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

Welcome, everybody, and thank you for coming today at the Leonardo Capital Market. We are in the heart of the electronics division. It's truly manufactured in place and we have created this environment for a full immersion in the so-called digital continuum which will be a recurrent idea in our presentation. Before starting with the description of the plan and the discussion, we thought it would have been useful to give you some numbers. So you know exactly why you're here. This is a synthesis of the key financial figures of the plan. By the year 2028, so the end of the plan, we expect the orders to grow up to EUR 22.6 billion with an increase approximately 25%, 26%. Revenues growing to EUR 21.3 billion, about 39% more than today. EBITA almost doubled, EUR 2.5 billion as opposed to EUR 1.3 billion today. Free operating cash flow more than doubled, EUR 1.35 billion. Return on invested capital growing by 70% compared to today, and return on sales reaching double digit in 2026 and approaching 11.5% in 2028, at the end of the plan. In addition, I'd like to mention that yesterday, our Board has approved the proposal for our assembly that will be -- should be approved in May to double the dividend per share from EUR 0.14 to EUR 0.28 in 2024, and there's a strategy, of course, for the years to come. Before keep running with the -- keep going with the discussion, I should mention that the emergency exits are left and right. So if you don't like the number, you know how to go out immediately, and down there is the quiet place and also there but that one is bigger. Nothing will happen but safety first. During the discussion, we'll have an architecture -- a description of the architecture of the Industrial Plan, business overview of the division, that will be very transparent, very direct, you will see the numbers. The targets of the group at the end -- the global targets of the group, and finally, a few relevant initiatives. So before starting this discussion, there is an inspiring movie that has been elaborated by our new Digital Hub and I hope this will be useful for the next -- for the forthcoming presentation. And I ask you guys, please, launch the movie. Thank you. It's just 1.5 minute. [Presentation]

