Avio SpA

MIL:AVIO

Earnings Call Transcript 2020-Q1

[Operator]

Good afternoon. This is the Chorus Call conference operator. Welcome and thank you for joining the Avio First Quarter 2020 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Giulio Ranzo, CEO of Avio. Please go ahead, sir.

[Giulio Ranzo, executive]

Good afternoon to you all, and thank you for joining the Q1 interim financials call. I hope you all have our presentation we posted on our website of Avio.

So I'd like to go over this result very quickly with you. So if we move on to Page 3. What are the key highlights of this quarter? Revenues were stable and EBITDA was growing. And most importantly, we achieved -- a way to come back to flight operations with Vega, which we will start very soon.

Of course, this has been a very peculiar quarter, which has also materialized in the COVID-19 outbreak, as you know very well. And as a matter of fact, the Kourou spaceport closed on March 16. But after quite an intense effort we have put in place, in particular at [ Anyo ], we were able to reopen with operations by May 11, and we were authorized to send our technical team to do -- prepare for the mission for the flight #16, which will happen sometime in mid-June.

Of course, now in order to perform these operations, we need to adjust to a new normal in terms of handling operations in a safe mode by observing different practices and sanitary practices to make sure everyone's safe. But to make a long story short, our team is back in Kourou and currently observing a quarantine period and they will be effectively at work in a few days.

So we ended the quarter with revenues up into about $80 million, pretty much in line with first quarter last year. We have had some slowdown in production -- in certain production and development activities such that it probably did not achieve the targets we had in mind, but more or less we were as the last year. One of the targets, for example, we did not achieve was actually the Vega flight, which was scheduled to happen in the last few days of March, unfortunately, due to COVID slipped now for a few weeks.

In spite of that, EBITDA ended up at EUR 7.2 million, which is up about 4% with respect to last year and EBIT pretty much in line with last year. So what we tried to do during first quarter was to keep a very tight control of general and administrative expenses and all other fixed costs such that we could handle a little bit of a slowdown on our programs. And at the same time, of course, we incurred some nonrecurring expenses as compared to last year due to the COVID-19 outbreak. As you may recall, we never point you very much at adjusted EBITDA figures or adjusted EBIT, especially because, in the course of the last couple years, we have managed to keep the nonrecurring expenses to a bare minimum. So given this exceptional situation this year, I think your attention will have necessarily to move also to adjusted figures because, of course, we've incurred some expenses that are definitely nonrecurring in nature.

The net cash position ended up at EUR 42.1 million, which is some EUR 15 million lower than at year-end. And this is typical with the ordinary business seasonality as by now, you probably know, we tend to have a higher cash position at the beginning of the year, lower at midpoint year-on-year and then coming back towards the fourth quarter.

The most relevant business facts were the 2 successful Ariane 5 launches, VA251 and VA252, occurred during the wintertime. VV16 Vega mission is ready on the launch pad. Operations will resume by May 25, and we are ready for launch by mid-June.

Then we have achieved some very important development milestones. We fired on ground the Zefiro 23 in February, very successfully. This was tremendously important to demonstrate once again the robustness of the design of the Vega propulsion systems, which have some [indiscernible] in rebutting questions after the failure last year. Now we're extremely confident on what we're doing again and so this is really, really important.

And then we also had the successful firing test of the M10, our [ anomalies ] and somewhat revolutionary liquid oxygen methane upper stage engine, which would power Vega E in a few years to come. So overall, I would say, a positive quarter in spite of the emergence of the COVID-19 outbreak.

Now moving on to Page 4. As we said, the Vega launch is ready on launch pad. We have a very interesting, intriguing mission to be performed, the so-called proof of concept like on the SSMS, which stands for Small Spacecraft Mission Service, which is our technology that is designed in order to perform, support ride-share missions. So missions will include so many different small satellites all together. You can see on the right side of the page a picture of the 52 satellites assembled now a few weeks ago, which will be launched by mid-June.

This is the first time in Europe we do a ride-share mission with so many different satellites coming from all over the world, largely from North America so with customers such as Planet, Spire, GHGSat, Tyvak, ISIS and so on.

And this is interesting because the satellites will be delivered on 2 different SunSyncronous orbital planes, and the satellites will be delivered to different anomalies around the orbital plane. So it's a very sophisticated type of mission. It's somewhat of a one at a kind. And so I think it's worth keeping an eye on and we'll certainly keep you posted on the developments of this mission as the date of launch comes closer.

