Leonardo Spa Ord

Good evening, everybody, and thank you for joining us for this first quarter 2024 results presentation. I'm Valeria Ricciotti, head of IR and credit rating agencies. Today, our CEO, Roberto Cingolani, will take you through our progress during the first quarter of this year, and then our CFO, Alessandra Genco, will take you through the Q1 financial results and the outlook for the full year. And then, as usual, we will welcome your question. And with this, I leave the floor to our CEO, Roberto Cingolani.

Hi, guys. Nice to meet you again and welcome to our new digital facility production facility. I hope you will like and the presentation will be clear. So today we are going to tell you what happened in the first quarter. The numbers are very encouraging. We're very happy to show you the numbers today. Let me show you. quickly the agenda. I will start with the executing the industrial plan, and then the first quarter results, and then Alessandra will give you all the numerical details. The start of the year was really strong. Just let me summarize. Orders are increased by 14.9% up to 5.8 billions with a book to bill of 1.6 pair. The backlog of orders has reached the record level, more than $43 billion. And the revenues are up by 15.3%, up to $3.7 billion. The group EBITDA has grown by 67%, up to $182 million. And the free operating cash flow at $621 million. improved by 11.5%. So what we're pumping up is now much better than the last year. With those numbers, we feel that the start is good. This is 20% of the year. We believe this is quite on track with respect to the guidance for 2024. So, so far, so good. Let me tell you that we are fully focused on the execution of the industrial plan that you've seen from us a couple of months ago. So strengthening the core business, you remember making our platforms, aircraft, airplane, electronics, more attractive, more digital. Meanwhile, pave the way to address the global security challenge and building up the future of Leonardo, so the complementary new platforms like cybersecurity space that will contribute together with the core business, the traditional core business, in creating this multi-domain, cross-domain, multi-operating system for the future defense. The plan is based on a three level strategy. I'm sure you remember, we gave you the representative plot by the organic growth, which is based on improving our products, rationalizing the product, rationalizing research, saving plan that was very important, very substantial. And finally, the inorganic growth that will go through emerging acquisition programs. In short, We've been working, since the plan was approved, but also in the month before, on the reorganization and the governance improvement. We're still working a lot on the organization. Soon there will be a few other news. Actually, you can see from this side, we're defining a much more competitive and flexible organization. And we're focusing the research and development, especially quitting a number of off-core business activities that were no longer strategic for the company. Concerning accelerating the digitalization, those are the two pillars of strengthening the core business. Concerning accelerating the digitalization, we've been developing a strategy to leverage generative AI and multi-domain capability in our products. This is actually ongoing now. We've introduced a massive business intelligence, even in the administration, and a lot of product digitalization that increases efficiency, increases level of servitization of the products, and of course, improves efficiency in the production chain. We are extensively using artificial intelligence and digital twin across most of the product catalog of the company. And this is actually impacting positively the production. And we're now accelerating the digital continuum initiative with the Army. I think in September, there will be a first demo in which we will coordinate different domains under the same digital umbrella. So this will be a physical, real-time demo that we will make. Concerning the saving plan, we are fully in action. I'm sure you remember in the original plan, the new plan, strategic plan, we promised a strong efficiency and saving plan for the future up to 1.8 billion in the five years. So the efficiency boost is something that we consider very important for the future of the company. The saving plan is full in action. We are preparing both the organization to check it continuously and also the digital instrument to monitor in a quantitative way what's happening. And I think we are on track to achieve the full year target that we promised at the presentation of the plan. Of course, all those things should create new revenue streams and generate cost efficiency that will be sizable, valuable in the next months. Concerning the second part of the plan, so paving the way to address the future of Leonardo and the global challenge of security. Here, we're working a lot on strengthening the international alliances. This is something that is running on a daily basis. And I'm sure you remember how many actions were ongoing. And we're accelerating the definition of new scenarios in aerostructures that I will mention in a minute. So concerning paving the way to the future, We have crafted the new space division. This is up and running now. We are organizing the top management. We have quite a strong technical plan. We are working on the European defense framework with other institutions and companies at the European level. And finally, we are actively working to give a continuity to the memorandum of understanding with Bell for the tilt-rotor technology in collaboration with Bell and our helicopter facility. Now, last point I wanted to address