 5 % of employees, second for its use of additive both independently and in manufacturing technology to Group alongside Airbus UK. The aim is to facilitate teams, have together proposed increase workshop productivity the development of new thinner and more modular more than 60 technical or (Aerostructures Division). wings using more compact data and power organisational innovations. transmission solutions. 14 -15ANNUAL REPORT 2018

REVENUE

Data audited

58% 42% Aerostructures Interconnection Systems

2017* 2018

In 2018, Latécoère generated €659.2 million in revenue, an increase MILLION€657.4 €659.2MILLION of 3.1 % at constant exchange rates. The positive sales momentum that began in 2017 continued through 2018. 2018 KEY FIGURES OPERATING INCOME

Latécoère’s recurring EBITDA came in at €54.5 million in 2018, representing a margin of 8.3 %. The year was marked by the roll-out of the Transformation 2020 plan, the unfavourable euro-dollar exchange rate, pressure on prices for certain programs that are reaching maturity, and unforeseen costs caused by the defection of a major supplier in the first semester of 2018 and the impact of the termination of the A380 program. Latécoère’s industrial and commercial transformation process, initiated at the end of 2016, is now showing its first positive effects. The projections of Latécoère’s order book amount to €2.2 billion, the equivalent of more than three years’ revenue, and provide a positive outlook for our future business activity.” Sébastien Rouge, Chief Financial Officer FINANCIAL RESULTS

RECURRING EBITDA** NET INCOME

2018 2018

€54.5 MILLION €6.0 MILLION

RECURRING OPERATING INCOME BREAKDOWN OF REVENUES BY CUSTOMER

2018 11% 7% MILLION Others including DASSAULT AVIATION €28.0 BOMBARDIER 12% EMBRAER OPERATING INCOME 51% 2018 AIRBUS 19% €4.9 MILLION BOEING

* Restated for the application of IFRS15 in force since January 1, 2018

** Recurring EBITDA corresponds to recurring operating income before recurring amortization, depreciation and impairment losses. 2018 KEY FIGURES Details of non-recurring items are presented in the Group’s CASH FLOW accounting principles from consolidation financial statements.

The Group reported negative free cash flow from operations of €35.2 million in 2018, mainly due to non-recurring investments of €41 million, including the employment preservation plan in France (PSE) and the industrial investments planned as part of Transformation 2020 for the Toulouse-Montredon and Bulgaria sites. Recurring free cash flow from operations came in at €5.8 million, mainly hit by the establishment of stocks required for the growth of Interconnection Systems business expected in 2019. RESPONSIVENESS Free cash flow from operations improved in the second semester of 2018 to -€6.9 million. In 2018, the operational been able to maintain a difficulties created by the strong level of activity. With need to quickly replace this reorientation, the Group a major supplier in the should deliver significant ANNUAL ACCOUNTS Aerostructures Division organic growth in revenue were overcome in the fourth for 2019, and implement Latécoère’s statement of accounts remains stable, quarter. By integrating the major investments to manufacturing of parts finalise the Transformation with net indebtedness not exceeding 9 % of internally, Latécoère has 2020 plan. shareholders’ equity and at less than 50 % of the Group’s EBITDA in 2018. 16 -17ANNUAL REPORT 2018

Latécoère employees during the inauguration of the Plovdiv site, Bulgaria, in October 2018.

FACILITATING THE PRESENT AND ANTICIPATING

THE FUTURE To support the Group in winning back its market share, the HR Department provides assistance to both branches on a daily basis. Yes, it is possible to guarantee processes and work as a business partner, while gradually deploying tools to shape Latécoère’s future. A detailed insight. HUMAN RESSOURCES AND CSR

