Avio S.p.A. (AVIO) Earnings Call Transcript & Summary

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Avio Full Year 2020 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Fabrizio Spaziani, Investor Relations. Please go ahead, sir.

Yes. Thank you very much, and good evening, and welcome to the Avio conference call on the 2020 results. With me, the CEO, Giulio Ranzo; the CFO, Alessandro Agosti; and Matteo Picconeri, who works with me on the Investor Relations. We will go through a presentation that you can find on our website. And specifically, Giulio Ranzo will underline the key highlights for 2020 in terms of business achievements and in terms of economics. Alessandro Agosti will then provide some additional information for the full year financials. And then, Giulio Ranzo will also provide some additional guidelines for 2021 and beyond. So let me turn it over to Giulio Ranzo. Thank you.

Thank you, Fabrizio. Thank you for your introduction, and good afternoon to you all. So we are presenting the results of 2020. A very complex year, I would say. So I will go through the presentation starting from Page 4, which provides a little bit of a summary. So 2020 results were within the guidance, the guidance we announced in September. And we have a better long-term visibility, which is much improved beyond what we actually expected. So the 2020 guidance was announced in September, when you recall, we had suspended guidance from March to September due to the presence of the COVID-19 pandemic. And indeed, 2020 was characterized by very heavy, nonrecurring costs due to COVID-19 specifically. However, as we speak, and among the many difficulties we've had this year, including, unfortunately, our Vega flight anomaly. Today, we are back on the launchpad with Vega being ready for flight by the end of April. Meanwhile, new development contracts have been finally kicked off, and they are all in progress. And we managed to improve the order backlog and the cash position, therefore, having a better long-term visibility. I signed one other important agreement today for the production of Vega launchers. So we've expanded a little bit the long-term visibility and provide a lot more reassurance on future business. Based on these considerations, we decided to propose a dividend distribution this year. So going back to dividend distribution after we have suspended that for last year. Last year, as you may recall, we have done share buyback but no dividend distribution. So this year, we're coming back to some degree in distribution. Now if we move to Page 5, I think it's worth having a quick snapshot at the comparison between the 2020 actual results with what we announced in the guidance in very early September. So as you can see, the backlog ended up at EUR 736 million, well above the expected guidance between EUR 650 million and EUR 680 million, and revenues were actually down to EUR 322 million, this is pretty much due to the inability to execute on the expected program during the year for the many reasons you know imposed by the pandemic. And this actually made the EBITDA reported to go down to EUR 35 million, which is pretty much within the guidance. And EBITDA adjusted to fall also within the guidance. As you can see, the net income is slightly below what we even announced as guidance, and this is partly due to the fact that we had more depreciation that we actually had anticipated earlier in the year, but that's nothing worrying at this stage. What is actually a positive is a better net financial position of EUR 62.6 million. This is the highest net financial position we ever had, and it's well approve what was in the consensus among the analysts that were between EUR 42 million and EUR 46 million. This is a sign of the fact that we worked heavily on managing working capital and making sure that we would maintain a very, very robust balance sheet amid a very complex situation with COVID-19. So this is the comparison with the FY '20 guidance. I it is worth also to have a review of 2020 results, in comparable to 2019. Now on Page 6, you do see this comparison. And you can see that the backlog is improved also with respect to year-end 2019, the revenues were obviously significantly down. And so was EBITDA reported for the reason of the high nonrecurring costs due to COVID. But you can see that the EBITDA adjusted is essentially no different from what it was last year, which, from my point of view, is quite remarkable because it means that in spite of the many difficulties, pretty much we managed to maintain a decent level of profitability. Now the net income is significantly lower for the reasons we told you before, because in addition to the lower EBITDA reported sort of impacted heavily by nonrecurring costs, we also had a bigger charge from the depreciation of the new infrastructure that we have put in place for new generation products. And maybe Alessandro will elaborate more on when he talks about the financial details. Then you can also see the net financial position was higher than last year. So continuing on the path of cash generation, which is also important in many respects. Because this year, we achieved also the highest level of capital expenditure. So notwithstanding having continued to invest on the company assets and facilities and having done all what we have done in terms of share payback, we managed to maintain a very high net financial position. Now let's