Leonardo Spa Ord

Good afternoon, everyone, and welcome to our first half 2024 results conference call. I'm Valeria Ricciotti, head of investor relations and credit rating agencies. Today, our CEO, Roberto Cingolani, will take you through the important progress that we achieved during the first half of this year and how we are positioned looking forward. And our CFO, Alessandra Genco, will take you through the first half 2024 results and performance across the group. We will then welcome your questions. The call is planned to last no longer than one hour and a half, including Q&A. The supporting slide presentation is available for download by registering to the webcast and all the first half results materials are available on our website under the investor relations section. Please note that throughout the presentation, we will be making forward-looking statements, so I invite you to refer to our Safe Harbor Statement, which applies to this call as well. Now, I will hand you over to our CEO, Roberto Cingolani.

Thank you, Valeria. Hello, everybody. It's a pleasure to be here again. Today, we'll see the data of the first six months. Data looks quite good, I would say. In this plot, you see the pro forma for the first quarter, which includes now the data of the consolidation of Telespazio in the balance sheet. This is now the actual number for the first semester of 24. We see new order that's growing by 15.6%. Revenues are growing by almost 11%, reaching $8 billion in the semester. EBITDA is growing from 444 to 503, growing by 13.3%. The return of sales is growing up to 6.3, so plus 0.1%. The cash absorption, free operating cash flow, is improved by approximately 8.4%, from minus 448 to minus 402. And the net debt is considerably reduced by 18.2%. Actually, the book-to-bill has reached 1.3 this semester. The backlog has grown up to 43 billion, a considerable increase compared to the recent performances. This is without jumbo orders and with a rather homogeneous growth throughout the company and the different divisions. Now let's see how we are implementing the plan. I mean, you remember on March when we presented the new industrial plan, there were two main actions, strengthening the core business and paving the way to the future that namely addressing the global security challenge through primarily space and cybersecurity to improve the global technology attractiveness of the company. The strengthening of the core business primarily involves organic growth and the efficiency boost, the saving plan that we introduced on March, 1.8 billion in the next five years. Pave the way to the future refers primarily to inorganic growth and empowerment of cyber and space divisions. Now let's see how we're trying to work and we have been working over the last six months. We have seven bullets that we will detail later. First one, We have done considerable progress in digitalization to empower business. This has to do with different strategy employing digitalization in production, in product design, and multi-domain operation initiatives. Portfolio streamlining, making more efficient the entire offer of products of the company, including cutting non-core business activities or products that are no longer interesting for Leonardo. Third, efficiency boost. I told you before, we will go through the details later. For this year, we are targeting 150 million savings and we'll see how this is progressing. The fourth is strengthening international alliances. There's plenty of news that I will detail later. The fifth is the emerging acquisition strategy. I'm sure you remember we were promising within the inner growth to act on specific due diligence, primarily in space, cybersecurity and unmanned systems, trying to acquire small companies whose cost should be in the range of 15 to 20% of the turnover of the division that is making the acquisition. We'll show you what we've been doing. Finally, sixth and seventh. Sixth is the organization and governance, primarily the definition of new space division and some progress in new hires. And this was rather unexpected at the beginning when we introduced the new plan. We decided to accelerate the new industrial plan of the aerostructure divisions. Of course, in March, it was impossible to forecast the problem that Boeing had to face and in turn we had to face because the shipment of our components is being reduced. So we decided that no matter whether the breaking point will be reached or not in 2025, we're now working on a new strategy for the Aerostructure Division. Basically, the idea is that we will go from an intra-divisional solution to an inter-divisional solution. So there will be diversification, differentiation of the production, including some military production to be moved into the Aerostructure Division to accelerate the recovery of a profitable business. So let's see now one-to-one how we progress. First of all, digitalization empowering the business. Here we summarize quickly the strategies that we've been developing for the digital twin and big data in helicopters and aircraft smart factories. First thing, The prototype machine, the 139, which is one of the best sellers of the company, has been the subject of strong work in terms of digitalization. Everything is digital now, from the maintenance to the design to the quality of flight. We have analyzed 50 terabytes of data that are produced during 2.8 million hours of flight. more than 1,200 helicopters and 12 years of flights. So this means offering new services, predictive analysis, much more efficient design, and of course, product performances. We have developed also new algorithms for broadband noise prediction, particularly for main rotors of helicopters, and something similar to the 139 helicopters now being set up for the digital-connected fleet of aircraft. Particularly, we are following the same similar approach for M346, the trainer, and for the C27J, the transporter aircraft. Finally, We are now up and running with the Nemesi program, which is a fully digitalized capability for the fuselages in aerostructures. The production is improved substantially and the quality of the production is now state of the art. Second approach for digitalization has to do with the multi-domain strategies. So we have launched, together with Armis, from the three-domain Lands in Air program to establish the requisites of the multi-domain capability that we want to develop for our products. This is a working group that is mixed with the Armis and the Leonardo technical team. And actually, we have set up a multi-domain innovation hub at the headquarter of the electronic division. You can see here in this, this is the image of the new hub where both the technical staff of the armies and our technical staff will get together to design the new requisites of the multi-domain technologies that we plan to develop over the five years of the industrial plan. Let's go now to the portfolio streamlining. Well, here, I think you remember some of those things have been anticipated recently. An agreement has been signed on May to sell the underwater business, formerly the VAS, to Fincantieri. That's a very important step to clean our portfolio. And the evaluation was up to a maximum of 415 million, 300 the fixed part, and approximately 115 is a sort of earn out. Actually, the data looks promising, so very likely we will accomplish the maximum amount of money. The closing of this operation is expected in early 2025. The contract has been signed in May 24, so during the semester. We finalized the exit from a couple of important non-core activities. The first one was Industria Italiana Autobus, which is a company where Leonardo was involved for many years producing electric buses, electric transportation systems. Actually, we finalized the closing. We exited the company on July 11th, and that was a loss of approximately 30 million every year. So that was an important step towards a very disciplined allocation of our money. Similarly, on the Sky-Dweller program, which is a company producing a large drone with 70 meters wingspan, completely solar powered. This business was not promising for us. It was absolutely getting out of our core business. And closing this activity returns in a saving of approximately 15 millions every year. Concerning the important initiative of the saving plan, I'm sure you remember this plot, this graph that we presented at the Capital Market Day. We plan to save something like $1.8 billion over the budget plan period. On average, our expectation is that 70% of that savings on average in the five years should come from efficiency measures. So direct procurement, 13%, travel, 13%. energy 12%, real estate nine, information technology eight, and 15% other indirect procurement. 