Leonardo S.p.a. (LDO) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to our full year 2022 results slide Q&A session. Before taking your questions, I would like to hand you over to our CEO, Alessandro Profumo, for some initial remarks. Thank you.

Many thanks, Valeria, and good morning, everybody. Before starting our Q&A session, I would like to highlight some key messages. 2022 was an important year of delivery, solid execution and growing commercial success, and we are pleased to report today a strong set of full year results showing a group that is stronger, more robust and resilient, sustainable, steadily growing year after year. We have continued to deliver on our promises, meeting or exceeding all our key targets once again. And as a group, we are in a better and stronger position to capture new opportunities. We have stepped up and we are accelerating our commercial momentum. We have grown our top line and continued strong program delivery. We have also continued to improve our profitability. We have a structurally more solid, increasing cash flow, and we are laser focused on deleveraging. On ESG, we have also continued to make important progresses. And finally, we are fully committed to creating value for all our stakeholder. And with this, we are ready to take your questions. Many thanks.

[Operator Instructions] Our first question comes from Alessandro Pozzi of Mediobanca.

If I look at the 2023 guidance and if I take the midpoint, we could see maybe a slight progression in margins, and I think that's a good data point given that concerns around inflationary pressure. And I was wondering how should we read this in 2023? I mean, assuming that we are going to see stabilization of inflation, is -- if our inflationary pressures as worse as they could get in 2023. And then we should see an improvement from '24 also because you are maybe renegotiating some of the contracts in defense or you are able to pass on price hikes to the end customers, especially in [ defense ] program. So I was wondering if you can give us maybe a bit more color on that? The second question is on order intake. Obviously, came much above guidance, despite having raised the guidance over the Q3. And I was wondering perhaps if you can give us some indication of why it was so strong even after you raised the guidance? Maybe was it some of the orders that were supposed to come in 2023, both forward in 2022, given that the order intake guidance is around EUR 17 billion for next year? And also on the order intake for 2023, can you give us a sense of how you built it up? I guess, we already -- potentially you already included some of the big orders like the one in Brazil. I was wondering, does you rely on jumbo orders? There could be a lot of opportunities in 2023? And if so, how much?

I think that Alessandra will start talking of inflation. It's very, very important -- if you consider the fact that we also gave a view on the longer-term future, so we will continue to grow also after 2023. I think that the number in 2023 is very important because you remember the idea you had that we were not able to face the inflation pressure. While here with this guidance, we demonstrate that we are capable to manage that, and we will continue to do so also in the longer-term perspective. But I leave the floor to Alessandra.

You highlighted the key elements, Alessandro. Certainly, '22 at an EBITA level, double-digit growth over '21 testifies that the group was able to manage inflationary pressures, and '23 is another step forward in profitability, in line with the plan that we had, capturing all the opportunities that we have in the top line, and managing well for another year the supply chain and the inflationary pressures. Honestly, I think your view is well drafted and well crafted. '23 would have been a year of even higher growth in profitability if we had not to manage the pressures on inflation. And clearly, '23 is a year where this impact is the highest. Going forward, there is going to be an opportunity to reprice contracts with customers as well as we are embedding starting from '22 in the new bids, and this is the key, the new curve of cost that will be factored into our bids to customers. Therefore, we will be, again, naturally hedged from '24 onwards and will accelerate the pace of profitability growth. In any case, '22 and '23 are evidence of the fact that inflation is well managed and has been more than offset by the actions taken by the group.

On order intake, Alessandro, In 2022, we had the EUR 1.4 billion order from Poland. So in reality, this was expected to come in 2017, so -- sorry, in 2023. So the EUR 17 billion number is in reality EUR 15.6 billion, which is higher than the guidance we gave to the market at the beginning. But in this order, there is as well this EUR 1.4 billion. The EUR 17 billion of 2023 is composed by small orders. There are no jumbo orders. So it's very, very solid. And I think it's a clear demonstration of the fact that we continue to grow. It's also important what we said for the plan. Overall, we are seeing [ 10 billion ] more of orders on same lines in terms of years vis-a-vis the previous plan, giving review that we are really managing well the growth. We do expect that the market overall with the 2% expected expenditure on defense by all the NATO countries will realize. So I think is the 2023 number is really a solid number, again, without jumbo orders.

