Leonardo SpA

MIL:LDO

Earnings Call Transcript 2021-Q1

[Operator]

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Leonardo First Quarter 2021 Results Conference Call. [Operator Instructions]

At this time, I would like to turn the conference over to Ms. Valeria Ricciotti, Head of Investor Relations and Credit Rating Agencies. Please go ahead, madam.

[Valeria Ricciotti, executive]

Good evening, everybody, and thank you for joining us today on our first quarter 2021 results conference call. I'm Valeria Ricciotti, Head of Investor Relations and Credit Rating Agencies. Today, our CEO, Alessandro Profumo, will take you through our progress during the first quarter of this year; and our CFO, Alessandra Genco, will take you through the Q1 financial results and our outlook for the full year. And then we will open your questions.

I will now hand you over to our CEO, Alessandro Profumo.

[Alessandro Profumo, executive]

Many thanks, Valerio -- many thanks, Valeria. Many thanks to all of you. My mistake is due to the fact that there is as well Valerio Cioffi with us today and Giovanni Soccodato. So thank you for taking the time to join us today. And we start with the key points about our first quarter results and our rating progress is starting the year.

We have made a solid start to the year and in line with expectations. Also, first quarter is the smallest contributor to the year. We have continued to achieve good order intake and our strong backlog has supported growing revenues. Our profitability has remained robust, and our cash flow is in line with the plan. We are progressing well with our plans. We are leveraging on our EUR 36.4 billion backlog in a complex global context. We have strong order intake level also this quarter at EUR 3.4 billion, less relying on large-scale orders and benefiting from the resilience of the military/governmental business and demand in export markets.

Revenues of EUR 2.8 billion, confirming our growth path with higher profitability across the group besides Aerostructures. EBITA is at EUR 95 million this quarter, recording a total growth rate higher than 130%. Clearly, the last year, we had the first impact of COVID, but I think that this is quite a good number. And we are confirming our strong liquidity and financial flexibility with a free operating cash flow at minus EUR 1.4 billion, reflecting usual seasonality.

Military and governmental markets remain robust. We are continuing leveraging on our prevalent exposure on key domestic markets. We are seeing good continued demand in export markets as well, even if travel restriction has delayed the winning of some orders or the delivery of some sale products. Meanwhile, we remain cautious on the speed of recovery on the civil side, as we talked about it to you in our recent full year results.

The impact of COVID pandemic is certainly not yet over. We continue to see its effects globally, and there is continued uncertainty because -- by it around the world. And this will continue for some time, at least. But despite this, overall, we have made a solid start to this year.

Also to mention on our continuing progress on ESG. ESG targets have been included in our remuneration report to be approved by the AGM, and they will now be part of both the short-term and long-term incentive plan. And we also continue to make a good strategic process in important areas, as you can see here in the next slide.

We continue leveraging existing assets and technologies to support next-generation products. For example, the Eurofighter platform has a strong development path for platform upgrade. Also, thanks to government support and the export market. And we are actively pursuing new opportunities post-COVID. But strategically, we are also doing more than this. We have talked for some time about our portfolio. What we have seen from us in the first quarter of this year is really taking a much more active approach to managing the portfolio to maximize its strategy.

First and most importantly, in addressing the challenges impacting the civil side of our business with a proactive review of options to accelerate transformation and address structural issues, including rationalizing industrial sites, investing to increase efficiency and flexibility, and head count reduction. We are in active dialogue with unions on plans to address these challenges.

We want to position Aerostructures and our ATR joint venture for the future, both operationally, financially and being set up for the long-term and next-generation program. We hope to update you later this year in more detail on our progress here on the civil side.

As I said, in full year 2020 results, we are also evaluating potential disposals. For example, the automation business. We are conducting a critical product portfolio valuation, focusing capital online of business with the strongest capabilities. It will also contribute to maintaining a solid capital structure.

And then we have also seen our active approach with the IPO process that we began for a minority stake in DRS, our important presence in U.S. The rationale in this scale is to allow the financial market to preset better increasing value in the company while maintaining our exposure to this key strategic market. And despite the strong interest received during the road show, the recent market conditions did not support an adequate valuation for us. So we intend to reconsider this move when market conditions are more favorable and allow for run rate-based valuation of this.

Then you have seen that we have recently expanded our naval electronics offer with acquisition of 30% of General Electric Italia, and we have announced the acquisition of a 25.1% stake in Hensoldt. This move will establish a strategic presence in the fast-growing German defense market and allow a further cooperation between complementary businesses across geography [Technical Difficulty] markets.

We have also -- we also had a long-held belief in importance of building cooperation across the European aerospace and defense industry, and we are determined to play an active role here. And that's as a context relating to the acquisition of the stake in the leading European German Hensoldt sensor solutions business. Let me give you more color on that.

We are acquiring a 25.1% stake and intend to implement a new strategic partnership to take advantage of attractive future opportunities. The closing of transaction is expected for the second half of 2021, subject to customary closing conditions [indiscernible] is in a very attractive space sensor tech for defense and security application. It has an expanding portfolio in cybersecurity, data management and robotics.