On Page 5, some update on the COVID-19, how we have managed that and how we are adjusting now to the end at the lockdown and adapting to a new normal. First of all, on the top left, you see the new way in we actually approach the campaign. We have arranged a special flight to get the team to Kourou. The whole team has been equipped with individual protection devices, such as masks and gloves and suits and all what is needed in terms of medicines and medical support and so on to really ensure that we keep at work the adequate social distancing and self protection that is needed to perform the work without putting anyone at any particular risk.

Even in our offices, as you can see, we have implemented measures to keep the distancing to protect each other to make sure all the surfaces are properly sanitized and that hand sanitizers are available everywhere and so on. We even received a third-party inspection, actually, yesterday from Italian authorities in charge for safety at work and reportedly, we were found to be in full compliance with expectations with no issues. So this proves that actually it is possible to work in spite of this strange epidemiological event, but of course, you need to change the way you work. We have benefited from the fact that we never stopped working since the beginning of this outbreak, and so now we are confident we have been adjusting ourselves to this new way of working quite well.

On Page 6, you've seen the relevant things we did in this first quarter. The 2 flights of Ariane 5, both very successful. That continues to be, as you know, the workforce of our European activities launching telecom satellites from worldwide customers on a continuous basis. We have more Ariane 5 flights coming in the summer for other telecom customers. And of course, the VV16 flight coming up next in mid-June.

On the right side of the page, as we anticipated, some of the very important development milestones and accomplishments. In particular, with the LOX-Methane upper stage, this was the very first time, to my knowledge, that a liquid oxygen methane upper stage is ever being tested in the world. In fact, we performed these tests at the NASA Marshall facilities. We received a lot of interest of people wanting to watch that and see what happens. This is a 10-ton thrust engine that works very well. And so the combustion chamber manufacturing -- a single piece we have within manufacturing. So it's a very, very [ novel ] technology that will enable us to further improve performance and reduce costs. And on the bottom, we see the firing test of the Zefiro 23, which we tested in February to be -- make sure Vega propulsion systems are safe ahead of the return flight.

On Page 7, there's a summary of the key financial figures. So as we said, revenues in the range of about EUR 80 million. I think we would have been able to do a little bit more had we completed the VV16 flight and if we had been even faster in certain other production activities. But so far, so good. Everything else in backlog. So as you know, it's not a question of business. It's a question of timing in terms of execution. What we haven't done in Q1, we have a chance to catch up with in the next quarters.

EBITDA reported ended up at EUR 7.2 million in spite, as I said before, of some additional nonrecurring expenses. But at the same time, we managed to keep the profit on track by applying a very tight cost control on our fixed expenses. In fact, you see that the EBITDA adjusted, if you just take away the cost for COVID-19 and some of the donations we decided to make to support communities in the course of COVID-19, EBITDA adjusted happens to be higher than last year by about 11%. So I think, had we not had this unfortunate situation, we would have ended up the quarter with a very good profit, improved with effect to last year.

Now the EBIT line is pretty much in line last year, because this year we do see some increase in depreciation, which is associated with the substantial CapEx we have incurred in the past few years, and it is now coming to fruition as we actually implement the production activities of the new projects, such as the P120 propulsion system and so on. So no surprise. But again, if we were to look at EBIT adjusted, of course, the figure would look a lot better.

The cash position, we expect it to be lower than the beginning of the year as is normally the case every year. And in fact, it ended up at EUR 42 million compared to EUR 57.9 million at year-end. So this is completely in line with the ordinary business cycle, which, by the way, for your benefit, we have added to the appendix to just show how typically the quarters develop in terms of EBITDA reported and net cash position such that you can follow the relevance of the different quarters. And as you typically know, the first quarter happens to be a very small part of the year, typically less than 1/4 of the year in terms of revenues and profit and cash and so on. Nonetheless, it's an initial indicator of how things go in the year.

Now on Page 8, what's coming up next? In this difficult time, I think it is unwise to make too many promises and to provide any guidance. As you know, in March, I anticipated that we may be able to come back to the guidance upon the approval of the first half results. And therefore, we have no guidance to give you at this time while we are still understanding what the impact of COVID-19 may be. So don't ask us to have any better forecast at this time because we won't be able to give you any reliable figures. However, what we can do is to scan with you across the things that will be coming up in the next few weeks and months and for which of course we will update you as we go.