has to do with the Boeing problem. Boeing is going through a few problems, as you know. And of course, we are quite tuned to see what could be the impact on production and delivery. We are taking action in the short term to mitigate this. And of course, we are reasoning with some acceleration to the future strategy and to define new scenarios for the Aerostructure Division. However, the numbers are, as you've seen, are very good so far, so we believe that the combination of the new initiatives that the plan has proposed, the strategic plan has proposed, are now becoming measurable. Least but not last, I want to give you a snapshot about sustainability and our roadmap to decarbonization. Just in a few days ago, SBTI has classified Leonardo Scope 1 and Scope 2 targets to be suitable for the accomplishment of the 1.5 degree global warming threshold. This is very important for us. This is not easy in aerospace and defense technology. Our new target, so the one that are proposed by the new strategic plan, is to have minus 53% of Scope 1 and Scope 2 carbon dioxide emission compared to 2020. Originally, I think it was minus 50. And in scope 3 upstream, 58% of suppliers will be committed to emission rules by 2028. So this is a big challenge in our supply chain. Finally, in scope 3 downstream, minus 52% of scope 3 carbon dioxide emission per flight hour will be equivalent. And this will be the target by 2030 compared to 2020. Those are the snapshots. We're happy to see that the plan is now up and running. We're encouraged by the performances, and I would like to give the stage now to Alessandra Genco that will give you all the details about the financials. Thank you very much for your attention. I'll see you.

Thank you, Roberto, and good evening, everybody. It's a month and a half since we spoke to you in the detailed full plan and full year results presentation. And as you know, although Q1 is important to us as we look to start the year with the right foot, it is normally our smallest contributor to the food year. And it's important to bear this in mind. But it is clear that we have made a very good start to the year. You can see this strong start across all group KPIs. Very good commercial momentum with solid double digit growth in order intake. Very good top line growth delivering off our growing backlog and improving profitability as we anticipated as we leverage off higher volumes with margins benefiting from higher cost absorption and greater efficiencies. The efficiency plan that Roberto mentioning. And improving our cash flows, reducing also net debt. All of these figures compared to the first quarter of 23 have been restated on a pro forma basis to include Telespazio being fully consolidated so as to make a better comparison year over year. Group order intake rose 15% to 5.75 billion euros with especially strong commercial performance in defense electronics in Europe, reflecting also the good position in key domestic markets as well as export markets. This group order intake growth is well balanced with a good spread geographically and across business areas, and without any concentration in any single country or any single customer, and no jumbo orders. We're seeing growth opportunities across all segments, in defense especially, but also in governmental businesses, and good recovery in civil areas like helicopters. Our group backlog has risen to 43 billion euros as of March and stands at a record level. New orders and our ability to deliver off this backlog drove a top line increase in Q1 of 15%. So a strong quarter in terms of revenues, which rose to 3.7 billion, driven by strong performance across all segments, in particular defense electronics and cyber across all domains, followed by helicopters. Group EBITDA increased to 182 million compared to 109 million the previous year, leveraging higher volumes as well as efficiency gains. And it meant that profitability increased with our ROS return on sales in Q1 of 5% up from 3.4% in 23. Our Q1 free operating cash flow outflow was 621 million, a significant improvement on last year. This was driven by higher EBITDA, tighter working capital management, and better facing of milestone payments on programs. So reducing the usual seasonal outflow. As at March, our group net debt was also significantly lower at 2.9 billion versus 3.7 billion in March 23, including effects deriving from the DRS sale, the portion that we sold in DRS last November, as you may recall. So overall, we had a strong start to the year, and this is underpinning our confidence in our targets for the full year 2024. All of this translates into the first important steps in delivering our industrial plan. Now let's go deeper into the results and performance at each business. On helicopters, Starting with our rotary wind business, we saw continued strong positive commercial momentum resulting in order intake up 8% over to over 2 billion in euros in the first quarter, including the order for 20 AW139 for EMS and search and rescue in Saudi Arabia, and the order for four 189 for the Malaysian Maritime Enforcement Agency for SAR missions. Revenues in helicopters were higher with an increased pace of delivery and with increases in the dual use lines. Profitability also was higher with EBITDA of 54 million due to higher volumes driving higher margins. So good performance from helicopters and continued strong commercial momentum with good demand across business areas. Now moving on to electronics. As you know, electronics produce the standout performance for the quarter. In particular, the European segment was particularly strong. Excellent new order intake of 2.2 billion euros, up 38% year on year, showing good growth across all domains. Notable orders included in