Rome, 03 November 2022 18:32 Inside Information
- Backlog at € 37.4 billion, equal to about 2.5 years of production
- Book to Bill higher at 1.2, supporting revenue growth
- RoS 6.2%, or 7.2% excluding pass-through
- FOCF € - 894 million (ca. 500 mln higher YoY), with reduction in seasonality
- Redeeming 300 million of USD notes
FY 2022 GUIDANCE
- Upgrade in full year guidance of new order intake from ca. € 15 billion to a level higher than € 16 billion
- Slightly better FOCF Guidance now confirmed at ca. € 500 million, despite perimeter effect equal to ca. € 30 million
- Slightly lower Net Debt now expected at ca. € 3 billion from ca. € 3.1 billion, thanks to FOCF contribution and including extraordinary transactions
- Confirmed full year guidance for Revenues and EBITA, despite the change in perimeter
*Adjusted perimeter to exclude the contribution of Global Entreprise Solutions in August and September 2021 (closing of disposal on 1/08/2022). Avg. exchange rate August-September 2021€/$ @ 1.19671.
Leonardo's Board of Directors, convened today under the Chairmanship of Luciano Carta, examined and unanimously approved results of the first nine months 2022.
“Our solid Q3 results - Alessandro Profumo, Leonardo CEO, stated - confirm the underlying strength, current and for the future, of the business, with new order intake up 26.8%* and a backlog equal to about 2.5 years of production. Our defence/governmental business remains strong, with growing opportunities both domestically & internationally. We are seeing a gradual recovery in civil Aerostructures. We continue to manage the impact of pressures from inflation, supply chain and other challenges of the external environment. Our good commercial momentum allow us to capture opportunities, we are carrying this positive commercial momentum forward, allowing us to upgrade our full year new order guidance from ca. € 15 billion to a level higher than € 16 billion, lowering our year end expected Group net debt level from around € 3.1 billion to € 3.0 billion, thanks to cash generation and including extraordinary transactions, and we are also slightly raising our FOCF for the full year, confirmed at ca. 500 million notwithstanding perimeter effect”
"In addition, - Alessandro Profumo concludes – these months has also seen important moves towards the closing of DRS and RADA deal. This will reinforce Leonardo DRS core business of sensors and integrated systems in the fastest growing segments of the US DoD budget and current global defence requirements and needs. We have also strengthened our decarbonization plan by committing to Science Based Targets Initiative (SBTi). All of this makes us confident in the medium-long term value creation benefitting all our stakeholders”.
*Adjusted perimeter to exclude the contribution of Global Entreprise Solutions in August and September 2021 (closing of disposal on 1/08/2022). Avg. exchange rate August-September 2021€/$ @ 1.19671.
3Q/9M 2022 financial results
The results of the first nine months of 2022 continue to confirm the path to growth and increased profitability expected starting from 2020, despite the critical issues emerged at global level, especially as a result of inflation.
This path to growth is even more pronounced considering that, unlike the comparative period, EBITA for the period includes the charges related to the COVID emergency as recurring costs. The restated figures for the two periods under comparison have been provided in order to make them comparable. Additionally, the results for the nine months are affected by various changes in the scope of operations due to the strategic transactions occurred: the acquisition of the 25.1% investment in the German company Hensoldt, the pro-quota profit of which is recognised within consolidated EBITA, and the lower contribution from the disposal of the Global Enterprise Solutions business of the subsidiary Leonardo DRS.
The volume of new orders was rising in all the main Business areas and reflects, among other things, the acquisition of the order from the Polish Ministry of Defence regarding the AW149 helicopters for €bil. 1.4. It is worth noting that the volume of new orders is however increasing even excluding this order.
Revenues and EBITA showed a slight increase driven by the good steady performance of Helicopters and of Defence Electronics & Security, notwithstanding the impact of deconsolidation of Global Enterprise Solutions.
The increase in EBITA in the first nine months of 2022 is even more remarkable if we include in the EBITA figure for the comparative period the charges related to the COVID emergency, which had been previously recorded as non-recurring costs. It should be also noted that the net result for the first nine months of 2022 benefitted from the gain deriving from the sale of the businesses of Leonardo DRS Global Enterprise Solutions and of Advanced Acoustic Concepts as set out in section “Industrial transactions”.
Cash flows were also clearly improving compared with the same period of the previous year, in line with the expected trend of improvement.
Furthermore, the Group Net Debt figure is affected by the acquisition of the 25.1% investment in the German company Hensoldt (€mil. 606, plus related transaction costs), net of the proceeds from the sale of Global Enterprise Solutions and of the Joint Venture Advanced Acoustic Concepts (about USDmil. 470, after transaction costs).
Main Key Performance Indicator with perimeter effect
The 2021 comparative data include the contribution from the GES business for nine months. In order to make more comparable the Group operating performance, which in relation to the first nine months of 2022 includes the contribution from this business for seven months only, below are reported a set of key performance indicators for the comparative period, excluding August and September:
(1) EBITA and ROS have been restated to include charges related to the COVID emergency, which until the 2021 financial statements were excluded from these indicators as they were classified as 'non-recurring charges'”.
Avg. exchange rate August-September 2021 €/$ @ 1.19671.