have a look at the -- what happened in this very difficult 2020. Turning to Page 7, this is a snapshot of how the year went, actually. So we had 3 slides of Ariane, which were also disturbed by the fact that for about 3 months, the Guiana Space Center was shut down. You'll recall that at the beginning of the year, we were preparing for a return to flight of Vega in March. In fact, in March, we were ready to go on the launchpad, but we were hit by the shutdown of the Guiana Space Center. So we, unfortunately, to Vega much later at the beginning of September with SSMS successfully. And then, subsequently, we tried to catch up pretty quickly with another flight of Vega in mid-November, which actually ended up, unfortunately, in a phase-in. So to make the long story short, this was a very, very difficult year with a combination of the challenges imposed by the COVID-19 and by the flight anomaly of Vega. Having said that, on Page 8, 2020 also brought one very remarkable success, which was the flight of the first SSMS, so the first Vega rideshare mission with more satellites, which, as you may recall, is the emerging business in our sector that has launched in more satellites to space. So we experimented for the first time our technology to put together 53 different space caps of different sizes and purposes altogether going to space, and this technology worked beautifully. As you can see from the picture, all payloads were delivered where they were supposed to go. So this was a big, big technology demonstration, much appreciated by the small satellite customers. And so I would say this is one very big positive of 2020. Moving on to Page 9. We unfortunately also had the VV17 flight anomaly, a very disappointing one. And you may recall, we talked about this in November. However, following this flight anomaly, we went deep into the investigation of the root causes, along with an independent inquiry commission. And very, very rapidly came to the underpinning of the root cause in detail. And as a result of that, we received, from this commission, a set of recommendations to be implemented in order not only to return to flight, but also to stabilize the reliability of our internal processes to make sure that we mitigate any risks that it's going to happen again. And so as a matter of fact these recommendations focused on the need to conduct a full review of quality control and check procedures, to over inspect for acceptance, the flight out were to be launched on -- in particular on VV18 on the next slide. And then we also received a number of longer-term improvement actions to be put in place over time to improve quality control practices and training our operators and so on, to strengthen, in general, all our ability to execute. Now as a result of this process, we started to work the day after the flight anomaly and then intensively, I would say. And we subsequently passed towards the end of February the checks that were actually designed to verify whether or not we were properly implementing these recommendations. And so at the beginning of March, we were authorized to go back to the launchpad and integrate the next launcher for launch in April. So that proves it seems that we -- a lot of these difficulties are behind us now. We are awaiting the next flight to demonstrate our capabilities. And in fact, on Page 10, you could see that operations are running at full speed, the next Vega flight is currently integrated on the launchpad. The fourth stage AVUM was shipped today. It's currently in flight. All of the other propulsion stages are already integrated on the launchpad, so operations are now running really up to speed. On Page 11, we have a summary of the key elements of the -- or the key achievements of the 2020 development activities. From the left top part we started in 2020 what we call the Vega C Ground Qualification Review, which is the [ last path ] to this new generation product, the successor of Vega before it actually flies. So this is a process whereby the European Space Agency double checks with us everything we have done. Now all of the flight hardware for the main flight of Vega C is ready. So what we're doing is we are checking and rechecking everything under the control of the European Space Agency in their capacity as the qualification authority to be override for a main flight of Vega C. So this process is ongoing. It will end with the maiden flight, which we anticipate to be between the end of the year 2021 and the beginning of 2022. So it's a final rush, a lot of effort, but all the hardware is in place to go for a maiden flight. Then on the top right, the Vega E program, which is the successor of Vega C. The new brand of the development contract was kicked off sometime during the year 2020. And now we are making progress on the Step 2 of this development. We had already achieved substantial progress in previous years with the ground assessment of our prototype. Now we really need to make the next step to make this liquid propulsion motor and entire propulsion stage with all full capabilities and subsystems. And so we need some 2 to 3 years' worth of very intense work to make this happen. And for this very purpose, on the bottom right, you do see the new facility that we are finalizing the construction on in Sardinia for testing this motor on ground. So we will have our own facility to test these engines that we go through the completion of development. We