ATTRACTING NEW TALENT BY PROMOTING GENDER PARITY

To meet the challenges facing the Group, a In anticipation of upcoming recruitment process is underway across all sites. From cabling operators and technicians to managers increases in production after and engineers (in France, specifically), all categories securing new contracts, our of positions in both divisions have been recruited. recruits need to be perfectly “Each plant has its own training centre. We also attach great importance to integrating new employees into comfortable in their environment.” our company, and to ensuring they understand our Hervé Blanchard, Human Resources Director disciplines, products and customers. This commitment is reflected in dedicated and sometimes personalised orientation courses,” explains Hervé Blanchard, the Group’s Human Resources Director. “In anticipation of upcoming increases in production after securing new contracts, our recruits need to be perfectly comfortable in their environment.” The Interconnection Systems Division, for whom some of the manual tasks require a great deal of attention to detail, has mainly recruited women, particularly in Morocco and Mexico. More generally, Latécoère pays particular attention to the objective environment (HSE) matters. In 2018, all managers of parity in managerial positions, and anticipates this were trained in the Latécoère safety management change of era through proactive career management, system through the use of different processes, tools based in particular on a consolidated succession plan and routines. Intended for all employees, the at Group level for all managers and key roles. Managerial Safety Inspection is another training course that was provided in 2018. The course involves observing a workstation, assessing risky ORGANISING FORECAST-BASED MANAGEMENT situations and then involving all the employees OF SKILLS AND JOBS concerned in the feedback and, above all, in the action plan that follows. Another innovation – for Against a backdrop of heightened international managers this time – is an online resource portal competition, the Group is constantly adapting its called Management Place. It lists tools and good workforce structure. This work is facilitated by the practices to provide support on a daily basis. It is recent implementation of forecast-based clear how the power of digital technology becomes management of skills and jobs. Jobs are classed on all the more important in a transformation plan that, an exhaustive map by category and then identified by definition, requires a high level of cooperation according to their level of employability. In 2018, between teams. two pilot recruitment campaigns were launched using this approach for a design engineer and a sales representative. The success of these two tests now EVALUATING THE PERFORMANCE makes it possible to roll-out the approach across the AND POTENTIAL OF EACH EMPLOYEE Group as of 2019. Every year, managers conduct interviews to assess the performance and potential of their employees. CONTINUALLY TRAINING EMPLOYEES This essential assessment, just like training, is incorporated into the strategic area for People Training objectives have been formalised under one Development. of the company’s 5 strategic areas. In other words, In addition, as part of the People Review, each there is no higher priority. This is to address skills manager assesses the performance and potential of development and the future of the disciplines. the person immediately below them. Once approved, Training sessions (minimum of 3 days per year) focus career paths are incorporated into a Succession Plan. on technical, behavioural and health, safety and the This system makes it possible to anticipate the 18 -19ANNUAL REPORT 2018

needs of each position and associate a BUILDING A CSR APPROACH AND FORMALISING development plan with it, including training, THE GROUP’S COMMITMENTS coaching and career planning. Within this framework, careful consideration is given to applications from With a view to developing a pertinent and ambitious women. The aim is for more and more women to take CSR strategy in 2019, in-depth work undertaken in up managerial positions. 2018 identified stakeholders and their expectations. 26 CSR issues were then identified and divided into four categories: human resources and social, the ENCOURAGING DIALOGUE BETWEEN environment, performance and innovation. Through MANAGEMENT AND STAFF TO BETTER this approach, a map was drawn up representing APPREHEND EXPECTATIONS Latécoère’s key stakeholders, classed into five categories: employees, public authorities, civil While Latécoère is located worldwide, the cultural society, the financial community, and partners and practices and social laws in force differ from one key players in the industry. For each category, the country to the next. This is why HR teams based Group defined priority issues by drawing up a on-site, with the support of the Group HR materiality matrix ( see diagram) that illustrates the Department, actively participate in discussions with issues and actions to be prioritised by the Group, staff representatives. including in particular customer satisfaction, The company thereby demonstrates its willingness proximity between suppliers and plants, sustainable to listen to and understand employee expectations; procurement, employee development, health, safety it offers peace of mind for customers and and well-being in the workplace, circular economies, shareholders and ensures service continuity. anti-corruption, and combatting cybercrime. This commitment to social dialogue also involves This comprehensive approach sets ambitious, signing agreements. This reflects the Group’s desire measurable and achievable goals; it makes CSR to establish direct relations between employees a central part of the Group’s strategy and future and management, just like Yannick Assouad’s performance. presence at the Group Committee meetings that took place in France.