20% should come from corporate center restructuring, and about 10% over the five years should come from business product disposal. Now, for the six months that we are analyzing, the numbers are very promising. In this first semester, we estimate approximately 90 million savings overall. Those savings are coming primarily 70% from procurement, 8% from corporate cost reduction, 9% from travels, and 13% from business product disposals. As a tendency, that is promising in that it should outperform the expectation that we have for 2024, and the expectation, as you remember, was 150 million. So we expect to continue to pursue the strategy of savings with the same pace, so we very likely close the year with under 90 million savings. For your information, in the last 12 months, more than 200 executives have left the company for different reasons, retirement or because they just went. Ninth of those left the headquarters. In the headquarter, there were originally 300 executives, so 90 were going. Of course, you don't see immediate saving for that because, as you know, normally there is an accompanying program for those executives leaving. But, of course, this is a part of disciplinary allocation of resources, and also it opens the way to favor new hirings of younger people, so renewing a little bit the composition of our team. The saving plan is very important because it helps in mitigating inflation and shortfall in other areas that are not maybe very profitable at the moment, such as something in aerostructures or something in space telecom manufacturing, primarily due to our Space Alliance analysis. So we believe that the saving plan, together with the good numbers that we have in solid performances that we have, in the company results allow us to be rather safe in terms of capital allocation, investment for the organic growth on one hand and on the other hand in ensuring that the debt goes down as you have seen before. Let's go to the fourth bullet that was the joint venture and international initiatives. The most important one today, for sure you have heard already, is the agreement done with Rheinmetall for a strategic joint venture in the land domain. Actually, in that case, Leonardo Remetal will constitute, by September, so we are working on the work share, a joint venture that is 50-50. It's a very light joint venture. It's not distributing assets. It's just a team of people that are taking the market, taking the opportunities, and distributing the work share between the two partners. Leonardo will be lead system integrator and prime contractor of the next generation land vehicles. And as I said, we expect to sign and to close this joint venture by September. The two platforms that will be at the basis of such joint venture will be the new tank based on the Panther 51, KF 51 platform, the main battle tanks, and the new infantry fighting vehicles that are based on the Lynx platform in all the different configurations. For the Italian initiative, this has to do primarily with the renewal of the land fleet of the Italian army, which is approximately 20 billion business over the next decade or so, or a bit more. The work share will be 60% Italian and 40% in Germany. Of course, this is a very challenging program. It's open the way to export because the platforms are supposed to be extremely competitive at world level. And for... export uses, the joint venture will eventually define different war shares, and this is something we're discussing currently with our technical teams. To give you just a basic indication of the war share, let's say Leonardo will be more involved with electronic suite, optronic sensors, main gun, weapon system integration, turret, basically, rain metal, traditionally more on the chassis, transmission power unit and so on. The complementarity of the two companies is extremely promising and we believe we can deliver the first machine to the Italian army already in a period between two and three years from now. This is a unique opportunity to develop the next generation of combat land vehicles and to be very competitive as a solution in view of the European main battle tank program. So we expect this to open a much bigger market than the Italian army market itself. So we'll see. In September, you will see the joint venture up and running, hopefully. Second information, which is interesting, we just signed in the FANBORO a few days ago a memorandum of understanding with Airbus to support the NH90, the combat helicopter, for the next decades. I mean, here, as you understand, the platform, the NH90, is a very performing platform, but of course, it needs to strengthen the in-service support, manage obsolescence as usual for those technology, upgrade the core systems and mission systems to ensure that the machine is competitive. And of course, we are developing and changing the software, should be the third release of the software to make the machine more and more efficient. This is something that started recently with Airbus and it's part of the increasing collaboration between Leonardo and Airbus. I will tell you more later. Third bullet is the MOU that was signed with Bell. I mentioned this already to you in a previous discussion. This is the complementary approach to the fast combat rotorcraft. This is the tilt rotor. Right now, it's more relevant for the American market. There is the MOU with Bell. You know that Leonardo and Bell generated the concept since the very beginning, and they are presently testing machines. I mean, the Leonardo machine is close to certification for civil applications. Bell has a much bigger military machine, and we were awarded Leonardo and Bell in a joint, we were awarded by the NATO NSPA conceptual study to define the solution for the fast rotorcraft NATO contest in July 2024. Other companies are also involved. There will be three teams competing, but I have to say that according to what we have already in our hands, in our technologies, basically, we believe we are ahead of the competitors. And the last important point concerning the joint ventures and the international collaborations is GCAP. You heard a lot about GCAP. In FANBOROUGH, there was a lot of discussion and consultations among the partners. We met the Prime Minister of the UK, we met the CEO of BAE Systems, the Minister of Defense of Japan, so there was a wide discussion. You know that we are We are strongly committed. All the three countries are strongly committed towards the creation of the G-CAP joint venture. This should be done in the next few months. We're still discussing the war share. We're still discussing how much this will be an aircraft platform and how much will be adjunct drones and the system of system technology but the important thing is that we are all working together we want to finalize this as soon as possible and also the governmental support the governmental investment is is already allocated in all three countries for instance in the case of of leonardo the talent government has allocated 8.7 billions and this will be definitely dedicated since the very beginning to the system assistant probably part of the part for the adjunct development and of course for the collaborative job with all the other partners and not forgetting that at the moment we are increasing the team of the GCAP which is expected to reach more than 3 000 people by next year so it's a very massive commitment towards this big program. Let's go now on the merchant acquisition side. This is smaller, as you remember, we had the rule, the internal rule, not to exceed 15 to 20% of the turnover of the division that makes the acquisition, just to be very disciplined in the capital allocation. This is something we can do by the organic growth, by the ordinary money. If the numbers are good, as you've seen at the very beginning, we can make our organic growth without big struggle. We are scouting a number of opportunities. We are finalizing, especially in cybersecurity, the acquisition of a small medium enterprise which is specialized in resilient solutions for information technology and related technologies. This is part of the new plan. You remember We said very clearly when we introduced the industrial plan that one of the targets of the cyber division, the new cyber division, is actually to improve, to increase the proprietary technologies from 30% to 60, more than 60%, and to improve, to increase the applications and product for military application from, again, about 30% to around 70%. So that is a big commitment. And this kind of acquisition goes exactly in the same direction, because those are applications for infrastructure that are focused on the defense domain. By the way, this should be finalized if the numbers will be all right. The due diligence is almost finished in September. Concerning unmanned systems, we have an advanced due diligence for the acquisition of a small medium enterprise that develops tactical drones and particularly the challenge here would be to develop drones with a payload in the range of 100 kilos, 100 to 150, which is, by the way, the most relevant payload range for light drones for tactical and military applications. Finally, We recently acquired the control of Gem Electronica. Actually, Gem Electronica was already participated by Leonardo. We shared 30% of the company, but now we decided to go up to 65%. The closing is expected by Q3, but I mean, this is already established. It's very important because Gem produces small radars for coastal guard applications that are totally complementary to our radar technology. So this is a completion of our radar portfolio that is extremely efficient for our market analysis. In the meantime, it has a relatively low cost in the range of 20 millions, which is by far smaller than the market it opens. So disciplined capital allocation strategy must support growth and the leveraging plan. This remains our key, how to say, our direction. Together with good numbers, we hope this will continue over the next years to make a stronger Leonardo and more efficient company. Let's go now to the sixth bullet, which is the new organization, Pave the Way to the Future. You remember we said we want to create the new space division. This is a rather massive operation within Leonardo because last year we had only participations in different companies through the Space Alliance or through the Electronic Business Division. We decided to rationalize everything. So right now where we are, Telespacio has been fully consolidated. We have to acknowledge the strong support of our partners of our partner company Thales. The new line of business in integrated electronic sensors has been carved out, but the electronics is now fully integrated into the space division. We are leveraging on Thales Alenia space activity for earth observation and exploration, and E-Geos, which is a small company controlled by Telespazio, is now fully dedicated to geoinformation and ISR. now the core activities will be in our case very selected we decided not to as leonardo directly invest on satcom or in launchers this is this will be outside our core business we focus on satellite services health observation ground services global monitoring cloud and space exploration And we will adopt a vertical approach, sort of end-to-end solutions and products. And of course, this will be also mandatory because military forces need a strong satellite capability for multi-domain services. So this will be the focus, the correctivity of the space division. In terms of organization and governance, the division director has been appointed, Dr. Comparini, the Telespazio CEO has been appointed, the EGO CEO has been appointed, the TASI CEO has been appointed. Of course, we are sharing people and ideas with our partners in Thales within the Space Alliance, but also very important, the