And just going back on the contract renegotiations. Are you able to have discussions on existing contracts or you need to wait for the roll-off and the start of new ones to pass on price hikes?

Well, Alessandro, it depends on the individual contracts. But I think the key message here is that, overall, at group level, we are weathering inflationary pressure as well, and we're continuing to grow profitability year-over-year, '22 over '21 and '23 over '22.

And just a last one for me, if I can. In terms of guidance on free cash flow, you reiterated the EUR 3 billion, if the starting point is 2021 when net debt was EUR 3.3 billion. It means that -- and if we adjust it for Hensoldt, by the end of 2025, we should see a net debt around EUR 1 billion. Is that a fair assumption?

The way I would look at it is that our guidance is focused on cash flow generation, Alessandro. So over the 5-year term, '21 to '25, we are confirming cumulative cash flow generation of EUR 3 billion, of which 2 years are already delivered. The third one is, as per guidance, plan to be at [ EUR 600 million ] and the other 2, clearly, you run the math better than us. We continue, at the same time to pay a consistent return to our shareholders. As you have seen, the Board of Directors yesterday decided to submit to the EGM in May, the proposal to confirm the dividend payment for EUR 0.14 per share, same as we had in '22. And our focus in the capital allocation principles that we have set for the group is to be absolutely prioritizing net debt reduction over the plan time, as we have demonstrated to be doing and capable to be doing in the past few years.

I think that it's also important why we decided to confirm as the numbers are showing the 2021-'25 cash flow generation because we received hundreds of questions on Aerostructure. So this is -- this cash flow generation is included Aerostructure, that, as you know, has been different due to the 787 program. And then later on, maybe that Valeria will say something more on that. So this is -- these numbers, which is quite a good number, is included Aerostructure, which means, I'd say, all the rest is really quite strong. It's important to say that if we would crystallize Aerostructure in 2022, the conversion rate would be already 70%, which is quite a relevant conversion rate. So I think it's a very clear demonstration of the fact that our group is capable to generate a significant cash flow. We are delivering on cash flow. The [ counter ] of the companies focus on cash flow. So I think it's the most relevant element for all of us.

And the disposals were included in the free cash flow guidance?

No. Disposals are not free cash flow.

The U.S. disposals are excluded. Okay.

It's not the cash flow. The operating cash flow is a reduction of debt, but it's not a free operating cash flow, clearly. Here, we are talking of the operating cash flow.

Our next question comes from Virginia Montorsi from Bank of America.

I have 2 quick ones. The first one is, could you just tell us if -- or confirm to us if going back to investment grade remains kind of one of the key priorities in 2023? And if you're confident about that? And then just to confirm, the EBITA CAGR you're providing for the medium term, would that be still 2023 to 2027? Am I correct?

On investment grade, Virginia, absolutely becoming investment grade -- we are already investment grade for Fitch. Becoming investment grade for the other 2 rating agencies is a priority for the group, and we are confident in saying that we are delivering with these results in '22 on the plan that we have set to the agencies, and we are having clearly a very constructive and engaged dialogue that will have an appreciation of the results achieved to date. On the CAGR, the CAGR is a '22 to '27 CAGR. So it's basically the 5-year plan CAGR accumulated for the time being. I think yes, we're talking about double-digit, yes, at plan end, starting from '22 levels going up to '27 levels.

Our next question comes from Martino De Ambroggi of Equita.

The first question is on free cash flow again. Focusing on 2023, am I right in assuming that the improvement basically comes from the Aerostructure division improvement? And could you specify what are the underlying assumptions on factoring CapEx, net working capital and dividends from unconsolidated assets? The second question is on the order intake, that you increased the cumulated order intake in '22-'26. I was wondering what are the divisions that you expect to benefit more from this trend? And what regions -- presumably it will be western countries, but I don't know if you have some comments on this? And still on the free cash flow, you are providing the EUR 3 billion cumulated free cash flow for the group. Could you specify what is the underlying assumption for the Aerostructure accumulated cash burn in the same period?

