Leonardo Spa Ord

Dear all, nice to digitally meet you again today for the presentation of the third quarter of 2025. Before getting started with the numbers, I'd like to share with you some of the news. You have partly read something on the communique. First, I'd like to introduce you on my right Claudia Introvigne, who will be the new chief investor relation. There will be a new direction at the direct report of the CEO for investor relations. So welcome, Claudia, and thank you for being here today, joining us today. On my left, of course, Alessandra. Alessandra, today there is an important announcement. Alessandra, for personal reason, will leave the Leonardo. She will be with us continuing today the presentation and the last things for the Q3. And, of course, she will pass most of the information for the balance sheet of next year and for the closing of the budget. We already have a succession plan in place in the company. This is existing since a long time, so there will be no break even for one second. And I thank you very much, Alessandra, for giving this availability to give total continuity to the business and to the operations. And of course, I want to thank Alessandra healthfully because she really did a great job with us. And thank you for staying with us and also helping us in closing this very dense period of work. So we go now to the numbers of the third quarter. And then, of course, as usual, Alessandra will give most of the information concerning the division and the key PI, the financial KPIs and then the question and answers. Thank you. And I go to the to the to the board now. OK, here we go, as usual, with our our lead wall um the the quarter three of 2025 turned out to be particularly good as you've seen uh you can see here from the numbers the new orders year over year are growing by 24.3 percent reaching passing the threshold of 18 billions at the month nine of 2025. On the same footing, we have an increase in revenues in the range of 12.4%. So we are reaching this month 13.4 billions. The EBITDA is growing by 22.7%, reaching 945 millions. I remind you year over year, last year it was 770. And return of sales is growing by 0.6 points. That is, we reached 7%. Free operating cash flow is improving by 22.3%. That is very satisfactory for us. And the net debt is under control with a decrease of 25.9%. So those are the numbers that are characterizing our third trimester. As usual, Alessandro will give you much more information about how this is shared by the different divisions and business units. But the highlights are reported in a very synthetic way in this slide. So in general, all divisions performed rather well. There are no spikes in terms of geography or there is no killer product that jeopardize all the other performances. I would say performances are well distributed across the portfolio of products. About electronics, there is a solid order intake across all domains. The Eurofighter and the JICA are performing well. I'll give you more information later. The naval business with the frigates and also with the multiple purpose offshore patrol vessels are doing quite well for Indonesia in this specific case. Land defence, particularly with the new contract with the Minister of Defence, is growing as expected. DRS is also showing a good performance, actually, a strong performance, especially on electric power and propulsion technologies. And this class of products has to do with the Columbia-class program, which is one of the leading programs of DRS. There is a rather solid order intake across all regions. This is driven primarily by defense and governmental customers and the offshore sectors. They are both very well distributed, strong revenues across both platforms and services. You remember, I'm sure, helicopters are growing in services continuously. Aircraft is doing quite well, strong sales. Those are reflecting the Q8 Air Force business. You know, it's a jumbo order business. Two billion plus. We cannot give more details, but it's a big one. On top of that, solid contribution from the GCAP. At the moment, we have in the range of a bit less than half a billion programs, which has been already funded. I'll give you more details later. And even the C27J has been growing as a business with an order in the range of hundreds of millions. There is a lot of increase in the training services, not only the customers. We now have even the U.S. Air Force customers, but also the number of flight hours that have been delivered by the FTS, the training school, that corresponds to something like 90 million. So that's a very, very encouraging result in terms of training services. Last but not least, the 345, the small trainer aircraft, is finally in the phase of having a syllabus at the Italian Air Force bases. So this is now going to be an operating machine. Aerostructure. In the area of aerostructure, we are satisfied because we confirmed the rate of increase from five to seven fuselages in Q2. And moving towards eight, I'm sure you remember that The plan we're making together with the potential partner for the creation of a new joint venture is based on a progressive improvement of the situation, which is actually in line with our forecast at the moment. I will give you more information about the aerostructure situation later on during the presentation. On top of that, I should add that the Airbus 2020, the rear fuselage contract has been has been awarded, so we now are a double source for those components for our colleagues in Airbus, as well as the Nemesi optimization program for manufacturing has delivered the first fuselage of ATR. That's an important result because it took a bit of time to optimize the manufacturing, and now we're happy with what we have. Cyber is undergoing a strong growth. I mean, numbers of cyber are extremely interesting. Thanks also to the inorganic growth program, the acquisition of the zero trust technologies. So at the moment, the secure digital transformation program is running very well with the governmental and defense customers. There is a strong acceleration in the business with the European institution like European Commission, EULISA and the European Space Agency. And finally, the cleaning of the product portfolio and the production of new products that are proprietary of our division is clearly impacting on the improved profitability of the division. We are very satisfied with this trend at the moment. Finally, concerning space, there is a stronger performance across the service market, including health observation, both in Italy and for experts. And I should say that Our new activity related to the Earth observation constellation is growing fast. We inaugurated recently our facility together with our colleagues in Thales, the facility in Rome for the fabrication of satellites. And we are now starting the construction of the constellation and also the contact with other important countries that are interested in investing in new constellations. Before going to the technology news and the product news, I'd like to comfort all of you about the tariffs. You remember there were a bit of doubts at the beginning. What could have been the impact of tariffs on our business in the American market? I'm sure you remember that the preliminary evaluation was that tariffs would have impacted on less than 5% of the global market we have in the US. So we expected something in the range of 20 million as an actual impact. Now, fortunately, the US-EU trade deal has been officially implemented and now is exempting the civil aeronautics sectors and also the components for the civil aeronautics and even the helicopters. As another fact, um at this point uh we expect the cloud back in for the september cash out of approximately two millions this is actually no longer uh a complex uh issue we don't have to go to the courts it's something we do with the form feed basically and we're starting now the potential cloud back for the cash out that has been done before the trade deal implementation so i can say safely that with this uh piece of information we can consider right now with the with the with the situation that we have at the moment, we can consider the tariff issue as a marginal one. I would say even close. We don't expect any surprise under the present conditions. Update about the efficiency plan. This is running exactly as agreed. We are on schedule. As already reported in the previous quarters, most of the savings come from the procurements, primarily great attention in the procurement, but also renegotiation of a long-term contract. And this renegotiation is fundamental to keep under control the prices and, of course, the mitigation of inflation. At the moment, we are approximately at target. We were planning to have a saving in the range of 20, 30 millions in 2025. We are very close to this value. And apparently the trend, which you can see here with the green dots, this is the actual trend, is very close, slightly better than the expected trend, which is the pink line. So no news from this point of view. I think the machine is well started. People are very committed. So we will continue informing you about those numbers, but I think there's no surprise because the technology for the implementation saving plans seem to be operating very well. Now let's go to the description of the large scale initiatives. As you remember, at the last quarter presentation, I told you that started as inorganic growth, but now most of this is becoming organic growth because it's now in