Sesa Spa

Good afternoon, this is the Coruscall Conference Operator. Welcome and thank you for joining the full year 2036 Consolidated Results Conference Call. As a reminder, all participants are in listen-only mode. And after the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, then they 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, Head of Stakeholder Relations and Sustainability of SESA. Please go ahead, sir.

Good afternoon, everyone, and thank you for joining the SESA group presentation. Representing CESA today are Alessandro Fabbroni, Group CEO, and myself, Jacopo Laschetti, Head of Stakeholder Relations and Sustainability. Earlier today, the Board of Directors approved the consolidated financial results for the FOI ended April 30, 2026, and the new industrial plan covering the fiscal year 2027 and 2028. The corporate presentation is available on the SESO website and will serve as a reference throughout today's conference call. During today's presentation, Alessandro will first review the group's financial performance for the fiscal year 26, then present the main strategic priorities and targets of the new industrial plan 27-28. I will then provide an overview of our sustainability achievements and value generation for our stakeholders. Before Alessandro concludes with his final remarks. Now, I give the floor to Alessandro.

Good morning everybody and thanks for joining our group presentation. In a digital market supported by growing demand for data management and data protection, driven by the increasing adoption of AI and automation, the service group calls the fiscal year 2026 by achieving all industrial and financial targets set out in the 2026 and 2027 industrial plan by delivering a strong organic growth twice than the market trend and by increasing our market share and our role of digital integrator able to combine technology, digital platforms and vertical applications with AI adoption. In particular, we are pleased to report that we achieved all financial targets in the upper end of our guidance that we communicated to the financial market. And we are starting now the new fiscal year 2027 with a double-digit growth in revenues and we expect also in profitability. In the fiscal year ended April 30, 2026, the SESA Group reported consolidated revenues and added income from Euro 3.6 billion Up 7.9% year-on-year compared to performer results, that means like-for-like performance, and up by 10.6% against reported ones. Consolidated BDA reached €260.4 million, increasing by 8.2% year-on-year compared to performer, and by 10.6% against reported results. with an EBDA margin stable at 7.2%. The second half of 2026 marked a clear acceleration in our path with revenues growing by 9.8% year-on-year and an EBDA increasing by 9.9%. In the Q4 2026 alone, group revenues reached €915 million up 9% year-on-year While EBDA amounted to Euro 69 million, up 8.2%, with a quarterly EBDA margin at 7.6% of revenues. The group closed the fiscal year 2026 with around 6,700 people. That means a 3.6% increase year-on-year, but on the other hand with a stable trend during the second half of the year that confirms our strategy to be more and more focused on operating efficiency combined with scalable growth and the adoption in increasing way of air and automation. Consolidated revenues show positive contributions from all growth sectors. ICTVAS reached €2.25 billion, growing 8.6% year-on-year, with a strong acceleration in the second half, up 13% year-on-year. Growth was entirely organic and supported by increasing demand for data management and private infrastructure, driven by DEI adoption. and the growing request of digital sovereignty and security solutions. Green DAS achieved Euro 412 million in the year, up about 20% year-on-year, driven by growing energy requests from business segments, resulting from the acceleration need of data management, governance and private AI solutions. Software and system integration sector reported 909 million euro revenues, growing by 3.8%, despite slower demand in some manufacturing districts, while with a significant 7.5% increase in Q4 only. Business services finally reached euro 159 million, up 3.2% year-on-year, fully organic, supported by the development of digital platforms and vertical applications dedicated to the financial services industry with an expected return to double-digit growth in FY27 thanks to some main contracts that we acquired during the second half of FY26. Consolidated VDA increased to around Euro 260 million up 8.2% compared to performer results, so like for like, and up to 10.6% compared to reported figures, driven by the positive performance across some sectors, particularly sustained by ICT and Green DAS. The ICT DAS sector reported ABDA for Euro 101 million up around 13%, with ABDA margin improving to 4.5%, gaining 20 basis points in comparison with 4.30% of the previous year. The green DAS sector received EBDA for Euro 29 million increasing by 18.4% compared to Proforma and so on and so forth with a stable EBDA margin at 7.0%. Software and system integration recorded EBDA for Euro 96.6 million up around 2% year-on-year with a solid 5% growth in the second half reflecting the positive impact of organizational re-engineering implemented throughout the year. Finally, business services reported an EBITDA for around €30 million, up 9% year-on-year, with an EBITDA margin increasing to 19% of revenues. Group consolidated EBIT adjusted for good amortization and non-monetary cost reached €197.5 million, increasing by 6.5% compared to performer results and by 9.6% versus reported ones after depreciation and amortization for euro 55 million and provisions equal to 8.2 million. The reported EBIT amounted to euro 152 million up 4.3% in RONIA compared to performer results and 8% versus reported 2025, after a good amortization for Euro 37.5 million, up 15% year-on-year. In the FY26, the group benefit from significant reduction in net financial expenses equal to 34 million down 16% compared to 41 million year-on-year, driven by lower interest rates and by the FY26 improvement in financial efficiency and net financial position. The group P&T adjusted for good amortization reached Euro 106 million up 10.7% year-on-year compared to performer results and 13.3% compared to reported 25. Net income after taxes reported amounted to Euro 80.6 million up 13.2% compared with Euro 71 million as of April 30, 2025 on a performer basis and up 20% year-on-year compared to reported results. The FY26 was also characterized by a solid set of financial results and strong cash flow generation. The operating cash flow reached Euro 205 million driven by profitability growth and higher efficiency in working capital management. After 110 million of investment, net up 10 million of non-corrupted disposals. The full year 26 110 million euro investment consists of 50 million of capex in digital platforms for the groups of submission and of 60 million dedicated to selective set of small and vertical M&A and in particular focus on the program of minority interest acquisition to drive the organizational simplification. After the 110 million of investment and Euro 40 million distributed to shareholders through Deedens and Shared By Back during the year, the net financial position improved significantly from Euro 75 million of April 2025 to Euro 17.5 million net debt of April 2026, up by around Euro 60 million. While excluding the FRS liabilities, the group net financial position was equal to net cash for Euro 182 million as of April 30, 26 compared to Euro 158 million as of April 30, 25. With a so positive picture of FY26 results, I give the floor to Jacopo to present an overview of our ESG results and our value generation programs for the stakeholders.

