Sesa Spa

Good morning. This is the chorus call conference operator. Welcome and thank you for joining the full year 2026 consolidated first half results conference call of CESA. 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 Laschetti, Stakeholder and Corporate Sustainability Manager of CESA. Please go ahead, sir.

Good morning, and thank you for joining the CESA group presentation. Representing the group today are Alessandro Fabroni, Group CEO, Katerina Gori, Investor Relations and Corporate Finance and M&A Manager, and myself, Stakeholder Relations and Head of Sustainability. Earlier today, the Board of Directors approved the consolidated financial results for the first half of the fiscal year 2026, ended October 31, 2025. The corporate presentation is available on the CESA website and will serve as a reference throughout today's conference call. Alessandro will begin by providing an overview of the key business developments and achievements.

Good morning, everybody, and thank you for joining our group presentation. In the first half of 2026, CESA started the implementation of the new 2627 industrial plan by evolving our data-driven, digital market-oriented and people-inspired platform for enabling the sustainable growth of corporates and organizations with a specific focus on organic growth and skills development. In a challenging market scenario confirming growing demand for digitalization, CESA has achieved its goal of consistent organic growth in revenue and profitability by strengthening our position in the key areas catalyzing digital transformations such as cybersecurity, cloud, AI and automation, vertical and digital platforms by enabling the value creation for our stakeholders. The group's transformation from technology to a leading digital integrator has improved with investment focus on skills development and the adoption of the so-called digital enablers. In the first half of 2026, on a consolidated basis, SESA achieved revenues and added income for Euro 1.6 billion, up by 12% year-on-year, and MDA for Euro 114 million, up 11.4% year-on-year, and net profit adjusted for around 50 million up by 17% year-on-year. On an organic basis, compared to the half-year pro forma, including the first half 2025 data of Greensand, consolidated revenues grew by 5.5% year-on-year, EBITDA by 6.0% year-on-year, and group net profit after taxes adjusted by 7.6% year-on-year. The second quarter 26 alone show a great acceleration in consolidated revenues, which achieved Euro 755 million, up 16% year-on-year compared to reported figures, and 9.4% like-for-like compared to Performa, and an increase of operating EBITDA by 16.6% compared to reported figures, and 8.4% compared to Performa. with a group EAT adjusted increase by 30% compared to reported figures and 17% compared to pro forma. Consolidated revenues show positive contribution from all group sectors. ICT VAS recorded 939 billion, up 2.1%, fully organic, with a great recovery compared to the decline in first quarter 25, with a down of 2.7%, driven by the high single-digit growth achieved in the second quarter, up by 8.1%. The positive November backlog trend, up by 25%, will support positive trend for next quarters. Digital grid VAS reported 210 million, up by 26% compared to the first tough 25% performance, driven by the extension of the double-digit growth achieved in Q26 and tends to a strong performance in the corporate market, driven by the increasing energy demand associated with digitalization and AI adoption. System integration and software sector reported euro 420 million, up by 4% year-on-year, showing resilient performance despite the slowdown of demand in some made-in-Italy districts and the re-engineering process affected some business units. And finally, business services achieved Euro 74 million, up around 7% year-on-year, extending its entire organic growth driven by the development of applications for the financial services industry. Consolidated EBITDA increased by 11.4% year-on-year, up 6% in comparison with the performer, reaching €114.4 million compared to €102.7 million as of October 2024, with an EBITDA margin of 7.1%, broadly stable year-on-year, thanks to the growth trend in the VAS sectors, both green and ICT, and the business services one. ICT VAS reported Euro 42.7 million, up 6.6%, with an EBITDA margin equal to 4.5%, up from 4.4% year-on-year. Digital Green VAS reported recorded Euro 14 million EBITDA up 30% compared to the first half 2025 pro forma, with a 6.7% EBITDA margin compared to 6.5% year-on-year. System integration achieved Euro 43.4 million down 1.9%, with an EBITDA margin equal to 10.3%, reflecting the re-engineering operations in some business units of the sectors, with an expectation of a BDA margin stabilization FY26 at a similar level to FY25. Business services reported Euro 11.6 million up 6.6% year-on-year and a 15.8% BDA margin, stable compared to the previous year. In the second quarter of 2026 alone, business services revenues accelerated with an 11% low driven by the start of some multi-year contracts not yet translated into a positive impact on profitability. Consolidated EBIT adjusted amounted to €86 million, up 9.2% year-on-year, up 2.5% compared to the performer, after depreciation and amortization for Euro 26 million, up around 14% year-on-year, and provision for Euro 2.7 million. Consolidated EBIT reached Euro 65 million, up 8.8% year-on-year, after amortization of intangible assets relating to customer list and know-how for Euro 17.5 million, in line with the 2026-27 industrial plan, Net financial expenses show a significant decrease, equalling 11% compared to first half 25, improving by 15.5% in the second quarter 2026 alone, compared to the second quarter 25, thanks to lower interest rates and the actions to enhance the Group's financial management efficiency. Consolidated EET adjusted amounted to €50 million, up 17.1% year-on-year and 7.1% compared to the pro forma, reflecting the growth in operating profitability and the reduction in financial expenses. Group net profit adjusted reached €45 million, up 13% year-on-year, from €40 million in the first half of 2025, up 7.6% year-on-year, compared to the pro forma 2025, while consolidated reporting at profit reached euro 34 million, increasing by 19.4% compared to around 29 million in the first half of 2025, up by 5.6% year-on-year compared to the pro forma figures. In the Peter Dunn review, SESA Group selected its M&A investment and improved its payout ratio in accordance with the new industrial plan. Group reported net financial position as of October 25, including €208 million of IFRS debt was negative, that means net debt for €119 million improving compared to €122 million. compared to the pro forma figures following last 12 months investment for €140 million of which €37 million in the first half alone including €80 million of F&A investments of which €23 million in the first half and after last 12 months buyback and dividend distribution of around €35 million of which €30 million in the first half 2026 Now I give the floor to Caterina for presenting our M&A strategy and the main resolution of the last shareholders meeting and board of directors of today.

