SeSa S.p.A. (SES) Earnings Call Transcript & Summary

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the full year 2026 Consolidated Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Jacopo Laschetti, Head of Stakeholder Relations and Sustainability of SeSa. Please go ahead, sir.

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

Good morning, everybody, and thanks for joining our group presentation. In a digital market supported by growing demand for data management and data protection driven by the increasing adoption of AI and automation. The SeSa Group closed the fiscal year 2026 by achieving all industrial and financial targets set out in the 2026 and 2027 industrial plant by delivering a strong organic growth twice than the market trend and by increasing our market share and our role of digital integrator able to combine technology, digital platforms and vertical applications with AI adoption. In particular, we are pleased to report that we achieved all financial targets in the upper end of our guidance that we communicated to the financial market and we are starting now the new fiscal year 2027 with a double-digit growth in revenues, and we expect also in profitability. In the fiscal year ended April 30, 2026 the SeSa Group reported consolidated revenues and other income from EUR 3.6 billion, up 7.9% year-on-year compared to pro forma results, that means like-for-like performance and up by 10.6% against reported ones. Consolidated EBITDA reached EUR 260.4 million, increasing by 8.2% year-on-year compared to pro forma and by 10.6% against reported results with an EBITDA margin stable at 7.2%. The second half of 2026 market clear acceleration in our past with revenues growing by 9.8% year-on-year and an EBITDA increasing by 9.9%. In the Q4 2026 alone, group revenues reached [ EUR 950 ] million, up 9% year-on-year, while EBITDA amounted to EUR 69 million, up 8.2% on with a quarterly EBITDA margin at 7.6% of revenues. The group closed the fiscal year 2026 with around 6,700 people. That means a 3.6% increase year-on-year, but on year end with a stable trend during the second half of the year that confirms our strategy to be more and more focused on operating efficiency combined with scalable growth and the adoption in increasing way of iron automation, consolidated revenues show contribution from our group sectors ICVA reached EUR 2.25 billion, growing 8.6% year-on-year with a strong acceleration in the second half, up 13% year-on-year. Growth was entirely organic and supported by increasing demand for data management and private infrastructure driven by the AI adoption and the growing request of digital sovereignty and security solutions. Green DAS achieved EUR 412 million in the year, up about 20% year-on-year driven by growing energy request from business segment resulting from the acceleration need of data management, governance and private AI solutions. Software and system integration sector reported EUR 909 million revenues, growing by 3.8% despite lower demand in some manufacturing [ districts ] while with a significant 7.5% increase in Q4 only. Business services finally reached EUR 159 million, up 3.2% year-on-year fully organic, supported by the development of digital platforms and vertical applications dedicated to the financial services industry with an expected return to double-digit growth in FY '27 thanks to some main contracts that we acquired during the second half of FY '26. Consolidated EBITDA increased to around EUR 260 million, up 8.2% compared to pro forma results, so like-for-like and up to 10.6% compared to reported figures driven by the positive performance across some sectors particularly sustained by ICT and Green AS. The ICT VA sector reported EBITDA for EUR 101 million, up around 13% with EBITDA margin improving to 4.5%, gaining 20 basis points in comparison with 4.30% of the previous year. The green BAS sector achieved EBITDA for EUR 29 million, increasing by 18.4% compared to pro forma and so like-for-like, with a stable EBITDA margin at 7.0%. Software and system integration recorded EBITDA for EUR 96.6 million, up around 2% year-on-year with a solid 5% growth in the second half reflecting the positive impact of organization engineering implementing throughout this year. Finally, Business Services reported an EBITDA for around EUR 30 million, up 9% year-on-year with an EBITDA margin increasing to 19% of revenues. Group consolidated EBIT adjusted for good in amortization and nonmonetary cost, reached EUR 197.5 million, increasing by 6.5% compared to pro forma results and by 9.6% versus reported ones after depreciation and amortization for EUR 55 million and provisions equal to EUR 8.2 million. The reported EBIT amounted to EUR 152 million, up 4.3% year-on-year compared to pro forma results and 8% versus reported 2025 after a good amortization for EUR 37.5 million, up 15% year-on-year. In the FY '26, the group benefited from a significant reduction in net financial expenses equal to EUR 34 million, down 16% compared to EUR 41 million year-on-year driven by lower interest rates and by the FY '26 improvement in financial efficiency and net financial position. The group EAT adjusted for good amortization reached EUR 160 million, up 10.7% year-on-year compared to proforma results and 13.3% compared to reported '25. NET income after taxes reported amounted to EUR 80.6 million, up 13.2% compared with EUR 71 million as of April 30, '25 on a pro forma basis and up 20% year-on-year compared to reported results. The FY '26 was also characterized by a solid set of financial results and strong cash flow generation operating cash flow reached EUR 205 million, driven by profitability growth and higher efficiency in working capital management after EUR 110 million of investment net of EUR 10 million of noncore asset disposals. The full year, EUR 26 million, EUR 110 million investment consists of EUR 50 million of CapEx in digital platforms for the group formation and of EUR 60 million dedicated to selective set a small and vertical M&A and in particular focus on the program of minority interest acquisition to drive the organizational simplification. After the EUR 110 million of investment and EUR 40 million distributed to shareholders through dividends and share buyback during the year, the net financial position improved significantly from EUR 75 million of April 30, 2025 to EUR 17.5 million of net debt as of April 30, 2026 million, up by around EUR 60 million while excluding the IFRS liabilities. The group net financial position was equal to net cash for EUR 182 million as of April 30, 2026 compared to EUR 158 million as April 30, 2025. With a so positive peak share of FY '26 results, I give the floor to Jacopo to present an overview of our ESG results and our value generation programs for the stakeholders.