Thank you Alessandro. In light with our purpose to create long-term sustainable value for all stakeholders, promoting innovation including digital innovation of businesses and organizations as well as the well-being of people, sustainability continues to be fully integrated in the execution of our business strategy and remains one of the pillars supporting long-term development of our group. In the fiscal year 26, We achieved a very positive set of ESG results. The value generation was equal to 550 million, of which 90% distributed to stakeholders, with a 10% increase year-on-year. We also successfully achieved all the targets set out in the 2027 Sustainability Plan. Electricity consumption per capita declined by approximately 4%. Natural gas consumption per capita decreased by around 5%, while approximately 97% of the electricity purchased by the group now comes from renewable sources. Our renewable energy production exceeds 1 million of kilowatt hour, resulting in more than 300 tons of CO2 emissions avoided. During fiscal year 26, we also confirmed our main ESG ratings. including Ecobuddies Platinum, MSCI BBB and Carbon Disclosure Project D, while continuing to strengthen our governance framework and transparency towards investors and all stakeholders. Finally, our green value-added solution sector grew organically by reaching 412 million of revenues. Driven by the growing request of energy deriving from digitalization of corporate and organization and AI adoption. In terms of value creation for our stakeholders, we work to combine sustainable growth with a solid shareholder value generation. In the fiscal year 26, the group raised its payout ratio at approximately 40%, distributing dividends equal to around €50 million. and delivering a share buyback program for around 25 million. Consistent with this approach and supported by the strong financial performance and cash generation achieved in FY26, the Board will propose the next shareholders meeting a dividend distribution of 1.33 euro per share, up 33% year-on-year, equal to approximately 21 million. together with the renewal of the Share by Back program for an amount of 20 million, confirming a payout ratio of around 40%. In particular, dividend payment date is set for the next September 23, with ex-dividend date on September 21 and record date on September 22. In light of this, we will continue to operate with strong commitment in creating sustainable value for all stakeholders and growing payout for our shareholders. I give the floor back to Alessandro.