So what's coming up next in terms of flight activity will be VV16 -- Vega 16 flight in mid-June. Next, we plan for another Vega flight immediately after VV16 in August with no interruption between one another. So what we will be doing with our team, we will keep the team in Kourou and work one launch campaign after the other to try and catch up with the delay as much as we possibly can because, inevitably this outbreak has created some delays, which we will be trying to catch up, but we will work across the summer and in Kourou.

And then the next things we need to do is another Vega flight, which is also scheduled, and the Vega C maiden flight, which -- for which the launch campaign may start before the year-end. Now whether or not we will do the Vega C maiden flight first and the Vega 18 after, we don't know yet. We will see as the time goes by and we'll update you on that. It's just a question of scheduling and seeing what is most urgent to do. But all of this is in pipeline, and we are prepared to do this in the next -- in the course of the next 6 months or so. Then we have an Ariane 5 flight coming up at the end of July and probably more in the last quarter of the year.

In terms of the backlog, the backlog, today it's pretty much stable compared to year-end, some orders have come into the backlog. And of course, some of the backlog is being consumed by the progress of [ revenues ]. There's more contracts that will be coming in the next few month as a result of the ESA 2019 ministerial conference that happened in December. And as you know, that has awarded us a number of new development programs, this contractualization takes time.

Obviously, we need to go through an RFP process and negotiations and so on. So don't worry too much about the date when these orders come. They will come. It's about [ EUR 0.5 billion ], but it doesn't happen in one day, yes. It takes a process to get to that. And the process is actually working probably faster than we expected, particularly because ESA is very well aware of the fact that the whole supply chain needs to be fed a new contract and cash and therefore the process is moving forward quite efficiently, I will say.

In parallel, we are heading for some more orders on the tactical propulsions, on tactical missiles, which we hope to be signed in the next few weeks. So all in all, I think we're on track to deliver the expectation of bringing in let's say, the order backlog with new business that we're actually anticipating.

In parallel, we're working on other development activities. As you know now, we are in very last few phases of the Vega C development, which we call the so-called ground qualification review phase. So this is the time when [indiscernible] development is almost fixed, time to check in for all tactical documents. You need to review with the European Safety Agency that every component of the system is well suited for flight and that there's nothing that was left behind. So we will spend quite some time with ESA to review each and every document, each and every subsystem. And this will start very soon in preparation, of course, of the main flight, as I said, a medium flight campaign to start by the end of the year.

Then we will also have to perform a third test on the P120, what we call the QM2. It's the third and last static firing test for Ariane 6, which we should be able to do by year-end. Meanwhile, I would say, on the development side, we will start to cram some of the development activities on new contracts that we began from ESA, such as those on Space Rider, for example, and on Vega E, on the LOX-Methane and so on.

So in terms of the 2020 calendar for announcement of results, we planned for the 14th of September to release the first half results, at which point, we should be in the position to release to you a 2020 guidance, we hope. We are confident that, by then, the understanding of the impacts of COVID on our business shall be clear. And by November 5, we shall be able to release to you the 9-month results. So that's pretty much the calendar that you will see in the next few months.

Just one final remark on the story of COVID-19, we do see inevitably an impact on our industry in the ability to execute, okay? [Indiscernible], just because part of the supply chain, has the people can begin to ship material and hardware and so on because everyone is adjusting to a new way of working and so on. So in the past few weeks, the efficiency has inevitably been somewhat different than before.

But in terms of business portfolio, the backlog, nothing has changed. So as you know, we tend to worry a little bit less than other industries because we don't have to make the revenues of this year. We don't have to make them this year. We don't have to gain them, we don't have to win them. We have to actually execute against our portfolio, against our backlog.

So if for some reason, we don't execute this quarter, we'll [ slip ] -- well, we will continue to execute the business that we had already won, okay? So in terms of looking at the business, don't worry too much about a slowdown in revenues. There's always an ability for us to catch up later on. The important information for you is that the backlog is intact, and it's actually being refilled in particular by the new orders associated with the new development strategies.

And this is it, pretty much the summary of the first quarter. Now I will leave the floor to you for any questions.

[Operator]

[Operator Instructions] The first question is from Martino De Ambroggi of Equita.