are erecting a very substantial facility with the best breed technology, which will allow us not only to test this type of engines, but potentially also future generation, larger engines. It's a key capability for someone who is in our business to be able to test propulsion systems on ground. In parallel, on the bottom left this year, we also signed the Space Rider contract, our small spaceplanes, which we had already delivered on in previous years with the development of the prototypes, which first flew in 2015. We now have a contract that essentially covers that up to completion. So sometime in 2024, these spaceplanes should be ready, and it could be another very attractive application for Vega entry point as a market segment in the demand that doesn't increase at the moment. So a very, very attractive opportunity for further growth. And if I move to Page 12, we can report quite a substantial progress especially made today with a signature of an agreement to kick off the production of the so-called Batch 4 of Vega C. So this covers pretty much the production of Vega C. Those are the efforts in the period -- to be launched in the period of 2023-2026. Arianespace gave us its order, to kick off this order in light of the growing demand they are receiving particular from European institutional customers, so with the European Space Agency, the European Commission and the National Space Agencies. And in particular, while they are negotiating a frame contract for 9 Copernicus satellite missions, which should be finalized during 2021. So if everything goes as expected, now we kick off the production of these vehicles. And we should have these orders completely sealed with customers within 2021, which means practically that we have covered the production of Vega and Vega C until 2026, which is a very good in terms of flight rate, which is a very good visibility at this stage. And we also signed some time ago, we have reported to you, the signature of Arianespace of the launch contract for the CO3D mission with Airbus Defence and Space and with the French Space Agency. This is a very important one. It is a very sophisticated observation system. We are quite satisfied about this. And we look forward to also launch this satellite soon. It is very important because we managed to sign a contract even after a load failure. So in a very difficult moment, if you want. So this tells you that there is trust in our capabilities and good prospects for growth. If I move to Page 13, this is a bit of status on where we stand with respect to the European main programs for institutional constellations. In Europe, we have 2 main satellite constellation program, Galileo and Copernicus. Galileo is a set of satellites launched with Ariane, and Copernicus is a set a satellites launched with Vega. There are some 40 more Galileo satellites to be launched by 2030. These are very small satellites, about 700 kilograms each. While there are some more -- some 10 more Copernicus satellites to be launched by 2030, but with an average mass instead of about 2 tons each. So already, I would say, Copernicus and Galileo should provide enough backlog to Ariane and Vega. But at the beginning of the year, the European Commission announced that they are launching possibly another constellation in addition to Galileo and Copernicus, a new European constellation to grant European countries to connectivity, Internet connectivity. So broadband constellations should provide reliable, secure and cost-effective IT communication in Europe. So I think this is a very interesting initiative, which we will follow it at this stage. Not assume yet to get to know how much this will impact -- the full impact [ order magnitude ] on. It's just starting, but it's noteworthy, I think, because it provides, again, one additional element of visibility even beyond, I would say, the 2025-2026 time frame. So as you can see what is happening is that the time frame in which we're looking at the business is expanding now well beyond the next 2 to 3 years, but going all the way down to 2025-2026 and beyond. On Page 14, in parallel, we are also happy to report the fact that on tactical propulsion, meaning the propulsion systems that we deliver for tactical missiles, we made good progress in 2020. We received an interesting order from MBDA for the production of the boosters for ASTER-30 missiles. And so this is quite important, because this is a key activity that for a few years, was extremely low in terms of production that was for us. Certainly, since we were listed, we were under a production low on tactical missiles. Now we're coming back with much higher volumes of production for the next 3 years, and this is obviously very positive because it's an element of resilience with respect to some of the shortfall we are adding maybe on the launch or production side. And we have also signed an interesting development program with the Italian Armed Forces for a tactical air defense systems. And this is also quite important. It is a development program that it projects, at least initially, Avio to new developments also in the domain of defense, which is probably one segment of the business that we have not spent sufficient time on in the last few years. So that's pretty much what happened in 2020. As you can see, it's a mix of negative things and positive ones. I would now leave you to Alessandro to give you a summary of the financials.