fact that we are discussing, you've seen this in the press, we are discussing in a very constructive way with the other big companies, Thales, Airbus, about possible opportunities alliances, synergies that should be developed for a stronger Europe in the space business. So this work is in progress, all technical teams now are working, but I have to acknowledge the absolute collaborative spirit that is now characterizing all the companies in discussing this important issue because Europe needs very likely a stronger space organization or a stronger space synergy to compete with a big market such as US and China. The new strategic framework of the division will be released on September 24, so immediately after the vacation period. The business plan and the market analysis associated to the framework will be released before the end of the year. Now, last point, as I said, we decided to anticipate something never considered before. Because of the fluctuation of the volatility of the market and the problem that we had, that Boeing has to face, we decided to anticipate the analysis and the proposal of a new industrial plant for aerostructures. Now, let me summarize. First of all, our structure consists of four plants. The one at the moment that has some problem is the one in Grottaglie, where we fabricate the wide-body 787 for Boeing. The others, primarily in Campania, Grottaglie and Ola, they got good performances. They are doing well. So at the moment, we focus on the Grottaglie plant. Actually, for your information, on my shoulder you see how it looks, the plant. It's really gigantic. I mean, it's a state of the art. For your information, this is one of the most innovative industrial sites in Italy. The total area is 364,000 square meters, covered more than 110,000 square meters. There is an airport just connected to the big hangars. 1,300 employees, about one half between 30 and 40 years old. So that is a very good facility where the country invested a lot of money by the time this collaboration with Boeing was launched. Now, the limit is that this is a single provider on a single model, and we believe now we cannot stand. It's too dangerous for the company, and we would like to diversify and to contribute to the relaunch of this plant. Now, first of all, we are working on a very tight schedule with the colleagues of Boeing. We are now analyzing a number of short-term initiatives because we need to mitigate immediately the reduction of the shipment of the fuselages that went from about 10 to 3 recently. So those are numbers that we cannot stand in terms of business. So at the moment, we will reduce the activity to single work shift. At the moment, we have two work shifts per day. We go down to one. This gives us the time to empty the warehouse where there are more than 40 fuselages. So we have time to mitigate the impact of the present situation. And also, we are discussing with the colleagues in Boeing how to increase the production and the delivery growth rate, particularly There is a lot of negotiation ongoing. I have to acknowledge a very constructive attitude by the colleagues in Boeing also. We expect that we go back to rate 10, so 10 fuselages per month by 2025. And likely this is going to increase because you know that anyway there is a large queue of orders for the large body frame aircraft. So we know that sooner or later this business will increase again. However, we have to face the short-term problem. So that's why we're We are working on the on the work shift and we are working on the immediately on increasing the rate. The negotiation is ongoing. Hopefully by September we can close. We are now negotiating plan Z60. So the number 60. So there's a lot of work behind. On top of that, however, we are accelerating initiatives to diversify the Grottaglie plant. And as I said before, we go from an infra division. So a problem that belongs only to to aerostructure to an inter division so a permit that belongs to the company so the company leonardo is now planning to move different productions there particularly productions that are institutional or military to a company to support the the big business that is correlated to the 787 that at the moment has a problem so particularly we are analyzing industrially to move the final assembly of the tilt rotor machine which is the top-class technology at the moment, as I mentioned before, for Italy and of the AW101. So those are two top machines that could be moved for the final assembly there. Don't forget that close, in proximity to Crottaglie, in a city called Brindisi, 30 kilometers from there, maybe 40 kilometers from there, we do have another plant for helicopters. So the proximity helps. There is already tradition there. And we are now analyzing technically how to do this. But for sure, this means diversifying the activity. There are a number of other technologies and products, Euro drone wings, prototypes of advanced air mobility, fuselages for the Proteus helicopter. There is the new Aerotech Campus Academy, which is now, which has been launched in the fall 2020, which will be launched in the fall 2024. And I should say, on top of that, there is a very good news because our partners in Airbus actually, you know, we also have a lot of interactions, collaboration with Airbus, have engaged a discussion. to expand the collaboration across another product line, the A2020, not in Grottaglia, in the other side, but anyway, contributing to the overall stability of the Aerostructure Division. And we plan to sign, by the end of the year, a new agreement for the fabrication of the rear parts of the 2020. So we believe that thanks to the increasing collaboration with Airbus, thanks to the strong commitment of Boeing and Leonardo together to improve the situation of the 787, and on top, thanks to the diversification of the activity in Grottaglie, the plan that we are building should give more stability to a long-standing problem that was the profitability and the survival of the aerostructure division. So we are very confident this will be a good solution. And by the end of the year, we will bring you numbers. But this is what we are doing now. Let me go now quickly to a miscellaneous of other things. I will not bore you too much here. It's a very complicated slide. Sustainability, give me one second and I will go to the main data. ai driven business intelligence just to let you know that our business intelligence based on ai is now operating even in the administration and and planning control activities so this is now being more and more used within the company we are investing in a constant smooth way on the high performance computing and cloud capability we need to keep the we need to keep the gap with with the competitors and this doesn't need so much money it needs primarily good people, good commitment, and a relatively small upgrade of the facility. We have launched the outreach and digital content brand initiative. Where we are now, this is our digital fabrication area, digital hub, and the STEM dissemination program to attract young brains. Finally, which is more important at the moment, what I wanted to tell you, it's written down here, but I'm sure you can see it, Capability Enhancement Program by the Human Capital Strategy. uh just to let you know our organic growth plan uh forecast uh 3 500 people in in this year uh in the last 12 months actually um you remember that over the five years plan we had approximately 27 000 headcount new uh large part of those were brand new people, and about 9,000, if I remember correctly, were replacing people that were retiring. So there will be a massive investment to ensure the organic growth. As long as the numbers are good, this makes a lot of sense. This year, 3,500 new hires, 38% are STEM, so science, technology, engineering, and mathematics, 48% around 35 years old on average and one quarter 25 percent women this is the first measurable result of our human capital strategy that has been launched at the very beginning of the mandate and now is getting implemented on a daily basis i want to show you as the last as a last piece of information, the strong position across ESG ratings that characterizes Leonardo at the moment. So a few news here. First of all, we were renewed in July, 2024, the anti-corruption system certification ISO 37001. That's very important. And also, we got the gender certification UNI PDR again in July 24. Those are important accomplishments for our sustainability integrated balance sheet. And in the table here that you might not see very well from the screen, but you have it in the slide that we delivered before that are available, this is actually the list of the main rating agencies in the field at large of sustainability. the Leonardo rating, the scale, low, high, and primarily what is important, the ranking in the aerospace and defense sector. So let me focus the attention on three important companies. SP Global, that is kind of prognostic to the Dow Jones ranking. This is about all the ESG. Leonardo is ranked first out of 97 competing companies. So we are first. The second one is HiSS ESG. This is now Prime Threshold, there are only five aerospace and defense company that are in the Prime Threshold, in the top 10, and one of those five is Leonardo. And least but not last, CDP, that is the carbon company, the carbon rating agency, that by the way, recently has been extended not only to carbon but also to water, and we are ranked in the leadership band, among the top in the entire group of the, of the aerospace and defense company with a Leonardo rating A-. So I believe this is an important result that we got because our first sustainability operative unit was launched in 2020. So in four years we are really leading and we believe there is of course margin for improvement but there is a strong commitment in the company to be as much as possible sustainable and to improve in any respect our performances. At this point, guys, I want to thank you for having the patience to listen to me. I gave the stage to Alessandra Genco because she will now show you in more detail some numbers. And of course, after her presentation, we will be happy to talk to you and to answer your questions. Thank you very much for your attention. See you in a bit. Alessandra.

