Sesa Spa

Good morning. This is the Chorus Call Conference Operator. Welcome and thank you for joining the full year 2026 Consolidated Three Months Results Conference Call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Jacopo Lascetti, Stakeholder and Corporate Sustainability Manager of CESA. Please go ahead, sir.

Good morning, and thank you for joining this CESA group presentation. Representing the group today are Alessandro Fabroni, Group CEO, Caterina Gori, Investor Relations and Corporate Finance and M&A Manager, and myself, Secure the Relations and Adopt Sustainability. Earlier today, the Board of Directors approved the consolidated financial results for the first quarter of fiscal year 2026, ended July 13, 2025. The corporate presentation is available on the CETA website and will serve as a reference to our today's conference call. Alessandro will begin by providing an overview of our key business developments and achievements.

Good morning and thank you all for joining today's call. In the first quarter of the new fiscal year, Cesar returned to growth, confirming the achievability of the guidance of the new industrial plan. Overall, first quarter 2026 shows a solid recovery in consolidated revenues and VDA, along with a significant improvement in net profitability. supported by a substantial reduction in financial expenses and the improvement of the net financial position compared to April 2025, with a clear and progressive reversal of the main trends of revenues and profitability. In the first quarter, on a consolidated basis, the group recorded revenues for €846 million up 8% and EBITDA of €61 million up 7.2% year-on-year, and an adjusted net profit for Euro 29.8 million up 6.4% year-on-year, with an adjusted group net profit equal to Euro 27.9 million up by 4.5% year-on-year. The trend in human people shows 6,593 employees as of July 2025, with the moderate growth up 0.9% compared to April 2025, in line with our target of growing operating efficiency of the new industrial plant. On organic basis, revenues increased by 2.2% year-on-year, EBITDA by 4% year-on-year, and adjusted group net profit by 2.3% year-on-year, compared with the pro forma figures of July 24, restated to include the quarterly results of Green Sun, company acquired last November 24. Consolidated revenues by sector show a positive trend compared with for quarter 25. ICTDES, with revenues for Euro 497 million, down 2.7%, entirely organic, showing progressive recovery from the 8.2% decline for Q25, with a return to growth expected from Q2 2026, following the double-digit increase in the July and August 2025 backlog. Digital Green VAS with revenues for Euro 111 million up 24.7% year-on-year driven by 20% organic growth and strong business demand supported by rising energy needs related to digitalization and AI adoption. Software and system integration sector with revenues for Euro 220 million up 2.8% year-on-year despite the slower demand in some key made in Italy districts and the re-engineering activities in some business units and finally business services sector with revenues for Euro 37 million up by 3.0% year-on-year which continues to grow entirely organically supported by the increasing focus on digital platforms and vertical applications and the expected acceleration in upcoming quarters thanks to new agreements with some major retired banks. Consolidated EBITDA increased by 7.2% year-on-year, reaching EUR 61 million, up 4% versus the performer figures, and driven by the 20% growth of green BAS and business services sector, while the ICT BAS and software system integration sector remain broadly stable year-on-year. ICT BAS achieved an EBDA of EUR 22.2 million down 0.9% EUR with an EBDA margin equals to 4.5% as of July 25 up from 4.4% as of July 24. Digital Green BAS reported an EBDA of EUR 6.2 million up 18% year-on-year, with an EBITDA margin of 5.6% as of July 25, slightly down from 5.9% as of July 24. Software and system integration sector achieved an EBITDA of €23.5 million, down 2.7% year-on-year, with an EBITDA margin equal to 10.7% as of July 25, compared to 10.8% in the full year 25. This reflects the re-engineering operation in some business units with a BDA margin expected to stabilize in full year 26 at the same level of the full year 25. Business services reported an BDA equal to EUR 7.3 million up by 25% year-on-year with an BDA margin of 20% driven by the progressive focus of revenues on proprietary digital platforms and vertical applications developed over the past two years. Adjusted consolidated EBIT was equal to EUR 47.3 million up 4.2% year-on-year after depreciation and amortization of tangible and intangible assets equals to 12.7 million up 15% year-on-year and provisions for around 0.7 million. As expected, in the new industrial plan, Net financial position show a significant reduction equals to 12% compared to first quarter 25 and equals to 36% compared to fourth quarter 25, driven by lower interest rates and efficiency measures in group financial management. The first quarter adjusting consolidating net profit was equal to EUR 29.8 million, up 6.4% year-on-year, reflecting stronger operating profitability and reduction in financial expenses. The adjusted group consolidating net profit reached EUR 28 million, up 4.5% year-on-year and up by 2.3% versus the performance figures as of July 24. Finally, consolidated report in net financial position as of July 2025 equals to a net debt for Euro 65 million shows a significant improvement compared to Euro 75 million as of April 2025 thanks to the operating cash flow in the quarter and lower investment compared to the previous year with CapEx and M&A equal to approximately 11.5 million in first quarter 26 alone. Now I give the floor to Caterina to present our new strategy in terms of M&A and the main resolution of the last shareholders meeting held on August 27, 2025.