our It's incorporated in the plan of the company and a lot of work is running. I will go analytically one by one through the different initiatives. Let's start with the Leonardo Rai Metal military vehicles. You remember very well that in this specific initiative, the execution means that we have to integrate payloads, weapons and turrets on existing machines, chassis, motors, transmissions. So basically, the challenge here is to have a very efficient integration of top notch electronics, weapons control systems and top-notch military carriage technologies. At the moment, commercial and operational actions are underway because we have to secure that the the delivery which is for the first period as shown here is respected. Actually we already secured the contract for the advanced infantry combat systems which are those smaller with smaller guns but multi-purpose and right now we have already 400 millions have been allocated on the AEICS and another $250 million program is supposed to be launched very soon, the second phase of the program. So we're starting the real business. Five of those machines will be delivered by the end of the year. In the meantime, we're all working on the MBT. It is more complicated, of course. The chassis has to be prepared and we have to start the system integration on the main battle tank, which will come later compared to the AICS. As you see from the plot, the red is the AICS and the blue will be the MBT. Now, the peak of the red start rising earlier, whereas for the main battle tank, we expect the first prototype between 29 and 2030. But anyway, we are on track. We are working with our partners in Remetal, and I would say the team is really attuned and committed to results. At the moment, I don't have any danger or any, how to say, uncompleted part to communicate. The program is running well. On the same footing, I can tell you more about GCAP. Now, you know, in the scenario in which the competitors, like those in US or like those in Europe, seem to progress very slowly, if they are progressing, G-Cup is really now up and running. The Edge Wing organization, which is actually the top company that coordinates the activity of the NATCO, has currently reached 180 people. The target is going to be something like between 2020 and 2050. So it's almost completed. The ramp up is progressing very well. And also new governance and operational procedures are in place. So the edge wing mother company in the G-CAP is actually almost ready, fully operative. In the meantime, we have launched the consortium that involves Leonardo, Mitsubishi, and others to deliver the next gen of Isanke. So the integrated sensing and non-kinetic effect electronics and an integrated communication system, ICS. Those are essentially fundamental, crucial elements of the G-CAP architectures. They represent the heart of the communication and control. And now we are working to deliver the next generation technology for the Isanc and ICS. On top of that, I should say that at NatCo level, so now I'm dealing with the NatCo connected to the Italian funding of the G-Cup, Quite a substantial budget has been secured at the moment. We're one billion plus. And this is being used by the end of the year. It's being used to cover the national technology program that should essentially incorporate high-performance computing and AI technologies into the building blocks of the future G-CAP architecture. The concept and the assessment phase for the adjunct. The adjunct is simply a fighter drone that could be universal, controlled by G-CAPA or by any other sixth generation fighter. And finally, the working environment and the digital infrastructure that will control all the components of the system of systems. So this is now initiated at NatCo level with our domestic funding. And our engineers, our teams are already working on the development of those components. Now, last but not least, there is also another good news from this point of view. GIGO, which is the governmental structure on top of the GCAP, is now discussing and negotiating the first international contract that will be provided to the edge wing. And the edge wing, with that money, will boost the activity of the three NatCo. This is going to be not only national activity, but coordinated sovereign national activity of the G-Cup consortium, having to do primarily with the platform and so on and so forth. So apparently the G-Cup machine is moving. The company is up and running. And I think if we work seriously and we're all committed in getting the results on time, I think our G-Cup roadmap will grow properly. And that's very important because apparently our competitors at the moment are slowing down for different reasons. Let me go now to the third initiative. This is to do with the BICAR Leonardo collaboration. The LBA is Leonardo BICAR Advanced Systems. So what are we doing now? We are working, first of all, with the regulatory for the regulatory approval because we are making a sovereign national a several national joint alliance. And this, of course, needs several regulatory approval, not only antitrust, but also authorization, certification. So we do need a lot of work to make sure that those machines can fly. Because as you know, in most war combat areas, war scenarios, Drones are not certificated. But now we are thinking to an industry that massively produce machines of different payload, different size. And we want to have machines that are certificated and can be sold everywhere in the world, not only in Europe. In the meantime, we are progressing in the integration of payloads and platforms. Now, let me show you a bit more in detail. I just expand the plot here. This is the industrial plan. So I start with the Ronchi de Legionari, our plant in close to Trieste in northeast. This is the Leonardo plant that originally was involved in drone fabrication and design. So here we're going to assemble, make the final assembly of the TB3. which is one of the cash cow of this category of machines. And in the meantime, we are also recovering, improving the MIRAC, which is a Leonardo platform, actually. It's in the range of 200 kilos with a payload of approximately 50 kilos, which is a lot. For a machine like this, it's pretty much like a missile more than a standard drone. And this will be assembled in our Ronchi del Legionario plant. So integration of electronics, payload sensors, weaponization will be done there, starting from these two platforms. In Genova, close to Genova, in Villanova di Albenga, we're going to make the final assembly of TB2 and Akinci. Akinci is the bigger platform. The bigger machine, 22 meters wingspan, they have quite a big payload. And those machines will be assembled there. Meanwhile, in Torino, where we do have a lot of aircraft activity, aviation activity, we have all the engineering and certification activities, which are crucial for the future expansion of this market. In Rome, now in our plant, in the electronic plant in Rome, where we did our roadshow two years ago, we are now developing in the new multi-domain facility all the technology that are needed to... to control, to govern the multi-domain situations that involve drones. And finally, in Grottaglie, which is our plant for aircraft, civil aircraft, carbon compounds, and so on and so forth, we're going to make composite manufacturing and final assembly of the Kizil Elma. The Kizil Elma is the fighter. It's a real aircraft, something that looks like an aircraft. And this one actually is going to be our adjunct universal adjunct fighter that can be coupled to any machine as long as you can develop the electronic for the control. And this is, of course, what we do because this is one of our specialty. So now As you see, the geographical fingerprint of the drone activity is quite well organized at the moment. We are making all the necessary investment and upgrade of the production lines. We are working on the integration. And as soon as the regulatory issues will be fixed, we are working daily with the authorities, including the Minister of Defense. I believe that already next year, the first product will be delivered to the market. Let's go now to the IVECO defense acquisition. Iveco Defense, of course, you know the story. It's quite recent. Now, what are we doing with Iveco? This is a rather young initiative. Three months ago, we completed the agreement. And now we're working on, first of all, a regulatory approval that is quite very important at the moment. and of course we are negotiating to ensure the deal closing. Now, to be clear, Iveco Defense at the moment needs to fix a few important things. The first one is that the supply chain has to be guaranteed. Originally, Iveco had a sort of mixture of civil and military technologies. So some of the components were produced by the civil part of Iveco and they were delivered like an internal supply chain delivered to the military part. Now, of course, we own, we're supposed to own the defensive Iveco part, but the civil part will go to another owner. So in collaboration with the government, we are working to the prescriptions in the golden power to make sure that this internal supply chain will be insured for at least one decade under the same conditions. This is very important to have no interruption in the production pipeline. It doesn't seem to be a problem. There is maximum availability. And I have to say that this negotiation discussion is progressing very well. We don't see big obstacles, big hurdles. But anyway, it's something we