Thank you, Roberto. Thank you and good afternoon, everybody. I'm very pleased to be talking to you through our first half results, which show a strong commercial and financial performance across the group, with very solid double-digit growth across order intake, revenues, and EBITDA, while improving free operating cash flow and reducing net debt. We're showing a sustainable growth in order intake. As Roberto mentioned, order intake is up nearly 16% in the first half. delivery of a record backlog of over 43 billion, resulting in double digit revenue growth of 11% and higher operating profit driven by good performance and acceleration of our efficiency plans. All of this resulting in an EBITDA up 13%. Cash flow strengthening is driven by good cash-ins, delivery on regular invoicing, credit management actions, and working capital actions that let the working capital be under control. All of this is leading to lower cash absorption and free operating cash flows improving by 8%. A disciplined capital allocation is aimed at supporting growth, as we told you in the Capital Market Day in March, and we're continuing to deliver while we improve shareholders' return. The debt pay down has been of 18%. We did not refinance the bond maturing last June. We didn't have to refinance it because we use our cash on hand to reimburse it. And we maintain a solid balance sheet, supporting investments around 350 million, which are key as an enabler for long-term growth and innovation. We also doubled the dividend from 14 to 28 cents per share, and we're continuing the very positive trend and the good start to the year that you saw earlier in the first quarter. Confirming the strength of our portfolio of products, our solid positions across global geographies. First half results are, as mentioned, a strong performance across all KPIs. And to make a better comparison, what we have done is to pro forma the previous year as if Telespazio were consolidated from January 23. So you can see continued very strong commercial momentum with group order intake rising to 10.3 billion euros in the first half, which translates into a 15.6% pro forma increase, with an especially strong commercial performance in defence electronics and helicopters, reflecting good positioning in domestic as well as export markets. This growth in new orders is again well balanced with a good spread across geography and across business areas and without any concentration in any single country or any single customer and no jumbo orders as Roberto mentioned. The book to build was 1.3 times and we're seeing growth opportunities across segments in defense especially and also in governmental businesses plus growth in the civil areas of helicopters. Group revenues increased 11% to just under 8 billion, and we delivered strongly off our backlog. Higher EBITDA across the group, especially driven by defense volume, as well as efficiencies. An increase of 13% to 500,000,003. The return on sales improved slightly to 6.3%, and you can see the continuously improving cashflow and reduction of net debt. Our first half free operating cash flow outflow was contained to 502 million. And as of June, our group debt was also significantly lower at 3 billion versus the 3.7 billion in June last year. This was also supported by the sale of the 8% stake in DRS, the transaction that we closed last November. So first half, very solid and on track. And it underpins our confidence on the full year target. Now let's go deeper into the results and the business performance sector by sector. Helicopters is where we see continuous strong positive momentum. Excellent new order intake in the first half, up 28% to 3.5 billion. Revenues up 12 plus percent to 2.4 billion. And EBITDA up almost 10% to 172 million, with return on sales steady at around 7%. Order intake was very strong in both governmental and civil sectors, in addition to the defense market. Major orders included 20 AW139 for Saudi Arabia, 4 AW189 for the Malaysian Maritime Enforcement Agency, and NH90s. Revenues grew, mainly driven by delivery of backlog, which now stands at over 15 billion, with increased activity on dual-use helicopters, as well as customer support services and training. EBITDA growth reflects higher volumes and continued successful management of supply chain and other pressures. All of these have been affecting the entire industry and need careful managing in areas such as hiring engineering talent. So a good performance from helicopters and continued strong commercial momentum with good demand across business areas. Moving on to defense electronics. We see a standout performance across both Europe and the US. I'm also going to show you separately the numbers for our cyber business, which for the first time is identified as a separate sector before it was incorporated within Defence Electronics. We wanted to show it as a distinct business segment consistently with the strategy and the business direction we defined in the Capital Market Day. So the numbers on this slide for defense electronics have been restated to exclude cyber and security solutions, and also the space line business now accounted for in the space division. So starting with electronics in Europe, we had a very strong ordering take of 3.4 billion euros, up over 20% year over year, with a book to bill of over 1.4 times, showing good growth across all domains and leveraging on our key strength in our integration capabilities. Notable orders included combat systems for the Italian Navy surface patrol systems, new generation communication system for light tactical vehicles for the Italian Army, plus several export orders for naval guns. Revenues were up 9.3% at 2.1 billion, reflecting mainly the delivery of backlog across segments. EBITDA grew strongly to 251 million euros and increased by 18%, with return on sales also stepping up to 11.8%, thanks to a growing volume and the good performance of MBDA. So Electronics Europe was again a key growth driver with continuing very strong performance and momentum. At the same time, Leonardo Diarres also had a very strong first half, with significant increases in new orders, revenues, and profits, as you are also hearing from Bill Lynn, the CEO, who is holding a conference call as we're speaking. The new order intake grew 21.4% to $1.8 billion, including electric propulsion component for the Columbia-class submarine, plus the order for the family of weapon sites. DRS revenues also stepped up 20.4% to $1.4 billion on the back of delivery of key programs