The young Leonardo give us a [ bite ] to the future. It's interesting because he will see this drawing that was done by kid, will come back to our -- in our plan as a new idea that will inspire all our technologies for the future. So what did we learn -- all the recent happenings, I mean, namely the Ukrainian war. I think there are 3 lessons that we should not forget after what happened in the last 2 years. First of all, warfare is changing. There's a combination of traditional weapons that was the same for centuries and new civil technologies like mobile phones, satellites or Internet, drones that normally bring along cameras that use together in an orchestrated manner can destroy machines, war machines that are worth millions. So, bullets and bytes seems to be the new approach. This unprecedented introduction of digitalization in the warfare never happened before, of course, and we have to be ready to face this change. The second lesson is globalization is an element of fragility. When this war started just at the periphery of Europe, the first impact was energy insecurity. At that time, I was Minister of Energy. I believe it was a nightmare. And then, we had food insecurity and then we had cyber insecurity and then we had infrastructure insecurity. And lately, we realized there was a war at the corner of Europe, one of the 55 wars unfortunately. So maybe defense is not enough. We should think in a different way. Defense is just a set of measures within a much bigger scheme, which is a global security, defense into global security. The third lesson was no single European country can make it on its own. We've seen the fragmentation, how weak was the approach. When we fragment our effort, we're not coordinated. So security is a continental problem. It's not the domestic problem, it's not national. Now let's see one by one the 3 lessons. This is the -- if you want the manifesto of the technology we want to develop. Now we have to create an artificial intelligence dynamic cross-domain in which all the domains are interconnected. And the platforms of each domain can talk to each other or communicate. They're orchestrated synergically, so to be more effective. This is under the umbrella of the satellite vision, geo-localization, looking at the landscape. Well, in the past, we have the Sentinel on the top of the hill. Now we have the satellites in the space. And all the signals that they are interconnecting the platforms or the domains have to be cyber secure because they cannot be intercepted and electronics, by the way, here we are in electronics, and electronics is the glue, what makes this possible. Now if you have this scheme, high performance computing connected with a powerful cloud makes it possible to make decisions in real-time to simulate, to forecast, to predict to make decisions. And this is going to be the new multi-domain interoperability that we want to accomplish. This is the technology that's going to be developed. I mean, it's a mandatory pathway. No one can do this, can how to say, protect peace without doing this. In order to do this, we have to develop command and control, communication standards, modeling simulations and training, global monitoring. So space, as I said before, system of system architectures, very likely we have a mother platform with many drones or -- well, loyalty machines, cyber resilience has to be guaranteed and autonomous systems are to be developed. Now this is possible because we should be able to create a digital continuum. The digital continuum is exactly what we said before. Cloud, we're talking about petabytes, at least. Computing power, we're talking about petaflops that 10 to 15 floating point operation per second, big things. Resilient broadband communications because everything has to be protected. Satellite and sensors, well, very clear. Network of sensors on ground and satellites on the top. Digital twin, because those things can be simulated only if you have the digital twin of all platforms, and artificial intelligence as the brain that orchestrates all the platforms and all the -- and interconnect all the domains. Well, Leonardo has everything in the portfolio. All those technologies are developed by Leonardo. The point is to create the orchestra to put them together. The second lesson is from defense to global security. I think it's clear from the previous description that this is the way to go. But even market-wise, this is convenient. It is not only a technical requirement, or a technical choice, it is convenient even from the point of view of market because if you see defense is growing at a CAGR of 4.5%. This is including the 2% GDP increase expected by the NATO -- in the NATO alliance, but cybersecurity space are growing even faster, on average. So even market-wise, it seems to be convenient to approach this way. The third lesson, security as a continental problem has to be fixed especially in Europe very soon. You can see this plot is self-explanatory. This is the procurement budget of the United States in 2023. That has been around $250 billion spread over or allocated over 12 different platforms last year. That means on average $20 billion per platform. If you see Europe is investing a bit less, let's say, a bit less than one-half, but still plenty of money. But this is allocated over 30 platforms. Every country in Europe wants to have its own aircraft, its own tank, its own machine, its own platform. So on average, we invest EUR 4 billion per platform. This is not effective -- not efficient. We have to do much better. So orchestrating, creating the synergy, creating the link means also changing the way we allocate resources. And of course, industries play a role in this. So the question is, is Leonardo ready to face those challenges that I mentioned so far -- that I've described so far? Well, the answer must be yes, of course. We have, first of all, to strengthen our core business. So the platforms have to be competitive, aircraft, tanks, whatever we do, whatever hardware we do, it has to be competitive, high tech. So we have to consolidate the core business. This means, first of all, rationalize and optimize the portfolio, choosing only the best platforms, the best technologies, focus our R&D, and implement massive digitalization throughout the portfolio. That's compulsory. This is to answer the bullets -- to address the bullets and bytes lesson. The second is to address defense and global security, forge international alliances and eventually joint ventures. No one can do it on its own, at least in Europe. So we have to create alliances. We have to work for synergies. The second part -- the second actions, to be ready, it paved the way to the global security challenge. So we have a narrow window of opportunity to integrate cybersecurity in space in this picture of the interdomain -- sorry, cross-domain interoperability, which means enhancing cyber capabilities for defense, space and national strategic organizations. And in the meantime, boosting our presence in the space we're going to create this -- we have created a space division, you will see in a minute, boosting space alliance and focusing on a high-value segments for the picture I've shown you before. And this addresses the security as a continental problem. So this is -- the answer or the question, are we ready? This means transforming a company working in multiple divisions and related domains, electronics, helicopter, aircraft, aerostructures, cyber and space. These are pictures now and those are the domains; air, land, maritime, space, cyber. Intercompany working in a cross-divisional multi-domain environment powered by the digital continuum that I mentioned before. So if the question is are we ready? The answer is yes, we are ready. We do have the toolkit. All the toolkits are in our box, but we have to synergize them. By the way, this is not too much capital-intensive effort. So I like it also because we go towards a massive digitalization, whereas we are historically manufacturing companies that has to invest a lot of money, capital allocation for hardware, technologies, of course, are heavy. That's why when you do manufacturing, unfortunately, your life is harder than in other segments -- industrial segments. This generates a growth model. Now forgive me, I was a scientist for most of my life and I need formulas from time-to-time. This is very exemplificative as just an example. This is the generic financial KPI. It could be free operating cash flow, EBITA, whatever you want, just to give you an idea, basic idea. The summation over the years of the plan and the summation of the organic growth, efficiency boost, and inorganic growth should result in different contributions that ultimately should bring us to the forecast. Now how do we do -- how do we compute those things? Let's go here. The organic growth consists of 3 contributions focusing R&D and technology innovation, primarily focusing on digital technologies such as artificial intelligence, digital twin, cloud computing. By the way, we were among the first in the world in 2019 installing high-performance computing and with a fast-cloud computing interface, one of the largest in the aerospace and defense sector. And that gave us some competitive advantage. The disadvantage in this field, maybe 6 months, 9 months can be years, but we have to rely on that competitive advantage and we're investing a lot in terms of brain and infrastructure. Second massive digitalization of solutions and operations. So the key enabler to improve our product competitiveness and to streamline our processes, of course, is digitalization. This has to be done immediately. We're working on that now. Third, increasing the services because if we digitalize our platform, have new services and normally services have very good margins. So we like servitization in our platforms, and of course, customer proximity. There is a massive advancement in our customer proximity network. We have a directory for that business and operation. So this is really a strong effort. The efficiency boost which is this part of the curve or this part of the curve consists of 3 contributions. The first one is increasing the efficiency group-wide and corporate cost reduction. So guys, I'll be very clear. There is a plan for EUR 1.8 billion savings in 5 years. This is unprecedented in the company. Everybody's committed to that. We know it's kind of hard job, but we will do it. Group-wide efficiency and corporate cost reduction means optimization of procurement, cost reduction of the headquarter, I know that you expect this, and we're doing this very seriously. In terms of organizational processes, business and product, focus and rationalization, we are investing in high priority actions -- activities. We're divesting of core business actions. You will have some example. We have closed businesses, joint ventures and products that are not promising or maybe not so central to the strategy. Finally, broad optimization of manufacturing. Sometimes we are victim of our own success and accelerating the conventional, the backlog of orders into revenues is mandatory. So this is -- this goes through exploitation of digital capabilities, automation effort in engineering. And this is what we're doing now. Least but not last, we expect to have an inorganic growth, obviously, given by steering global alliances. As I told before, it's a continental problem global security, and merger and acquisition in emerging technology markets. We are selecting -- we have a number of due diligence as of the moment, selecting companies that could add services that we don't have or could improve the cloud -- could add technologies that it's cheaper to buy than to develop in-house. However, to be very clear, the numbers -- all right, battery over. No, here. The numbers I gave you before. Just take into account for the final forecast organic growth and efficiency boost. This is surreal. We're doing that now. The inorganic part is, of course, not included in those numbers I gave you before because this is in progress, is ongoing. We are here since 10 months, we're doing a lot of work, but this needs the crystal ball to be quantified at the moment. But this means also stay-tuned. There is margin for further improvement compared to those numbers. Let's go now to the short business overview of the division. For the sake of transparency, we want to give you an update on what every division is going to do with a forecast of the final -- of the main KPIs -- financial KPIs. I think this is maybe heavy to read and even to say, but it's good to have an idea of how Leonardo is getting organized in view of this transformation. A key point is that this transformation is not the discontinuity. I would be -- it would be a mistake to think to a digital jump. We do have all the technology and the skill in-house. We just have to change the mindset and make them homogeneous and synchronize. So that makes the reorganization or if you want the jump not discontinuous, but quite massive. So let's see the business overview. This is in a nutshell, the entire plan. You have the 4, let's say, hardware platforms or divisions: electronics, helicopter, aircraft, aerostructures. We have to strengthen the core business, as we said before. And then you have the, let's say, the new entry, the new players that become important for the exploitation of the inter domain strategy, which represent --- pave the way to the global security challenge. Now, we go one-to-one. This is what is now. This is where we want to go. You will get this. I don't waste time to read and to present you the details. We will go now one-to-one in a drill down. So let's start with Electronics. We are in the -- our host is the Electronics division. So we're here. The target of Electronics is to go from second largest European player in defense electronics and to become global player with European leadership and to catalyze a European cooperation. Now, first of all, consider that over the last decade, the content of electronic technologies in any platform has been increasing dramatically. A few decades ago, about 1/4 or less of the high-tech content of a platform was electronics. Right now, we are -- or recently, we were around 40 and now and onwards, we are going towards 1.5. This means that electronics is getting -- is playing a more and more dominant role. And obviously, because electronics is the hardware that makes it possible, cybersecurity, interconnection, simulation, forecast. So this is the glue of all the technologies that a company like Leonardo produces. With this in mind, the first thing we have to do, and this is something the Electronics division is doing now. We have to rationalize 20% of the current portfolio. I guess Electronics has about 500 products at the moment. About 20%, yes, about 20% under the supervision of Marco De Fazio who is the Director of the division. Rationalizing the current portfolio allows us to have better capital allocation. And the main area of rationalization are if you customize the command and control, communication, land and naval radars, all generation and other legacy products that maybe are less relevant at the moment. To increase the competitiveness across all domains. At the moment, Electronics is pushing a lot because we have to update the core platform, for instance, for the Eurofighter. There's a massive job of -- massive work of optimization for the aircraft in particular. And enabled the new programs to start, in particular, the GCAP, so the 6th generation fighter and the armored machines -- combat machine that will become important element in the future for interconnected domain applications. Finally, Electronics has to continue to invest and update on the traditional leading products, radars, sensors, communication, command and control. So you see there is essentially a 2-fold approach. Keep alive and update continuously the existing platforms, getting ready for the new platforms and continue to invest and update legacy programs. On the other hand, we do have another challenge, which is catalyzing European cooperation and possibly expanding the international reach. Now, consider having wider access to European market means unlock synergies in a wide portfolio, radars for airborne and the electronic warfare for airborne, combat system for next-generation frigates. So this is maritime. Land sensor solution in wide networks, advanced air defense systems, optronics, and this is part of what we are discussing with Hensoldt in the frame of a large-scale collaboration. Of course, this is the technical discussion. We'll see where this -- we land, but it's -- that's a work in progress. Then, we have a contribution to land defense. This is what we are studying and developing for the European space based on armored vehicles, particularly the collaboration with KNDS, the main battle tank program. So this is work in progress because there is a large opportunity, both at domestic level and at international -- European level. And finally, there's a collaboration ongoing in the naval area, in the maritime area with Fincantieri, particularly the Orizzonte Sistemi Navali for the whole-warship capability. Well, I mean, there's a floating part and electronic part and a weapon part. The synergy is quite clear. And we are also discussing about future underwater defense systems. So with this kind of approach that is very synthetic, we