Martino, I'll take the first one. So free operating cash flow of 2023 and improvement drivers. The main improvement are associated with our core business, defense and governmental. Aerostructures, as we said, will slightly improve year-over-year, but this is not going to be the determinant factor. What you see is that we are going to grow top line. We're growing profitability while maintaining a strict control of working capital. We have expedited significantly timing of cash-ins from our customers, and that's a key element of the culture of cash that Alessandro was referring to before. And in '22, we also managed to accelerate the payments to suppliers. So these drivers will continue to make a difference in delivering cash. While the CapEx level is around EUR 700 million to EUR 800 million per annum CapEx, meaning both tangible and intangible investments. And the dividends from joint ventures will be consistent throughout the plan for the group. Alessandro, do you want to take the second question?

Yes. On order intake, we do see a growth in order division. The one which will grow more is Defense Electronics, which is clearly incredibly important in order to manage interoperability and multi-domain request we are seeing from different customers. In terms of geographies, is very well spread. So really, we do have a significant growth in all the geographies. So there is not one geography which is more relevant than the other one. So what we have seen in the period '18-'22 is more or less reflected in the following period. Here, you can see where we received the different orders. There is not a single country, which is really dominating U.S.A. The most relevant one in terms of single country is, by far, the largest market worldwide, and we will continue to move in this direction. But all the others are also relevant. U.K. clearly is not only U.K., but -- since for us, U.K. is very, very important for the Eurofighter, the end customer in some case are in the Middle East, which is the area in where we have the strongest export in terms of Eurofighter from U.K. If I can add, I think that the balancing that you have seen, so mainly 62% in our domestic markets, the 20% that we have in Europe, including Poland and 18% -- 20% in the rest of the world will be maintained also in the new order intake that we are presenting now. And we will have some new opportunities which are in the Middle East and in North Africa where we have built and are building several potential opportunities and that are markets in which we are investing on.

Finally, Martino, on your question on free operating cash flow for Aerostructures, as you know, year-over-year free operating cash flow is improving in the division and is improving at a good pace. We had an absorption of cash of EUR 339 million in '21, which went down to EUR 296 million last year. And for '23 we're projecting a slightly lower cash flow absorption, but again, not material with the goal to achieve cash flow breakeven at the end of '25. And as we have always said -- Valeria reminded about this several times, that this is going to be a back-end loaded profile considering the mix of programs and level of production that the division will follow, mainly on the B787 program.

Alessandra, I should correct a little bit you, it's not mainly is due to the 787 program. As we know, the 787 program will have a completely different profile from the fuselage 1,407. So maybe that -- Valerio can elaborate on that.

You have seen -- as you have heard, we are mainly doubling all the numbers year-by-year on the 787. Last year, we delivered 2 fuselages per month. While this year, we are expecting 4 to 5. And on Boeing latest plan, we will arrive at 10 ships per month within the 2025. So we are doubling year-by-year. On the other program, we are on a clear upwards trajectories. For any program we are already on levels higher than in 2019 for the A321, the A220. We are restoring higher level on ATR. But as Alessandro said, we need to arrive as soon as possible to 1,406 serial number of Boeing in order to increase profitability as per contract and restore higher volumes, such as we had before the COVID.

If I may, just 2 quick follow-ups on the accumulated cash burden for Aerostructure. Am I right in assuming EUR 900 million, EUR 1 billion over the plan period? And on the division that is benefit more from this current improvement in the accumulated orders, being Defense Electronics, which is the most profitable. Am I right in assuming some positive mix effect on the EBITA margin going forward?