in key strategic areas such as force protection, advanced sensing, network computing and communication, power and propulsion, and EBITDA grew strongly from 91 to $121 million, an increase of some 33% with an increased ROS return on sale of 8.4%, reflecting also higher volumes. Moving on now to cyber and security solutions, you can see a strongly growing business with first half order of 427 million up 54% and revenues up 13% to 301 million. EBITDA is up 33% at 11 million with book to build well above one and a positive trajectory with increasing volumes and profitability. The first half order intake growth was mainly driven by domestic markets and included in the area of defense and governmental implementation phase of the JOC-COVI, the Joint Operations Center for the Joint Operations Command, and cloud infrastructures for the Italian public administration through the PSN program. Revenue growth is reflecting higher order volumes, while approved profitability is mainly driven by operational leverage. Speaking now about aircraft, here we saw continued strong delivery of profit and high margins driven by the fighter program. Order intake in the half was over one billion, lower than last year because of the facing of some export orders. And there are a number of international campaigns that are being pursued and are progressing well. Revenues were 1.3 billion in line with last year, if we include press through activities. And profitability continued to be very strong with EBITDA of 167 million, an increase of 4.4% year on year. And the top notch return on sales of 13 plus percent, with leading contribution coming from the fighter business. Turning to aerostructures, in the first half we made further progress. Order intake increased, revenues were slightly higher as activity increased. Volumes on the B787 program were higher than the same period last year, with 23 fuselage sections versus 18 last year, but still below the rate we would want to have. and the aerostructures EBITDA loss in the first half was reduced slightly to 71 million euros. But the first half results are still not reflecting the slowdown in the B787 program. As you have heard Roberto say earlier, we have taken immediate actions to address a short-term production profile at the Grottaglie site, and we are accelerating key initiatives to diversify the mix of businesses and aerostructures. We are going through a negotiation phase with Boeing, and we do see positive prospects of the B787 in the medium to long term. Finally, ATR delivered 11 aircraft in the first half versus 12 in the previous year. Now speaking about space, here we have been putting in place the building blocks for our new focus pay division that the CEO described. And we see a growth area for the future. It now includes the consolidation of 100% of Telespazio plus the space business line previously accounted for in the electronics business. We saw a good commercial performance in the first half. In Telespacio, new orders were higher at 335 million, with highlights including the preliminary activity for the Moonlight Initiative for the creation of the Lunar Communication and Navigation Services and related infrastructure. Telespacio revenues grew to almost 400 million, driven mainly by satellite system and geo-information. And EBITDA stood at 24 million with a return on sale of 7.3%. So a solid performance of the business that we have consolidated with a year-on-year fall in EBITDA of the division as a whole, reflecting the difficult market environment of the telco satellites business within TAS. The task operating performance is impacting our first half result, and now it is expected to be negative for the full year due to the combination of the fall in commercial telco activity and the higher level of R&D and the impact of restructuring costs. So this is the performance all across the group, and it also has translated into a better bottom line performance. EBIC grew to 390 million in the first half, up 4%. Restructuring costs were lower in the first half, 15 versus 31 million last year, while non-recurring costs were higher at 70 million versus 13 million last year, relating to the favorable conclusion and termination of certain contracts that were legacy contracts that dated almost 10 years. The ordinary net result was 189 million, almost in line with last year, while the net result of 555 million benefited from the capital gain accounted for the consolidation of Telespazio on the back of the fair value evaluation. Importantly, we have continued to make progress this year in improving our cash generation. You can see a lower level of outflows in the first half with free operating cash flow negative 502 million compared to negative 548 million on a pro forma basis in 23. This improving performance underpins our confidence in our positive trajectory going forward and for the full year target. We continue to focus on executing our disciplined financial strategy and we set out for you in March our priorities here. Being fully committed to maintaining investment grade status, supporting growth and improving shareholder returns. So you have seen in first half, we have made a good start to the year. Our main businesses in defense and governmental side are delivering strongly, especially in growing order intake, increasing revenues and EBITDA, as well as cash flow. While recovery in aerostructure may be slower because of the well-publicized challenges related to Boeing, we're accelerating efficiencies in 24 to offset these challenges coming from aerostructures and the telco activity in space. So overall, we are on track and we are confirming our full year guidance. As we previously said, it is based on our current assessment of the effects of the geopolitical and macroeconomic environment on supply chain, on inflation and on the global economy, assuming no major deterioration. You can see here on the slide, we expect this year continued strong commercial momentum, rising backlog, top line revenue growth delivering from backlog, improving profitability, strengthening cash flows and reducing net debt. So to conclude, we are pleased with the first half with good performance across all key metrics. We saw further growing commercial success and stronger financial performance. We are on track and we're delivering our plans in line with our full year guidance and all translating into the first important steps in delivering our industrial plan. We're confident of our path forward. Thank you and I will now hand over to the Q&A.