have to fix supply chain first, then A second thing which is very interesting is the technology of land drones. At the moment, we are studying together with our partners and colleagues, I should say, in Iveco land drones that are ranging between 600 kilos and two tons. So those are land drones with trails and not on wheels, but they can also be on wheels. they can they can mount and transport different payloads they have different functions and of course in the concept of multi-domain interoperability having land drones together with all the other manned machines it's very appealing so we there is a special focus now in our technical teams and commercial teams about the land rules the third issue that we are we're studying, is that I'm sure you remember originally we were discussing with our partners, Rheinmetall, about the possibility to carve out the tracks as opposed to the... armored vehicles actually now that our teams are working together where we are studying all the perspectives it is yet unclear because the due diligence is in progress whether it's more convenient to keep things together or to carve out them but this this is just industrial analysis depends on how much money you have to put to change it to double to split the line or so but one thing is sure the tracks that at the moment uh iveco can offer 6 by 6, 8 by 8, 10 by 10, 12 by 12 wheel traction can be very interesting for a number of applications, including the transportation of different weapons and different payloads, massive payloads. And so we are now analyzing also what kind of market openings we can have by combining different payloads, different guns or different missiles or radars with the different platforms for transportation. This is now under examination. We have to see basically it's just an industrial analysis. We have to see what is more convenient to split, to double or to concentrate. And it will depend, of course, on the on the financial and commercial analysis, which is in progress. But for sure, The more we work on the IVECO analysis, the more we are convinced that this was a very promising choice from the technology point of view. Needless to say that IVECO ensures the possibility to offer the same armored vehicles on trucks or on trails or on wheels. And this is a unique possibility now we have. Depending on the market, we can offer wheeled machines or machines with trails or with tracks that can go in different in different ground and different commercial scenarios. So you of course, you will be informed continuously about the evolution. I think we are online. We are on time for the for the closing of the deal. That should be the first quarter, if I remember correctly, of 2026. So the teams are working continuously on this assessment. I go now towards aerostructure. I know you're very much interested in the aerostructure issue. So let me tell you that the very good thing is that we are really progressing according to the agenda. You remember in July, our counterpart, our potential partner, approved our standalone plan and gave a very positive evaluation, financial and technical. Now it's the other way around. They're making their own standalone plan that should be complementary to ours to create synergies. They're working with our people. Basically, on a two-week basis, we are at their place or they are at our place. There is a number of important things. Of course, we are working... on the on the deployment of the synergies that the uh that the the merge of the of the two partners can make and this is the most interesting part at the moment we have uh so the teams working commercial industrial synergies this is done by a joint working group which is quite consistent quite big we are working the same time with the key stakeholder needless to say we have to share our vision and the idea of this joint venture with our main customers, those for which we built the components. And this is already in progress. Reaction seems to be interested. And then we are working on the joint venture governance and organization, which comes out of the industrial choice, but also on the sovereign national character of the initiative. There is a detailed joint venture implementation roadmap at the moment. To make a long story short, because the confidentiality constant given by our partners is still very strong, they gave us a disclosure only to discuss with the key stakeholder clients, suppliers, basically. But to make the story short, We maintain our target to sign the partnership agreement by the end of the year. Of course, we are working very, very hard for closing this very complex negotiation. We believe we can keep the end of the year as the target and we will make a special session, information session, communication session to you guys Of course, not waiting for the first quarter of 26. That should be months after January. So the sooner, the better. As soon as we close, we call you and disclose everything. But as you can imagine, what I told you, after almost one year of work, clearly there is a strong motivation, very strong motivation. Also, I have to say there is a strong interest by the governments of both partners. So that's an extra guarantee that we are on the right track. I can't say more, as you know, about that. But I inform you about the progress and you can see that with this kind of progress, clearly our partners really want to make things, want things to happen for real. Last but not least, capacity boost. Now, we explained you the concept of capacity boost in the last quarter. Now, the capacity boost team and the accelerator advisor and our dedicated team is now focusing on a number of specific actions. So let's go on. Let's consider this column. Engineering is responsible for 30 to 40 percent of the extra workload, millions and millions of hours that is necessary to improve the efficiency in production. Manufacturing is responsible for at least 10% to 15% of the extra workload necessary to improve our capability. And finally, supply chain is responsible for 10% to 20% of the total strategic supply. Well, actually, not responsible. In the supply chain, we have identified 10% to 20% of the strategic suppliers which are classified as critical, and this has to be addressed by the capacity boost. So those are the three pillars where we are moving now about the engineering. We are working essentially on engineering digitalization. So the infrastructure is fundamental because the more we digitalize the engineering, the more efficient is the process. We have selected a few partners for engineering, optimizing the partnership to have basically more hours, less price, and of course, more focused collaboration. And we are working a lot on talent attraction. That will be the first talent attraction campus in close to Napoli where there are structures, but this is now being extended to many other manufacturing areas and engineering areas of Leonardo. Just to let you know, within the industrial plan, period, we plan to hire 17,000 people, partly replacing retirements, maybe 9,000 or so, but most of them are fresh brains. And of course, those fresh brains will be STEM primarily, and they're going to contribute to the efficiency of the engineering. Now, in order to make a very good hiring program, we need to invest on talent attraction. And this is exactly what we are doing now. And our HR department is fully committed in developing this strategy. Second, manufacturing. Now, because we want to reduce the inefficiency in manufacturing, there's sometimes really impact on margins. We have now a number of case studies. In La Spezia, we are making a very strong analysis and improvement for the land platforms. This is crucial for the Rheinmetall program, for the land defense program. We are investing in Cameri, in Caselle, in Venegono, which is a pilot experiment for helicopters. So in that case, we are really working on the division of plants to improve manufacturing. That means many things. Process engineering, rules, supply chain, warehouse organization. There is a lot to be done and we are working full time on that. Finally, about the supply chain, we are working on the supply chain. There is a program for the supply chain. By the way, this is also supported by funds, not necessarily from Leonardo. We need to invest in our supply chain, not only financially, but also, for instance, moving productions of products. products that don't have big margins, but they can fill the capability of the supply chain. So we are really working in the optimization and distribution of workload with our most important supply chain representatives. Now, last thing that I didn't mention before, is a new program called Mixing the Blood. This sounds a little bit like a vampire movie, but that's very important because recently I've been in Washington visiting our colleagues in DRS. By the way, welcoming the new CEO, John Balluni, that I think is starting in these days. And then we've been in London talking to our guys in the various lands that are distributed in the UK area. Now, the point is that I need much more integration. I need much more synergy. We cannot do sort of independent industrial plants because we belong to the same multinational company. There must be synergy. No problem at all in deciding that a company, the IRS, makes something and we don't make it in UK or in Italy, as long as this product is the best. And also it's available to all the others in the Leonardo Galaxy, in the Leonardo family. So the Mixing the Blood program means that