Thank you Alessandro. After years of significant M&A activities, our new ESPOIR 2026-2027 industrial plan represents a strategic shift with a clear focus on simplifying the group and accelerating organic growth. We've capitalized on the capabilities and business model we have developed over the years to drive sustainable growth supported by target CapEx in AI, automation and skill development to enhance efficiency, scalability and market penetration. As a result, annual M&A investments are expected to decline to around €30 million following a selective value-driven strategy. while CAPEX is expected to be roughly €50 million per year. In the first half of FY26, we further strengthened our international presence through four strategic acquisitions, all within the SSI sector. Two M&As consolidated in the first half of FY26, with total investments of approximately €7 million. physical GmbH in Germany, and SAP consulting specialist with Euro 5.3 million in revenue. And the second, Delta Tecnologia de Informacion in Spain, an AI-driven player in digital identity with Euro 2 million in revenue. Both companies deliver a BDA margin of about 10%. And two additional M&As with total investment of approximately Euro 7 million. Albasoft, a Euro 2.2 million software company specializing in treasury and finance management solutions. And 4IT, a Swiss cloud and managed service company with Euro 9 million new revenues. Both companies will be consolidated from November 2025. Delivery and VDA margin above 10%. The deal structure is designed to ensure the long-term commitment of key people in target companies, with an entry valuation of around five times the BTA, adjusted for net financial position, and consistent with our standard approach. These acquisitions confirm our strategy, a selective approach to high-value M&A in Europe, together with continuous strong investments in digital transformation areas. such as AI, automation, and digital platforms. As outlined in the 2026-2027 Industrial Plan, we are fully committed to generating strong cash flow and delivering solid returns to our shareholders, as demonstrated at our latest shareholder meeting on August 27 of 2025, where we approved a dividend of €1 per share in line with the previous year, with EUR 15.5 million distribution completed last September. A significant increase in the share buyback programme from EUR 10 million in FY25 to EUR 25 million for FY2026, to further strengthen shareholder value by raising the payout ratio from 30% last year to 40% this year. The shareholder meeting on August 27 of 2025 approved a new Euro 25 million buyback programme, structured in two phases. The first Euro 15 million phase, completed on October 9, and the second Euro 10 million phase, beginning on November 6 of 2025. CESA held €143,000 706 treasury shares of October 21st of 2025 and 246,868 as of December 12th of 2025, equal to 1.609% of share capital. Today, the Board of Directors approved the cancellation of an additional 157,522 shares, representing 1.03% on share capital, which is part of the 1.609% Treasury share mentioned above. And finally, the cancellation of treasury shares up to a maximum of 2% of treasury share capital over the next 18 months. As of August 27th of 2025, approximately 1% of shares has already been cancelled. And today, we completed the plan of the cancellation of an additional 157,522 shares. Additionally, last October we signed a binding agreement for the sales of the controller stake held by DeepWalding in Digital Value SBA, subject to the fulfilment of certain conditions precedent, including golden power and antitrust approval. Upon completion of the transaction, SESA plans to disinvest a 6.6% stake in DeepWalding for an expected gross amount of around the Euro 11 million compared to the initial investment of around Euro 4 million. This transaction is expected to generate a positive impact of around Euro 7 million on sales and consolidated net profit. The disinvestment is fully consistent with the 2026-2027 industrial plan, which focuses on strengthening core activities and provides for the possible disposal of non-strategic assets, in line with a disciplined and optimized approach to capital allocation, while leaving us room to evaluate selective non-strategic disposals in FY26. And I invite Jacopo to present our ECG results for the first half of FY2026.