the naval sector the order for combat system for the upgrade of the Italian Navy surface patrol ships and in the land sector the order for the new generation communication systems for light tactical vehicles for the Italian Army. On top we saw continued good demand for defense systems with new orders for the naval sector. Revenues were up almost 10% at 1.1 billion euros, reflecting higher volumes as we delivered off the growing backlog. And EBITDA stepped up to 123 million euros, an increase of 38%, including the good performance of MBDA. So defense electronics was a key strong driver with continuing strong performance and momentum. Also, DRS at the other side of the ocean had a good start to the year, showing good growth and strengthening performance. Growth in orders was 8.8% in Q1 to $815 million, with further orders for the new generation mounted family of computer systems for the US Army Mission Commands, and with revenue stepping up to $688 million on the back of growing volumes. EBITDA grew from $33 to $55 million with an increased ROS of 8%. In our aircraft business, we saw continued strong delivery of profit and high margins. Order intake in the quarter was some $568 million, lower than the last year because of the timing of some export contracts relating to proprietary platforms being expected later in the year. We continue to have a solid contribution from the fighters business and the cargo aircraft as well. Revenues increased by 2% to 570 million euros and profitability continued to be very strong with EBITDA of 55 million and return on sales of 9.6%. The leading contribution to profitability is coming from the fighter business, as you well know. We are also building up attractive customer support activities within aircraft and we're continuing to work on proprietary programs to deliver continued growth and maintain our strong margins. In Q1, Aerostructures made further progress in line with its recovery plan, showing a gradually improving financial performance in the quarter. Order intake increased, revenues were slightly higher as activity increased across business lines, and the EBITDA loss was reduced from 40 to 36 million. ATR on its side made further progress and confirmed the recovery trends with four deliveries versus two in the previous years, and the loss in the quarter reducing from 16 to 7 million euros. On space, we have been putting in place building blocks for our focused new space division, as Roberto described to you. And we see our newly created division as a growth area for the future of Leonardo. As you have seen, we are now consolidating Telespazio line by line, in line with our management influence following the recent amendment of the joint venture agreement with Thales. Telespazio performed in line with last year's, with revenue growing, mainly driven by satellite systems and operations and the geoinformation business. EBITDA decreased due to the task performance negatively impacting the margins, mainly related to the development cost in the manufacturing segment of the commercial telco business that we have had the chance to discuss with you earlier in the year. EBITDA growth is driving stronger bottom line. And our stronger EBITDA delivered a 182 million result in Q1, with only a very low level of one-off items. The ordinary net result grew to 93 million versus 40 million in the previous year, as it was partially upset by a higher tax charge. The bottom line net result of 459 million benefited from the capital gain on the consolidation of Telespazio on the back of the fair value valuation. Importantly, we have continued to make progress this year in improving our cash flow generation. You can see a lower level of cash outflows in the first quarter, with negative free cash flows of 621 million compared to negative 702 million last year on a pro forma basis. We're pleased with this performance. It reflects the efforts we have been making to manage working capital more tightly, and we have achieved better facing of milestone payments on our programs. So reducing the seasonality of our cash flows is the final effect that you see in our numbers. This stronger Q1 performance underpins our confidence in our positive trajectory going forward in our full year target. As you have seen in Q1, we have made a good start to the year, and we are on track with our expectations. Our main businesses in defense, governmental, and also commercial are delivering strongly and the year has started well, especially in order intake and cash flow. We are pleased to see the good progress in Q1 and we are confirming the full year group guidance that we recently gave you at the time of the recent full year results and industrial plan presentation. As we said previously, it is based on our current assessment of the effects of the geopolitical and macroeconomic environment on supply chain, inflation and the global economy, and assuming no major deterioration. You can see it here on the slide. We expect this year continued strong commercial momentum, rising backlog, top line revenue growth delivering from backlog, improving profitability and strengthening of cash flows, resulting in reducing net debt. So now to conclude, we are pleased with a strong start to the year. Q1 was another quarter of delivery with good performance across all key metrics. We saw further growing commercial success and strong financial performance. While remembering that it's early in the year as it's only Q1 and our smaller quarter, we are on track and we are delivering our plans in line with our full year guidance and all translating into the first important steps in the delivery of our industrial plan. We are confident of our path forward and we thank you. I'll now hand it over to the Q&A.