we will start soon in having top managers in UK from Italy, top managers from UK to Italy, being resident and working side by side with the others. and also revisiting a little bit the synergy with DRS, which is very important because there are new areas where DRS is starting, for instance, space, for instance, cyber, where we can really benefit of each other. We can open much more market for DRS in Europe, and they can open much more market for Leonardo Europe in US. We have to exploit the synergy. Otherwise, we miss big opportunities and, frankly speaking, big money. So the Mixing Ballot Program is basically a program performed, carried out by a team of HR strategy operations in collaboration with the divisions and the plants, because we have to accomplish this in the next six months. We have to improve a situation that at the moment gives fragmentation, zero synergy and ultimately loss of good opportunities. We will make also jump to see what is the situation in Poland. Most important is that when I was in UK, I spoke to the Undersecretary of Defense, Honorable Halley. I will meet him again in Naples mid-November because we are trying to boost the collaboration with the UK government. We have a company, we have a plant in Yeovil that is not getting industrial grants, public governmental grants from the UK government since 14 years. And you understand that in order to make sure that this plant is not only subsidized by Italian orders and technologies, we need to have more participation. So we are negotiating a bit more attention to our industrial presence there. Anyway, I can say I found good faith and good willingness by everybody. I'm sure we can make much better than in the past. This will be the commitment for the next few months. I just go now towards the conclusion, and I want to tell you a bit more about the future. And the future has to do with the recent news that I'm sure you've heard. We've been working for more than a year, almost a year and a half, with our colleagues in Thales and Airbus. for the creation of a giant. We signed this agreement with Airbus and Thales to create a key European player for space technologies. The new company is expected to be operational in 2027. We have about one year and a half or so, maybe one year and a half or two years to, first of all, to face the antitrust situation and then to coordinate and develop the synergies. But most of the conceptual work has been done. We aim at creating a European space of space, basically. Till then, Leonardo will work, I mean, every company will work on its own. And of course, Leonardo and Thales within the Space Alliance. And we will try to do our best to develop satellite constellation, promote end-to-end solutions like proposed by the industrial plan. However, we are all in the mindset that we have to converge, carve out those things, merge into a unified new company, and work together. This is crucial. From our point of view, in view of the multi-domain solutions, in which space is a key pillar that would be necessary for integrating air defense and heart observation. So the Bromo company, which is this new company that you have heard about and we mentioned so far, means to establish European space global player that can compete with the big players in the US, China, very likely India and other emerging countries. We will be very careful not to jeopardize the PME and the small medium enterprises, sorry, SME and the startups. But of course, we need at global level a very competitive big machine. The governance structure in a simplified form, the Space Alliance Thales plus Leonardo is at 65%. Airbus is at 35%. Within the Space Alliance, as you see, Thales and Leonardo are equivalent, 32.5%. The JV will be based on five NATCOs, Italy, France, Germany, Spain, and UK. This reflects the geographical fingerprint of the constituting companies. And there is a matrix where you have the six domains and five NATCOs. And if you are sitting at the head of a NATCO, you'll be responsible of the domain, which is relevant for that NATCO, and all the activity will be done by the NATCO. The domains are health observation, SATCOM, navigation, exploration and science, equipment, and ground operations. There's a lot to be done, but the very important thing is that in the idea that we have of Bromo, actually, the NatCo, they're going to have legal autonomy and profit and loss management, so they have a balance, so they're real companies. They have the responsibility for the sovereign decision of the government in dealing with security because, of course, we have to consider that each country wants to have a sovereign dominance of the security area. And of course, each NATCO will be in charge of the supply chain to make sure the supply chain is boosted and not jeopardized. Anyway, this is now, in a nutshell, what we will do with Bromo. We're going to work in the next, let's say, 18 months to making this thing happen for real. So the concept, the scheme is clear. Now we have to see how this will work in a very operative way. We need a lot of good managers, a lot of participation and goodwill to make this work. But this is going to be a very competitive company in the world if we make a good job. At the moment, the revenue profile is approximately 6.5 billion, with 25,000 people involved. And the synergy, in a very conservative way, we expect easily half a billion synergies from scratch. Of course, we have much bigger opportunities. This is just to give you a very rough idea of day one. The ambition is really high. um i conclude uh because i want to wrap up uh what has been what has happened in the last uh two and a half years and what could be uh the leonardo's architectural vision for the future this has to do with the integrated air defense system that i i'm sure you remember i introduced you at the last quarter that was my last slide when i introduced you the michelangelo dome this concept of of air defense dome that should be customer friendly, very flexible, adaptable to any effect or any missile, any weapon. So not a rigid system, but something which really makes the difference because it essentially takes advantage of all the strategic choices that Leonardo has been doing in this three years. Number one, creating a space division. Launching the Constellation and creating Bromo at European level. Launching a large-scale initiative on drones, so cutting the edge and basically accelerating the drone technology. The G-CAP for the sixth generation fighter, which has been launched and, as you've seen before, is up and running. The land defense boost given by the Rheinmetall-Leonardo collaboration, IVECO acquisition, and so on and so forth. The strong investment on digital high-performance computing and artificial intelligence as a connectome of the entire company. which allow us to produce electronics, which is for command and control, combat systems, almost ubiquitous in all our platforms. We can do platforms for all domains, land, sea, space, air, sharing a concept electronics, which is meant to interoperate all the platforms in the multi-domain approach. And finally, the strong investment on cyber technologies, which has brought to a strong increase of our cyber technology capability and also of our cyber technology product. Now, all these things, should converge into something that takes advantage of the fact that Leonardo produces all kinds of state-of-the-art radars from 30 kilometers to 1,000 kilometers, produces all kinds of platforms, drone, land system, contribute to ships, sixth-generation fighter, all the ground systems, all the armored vehicles. We can do all platforms. we start now working with our constellation but of course intercom with other constellations so if you have all the ingredients the problem now is the uh is the interoperability is to develop the proper electronics that makes it possible to enable any platform to enter in this sky dome and to neutralize any threat from 30 kilometers in that zone to 3 000 kilometers no matter whether it's a hypersonic or subsonic or, you know, whatever. I can't say more now, but I want to tell you that on November 26, we're going to present this program, the Michelangelo Dome, the Michelangelo program, to our Minister of Defense and all the military forces in Italy. And on November 27, we will present the Michelangelo project to the market and to the most important stakeholder. so please save the date you will get an invitation the presentation will be done in detail at the multi-domain center that we created in Tiburtina plant close to Rome for most of you attending the first road show when we two years ago two years and a half ago we presented the we presented the industrial plan you were there so this will be the place and I hope you will realize how the vision developed in this almost three years that was really making a new Leonardo now will be transferred into the Leonardo the future which is the interoperable multi-domain machines a multi-domain company that has to guarantee global security for any kind of threat this is now the system of system evolution of the effort we did so far in Leonardo. I look forward to seeing you on 27 in Rome, either by video or in presence. We will show how this will be deployed. Thank you very much for your attention. And now I'd like to give the stage to Alessandra, who, as usual, will give you all the details about divisional activities and financial KPI in a much more precise way than I'm able to do. Thank you very much for your attention, guys.