Martino, I have to say, the way I'd look at it is widely spread improvement in cash flow generation and profitability throughout the group, with the qualifier for our restructure that we discussed with a clear target to break even and a consistent improvement year-over-year. The mix is clearly an element that plays into the equation. But honestly, what we're seeing is that, overall, throughout the group, we do see consistent strengthening of cash flow generation and improvement in profitability, being in Defense Electronics, in helicopters, in aircraft that maintain, for example, a top margin level in absolute terms and even relative to peers. So we are capturing all of these effect at divisional levels and embedding this in the plan for group, which we are delivering to you today.

We now have a question from the webcast.

Yes, exactly. Before moving on with questions from the call, let's take a question from the web that is coming from Monica Bosio at Intesa Sanpaolo. Can you please provide us a rough indication on financial charges as for 2023 and going forward? And do you expect further restructuring above the EBIT line this year?

Sure, Monica. Financial charges for '23 are expected to be around EUR 230 million. The number you see in '22 reflects some one-off effects, including some FX -- fair value FX as well as some actualization of balance sheet accounts that has dropped the number significantly. So '23 is going to be in the range of EUR 230 million with a figure that over time will clearly decline as we decline net debt in the plan Horizon. On restructuring, what you do see recorded in '22 is the effect of the pre-pension plan signed with the unions in December, focused on a change in mix in corporate functions and staff functions of the group. Going forward, we do not see any specific restructuring happening, therefore, guidance for below the line and the restructuring line will be below EUR 100 million.

[Operator Instructions] Our next question comes from Gabriele Gambarova of Banca Akros.

The first one is on DRS. I saw that in the first 9 months, the margin -- EBITA margin in absolute term was almost flat, and then there was a nice acceleration in Q4. So I was wondering if you succeeded in fixing the supply chain issues, or even, let's say, you passed higher costs to clients. Basically, I was wondering how it could perform in 2023? This is the first question. Then I saw that in the press release, you made a reference to reduce the factoring. Is it possible to have a number on this item? The third one is on the new Medium Helicopter contest in the U.K. Any update on the timing of the RFP would be very useful because there are no more -- not many information on this. And that's it.

DRS. In U.S.A., as you know, there are still some -- probably not for us, but for the overall industry in terms of supply chain. So it's not something related to Leonardo DRS. In any case, DRS is working quite well with the customer base. The profitability of DRS is going up, as we said, 2 years ago, and we will -- is continuing and will continue to happen, because many programs are moving from development to production. So there is -- and there will continue to be a good growth in terms of marginality of DRS. Again, it's included in, what is already on the book, because we know and we were saying that when we were talking of the listing of DRS, we have been capable to grow in a very significant way in terms of new programs. This is also one of the reason why I'm so positive on the proxy contract because, thanks to the proxy, we can bid in any classified program. Clearly, there is a significant program, the Ohio replacement program, so-called, that is moving forward. And while before was absorbing cash and was also negative in terms of marginality, today is positive, and we are talking -- working on second rounds of opportunities. So it's clearly very relevant. But there are many other programs on which we are in a similar position. So DRS will continue to move positively in terms of marginality. I will talk of the last question on helicopters and then I will leave the floor to Alessandra for factoring. We don't have any news on the new Medium Helicopter in U.K. in terms of time frame. We continue to have a continuous contact with the customer. We have a platform, which, in our opinion, is incredibly strong. It's a 149, is helicopter we just sold as well to Poland, is the military version of the 189. So we think that this is the most ready for sure. And in terms of readiness is really -- we are sure that there are no doubts on that, that we are the ones most advanced. We think that it's also an incredibly good helicopter for this type of mission. So we continue to see -- to be confident, but we don't have any news in terms of time frame. Alessandra, factoring?

Yes, Gabriele. Factoring has been decreasing in the last 2 years consistently. And at year-end '22, we were below EUR 400 million.

Our next comes from Ian Douglas-Pennant of UBS.

Yes, I've got a couple left, please. So in helicopters, very strong order growth there, even accounting for the jumbo order from Poland. Should we -- and clearly, some Polish language from you as well, should we see this as evidence of a structural turnaround in helicopters? Do you believe that the market outlook longer term has improved? Secondly, following up on a previous question on factoring. Apologies if I missed the answer, but you gave some guidance on CapEx spending and dividends from JVs, cash flow next year and in future years. There was also a question on factoring in that question. I'm not sure I heard the answer.