[Martino De Ambroggi, analyst]

Yes. Before asking your something more general on the sector, I had a question on the development activity because I suppose it shouldn't suffer a lot of delay or slowdown of the business. But just to have an idea of what could be a reasonable projection for the development business for the current year? Or just if it's slowing down a lot, just a little bit, it's able to recover during the year?

[Giulio Ranzo, executive]

Well, it depends. We have, as you know, many development projects. And so the situation may be different from one development to the other. To be honest with you and to be honest with myself, not every development project is affected only by COVID. It's also affected by some problems as we guide the development and so on, which sometimes cause delays, then we can catch up and so on. Of course, part of the COVID-19 effect was therefore the development of Vega C has been the fact that some suppliers and partners have been unable to deliver to us certain subsystems that were for us important. They were unable to deliver on time on the schedule. So all of them we see now are catching up and going back to normal operations. But of course, we have accumulated a bit of delay on certain subsystems that we were expecting to receive on time by certain suppliers and partners that are inevitably a little bit late.

On tactical propulsion, on the development of CAMM-ER, as you know, we achieved a very important milestone last year with the first flight of CAMM-ER. We have a few more activities to do. We have some delay on that, which suspends anyway on the technical aspects, not so much on COVID or anything like that. But it's one delay that we don't worry too much about it that we believe we can catch up with. So all in all, I would say, what we are observing in development is a normal situation where you see some programs on track, some with a few delays but nothing that we cannot catch up, let's say, in the next 8 months or so.

[Martino De Ambroggi, analyst]

Great. And the two general questions are the first on OneWeb, the Chapter 11. So what could be the implication for you and for the sector as a whole? And the second general question is on -- maybe much more difficult. But just to know if you believe that the current crisis could have some direct or indirect effect on the satellite sector going forward?

[Giulio Ranzo, executive]

Okay. First of all, OneWeb, we've talked about this is the -- when the news emerged, that they wanted Chapter 11. Now it would be, quite frankly, unfair to believe that this is the OneWeb Chapter 11 situation matured only as a result of COVID-19. So as we know, in the U.S., many companies which are heavily invested, and they are many in a phase where they also look for different owners use the Chapter 11 procedure as a way to also change their executive structure and evolve to a new financial structure, in a way.

OneWeb, we are not very much affected because, as you know, OneWeb has a contract with [ RM Space ] because we know it's [indiscernible]. So we are not -- we are observing this phenomenon, but we're not [ in large scale ] involved. What we think about OneWeb is that is a robust project. It's a great idea. It has very strong partners behind it, such as Airbus who actually developed the satellite and the ground infrastructure. So we think it's an interesting project.

We will see what their Chapter 11 procedure will be, whether it will bring new owners and the board that [ initially ] will be relaunched, or whether this initiative will tend to slow down, none of which will, quite frankly, impact our revenues or profits because we have nothing to gain and nothing to lose from the specific situation on OneWeb.

Now your more general question that this COVID situation has a direct or indirect impact on your business. It may have, so far we haven't seen any relevant one because, as you know, our projects are typically very long term. So we have not observed a single customer who was forced to stop this and is initially going to cancel an order because of COVID-19. Many of the things we do, in particular for Vega, are backed up by government budgets that do not tend to be volatile with this type of economic crisis. So we will see how the situation matures. But so far, we see our sector being less impacted by these prices than many other industrial sectors.

I think we pointed all of you to an interesting report that has been published in the U.S., and that was also renounced by SpaceNews, the Quilty report on the impact of COVID on the space industry. And that highlights the fact that, in the sector -- the sector by nature -- [indiscernible] such a big backdrop that is very seldom impacted by these abrupt events.

The ones who tend to be more impacted are the ones that are under a heavy debt. So all companies operating under any debt make up their -- in the very short term, but it is typically to serve their debt appropriately. And therefore, this may be a direct impact. But when I look at the customers -- at the end customers that really drive most of the revenues we have, we have at least 35% of our revenues are driven by the European Space Agency, which is an intergovernmental organization that doesn't have any debt, and it's not very much impacted by the financial crisis.

And another chunk of that is driven by the European Commission. And that may have so many different problems, but not necessarily on the space sector. And then we have many of it in governments all around the world. We have projects, as you know, in Korea, in Thailand, in the Middle East, in North America, and not many are directly impacted by the crisis. So we may have a small portion of our business which is more associated to commercial initiatives, which may be impacted. So far, we haven't seen any [ worrying ] sign. Should we see that, of course, we will try to anticipate this to you before it happens if we can spot it.