Thank you, Roberto, and good afternoon, everybody. I'm very pleased to be talking you through how we have delivered another good quarter and so very solid nine-month results. We're continuing the positive trends that we saw earlier in the first half, especially in our main defense and security businesses. We're seeing new orders coming through at a good pace, and we're delivering off a record backlog of 47 billion. This is driving higher volumes and solid double-digit top-line growth and high double-digit operating profit growth and higher profitability. We have also delivered another quarter of improving free operating cash flow, and we're reducing net debt with disciplined capital allocation aimed at supporting growth while improving shareholder returns. We are on track on all our key metrics and we're confirming the full year guidance that we have upgraded a few months ago in July. We see strong performance across all group KPIs with increased order intake, growing volumes and profitability. Let's now look at the key group KPIs. In the first nine months, group new order intake was 18.2 billion, an increase of 24% year-on-year. We have also seen strong commercial performance across defence and security in electronics, helicopters and especially aeronautics, with a very strong recent quarter which includes the recently signed extension of the Kuwait Eurofighter multi-year support contract. This order intake is consistent with the upgraded guidance that we set out in July when we flagged potential large orders in the pipeline. Book to bill was 1.4 times. We're seeing sustained demand all across defense and security and fast growth in areas like cybersecurity. Then group revenues grew 12.4% to 13.4 billion. we have continued to see across all divisions the capability to deliver versus last year. By virtue of good visibility in our backlog, we see strong growth going forward. Plus, we have a strong capability and focus on program milestones and good support from the supply chain in general. And this has translated into higher EBITDA across the group, an increase of 23% to 945 million, with good performances across the group. Return on sales improved to 7%. And as we saw in the first half, we are proceeding at improving profit at almost twice the pace of revenue growth. and we have continued to strengthen our financial position. In the nine months to September, we saw an improved free operating cash flow with a cash absorption of 426 million versus an absorption of 548 million last year. As at September, our group net debt was significantly lower at 2.3 billion versus 3.1 billion. last year, in part because also of the proceeds of 446 million from the sale of the underwater business, which we completed in January. In August, we received another credit rating upgrade from Fitch and we're very proud of it. So a good first nine months on track and it underpins our confidence in our targets for the full year. Now let's go deeper into the results and performance at business level. Starting with helicopters, we saw continued positive momentum supported by a good flow of business with progress on all programs as well as customer support. New order intake was 4.9 billion in the nine month, a good performance against a strong comparator for the previous year. continued solid order intake on defense and governmental, including the AW249 program for the Italian Army, governmental orders in Malaysia, customer support orders from the UK MOD for its Merlin fleet, and orders for the Italian military for ground-based pilot training systems and other logistics. And follow-on orders also in the US from the US Air Force on the MH139. Helicopter revenues increased to 4.1 billion, up 13%, driven by increased activity on the AW family, the dual-use area, as well as the good contribution of customer support and training. And this was all supported by good resilience in the supply chain. This is an element that Roberto stressed whose importance we can't absolutely under-evaluate. Leading, all of these results have led to an EBITDA of 320 million, up 18%, with a slight improvement in return on sales, supported by consistent program delivery. So a good performance from helicopters, with strong demand across the business, and good growth in revenue and EBITDA. Now, moving on to defense electronics, which continues to perform very well across all segments, both geographically and across domains. Electronics Europe achieved good growth in orders, volumes, and profitability. In the first nine months, new order intake was 4.9 billion, up 2.5% year on year, excluding the underwater contribution, and the book to bill was 1.4 times. All of this is showing growth across all domains and especially in defense systems and good demand for the upgrade and renewal across a broad range of platforms. We saw additional orders for the Mach 2 radar for the UK Eurofighter Typhoons for our Royal Air Force customer, as well as defense systems for the 16 Eurofighter for the Italian Air Force. and in the naval sector, the order for combat systems for the Indonesian Navy patrol vessels. Electronics Europe revenues were up 13% at 3.5 billion, reflecting higher volumes as we delivered off the growing backlog. EBITDA rose to 450 million, an increase of 18%, and return on sales increased to 12.8%. Contributions from strategic joint ventures were in line with expectations, and MBDA continues to perform well thanks to a continuous flow of business and strong program margins. At the same time, as you have heard last week, Leonardo Diarres has also reported a good nine-month performance, showing new order intake of 2.8 billion euros, up year over year about 9%, with continued broad-based customer demand across the business, and especially for counter UAS, advanced infrared sensing, naval network computing, and electric power and propulsion technologies. Revenue rose to 2.3 billion, up 11.7% on the back of growing volumes, and EBITDA grew to 217 million, up 15%, with an increased return on sales of 9.4%. Moving on to cyber, cyber and security, where we see the first nine month volumes and the profitability continuing to trending up significantly compared to last year. New orders were 700 million, up almost 20%, revenues of 532, up 19%, EBITDA 41, up 86%, with return on sales rising from 4.9 to 7.7. So continuing its positive trajectory with increasing profitability driven by higher volumes and product mix. Order intake included various orders for Italian public administration through the PSN fund for digitalization, the cloud infrastructures and the secure communication, as well as new governmental orders in the UK and elsewhere. As we mentioned at the half year, we're now presenting the Aeronautics Division. This reflects our role as a leading player in fixed wing aeronautics in both the military and civil sectors. with our aircraft and aerostructures units combined. And it also now includes our participation in the next generation GCAP. You remember that the GCAP program was previously reported under the other activities. We're also developing our activities in unmanned aerial systems. You can see the aggregated aeronautics divisions' high growth in orders and revenues, while the EBITDA fall reflects the losses in the first nine months in aerostructures and ATR. To make operating performance comparable, we're also setting out for you the KPIs for aircraft, now including GCAP, and then for aerostructures. You can see aircraft has been performing very strongly this year, especially with new order intake. After an excellent third quarter, new orders in the first nine months have now grown to 4.3 billion, well over double the previous year's level, benefiting from the follow-on logistics support contract for five years for the Kuwait Eurofighter program. We are also seeing orders coming from the GCAP program and export orders for the C-27J multirole aircraft, as Roberto mentioned at the beginning of his speech. Revenues have grown in the first nine months to 2.3 billion, up almost 16%, on the back of higher volumes across military programs such as C-27J, GCAP and JSF. EBITDA grew to 265 million and maintaining strong double-digit profitability. We have previously mentioned that now about a third of the aircraft divisions revenues are coming from customer support. And that is representing an attractive margin and cashflow business, which also is showing how we have successfully been implementing the servitization strategy over the last few years, which was one of the pillar and is one of the pillars of our industrial plan. Now moving on to the civil side of aeronautics. In aerostructures, order intake in the first nine months increased to just 789 million, up on the previous year on the back of orders from Boeing. Revenues were 510 million and EBITDA losses rose slightly to 135 million, excluding ATR. As planned, we have just returned to a second shift per day in aerostructures and are increasing production levels relative to the first half of the year when we were unwinding inventory, which, by the way, we continue to unwind. And this is leading to better underperformance, underabsorption of fixed cost and reduced losses in the second half. Our actions are taking effect to narrow the gap in line with the ramp up by Boeing for the B787 to seven ships per month. Separately, ATR's contribution in the nine month was negative 34 million, with lower deliveries impacted mainly by supply chain constraints, which are currently being addressed. And we're now pleased to see more positive signs at ATR in terms of new order intake. Turning to space, we have continued to see improving commercial performance and profitability. New orders were 655 million, notably in telespazio, satellite systems and operations, and geo-information segments, also leading to increasing revenues. The more positive EBITDA contribution reflected the confirmed profitability of Telespazio and also partial recovery in TASS following the efficiency plans launched last year, which benefits mainly on the SG&A line with close attention on program deliveries. You have heard Roberto talk earlier about the exciting proposed combination of our space activities with those of Airbus and of Thales to create a leading European player in space. Our higher group EBITDA in the first nine months also helped drive a better bottom line performance. EBIT grew to 722, up 13.5%, and the group net result grew to 466 versus 364 million in the same period of 2024, with lower financial expenses in line with our reduced debt levels. The bottom line net result of 735 million benefited from the capital gain recognized on the sale of underwater business to Fincantieri completed last January. We have also made continuous progress in improving our cash generation, which as you know for us is one of the key highlights and key drivers of performance metrics. It is driven by a robust performance on defense and governmental. And year over year, there is a reduced outflow with a cash absorption of 426 million versus 548 in the last year, 2024. This is reflecting our improving operating performance and higher EBITDA and the efforts we've been making to manage working capital and cash-ins. You know that this is a key area of focus for us and the culture of cash is being permeated within the company. We have full confidence in our 2025 free operating cash flow targets, which we have raised last July to a range of 920 to 980 million. Then we continue to focus on executing on our disciplined financial strategy. And you can see how over the last three years, we have achieved a very solid investment grade, receiving repeated upgrades in rating and in outlook. Most recently in the last few months, there have been two upgrades in our rating and one upgrade in our outlook. remain fully committed to maintaining a very solid investment grade status while supporting growth and improving shareholder returns. We also recently announced a successful renegotiation of our ESG link to revolving credit facility. It was oversubscribed three times, confirming the positive sentiment and the support that the market has for Leonardo. We also achieved a margin reduction of up to 30% and savings on financial charges. These improved terms reflect our stronger balance sheet and the solid investment grade we have achieved. We also are including a new ESG indicators in the credit line, which are in line with the financial and sustainability strategy we have put forth. Let me finish with a confirmation of our full year guidance. We have seen in the period to September that we have continued our good start earlier in the year, and we are on track with our expectations. We continue to see clear momentum, and as such, we confirm the full year upgraded guidance, which we gave you in July. Our main businesses on the defense governmental side are delivering strongly in order intake, revenues, profitability, and cash flow. We're seeing good demand for our core defense and security products, technologies and solutions with solid commercial performances across all divisions. New order intake has been very good and especially in the last quarter. And it gives us confidence. Orders are an indicator of the future. They're not linear as you know, but overall the trend is positive and a step up again this year. We're pleased with not just the level of orders, but also the quality. And as I said earlier, this order intake is consistent with the upgraded full year guidance we gave you of 22.25 to 22.75 billion when we flagged the potential large orders in the pipeline. We're also confirming the full group guidance for revenues and EBITDA with top line revenues growth as we deliver from backlog and improve profitability. and the full year free operating cash flow that we upgraded in July. So now to conclude, we're continuing to deliver well, on track, with a good performance across all key metrics. Thank you all, and I will now hand you over to the Q&A.