Thank you, Jacopo. Today, the Board of Directors has also approved the new gross industrial plan for the fiscal year 27 and 2028. In a scenario where the Italian digital market is expected to grow with an annual rate of around 3.5% in the 2026 and 2029 period, driven by the increasing demand of technology, data management and protection boosted by the adoption of AI automation says that we target to extend the AI single digit growth already achieved in 2026 by growing twice the market trend and leveraging our positioning as a leading digital integrator able to combine technology, digital platforms and vertical application with AI adoption. The new industrial plan in particular Focuses on organic growth, organizational streamline and technological innovation by accelerating organic growth of our business core through increasing market penetration and organizational streamline by reducing the number of legal entities enhancing productivity and operational scalability through the progressive adoption of AI and digital endeavors while maintaining a substantially stable people throughout 2028 and supporting the group transformation through annual investment of around 110 million including euro 60 million dedicated primarily to acquisition of minority interest and select MNAs and about euro 50 million of cutters on digital platform and skill development for our group transformation. Building on these pillars, the new industrial plan targets to extend the high single-digit growth revenues achieved in FY26, with expected revenues over €4 billion, immediately above €300 million, and adjusted EAT reaching around €130 million for the fiscal year 2028. In particular, we plan to achieve the following growth targets over the FY27-28 period. Annual revenue growth in the range between 5 and 7.5%, targeting a range between Euro 4 billion, 4.2 billion in FY28. Annual EBDA growth in the range between 5 and 10%, reaching the range between Euro 290, Euro 350 million in FY28, with an EBDA margin increasing from 7.2%, up to 7.5% in FY28. Annual group adjusted EAT growth in the range between 7.5% and 12.5% targeting the range of €123 million to €134 million in FY28. Within BAS, including ICT and Green, we expect a mid-to-a single-digit growth in both revenues and profitability Driven by increasing demand for data management, data protection, AI adoption and digital sovereignty, combined with the increased request of renewable energy solutions. Business Services is expected to deliver annual double-digit growth in revenue and profitability, driven by the development of vertical applications and digital platforms dedicated to the financial services industry and by the increasing market penetration. Finally, software and system integration sector is expected to achieve a low single-digit growth in both revenues and profitability driven by greater focus on higher value-added activities and the progressive reduction of labor-intensive business server. Considering the very positive beginning of the first quarter of the new fiscal year 27 with double-digit growth in terms of revenues and profitability, particularly across BAS sectors, We are strongly confident in the achievement of the targets outlined in the new industrial plan for new FY27. Revenue growth in the range between 5 and 7.5%, that means EUR 3.8 billion to EUR 3.9 billion, EBITDA growth between 5 and 10%, targeting from EUR 275 million up to EUR 290 million, and group-adjusted EIT growth between 7.5% and 12.5%, targeting from Euro 114 million up to Euro 190 million. We are entering the new fiscal year 27, focusing on executing our new industrial plan with great determination, leveraging our strong competitive positioning. Broad technology ecosystem and high-skill people, together with all our people, will work Thank you all for joining us today. We are now pleased to open the Q&A session as usual.

Thank you, this is the Colosco 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 touchtone telephone. To remove yourself from the question queue, please press star and 2. Please pick up the receiver when asking questions. Anyone who has a question may press star and 1 at this time. First question is from Pier Andrea Randone in Termonte.

Thank you and good afternoon. Thanks for taking my questions. I have two. The first one is about your value-added solution business, so the core business that performed very well. You provided us in your introduction some explanations. I wonder if you can provide us more details about this quite surprising trend. If you can detail if there are any particular product, if you are gaining market share also in relation to some changes in the competition, and what are the drivers that make you confident in your ability to sustain This high single-digit trend also for the coming months and quarters that is probably above what you expected 12 months ago. So if you can focus on this area. And the second question is about your networking capital. The results are good. You lowered the level of your working capital and in particular I see higher commercial liabilities. I wonder if this is a number in relation with the slightly different revenue mix. In other words, if The stronger performance on VAS business is also driving some benefits in working capital.

Thank you. Thank you, Andrea, for your question. So first of all, it's true that our VAD solution is performing really well, overperforming our expectations because we closed We enter the new FY27 with a great growth, double digit, so that means we are really confident to be able to maintain our guidance to grow So the change is that the AI adoption as a driver is generating a growing demand for data management and data protection and so that means a great job and opportunity for us as digital integrators that is able to combine technology with vertical applications and digital platforms with AI. I underline again that this trend is accelerating, was accelerating during the year because we increasing in progressive way our past quarter by quarter. As for the trend of networking capital, so we really made a great job because we So that is, generally speaking, a result of well performance coming from all sectors, not only from the ES. I underline that we are working in progressively moving of our A software baseline as a service model that is part of our software system integration business that is not so relevant in comparison to 100% of our revenues of software system integration, so that means just 20% of our business unit redundant revenues, but it is another point that is improving our capability to release Thank you. Thank you. As a reminder, if you wish to register for a question, please press star N1 on your telephone. Next question is from Gabriele Berti, Peso San Paolo.