Good morning again and thank you, Caterina. During the first half of the fiscal year 2026, we continue to focus on integrating sustainability in our strategy, monitoring at the same time key ESG KPIs to measure progress and the achievement of the targets set out in our sustainability plan. This approach allows us to keep a constant view on our environmental, social, and government performance, and to guide our operational and strategic choices. Our sustainability plan for 26-27, approved by CESA Board of Directors on last July, defines priorities, targets and specific actions to integrate sustainability in our business model, contributing to the creation of long-term value for our stakeholders. Digital innovation, long-term value creation, sustainability and digitalization contains to be the core pillars of our strategy, defining the group's purpose. In this context, we are also delighted to announce that we have obtained the EcoBuddies Platinum Rating, the highest level in the assessment model, which recognizes the group's commitment and achievements in the ESG field. This milestone further confirms the strength of our approach and reinforces sales acquisition as a reliable and responsible partner for customers, investors, and stakeholders. In terms of HR management, we are facing a phase of consolidation with an increased focus on work and collaboration, and the progressive integration of digital enables in our organization and the way we work. After a great improvement of our human capital over the last four years, in the first half of fiscal year 2026, we increased the headcount by 1.7% compared to April 30, 2025, 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 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.

Many thanks, Caterina and Jacopo. I will now share the final remarks and conclude our session. Six months ago, we presented our new industrial plan, aiming at group 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 the customer's digital transformation. In the first half of 2026, we worked strongly to deliver the main strategic targets of the industrial plant, driving organic growth across subgroup sectors, streamlining legal entities, and in particular adopting AI automation and digital enablers to boost operating efficiency and group transformation both internally and towards our customers. 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 for the business segment. In particular, in the first half of 2026, we achieved a mid-single-digit growth in revenues and profitability, driven by the great acceleration of the second quarter of 2026, with revenues improving by 9.4% year-on-year, EBITDA by 8.4%, and Group EAT by 17% like-for-like. A 20% organic growth in both revenues and profit of digital green VAS, fueled by strong business demand, rising energy needs resulting from digitalization and AI adoption. The back-to-growth of ICT DAS, up by 2.1% revenue, 6.6% in EBDA, and by 15% in Group EAT, of which in the second quarter only, a growth by 8.1% revenue, 16% in EBDA, and around 13% at Group EAT level. and 6.8% organic growth in revenues and 15% growth in profitability of the business services sector, with a decrease in marginality during the second quarter only due to the start of several multi-year new orders with major customers. A significant reduction in net financial expenses has been achieved, out of the down by 11.6% in first quarter 2026, and by 15.5% in the second quarter of 2026, reflecting the ongoing recovery trend driven by lower market interest rates and the efficiency measures implemented in full year 25. In light of our second 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 fiscal year 26. That means a 5 to 7.5% organic off-year revenues, a 5 to 10% organic increase in EBDA, and around organic 10% increase in net consolidated profit, confirming that we are on track to achieve our key value generation targets for our stakeholders. Considering the positive trend of our net financial position and cash flow generation, we have been delivering the planned 40% payout ratio by executing the new 25 million by the program approved by the last shareholders meeting and the 2% short capital cancellation. The goal for the remainder of the fiscal year is to execute with great commitment the new 2026 and 2027 industrial plan in line with the targets and guidance already communicated by focusing on organic growth, operating efficiency, the adoption of digital enables and in particular inspired by a corporate vision oriented towards sustainable growth and digital innovation. Thank you very much for your attention. Now we open, as usual, the Q&A session.

