Somec S.p.A. ($SOM)

Good afternoon. This is the chorus call operator. Welcome to the presentation of 2025 results -- financial results. The call will be in Italian with English translation. [indiscernible] under the bottom bar and listen to your language. Now we will give the floor to Mr. Bicciato, the CFO of the group.

Good afternoon, everyone, and thank you for being here with us. Let's start by providing the results, the financial results of financial year 2025, showing the main indicators. So this slide shows the revenue, EBITDA results, net financial position, also including the backlog, which is -- which are the main indicators for this presentation. Let's start from the revenues. 2025 revenues are EUR 370 million as compared to EUR 382 million (sic) [ EUR 382.8 ] from the previous exercise, so marking a minus 2.1%. Considering our business, which is mainly based on orders, this variation is just marginal and also physiological for our business. And at constant change, the difference is 3.3% at constant ForEx. Then EBITDA adjusted moves from EUR 30 million (sic) [ EUR 30.1 million ] to EUR 34 million (sic) [ EUR 34.3 million ] with an increase of 14%, showing a recovery in marginality that was already highlighted during the previous half and the previous exercise. EBITDA margin also increased by almost 1.5% -- 1.4% (sic) [ 1.4 ] basis point. And then we will see business unit by business unit what the results are and marginalities. And net result has increased from -- to EUR 7.1 million, a strong result, also aligned with the six -- with the half -- first half indicators and net financial position that was mainly focused over the last exercises. So decreases from EUR 36.1 million to EUR 13.1 million (sic) [ EUR 13.8 million ] with a reduction by EUR 22.3 million. So we've decided to drive accelerated deleverage, which is really remarkable. As for the backlog, we can see an increase by 3.6% as compared to the end of previous exercise, EUR 744 million to EUR 771 million. This amount does not include what we have announced over the last months, especially at the beginning of February. Now let's move to the revenues at a consolidated level and then by unit and margins. So as I was saying, the total revenues have been recorded at EUR 370 million, that's increasing also more if we take into account some constant items, so with a decrease by 2.1%. In terms of geography, so 2025 account for 57% (sic) [ 57.1% ]; 36% (sic) [ 36.5% ] in North America and the rest of the world is 6.4%. As compared to the previous exercise, we have seen more focus in Europe and European area. So if we break down the revenues by a single business unit or by division, we can see a sort of decrease for Horizons, so in terms of glazing the ship and civil facades with revenues from EUR 239 million to EUR 219 million (sic) [ EUR 219.8 million ], so minus 8%. But this decrease is ascribable to exchange rate, so depreciation of dollar over '25, but also so the extension of some projects, especially in the civil business shipbuilding. As for the other two divisions, the -- we can see improvement. So Talenta, EUR 58.9 million to EUR 62.5 million, a 6% (sic) [ 6.1% ] increase. And this increase has driven the improvement of professional kitchen on ships. And as we are consolidating our position among the sector leaders also in shipyards abroad, not just in Italy. As for the third division, Mestieri, again, and we can see a significant increase with revenues, growing from EUR 89 million (sic) [ EUR 89.6 million ] to EUR 95.3 million. So with 6% (sic) [ 6.4% ] increase. Again, the driver is by the naval sector and the interiors in the naval sector. And as for the performance indicators and EBITDA in particular, we can see that the EBITDA has improved, moving from 7.9% to 9.3%, so at EUR 30.1 million to EUR 34.3 million as an absolute value. The increase has been driven by increase of marginality in Mestieri division. And as for Talenta, the Horizons -- Talenta has increased too while Horizons has decreased slightly. Then EBITDA adjusted by division. As we were saying, Horizons has recorded a contraction by 10.7% to 9.5%. And the margins have gone down a little bit, especially in the civil sector both in Europe and the U.S. And then a small impact was due by the tariffs, so lost 1.2 basis points. As for Talenta, we can witness to an increase from EUR 4.2 million to EUR 5 million and EBITDA margin from 7.2% to 8%. So the significant contribution of the professional cooking equipment in the naval sector and also the capability of generating profitability, especially in naval catering. As Mestieri, this may be the most significant data because marginality increased from EUR 0.3 million to EUR 8.3 