Thank you, Giulio. Good evening, everybody. Shall we move to Page 16? We start with net of the backlog despite the difficult year, as described in 2020, we increased by 10% our backlog, basically, that the new contracts signed for about EUR 400 million. These refer principally to new production batch for Vega for about EUR 135 million and other EUR 35 million from ground activities. In addition to that, we also signed a contract for development activities for Space Rider space study for EUR 55 million. And we also had an increase in our backlog thanks to tactical production of ASTER booster for about EUR 60 million. On top of that, we expect further contracts to be signed in 2021. As Giulio mentioned before, the Vega production Batch 4 that was the agreement signed today; the Residual ESA '19 Ministerial Council related to development contracts that we have to finalize in this 2021; second part of Ariane 6 P120 contracts; and additional tactical propulsion contracts in addition to the EUR 60 million that we have already signed in 2020. If we move to Page 17, we have summarized the trend of our revenues. As commented before by Giulio, our revenue was reduced in 2020 due to the slowdown of the COVID outbreak and the closure of our launch base in French Guiana. As you can see, the mix in between line of business on the left side of the page and in between production and development, remained substantially stable. Vega, the green one, confirmed more than 50% -- more than 50% of total revenues. And the decrease in Vega was basically -- Vega production was basically due to the return to flight that was postponed initially expected in March and ended up in September 2020. And the decrease in Ariane is due to the ramp down of Ariane 6 partially compensated by the ramp up of Ariane 6. In terms of development revenue, the decrease was due substantial postponement of activity to next year due to the fact that we were busy with the return to flight for most of the part of the year. On Page 18, we have summarized an interesting analysis on EBITDA adjusted. Adjusted remains taking out the nonrecurring cost of about EUR 8 million, as we said before. You can see here that our EBITDA adjusted show a substantially confirmed resilience even in this difficult year because we closed EUR 44 million in 2019 and EUR 43 million 2020. In between the 2, we had incremental operational costs by basically coming from disruption and planning activity, which was supposed to return to flight with Vega 16 in March, and we had the closure of the launch space for a couple of months due to unfavorable weather conditions and will return to flight in September. This caused some disruption in our planning, with costs associated of about EUR 6 million, but where savings in industrial fixed costs for a similar amount due to cost control and savings in, basically, utilities. On Page 19, we have reported breakdown in post-2020 not-recurring costs by network. As you can see by the big chart, more than half of this EUR 8 million of extra cost was related to Vega 16 return to flight for the different campaign that we had to sustain from March to September. In addition to that, we had the cost protection devices, basically, to increase our office equipment and to guarantee distancing between our employees. HR costs for bonus recent benefit to personnel. And the donation that we made in March to the Hospital of Kourou and to the Civil Protection of Colleferro. On Page 20, we have reported our P&L. As discussed, net revenue decrease in basically for reduction in Ariane 5 ramp down, partially compensated by Ariane 6 ramp up, and the decrease in Vega production due to the delay on return to flight of VV16. In terms of EBITDA report, the impact was basically related to EUR 8 million of nonrecurring costs. Adjusted EBITDA, we discussed -- we commented before, substantially in line with previous year. In terms of savings, as Giulio mentioned before, we had this year an increase in amortization that is principally related to the start of exploitation of our new P120 engine, which we receive through Ariane 6 and Vega C, and the second phase of Vega C engine, Zefiro 40. So we completed the development of this model with R&D activity. We started production. So we started depreciation and amortization of these assets. For the bottom line of the P&L, in terms of EBIT -- profit before tax and net income in between EBIT report or the profit before tax, you can see that in 2019, we had 2 one-offs of interest income from recoverable VAT credits and impact in taxes. That's the reason why the net income was substantial in line with profit before tax in 2019 compared to 2020. On Page 21, we reported the source and uses of our balance sheet. As you know, we have -- we confirmed the negative working capital, which is structurally negative this year. In this difficult year, it's even higher than previous year, working capital basically due to a slowdown in certain ability by suppliers and contractors due to the COVID-19 pandemic. The other set on which changed significantly was the fix assets, basically for CapEx on P120 on Vega cadence and development activities on the Vega family new products. In terms of net cash position, we reached the highest level as Giulio commented before at EUR 63 million end of 2020. And equity increased by the positive contribution to net income 2020, less the share buyback that we -- program that we completed in October 2020. On Page 22, we reported a bridge in our net debt position between '19 and '20. We started with EUR 58 million, ended up with EUR 62 million. The operating cash flow is positive of EUR 16 million, thanks to the contribution of EBITDA reported, the positive contribution of change in working capital, and the effects of CapEx of about EUR 35 million. In terms of nonoperating cash flow, the main caption is the completion of the share buyback of EUR 6.3 million. I will give the floor back to you, Giulio. Thank you.

