Alessandro Profumo, Leonardo CEO stated “First quarter 2019 results are solid and growing, in line with expectations. We confirm our 2019 Guidance and we are focused on the execution of the Industrial Plan aimed at Group sustainable growth”.
The results were up for the first quarter of 2019 over the comparative period. Key highlights:
- New Orders, amounted to EUR 2,518 million and showed, compared to the first three months of 2018 (€ 2,164 mln), an increase of 16.4%, mainly due to Defence Electronics & Security
- Order Backlog, amounted to EUR 36,575 million, increasing 9.6% compared to € 33,360 mln in 2018 and ensuring a coverage in terms of equivalent production equal to about three years
- Revenues, amounted to EUR 2,725 million, an increase of 11.2% compared to the first quarter of 2018 (€ 2,451 mln), mainly in relation to Defence Electronics & Security and, to a lesser extent, to Helicopters
- EBITA (Earnings before interest, taxes, and amortization), amounted to EUR 163 million, an increase of 6.5% compared to € 153 mln in the first quarter of 2018
- ROS equal to 6%, substantially in line with the first quarter of 2018
- EBIT (Earnings Before Interest and Taxes), amounted to EUR 156 million; showing an improvement of € 35 mln (+29%), compared to the first quarter of 2018 (€ 121 mln), due to an improved EBITA and also to the decrease in restructuring costs and lower amortisation of assets deriving from the business combination of Leonardo DRS
- Net Result before extraordinary transactions, amounted to EUR 77 million, (€ 50 mln in the first quarter of 2018) and benefitted from both an improved operating result and from lower restructuring costs and lower amortisation of assets deriving from Purchase Price Allocation, as well as financial expenses
- Group Net Debt, amounted to EUR 4,016 million, and increased, compared to 31 December 2018 (€ 2,351 mln) and to 31 March 2018 (€ 3,595 mln), due to the usual cash flow trend in the first part of the year as well as to the adoption of IFRS 16 “Leases” (the effect as at the 1st of January 2019 amounted to € 458 mln)
- Free Operating Cash Flow (FOCF), negative for EUR 1,114 million was substantially in line with the first quarter of 2018 (negative for € 1,057 mln)
In consideration of the results achieved in the first quarter of 2019 and of the expectations for the following ones, we confirm the Guidance for the entire year that was made at the time of the preparation of the financial statements at 31 December 2018.
Analysis of the main figures of the first quarter 2019
Compared to the first quarter of 2018, new orders showed a significant increase (16.4%) essentially in relation to Defence Electronics & Security, which benefitted from important new orders mainly in Leonardo DRS, as well as in Helicopters.
The book to bill ratio is slightly lower than 1. The order backlog ensures a coverage in terms of equivalent production equal to about three years.
Revenues showed an increase (+11.2%), compared to the first quarter of 2018. The main driver was Defence Electronics & Security, with higher activities in Leonardo DRS and within the Airborne Systems, in addition to the higher activities on government programmes of Helicopters.
EBITA equal to € 163 mln (with a ROS of 6.0%) showed an improvement compared to the first quarter of 2018 (€ 153 mln - ROS of 6.2%) despite a lower contribution from the GIE-ATR Consortium, caused by lower deliveries.
EBIT, equal to € 156 mln showed, compared to the first quarter of 2018 (€ 121 mln), an improvement of € 35 mln (+29%), due to an improved EBITA and also to the decrease in restructuring costs and lower amortisation of assets associated with the business combination of Leonardo DRS.
The Net result before extraordinary transactions, equal to the Net Result (€ 77 mln) benefitted, compared to the first quarter of 2018, from an improved operating result and reduced financial expenses, partially offset by the different tax level. FOCF in the first quarter of 2019 was negative € 1,114 mln (negative € 1,057 mln in the first quarter of 2018), in line with the usual trend to record significant cash absorptions in the first part of the year.
Strategic transactions of the period include the financial effects of the completion of the Vitrociset transaction, net of the cash acquired.
The Group Net Debt, equal to € 4,016 mln, increased compared to 31 December 2018 (€ 2,351 mln) as a result of recognition of financial liabilities deriving from the application of IFRS 16 starting from 1 January 2019 equal to € 458 mln, as well as the negative FOCF performance and the impact on the Net Financial Position of the Vitrociset transaction.
Net invested capital showed, compared to 31 December 2018, a significant increase that, in addition to the seasonal trend of the cash flows, was caused by adoption of IFRS 16 “Leases”, starting from 1 January 2019.
The performance of the first quarter of 2019 confirmed the progress in the path taken last year, highlighting, in comparison with the same period of the prior year, an increase in New Orders mainly for the acquisition of the contract related to the supply of 23 NH90 tactical helicopters for the Spanish Ministry of Defence, and Revenues as a result of the higher activities on governmental programmes and a profitability in line with the first quarter of 2018 and with the 2019 expectations.
Defence Electronics & Security
The first quarter of 2019 showed a good performance both in commercial and financial terms. Compared to the first quarter of 2018, orders increased in particular thanks to higher orders recorded by Leonardo DRS and Electronics Division. Revenues increased driven by higher activities in Leonardo DRS and Airborne Systems, and profitability increased as a result of higher volumes and improved profitability recorded in all the business areas.
During the first quarter of 2019, new orders were gained for € 454 mln, mainly related to the Aircraft Division. From a production point of view, 40 deliveries were made for fuselage sections and 16 stabilisers for the B787 programme (compared to 35 fuselages and 20 stabilisers delivered in the first quarter of 2018) and also 17 deliveries of fuselages for the ATR programme (20 delivered in the first quarter of 2018). For the military programmes, 8 wings were delivered to Lockheed Martin for the F-35 programme.
The lower result of the first quarter of 2019 was attributable to the lower activities in Manufacturing, in particular for satellite telecommunications, and to higher costs for the development of new generation satellite platforms.
On 31 January 2019 Leonardo, as all required conditions were met including Golden Power and Antitrust approvals, signed the closing of the acquisition of 98.54% in Vitrociset. Furthermore, on 25 March 2019, Leonardo signed an arrangement with the Algerian Ministry of National Defence for the establishment of a joint venture for the local assembly of Leonardo helicopters, their sale and the supply of various related services.
During the first quarter of 2019, the Group did not finalise any new transactions on the capital markets.