can go and see quickly what is the expectation for the Electronics division. Orders growing up to EUR 6.9 billion in '28 with a -- they are steadily growing with the backlog reaching EUR 17 billion by the end of the plan. Today, it's around EUR 13 billion. Revenues growing to EUR 6.4 billion with a remarkable CAGR. And the return on sales going up -- being always double digit, growing up to more than 12% with an EBITA reaching EUR 0.79 billion with such a CAGR. So those are healthy numbers, promising. And as I said before, no inorganic part is included in those analysis which are just an indication for the time-being with the organic growth plus efficiency boost. Let's go to the next division, which is Helicopters. This is a slide that just summarizes the portfolio of the Helicopter division now and then -- now and tomorrow. Of course, we don't have time to go through. You will have it. You can see whenever you want. We will focus on some key products like the new motor, single motor, the multi-purpose machine like the 249 and the most advanced platforms like the tiltrotor or the rotor and managed systems. In a nutshell, Helicopter has huge backlog of orders. Now they are making an effort to optimize the industrial model, scaling the industrial capacity to accelerate the transformation of backlog into revenues. They are reducing standardization, improving in the industrialization process by digitalization and supply chain, of course. They're going to force -- to reinforce the portfolio because they have both services -- both in terms of services, which is a remarkable part of the income and platforms, namely the new single motor, AW09. They are developing the so-called smart helicopters, so introducing further connectivity, autonomous capability, digitalization on the platforms. And of course, they have to do the generation upgrades for the AD family. This is to keep the machines competitive anyway. But the news are coming also from the other side of the ocean. The American authorities, they have done recently a number of important choices. And particularly for the new requirements of U.S. and NATO that for fast machines they have -- should have a range of 1,500 kilometers, taking off and landing vertically, but in the meantime, flying much faster than a standard helicopter. So apparently, all those technical choices by the authorities point towards the tiltrotor as the only viable and mature technology, and Leonardo has been investing quite a considerable amount of money over the years. And now we have one of the 2 possible platforms in the board that are close to certification, particularly for civil use. And on the same footing, rotor and managed systems are now confirmed to be the main system for exploration in battlefield complex -- battlefield scenario by the U.S. and Army authorities. So those things are actually rewarding the efforts we have done over the years. This is the rotorcraft you see that can take off with vertical rotors and then moving like standard aircraft. And of course, this opens up the way for exploring international cooperation. The good news here -- I'm sorry, this is written just at the bottom, is that in Anaheim, recently, we have signed an MoU between Leonardo and Bell during the Heli-Expo '24. This outlines the perimeter for a potential wide-ranging cooperation on the tiltrotor technology. This could be joint advocacy technology for its future programs, but also more like industrial cooperation across the entire value chain. This is very promising because at the end of the day, we now have a competitive advantage that comes from the investment done over the last few years. The numbers for helicopters are those you see here. Orders are increasing to EUR 6.2 billion at the end of the plan. The backlog is increasing, but this should be very likely a faster transformational backlog into revenues because of the optimization, which is ongoing. The revenues are growing up to EUR 6.2 billion with such a CAGR. And the EBITA is also growing to EUR 0.63 billion with 8.4% CAGR, reaching the double-digit condition between '26 -- let's say, '27. All right. Let's go to the third division. This is Aircraft. I'm sorry for the compilation, but I think it's important to have a clear picture. Aircraft, also in this case, this is the menu of the portfolio. We're not going to discuss everything, but you're going to see those things whenever you want later, you will have the slides, of course. We will focus on some key technology, our key platforms. Primarily, we need to continue to boost the Eurofighter campaigns because Eurofighter at the moment is one of the key platforms for the division. And by the way, we expect to -- still to have quite a long lifetime of this aircraft in the next maybe 10, 15 years. In the meantime, the Aircraft division is committed in -- this is the Eurofighter. The Aircraft division is committed in upgrading the platforms, especially for the trainers with strategic operations, 346, 345 and some unmanned technologies. But of course, there is something which is coming out now, which is very promising. This is a 346 for training. We are boosting integrated simulation in training in a sort of service business. The example is the school of training that we opened in Sardinia, Decimomannu, which is a collaboration with the military forces where, if I remember correctly, Marco, you can confirm it. 60 countries are training their pilots there, right? And this is a mixed training, about 1.5 in the simulators that are more and more advanced, thanks to the digitalization that we could develop in-house and of course, real training on the aircraft. Besides this, we have to secure another important technology, which is a key role in the GCAP consortium. The GCAP is a 6th-generation fighter, Japan, U.K., Italy. So we are discussing, I would say, quite intensively at the moment how to secure a key role in this consortium, where here, the challenge is, of course, the platform itself, stealth, high-performance and so on, adjunct unmanned managed development. So the -- basically, the big drones that will be controlled by the 6th-generation aircraft and air combat cloud because we need to have a complete -- well, actually, we could contribute completely in all the technology aspect of this consortium. Finally, it's important to note our industrial partnership. Well, we need to upgrade our -- and develop our trainer solution. There are many countries interested in that business. There are next-generation airlifter. And of course, there are -- there is plenty of activity in the market of unmanned systems. You've seen in Ukraine and [indiscernible]. Of course, this is, at the moment, something we are working on. Nothing that we can anticipate specifically, but there is great attention to this kind of evolution. The numbers of Aircraft are here. Orders increasing to EUR 4 billion with a CAGR of 11% by the end of the plan. Revenues, EUR 4.2 billion by the end of the plan, CAGR 7% and EBITA being in the range of EUR 0.5 billion by 2028. Now you have to consider that while the EFA, the Eurofighter, market will smoothly reduce. In the meantime, we expect the GCAP to grow. So there will be a crossing point. We're keeping this, of course, continuous under control. I mean -- the Aircraft division has best-in-class profitability. You see the return on sales is always double digit. Yes, we had after the quiet -- jump orders, but it's always double digits. So we keep the standard as much as possible like this for the years to come. Aerostructures is the fourth division of the business to be consolidated. Once again, this is the menu of our products, wide-body segment, primarily Boeing; narrow-body, Airbus; regional, the ATR. And there are new segments like the supersonic or some vertical machines and another branch of exploratory actions, including the GCAP. Now the most important thing here is that we are fully committed in keeping the breakeven point at 2025. So this is confirmed. The division has made a gigantic investment during the COVID and the worst moment with the institutional funds to -- through the NEMESI program to shorten production time cycle, to reducing efficiency and to increase production flexibility. At the moment, our quality is outstanding. You know that there are problems in our restructuring, manufacturing at the moment in the world. I think we can guarantee quite an advanced standard. We are trying to diversify the current product portfolio, entering selected high-potential segment, Eurodrone, supersonic aviation. But those do not require important investments, just to be clear. And we, of course, are evaluating potential industrial partnership. The important thing is that due to the effort done to optimize this and due to the fact that the aircraft market is restarting now after the COVID, the numbers we expect for the Aerostructures division is as follows: orders at EUR 1.4 billion at the end of the plan with the backlog staying almost constant. Revenue, up to EUR 1.4 billion with 16% CAGR. And the EBITA getting positive finally in 2025, as promised, since the very beginning. That's our main target, obviously. With the return of sales that is increasing over the next years. All right. So this is for the core business that is going to be consolidated over the next years. Now we enter into the last part, which is pave the way to the future, how we approach the cyber challenge and how we approach the space challenge. About cyber, today, we are a domestic player. The ambition is to become a European key player over the plan origin. That means, first of all, rationalize and focalize all the existing product portfolio. This means we have to leverage big data, computation, artificial intelligence to improve existing products. One class of product is cyber and resilience. That means we make smart systems that already existed like threat intelligence, we should make it predictive, extending detection and response, cyber operation and command and control. All those things can be -- can benefit of the additional AI and digital approach to the platform. Second is secure digital platform. We need to rationalize all the current platform. We have a number of digital platforms, will be rationalized into one single artificial intelligence-driven architecture, which will orchestrate or secure all kinds of cloud solutions, private/hybrid/multi-cloud solution to match defense, governmental and even customer needs. That makes the offer extremely flexible and ambitious. And finally, mission-critical communications. We have to transform from narrowband to broadband. This is fundamental for mission-critical communication. Now another aspect of cybersecurity is that we do produce platforms everywhere, helicopters, aircraft, satellites and so on. And we are one of the few companies in the world that can make cybersecurity by design. So designing our new platform directly since the very beginning, introducing cybersecurity as a key concept. So I don't want to have a mobile phone where I put the app for security. I just want to have a mobile phone, which has been designed to be secure. This is the concept. We are among the few that can do this. Of course, we need to accelerate some merchant acquisition for strategic partnership. We are working on that. There is several due diligences, of course. I will tell you how we will allocate capital later just to make you, how to say, be safe. There is no big discontinuity. Our capital allocation will be very disciplined. Okay. At the end of the day, this rationalization -- we'll move in the metrics of quality. This is industrial attractiveness vertical versus ability to win. Today, we are a little bit spread. So we remove a number of off-core business. We concentrate the investment and the resources. We improve the quality of the platforms. And so choosing 8 classes of products, we're going to be in the top part of the industry attractiveness ability to win metrics. Basically, just to give you a key indication, 87% of the orders by the end of the plan are expected to come from cyber and resilience and from secure digital platform. We will quadruplicate the defense business. I mean, of course, because I told you before, what we're going to do for the interconnected domain, so the defense would be involved in this. And finally, today, we have about 30% of products which are proprietary. By the end of the plan, it should be 70%. That's very important know-how which is developed in-house. Numbers. Orders will grow to EUR 1.4 billion. Today, we are rather small, EUR 0.7 billion, EUR 0.8 billion with a CAGR, which is very high. Revenues about doubled with a CAGR, which is very high. And respectively, the EBITA is going to be growing very fast. Okay, you might say, okay, you're small, it's easy to have a big number at the beginning, okay, but we have to start growing, and this is what we're trying to do. Last but not least, space. Now you've seen the kid making the design of the interconnected interdomain scenario. I have difficulties myself to describe properly the initiative that we're going to launch -- the rationalization we're going to launch in Space. So I did myself. Before being a scientist, I was a drawer of comics. So my nature comes out here. This was done between night and the early morning yesterday and then perfection. During the Board of Directors shouldn't say this, but we were drawing. And at the end of the day, I decided with the digital people here that they hate me because I interrupted the nice, fully measured with this bad design. But this clarifies a lot of idea. So basically, Leonardo can do everything in space. We are in launches, we're in SatCom, in satellites, in services. The point was until last year, there was no clear selection. We were fragmented in a number of joint ventures, good stuff, of course, but there was no presence of a real space fingerprint in the balance sheet of Leonardo. Now because we have all the knowledge, if we oversimplify with this little drawing, so we're strong in ground services, big infrastructure [indiscernible]. So we can really do a big thing. This is an infrastructure, it's solid. We're strong in satellite services downstream. We send a number of images or whatever information. Those are processed like satellite, those are services, geo-localization, navigation, infrastructure, control, military, telecom, even SatCom, even though we're not going to make SatCom ourselves. In the future, we're going to learn. We don't see any more green now. We're going to put space cloud. So we're starting to develop. We have a program to develop Space cloud, which could become fundamental to improve our capability in satellite-as-a-service. So we don't -- we even don't send down the data. The data came already processed. And space cloud could be even an asset to offer services to other constellations, what you see from there, something which is not possible at the moment. And then, of course, we are good in exploration and space logistics. So those are the 4 markets: Ground services, market one; satellite, market 2; satellite-as-a-service, market 3; logistics and exploration, market 4. We're not going to invest on launchers. We don't need this. We participate in Avio, that's good, but this is not our business. We're not going to do SatCom primarily because this is not our business. We do some SatCom for specific needs of the country, institutional needs, but it's not our core business. Now with this simplified [ Avio-approved ] picture, it's much easier to understand the actions that we do in Space. So first of all, we established for the first time a division, so a business division that makes space activity. We have -- we now consolidate Telespazio. Telespazio is the company was -- that is a joint venture with the French in Thales, 2/3 are -- 66% are under the -- essentially under Leonardo's control. Now it's consolidated in our budget, but also in our balance sheet. But also, we have restructured the line of business of space electronics from electronics, and this is synergistically incorporated in the business division because we are -- we have the possibility to make sensors infrared multispectral technologies and all those things, together with the hardware capability and the ground segment give us the opportunity basically to be independent vertically on all satellite services. So I don't need to enter into single details, mission and satellite operator, end-to-end integrated space-as-a-service offer, geo-observation, geo-intelligence, exploration and logistics. All those things are now synergistically incorporated in this division. And this division let Leonardo to be a good reference even at the European level. We now have a structure. We don't go there fragmented with different entities and joint ventures. Of course, we want to integrate -- we want to embed cybersecurity into space application. You've seen before how important it is having the umbrella of the satellites to extreme data that are secure. And of course, we are leveraging with -- we're starting inorganic actions. Well, I have to say, it's very important what is written here, both Leonardo and Thales believe a lot in the space alliance. We have a high growth potential in satellite services and infrastructures for earth observation, satellite and mission operations, position, navigation and timing and in exploration logistics. So with Thales, we