Thank you, Alessandro. So maybe a couple of slides on what we see beyond 2020. So starting on Page 24, which we called 2021 and beyond. So first of all, we believe it's not the time to provide quantitative guidance for 2021 Why that? Because at this stage, as you know, the prospects are still contingent upon the COVID-19 evolution that we cannot forecast. The situation is still uncertain. The evolution of deducting is also uncertain in terms of how long it will take to unfold. And we don't know also what is going to happen in French Guiana at the space port yet. For the time being, the situation is calm, but we don't know. So it's difficult to predict which ability we will actually have to execute during this very complex year. For the time being, activities are running relatively well. But it's difficult to forecast at this time. Should things go well, we should be able to go anywhere between 3 and 4 flights of Ariane 5 as Arianespace has announced, and up to 3 Vega flights. In parallel, we will also prepare for flight Vega C maiden flight. So if the year runs smoothly, we will have an equivalent of nearly 4 flights. The Vega C main flight will take more to prepare, so it may end up that the flight event is at the beginning of 2022 rather than at the end of 2021. It doesn't really matter as far as revenues and profits are concerned. But the year could be quite busy if we don't have any additional hurdles from the pandemic. In terms of production, we should see a growth in the P120 production, which is on its ramp-up curve at the moment. So we think we can reach up to 50% more of what we produced last year. So we -- as we already explained to you, we are on a ramp up curve. In tactical propulsion, as I said before, also, we should see some good ramp up, obviously, tacking our production accounts for a small portion of the overall revenue mix, but still quite relevant overall. And then we plan to make progress and therefore, also in terms of revenue profits. On the 2 big new -- the revenue contracts that we have kicked off in 2020, which are the Space Rider program and the Vega E development program. What also we see today is that the medium-term growth prospects if we look at 2025 and beyond, appear to be more robust. Why that? Because the order backlog, as you have seen, is improving, and is set to improve naturally as we approach the main flights. So if we conduct successful maiden flights of Ariane 6 and Vega C between this year and next year, we think that in the next 3 to 4 years, the backlog will naturally grow and improve, no doubt. If we execute well, of course. We need to leverage the maiden flights and what follows, to further increase the customer confidence in this new generation products. In parallel, as we ramp up with production volumes, we shall improve industrial efficiency. And therefore, across the transition between Ariane 5 and Ariane 6 and the transition between Vega and Vega C, we eventually achieve a better efficiency. But of course, this growth prospect with a time horizon between 2025 and 2026, are yet to be achieved. And it will take this time to go through them. But the growth process is indeed quite attractive. Of course, all of this, it's difficult to judge today until we have a clearer picture on what will happen with the pandemic and with the limitations of the pandemic inevitably put on the natural execution of operations. Anyway, with a bit of optimism in mind, on Page 25, we have decided to propose a dividend distribution this year, and also to come back to a potential new share buyback program. So on the left side, on the dividend policy, for 2020 we have proposed a dividend of 50% payout essentially. So the maximum allowed by our current dividend policy, which ends up being EUR 7.3 million, which will be equivalent to EUR 0.285 per share. And we think this is important, and we struck an achievement because we come back to dividend distribution, which is our main goal to remunerate shareholders. But at the same time, we also proposed a modification in the dividend policy by growing the maximum threshold for dividend payout ratio from 50% to 60% of net earnings to make sure that over the next 2 years, we could have more flexibility to distribute even more should we be in the position to do so. Should we continue to have good cash generation, we may take this opportunity. So in a nutshell, on dividend policy, we resolved that we need even more flexibility to interact with our shareholders and make a good use of our liquidity. On the other side, I would say that the share buyback program was completed successfully sometime in October last year. As you know, under Italian regulation, the share buyback program can only be up to a maximum of 30% of the corporate nominal capital, which in our case is EUR 90 million. So we can buy own shares up to a maximum of EUR 18 million equivalent. With the share buyback program approved by the shareholders' meeting a couple of years ago, we completed the first tranche of 10% of the nominal corporate capital. So we acquired an equivalent of EUR 9.1 million in shares. And so what we will be proposing to the shareholders meeting is an authorization to potentially buy the rest of the shares up to the maximum threshold of 20%, which means practically an authorization to purchase up to another 9.1 million worth of shares. We don't know yet whether or not we will execute on this program. You know that the program may be used for different reasons and purposes, from the general efficiencies of liquidity to be distributed to the market, to the possibility to leverage these assets as a way to conduct M&A transactions, should disseminate transactions become available to us or to deleverage for management incentive plans. So it's one other element of flexibility that we would like to have for the next 1.5 years or so, to make sure that we would have different avenues to potentially remunerate shareholders. So that's it on my side. I thank you very much for your attention. Sorry if we took a little bit a long time. But that's, I think, a very challenging year to report. I mean, we want to give you, as much as possible, a clear feature. So thank you very much, and I would give the word back to Fabrizio.