[Operator]

The next question is from Christophe Menard of Kepler Cheuvreux.

[Christophe Menard, analyst]

I hope you are well and safe, as well as the teams at Avio. I had four questions, four quick questions. The first one is on the -- your fixed cost amortization, which is in Q1 quite remarkable, I would say, compared to other firms in aerospace and defense. I was -- I mean I was wondering what is the reason for this? Is it that productivity continues to be good. Is it because -- I mean quite obviously, the sales -- I mean you continue to book some sales. But I -- some firms have really registered a recorded drop in EBIT of 70% or 50%. You are actually progressing a bit. Is it your workforce that still comes to the factory? Just trying to understand this. And also what is the impact for Q2? Would you expect some resilience as well and good fixed cost amortization? That was the first question.

The other quick questions are the slow launcher business as a result of the COVID-19 crisis, would you expect some weakness by some of your competitors in terms of financing funding that could benefit you actually in terms of relative competitive positioning?

On the order intake, just -- I mean you partly answered this, but I was wondering whether, in terms of the ESA conference, the speed at which you're booking the orders, you were saying it's a bit faster than expected. I mean, are you ahead of your target at this stage in terms of -- I think you were talking about EUR 400 million to EUR 500 million.

And the final question is on the, let's say, on ESA, the consequences of ESA and the fact that you have there more to do than expected. Does it mean that, in 2020 and 2021, the share of development as a percentage of total sales will be higher than what you initially expected? Sorry, it was a bit long.

[Giulio Ranzo, executive]

So let's start from the first part, hoping that I understood your question because I did not quite get what you mean by fixed cost amortization. But what I can tell you is this. Since the beginning of this year, we put very strong and tight control on fixed costs and on general and administrative expenses. As a general measure because we believe that, in our industry, it's more and more important to stay lean and competitive above growing overhead costs and work on your gross profit as much as you can and forget about having big fixed costs because that won't do any good to the development of the company. So starting from January 1, we applied a very strong cost control. We cut all kinds of expenses that were not mission critical.

Once COVID-19 came, we cut even more than what was actually needed. So we applied very, very tight cost controls. And this ended up to be important because, with a slight slowdown in the progress of revenues, we tried to concentrate ourselves on those activities that would provide most of the gross profit and to minimize fixed costs such that we would end up with a better EBITDA, [ we post that ].

What we do during Q2? I don't know. We will continue to work very strongly on keeping tight control on fixed costs because now it's even more important given the outbreak. And we will do everything we can to accelerate the generation of new gross profit, which, as I said before, depends only on our ability to execute what is in the backlog as fast as we possibly can.

So to this end, the most important thing was to restart launches because, of course, if we start launches, we push -- actually, we pull that the production system to follow, you know what I mean. So until we have a bottleneck in flights, I mean, we will not just manufacture for the sake of putting everything into stock. So now that the flow starts moving again, then we can accelerate on this process. And this is why we have put so much effort to do this launch campaign and to make it happen in spite of COVID-19 and we [indiscernible] that you can [ manage ] because I can guarantee to you that those [ indiscernible ] is not a joke. But because it is so important for us to restart the speed at which we generate gross profit.

Now what's happening in the domain of small satellites, more launches at this time? You are right, small company start-ups that are attempting to create small [ constellations ] of small satellites, which are in the start-up phase, and they may have venture capital money or even that may be suffering. But again, many of them, in order to overcome this issue, they need to fly because many of the projects, if they don't fly, then they will bust. So [indiscernible], there is an urgency of many of these companies to actually edge each other in order to go to space. And we have seen this very clearly within the SSMS flight because I have not had a single customer complaining to say, oh my god, maybe I don't have the money, maybe I'm going [ bust ]. They all ask me to draw a loan as soon as possible because they need it themselves to achieve a milestone makes you even raise more funding and go across the [ flights ]. And so we make ourselves available to do the impossible to make the flights happen.