plan to develop Telespazio also through merchant acquisitions that are properly agreed. This sentence is agreed with my colleague, Patrice Caine, in Thales just because we want to give a clear message that this synergy has to be developed and we believe in this synergy. Well, this is less precise than in the case of cyber. But once again, rationalizing things, we get more competitive. In blue, we actually have transversal markets. So all the satellites and ground operation are transversal, can be used for many applications: military, civil, environmental, agriculture, geo-position and so on. And in red, of course, geo-information, which is a market vertical because this is a market in itself. And I think I convinced you that because we can do almost everything in-house, I would say, everything in-house, we can be really strong if the organization works properly. Least but not last, I'd like to tell you that in the past -- so currently, not in the past, 83% of the funding was institutional and only 17% of the funding was private basically. This is going to change over the next 5 years with a remarkable increment of private funds, non-institutional funds. And this is very interesting because we have to be ready to be competitive towards private investors. In the United States, maybe the ratio is -- the upside is the other way round, much more private than institutional. But the transition is occurring in Europe too. And I think this organization will help a lot in being more competitive. All right. So numbers. Well, clearly, up to '23, the division did not exist. So we are actually making a sort of pro forma report here. But since '24, it exists. We started with about EUR 1 billion order portfolio. Today, the revenues are in the range of EUR 0.9 billion, like we started now with the consolidation. We expect revenues to grow up to EUR 1.4 billion with a remarkable CAGR and also the EBITA being -- actually doubled compared to what it is today with a remarkable CAGR. The return on sales is going to be double digit in '27. But please remember, this is only organic and savings. The inorganic is not here. So somehow, I think we should stay-tuned for that because there is room for improvement. All right. This is a drill down of the different divisions. Let's go to the final picture, which is the group target that I anticipated at the very beginning. So you know already the final results and nobody went away. So I think it was acceptable as a number. This is -- for the entire group, of course, this also includes not only the divisions but also the participation in our joint venture, MBDA. There are components that are introduced, of course, to complete the numbers. But anyway, you see we have another portfolio that will exceed EUR 22 billion by the end of the plan with a backlog, which is increasing from the current EUR 41 billion, EUR 42 billion to EUR 50.9 million. What is important is that this portfolio has no concentration or exposure in single countries. It's very well distributed, which is healthy. We have some flexibility. The book-to-bill is going to be 1.1 throughout the plan. And the total expected accumulated orders in the budget plan is exceeding EUR 100 billion, EUR 0.1 trillion. Concerning revenues, we expect to pass EUR 21 billion at the end of the plan with a very balanced growth across the businesses. We don't have a big imbalancement, of course, the youngest divisions need to grow more, but it is rather balanced. And we expect accumulated revenue portfolio of EUR 95 billion over the budget plan. This is the EBITA that we expect, 1.8x, so from EUR 1.3 billion up to EUR 2.5 billion at the end of the plan, getting double-digit growth in 2025, around here. Finally, we have the free operating cash flow. That was one of the weak points. When I came here, I was told that this was one of the weakest points over the past, but I think the efficiency, the selling plan and the organic growth and hopefully, the inorganic will come to really improve the situation. We expect to more than double the free operating cash flow at the end of the budget plan with 15.7% CAGR. With the free operating -- with a cash conversion that from my understanding, I'm a physicist, I like standard formula. So I know that the cash conversion is calculated with different formulas depending on the definition. What we do here is the ratio between free operating cash flow on adjusted EBITA, it goes up to 83% at the end of the plan, and it starts today 69%. I know that you can calculate exactly with different numbers. I don't think it's important the absolute value, it's important the variation. In this case, the cap should be 100%. So there is a remarkable variation due to this efficiency plan, organic growth that we have planned and hopefully, something better will come also by the inorganic part. By the way, I should mention this is very important. I was forgetting a statement that we'll anticipate the capital allocation slide. Cash flow will support disciplined capital allocation strategy. I will explain this sentence later. It's very important and I know this is crucial. So give me 1 minute, and I will go to the capital allocation. Efficiency boosting that was what I told you at the very beginning. This is the plan of efficiency. My laser is gone. Is there any other laser in the organization that I can use? Okay. No laser. So EUR 1.8 billion over the 5 years. This is our estimate. EUR 150 million this year, EUR 280 million, EUR 360 million, this is the growth, a serious stuff. To give you an idea, we go from 10% of the EBITA this year up to more than 20% at the end of the plan. So it's a serious commitment to everybody. At the moment, we have an idea how this can be -- well, a plan, how this can be accomplished. The efficiency measures will represent 70% of the total plan, direct procurement, travel, energy, real estate, information technology, all the other indirect procurement, advisory, sponsorship and so on. This is approximately right now what we expect to do. Those numbers, of course, may change from year-to-year. But clearly, the indication is given. The Corporate Center restructuring, this includes many items, including personnel. It's going to pay -- it's going wait for 20%. And at the moment, the interruption of the disposal, the phase-out of businesses that are off-core business like the production of electric buses or the Skydweller solar drone or the cleaning of the portfolios and other activities we're doing, this is a continuous efficiency today represent 10%. I might inform you in the future how this will evolve. But clearly, the road is clear. And I think it's very important because this is a commitment of the headquarter and of all divisions. Don't say it's easy. I cannot say it is easy, but it's feasible. Laser, sorry. Thank you. And now, just a summary of the disciplined capital allocation strategy to support the growth. Now under the control of my CFO and all the experts in finance, I think we have 3 principles: strong and flexible balance sheet, so debt payment and maintain -- of course, well-maintaining investment grade. We are investment grade at the moment from the 3 major rating agencies. Investing in growth. This is essential because you have seen what we're going to do. That means CapEx, the criteria IRR, always larger than the WACC plus hurdle rate, which if I understand correctly, is 2% roughly. But then Alessandra Genco will help me in those numbers. Thank you. Thank you very much. And then merger and acquisition. Focusing on strategic areas of growth. I told you before, either new products that will complement our arsenal or new services that will improve margins that will be easier to buy than to develop in-house. And finally, return to cash to shareholders. We know we have to improve the payout ratio to shareholders. The company is between 9%, 10%, 11% is paying back to the shareholders around 10% today of the net income. This is not enough. So what we do for the next few years, debt repayment, we're going to go 50% regularly repaying the debt. Today, we are much better than last year already. Organic growth, we plan to invest something like EUR 750 million to EUR 850 million. Let's say this should be regular growth over the next 3 years per year, annual investment. It goes on Electronics and Cyber about 40%, Helicopters 30%, Aeronautics 20%, Space 10%. But those are just very basic information to let you understand what could be the kind of allocation. But of course, it has to be flexible, and we have to be ready to change depending on the market opportunities and also technology opportunities. Inorganic growth, to be very clear, we will not allow operations that cost more than 15%, maybe 20% of the division turnover. Even if the corporate would make an acquisition should stay -- should undergo this criteria. Otherwise, it's not credible. If you -- your site is 1,000, you don't buy something, which is 500. It's too heavy to undergo. So I think this is quite a prudent approach. And finally, as I told you at the very beginning, we doubled the dividend in 2024. Today, we're paying EUR 83 million every year. We go to EUR 165 million for this first year. I think we're reaching some 25% of the income, net income. It's a good signal to our shareholders, but it's not the last signal. If things will go as we said, we should be -- we should go better, we should improve. And we consider also share buyback over the plan horizon as a further support to growth. So this is our plan to do. And I'm finishing with something that is as well important maybe less quantitative, but so important in terms of the reputation and visibility of Leonardo. So those are a few enabling factors that underpin our strategy. Well, first of all, sustainability. I guess, obviously, we have a plan of sustainability that is really ambitious. As you know, Leonardo is among -- always among the very top in the aerospace and defense in all the ranking. I don't list you the names, but we're really always among the top. This venture started in 2019 and I think when I was hired as a CTIO of the company in September '19, actually, I started the first sustainability plan. At that time, there was nothing. We were starting to consider the sustainability balance sheet at the end of the year. So we started, then I had a post for 2 years. Raffaella Luglini got this in her hands and things are doing very well. The plan is very ambitious, has been approved yesterday by the Board. So we integrate sustainability along the entire value chain, technology innovation and, of course, people and the environmental factors, supply chain, which is important. We create new business opportunities, thanks to the increase of competitiveness. And we are quite strong in mitigating ESG, environmental, social and reputational risks. This is very important, as you know, and the plan will be -- is public, it will be public. I think today it will be accessible. You can see here, just in a nutshell, those are the main ISG in the area -- or ESG in the area of research and innovation, environment, operations, different solutions and social, you can find quantitative targets for all those areas. I think it's very interesting to see how we started recently to use new, safe environment fuels for the rotorcraft. I think in November, we had one of the first public demo developing aircraft, which are more and more sustainable by technology, investing a lot in science-based targets, Scope 1, 2, 3, smart water program, energy self-production. A lot of investment in digitalization and optimization of the factory of the future. NEMESI, what has been done in aerostructures division is an example. We have an unprecedented precision in manufacturing and a very high quality in the final products, carbon fiber recycling. A lot of work on the supply chain. You will see the targets in a minute, space simulation awareness, a lot of digitalization, AI and so on. A lot of work on satellites for simulation and training in aircraft and satellites for global monitoring and so on and so forth. Now the main indicators, the main KPI are by the end of the plan -- by 2027, I'm sorry, having more than 500 key suppliers that are trained on strategic sustainability topics. Today, I think they are less, but already something has been started. More than 70% of the major tenders will include ESG criteria by 2028. These are quite aggressive numbers. Digitalization, we're continuously upgrading and updating our computational capability. And actually, by 2025, we will increase by 40% the compute and storage capacity per capita. At the moment, Leonardo owns a supercomputer for 6.1 petaflop and about more than 30 petabyte of memory, so the per capita is calculated very easily. And this is, for us, an indicator. The higher the computational power per capita and the storage per capita, the stronger you are from the digital and AI and interconnection point of view. Decarbonization, I think we are one of the few companies on the track for 50% reduction in emission by 2030. We did a terrific effort, despite we're a manufacturing company. And finally, a lot of work on diversity and equity inclusion. Okay. Considering where we're starting from, 20% of women and employees in management by 2025 is not that exciting, but we're starting from very low. So the derivative is very good. And 30% of women in STEM, new hires by 2025, is promising. But we have to improve, but we're committed. The new organization at the moment has much less first report to the CEO and to the president, but there's almost 50% gender ratio. So this has to be spread out to all the company. Embedded in the plans of the divisions that we have seen so far on the KPIs, we evaluate something like $270 million for sustainability. This is not additional. This is already embedded in what the divisions are doing, because they are already working with the idea that sustainability matters as an element of development. Okay. I think this gives you an indication. You will see the plan as much more, of course, much more detailed. The second thing is that we are going to introduce artificial intelligence as a business intelligence to improve our administration. Everybody has a planning and control. But I think this will be one of the first in the world, the planning and control on an iPad, where you can monitor real time all the financial KPIs of the company. In any place in the company, in the world, any item you want to see, just click and see how it develops. And to me, this is really a step forward in planning and control. This is now developed by Simone and people, Simone Unger and people, together with the CFO. I think this is a tool, because we have to check that all what we said is progressing, especially the savings. So this is very important to have in your iPad at home. You can connect and use it everywhere. Supercomputing, that is our asset. It created a competitive advantage to Leonardo over the last few years. We need to nurture this competitive advantage. So not only we improve the computational capability and storage capability, but we also invest in the Leonardo Labs for artificial intelligence. At the moment, we're committed in putting artificial intelligence capability, and in general, digital capability, in all our platforms. And the Leonardo Labs are developing a new group of young people, more than 100 people at the moment expected to grow, that will become a transversal asset for the entire company. Because as you see, if you want to make digital twins of all the platforms, if you want to have autonomous systems in all divisions, if you want to have digitalization everywhere, from administration to engineering, you need to have those brains available for everybody. Last initiatives I want to say is the creation of this outreach digital content and brand. This is our digital production site. We can work in augmented reality. We can produce any kind of digital content. And this is, by the way, responsible for this thing where you are today. And this is a plan for digital STEM, so science, technology, engineering, dissemination. And we will leverage on schools, education, since the very youngest level. Because we believe the social responsibility of Leonardo is not only to develop technology and to ensure global security and to catalyze European things, as I said since the very beginning, but also, we have a social responsibility in spreading a high-tech message to the young generation. And finally, human capital strategy. I don't have movies here. I don't have pictures. People are here. Everybody is very committed. And thank you very much for your attention. Thank you. 3 minutes rest. We'll put the stands here for the question-and-answer. Just want to tell you that if you continue that way, there's a corridor so the immersive experience does not stop. And you go in the exhibit area, where you can see demo of the interoperating platform, tanks, simulators. It's really nice to see. So now, we'll make the question-and-answer session. But then I really invite you to go there. There will be some lunch, some finger lunch for everybody. And it's very nice to see the demo area that we have prepared, which is in continuity with this place where we are today. I would like to ask the CFO, Alessandra Genco, to join me for the bombing session. And I think Valeria will be in touch with the network and giving us all the questions. Thank you. [Break]