million. So we can finally see an exercise in full marginality because this is the result of the last 2 years. That is actually yielding results and marginality, 8.8% of marginality, again, positive contribution of the interiors in the naval sector. This slide shows the bridge from EBITDA to net results, and again, also nonrecurring elements, more limited as compared to the previous exercise and financial year and the -- so positive net result. On the right-hand side, you can see the graph from the -- shown in the last 3 financial years with a significant increase and recovery of marginality. In connection to these and, again, usual results of margins, also the net financial position that has grown accordingly, so moving from EUR 58.6 million going down to EUR 36.5 million, minus 37% (sic) [ 37.7% ] year-on-year. As for the net financial position, excluding IFRS 16, the reduction is by 61% (sic) [ 61.8% ], going down from EUR 36 million (sic) [ EUR 36.1 million ] to EUR 13.8 million. So this significant decrease is driven by margins and the ability of carrying out orders with the profit, also the ability to turn it into cash. And now the cash average and the net cash flow is over EUR 37 million, and all the cash generated was mainly used to decrease the bank leverage. As you can see, loan repayment is EUR 16 million more or less; investment for CapEx, EUR 4 million; put and call, EUR 3.4 million; loan repayment, EUR 18 million (sic) [ EUR 18.6 million ]; EUR 7.5 million lease payment; and dividend paid by minus EUR 3 million. Again, on the net financial position. As we saw, there was a decrease of these accelerated leverage, and this is the composition of our net financial position. On the right-hand side, we have highlighted these deleverage that carried out over the last 3 exercised financial years that testify our ability to turn EBITDA into cash. In 2023, the net financial position was EUR 84 million (sic) [ EUR 84.3 million ] with leverage by 4.6x. Last year went down to EUR 58.6 million with the leverage by 1.95x on EBITDA. And this year, we have reached EUR 36.5 million with leverage, which is almost 1:1 ratio to EBITDA. Last, as we usually do, we also wanted to give you an overview of the order backlog, which is significant to us. Some increase year-on-year is 3.6%. So the order portfolio is up to EUR 771 million as compared to EUR 744 million without including the EUR 95 million orders that we secured after the December 31, 2025. On the right-hand side, you can see the development of our backlog until 2033. And of course, 2026 and '27, mark the most important part of the backlog. And we also show the breakdown in the different business units. So the most important part is Horizons and then Talenta but also Mestieri. But Talenta is significant to both '26 and '27. As a matter of fact, this is the division where the portfolio which has already been undersigned, will allow further growth in '26 and '27. And then we have provided 3 macro messages for our reference markets, which are across the divisions. So that's the impact. The first one concerns the Middle East, which is, of course, very current. And just to inform investors that the impact of these Middle East tensions is marginal. The total revenue 2025 developed in the Middle East is below 1% on the total revenues. So we reckon that this is a very important element that we would like to inform our stakeholders, we reckon that it won't to grow significantly in 2026. So we can say that the projects underway in the Middle East have been confirmed. As for the other businesses, which are across the divisions, of course, the cruise industry is fundamental. And we can confirm what we've already [ speak ] at the end of last year. We are seeing a robust increase in terms of passengers and investments by the shipowners. That is turning and transforming into many important announcements for the shipyards. So we expect a significant order collection, and it will take approximately 12 or 15 months to see the results and from the first negotiations, after which the shipowners will start negotiating with the different providers, including Somec both for the interiors and the professional cooking equipment. And then some comment on the hospitality, especially civil hospitality. There's quite a lot of buzz and excitement in this business, which is allowing a very important order connection and -- so not just Mestieri, but also Talenta, which is serving professional cooking also in the civil sector. So retail, hospitality, private [indiscernible], museum and -- among all of these, hospitality is the one that is showing the most important growth rate. So now if you have any questions, we can start the Q&A session.