Key Performance Indicator
(*) EBITDA is given by EBITA, as defined below, before amortisation and depreciation (excluding amortisation of intangible assets arising from business combinations) and impairment losses (net of those relating to goodwill or classified among “non-recurring costs”).
(**) EBITA is obtained by eliminating from EBIT the following items: any impairment in goodwill; amortisation and impairment, if any, of the portion of the purchase price allocated to intangible assets as part of business combinations, restructuring costs that are a part of defined and significant plans; other exceptional costs or income, i.e. connected to particularly significant events that are not related to the ordinary performance of the business.
(***) EBIT is obtained by adding to Income before tax and financial expenses (defined as earnings before “financial income and expense”, “share of profits (losses) of equity- accounted investees”, “income taxes” and “Profit (loss) from discontinued operations”) the Group’s share of profit in the results of its strategic investments (MBDA, GIE ATR, TAS, Telespazio and Hensoldt), reported in the “share of profits (losses) of equity-accounted investees”. Until 31 December 2021 this indicator included solely the part of the results of the strategic joint ventures (MBDA, GIE ATR, TAS and Telespazio) pertaining to the Group.
(1) EBITA and ROS have been restated to include charges related to the COVID emergency, which until the 2021 financial statements were excluded from these indicators as they were classified as 'non-recurring charges'”
Commercial Performance
- New Orders, amounted to EUR 11,719 million showing significant growth (+26.8%*) compared to the first nine months of 2021. An excellent commercial performance was recorded in almost all core business sectors, and especially in the Helicopters Division – thanks to the mentioned order from the Polish Ministry of Defence – and in the Aerostructures Division supported by major orders from Airbus and under the Euromale program. It should be noted that the volume of new orders is increasing also excluding the contribution from the contract signed with the Polish Ministry of Defence for the AW149 helicopters worth €bil. 1.4
- Backlog, amounted to EUR 37,353 million ensures a coverage in terms of production equal to about 2.5 years. The book to bill ratio (the ratio of New Orders for the period to Revenues) is equal to about 1.2
*Adjusted perimeter to exclude the contribution of Global Entreprise Solutions in August and September 2021 (closing of disposal on 1/08/2022). Avg. exchange rate August-September 2021€/$ @ 1.19671.
Business Performance
- Revenues, amounted to EUR 9,917 million, showed a positive trend (+4.0%*) compared to the first nine months of 2021 (€bil. 9.6), mainly due to the performance of Helicopters in both the military and civil segments
- EBITA, amounted to EUR 619 million, recorded an increase of 9%* compared with the restated figure for the nine months of 2021 (€mil. 572), with ROS improving by 0.2 p.p. vis-à-vis the comparative restated figure (6.0%). The comparative values have been restated to make them more comparable with the trend for the current period, which includes also the charges related to the COVID-19 emergency (classified as non-recurring costs in the first nine months of 2021)
- EBIT, amounted to EUR 552 million, compared to €mil. 445 in the first nine months of 2021, benefitted from an improvement of EBITA and from the lower restructuring costs, which in the comparative period included the effect of the planned voluntary early retirement arrangements in the Aerostructures Division. Non-recurring costs for the period included the write-down of the exposure to the countries involved in the conflict existing between Russia and Ukraine for an amount of about €mil. 33. On the contrary, the figure for the first nine months of 2021 had included, as noted, the charges linked to the COVID-19 emergency
- Net Result before extraordinary transactions, amounted to EUR 387 million, (€mil. 229 in the corresponding previous year period), benefitted from the EBIT performance, as well as from lower financial and tax charges
- Net Result, amounted to EUR 662 million (equal to the Net result before extraordinary transactions in the first nine months of 2021), reflects the capital gain from the disposals of the Global Enterprise Solutions and Advanced Acoustic Concepts businesses of Leonardo DRS as set out in the “Industrial Transactions” section below
It should be recalled that the comparison with the data for the first nine months of 2021 is affected by the lower contribution from the sale of Global Enterprise Solutions which was finalised on and effective from 1 August 2022, thus fully consolidated for the entire nine-month period in the comparative figure.
*Adjusted perimeter to exclude the contribution of Global Entreprise Solutions in August and September 2021 (closing of disposal on 1/08/2022). Avg. exchange rate August-September 2021€/$ @ 1.19671.
Financial performance
- Free Operating Cash Flow (FOCF), negative for EUR 894 million, showed a significant improvement (+36.6%*) compared to 30 September 2021 (negative for €mil. 1,387). This result reflects the expected positive trend towards improvement, as well as the usual interim trend in this part of the year
- Group Net Debt, of EUR 4,359 million, showed an increase compared to 31 December 2021 (€mil. 3,122) mainly as a result of the abovementioned FOCF performance and of the following factors:
o acquisition, completed in January 2022, of the investment in Hensoldt AG (€mil. 617, including the related transaction costs paid)
o dividend payment in July 2022, for €mil. 78
o the disposals finalised in July 2022 by the US subsidiary Leonardo DRS of the Global Enterprise Solutions business and of the Joint Venture Advanced Acoustic Concepts – as more amply described below – for a total amount of about USDmil. 470, after transaction costs
o the foreign exchange negative impact