Let's start the Q&A session from the room. Tristan, you've got the mic. Please state your name before the question. Thank you.

Tristan Sanson from BNP Paribas Exane. Thank you very much for your invite and your presentations. I have 2 questions. The first one is a fairly generic question for Roberto. I would like to understand, in your view, what are the main hurdles that you see in implementing that plan that you need to overcome over the next few years? And the second one is for Alessandra. I'm seeing in the plan that there's a jump in the free cash flow conversion that is expected from 2027. So you have 70% until 2026 and a jump towards 83%. Can you explain to us what are the drivers of that expected jump in free cash flow conversion?

So you asked me, I believe, the hurdles that I see for the implementation of the plan. Okay. First of all, I have to say I'm absolutely optimistic, because as I said at the very beginning, most of the technology and the capability is already in-house. Here is more matter of homogenizing these things, harmonize. And if I see a hurdle, I can see primarily in the culture that has to be developed within the company. Obviously, if you've been working on kind of vertical silos, slightly separated, now having a transversal warehouse of data, a transversal culture, so that divisions or platforms that traditionally never talk to each other are forced to talk now and to share vision and design, this could be a difficulty. But to be honest, I prefer this difficulty, which is cultural, brain-driven, rather than an infrastructural difficulty. That will concern me much more.

So Tristan, on cash flow conversion over the plan horizon, what allows us to double our cash profile is a result of a number of things. The first one is clearly we're growing. And we're gaining operating leverage through this growth. We're building into efficiency measures that Roberto discussed that strengthen profitability, which converts into cash flows, while we're continuing to invest in the key product developments throughout the group as well as in expanding our facilities to support growth going forward. The element that we are highlighted is the step up in tax payments. As in 2026, we end the net operating losses carried forward. We will have fully utilized them. That's the good news. It means that we are very profitable and we're using those items. So from '27 onwards, we'll be paying, from a cash standpoint, the full tax rate.

Okay. Martino, you've got the mic.

Martino De Ambroggi, Equita. My focus is still on free cash flow and net financial position. The first is the discipline network, working capital, that you expect. So just if you could elaborate on this in order to understand the contribution. On the cost saving plan, if you could quantify the cash out of the restructuring cost that I suppose will be present. And maybe this is affecting the improvement over the years for the free cash flow? And last, always on the financial structure, what is the firepower that you have in mind for M&A? And since it was mentioned on public newspapers, e-vehicle, defense vehicles, and torpedoes are part of the M&A deals.

Maybe I get started with some general arguments and general topics and then I pass the word to Alessandra to clarify a little bit better about the capital allocation. So first of all, last question. We read about the newspaper recently. But there was -- we were not the source of that information. At the moment, there are 2 entities working between Leonardo and Fincantieri. One is the Orizzonte Sistemi Navali that essentially coordinates for the frigates and the ships, the electronics and the warfare, together with the floating part, which is fine. And then we have a table open, which is discussing about potential collaborations in the submarine area. This includes torpedoes, electronics for torpedoes. But there is nothing at the moment, nothing yet decided. And we are, as usual at this stage, collaborating, checking the numbers, checking the market opportunity. Needless to say, the relationship with Fincantieri is very good. This has been kind of relaunched recently, I think, since I joined Leonardo again. And we'll do our best to create synergies. But we are still in the technical phase, trying to find the good numbers and the situation that satisfies everybody. That's concerning the last question. Then I would like to anticipate, in general terms, the strategy for the saving plan. And of course, Alessandra is going to add maybe more quantitative information. This idea of the rationalization came after a long internal analysis. So you know, in part, it's money that can be saved. In part, it's unspent money. In part, it's something that we close and we redirect that money on some more promising investment. In my kind of low-level economical description, part of this would be free operating cash flow. Part of this will impact the EBITDA. Honestly, at the moment, it's not important, as long as we keep the EUR 1.8 billion stable in our calculation. Then, of course, Alessandra can clarify better where things come. Second point is that, as you might understand, if you want to make a massive optimization of procurement, this is not only saving money on the single object. It's changing procedures. And of course, we know that we have to do this. We are working on that. We are going to change the procedures. But this will take a few months. And this is why, also, you see an impressive growth of the savings over the years. Because maybe right now, we can kind of save what we can save. But the structural saving will come after the procedures and the processes will be optimized. So as I said before, staying the target, which is at reach, there will be an internal evolution that will be communicated from time to time. And that's why we need to have a planning and control, real-time, with business intelligence, because those things have to be measured on most real-time. So it's new, but we know where we have to go.

Thanks, Roberto. So on the cost-saving building of what Roberto said, the way I would think about it, Martino, is not a restructuring, but an efficiency plan, which means that we don't have upfront costs as the pre-retirement portion on the headcount is fairly minimal compared to the overall contribution that the other savings are providing us. And so on the efficiency fronts, we're using all the tools that are available to us. So in procurement, Roberto was mentioning procurement. Let me give you some examples. We are looking at existing contracts, going out to suppliers and asking them to renegotiate terms. In some other instances, we're launching new tenders to revise who is the supplier of that product, and looking for a second source. In other contexts, and this is a plan that is deployed over a 5-year horizon, we're also looking at restructuring demand. And that was the process component that Roberto was talking about. So think about the real estate, right? We are a growing company. We are spending also a portion of our CapEx in real estate. We want to make sure that as we are building new assets, those are standardized across the group, so that we can go, the team that is procuring these assets can go out with RFPs that are standards and get the best out of those RFPs, get the best price out of those RFPs. So these are all concrete examples. Let me give you another example, travel policy. With the HR head, we restructured the travel policy, and we said, let's look into who is traveling and how we're traveling. As Roberto puts it, it's the price and the quantity element that goes into the equation. The price is the renegotiation. The quantity is, let's think about who really needs to travel. Is it to visit and see customers, or is it just for internal travel? In that second case, we can get rid of it and do it differently using telecommunication, remote instrument and also escalating the authorization to the top -- the prime reports of the CEO, so that we make sure that the number of people who are traveling are really those that need to travel and not beyond that.

Yes. P times Q will be the algorithms. P, so price depends on the good negotiation, which has to be better and better. Q, the quantity depends on the policies, how we authorize or not. This is the simplest case of travels, of course. But travels, well, they matter. Overall, I think it's more than EUR 100 millions, maybe EUR 120 million in the company. So we have to go and carve out any single individual item and make savings there. This is really mandatory. Again, it's a cultural approach, not only a technicality.

And firepower and Iveco? The total firepower under the new business plan and the Iveco, if you could be interested or not.

Okay. Concerning Iveco, we also read the newspaper. At the moment, there is no discussion ongoing.

Monica, who is close to Martin.

I'm Monica Bosio from Intesa Sanpaolo. I have 2 questions. The first one is in the Space segment. What is in your view, the optimal size for the Space segment? And how does this cope with the rule of thumb of 15%, 20% of the turnover division? I'm just curious about this. And a second question is on the cumulative order intake. I'm just wondering if you're planning some jumbo orders across the plan. And if yes, if you can detail it. And the very last. Okay. The company is growing. We grow through external growth, very disciplined external growth. Fine, you have also the helicopter. Would it make sense to put on the market a small teeny part of the helicopters and to fund the remaining to grow? Just a question.