Thank you, Alessandra. We are now ready to take your question. We'll start from the conference call. And as usual, we are ready to take questions also from the web. You can text them directly and I read them for Roberto and Alessandra. So I kindly ask the operator to start with the first question from the line.

Our first question comes from Alexandro Pozzi with Mediabanker. Your line is open. Please go ahead.

Thank you for the presentation. I have a long list of questions here, but I'll try to limit myself to two. The first one is on the land domain, on the land JV. In June, you suspended the JV with KNDS. And I believe, Alberto, you mentioned that was because you didn't share the vision for where the main battle tank could have gone in the future. And my question is, what Remetal can bring to the table than KNDS didn't? And could you perhaps try to quantify the... the potential uh opportunity in terms of orders for the uh for the for this new jv with um remittance The second question is on Boeing. And I believe you are trying to get back to the 10 units per month in 2025. At the same time, you mentioned you are bringing over new programs like the AW program. or the AW101. And I was wondering, can you give us maybe a sense of whether the 50 million that you mentioned last time during the call of potential losses cumulatively over the next couple of years, still holds, and perhaps I guess there are additional costs in moving some of the production from other sides to Grottaglia. So any call on the 50 million and how you're planning to get back to the break-even target for the infrastructure will be appreciated. Thank you.

Thank you very much for the questions. So concerning KNDS, I would say the main difference in the situation and in the collaboration we are discussing with Reymetal stands in the strong complementarity. It's really strong complementarity between Leonardo and Reymetal. I don't want to oversimplify, but Chassis versus turret and electronics and guns basically gives you an idea of 50-50 distribution. The work share is therefore inherently very symmetric. We're talking about 60-40 in the case of the Italian supply, but it could be the other way around for export, but we are always in the range of something like 50-50. The timeline is very good because the requirements of the of the army was to have the first deliveries in a couple of years so we can with some effort start delivering between 24 to 36 months both for the infantry vehicle and for the main battle tanks in small numbers but just to get started. With KNDS it was a bit longer And I would say if you want to have an idea of the potential market, so if we say only on the domestic tender, let's say for the Italian army, it's going to be something in the range of 20 billion overall infantry vehicle plus main battle tanks on a time scale in the range of 10 to 15 years. Those numbers are being now making clear by the authorities. But if you consider this on a much broader scale, main battle tanks market, this could be in the range of 40 to 50 billions over the next decade. So it's quite a big market. Concerning the second question, Okay, the first point is whether we can confirm 50 to 60 million losses, let's say, in the next couple of years. At the moment, well, it's difficult to be more precise, primarily because the situation is still very volatile. It depends very much on what will be the price of the single components that we will agree with Boeing, and this is part of the negotiation at the moment. We believe, for the time being, we can confirm those numbers. Concerning the 609 and the 109, by the way, we confirmed those numbers, but of course, we hope by September to close, to clarify, to close the agreement, and then we'll be much more precise, depending on the pricing and on the rates. concerning the cost to move the production 609 and 109 or the final assembly in another site of course there will be a cost but please consider that that cost has to be underwent any as we undergone anyway uh wherever you you you make the assembly so uh the fact that we move this in a plant in grottaglia does not mean that we don't have to invest money to to to to finalize the the assembly in another site so i would say this is part of the

part of the standard investment to the company this is what we're going to do anyway wherever we we make the the final assembly okay and with regards to the new pricing you still have a step up with a section of 1406 i believe and do you expect to produce that by the end of next year or it's going to be 2026. are you mentioned you refer to the 609 am i right or

Well, this depends on the negotiation with Boeing. I mean, right now, the rate of delivery is two, three components per month is not enough. However, we know that this rate has to increase, and in the plan Z60 that we're negotiating now, the estimate is to rise to 10 shipments per month in 2025. This is so far what we are discussing.

Okay, my question was the step up in pricing is yet to be agreed or is it already agreed with Boeing?

No, this is actually what we are negotiating now on the basis of the last proposal that Boeing made to our Aerostructure Division. So we believe this is the reasonable basis for the final agreement. But we have to finalize this. It's work done in these weeks.

All right.

Thank you very much.

Welcome.

We now turn to Virginia Montossi with Bank of America. Your line is open. Please go ahead.

Thank you very much for taking my questions. I had a follow-up on the programs you're moving to Grottaglie. What happens exactly to the final assembly lines of the programs that you're moving away from? Should we expect anything specific in terms of cost absorption or anything on the profitability of these facilities?

Well, once again, imagine that we're close to the certification of the 609 next year. It should be in 2025. And we have a plan for the very beginning to have at least 30 machines to be built and delivered. So we have to finalize the assembly of those machines anyway somewhere. So we have to invest this money anyway somewhere. So this is, as I said before, is an inter-divisional effort. It's no longer an intra-divisional effort. So to be clear, the helicopter division has to invest that money in some place so I would say yes we will need an investment because we have to make a full assembly line operative by the time the machine will be ordered but this can be done where at this point is more convenient and we believe diversifying the activity in Grottaglia might have many advantages at least but I mean just to mention one there is an airport there there is a runaway so assembling the machine in a place where you can take off and landing not only vertically but also horizontally like a fixed wing is definitely an advantage. The infrastructure is state-of-the-art so in some sense maybe it's cheaper to make this there than building a new building somewhere else in Italy and starting from scratch with the construction of a new plant. We are making the calculations of course but it seems to be rather attractive as a perspective.

Okay, thank you. Maybe just as a follow-up, for example, you mentioned you're moving the AW101 there. Where is it currently, if I take this one as an example, where is this currently produced and how are you moving it?

This is because of the synergy that the helicopter division wants to make with the existing helicopter plant in Brindisi, which is very, very close to Grottaglie. So part of some activity related to that machine is already there. And then of course, the 609, since we have to start from scratch, it would be more convenient to make it there than elsewhere. This is the part of the strategy that we are developing with the helicopter division. Actually, Virginia, if I may, the paradigmatic change is that before, that was a problem of aerostructures, okay? So the one company did not impact on the aerostructure. Aerostructure had a problem and was supposed to fix the problem on its own. Now, the one company is working like a company. So we can move a production from one side to another because this is in the interest of the one company, not of the single division. And out of this synergy, because this is an industrial synergy that we're trying to develop, we might have a global benefit, which is not only impacting on the infrastructure, but on the entire Leonardo Group.

Okay, thank you very much.

You're welcome. We now turn to Christoph Menard with Deutsche Bank. Your line is open. Please go ahead.

Yes, good afternoon. Thank you for taking my question. The first one is on free cash flow, which in Q2 was significant. or stronger than expected. This is good momentum. You justify it in the press release. I was just wondering about prepayments because order intake continues to be strong. Will there be a time when prepayment will start being material in your free cash flow? Because I don't think we've seen it yet. So any color on this? I mean, I'm asking because most of your peers are talking about prepayments even in Germany. So that's the first question. Second question is, You're very clear about the joint venture with Rheinmetall and the objectives. Delivering it within three years could be a challenge. If you can't deliver within three years, what will be the financial consequence? Is there any financial consequence or is it just a target that you have? And basically, you're aiming at that target, but there will be no financial impact.

So, Cristof, Alessandra, for the free operating cash flow, then I will tell you about Rheinmetall.

Yes, Cristof. So, in terms of cash flow generation, it's all organic and it's not composed of any contribution from specific orders. As I mentioned and as we mentioned, there are no jumbo orders within the order intake mix. So the advance payment from customer is really in the ordinary course of business and the utilization of these advance payments as we deliver milestone of activities is also in the ordinary course of business. It's all through organic, good invoicing processes and good cash in processes with a tight control on working capital.

To answer your question, just to clarify, I think that after talking to our colleagues in Remetal and of course talking to the army, the delivery of a first slot of machines either infantry vehicles or main battle tanks is expected to be within two three years for a small for a small number let's say five to ten to give you the order of magnitude and this respect our colleagues in brain metal told us that they have availability of a number of platforms so for that for those numbers this shouldn't be a paramount problem of course in the course of the program that is at least 10 years, lasting 10 years, we have to reach numbers in the range of a few hundreds. And therefore, the production will grow and the synergies among Leonardo and Rheinmetall will grow in terms of production and construction of the machines and the different sites. La Spezia in Italy, of course, the central sites in in Bremen or in Dusseldorf, depending on what will be done. So I believe that there should be no particular big problem for that. Should this fail, well, we don't have yet any, how to say, contract that establishes rules and fine and penalties in case of failure. But as I said, Rheinmetall was very, very clear in evaluating the risk for a small slot of deliveries in two, three years.