GUARANTEEING SAFETY AND RESPECTING THE ENVIRONMENT

The roll-out of the Latécoère safety management system across all sites was a major event of 2018. It was preceded in 2017 by a training program and the drawing up of a number of golden rules to be respected under the framework of the new organisational structure implemented. At its head, a Group Health, Safety and Environment coordinator is supported by HSE managers for each branch and for each site. With regard to the environment, in addition to a schedule of IS 14001 certifications for each site, Latécoère committed in 2018 to measuring its carbon footprint, in accordance with the provisions of the Grenelle Environment Forum. From 2019 onwards, corrective actions – such as a car-sharing system, promoting cycling or acquiring electric vehicle fleets – will be implemented to reduce the Group’s carbon footprint. HUMAN RESSOURCES AND CSR

MATERIALITY MATRIX

The rating of CSR issues was carried out on the basis of several workshops with the contributors met during interviews. The issues in the first two circles are identified as the priority CSR issues for Latécoère.

• Products quality

• Product innovation • Customers Water, air and relationship VERY IMPORTANT VERY subsoil pollution • • Business ethics

Information Relationship with suppliers Systems Security and continuity of supply Responsible purchasing • • • • Health and security Social relations and human rights at work • Integration of employees and skills • • Territorial integration Export control Personal • Waste management • • • Diversity and equal treatment data protection Talents attractiveness Environmental regulations

IMPORTANT • • • • Well being at work Factories Raw materials management environmental • • certification Biodiversity

Stakeholder expectations Stakeholder protection

• Greenhouse gases emissions

• Noise • Adaptation to climate change MODERATE

• Water Management

MODERATE IMPORTANT VERY IMPORTANT

• HR/Social Importance for Latécoère • The environment • Performance/Innovation • Societal commitment 20-21ANNUAL REPORT 2018

READY TO CONQUER NEW MARKETS

Demonstrating superb reactivity and adaptability, in 2018 Aerostructures made significant progress in all five strategic areas of the transformation plan. With an improvement in customer satisfaction, economic performance delivering higher sales than expected, entry into new markets, adoption of the agile method to bring innovations to the market more quickly and a rapidly falling accident rate on production sites, Aerostructures faces the future with confidence.

E2 EMBRAER

EMBRAER E2 DOORS: The E2 is innovative in particular INNOVATIVE AND ROBUST due to simpler ergonomics for users and better operability. Brazilian aircraft manufacturer Despite new airworthiness Embraer’s E2 door is the result of certification requirements, which Latécoère’s R&T innovation and have added more complex safety Plant in R&D practices. Its design is based features to door mechanisms, on Embraer’s E1 family of doors, of Latécoère has managed to make Hermosillo which Latécoère is the sole supplier the product simpler and easier (Mexico) (passenger doors, service doors, to use. – production line emergency exit doors and of Boeing 787 baggage hold doors). doors. AEROSTRUCTURES