Thank you, Alessandra. Good afternoon to everybody also from my side. I think that it is now the time for the Q&A. We can use the remaining 20, 30 minutes for the Q&A session. So I leave the word to the operator and you can open the line. Thank you.

Thank you. I would just like to remind all of the participants to please make sure that your audio is clear and that you are unmuted locally. Our first question comes from Alessandro Pozzi with Mediobanca.

Good evening. Thank you for taking the questions and let me start by saying congratulations to Claudia for the new role and I wish all the best to Alessandra. um the uh first question on uh on results uh clearly very strong set of numbers uh now the the only issue here is that um you haven't changed the guidance and therefore a q4 looks really low especially once you uh the implied guidance for q4 once you factor in the seasonal trends and i was wondering um what how you feel about the guidance and the reason why perhaps you haven't upgraded the guidance, especially for order intake, which seems to be really strong in Q3. And also in light of the fact that there are probably new contracts that you will sign in Q4, very large, like the Turkish Eurofighter, the Germany Eurofighter contract, just to name a few. The second point I would like to discuss is IVECO defence. I believe that you're doing an industrial analysis at the moment. I don't know whether I understood correctly, but maybe the carve-out of the tract division of IVECO defence is not on the table anymore, or maybe it's perhaps. I was wondering whether there is a chance whereby you end up with 100% of IVECO defence. And maybe the last one, you mentioned synergies with DRS. It's certainly been really difficult to create synergies between the European subsidiaries and US subsidiaries. And I was wondering, how do you think you will be able to improve that? And longer term, what's your view on your stake in DRS? Thank you.

Yes. Thank you for the set of questions. Okay, I will be at the very beginning about qualitative and then obviously I will ask Alessandra maybe to point out a few aspects on my answer. To be frank, guys, At the last quarter, I had a discussion, maybe because of my scientific background, but I like to have a kind of algorithm for KPI that are giving us a guideline. I mean, of course, they're very flexible, but they give a criteria for us to make actions. For instance, I was wondering whether it makes sense that we update the guidance every quarter because there is an increase of 1%, 2% of the specific KPI. So, you know, I just proposed, but that was a very flexible proposal, okay, just to give a criterion, not because it's not mandatory, it was just a proposal. Let's communicate a change of guidance when we expect, let's say, 10% increase on a specific API, which was the case. We might argue and discuss. I'm totally flexible, no ideology at all. If you think 10 is too high, we can make five or whatever. I was just trying to give to the team an idea that we have a target. If we go above that target, we change the guidance. If we are below, even if we grow, maybe it's not so relevant to give a marginal change to the guidance. For instance... To be honest, I'm pretty sure, guys, that we go well above 19 billion. We already have 19.2 or so for revenues. And we possibly break the roof of 1 billion for the free operating cash flow. I'm very confident this will happen. So in some sense, I would feel very confident to propose you an upgrade in the guidance. But it's going to be 2%, 3%. Because we are growing, we are growing fast. We did a lot of work, and now I expect to grow rather continuously. Maybe there is no point to update the guidance every quarter. But with the same transparency and honesty that I told you in my premise, if you think it is better to update, even a marginal increase, 1%, 2%, we do it. We're not, how to say, hiding or protecting or acting in a conservative way. I'm sure we're going to pass the target this quarter, the next quarter, for sure. I wonder whether it is useful to anybody to give an upgrade of 2% or 2.5%. If you think so, we are ready to get the lesson and to do it. I mean, really, we are absolutely agnostic in this respect. So I know that it's a non-conventional way to answer, but as I said, I feel confident with the numbers. So in the end of the day, for us, it doesn't make any big difference if we say we correct the guidance every three months, plus 2%, plus 3%. We can do it. Or if you like the Cingolani's algorithm, we don't disturb you if it is less than 10% or 7% or so. Now, concerning Rheinmetall, as I tried to explain before, the due diligence in the industrial analysis is really very complicated now. So we know exactly what we could do in Iveco, for instance, splitting an internal supply chain line or doubling a production line in a plant. Now we have to see whether the investment to do it is worth it. to make it to carve out a specific part and maybe to sell this to our partners or we better keep all unified and anyway having commercial agreements with our partners which would have exactly the same result in the end of the day without a massive investment. We're going to make this analysis in the next weeks. There is a team of about 20 people, including advisors that are working with us. As soon as we are clear with the numbers, of course, we will make a proposal. But to be honest, we cover both scenarios, two-thirds, one-third, or everything for Leonardo. There is no, how to say, financial problem for that. We are ready to both. We want to make the things which is more effective and requiring less investment. I think you had another question. Which one? Synergy for DRS. Yes. What we conceived with our colleagues in DRS is to create a mixed team of top managers that from the US are staying in our place and from Leonardo, let's say Europe, they move there to have a much closer interaction of people. And, of course, to update and align the industrial plan that DRS has made and, of course, Leonardo's made, and not always coincident or maybe sometimes overlapping with less synergy and more repetitions or overlaps. Maybe some thought about the operation of the proxy can also be done. But this is one of the avenues we're discussing together. I mean, we have a common aim, to integrate more, to make more synergy. Mixing the blood means mixing the people and also the product. And this is what we're going to study in the next three months. But by the end of the year, beginning of next year, we should have one or two scenarios to propose and develop. I hope I answered. And of course, Alessandro, if you want to say more...

I think you have covered it all, Roberto. OK, so we move to the next question. Thank you.

I also agree on raising the guidance only when you think you can beat by a certain amount. So again, changing guidance by 2%, 3% every quarter, maybe Yeah, I agree with you on the style. Also, on the equity participation of Avio, maybe can you say something? You announced a sale of a 9% stake in Avio. what is the longer term view?