Yes. Thank you, Giulio. I think we can open up the Q&A session.

[Operator Instructions] The first question comes from Martino De Ambroggi of Equita.

The first question is on the orders you expect in 2021. If you could quantify the amount of -- very rough amount of what you presented in Slide #16.

It's difficult now to say that in aggregate. You've seen what is our typical order intake, order of magnitude, okay? Now the situation is that all these contracts are now released in tranches. So we need to get the second tranche of Batch 4. We don't know how big the second tranche will get. It's difficult to quantify a figure, but I would not expect anything different from our typical order intake of previous years. Once again, if everything moves as we have seen in previous years. The general trend we are observing for the time being, is one where the order backlog shall grow and as order backflow. Again, if everything goes well. So if everything goes well, at the end of next year, we should have a higher order backlog. But specifically, on each of these contracts, we actually don't know. Because it depends how each of these will be broken down in tranches and when they're not realized and so on. While 3, 4, 5 years ago we used to get, let's say, fewer jumbo orders for a long time. Now we start to get tranches of everything. So it's more difficult for us to quantify the exact figure.

If I may change the question, so not for next year -- this year, 2021, but the total amount, so -- and we will see how it will be spread over the years. But just to have an idea of a total figure.

For -- first of all, for the relevant contracts, the residual part coming from the -- as 2019 is their accounting, at the end of the journey should be in the order of magnitude of EUR 500 million. This is what we got in 2019. And the course of 2020, we achieved a part of that and the rest should be released in the course of 2021. For the production, the Vega production Batch 4, we already received EUR 135 million. Now I will not tell you for commercial reasons what is the actual value of the full order, but the order of magnitude, we can estimate, is more than EUR 300 million. And -- but again, I don't know in what tranches this would come. The P120 contract, also without the first tranche, which I think we reported back some time ago, maybe for '17, '18 or something like that. Now this -- I don't know how big of our contract to get because this would be on a rolling basis. So it could be another EUR 70 million or so, but we don't know yet. It depends how long of a batch we will be able to achieve. Tactical propulsion contracts are, of course, a lower order of magnitude and -- although, they are quite attractive.

Okay. Okay. The second question is on the net working capital. So just to understand, how much this in 2020 benefited from down payments received? And if we should expect this effect with the negative implications for the current year?

Yes, this is Alessandro. Martino, since the working capital is higher -- negative working capital was higher in 2020 compared to previous year because, substantially, we collected cash from -- regularly, as expected. And that we had a slowdown in procurement activity from some suppliers and contractors, that is, as you will understand properly, a postponement of some payments beyond -- in 2021. So we expect, as a normal business cycle, an effect of working capital that will go down in 2021 and then will go back again following the new contract as Giulio mentioned before. So now, following the pandemic effect, it's difficult to estimate residual designs of this effect. However, the trend of the business cycle, as you know, is better.

Yes. On last question on the EBITDA. How much in 2020 came from fiscal benefits on R&D? And what could come going forward? And still on the EBITDA, I noticed the nonrecurring costs are mainly relating to the extra cost for the Vega return to flight. So more than 50%, if I remember correctly. So I suppose this line will become much, much smaller in 2021.

Yes. With respect to the -- our EBITDA spread in 2020, we had -- we refer to as a positive contribution. As you may recall. In 2019, we were affected by low retroactive effect to 2017, so we had no benefit in 2019 from tax credit. And in 2020, we went back to a benefit of about EUR 4 million. For the future, the law now states benefit up to 2022 in the order of magnitude of that amount, we expect. And then for the year of '22, however, it is reasonable to expect a postponement of the benefit, even not yet stated by law, considering the contribution of the recovery plan, particularly to these R&D activities. So we will expect to maintain that. With respect to nonrecurring cost of 2020, yes, the 60% of -- out of EUR 8 million were related to the postponement of the return to flight Vega 16. That was due to the fact that we were ready to launch on March 21, 2020, then the French government closed the launch base in Guiana from March to May. We had to prepare and incurring costs for the second campaign. Then, when we were ready, unfortunately, there were unfavorable weather condition that postponed the flight, the flight from May to September, with different campaign and different costs that we incurred. So for the next year, we expect that even in the uncertainty of the pandemic that is continuing, we expect a lower level of [ net count ] compared to 2020.

Quite significant, I imagine?

Yes, we hope so. Considering that, as you know...

Non-recurring is not recurring, but okay. Okay.