Because I think it's incredibly important to stress some concept. First of all, the -- you talk of restructuring, the, I would say, redesigning process of helicopter is completed. So am really incredibly satisfied by what [indiscernible] and his team did in this 6 years. You remember that when I joined Leonardo in 2017, we made the profit warning on helicopters. Today is completely behind us that time. So the team is strong. The way they manage the programs is incredibly relevant. And so, we are very solid and very positive in terms of forward-looking, what we do see in the helicopter world. On the military side, we will continue to see a demand which is not incredibly growing. So the growth rate is not very relevant, but we are sure that, as Leonardo, we are capable to increase our positioning in this market. What we have done in U.S., I think, is a clear demonstration of that. We are the only foreign company, non-U.S. company present on the defense system in U.S. with 139 -- the MH-139. Just in these days, we started the production after the first prototyping and this is very, very relevant. AD139 we will deliver to the U.S. army and this is relevant. Then we have the 135 order, which in reality is not yet in the backlog because, as you know, in U.S., we book as a yearly order, but the total number of the TH-73, which is 119 for training, the total order is 135. And we are delivering. The customer is incredibly satisfied. We assume that there will be something more in the future in the FNC, so very confident on that. On top of that, you know the FLRAA tender how has been completed where the TiltRotor technology has been the one who has been the winner of this tender. This is, again, incredibly relevant for us because we are close to the certification of the 609, and we already received the 4 first orders. This is incredibly important because the technology is solidly accepted. And thanks to that, we do see a very good perspective also for us. So this is the military award and the 609. On top of that, we are seeing a more dynamic market in the civil domain. Search and Rescue is very important. You have seen, I think yesterday or the day before yesterday, a very important order from THC, the helicopter company in Saudi. This is very, very relevant. Emergency Medical services is another important market. We do expect some improvement as well in Oil & Gas, is not in the plan, but we are positive as well on this domain. So overall, we are very positive on our Helicopter division. I hope that I answered to your question.

And the assumption of factoring in 2023, please?

Ian, as you know, and I'm sure you have not missed, the quality of free cash flow generation has significantly strengthened. So not only the absolute value, but also the quality. And you must have appreciated the lower cyclicality throughout the year, as on a quarterly basis, our cash flow absorption profile has significantly smoothen out throughout the last 2 years. With respect to factoring, the answer for '22 is that we have a level which is below EUR 400 million.

Sorry, the question was a follow-up on the prior question on 2023. So you said CapEx, EUR 700 million to EUR 800 million. You said dividends from JV consistent throughout the plan, and I missed the answer on factoring 2023.

Yes. I mean factoring '23 would be around the same levels of '22. We're clearly continuing to work throughout the group to accelerate cash in from customers, and we're confident that the quality of the free cash flow will continue to improve year after year.

Just following up on helicopters, sorry. The U.K. NMH has been delayed. Do you expect to hear something soon after the integrated defense review is published or maybe I could ask you expect to hear something this year?

We don't know. We think that will come next year, but you never know. So we don't have -- it's not in the 2023 numbers, just to be clear.

Let's take another question from the web. It's from Yan Derocles from Oddo. Can you give a little bit more color on the negotiation with your unions in terms of wage increases in your main geographies? Then he asked again about factoring. I think we have already answered. And the third question is, unlike peers, gross customer advances did not grow strongly in 2022. Given your expectation of a book-to-bill greater than 1, can we anticipate an increase in down payments in 2023?