Okay. Thank you. Thank you very much. As a reminder, if you'd like to ask a question, please press star one on your telephone keypad now. We now turn to George Sal with Bernstein. Your line is open. Please go ahead.

Hi. Good evening, everyone. First you know earlier today DRS raised its full year revenue guide by $150 million at the midpoint. You've chosen to re-edit your guide. So is that all conservatism or does that reflect any of your portfolio including um you know air structures versus your initial guide um and second one i guess what's the status of your discussion uh with ibaco regarding you know potential acquisition of its defense vehicles business and especially following the jv with ramital you know what would the rationale of a potential deal be okay go ahead with the first let's

Sure, John. Well, the upward revision in the revenue guidance of DRS, as you can appreciate, is not material for Leonardo. 150 million within the target for Leonardo is, you know, it's a percentage that clearly does not move the needle. Our view of the risks and opportunities associated with the full year prospects on revenues is well balanced and gets us to the landing point of the guidance. We are clearly going to have some shortfalls in aerostructures, which we will be compensating with the strong performance of defence businesses across all segments, defence electronics, helicopters, aircraft, and considering all of these elements all together, plus clearly DRS, the guidance is confirmed and well balanced.

John, concerning Iveco, thank you for the questions. Well, you know, there should be a complementarity because Iveco produces a number of wheeled vehicles that are not in the target of the one we are discussing with Remetal. However, to be very, very clear, we have to exploit the strong synergy between Leonardo Remetal and the joint venture, so we are working 100% of the time on closing the JV. By the time this will be closed, very likely and hopefully this will be September, For sure, we're going to analyze further synergies that could be implemented with Iveco. I'm sure there are synergies. This is something that we have to share and agree with our partner, Rimetal, and very likely there could be a joint interest to make a sort of merge acquisition, whatever. But, of course, first of all, we have to see whether there is a clear technology synergy. Second, whether there is a clear industrial strategy that we can develop together. It must be advantages. Otherwise, it would be just a political operation we don't want to do. And least but not last, it has to be cost effective. For the time being, I think our focus is 100% on the creation of the JV. And for the next seven, eight weeks, our technical teams will work full-time on this accomplishment. Immediately after, we're going to analyze the Iveco situation. To be very fair, we are, of course, already discussing with our people because, I mean, we know each other and discussing is obviously part of the business. But I was very prudent in my analysis and I said, guys, let me understand, first of all, what is the status of the industrial program with Remetal, and then we will exploit, analyze and exploit all possible synergy with Iveco Defense. So I'm very positive. There is no closing whatsoever, a priori closing, but we have to see technology, market and cost effectiveness. All right, thank you.

We now turn to David Perry with JP Morgan. Your line is open, please go ahead.

Yes, good evening, Roberto and Sandra. Three quick ones, please. The first one is the Rheinmetall JV and this potential big contract, but it's kind of new to me relative to the industrial plan, so I was just wondering if you think this is upside to your guidance or you already have something baked in. The second question is there were a lot of press reports this summer about Italy saying very soon would order more Eurofighters. But you've made no mention of that or GCAP in your presentation. So I'm just wondering if maybe there's a budget issue that Italy is prioritizing land in the near term over more Eurofighters. Be interested in your view there. And then my third one is on cyber. It's a very, very small division you've created. Usually companies... only do that if they're planning to significantly grow those businesses with acquisitions. So, could you just talk to that and what your plans are, please? Thank you.

Thank you, David. So, concerning the Raymetal Leonardo joint venture, because of the previous ongoing discussion with another company, we already included approximately 50% of the estimated value in our industrial plan. Of course, as you know, at the very beginning, you don't make big money, so you have to let the the activity grow and I think for the time being we don't need to upgrade or change the guidance. Well, we hope we can do this soon, but at the moment I think we are prudently following the construction of the JV and some of the numbers already included. Concerning the Eurofighter, So first of all, I would like to say that the allocation of the money for the GCAP is on one chapter, has been done already, 8.7 billion, if I remember correctly, at domestic level. And so this will be transformed very soon into domestic programs. Concerning the Eurofighter, that's another chapter of the governmental money. Yes, I confirm there will be there will be a growth in the Eurofighter orders. I can't give many details, but it's going to be big numbers for the near future. And concerning cyber, I think that in our industrial plan. For the cyber division, we've been very, I mean, actually very outspoken because we make a clear selection. I mean, actually the cyber division was a little bit spread on too many applications. I'm getting now the original presentation. Let me tell you really in short, in half a minute what we're going to play, what we're going to do with the cyber division. First of all, cyber was dedicating most of its activity to public administration, primarily integrating software that was purchased by other sources. That means that they own something like 30% of the product. There were no proprietary products, basically, or very few proprietary products. And let's say the idea is that we want to go from 30% to 70% of proprietary product. So the first challenge of the cyber division is to grow in the capability to develop algorithms and technologies. Otherwise, as a system integrator, there is no future in terms of revenues, in terms of profitability and so on. The second big challenge is we want to quadruplicate the product for defense application. because before it was all public administration so this transformation is ongoing now and we do see already the change that's why the numbers were not so bad ultimately i agree it is not very big but it's growing and primarily is growing along two clear directions improving defense increasing defense products and increasing proprietary products substantially four times the the military products and more than doubling the proprietary products on top of that we made the forecast, we expect almost 90% of the products in the cyber and resilience area and secure digital platforms. So by focusing, we don't need to be very big. We need to be very strong. And I think those two areas are representing a large part of the cyber market at the moment for defense and for the leading proprietary product. So I would say the forecast for cyber, it's very challenging at the moment. I agree, not very big, but don't forget that the cyber division in Leonardo will act like the glue for all the other platforms because we are imposing now that all divisions in Leonardo should start designing their new platforms that should be conceived as cyber secure by design. That means that, first of all, the cyber division should be transversal to all our division, hardware platform divisions, and on top of that, should develop proprietary products and military applications. So I think for the next couple of years, two, three years, that is very challenging as a program, and we want to see the numbers rising substantially. Then we might make a second step. But for the time being, the challenge is very big.

Okay, thank you very much. Can I just sneak one extra in for Edward, please? Could you just give us an update on the non-referring and the restructuring for the full year? It came in fairly high for H1. Thank you.