[ I will provision that up. ] [indiscernible] It's a very difficult task.

No, no, absolutely. Absolutely, it's clear. But let's say, the cost -- 58% is removed, more or less.

[Operator Instructions] The next question is from Carlo Maritano of Intermonte.

I just have a couple of questions. The first one related to CapEx. CapEx in 2020 was quite high. I was wondering what we expect in 2021 and years later. And then on M&A, now that you have a quite significant net cash position, do you think you will accelerate in finding new opportunities? Or there is nothing on the table right now [ consumer heavy ] on the core business?

So first of all, the CapEx, as you know, reached this year a peak of about EUR 34 million, which is the highest we ever had. And this is in conjunction with the finalization of the investments for P120 for the overall production infrastructure of P120 and Vega C and so on. Now for 2021, we expect probably something comparable. But then we expect to substantially go down in the following years because by then, the investment in new assets would actually be completed related to the transformation from Vega to Vega C and Ariane 5 to Ariane 6. So we have 1 year or more of heavy retail CapEx and then we should go down. Then in terms of M&A, we used to have a number of those years on the table. Some of which -- 2 were hit by the pandemic. So all the discussions slowed down. We also had to direct our attention to something else, given also the situation of the [indiscernible]. But as you correctly say, the time could be ripe for resuming these discussions, considering that this may also be an additional opportunity because in the middle of the troubles, we end up having a good cash position. So even more possibility to do that. Now we just need to spend some more of our attention to return to flight, to make sure that we're back on track. And then this may be on our radar screen maybe in the second half of the year.

[Operator Instructions] We do have a follow-up question now from Mr. Martino De Ambroggi of Equita.

One more quantitative question on the EUR 5.3 million savings in fixed cost in 2020. How much of this we are returning 2021? Or maybe they are structural? And the second is more a strategic question because maybe I'm wrong, but I didn't see in your presentation an update -- any update on the mini launcher. Is there any delay because of the pandemic also maybe you will think in a different way the strategic evolution? So just an update on this.

So first of all, on the fixed costs. On the fixed cost, there are 3 components by which we managed to reduce the fixed costs. The first component is an achievable one, reduction in travel expenses. We were unable to travel much. And so this further expense went down drastically in 2020. The second component is that we deliberately cut a lot of fixed expenses. For example, we lowered the communications budget by 70%. We lowered the budget of all staff functions significantly. So advisories, consultancies and things like this, we kept almost brutally, I would say. And we took the opportunity to go for early retirement for a number of employees who are close to retirement, especially in staff functions and then we took the opportunity to lower this cost. Then we also had, let's say, a good result from an effort in reducing energy costs in our plans, okay? So we reduced, on one side, energy consumption. And on the other side, we did pretty well with the pricing of energy, meaning electricity and steam, which are the 2 main sources of energy we use. So by strict control of these things, we were able to achieve a good result. So I think on the reduction of fixed costs, this contraction will stay for 2021. We are trying to keep these costs very low for 2021 and 2022. We will keep fixed costs up and in, especially for general administrative expenses. For what concern, energy is a little bit difficult to predict, because if we have been virtuous with consumption in 2020, we will probably try to do the same in 2021 on the pricing of the purchase of electricity and steam, we don't know yet. We hope to be lucky as we were last year, what can I say? And on travel expenses, we should see. The year started with not much of a travel. We will know for the rest of the year. At some point, we will need to rather to go and visit our suppliers to go to the launch site and so on. So we will see on this portion, I don't know. The portion of the cost, as we said, it's very difficult to forecast with the nonrecurring one. Because this can be low or very high, very much depending on what happens. Then second question on the mini launcher. No, we have not forgotten the mini launcher, not at all. Actually, do keep in mind that a small funding for the initial stages of the mini launcher development were awarded by the administrative conference of 2019 of March, EUR 5 million to EUR 10 million. However, we have to give priority to do something else. I wouldn't say we canceled this activity, but we had to put it on hold. Because the groups are all working on the return to flight effort, which I can assure you, it's a very intense effort. Because the rechecking everything we do and reassuring quality and so on, is a very, very intense engineering, quality and operations effort.

[Operator Instructions] Gentlemen, at this time, there are no questions registered. Would you like to make some closing remarks?

Thank you very much. Thank you all for joining the call, we appreciate that. And do not hesitate to reach out to us for Fabrizio and myself for any questions you may have. As always, we appreciate [ your exchange ]. Thank you.

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