Yes. Okay. Could I get started here?

Absolutely.

Concerning Space. I know that seems all well-conceived, but this new division actually starts now. And it's the result of a lot of work done over the last few months. This idea came -- I'm here since 10 months. It came 6 months ago. And all the Space people were fully committed in working on that. We are seeking on the market for hiring new people. So it's brain-driven. It's a brain-driven growth. It's a infrastructural growth. It's a business growth. Give them time to grow. Clearly, the market is huge. Space is exploding as a market, but we have to find the most profitable areas. We cannot do everything. I think with the selections we did, let's say satellite as a service or satellite as infrastructure and service is definitely where we are competitive and we can be very competitive because we -- basically we do everything. The satellite, the services, the AI, the payloads. So we don't need much. We just need focusing and integration and that's the right strategy. I think the marginal growth are higher than those you've seen. This is organic and efficiency. As I said, inorganic is not there. Now, how big can be an acquisition? To be honest, I think in general, at least at this stage of the transformation for Leonardo, we should never target emerging acquisitions that are too big because then you have to manage them. You have to handle them. Whereas we are in a phase that maybe for us is more convenient to select specifically what kind of service or what kind of technology we need to integrate this in the strategy, maybe letting the company grow -- the company that we acquired grow in its environment. So the 15% to 20% for the time being, it's reasonable, but we expect the growth. So today it's a number, in 3 years could be another number. And this is obviously supported by this capital allocation that we have described that should give us the opportunity to continue to invest. Don't forget that we have a triple challenge. Given the -- we have to grow, of course. But given the capital, part of this will keep the debit and control, part of this will be investment for growing and part of this, of course, would be remuneration. So we have to be very disciplined, but we should never stop investing for the growth in the right way, of course. Concerning jumbo orders, obviously those are not included there. At the moment, we did things that are, let's say, under control, incredible. And concerning Helicopters, well, helicopters, it's worth living as quality, as visibility. We are now -- we have very favorable indication, especially in U.S. of the requisites for the future rotor technologies. This is good news for us, and it rewards the investment that has been done so far. That was very massive. So fortunately, now we are happy with what we have. Let's see how this can develop also in view of strategic alliances in the next years. You understand now that technical tables are formed, people are discussing, you have to analyze complementarities, market opportunities. But clearly, it's a very good moment.

Okay. George, you've got the mic, up to you.

George Zhao from Bernstein. First question on Aerostructures. You have the 7% EBITDA margin target by 2028. That seems to include ATR. So how high can Aerostructures margin get without ATR? And could you just confirm that the 2025 breakeven that you've said for a long time, that you can get there without ATR? Second one on buyback. You said you would consider buyback over the horizon. What would you need to see to get there? Is it delivering on the cashflow according to your plan, or is this dependent on cash use for M&A?

Okay. George. So on aero structures, we confirmed the breakeven in 2025, at the end of 2025. And with respect to margins of the business going forward, clearly the business is doing from an industrial standpoint well. What you know that is missing are still the volumes explicitly on one single contract, the B-787. However, according to the last schedules we have received from Boeing, volumes are confirmed to ramp up between '24 and '25, delivering the target, as well as supporting continued increase in margins going forward. I have to say that Aerostructures remain a segment where clearly the leaders and the market makers are the OEMs. So in a market that is really competitive, our goal is to maintain the highest standard compared to our peers of profitability going forward. ATR is included in the segment. Yes, it is. And with ATR, you will see -- so mostly at the end of a plan, a ramp up in delivery with an associated margin increase. With respect to buyback, with respect to buyback, I think that what Roberto mentioned is very clear. We want to do things in steps. So we felt that the shareholder return to date was not adequate compared to the peers and the board of directors yesterday decided to double that remuneration. As the plan progress, we will reassess the entire situation and we will have an updated view with respect to other avenues to boost shareholder returns.

Ian, sorry, Alessandro, you've got the mic.

Alessandro Pozzi from Mediobanca. I think it was the first time I see such a clear vision out late during the Capital Markets Day. And also appreciate the fact that you only limited yourself to one easy formula this time. You talked about a lot about interoperability and the digital continuum as well. How long will it take to change the approach across the business? And how long will it take for it to make a big difference when pitching for Leonardo clients -- pitching for Leonardo products to your clients? Basically, that's the first question. The second question is, of course, during the plan you have an increase in margins and especially in electronics. And in electronics, I think we see a big bump up in margins in '25 and '26. What is the visibility that you have about that increase in margins and what is the main driver? The final question is -- sorry, going back to M&A, you have a cumulative free cash flow target of EUR 5 billion over the plan. How much of that it will be allocated to M&A? Is it half or is it less?

How long it takes? First of all, I have to say that all the production divisions seems to be very committed in working towards accomplishment of that vision. I mean, don't forget that where you are today, this is the parking of the electronic plant here. And it's more than 2 weeks that we're working to create this place. And so really this tells you how people want to see also something new and clearly digitalization, what we're doing now is new. And the division seems to be very committed also because the indication of not only the market, but the real technology, I mean, unfortunately of the wars are showing that this is the way to ensure global security. How long it takes, technically speaking, is not easy, but I will give you numbers. I joined Leonardo in September 29 -- sorry, sorry, September '19, '29 would have been, okay, in September '19, but I look forward, in September '19. And the first initiative launched was the Leonardo Labs for AI and the High Performance Computing capability that was inaugurated in '21. I think the inauguration happens when I already left Leonardo because of my, let's say, appointment as a minister. So since then, it's been 3 years maybe, 10% of our platforms are digitalized. So we're moving fast towards creation of Digital Twins. Helicopter starts first, and then all aircraft are moving. Everybody's moving in this direction. Now, we might say that by the end of the budget plan, if not everything, but a large portion of all our platforms should be digitalized. So Digital Twin for most of the platforms. This is a gigantic effort, of course, but it's brain-driven, it's digitally driven. You don't need CapEx investment that are unaffordable. It's just brain. And that is for what we sell. But now consider inside the same approach for business intelligence and administration or for optimizing manufacturing, what we did with Nemesis in aerostructure. That is terrific. And this should be the new approach to efficiency even in the manufacturing and industrialization. I'm not saying it's easy. If this were easy, it would have been done already. But for sure, it's a treach because we did all the homework before. Concerning electronics. Well, first of all, the electronics is making an effort in rationalizing the portfolio. All this will be moved into more productive things, investment. And also electronics is very good. People are very good. They're good. And in this field, you win, you sell, if you have good engineers and in general, good products. So don't forget that we can make all the -- we are a high-tech industry. We make industrial policy. We don't make -- we're not the industry of politics. We make industrial politics, which is totally different. So we have to be good. And if our products are good, we will win. So where we're pushing now is in having a high-tech content in all our things, rationalizing things and making an effort, maybe focusing less platforms, less products, but better done. And I think this will be the trick. And definitely electronics is interpreting this role because it's the glue of all our platforms. You've seen airborne, ship, it's everywhere. And so they have the advantage that they can make a sort of unified approach to the electronics to make all the domain interact with each other. I'm strongly, really strongly confident that this will be -- will happen. Yes. About the -- how much we want to put on the capital allocation. I gave some numbers before for investment. It was EUR 750 million, maybe this year, moving towards EUR 850 million. This depends of course on the results, but we keep growing and we keep the right investment. What is maybe to be changed will improve for sure how amortization will progress. So we will make a reasonable capital allocation. This is under the control of the CFO.

Yes. In terms of CapEx for M&A, so that is on top, I guess. And of the EUR 5 billion of free cash flow over the plan, how much will that be dedicated just to M&A?

Okay. Well, should we say the real number? Now let's say at the moment, let's say this year, we have a portfolio given the recent operations we did in the range of a few hundred millions that we can use for the start. Over the next years, we will follow the same criteria, but let's see what is the budget we have every year. But anyway, I think for the moment, it's difficult to give a number, but…

I'm asking that also because I'd like to know where the net debt profile is going to go over the next few years. And clearly, the M&A part is quite big, I understand that.

I mean, let me try to help you here, Alessandro. I think we -- what Roberto described is an organic growth boosted by an efficiency plan and a boost from the industrial standpoint with a strong commercial momentum that Leonardo is relying on. As he very clearly described, the exogenous component is not yet depicted. So stay tuned, we are clearly looking -- the group is clearly looking at strategic opportunities, joint ventures, potential acquisitions, stay tuned.

Let's say at the minute, there is maybe a dozen of due diligences we are making for relatively small, medium, small companies that undergo the criteria 15% to 20% of turnover division, depending on the division, of course. And then maybe larger initiatives that takes more time because they are international. So by the time this will be more and more public and manifest, you will make the calculations very easily. But of course, they have to stay within this discipline and prudent approach to capital allocation.

Ian.

It's Ian Douglas-Pennant at UBS. I'm up at the back, Roberto, Hi.

Oh yes, sorry, I'm blind with the lights here, sorry.

No worries. You're having light and sound issues. What are the -- you've given us very detailed forecasts. What are the error bars on those forecasts? In the U.K., we have a saying that every plan doesn't survive contact with the enemy. What are the error bars on those? And crucially, how will you update the investors as your plans change over the next few years? And the second question, if I understood the annualized cost savings targets, they appear to be relatively backend loaded in the plan. How well defined are those cost saving opportunities? And why are they not, I guess, earlier? If I understand that chart correctly.