[Operator Instructions] The first question comes from Filippo Mazzoleni from Alantra.

Congratulations for the great results. I have a question as far as marginality is concerned. So you show an exciting increase both between the mixed and single divisions. Horizons shows the highest marginality, but suffered some pressure. While Mestieri has really shown a great increase. So what is the normalized rate of marginality? So this 9%, is there more margin? So this is the first question. And the second one in terms the working capital, especially cash generation, both thanks to marginality, but also for an improvement in working capital. Is this replicable in 2026? Or is it driven by nonrecurrent elements?

My name is Oscar Marchetto. I'm the CEO and Managing Director of the group. If we can see that Horizons, this is our core business, where we started from. Somec started from the naval sector and then joined the civil sector in 2018. So this is where we have longest history. Our objective is to grow again in 2026, and refit activity is what can provide us the high marginality to reach higher margins. So what we have been focusing over these last 2 years is the growth of Talenta and Mestieri. Already in 2026, you will see that Talenta will increase significantly. These two divisions are the youngest one developed after COVID. And this is what we have organized over the last 2 years. And now, it's starting to provide great signs of marginality. These can increase up to 10% and exceed 10%. This is our long-term objective. As far as 2 years ago, we said that we are not seen -- we're not focused on the growth only. We'll grow in the returns of revenues. But our main goal was to drop the net financial position and recover marginality. We will continue on this path also in 2026. And then we will start -- by the end of '26, we will start again with some M&As. And yes as far as the working capital I can confirm that also this year, we have been able to work on working capital. And 2024 as compared to '23, the improvement was mainly on -- connected to orders. This year, if we have looked at figures, we can see that, that contribution is less positive. But it's something that we work on credit, receivables in particular. And then after working on orders mainly, so the main part has already been done. And we will continue on deleveraging the energy position. So we actually worked on maybe it's quite a lot. As far as the expectation for next year is concerned, this is something that, consolidated, we have a great ability of turning EBITDA into cash. So we expect a robust cash conversion. And we don't expect to work on net working capital so much if not connected to some advance that we will be able to cash during the year. But this is connected to the order acquisition and especially if we will have some more downpayments, then we will continue decrease in the net working capital. But this is an element, an item that is outside operational management.

Next question comes from Francesco Brilli from Intermonte.

Congratulations for your results -- on your results. So the first question concerns the phasing of the top line. Over the year, we have seen some volatility in revenues. And maybe if you could give us some color of this phasing in terms of orders and how much it reflects your decision or any change on your side in the pace of order process and your execution. And second question, going back to margins, excellent performance that was achieved in 2025. Just was wondering if there's been some one-off event that contributed to improve even more the performance, or it was just an organic progression, so that can be repeated in 2026. So you just mentioned this. And then one last question. Since the great level of cash conversion and the improvement in the net financial position, will this level make us expect that the M&A will continue?

Francesco, so for the first part, I'm going to answer. We haven't lost revenues. On the other side, we have increased our backlog, but that is really proving to be effective and with new orders in 2026. We work by order, so 3, 4 days' work that can be postponed. If it was a byproduct, then I could say, yes, maybe we have slowed down the sales. But we have actually increased. 43% of our jobs is in the U.S. So during the tariff period, some of the building sites have somehow suspended because even if we have a company in the U.S., the part material is not produced in the U.S. So it will be imported from the EU, from European -- from Europe. So there was some doubts in the price to be paid, and that has postponed some of the building sites. As for the naval sector, the shipyards are busy until 2036, '37. So again, some of the orders have been passed over. In the shipyards, there is somehow some postponements, postponing in the orders. But if we have a look at the orders and the figures, we're just talking about 1 week in terms of bringing forward. And then I'll answer the third question and then I'll leave the second to Daniel or Alessandro. As for the M&A, yes, I've always said that when we get below 1:1 ratio EBITDA and net financial position, we have gone even too far by 1 year. So if it continues to stay like that already in '26, at the end of '26, we will start considering new M&As, especially in the Mestieri division. And that we'll take place between '26 and '27, as we've always done in the previous years. Thank you.

Yes. Just a comment on marginality and nonrecurring items, and maybe focusing on the Mestieri, which is the one that shows a higher marginality increase. We have had a project with a very high marginality in 2025. But rather than focusing on '25, there were -- in '24, there were some nonrecurring. We were already suffering from projects that have been dragged or had not performed significantly between '23 and '24. So one-off mainly would be referred to '24. 2025 was a very positive year with expected results. And as we've said, the great job carried out by Mestieri and also the reorganization and reintegration of the new entities of Mestieri has allowed to reach these results and especially the naval interiors that in the past that did not reach great marginality, whereas now it has allowed to recover. And what has been done in Mestieri has been done in over 2025 and also in Talenta. So you will see the increase results both in Talenta and Mestieri. Talenta is completely organic. The business model has not changed significantly while Horizons was some issue on marginalities in the U.S. Thank you very much.

Just a comment from the revenues of Horizons, the value of production causes to be focused on the top line and the Horizons division. So especially for the British and the U.S. market, especially for the glazing, we had some delays due to the tariffs. So to review the total budget, they waited a little bit longer. So they lingered a little bit, also caused by tariffs. And we adopted a system to work almost just in time. And so if the shipyard has slowed down, that was mainly due to that. But these are just postponing. And especially now, we have learned to manage these postponement that happens. As for margins, the focus was also to the betterment of some orders, and we focused on acquiring a higher marginality projects. This is our aim, be it in Mestieri or Horizons or naval and civil sector. And these may go to the detriment of the revenues. And that difference, '25 and '26, is also due to refitting. Refitting happens in waves. So there are periods when shipowners invest more and periods when they invest less. But we would like to continue on this path in '26 too. And we know that the world of luxury, especially for Mestieri and also for Horizons, we will focus on revenues or because the orders are quite larger and margins is still quite good, what we have reached. But refitting can make a difference in that.