Thank you, sir. This is the course call conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touch-tone telephone. To remove yourself from the question queue, please press star and 2. Please pick up the receiver when asking questions. The first question comes from Alexandra Orsova of Equita.

Hi, good morning. Thank you for your presentations. One question on my end. Maybe some color on the guidance, so you seem confident to confirm the guidance, but maybe can you clarify which could be the elements that could potentially drive the guidance and the actual numbers, let's say, in the upper end or in the lower end? And then maybe, again, on the guidance, in terms of EPS or net income adjusted, as I said, approximately plus 10% organic, if I remember correctly. In the original guidance, it was between 10% and 12%, so maybe just to clarify, where do you see this slightly lower expectation coming from? Thank you.

Good morning. Thank you, Alexandra. So the full set of results that we achieved in the first half and in particular in the second quarter show that we are absolutely on track to achieve the guidance. So that means considering the second quarter trends and the positive outlook of the backlog and the beginning of the Q3, we may consider the upper end of the guidance the right target today. So that means not only for revenues and EBITDA, but also for net profitability. In terms of outlook, in comparison with the start of our fiscal year, we are absolutely overperforming in the ICT distribution on one end, and in the digital green. We are more or less in line with the business services. So that means that for 60 to 70% of our group perimeter, we are over-performing. We are slightly lower the guidance in the first half for software system integration, but the improvement that we achieved in the second quarter and outlook and the trend of the backlog So that means we are on track to recover a positive trend in the second half of the year. So that means we may consider the average to upper end of the guidance the reliable target for our fiscal year 2026.

Thank you very much.

Thank you.

The next question, sir, is from Andrea Randone .

Thank you, and good morning. Thanks also for the indications just provided. I wonder if you can comment on the ICT VAS trend in the current quarter. that is the seasonal important. You mentioned the backlog up 25% in November. If you can comment on the trends you see if they are sustainable, consistent, also for the remainder of the year. This is the first question. is about CAPEX, if you can confirm the about 80 million guidance including M&A for the full year. And okay, I think these two questions. Thank you.

Thank you, Andrea. So first of all, about the trend of ICTVAS, we may confirm we enter very well in the Q3. we close a very positive Q2 with a growth in revenues by 8.1%, an increase of EBITDA by 16%, and around 15% in profitability. We enter with a 25% growth in the backlog for Q3, so that means the beginning of December and in particular the month of November, so that is a very positive indication to be able to work with the guidance of mid single digit growth for the full year. In terms of CAPEX, we confirmed our guidance of 80 million euro investment overall, including 35 M&As and 50 to 55 CAPEX. In the first half of 2020, we invested around 40 million of which more or less 20 in M&A. So that means we are on track for this kind of trend.

Thank you. If I may just a quick follow up on SSI. It's a normal question, but can you comment once again

implications from ai on this business line thank you thank you andrea so yes the ai automation represent a driver that we are embedding in each of our delivering and also inside software system integration that is a sector mainly focused on technology digital business integration with a mix of consulting software and digital services. So what we are doing is to increase our efficiency to introduce AI in some delivering, for example, the cyber security services and to, as a result, increase our efficiency to make available this efficiency for our customers. Obviously our exposure to AI erosion is not high considering that we are operating with proprietary software and technology and consulting services. And from our point of view, that is an opportunity more than risk to increase our ABDI margin. And some of our investment will be focused on skill development and digital enables adoption in that direction.

Thank you. Thank you very much.

Thank you. As a reminder, if you wish to register for a question, please press star and 1 on your touchtone telephone. Once again, for any questions, please press star and 1 on your telephone. Mr. Laschetti, at this time, sir, there are no questions registered.

Okay. Thank you very much, everybody, for participating in this conference call, and we wish you a Merry Christmas, and we stay available as usual for any additional information about our results. Thank you very much.

Thank you very much. Bye-bye.

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