Written by Julia Segreti
ROME (Reuters) – Italy's Leonardo plans to focus on security operations and invest in digitalization, artificial intelligence and interconnected platforms over the next five years, a defense group said on Tuesday.
“The world's geopolitical scenario calls for a new global security paradigm, and we aim to play an active role in the evolution of the European defense sector,” CEO Roberto Cingorani said in a statement. “
Mr Leonardo unveiled an industrial plan for 2024-2028, saying he would strengthen core businesses such as helicopters, electronics and aircraft, while also leveraging opportunities in cybersecurity and space, seen as key to future defence.
Leonardo's shares rose as much as 6.8% on Tuesday morning as analysts cheered the plan's profit and cash flow outlook. It's a booming market for defense stocks, with shares up about 40% since the beginning of the year.
JPMorgan said the market would “react positively” to the strategy, given that guidance is provided for each five-year period of the plan, adding that it is “unconventional for most companies and requires no real accountability.” It shows,” he said.
Mr. Singorani, a former cabinet minister who took over as CEO last May, is working with other European defense organizations to leverage Europe's growing military budgets in a more efficient and less fragmented manner. We have been promoting collaboration between the two countries.
Growth from M&A, which is not part of the plan, will further boost the group, with “the expansion of our partnership policy and the potential for targeted bolt-on transactions in specific high-margin areas,” it said in a statement.
unleash the potential
The state conglomerate said its cumulative order book would reach 105 billion euros ($114.8 billion) at the end of 2028, with a compound annual growth rate of 4%.
Sales are expected to rise by an average of 6% a year to 95 billion euros between 2024 and 2028, with core profits expected to reach 2.5 billion euros, up from the 1.44 billion euros expected at the end of this year.
Free operating cash flow (FOCF) is expected to almost double from 700 million euros at the end of this year to 1.35 billion euros by the end of 2028.
“The industrial plan is designed to unlock Leonardo's business growth potential, deliver stronger top-line growth, achieve double-digit profitability by 2026, and double FOCF by the end of the plan. We have defined our strategy,” Singorani said.
He also promised total savings of €1.8 billion over the period due to “large-scale digitization and rationalization of products and services, efficiency and cost reduction initiatives across the group”.
Earnings before interest, tax, amortization and amortization (EBITA) for the group's space division are critical to the forecast for the period, and are expected to increase by 33%.
The company said its aerostructures business, which has slumped in recent years, “will become a profitable supplier” and “will be scaled up through strategic partnerships.”
(1 dollar = 0.9149 euro)
(Additional reporting by Romolo Tosiani; Editing by Gavin Jones and Keith Weir)