For sure. So first of all, thank you for stressing the point of the guidance. I'm very relieved that you understand how flexible we were. There was no intention to do anything strange. It was just a basic criterion to feel confident, some automatic decision system. So happy that it's acceptable. But of course, always happy to receive suggestions and criticism because we are trying only to speed up the machine. Concerning Avio, So the point is the following. Avio has made an industrial plan which moves the central mass of the company from launchers to, let's say, missiles and propulsion systems towards missiles, moving the business in the United States progressively. And somehow, how to say, seen by us in Leonardo, we were in Avio because our interest was 90% on launchers because we do the missiles with MBDA. So for us, it would be a nonsense to nurture two competing missiles activities in two companies that we control, we participate in, while losing the focus on launchers. So in a very collaborative spirit, we discussed with Avio that we are not interested in the in the augmentation of capital in this new initiative. Because that will be, first of all, for us, quite an amount of money to be invested to stay at 28%. In a company that, however, is moving the business towards a direction which is competitive to what we already do with MBDA. So, you know, industrially, I don't think my board and even you guys that are investing on us would understand the philosophy. Why are you duplicating something and, you know, losing the focus on the launcher that was the original idea, even though it was not very successful. But anyway, that was the idea. So we didn't want, however, to stop Avio because I think they have the right and they want to play their cards, obviously. So we said, of course, we agree on the augmentation of capital, but we don't participate directly. I mean, to be honest, this happened exactly the same with Ensold, if you remember, a couple of years ago. So it was a very mild way to say, OK, we don't follow you, but we understand your reasons. Okay. Now, technically speaking, that meant not participating in the augmentation of the capital, but we had to sell the rights, the right of options that are the residual value. So in doing this, we collaborated with a group of the bank advisors, and they suggested something like selling a bit of shares and then using part of the income of the sell to resubscribe some of the share of This is not actually participating in the capital augmentation, but subscribing again, of course, brings us around 18%, 19%, which is the minimum participation Leonardo should have in Avio, not to abandon Avio, because also the government wants to make sure that we still have some presence in, not the government, the Minister of Finance, which is our main shareholders, that there is some presence ensured in Avio, at least for the beginning of the action. So we diluted. from 28% to 18, 19 or so. We monetize in an amount in the range of 20 to 21 millions or so, our rights. And now we are there, not making hurdles to have on one hand, but on the other hand, meaning that we cannot follow the plan towards the missiles in United States. Now, there are other companies that would be interested, for instance, MBDA and so on. But we are discussing those things went very fast. So no one could take a decision. We were prudent. And we decided to follow this strategy. So in the end of the day, we get some cash. We diluted from 28 to 18 or so, 18, 19. I don't remember the exact number, but we'll see in a few days. And then in a couple of weeks, we confirm we're going to re-subscribe some of the shares to stay constantly at 18, 19. And then we will see how the market behaves and how the initiative takes off. And of course, we wish the very best to Abbio in the meantime to be successful with the new strategy.

Thank you.

The next question comes from Ross Law with Morgan Stanley.

Hi, everyone. Hope you can hear me. Thanks for taking my questions. So two from me. The first is similar to Aveo, but more specific to Hensalt and your stake there and how you're thinking about that. And then the second one is just on the NHI deal with Norway. You flagged that your free cash flow guidance now includes the impact of Can you just confirm what the magnitude of that impact is and does it all fall in Q4? And is this payment in line with your shareholding in NHI or is it slightly different?

Thanks. Okay. For Norway, I'll leave the word to Alessandra because she closed fantastically the deal. I will tell you a bit more about Ensold immediately after.

OK, Ross, so on the closing of the transaction with Norway, the cash outflow, total cash outflow for Leonardo will be 125 million, which is 41%. The stake that Leonardo has in NHI of the settlement amount, 305 million. The distribution from a timing standpoint of this outflow is mainly in 26. This year we're going to have an actual 10 to 15 million payment and the majority will be in 2026. Clearly, as you know, the closing of the transaction is a very positive event for us. This is a legacy contract, 20 years old. The risk has been, from a court stance perspective, the risk has been tangible. We could have had a much worse outcome at the end of the day. brought down the amount of exposure down to 300 million of a consortium. So it's a really good outcome that we are satisfied with, and we are closing once for all the topic. Back to you, Roberto.

Yeah. Soros, about the insult. After the contact I had with my colleague, Oliver Dore, the CEO of Ensold, we met a couple of times recently. So we are now studying what next. Of course, this has to be integrated into a very complex situation. On one hand, we have the the extra funds from Europe, the SAFE program, Re-arm Europe and so on and so forth. And on the other hand, we have the big boost that the German government is putting on defense, which means that they need the German companies to be really committed on the domestic programs. So I gave my complete availability to discuss any scenario with Ensold and eventually with the authorities on what could be the best scenario for them and of course for Leonardo. So the discussion is in progress. very constructive very friendly um well of course we we have to see how the the bazooka german program is deployed to understand what what is the best solution for both of us uh at the moment however the the collaboration is ongoing on the on the legacy programs uh the numbers are okay good and we we cannot complain i mean there is no red light anywhere. But in order to have a strategic choice made, we need to talk to our German colleagues when they have a clear planning of the situation. And at that point, we'll try to adapt our strategy to their strategy. In the end of the day, staying like this would not be bad. The point is, can we do better or can we do somewhere else something better? And this we will discuss with our colleagues as soon as they have a clear scenario in front of them.

Thank you both very much. Sure.

And the next question comes from Martino de Ambrogi with Equita.

Thank you. Good evening, everybody. I know the trend in orders is not linear, and you already talked about the guidance for the current year for sales and free cash flow, which may be better. I was wondering on the order intake, very strong in the nine months. Q4 implicit in the guidance would mean that the lowest absolute value over the last 10 years in a much more favorable environment. So I was wondering specifically on order intake if there is the same conclusion that you mentioned on sales and free cash flow. And on hand sold, a follow up on the previous question. When you talk about open to different opportunities and so on, does it include divestiture, either merger with other activities? So it's 100% every kind of possibility or, I don't know, because you also mentioned if we stay as we are today, we are happy in any case.

Yeah, I gave you the word for the first question, then I will specify about Enso.

So, Martino, on orders, you said it, orders are not linear. We're very pleased with what we have seen in the nine months, and clearly that's a very good outcome. And there's a performance that is also reflecting the jumbo order of the contract, the Kuwaitian contract for customer support. So if you project into the full year, we confirm the guidance between 2022 to 22,250 and 22,750 billion. And we feel very confident that we will hit that range.

LORIS D' Martino, about Ensold, so let's say so. But this is my personal interpretation, and I believe it's reasonable. I think we could consider as totally abandoned this idea, the original idea, six, seven years ago, because I was even not in Leonardo when this started, that one day Leonardo could own 51% of the share of Ensold, because that was before the war, before everything. And now I'm sure that... The profile of Ensold is growing a lot, and the strategy of the German government is very clear. I'm sure they don't want to leave the control by another company of an asset such as Ensold. So this we can discard. Two years ago, three years ago, could have been yet still the case, but for sure not now. Now, what can we do? We can, of course, create, we can divest, obviously, getting out. But I mean, this must have, from our point of view, divestiture is made because we make money to reinvest in something which is very strategic. We don't sell things to make money and that's all. We sell because we want to have money for a strategic investment. We did a lot of work so far, actually, a lot of new initiatives. Now, implementation is really the challenge. And even if you have infinite money and you buy infinite new things, then you have to make them profitable, to make them profitable. efficient and this means find managers proper organization so on so forth so I wouldn't do anything that would create extra load extra payload to our managerial activity and in the selectively unless it's really crucial for the global security program for the multi domain interoperability program I think we're very close to have all the elements and I don't want to do things that could make the machine more difficult to drive having said this Let's see also what our German colleagues propose. There are potential synergies between Leonardo and that could be further studied and developed. And this is also one of the areas where our teams are discussing. But as I said, I think now the ball is in the field of the German partner for domestic political reasons, for strategic reasons. We are happy to contribute to the discussion, but we look forward to having indications by Ensel to see what could be also for them a good way to go. In the end of the day, we are rather flexible. We don't see any red flag, any red light anywhere, as I said, because the program is running. We're doing things together. Margins and numbers are satisfactory. So for me, it's much more important to fix in a permanent way other loss-making situations, as you know. So in this respect, you find me rather relaxed and flexible. But we're discussing quite intensively any possible scenario.

Thank you very much, and Alessandra, all the best.

Thank you, Bertino.

Thank you. And the next question comes from Gabriele Gambarova with Intesa San Paolo.