Ciao Alessandro, ciao Jacopo, thank you for the presentation. A clarification from my side on the expected profitability trend. If I'm not wrong, at the midpoint of the 2028 targets, the implied EBITDA margin is around 7.4%, so only slightly above the 7.2% achieved in 2026. Given the top line growth expected in the range of 5 to 7.5% and the assumption of broadly stable headcount, I would have expected more visible operating leverage and margin expansion. Is the limited improvement merely a matter of prudence given the guidance or is it related to something else such as cost inflation, business mix? If you can provide some color on that would be helpful. and the second question, maybe if you can explain the reasons behind the soft top line growth for the business services in Q4.

Thank you for the question, Gabriele. First of all, we are planning to work, as you mentioned, with a number of people stable in the two-year period up to 2028. On the other side, we are planning to increase our EBDI marginality from 7.20 to 7.50%. So that means we are planning to gain 30 basis points. I believe that we are planning in a prudent way, if you want, our evolution of operating profitability. In any case, higher than the path of revenue. So we are planning to grow revenues between 5 and 7.5% and the IBDA between 5 and 10%. So that means if you consider the need of our average guidance, we are planning to increase our operating efficiency. I think it is possible to I don't remember what the second question was. It was about the business services in Q4, which registered a slightly softer top line growth than expected. What are the reasons behind that? In the business services we have slowdown and in the Q4 due to some postponement of several contracts that will be balanced by a great start of Y27 because we are planning, we are starting with a revenue growth higher than 15% in the quarter one. While the software system integration we grew by around 7% in revenue and in operating profitability. That is the result of the great job we did in the engineering process of that business unit. And so the two effect will be balanced. The positive things is that we are, as in the past, able to work to grant a good mix in term of growth of revenues and growth of operating profitability. And so if you want these a sort of risk diversification because it is possible that a single business unit may underperform but the other business unit may be overperformed and so the result, the net result as group is in any case overperforming our guidance and in particular our market because I remember that we are growing organically and more or less with the pace that is Over to the market trend. So that is the same as obviously if we consider VAS sector, because we are growing three times the market trend in that case, but also if you consider the means of the last three year period for business services and software and system integration, we view always by around two times the market trend. and so that is the job that we will continue to do in the new fiscal year. Thank you.

Next question is from Alexandra Arsova, Equita.

Hi, good afternoon. Thank you for taking my questions. Two follow-up questions. So the first one may be on the guidance on the first quarter trends. So if I got it correctly, you are seeing double-digit growth in the first quarter, at least in this first part, but your guidance for the fiscal year 27 is need to high single-digit revenue and EBITDA growth overall. So it's just a matter of prudence, or do you expect some deceleration of growth in the in the coming quarters after the first one, so just a clarification here. And the second one is on the growth rate recorded in the distribution business. So it's very strong, and I was wondering if you can give us some color on what is the price effect and what is the volume effect, so how much it depends on the increase in memory prices and other component prices rather than increasing volumes. Thank you.

Thank you, Alexandra. So, first of all, our guidance. I think that is very positive that we started with a double-digit growth. So that means it is an opportunity to overperform our guidance in the full year. I think it is better to start the Q1 before improving our guidance. I remember that our new guidance is in line for A427 with the previous one and we extend to 2028 in any case a path of growth at a pace that is two times the market and that is fully organic. So with this kind of trend that means we may rise our dividend distribution, our dividend per share to 2 euro per share because we increased by 33% in that year because growing organically means a great value generation and cash flow generation. In terms of trend of our BAES sector, So there's a mixed effect because for the most of products we don't have an increase of price. So the increase of price is impacting just several and it will affect PCs. In any case, this effect is more or less stabilizing. Our backlog is really strong also in the mid-term. and so there's a great opportunity in that area to continue to grow organically with great value generation. We expect that the problem of price more or less is evolving and stabilizing and obviously there's a general positive trend not only in the data, so data management, data center, driven by great demand of private infrastructure and data strategy that is enabling the AI adoption but also in particular on the data protection also for the requirements of national compliance and security for example driven by the adoption of the new regulation named NISTU. And so that means a great set of opportunities to continue to grow in the coming two-year period in that area. I remember underlying also our integration inside DAS of green because there is a growing demand of energy. a great opportunity to develop plans for producing energy from renewable sources and so that this business unit is going really well and with great perspective in coming to here period considering also the level of price that is low and so there is an opportunity to Thank you. For any further questions, please press star N1 on your telephone.

Mr. Laschetti, there are no more questions registered at this time.

Okay, thank you very much for your participation in the conference call. As usual, we stay available for any additional information via mail.

We remember that we are organizing also several meetings with our brokers in the coming hours, and so we stay available also for one-to-one to explain... Thank you very much. Thank you very much.