And if I can, I'd like to ask another more strategic question. Do you think that the Middle East situation, especially from the tourism point of view, could extend? Do you think that these could drive the cruise tourism?

Yes, yes. I mean the Middle East didn't play a great role in the Middle East. 68% is in the Caribbean and the rest in Europe. Yes, of course, if tourists go into Dubai maybe could shift or could change their holiday destinations. So 43% is in the U.S. and the rest is in Europe. So as we've always informed our investors, these are our main markets. So the compression on the cruise sector and already in the next years, this is quite consistent. So we hope so. We mentioned hospitality. Last week, Pambianco Conference in Milan mentioned that especially for 4- and 5-star hotels, there is a projection until 2031. Again, in this field, the growth is mainly focused on the very high level of hotels.

[Operator Instructions] The next question comes from Fausto Covolan, EOS Capital Partners.

Oscar, well, first of all, congratulations on the cash generation that was very strong. I have a question on the backlog. Total backlog that you have today, how much do you think that will turn into revenues in '26 and '27? And I've seen that 16% of the total revenue backlog is identified as options. How much do you think that this will be confirmed?

So our backlog consists all of the parts of the companies by orders taken and part of the orders are not -- some are not considered. And we're talking about the EUR 1 million, EUR 1.5 million orders, which is a backlog that was collected by other companies of the group. And now I'll leave the floor to Daniel.

Yes. This slide already showed the development. EUR 313 million is concerns '26 and EUR 189 million for '27 what can change as compared to the graph? And we had here based on the forecast of start and finish of the work. That could be a bringing forward a postponement. Some of these works maybe forecast in Q4, could be brought forward. So these are the effects that we may see. And this is not concerning the naval sector because the shipowners are in a hurry to see the build -- the ships built unless issues on the shipyards, but this is quite rare. Backlog is the largest part of those orders which have been placed months in advance. So we're talking about the naval part of the civil. So the glazing, and part of it is -- so the refit is not a part of the backlog because it's a very short time between the glazing of the order and the delivery of the order itself. So we don't have [indiscernible]. So that's not included in the products. And also in Mestieri, the development and the management time of this order is quite short. That's why we don't expect to generate the EUR 313 million revenue in 2026 because these are the trend of the backlog. And we've mentioned some shifting in the civil part. In the naval sector, we do not expect a great shift. And as for the options in the backlog, historically, the conversion of backlog into -- from option into a real order is approximately 100%. So that's what we have always seen, especially in the naval world, wherein the long-term action may lead to a sort of review in terms of value and volume. But it's usually going upwards because additional works are added, are required as compared to the basic. So this is quite a standard. In 10 years time, the standard could change, but it's always positive. But we have a cancellation track where that is significant as for the backlog as an option.

One last question in terms of competition. Due to the tension and there will be more and more ships being built and around so many players. Have you noticed a remarking polarization of shipbuilders who have the financial strength to take large orders or not?

Yes. Just bear in mind that 95% of the ships are built by 4 shipyards which are in Europe. And then 10 shipowners are the largest ones and EUR 100 billion orders. So if you have a look at the CLIA report, you will see a lot of information, and new ships will be built. EUR 100 billion order from now to the next -- to the following of 15 years will be in the new ships. And so the main ship owners have -- are the largest players. And also I just had a closer look to the backlog. If you have a look what we have in the 2026, it's EUR 313 million. And despite -- have a look at the same period last year. We have a backlog amounting to EUR 296 million. So this year, we have at least EUR 20 million of backlog more as compared to the previous year. And that's source of confirmation that revenues are very likely to grow again because when we get an order, then we always had to check whether they will be carried out in '26 or '27. And we also have the speed. That's all the new ships that are being built and especially the [indiscernible]. They are trying to take ships to the shipyards where new ships have never been built [indiscernible] . And so the requirement or one of the requests is to shorten and to speed up the construction of new ships. And if this pace or this rate of new acquisition continues, then our group is well positioned and all of the shipyards will be benefited as compared to smaller providers, smaller suppliers. So maybe we will see that in '27 and '28. But we will play a major role as compared to others. So you should take back a part of the value chain, so margins should have an impact on fact. Yes, clearly, it always depends on a mix of orders, and there are prototype ships that can look different in the beginning. So what is important is that the synergies between different divisions will allow us to highlight our know-how and our value. And our added value is also aligned with the strategy that the group has always implemented.

[Operator Instructions] There are no further questions booked.

Right. We would like to thank you all for your attention, and see you next time.

The conference has come to and end. You can disconnect now. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]