ON TIME DELIVERY AND ON QUALITY DELIVERY: INCREASE IN CUSTOMER SATISFACTION Our Mexico plant is proud to have won the first round of the Latécoère A particular focus on product quality in 2018 significantly reduced the number of customer Innovation Awards (LIA) with the complaints. Customer satisfaction in industry is additive manufacture of tools using 3D measured by two factors: On Time Delivery (OTD) and printing, which cuts costs and speeds On Quality Delivery (OQD), i.e. how often deliveries are made on time and are compliant. In the case of up production.” OTD, the Aerostructures Division was once again on Emmanuel Rémy, Director of the Aerostructures Division schedule for its principal programs (A320 doors) at the end of 2018, and had upheld its excellent record on B787 doors with a rate of 100 % at the end of December. With no less than 3,407 doors produced, companies (from China, India, and Malaysia, 2018 was also a record year for door deliveries. for example) in the same market. Latécoère’s Aerostructures Division also participates in a quality improvement program at Airbus (Supplier Quality Improvement Program – SQIP), INNOVATION HOLDS SWAY and received its first honourable mention. In Mexico, production for Boeing was awarded Silver One of a number of major aerostructures research for both OQD and OTD. programs, the Airbus ASGARD (aircraft of the future) door demonstrator is innovating in terms of design by adopting a dual product-process approach. This OPERATIONAL AGILITY AND CONTINUOUS “agile” approach to development means that the time IMPROVEMENT to market of products can be reduced to a matter of weeks rather than years. The two new factories opened in 2018 as part of the In terms of composites, Latécoère is innovating by 2020 Transformation plan are testament to Latécoère’s using thermoplastic for the A350, and by designing agility. Built in record time, both sites quickly went into doors using the infusion process for Airbus Defence operation, notably enabling Latécoère to step in where Space’s ELCOCOS research project, part of the other suppliers were proving deficient. The Industry European Clean Sky 2 program. 4.0 plant in Toulouse-Montredon (France), labelled Finally, Additive Lay-up Manufacturing (ALM) or 3D “Factory of the Future” and delivered in late February printing has been successfully tested for plastic and 2018, manufactured its first parts in March; by the end metal tools. Some parts of the Dassault Falcon 7X of 2018 the site’s overall equipment effectiveness could eventually be produced using this technique. (OEE) was above 90%. In Bulgaria, the factory completed in February 2018 also produced the first avionics racks for the A350 PEOPLE DEVELOPMENT AND ACCIDENT RATES: in March and had achieved 100 % OTD by the end SOON TO BE AMONG THE BEST of the year. While these greenfield industrial facilities are highly Significant progress was made in 2018 as regards efficient, they also ensure the safety of workers on a personnel safety through People Development, daily basis – there have been no accidents at the site Latécoère’s fifth strategic area, namely with a in Bulgaria since its creation. significant reduction in the accident rate. From 8 accidents at the start of 2018 to 4.5 by the end of the year – compared to 17 in 2015 – the Aerostructures BUILD-TO-PRINT PENDING A NEW CYCLE OF Division aims to achieve the ambitious target of one PROGRAMS accident per million hours worked by 2022. These results have been achieved by placing a particular In 2018 Latécoère entered new markets, for example focus on safety in the workplace throughout the with the Boeing contract to supply the aft access door Group, notably through a new initiative undertaken in for the KC-46A military tanker aircraft. This build-to- 2017: management safety inspections. Among other print contract is for the production of around fifteen things, they aim to improve the postures of Latécoère aircraft per year, based on the 767 civil aircraft. employees at their workstations. This discipline has a There is close to zero natural growth in the positive impact on product quality and ultimately on aerostructures market because of a lack of new customer satisfaction. aircraft programs. To grow, work packages already awarded to other suppliers therefore need to be won. Through the Transformation 2020 plan, Latécoère has quickly returned to a competitive position against around 200 other competitor IFE THALES 22-23ANNUAL REPORT 2018 AN AMBITIOUS CABIN STRATEGY

The Thales IFE contract, fruit of an ambitious new strategy by Latécoère Interconnection Systems, validates the development of the new cabin strategy currently being pursued by the Group. Latécoère was chosen as the reference supplier of IFE wiring for Thales, the world’s second largest supplier of in-flight entertainment systems. The innovative cabin packages solution has been developed and rolled-out on Latécoère sites in France, Mexico and India. The cabin packages market, which accounted for more than 10 % of the Interconnection Systems Division’s revenue in 2018, is expected to double from 2019.

Le Crès site (France), Space harnesses.

DIVERSIFACTION INITIATED

2018 was a year of profound change for Latécoère’s Interconnection Systems Division, when it rebalanced its customer portfolio through new contracts with cabin equipment suppliers and brought under control the ramping-up costs essential to support the associated growth. At the same time, innovation and internationalisation enabled the Group to better cater to customer needs and expectations. The high point of the year was the major success of the new cabin strategy: securing the Thales IFE contract. INTERCONNECTION SYSTEMS

FROM ELECTRICAL WIRING INTERCONNECTION competitive advantage. The new plant built in India in SYSTEMS TO IN-FLIGHT ENTERTAINMENT 2018 went into production in April 2019; in the future, it should play a part in keeping costs down. Until now, the division has focused on the Electrical Wiring Interconnection System (EWIS) and on the electrical wiring of complex systems specific to each Li-Fi AND OPTICAL NETWORKS TO aircraft. This year, the division’s focus turned to REVOLUTIONISE CABINS customers seeking cabin equipment, including In-Flight Entertainment (IFE) systems as well as Much like the hotel sector, cabins are environments galleys and toilets. that are very frequently renewed, with short life cycles The purpose of this rebalancing exercise involving of five to seven years. Because of this, the Group is customers other than Airbus, and the current process trying to make cabins independent of the central of expansion into new markets, is to diversify EWIS system, both in terms of electrical power and Latécoère’s customer base. data transfer. This diversification has not prevented Latécoère from To meet passenger expectations, Latécoère has remaining competitive in the EWIS market. The therefore turned to new, innovative technologies division has indeed demonstrated its ability and such as Li-Fi (Light Fidelity), which is 100 times faster expertise by developing the entire architecture of the than Wi-Fi (Wireless Fidelity). Free from Mitsubishi MRJ90 in 18 months. Using tools that were specifically adapted or developed for the project, the division was able to manage all EWIS constraints. Regulatory safety requirements based on the assessment of risk events, environmental constraints and installation rules were all incorporated in order to provide topological model simulations. This enableb Mitsubishi Aircraft to anticipate Japanese authorities’ requests and reach the target of having the aircraft certified in 2020. The division finalised the MRJ90 The fibre optic network, and delivered the electrical harnesses for the first which transmits on-board data, aircraft. It should be noted that complete control over the EWIS process is rare in this field. It offers the distributes light and data for each Interconnection Systems Division a uniquely close passenger via a single channel, relationship with the aircraft manufacturer and creates using Li-Fi. This is a new new prospects for future developments. technology, which is already revolutionising cabin design.” SETTING STANDARDS AND DEVELOPING Denis Bretagnolle, AUTOMATION Director of the Interconnection Systems Division

