Leonardo targets double digit profitability by 2020


Leonardo AW101 SAR Norway

Leonardo Helicopters is aiming to hit at least 10% profitability by 2020, the company has revealed in its new growth plan.

The company has been struggling to stabilise profit, revenues, orders and earnings before Interest, tax, and amortisation (EBITA) after a “challenging” 2017, with cash flow and earnings taking a hit and shares falling more than 11% – the Financial Times reported. This will see a consolidation period over the next few years where the company will execute a sustainable growth plan to improve profitability.

Leonardo said in its new 2018-2022 Industrial Plan: “The issues which affected 2017 performance are clearly understood and actions have been taken to change the organisation, its processes and its people. In improving markets, a clear plan is being executed to restore double digit profitability by 2020.”

In the lead up to the publication of Leonardo’s 2017 annual report in March this year, Leonardo Helicopters expects its final revenue, EBITA, and free operating cash flow (FOCF)  figures to be at the lower end of its guidance range. The OEM’s order book for 2017 is expected to be between €11.3 billion and €11.7 billion, and its net debt for the end of the financial year at €2.6 billion.

2018 will be a “consolidation year” for the company as it looks to grow revenues, it’s orderbook, and reach a EBITA of between €1,075 million and €1,125 million. Its FOCF target for 2018 is €100 million, a considerable drop from its previously estimated €500 million to €600 million.

Through to 2022, Leonardo wants to increase its orders at a compound annual growth rate (CAGR) of more than 6%, its revenue by 5%-6% CAGR, and its EBITA by CAGR 8%-10%. On the cash flow side, it wants to reach a cash flow conversion average of 50% through the period and also hit a book-to-bill ratio of one or above.

Despite the challenging year, Leonardo remains positive. Alessandro Profumo, CEO of Leonardo Helicopters, said: “We face attractive market improvement, we are taking actions to leverage off a new commercial strategy, we enjoy a strong backlog, and we know we can invest well for growth in enhancing further core products and technologies. We have taken actions to address short-term issues in our world-class helicopters business. 2018 is to be a consolidation year, and we are confident we are laying the seeds for a new phase of sustainable growth with steady improvement in our top line, profitability and cash flow, to create value for of all the stakeholders of the company.”