Then in terms of the ESA orders, it's a process. Typically, after the ministerial conference, it takes anywhere from 1 year to 1.5 years to convert the subscription of the [indiscernible] into contracts because the European Space Agency needs to define the work scope, the planning, needs to put in place a request for quotation. We provide an offer, we negotiate the offer with the final contract. All this process takes time. I would say so far so good because, in spite of the situation on COVID, they managed to work remotely. We received the RFIs. We are processing them, processing EUR 500 million worth of RFIs is again, quite an effort for our team. We need to work. It's not only ourselves. We need to work with the broader supply chain and the subcontractors and teams. So these 4, but to be honest with you, I'm not anxious to get to the finish line because I know it will come. And we, by the way, as you know, sometimes start working for ESA. Even if we don't have a contract, they just give us [indiscernible] and we start working anyway. So this is quite on track, I would say.

Now in terms of the weight of development revenues on the total revenues, I would say, for the next 2 or 3 years, we expect to keep pretty much the same ratio. When you had a ratio of anywhere between 35% and even 40%, probably, the next 2 or 3 years will be within this range. Thereafter, the weight of the relevant activities may slow down a little bit once we ramp up completely in Vega C. And therefore, production activity will probably gain a larger share of the overall revenue needs. But for the next 2 or 3 years, I expect this ratio of development activities pretty much stable in this range.

[Operator]

The next question is from Bruno Permutti of Banca IMI.

[Bruno Permutti, analyst]

I have a few questions. So the first one concern the scheduling of the flight. And so that you put in the presentation a schedule of the next 3 Vega flights there. If I well remember, you had 9 in your backlog. So I would like to have an update if possible on how it's going, the rescheduling of the Vega backlog.

A second one concern the extraordinary costs, only to understand if you plan to have some other nonrecurring items in Q2 and so -- in the other quarters. And the third point concern the -- your attitude on the M&A. So I wanted to understand, is this a situation in which you say, okay, stop for a while and see what happen on the market, and then perhaps there will be some opportunities, or you see on the contrary an acceleration of possible opportunities coming in?

[Giulio Ranzo, executive]

Okay. So let's start on the first question, the scheduling and rescheduling of flights. Well, it's a difficult situation. This is like when you are at the airport and something happens and all the flights are canceled and rescheduled. And you see passengers sitting all around waiting to hear a new flight schedule. It's obviously complex. We applied a general principle that, unfortunately, every captain will have to suffer somewhat -- apart from the delays. What we are committed to do is to push on the utilization of our assets and the integration of our people to catch up as much as we can by needing essentially no free time between one launch campaign and the other, by maximizing the use of the 24 hours, by using all the 3 ships on the launch pad, by really doing an accurate planning to catch up at least with part of this delay. All of the delay will be possible, as you know. And today, we accumulated 2 chance of delays. The first one was due to the [ phase ] of last year, and now this additional delay due to COVID-19. So we are, quite frankly, unable to recover 9 month worth of delays in a day. So we need to see in the next 8 to 10 months what we can do to at least minimize part of this delay, okay? And I think we have good chances. This was the reason for me to send a team now to stay for 2 launch campaigns, 1 after the other, to really make sure that we accelerate some progress. So I am confident that, if we work well, we can catch up with a lot of this delay.

Now the extraordinary costs for COVID-19 are related to mainly [indiscernible]. We procured I don't know how many thousands masks and gloves and things and sanitizers. And we purchased services from companies come and clean offices and shop floor every day. We have rented additional office space in the form of temporary prefabricated offices that we have put in the middle of the yard to have more workspace for the people to work. So at the end of the year, there will be some additional costs, for sure.

We don't believe that this cost will be so material to drastically out there -- the results of the company. It would be much more relevant whether we actually execute successfully on the programs to generate the gross profit. And if we have some more costs for these services, fair enough. Part of it we will offset by capturing some of the fixed costs. Part of it will be, unfortunately this year, a negative, but I think that this will happen to everyone, and so there's no shame for this.

On your last question on the attitude towards M&A, of course, this situation may open up opportunities for M&A, which we are reviewing also at the moment. But it's going to be tricky because we have to be careful that we not end up looking at companies that acting to be in difficulty because of COVID. But the reality is that they were in difficulty before COVID and now they are using the excuse of COVID to try and find another buyer. So we are looking at what is reasonable. We are safe on the situation that we do have cash. So if we want to execute a transaction of a small company to be integrated in our system, we can do it. But we will be selective because we have no intention to create ourselves yet another problem at managing a company that is not financially sustainable.