Thank you, Alessandro. In light with our purpose to create long-term sustainable value for all stakeholders, promoting innovation, including digital innovation of businesses and organizations as well as the well-being of people, sustainability continues to be fully integrated in the execution of our business strategy and remains one of the pillars supporting long-term development of our group. In the fiscal year '26, we achieved a very positive set of ESG results. The value generation was equal to EUR 550 million, of which 90% distributed to stakeholders with a 10% increase year-on-year. We also successfully achieved all the targets set out in the '26 - '27 sustainability plan. Electricity consumption per capita declined by approximately 4%. Natural gas consumption per capita decreased by around 5%, while approximately 97% of the electricity purchased by the group now comes for renewable sources. Our renewable energy production exceeds 1 million of kilowatt hour, resulting in more than 300 tonnes of CO2 emissions avoided. During fiscal year 2016, we also confirmed our main ESG ratings, including Ecovadis Platinum, MSCI BBB and carbon reclosure project B while continuing to strengthen our governance framework and transparency towards investors and all stakeholders. Finally, our green value-added solutions sector grew organically by reaching $412 million of revenues driven by the growing request of energy deriving from digitalization of corporate and organization and AI adoption. In terms of value creation for our stakeholders, we work to combine sustainable growth with a solid shareholder value generation. In the fiscal year '26, the group raised its payout ratio at approximately 40%. And distribution dividends equal to around EUR 50 million and delivering a share buyback program for around EUR 25 million. Consistent with this approach and supported by the strong financial performance and cash generation achieved in FY '26, the Board will propose the next shareholders' meeting a dividend distribution of EUR 1.33n per share, up 33% year-on-year, equal to approximately EUR 21 million, together with the renewable of the share buyback program for an amount of EUR 20 million, confirming a payout ratio of around 40%. In particular, dividend payment date is set for the next September 23 with ex-dividend date on September 21 and the record date on September 22. In line of this, we will continue to operate with strong commitment in creating sustainable value for all stakeholders, and growing payout for our shareholders. I'll give the floor back to Alessandro.