After years of significant M&A investments, our new FY2026-2027 industrial plan marks a strategic shift focusing on group simplification and organic growth. We will leverage the capabilities and business model we have built over the years to drive sustainable growth, supported by dedicated capital in AI and automation to enhance efficiency, scalability, and market penetration. As a result, annual M&A investments are projected to decline to around €30 million. guided by a selective, value-driven strategy, while CAPEX is expected to remain at approximately €50 million per year. In the first quarter of FY26, we further strengthened our international presence through only two strategic acquisitions, with total investments of approximately €7 million. Physikon GmbH in Germany, an SAP consulting specialist, with Euro 5.3 million in revenues, and Delta Tecnologia de Informacion in Spain, an AI-driven player in digital identity with Euro 2 million in revenues. But companies deliver a PDA margin above 10%. These acquisitions confirm our strategy, a selective approach to high-value M&A in Europe. combined with strong investments in digital transformation areas, such as AI, automation, and digital platforms. As outlined in the 2026-2027 industrial plan, we are focused on generating strong cash flow and delivering solid returns to our shareholders, as demonstrated by our last shareholder meeting on August 27th of 2025, where we approved a dividend of €1 per share in line with the previous year, a significant increase in the share buyback program from €10 million in FY25 to €25 million for the coming year, almost three times the previous amount to further enhance the shareholder value by increasing the payout ratio from 30% of the last year to 40% of the current year. We have already started the program the day following its approval, underlining our commitment to creating sustainable value for our shareholders. Then the cancellation of treasury shares up to a maximum of 2% of sales share capital over the next 18 months. As of August 27 of 2025, approximately 1% of shares had already been canceled. and I invite Jacopo to present our ECG results for the first quarter of FY26.

Good morning and thank you, Caterina. In terms of sustainability path, in light of the new CSRG regulations and the new ESG standards, we confirm our strong commitment to value generation for our stakeholders. and we continue to invest in sustainability and environmental protection, supporting intensively our customers to be responsible on the management of natural resources. By the way, our digital green sector contributes significantly to reduce overall CO2 emissions, thanks to our leadership position, which all while to improve the sustainability profile and performance of our partners. In light with our ESG growth path, our sustainability plan for 2026 and 2027 defines priorities, targets, and specific actions to integrate sustainability in our business model, contributing to the creation of long-term value for our stakeholders. On this point, our last results were characterized by a significant improvement in ESG performance and the achievement of some relevant sustainable development goal sets. We reinforce our group purpose that confirms our corporate values and goals of long-term sustainable value creation for the benefit of all stakeholders. Digital innovation, long-term value creation, sustainability and digitalization continues to be the core pillars of our strategy, defining the group's purpose. We also continue to extend our main group certifications, confirming all of our ESG ratings. In terms of HR management, we are facing a consolidation phase with an increasing focus on work and collaboration efficiency and the progressive integration of digital enablers in our organization and the way we work. After a big improvement of our human capital over the last four years, in the first quarters of the new fiscal year, we increased the ad count by 0.9% only, in line with our strategic industrial plan. We continue to work to further improve our loyalty rate, reinforcing at the same time our education, hiring and welfare programs, with wider and specific measures to support parenting, diversity, well-being and work-life balancing, thanks to dedicated programs in favor of diversity and inclusion. Now, I give the floor again to Alessandro for the final conclusions.