Okay. We had the discussion recently about the error bar, whether we should say about, whether we should say plus minus 5% in the guidance, or plus minus 2%, or simply make round units without decimal numbers. So in terms of guidance, I think we do about, or we give some range. Here, we just report the route. You saw the model. That was a summation of the years and summation of the different contributions. So it is apparently exact, but of course it's a forecast. And the more you go far, the more this is less precise. And of course, in the guidance year-by-year, we can give a margin of error. But I mean, I believe that technically speaking, something like plus minus 5% to 10% should be kind of inherent when you make such a long forecast. It could have been much more precise on a 2 year scale, on 5 years scale, of course. This is almost nominal. Yes. I don't know, Alessandra, do you want to add something? But this is just a good sense from our side.

Yes. What I would say is that the number that you see, which is in our budget and plan is the result also of a risk and opportunity analysis that every division run and that we centrally then confirm. So there is always, as you can appreciate, there is always a reserve plan that we all have in case what we have exactly planned doesn't come. We also have risks that we face that were not planned. So the important thing to me is that this risk and opportunity analysis lands in a point that is close enough to where we are setting the bar for the baseline.

And sorry, in terms of updating investors over the next few years, will we get these numbers annually or?

Annually, I would say annually, right?

Yes. And I guess we haven't thought about it. I mean, you're raising a question that I think I haven't thought about it personally. Maybe Roberto hasn't thought about it.

I don’t know maybe annually, but yes, to be honest, I will do this annually, but to be honest, I don't know what is the practice. So we'll let you know.

And the cost savings?

Sure. On cost savings, well, there are 2 elements here. There is one element that is clearly, you're building up year-after-year actions and not all the actions can be put in place at year 1 because otherwise, the disruption that you will be causing on the business may be not effective. So there is a gradual buildup of action, number one. And the other element is that the process is in phases. So the first line items are associated with renegotiating, maintaining the status quo. The second phase is changing processes and controlling at a deeper level demand. So that's the stage process that you see also reflected in the figures.

David?

It's David Perry from JPMorgan. So just a couple of clarifications, please. I know you've not guided on the associates, the JVs, throughout the presentation. But do you have a rough feel in aggregate, how much they will be contributing at the end of the plan? So how much of the EUR 2.5 billion of earnings? And then just slightly detailed ones, I'm just a bit confused, how much -- are you moving some sales from European defense electronics to Space over and above the Telespazio consolidation? Can you just confirm that? And is Cyber now a new division or is it just for our interest and it stays parts of defense electronics?

So Cyber is not the new division, it was existing. There is a restructuring and focalization of the business. To be honest, I didn't understand the previous question about space and electronics. I didn't catch it.

The Space division, you fully consolidate Telespazio.

Yes.

Are there other changes in the perimeter there or not?

Yes. Of course. I mean, we are prioritizing the activity. We will now -- what we're doing now, we're identifying areas where we want to invest more and areas that maybe are less marginal. This is part of this reorganization and the work is in progress. And also -- sorry, new people very likely to be hired. So compensating some gap in some areas. Go, ahead.

I think David's question is perimeter. So what's happening is we're taking out a piece of electronics that does space activities and put it into the dedicated new division.

We had -- within electronics, there was a line of business that was producing hardware for space exploration, robots, electronics and there is a lot of activity in sensors and payload for satellites. This was spread in different areas. Now those are actually within the new perimeter because we are recollecting and restructuring a little bit the action to create synergies, internal synergies. That's very important because if you make the spectrometer or whatever, the payload, the satellites, they're better under the same umbrella under the same business strategy.

And how much are those sales that you're moving across?

Originally, this was something in the range of EUR 150 million revenues. So Marco, I think I'm right. So it's a partisan, it's in Tuscany, partisan is in the area of Milan, right? So these were teams that were -- now they're much more homogenized in the new Space division because they are now not really doing something as electronics, but they are really embedded into the Space division. So it's an efficiency that helps a lot in the planning.

Okay. And the associates, what you're assuming?

Sure, David. So associates are fundamentally not changing in terms of contribution over the planned time by the result of a number of offsetting elements, meaning MBDA continues to perform really well and have a positive trend. On the other hand, the manufacturing component of the Space Alliance, as you have heard from our co-shareholders, Thales is going through a restructuring process in the commercial telecom satellite market that will determine a lower contribution of that segment within the overall associates. So plus and minuses overall, slightly positive, but nothing major.

Any other question from? From Virginia, sorry.

Hi, Virginia Montorsi from Bank of America. Going back to M&A and your pipeline, how should we think about the key timeframes and would HENSOLDT or DRS potentially be a source of fund for your M&A pipeline?

Okay. Clearly, M&A is always a 2-body problem or sometimes even 3-body problem. So we can have expectations, but you have to take into account that you don't decide everything. With this in mind, there are relatively simple acquisitions that we can think of, typically as small, medium enterprises. This is rather simple. For large initiatives, like with big groups, of course, this is much more complicated, especially in some domain, which is also of governmental interest. So you have to combine different requirements and needs. However, the good thing is that there is an acceleration. So our technical tables are working. And well, depending on the outcomes, I think maybe in the next couple of years, we could see something. But of course, as I said, it's not something we control. We don't have the watch. We don't control the watch. We try to do as fast as possible, but not necessarily those discussions or exploration or whatever, the technical table might go to the point that we decide something. So those things can fail. But I'm confident that we're on the good track.

Okay. Any other question from the room? Yes, Gabriele. Could you please give a mic? Sorry. Could you please give a mic here?

Valeria. I think there was a gentleman there already.

Okay. No, it's just a matter of giving all the people the chance to ask at least one question, and then we can start with the second wave of questions.

Okay, okay.

Gabriele Gambarova with Banca Akros. I would be interested in any comment on your MOU with Bell. We know that there are just a couple of tiltrotors on the planet. Basically, one is your AW609. So I was wondering, how do you see this relationship evolving, what's your, let's say, positioning under the technological standpoint, even because they have lots of problems, if I'm not wrong, with the Osprey, their military platform. So any idea on this?

Okay. I'm very open, very convinced that this is something we have to explore deeply. I do see the difficulties, but once again, we are in the high-tech. If things were easy, would have been done already. So we have a competitive advantage. We are the edge. Our model is more for civil certification, towards civil certification. I think they have developed a platform more for military application. There's a lot of potential synergy, and I'm really enthusiastic about the fact that we opened a discussion. I do foresee a big opportunity. But of course, first technology, then market. And if the 2 things match, we're going to do something big. If they don't match, okay, we did our best. The point is that we invested a lot, and it was the right choice, because now we have a leading-edge product. I come from -- my history is in technology, since I was born. And unfortunately, very often you invest, and you're not successful. This is a case in which you invest, and you get something good in the end. Though you have invested a lot, like when you buy a big house and you make a big loan, but this is good. I mean, it's very promising. I think we should boost this discussion.

If I may, another couple of questions. On DRS, basically, you didn't mention much about it, so any idea of the future?

The relationship with DRS is perfect. They are going to present their strategic plan in a couple of days or so. I spoke just yesterday, we had contact with Bill Lynn, the CEO, we exchanged information, all good. We need this window, let's say this door in United States. They're doing well. They have good technology, the business works. So there is really -- I mean, it's all good, and there is no surprise coming at the moment. So we -- I don't have anything to say, because no news means that things are doing well.

And last one on aircrafts. Basically, you are projecting very moderate growth. We know that the Jumbo contract with Kuwait is going to come to an end in a couple of years, I would say. So I was wondering what are the assumptions, let's say, beyond 2026?

Okay. Well, I mean, Marco's here can complement, but my understanding is the following. First of all, the Eurofighter, as I mentioned before, has a long tail. It's not something that will be distinguished as a program in 2 years. Maybe 10 years or so, and we are fully committed in expanding the market, traveling around. We have now a number of negotiations ongoing, and of course, in upgrading the machine continuously. Because this is a machine that, at the moment, ensures high margin to the division, and this is our state of the best-in-class margins, 12% on average, so it's good. Of course, other platforms are less -- have less margin, but this is an extra reason to improve them and to explore untapped markets. With this in mind, because you have to assume later on a facing down of the Eurofighter, we are putting all our efforts on the GCAP and future generation aircraft, because if this were just a simple mathematical function, the GCAP would go down, and over the next year, the GCAP is supposed to come. So the point is, don't have a depression in the crossing of the 2 curves. This is what we are working on at the moment, but I think it's okay, it's reasonable, and the growth at the moment is still interesting.

Tristan.

A couple of follow-ups, please. The first one is on the cleanup of the portfolio. You said you have 500 products, you want to trim that by 20%. Can you give a timeframe to complete that transformation? Is it within the next 2 years or by the end of the 5-year plan? Second question is, can you give a feel for the evolution of the R&D to sales ratio over the timeframe of the plan? And the last one, I'm still a bit confused about the development of cash conversion at the backend of the plan, but can you tell us what are the big areas of investments that you have in mind for the last years of the plan to prepare for the further step of development post-'28?

Concerning the cleaning of the portfolio, this Marco is in front of you, the head of the division. I think this is something in progress at the moment. Of course, quantifying the impact is not immediate because in some cases are marginal products, the legacy products or products that are less interesting at the moment because they had a longer history or they are replaced by new products. I think over '24, this will be clarified and yes, we will see the impact. Maybe one or maximum 2 years. Marco, okay, let's say a couple of years should be the average to give a final answer and also to compute the total impact. About capital allocation, we had a long discussions. Of course, Alessandra can tell you, but this is something we've been discussing a lot. Combining growth, investment and disciplined allocation for positive cash at the end of the year. You can say if you want, if you want to say.