So I think we will be very opportunistic from this point of view. If we find a good asset whose problem is only temporary cash availability, that will be a good opportunity. But we will be extremely selective. And as you know and you observed in the past few years, in our sector, M&A transactions are not so straightforward and not so frequent. So we need to see really what comes up in terms of opportunities.

[Operator]

The next question is from Carlo Maritano of Intermonte.

[Carlo Maritano, analyst]

I have a question related to future strategy. So in the past, you were studying the possibility to find a new space porter and not to depend only on Kourou. Are you still starting the opportunity so that in case of exceptional events, such as coronavirus or the strike in the past, you don't depend only on that base?

[Giulio Ranzo, executive]

First of all, as you know, in Europe, there is one initiative for the possibility of a new phase for in Portugal on the [indiscernible] islands is presently, let's say, an open bid. We are participating to this bid. We have an interest. We think that the bid itself has had some slowdown due to COVID and maybe not only due to COVID. That is a long shot because, as you know, we don't create a new space port so rapidly and maybe it's interesting option. However, we don't think that having a second space port will do any difference to us in the event of something like a COVID because, as you have seen, this has been a planetary emergency that has stopped operations everywhere in the world.

I can tell you one anecdotal aspect for the VV16 flight, for example. We are having problems and bottlenecks, not really coming from the [ loan front ]. But for example, from the [indiscernible] stations and for us ability to perform the flight. We have one, for example, on the Bermuda Islands, and such, there is a station needs to be operated. So there were no flights to go to Bermuda. We had to actually rent a business jet to send the people. So sometimes the bottlenecks not necessarily come from the spaceport. And to be honest with you, what happens was is the demonstration that Kourou is definitely not the most critical bottleneck at all. So bottlenecks may be somewhere else but not necessarily in the big -- in the space port in particular, in Kourou, which is, by the way, very big, very well equipped and so far is adequate in terms of capacity for what we need and actually for even more. So we see any extra capacity that we can extract out of Kourou for the future. So far, I think it's interesting to look at other opportunities for a very long term, but it's not an urgent need.

[Operator]

[Operator Instructions]

The next question is a follow-up from Martino De Ambroggi of Equita.

[Martino De Ambroggi, analyst]

Yes. Just curiosity on the multiple satellite launch. So should we assume it is the same profitability of a single or a double satellite launch or there are differences? And just an update on the CapEx plan for the current year.

[Giulio Ranzo, executive]

So on the first question, to be honest with you, for us, it's difficult to judge because this is the very first time we do our ride share in this way. So from one data point, it's difficult to say whether doing a flight of this kind is more profitable or less profitable than a single payload. The variables that drive the profit are typically the fill factor. So if you manage to fill the launch as much as we, for example, have been able to do at the occasion of this very mission with a fill factor in excess of 80%, the flight tends to be profitable. If for some reason at the last minute, you don't fill the launcher completely, then you may suffer profitability. So this is the main driving factor of the profitability of our flight.

Of course, on a single mission, everything is easier because you may locate everything with a single customer, and you shall have no surprises as the date of flight comes closer. So let's say it's simpler to generate a profit on a single payload and safer. It is more challenging on a multi-payload mission for sure. But there's a growing demand for more satellites for me to learn to do this well, to do -- to find a way to be profitable so this very flight will be successful. I don't know about the future flights, we will see. For this time, we've been successful. Probably in the next few calls, if we succeed at closing out contracts with smaller customers, we may update you on this point if we have a better understanding.

Yes. The CapEx plan for the year. The CapEx plan for the year is pretty much a comparable order of magnitude with respect to last year. It could be even slightly more. As we commented in the past, we are historically in a bit of a peak in terms of capital expenditure. Until we finalize this process of transitioning towards the new industrial setup, the first quarter is typically not so indicative of what we do until year-end. So it's early for us to say, but this year, we will end up develop more CapEx or less because, again, it's a program that depends on whether or not we slip on the effective time line. But we pretty much have in mind where the same order of magnitude in terms of CapEx, we'll see it compared to last.

[Operator]

[Operator Instructions] Mr. Ranzo, there are no more questions registered at this time.

[Giulio Ranzo, executive]

Okay. Thank you all for joining the call. Stay close on the news flow, as soon as we have anything new, we will communicate to you through the various channels. And do not hesitate to come back to our Investor Relations for any questions you may have. Thank you.

[Operator]

Ladies and gentlemen, thank you for joining.