Thank you, Caterina and Jacopo. I will now share the final remarks and conclude our session. Three months ago, we presented our new industrial plan, aiming at groups transformation by focusing on organic growth of core businesses, organization streamline, growing operating efficiency and market penetration by reinforcing our role as leading digital integrator and partner of customers digital transformation. In the first quarter of 26, we worked strongly to deliver the main strategic targets of the industrial plant, driving organic growth across all growth sectors, streamlining legal entities and adopting AI and digital enablers to boost operating efficiency. In particular, in the first quarter of FY26, we achieved A 25% growth in profitability of business services sector, driven by the expanding market penetration of our proprietary digital platforms and vertical applications, developed over the past two years. A double digital organic growth in both revenues and EBITDA for the digital green VAS sector, fueled by strong business demand and rising energy needs, driven by digitalization and AI adoption. recovery in an ICT VAES trend compared to Q4'25 with a double-digit background growth in the month of July and August'25, supporting an expected return to a year-on-year growth from Q2'26. and we also achieved a significant reduction in the net financial expenses down 36 percent compared to four quarter 25 and down by 12 percent compared to first quarter 25 reflecting the ongoing recovery trend supported by lower market interest rates and the efficiency measures implemented during fy25 Thanks to our strategy, we strengthened our position as a leading digital integrator with a strong focus on cybersecurity, AI, automation, vertical application and digital platforms. And at the same time, our business services sector continued to grow in the financial services industry, driven by rising demand for specialized vertical platforms and applications. In the light of our first quarter 2026 strategic achievements and the disciplined way we have been executing the new industrial plan, today we confirm our commitment to deliver all growth targets we have outlined last July for the new FY26. This means a 5% to 7.5% growth in revenues, a 5% to 10% increase in BDA and about 10% improvement in net consolidated profit, confirming that we are on track to achieve the main value generation targets for our shareholders. Considering the positive trend of our net financial position, improving by around 10 million compared to April 30, 2025, we are delivering the planned 40% payout ratio compared to the 30% of the previous year by executing the new Euro 25 million buyback program approved by our last shareholders meeting. Now we will continue to execute the new industrial plan with strong discipline, focusing on organic growth, operating efficiency, the adoption of digital neighbors, and inspired by the corporate vision oriented towards sustainable growth and digital innovation. Thank you very much for your kind attention. Now we open the Q&A session.

Thank you. This is the Coruscant conference operator who will now begin the question and answer session. Anyone who wishes to ask a question may press star and one under touch-tone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. The first question is from Andrea Randone, Intermonte. Please go ahead.

Thank you and good morning to everybody. My question is about The outlook you provided for the business segments, we can see that Digital Green is performing I'm slightly ahead or I can say ahead of initial expectations while maybe software system integration is a bit softer. So my questions are what is the visibility you have on the most recent months and if you can provide some indications on the full year profitability you are expecting compared to what we have seen in the first quarter. And any further comment on this, the expected evolution of the business segment is welcome. Thank you.

Good morning, Andrea. Thank you for the question. So first of all, the trend of business segment is characterized by a growing focus on proprietary digital platforms. So that means, as a result, a growing level of a BDA market that will achieve a record 19.9% revenues. So we grew by 3% in terms of revenue. We expect to accelerate the trend of revenues, considering also several main contracts that we won during the first quarter and that we will account starting from the second quarter. So our guidance continue to be a double digit growth in terms of revenues and in particular in terms of profitability. In the digital green, we capitalized the great effort we did in the last quarter. So the merger between PM Service and Green Sun created a leading player in the entire market. increase our market share in the business segment. There is a great demand of energy from renewable sources considering the low prices that stabilize, so the trend of prices were stable in the quarter. So the lower level that we achieved over the past year and a half made very competitive the green energy solution and there is a great demand from corporate organizations in that direction. So the trend of the market is a trend of high single digit growth. and we plan to be able to perform to continue to grow double-digit thanks to our competitive advantages and our market share we achieved in the entire market. The situation of the software system integration in the quarter characterized by a recovery of MBDA marginality in comparison to the four quarter because we performed with a 10-point 7% compared to 10.2. We expect to stabilize this level around 10.8, 11%. And so to start increase also in terms of EBITDA quarter by quarter. So our feeling is that the first quarter of that fiscal year was the most difficult to face because we are in the beginning of the industrial plan But the actions that we perform, we will disclose most of their effect in the coming quarter. So that is the reason today we confirmed the consolidated guidance for the whole group with visibility level that increased a lot compared to three months ago.