Yes, yes. So Tristan, on R&D over sales, if we combine the R&D that is expense in our income statement and the one that is capitalized, we are around 4% to 5% of sales. And with respect to major programs and major projects, I would say that clearly a portion of the CapEx relevant is associated with development of top programs, some of which are completing programs in the trainer business, in the helicopter business, the 609, the single engine, the 09. And another portion is associated with stepping up our production infrastructure to support the growth path for the group, both in terms of expanding sites as well as increasing the facilities, the facilities capacity, as well as digitalizing our facilities, the digital factoring and making them more interconnected in order to become more efficient in production cycles and accelerate the entry into services of new products.

Yes. Let me add one thing. Generally speaking, I understand that you're worried about the future. We are all worried about the future. But today, if I have to think about the safest way to invest is for sure digitalizing. I mean, as you know, in many other markets, the digital services have the largest margin because in the end of the day, they are more brain intensive than CapEx intensive. So I think we move towards a way that we're going to digitalize production, digitalize manufacturing, introducing digital content, AI computation in all our platforms. This could be revolutionary in terms of performances of the machines. But in the meantime, it's what costs you less compared to any other hardware investment. So let me -- it gives me some brief if I consider the future. And I believe in the future, there will be more and more digital investment than CapEx investment in terms of a heavy, metallic things or hardware things.

Christophe, could you please give a mic over there?

Christophe Menard, Deutsche Bank. Just one question. Do you have a target of services as a percentage of total sales by the end of the plan? Where is it at the moment? And how can we on our side measure it?

Let me take the good example of helicopters. I think they have something like 30% of revenues from services. Sorry?

40%.

40% because they are ahead in digitalization. So you can make many things like training, predictive maintenance. You can train not only the pilots, but also the maintenance, the technical staff. So the more you introduce digital services, the more your platform increase the margin. So under the -- let's say, under the forefront job work done with helicopters, we're following the stream. It should be very similar for aircraft. We are improving a lot in any other field. So I believe that maybe I cannot give you now a percentage. But if I take the experience of helicopters, getting 40% incomes, revenues from services, it could be an achievable target for most of the hardware platforms. That's why I like very much the idea that I don't need to invest so much in digitalization, but digitalization means higher efficiency, more sustainability, and servitization. So if I increase the services, I get better margin. If we can do this, we make the square round. And I believe that maybe 40% -- actually, the question is very good because we don't have a projection. But now that you asked, we could make an exercise, division by division. For instance, Space is going to benefit a lot of all digitalization. Because if you introduce generative AI for analyzing images or information, this is going to be a much more remunerative product. Well, Cyber, needless to say, if you make your platforms cybersecure by design, you force your customer to update the platform every, let's say, 3, 4 years. And this is actually a lifelong revenue that costs you very little because the, I mean, all the investment, digital investment has been amortized before. So we'll make a focus about that. But as I said, the experience in helicopters is really giving the direction.

Any other question from the room? No. We do not have question from the web. So if there are no other question from the room, we can.

I can ask question myself if you want.

Up to you.

Okay, I can see that this was exhaustive during the presentation, maybe. I just want to go for lunch.

George, do you want to ask a final question?

Yes. George from -- George Zhao from Bernstein. On Cyber, right, how do you assess the opportunities between military versus commercial? Is most of your priorities on acquisition and growth going to come from the military side or would you consider the commercial cyber as well? And the last one on European defense integration. It's been talked about for a long time, but we haven't seen much success here due to a lot of differences between countries on the work share, export policies, et cetera. So what's going to change or are there geographies within Europe that you think is going to be more conducive to this?

Yes. Thank you for the question. Maybe I forgot to show this because it was in the slide. I wonder what they didn't say. Concerning the Cyber portfolio, just reading from the slide I projected before, we expect to quadruplicate the orders from defense business within the budget plan, the budget plan horizon. So yes, the answer is yes. We believe we're going to be more attractive to defense than in the past, primarily because we are focusing the business more than before, and we've chosen specific areas of rationalization and investment that are of interest for the defense. So we estimate at the moment quadruplication of the defense orders within the budget plan. I see Andrea, the head of the cybersecurity division, so just confirm me what I'm saying. And on top of that, the fact that we go from 30% proprietary cyber product today to 70% proprietary cyber product at the end of the budget plan means that we're going to be much more flexible in adapting solutions, developing kind of custom-tailored solutions. So this makes me very positive with the idea that we can really offer more than now, because now we are more rigid. 30% is ours, the rest is adapted. When you get 70% yours, you can be much more effective in the offer. This was your first question. The second, I hope I answered. The second question is much more complicated. Yes, you're right. The European space of defense seems to be far to come. I think that the good thing now is that people are starting to talk about that, but because of fear, because of the situation, people are afraid. Never like this since 1945. I mean this was -- we said this in the introduction. We have conflicts just at the border. I don't know whether this will be enough for the Europeans to understand that, at least in defense, they have to get together. The point is that every big country in Europe has its own aircraft, its own tank, its own torpedo, its own everything. And of course, when you want to make a joint European space of defense, you have to give up something, because either you contribute to a unified platform or there will be unavoidably a competition on each platform. So this will become an industrial competition. So I do see a couple of potential solutions, but this is long-term. I mean, not we're doing in a few months. One thing is that European institutions should really consider that some choices that are of continental interest should be done in the interest of citizens. So maybe antitrust and rules like those do not help in being safer. There are a few areas in which Europe should understand that the rules for the free market apply in a peaceful period. But in a war economy like the one we are, free market and antitrust rules can be a hurdle, an obstacle to the accomplishment of serendipitous citizens and global security. So this is something more political. I know that this is not my job, okay? So I'm talking like a European citizen. So I cannot force the company to do something in this respect. But as a European citizen, I'm fully convinced of that. The second issue is that companies can be proactive. So we do have a model in Europe that works well, even in war period, which is MBDA, which is a triple joint venture. Lorenzo Mariani, our general director for business operations, has been the CEO of the Italian part. This is a virtuous model. Triple joint venture, roughly 1/3, 1/3, 1/3 between 3 countries. Not necessarily 1/3, 1/3, but the statute and the rules give equal dignity to the participants. And in this way, in a specific area like -- well, in that case, missiles, this company became the first in the world for revenues and efficiency. So maybe we should consider having triple joint ventures, in which then the point is not to compete with our individual platforms, but joining forces, contributing to a stronger platform that takes the best from all the other platforms. And then the point of competing on the revenues is no longer a point because you have a triple joint venture. I mean, on paper, it's easy. I understand business-wise it's complicated, but the private, so the companies can be proactive, the institutions should understand that we're not in a normal historical time. So we cannot really apply standard rules for a peaceful period like antitrust in a moment in which there is a war at the corner, at the border. And we need to care for the security of citizens in Europe and elsewhere. I hope with my very personal opinion, I answered your question.

Martino, a follow-up.

Martino. Just a curiosity. Could you consider the listing of one of our assets, your asset, for instance, cyber, like it happened for DRS, maybe just to have a paper with better multiples to be used for M&A? And 2 housekeeping questions on R&D, because you mentioned, Alessandra, 4%, 5% of sales. The balance between capitalized, amortized was EUR 100 million and will stay more or less in that region going forward. And financial costs, since you are generating a lot of cash, probably will collapse.

Okay. I answer you first strategically. And then of course, Alessandra can consolidate from a number of points of view. But what I want to tell you, with a picture I've shown before, I cannot work without a strong cybersecurity contribution because this interoperable cross-domain picture needs space to observe and localize, sensor on ground, all the platforms talking to each other in the different domains, but all this is wireless. And all the platforms have to be cyber secure and all the signals have to be protected. Now imagine I come to you and I show this, let's say, nice presentation that the Leonardo kid in the movie, Leonardo, the young Leonardo has made in the drawing. And I forget to say, I don't have the cybersecurity. That will be a technical suicide. And I'm sure that ultimately the analysts and the competitors will laugh about that because how can it be successful without cybersecurity? So I have to really invest in cybersecurity because we need a strong cybersecurity European leader. Now if then something, I don't know, disruptively happens and there is some great opportunity at European level to create, for instance, an MBDA or cybersecurity. I know this is impossible because this is a very fragmented market. And I think Andrea can confirm, but imagine there is some high-level institutional initiatives. Of course, we could consider this, but at the moment, this is science fiction. Whereas at the moment, I do need cybersecurity a lot to complete the vision and to make Leonardo much stronger. So the commitment is to invest and keep it strong. Unfortunately, the investment in cybersecurity is not very, very heavy because it's not, let's say, hardware-intensive. So this helps. Once again, the advantage of digitalization. I spent most of my life in doing microelectronics, nanotechnology. You could not move one step if you didn't have EUR 100 million equipment for doing technology. I'm so happy that I can do something that I don't need EUR 100 million pre-investment to be competitive. So in this respect, this once again gives me a good feeling for the future. That's a strategic point. Alessandra, maybe you want to say something about.

Yes. The 2 technical questions you asked me, R&D above and beyond amortization, the target that we have around EUR 100 million -- that you have in mind around EUR 100 million, I can confirm it. And with respect to the financial costs, they are going down in terms of absolute value, certainly. We also have to take into account that compared to the last few years, there is going to be some increase in interest rates as we repay debt that is maturing at very, very low rates. There is a bond maturing at 1.6% interest rate this year. So clearly, current rates are higher, but the trend is clearly having interest expense go down over the plan horizon.

Okay. I think this was the last question. So we can end the webcast here.

That way there is the exhibit with all the interoperative domains that you can see tanks moving. We don't shoot because we want to save money for the bullets, but you can see the tank moving. And I hope you enjoyed the demo that is there for you. Thank you for your coming.