To bring costs under control by 2020, the Interconnection Systems Division needs to manage the ramping-up costs necessary to support growth electromagnetic radiation emissions and with an and internationalise its production sites to bring the independent communication circuit for each seat, the branch closer to its customers. The division system costs less and weighs less overall than current successfully met the challenge of imposing standards systems. These advantages convinced the Group that on all production lines – a recent initiative – and Li-Fi was the ideal solution in the very short term. This completed most of its manufacturing in best-cost breakthrough innovation, developed and tested by countries. From 2018, the IS Division’s production at Latécoère in 2018, will be presented to customers sites in best-cost countries (Tunisia, Morocco and from 2019. Mexico) increased to more than 92 %. Wherever possible, the Group ramped up automation across its production sites. This should enable Latécoère IS to bring all its costs under control by 2020 and gain a 24-25ANNUAL REPORT 2018

ESTABLISHING A VIRTUOUS CIRCLE OF VALUE CREATION

Making the organisation more transparent for customers. Simplifying access to products and services. Supporting sales teams in their effort to secure new customers. These are all priorities for the Group during its transformation.

SINCE 2017, ALL COMPANIES WITHIN THE GROUP HAVE TAKEN THE LATÉCOÈRE NAME

The brand is responsible for Aerostructures and Interconnection Systems activities. The company first clarified its vision, mission and values. As well as carefully reviewing the ties between its customers and Latécoère, the Executive Committee is visiting Change requires each of the Group’s sites, without exception. The aim understanding.” is to share the company’s strategic ambition with all Thierry Mahé, Communication Director employees. Change requires understanding.

Based on this tenet, a practice has emerged that is now monitored in the Group’s KPIs. Twice a year, At the same time, Latécoère TV programs each site gathers all of its staff together for a briefing commenced in 2018. This in-house information meeting. This provides an opportunity for discussion channel provides real-time coverage of corporate based on hard facts. The quality and swiftness news: safety, the environment, business, quality, in taking on the changes are proving decisive for etc. A particular feature of the channel is that Latécoère. it allows sites and their publishers to produce their own content. But these meetings are not the only way in which Latécoère is supporting change. A newsletter is By adopting an approach based on sharing regularly sent out to all employees. While its editorial knowledge and decompartmentalisation, policy is to discuss strategy, the transformation as the company has made everyone a stakeholder “seen from the field” also features prominently. in its transformation. CHANGE MANAGEMENT

Being immediately identifiable all over the world.

As a living, social entity, the company is constantly interacting with its environment. ESTABLISHING A VIRTUOUS CIRCLE OF VALUE CREATION

Fostering employee pride in being affiliated with our Group.

Conventions: an opportunity to understand the why (motivation) and the how (assimilation).

A transparent organisation: the ideal partner for cooperation.

A digital ecosystem mirroring the group’s news. 26-27ANNUAL REPORT 2018

Test benches

Latécoère has a unique position in the aviation industry, combining expertise in the businesses of Aerostructures and Interconnection Systems. COMPLEMENTARY COMPLEMENTARY BUSINESSES

Fuselages

Doors AN EXPANDED OFFER

Equipment & systems

Avionics racks

EWIS harnesses

Space harnesses NOS ENGAGEMENTS EN ACTION

135, rue de Périole — BP 25211 31 079 Toulouse Cedex 5 — France T +33 (0)5 61 58 77 00 RAPPORT ANNUEL 2018 www.latecoere.aero