Negotiation with -- there are no negotiations, in the sense that there are the contracts, so is -- the trend is very clear. So we don't expect a pressure higher than the one are implied in our numbers. because the contracts are already signed. Clearly, this is one of the piece of the inflation pressure, because, if you have a step up in 2023, then this increase will remain also the following year, will not increase furthermore maybe. But -- So overall, we are incredibly satisfied with the capabilities we have in terms of offsetting the inflation pressure, because you have seen the guidance, and also -- we will continue to grow also after 2023 in terms of marginality, offsetting completely this increase. Because if you have a 5% increase in one country and you don't have another 5% the following year, but in any case, the base is higher. So you have a higher cost, which will continue to be there. Despite of that, we will continue to improve our marginality. So this is, I think, a demonstration of the strengths we have. So this is very important. As you know, in Italy, we have a contract for which we have an increase -- an expected increase of salary related to the core inflation. Today, the inflation is mainly important. So this is the reason why in Italy we have a lower impact in terms of salary increase. Alessandra?

Yes. So on customer advances in '22, the flow of cash-in was ordered, I would say. Nothing material to report. And this is honestly good news, again, going back to the quality of the cash flows because we have delivered increasing cash flow year-over-year, more than double cash flow organically, with no jumbo contribution from any single order and from no contribution from customer advances, which over time need to be repaid as we all know. So we're really happy with the mix of this cash flow generation in '22, and we're projecting a similar composition also in '23.

[Operator Instructions] Alternatively, you can submit with a question via the webcast.

Let's take another question from the web. Could you please provide us with an update on the B787 and the other programs within the Aerostructures division?

Valerio?

As I have already anticipated for the other question, we are on an upward trajectory. We are -- have already volumes higher than in 2019 for the A321 and the A220 and the A220 has also renegotiated terms in order to increase profitability by the end of this year. ATR is strong with large potential portfolio also due to sustainable configurations. We have the cargo version. We are near to deliver the store version. On the 787, as I anticipated last year, we delivered 2 fuselages per month. We are planning to deliver 4 to 5 this year, and latest Boeing plants are foreseeing 10 ships per month within 2025. So doubling year-by-year. At the same time in Aerostructure, we have also -- on the military side, we are robust and profitable. On Eurofighter and JSF, we have several new opportunities, which have not been included in the plan, relevant to newer packages. We have in the plan EuroMALE, where the first order for the wing in terms of design has been already finalized. And in top of all these commercial potential contracts and opportunities, we have reduced our cost base. You know that we reduced the head count 20%. We reduced our manufacturing cost with automation, digitalization. This year, we will have our first fuselage in terms of production for the ATR in Pomigliano, which grant us higher quality level standards and profitability. So I think that our volumes are coming back to previous one and the 2021 was the bottom year as confirmed also by number that you have in 2022.

Our next question comes from the telephone lines, and it's that of Harry Breach of Stifel.

Can I ask you maybe 3 simple ones. Firstly -- and Alessandra, forgive me if I misunderstood. MBDA -- the cash that you own through MBDA, I think increased by EUR 50 million around that number in 2022. Clearly, with the level of orders and down payments, the cash position at MBDA should continue to get very strong. Do you expect to increase your debt to MBDA or effectively your withdraws of cash from MBDA? In 2023, should we think about the same level as in 2022? Second question, Defense Electronics, guys, overall, a very impressive full year margin performance at Electronic EU, particularly. How do you think about margins at that business overall following what you've reported? Are we kind of at a natural ceiling level for the EBITA margins at Defense Electronics at the current level, 11.7%? Or do you think it could get even higher, especially as the equity income from MBDA continues to rise? And then final question, maybe more for Alessandro, supply chain. We've spoken about it more in the past in the context of DRS but over in Europe, in Italy and the U.K. as well over the U.S., is the situation in terms of on time, on quality and health of supply chain about the same as it was maybe 3 months ago? Is it stabilizing? Is it getting better? Can you give us any idea, please?

Sure. On supply chain, starting from -- sorry.

[ No, he didn't ask ] on supply chain. From MBDA.

MBDA. MBDA cash is basically projected to be stable. Now the company has ended '22 with a high level of cash, absolutely. We are currently in discussion the treasury committee level with the other shareholders to understand, how to best utilize this cash that is available in the joint venture. And in any case, for us, is honestly quite neutral because we -- as you know, we get that cash, it's accounted for as debt. So from a net debt perspective, it's absolutely nil impact. And the group has strong liquidity. So clearly, the cash from MBDA is one of the component, but is one of the multiple components of this liquidity base.