Yes, good evening. Thanks for taking my question. The first one is on aircraft. You got this... a huge contract with Kuwait. And at the same time, I remind that during your, let's say, March business plan, you assumed that aircraft margins would go down by roughly 200 basis points starting from next year. So I was wondering if this Kuwait contract, a jumbo one, changes anything about this. Another question is on the UK. Roberto, you mentioned the plant, and we know that there is this new medium helicopter programme ongoing. You are the sole contender. I was wondering if something is moving there, if you have any update on this? And the third one is housekeeping, just housekeeping on the below the line items you expect for 2025.

thank you very much okay uh we'll go with the with this expectation for aircraft then i go for sure copters sure so the margins on aircraft that we have projected factored in a portion of the contract and of the servitization strategy that we had in place Having said that, as you know, the aircraft division has proved to deliver very strongly at top level margin systematically year over year. So I would say that in the context of the opportunity that we see throughout the fighter business, being Eurofighter in export, being Eurofighter for the four core nations, the JSF, which is a continuous positive contributor to the overall volumes, as well as the GCAP, we will have a consistently solid and top-level profitability in the division.

So the question was the other one?

The NMH in UK.

Yeah, the NMH in UK.

So, Gabriela, look, the reason for me to go to UK and talk to the Undersecretary of Defence, Honourable Halley, was just to make sure that things are coming and moving because there was a sequential delay of the decision point for the helicopter tender. And so we made clear that we are waiting. For us, time matters at this point. We cannot subsidize Joville forever. It's 14 years, 1-4, 14 years that we don't get any contract from the UK government. You know, it's getting difficult for us to keep this big plant alive without institutional collaboration. I think the minister was very, very serious, very, you know, he's working on that. As I said, we will meet in Naples very soon and our team uh clive vegans and team in uk are really working uh and kind of chasing the institution to see what happens so i think we can be we can be positive uh but of course we have to see what happens in the end i mean those as you know those are very complicated tenders that there is a lot of political influence behind uh And therefore, it's not simply an industrial issue. It's a kind of geopolitical issue. We want to see what happens. But of course, should this not happen, well, we should seriously consider why we keep a plant there for 15 years not getting anything. But this is part of the efficiency plan that we might consider in case things will not run properly. But I think we made a very clear statement, and we found a very collaborative and responsible answer. So let's see what happens in the next few weeks. Decisions should be made by the end of the year. So we are really at the last mile, OK? We should not wait for long.

Gabriele, on your last housekeeping point, the expectation for below the line, before the closure of the NH90 program, I would have responded to your question as approximately in line with 2024. I have to say that given this extraordinary item, which is accounting for 125 million, we may be slightly above last year.

Okay, thank you very much. And all the best, Alessandra.

Thank you, Gabriele.

And our last question comes from Christoph Menard with Deutsche Bank.

Yes, good evening. Thank you for taking my question. The first one is on the NH settlement. What is the impact on the 2026 free cash flow guidance? You're obviously spending 125 million, a little bit less than this, but what is the impact on what you guided? The second question is on capacity boost. Can you also remind us the free cash flow impact that it could have, if any, in the coming years? And the last question is on the Michelangelo project. I was wondering how it actually fits with the European Skyshield Initiative. What is the plan or strategic plan to insert it within ESSI? Thank you very much and also my best wishes to Alessandra.

Thank you. Thank you, Christophe, for your well wishes. And let's start answering your question on NH90 settlement and impact on next year free cash flow. What I can tell you is that we will work our hardest to compensate that outflow with other inflows and maintain the outlook that we have provided last year. Clearly, this is a budgeting cycling process which has just started and we will keep you posted. But the goal for us as management team is to not have a negative impact next year from this settlement.

OK, Christopher, concerning the capacity boost, let me remind the main motivation for the capacity boost is that we know already that with the exponential growth of demand that we're going to have in drones, aircraft, land defense systems, we soon are going to meet a bottleneck in our production capability. So before telling you what is the expected amount, the expected improvement in terms of cash, I want to fix the main problem, which is we need to deliver, for instance, in the case of land defense, 1,250 heavy armored vehicles, approximately 250 main battle tanks, approximately 1,000 advanced infantry combat vehicles, and we don't have the capability right now to deliver because we need a strong efficiency in our production capacity. So somehow the revenue or the money that we can get, it's a consequence of the fact that we can deliver more. And we don't deliver. If we don't deliver, of course, we don't earn money. So that was the first motivation. And so it's a kind of indirect analysis we can do. But if you consider that we have about $20 billion program, more than $20 billion program in 10 years for the land defense, that's an example. But I could tell you the same for GCAP, for other things. You divide by two, us and Rheinmetall, and you can see that the margin can be 15%. OK, you easily get how much money we can earn if we are able to deliver. If we don't deliver, this money is not taken. The second point is that we are facing something like, I don't remember exactly, but we're talking millions and millions of offload engineering hours. And this is a cost. It's a net cost that goes against the margins of our manufacturing. Of course, in order to satisfy the demand, if you have to pay 10, 11, 15 millions of engineering hours, you're going to pay that. And this is going to be a reduction in the margin. So reducing the number of hours of offload that we buy, it immediately turns into margins. and of course into euro or dollars or whatever. So we are not able to make the calculation now because we are trying to cut this 30% to 40% extra workload in the engineering, 10% to 15% extra workload in manufacturing. And if we manage, then we can give you an equivalent in euro. But clearly, the algorithm is very simple. The point is to act in a way that we can make the capacity boost. In terms of investment, because of course you could ask, OK, but you have to put money on the plants to make them more efficient. Obviously, we invest in the optimization manufacturing as long as the investment is below the expected gain in two, three years in the budget plan. This is exactly what we're doing now. And it seems to be very effective as a model. So sorry for not giving you a number, but those are big numbers, to be clear. There was any other question? Oh, yeah, Michelangelo. Sorry, Christophe, I would like to ask you, can you repeat the question? Because you said how you integrate your Michelangelo dome in something, but I didn't understand the acronym. What did you say exactly?

Yeah, I was hinting at the European SkyShield initiative that Germany sponsored, which is a multi-layer defense system.

OK, sorry, I didn't understand. Yeah, so we do have a product portfolio of approximately 150 components in electronics, radars, sensors, effectors, mounted on land defense systems, vessels, aircraft, helicopters. And we built our own constellation. These things are already on the portfolio. So I'm talking about the largest integration program ever in the defense industry, but we do have all the components. I don't think anybody else has the portfolio ready. So one thing is to say, I would like to do this. One thing is to say, I have these components. I want to integrate them. So I'm not able to compare because I know what I have, but I'm not aware of what they have. But for sure, they don't have all the platforms and all the components. So I think they are a little bit, if I remember correctly, they made a statement that we candidate ourselves to drive the design of the air defense system. Fine. It's a candidature. What I'm going to present is a product.

OK. OK, yeah, looking forward to the presentation.

Sure, I'll be happy to give all the details as long as we can disclose everything. But it will be very clear.

OK, I think we are at the end of our presentation. Thank you for your participation. And I leave the last words to Alessandra.

Thank you. Thank you, Claudia. And let me say a few words here. Our journey together started exactly eight years ago, in November 2017. These eight years have been phenomenal, extremely intense, and Leonardo throughout this timeframe has become bigger, stronger, more profitable, and more cashflow generative. I thank Roberto for this great time we spent together, and I thank you all for the fantastic journey that we have done together. And I'm confident that Leonardo will continue to do great in the future. I look forward to crossing paths again with each and every one of you in our future.

We will for sure.