Thank you. Thank you very much. Very helpful. Thanks.

As a reminder, if you wish to register for a question, please press star and 1 on your telephone. The next question is from Gabriele Berti in San Paolo. Please go ahead.

Hi. Good morning, everyone, and thank you for the presentation. First question on CapEx, considering you mentioned a shift in the CapEx mix used from M&A and internal developments where do you see capex in these fiscal years and how much will be dedicated to internal developments and if you could also provide some color on which kind of projects are you developing and then second question if you could elaborate on the driver behind the acceleration in the backlog for the vas segment thank you

Good morning, Gabriele. Thank you for the question. Yes, in terms of capex, including M&A investment, we had around 11.5 million in the first quarter, of which 7 million M&A. So that means we are more or less on track because our full year indication is an indication of 75, 80 million euro, of which 30, 35 dedicated to selected M&A. So the internal development research mainly the so-called digital enables adoption. So that means AI automation and also the development of digital platforms and vertical application for the trade in the market and also for our organization. In terms of trend of ICT, VAS, first of all, we closed a quarter with an upturn in comparison to the trend of the fourth quarter. So we declined 2.5% compared to a decline of 8%. But in particular, we closed the quarter with a very, very positive trend in the backlog. The backlog increased by over 10% in July. over the 10% in August with a good start in September. And so considering also the trend we had in the previous year, now we expect to recover a positive increase in revenues starting from the second quarter. I remember that our indication for the full year is to grow low single digit in terms of revenues and EBITDA and double digit in terms of net profitability. And in fact, In the first quarter, we increase in terms of net profitability in this sector by around 17%. So that means we are on track not only in terms of trend of revenues and EBITDA, but in particular also in terms of profitability and net income.

Thank you.

Thank you.

The next question is from Guy Breeden . Please go ahead. Mr. Breeden, your line is open. Maybe your line is on mute. Unfortunately, we cannot hear you. Could you please open up your line? Maybe you're muted. As a reminder, if you wish to register for a question, please press star and 1 on your telephone. For any further questions, please press star and 1 on your telephone. The next question is from Paolo Cipriani, a private investor. Please go ahead.

Good morning, Alessandro. Can you hear me well?

Yes, very well, yes.

Yes, I have a question regarding the financial experiences that are improving and should be expected to improve further. Could you just help me to understand a bit more, just to say something a bit more on what they are related to? I mean, just are they, for example, related to the acquisition of the previous small companies acquired in the previous years, I mean, related to the working capital management of these companies. And maybe just say something about the full effect of cost optimization initiatives that seems to, I mean, improve these financial charges. Thank you.

Thank you for the question. So, first of all, we are capitalizing two main factors. The first one is the lower level of interest rates. I remember that in any case we will benefit in progressive way because the several financial costs are accounted for in advance for three, six months, and so we will benefit moving forward. The second one is obviously the improvement we are achieving in working capital management and also in several other measures that we are introducing starting from one year. So the lower number of legal entities, the adoption of cash flow and obviously planning in generally speaking the identification of a planning and several targets for any group's legal entity. So the start of the fiscal year was positive because of the comparison with the previous year in terms of first quarter 2025. was a comparison with an improvement by 12%. But if we compare the first quarter 26 with the fourth quarter 25, we improved by 35%. So that is the reason we expect to accelerate in our progressive improvement quarter by quarter. Thank you. Thank you.

For any further questions, please press star and one on your telephone. Gentlemen, Mr. Elaschetti, there are no more questions registered at this time. I turn the conference back to you for any closing remarks.

Okay. Thank you very much. As usual, we stay available for any additional information, and thank you very much your participation.

Ladies and gentlemen, thank you for joining. The conference is now over and you may disconnect your telephones.