On Defense Electronics, we do see a continuous growth in terms of profitability during the plan. So clearly, this is in terms of contribution to the group in the period of the plan, the one -- the division with the highest growth rate in terms of volume but as well in terms of profitability of contribution in absolute terms. So this is clearly the area with the highest the group level, which is positive for us because do confirm the view we had in the past being -- saying for us, as the 2 platforms are relevant, helicopters and aircraft, also because they are receiving a lot of benefit and the Defense Electronics division is learning a lot from these platforms in order to be capable to grow furthermore. And today, there is no one in this market which is as strong as we are in terms of integration of the system. I learned in these 6 years how much it's difficult to have the right integration process, in the area where any program is more risky. So the fact that we have these 3 divisions together is really a strength for us. By chance, I open and close a bracket. When we made the investment in Hensoldt that [ EUR 23 billion ] -- at the timing Hensoldt was in the market at the price of [ EUR 16 billion ]. I remember quite clearly, someone were saying, why are you paying so much? Now let me have a look today and so this at [ EUR 34 billion ] so -- which is, in any case, not bad. So Defense Electronics really is in credit with relevant. And never…

Just to be clear, sorry, in the plan, the margin for the Electronics EU business, it is continuing to increase in the plan period, the margin?

Yes. The answer is yes. For me, clearly, it's relevant. The margin in percentage, but if you are reducing the volume is not good. So we are increasing the margins and we're increasing also in absolute terms, which is clearly at the end relevant for you because it's the value of the company. So in order to be very clear, we will have an increase in terms of percentage, so -- and in terms of volumes so that at the end, the bottom line will grow quite significantly. It's clear. Having said that, supply chain area. You remember that we started -- today, the situation is better than 3 months ago. But also, what is very relevant is what we have done on the supply chain in Italy since 2018. So I think that Valerio, -- since the procurement structure belongs to the area of Valerio can say some word on the results of our program on the supply chain.

Yes. We started -- as Alessandro said, in 2018, we are creating real partnership in which obviously we are assuring to our supply chain a future, a strategic view. We are creating a stronger supply chain. They are obviously putting on the table stability -- financial stability, sustainability of their competencies. Now we have created a taxonomic-mapped supply chain, which for the future is strong, not only for the Leonardo but for the supply chain in international programs, and we are moving on with supply chain towards sustainability and digitalization. So we have done a lot of work, and our supply chain is stronger and stronger again more with respect to previous year. You shall take into account that, for example, in the international programs, cooperation programs, supply chain is one of our building block in order to create a value chain.

I will now hand back over to the team for the webcast question.

Yes. Again, from the webcast, they're asking for a little bit more color on our role in the GCAP.

Valerio?

I think that my answer will also cover a few points that Alessandro said before. We are strong because we have electronics and we have platforms. Really, these are the reason for which we are a leading partner in the GCAP. The GCAP is an exciting new adventure, is the demonstration that Leonardo is strong in international cooperation programs such as Eurofighter, EuroMALE , and other program. And the GCAP with U.K. and most recently, Japan, it's the program dedicated to a system of system, which will cover all the domains, air, land, maritime, space and cyber and will take advantage not only by our divisions portfolio, but also will take advantage from our labs and the choice to have internal labs developing disruptive dual-use technologies. So we will leverage on artificial intelligence, Big Data analytics, quantum computing, digital twin, which is now a framework that we have in all our divisions and the program, which that now is not really in the number of the plan without only a technological activities that we are planning in next 2 years will provide the sustainability and prosperity, above all, will also provide capability to preserve and safeguard our competencies while generating STEM employment. So in our value chain that starts from universities and reserve centers with the startup in an open innovation contract. We will have really a strong opportunity being a leading partner in a new program that will arrive to an higher combat new platform in 2035, but covering a real system of system interoperable and in multi-domain.

Thank you. Actually, it was the last question. So thank you all for having been with us this morning and for your attention. As usual, we are available for follow-ups.

Good. Many thanks.