Thank you, Jacopo. Today, the Board of Directors has also approved the new group's industrial plan for the fiscal year '27 and 2028. In a scenario where Italian digital market is expected to grow with an annual rate of around 3.5% in the 2026 and '29 period driven by the increasing demand of technology, data management and protection boosted by the adoption of our automation says that we target to extend the high single-digit growth already achieved in 2026. By growing twice the market trend and leveraging our positioning as a leading digital integrator or able to combine technology, digital platforms and vertical application with the adoption the new industrial plan, in particular, focuses on organic growth, organizational streamline and technological innovation by accelerating organic growth of our business core through increasing market penetration. An organization streamlined by reducing the number of legal entities, enhancing productivity and operational scalability through the progressive adoption of AI and digital enablers while maintaining substantially stable people throughout 2028, and supporting the group transformation through annual investment of around EUR 110 million. Including EUR 60 million dedicated primarily to acquisition of minority interest and select M&As and about EUR 50 million of CapEx on digital platform and skill development for our group transformation. Building on these pillars, the new industrial plan targets to extend the high single-digit growth revenues achieved in FY '26. With expected revenues over EUR 4 billion, EBITDA above EUR 300 million and adjusted EAT reaching around EUR 130 million for the fiscal year 2028. In particular, we plan to achieve the following growth targets over the FY '27 '28 period, annual revenue growth in the range between 5% and 7.5% targeting a range between EUR 4 billion, EUR 4.2 billion in FY '28. Annual EBITDA growth in the range between 5% and 10% and reach in range between EUR 290 million, EUR 350 million in FY '28, with an EBITDA margin increasing from 7.2% up to 7.5% in FY '28. Annual Group adjusted EAT growth in the range between 7.5% and 12.5% target in the range of EUR 123 million to EUR 134 million in FY '28. Within VAS, including ICT and green, we expect mid- to single-digit growth both revenues and profitability driven by increasing demand for data management, data protection, AI adoption and digital serenity, combined with the increased request of renewable energy solutions. Business Services is expected to deliver annual double-digit growth in revenues and profitability, driven by the development of vertical applications and digital platforms dedicated to the financial services industry and by the increasing market penetration. Finally, software and system integration sector is expected to achieve low single-digit growth in both revenues and profitability driven by a greater focus on higher value-added activities and a progressive reduction of labor intensive business survey. Considering the very positive beginning of the first quarter of the new fiscal year '27 with double-digit growth in terms of revenues and profitability, particularly across BAS sectors, we are strongly confident in the achievement of the targets outlined the new industrial plan for new FY '27. Revenue grow in the range between 5% and 7.5%. That means EUR 3.8 billion, EUR 3.9 billion, EBITDA growth between 5% and 10% and targeting from EUR 275 million, up to EUR 290 million and group adjusted EAT growth between 7.5% and 12.5% targeting from EUR 114 million up to EUR 190 million. We are entering the new fiscal year '27, focusing on executing of our new industrial plan with great determination leveraging our strong competitive positioning, broad technology ecosystem and high-skilled people, together with all our people who will work with strong commitment on our evolution path as a integrator with a target of continuing to grow at more than twice the market rate and by extending the continuous growth track record of revenues and profitability achieved since our foundation. Thank you all for joining us today. We are now pleased to open the Q&A session as usual.

[Operator Instructions] First question is from Pierre Andrea Randone, Intermonte.

I have 2. The first one is about your value-added solution business, so the core business that performed very well. You provided us in your introduction, some explanations. I wonder if you can provide us more details about this quite surprising trend. . If you can detail if there are any particular product, if you are gaining market share also in relation to some changes in the competition? And what are the drivers that make you confident in your ability to sustain this high single-digit trend also for the coming months and quarters that is probably above what you expected 12 months ago. So if you can focus on this area. And the second question is about your net working capital. Again, the results are good. You lowered the level of your working capital. And in particular, I see higher commercial liabilities. I wonder if this is a number in relation with slightly different revenue mix. In other words, if the stronger performance on VAS business is also driving some benefits in working capital.

Thank you, Andrea, for your question. So first of all, it's true that our VAD solution is performing really well, overperforming our expectation because we closed the full year with a growth by 9% in revenues, 12.6% in EBITDA and 21% in net profit after taxes. So that means absolutely overperforming our guidance and so we enter the new FY '27 with a great growth double digit. So that means we are really confident to be able to maintain our guidance to grow mid- to high single digit. So the change is that the adoption as a driver is generating a growing demand for data management and data protection. And so that means a great job and opportunity for as digital integrator that is able to combine technology with vertical applications and digital platforms with the eye. I underline again that this trend seat was accelerating during the year because we're increasing in a progressive way our past quarter-by-quarter. As for the trend of net working capital, so we really made a great job because we improve our efficiency by roughly EUR 40 million year-on-year. So that is, generally speaking, results of well performance coming from all sectors, not only from ES, I underline that we are working in a progressively moving of our software baseline as a service model that is part of our software system integration business that is not so relevant in comparison to 100% of our revenues of software system integration. So that means just 20% of our business unit breakdown of revenues, but it is another point that is improving our capability to release net working capital management. So we are confident that we are able to continue to work in this direction also in FY '27.

[Operator Instructions] Next question is from Gabriele Berti of Sanpaolo.