Sure, David. Well, you know, the H1 is reflecting in the non-recurring line the positive closure of legacy contracts where the embedded risk was significantly higher than the number you see. You may remember the Doha Stadium contract in particular. We closed it down and we... settled with an agreement the position with our counterparty and we also cashed in the working capital that was owed to us, has been owed to us for a number of years. So that's clearly a positive. The other contract is another legacy contract dated 2015 where we had an opportunity to settle with our client position, which was also an overhanging risk in the plan for us. So from our perspective, these closures have actually been pluses and we took the opportunity to take advantage of this moment to close these contracts positively.

David, honestly, the risk to lose that money was increasingly higher and higher over the last couple of years. And we really wanted to close it because the risk was not losing something. The risk was zero, losing all. So we were really scared at a given point that we decided to accelerate.

So, you know, for the forecast for the full year, we do feel that these were the major item that we had undergoing. And I would say that there shouldn't be more material contracts such as these that may determine a significant ramp up in the figure for the full year.

Thank you.

It's very helpful.

Our next question comes from Martino D'Ambroghi with Equita. Your line is open. Please go ahead.

Thank you. Good evening, everybody. I have a focus on M&A because so far you achieved several divestitures, creating a certain firepower. But I was wondering, first, if you could remind us what is the maximum financial leverage you are comfortable with or the level you will never exceed? Second, I suppose the joint ventures will require probably cash injections from Leonardo. And third, based on your general rules, probably a big acquisition is absolutely ruled out, taken into account, despite taking into account the firepower. And the last one is just trying to summarize the guidance for this year. You are increasing the savings, but you are confirming EBITDA. Is it probably due to error structure? Trying to summarizing the picture.

Go with this one and then I will answer.

Yes, Martino, so on guidance, the confirmation of the guidance at EBITDA level translates also into a bit of a different mix, because as you were suggesting, we will have a lower contribution from aerostructures, meaning the loss in aerostructure will be larger than what we had forecasted in the budget, as well as the negative impact of TAS. in the component related to the telco manufacturing business will have to be taken into account. All of this will be offset by the higher savings we will achieve in 2024 as well as by a strong backlog in the defense and governmental businesses throughout all our business sectors.

Martino, concerning the M&A, of course, what we make available for the M&A depends on the numbers year by year. As long as they are good and the performances are good, those numbers can increase. But let me give you a very simplified picture. With the net income in the range of 700 million, like it was last year, more or less, 350 went to reduce the debt, 150 went to the extra dividend, and about 200 could be invested in the 12 months for small M&As. Those numbers, if we continue to grow as we are growing now and improving the efficiency, are going to grow. so i think in a disciplinate uh capital allocation we might have enough money for a number of small uh m a when i say small uh i mean those that are 15 to 20 percent of the turnover the divisions now if you want to make something big of course let's say half a billion or or more okay in that specific case obviously you have to do something different You don't make this with your cash pocket. You have to do this maybe creating new debt for a while or maybe selling something else. But of course, in that case, we are not simply evaluating how strategic is the acquisition for a division. because it's reinforcing a product or simply introducing a knowledge that would be more expensive to create in-house. In that case, it must be a Leonardo's strategic acquisition, so global. And in that case, it could be, well, we might evaluate to invest more money on something bigger. This, of course, is a different process compared to the division due diligence for the acquisition of a small media enterprise, to be honest. And we will analyze case by case. We were discussing before, namely, Iveco or other big, I mean, those are big companies. Should we decide to do something like that? Okay, we will analyze from any point of view, including financials, whether the risk is an affordable risk.

Okay, thank you. If I may just follow up on M&A for the Space Alliance, what is your best scenario you are looking at?

With the Space Alliance, we are actually in very close contact with our partners. in Thales and so of course there are different situations to be faced at the moment. The first priority is that the SATCOM business should be restored at profitable levels because this, of course, is creating problems to all of us. And, you know, this is a very complex market. So there is a lot of work ongoing with the SATCOM business to see how to improve the situation. On the other hand, there are other small acquisitions that could reinforce substantially our profitability and capability. For instance, Introducing federative or generative AI into the image analysis in specific domains, health observation or geo-localization, could help a lot for global monitoring, for instance. In that case, we can for sure consider acquisitions that just bring in competencies that would take too much time or too much money to develop in-house. But those are different levels. The third level, which is bigger is how the big companies in Europe can make synergies to make Europe more competitive with respect to China and US. This is something we are discussing at technical team level. There is a lot of ongoing discussion. You've seen this on the international press. I'm not disclosing anything secret, but of course we are all pretty much involved and committed to see whether we can develop synergies that make Europe stronger. Think to the launchers, think to SATCOM, think to satellite services. That is a bigger level, a higher level. We're moving on three levels in parallel, basically. Thank you very much. Welcome.

Let's take two questions from the web. Actually, they're quite quick, so I'll read them together. The first one from Nick Cunningham, saying, I think you said you have 4787 fuselages in inventory. What would be the right number, 1050? What 787 serial number are up to with your build? This will help us to work out out how long it will take to get to the point when the unit price steps up. And the second one is from Ian at UBS. Why was aircraft weak in Q2, please? Is this simply a question of phasing between quarters?

Okay, concerning the fuselages, I can answer. Well, I would love a situation in which the shipment rate is 15 to 16 per month. And then I would love to have 40 fuselages in the warehouse because that means that every two months and a half, I empty it and we make a lot of money. And also Boeing is very happy because they will deliver a lot of aircrafts. So we all look forward to go back to this fantastic situation. But at the moment, obviously, with approximately 40 fuselages in the warehouse, if the shipment is two, three per month, we have a problem because we cannot keep a high rate of production because we don't have space to collect the components. I think if we approach the 10 shipment per month, okay, we already entered into dynamic regime. in which you empty every month by one quarter the warehouse and you can keep some equilibrium. But of course, the best situation should be around 15 or more shipment per month. Yeah, this is what we are working. We are working all together. And I think since Boeing has a number of orders, I think I remember something like 600 orders for large-frame aircraft. Sooner or later, they will recover the rate and we are ready to produce as much as possible.

Yes, so on aircraft it's facing, I confirm Ian, we have, the division is engaged in a number of important export contracts and what happens is that the administrative process in the client country may take longer sometimes than originally expected. And in some instances, also, these contracts are supported by export financing plans. Therefore, all of this may shift programs. Nonetheless, we acknowledge and we confirm what we have stated at the divisional level. The opportunities, especially in the fighter domain, both Eurofighter and JSF are significant. The JSF rate of production remains and the order intake we received from Boeing remains very solid and constantly giving us a support with good profitability and cash flow generation. And the Eurofighter prospects are significant, both with heightened demand from the domestic countries, you have heard about Italy before, Spain and Germany will double down on their orders, as well as there are a number of export campaigns on which the division is working. Not to speak about the evolution of the fighter family into G-Cup. So the opportunities are significant and the facing is always not telling the full story.

Okay, this was the final question. So thank you very much for the time today. As usual, the IR team is available for follow-ups. Thank you.

Thank you very much, guys. Thank you. Thank you.