We see a very strong tangible industrial and strategic rationale behind this investment and partnership. It will enhance our combined access to the German, Italian and U.K. market, leveraging our joint networks to accelerate commercial initiatives in international market and leveraging complementary portfolios to offer comprehensive products and solutions to customers. Sharing best practices to ensure the compatibility of future technologies.

It will strengthen our defense electronic activities and strengthen our footprint in a fast-growing segment. It will put us in even stronger position behind important military and governmental programs, such as EFA and Eurodrone. And even before this, we have already been working together with Hensoldt. They are not stranger to us, and we are very used to these kinds of tie-ups, and we understand how to make them more valuable. At the same time, we can maintain a very solid capital structure, also through disposal and the potential IPO for DRS.

So all this adds up to important strategic progress and then increasing active approach to managing our portfolio. We are confident in our business strengths and strategy, and I mentioned the actions we are taking on Aerostructures and ATR. But let me touch briefly on our other businesses.

We continue to make choices and strategy aimed at increasing their long-term prospects, building up volumes and improving their quality and longevity of profit streams and cash flow. Take Helicopters. It has proven strength in the current conditions. As a business, it is a well-balanced in military, civil plus attractive customer support. We have the right product strategy we will use. The military/governmental components have provided great resiliency, flexibility and stability in a tough environment like we have seen during the pandemic.

Helicopters continues to perform well commercially, and we can be confident looking forward longer term. Here, we have a solid backlog and our product portfolio is leading to a solid stream of revenues coming also from the more profitable customer support activities in the coming decades.

We have also been able to catch many growth opportunities in the military market. And we continue to invest well and build for the future. Look at Kopter acquisition to enlarge the product range in a specific segment and opening new markets, or the AW609 and the Hero. Over time, the Helicopters is extra, the AW169.

While across our Electronics Division in Europe, here, we saw a very good start to the year commercially, and we have seen -- we have a solid order book. We have established long-term relationship with customers built on trust and close cooperation becoming the partner of choice. Our strategy is to gain long-term repeat business and also potentially support business as well. We have won positions on attractive long-term opportunities, and we can leverage our strong incumbent position to produce attractive continuing repeat business.

For example, the EFA fleets guaranteeing opportunities until 2040, 2050 and now Tempest. You can also see example in radar and IFF Mode 5. It also needs to -- us to expand in aviation market. For example, with our targeting radar system, where for 17 years, we have been the sole supplier to lock-in mapping for the F-35. And now for U.S. [indiscernible].

In U.S., DRS continued to perform strongly with top line growth confirmed. Yes, we are very well positioned towards U.S. Department of Defense key priorities. And we expect margin expansion to be driven by transitioning of programs from development to production. All in all, we see a positive outlook for the future for our defense electronics activity.

Next, Aircraft. It is a structurally strong business. We are well positioned on key long-term programs like EFA. This will bring a constant flow of high value-added customer support activities. It is performing very well commercially, and we will probably be looking at the pipeline of new potential opportunities. It has a best-in-class profitability. It is expected to grow on all metrics in absolute terms and not forget the key EFA Kuwait bringing growing contribution and the Eurodrone contract about to be finalized.

We are investing in trainers and attractive and growing business. The M-345 -- M-346, sorry, you saw recent achievements in Greece and other export campaigns, which will bring us a solid bulk of activities. And the M-345, still in the initial phase, with significant opportunities in domestic and export countries. And yes, certified where we see long-term MRO activities.

Looking further forward for our group as a whole, as I say, the impact of the global pandemic continues and it's not over yet. But we can have confidence in the short term because of our commercial and operational resilience and our continued commercial momentum by order intake and so on. Our top line benefiting from our strong backlog, especially on the military side, governmental side.

In the medium term, as the civil side will recover and we position for the future, and we take advantage of post-COVID opportunities. And in the longer term, we gain the benefit of our strategy of building sustainable growth and maximizing the value in our portfolio.

Thank you for your attention. And now I would like to hand over to Alessandra. Alessandra?

[Alessandra Genco, executive]

Thanks, Alessandro, and good afternoon, everybody. It is 1.5 months since we spoke to you in the detailed full year 2020 results presentation. As you know, although Q1 is important to us, as we look to start the year in the right way, it is always our small contributor to the full year. It is important to bear this in mind.

As you can see, we have made a solid start to the year. Q1 results are in line with our expectations when we recently set out our guidance for the full year. Continued strong demand for our products on the military/governmental side has supported both our order intake and growing top line.

We're leveraging on our strong backlog of EUR 36.4 billion. Order intake of EUR 3.4 billion, flat year-over-year, well balanced and with no jumbo orders included. Revenues of EUR 2.8 billion, up 7.7% year-over-year. Profitability remains robust and is higher across the group, except for Aerostructures.

Free operating cash flow is in line with plan at this stage of the year at negative EUR 1.4 billion, reflecting usual seasonality. And we confirm our strong liquidity position with no material refinancing needs due in 2021.

Let's look at the key group metrics for Q1. And remember, the prior year comparator, Q1 '20, was the period when we began to see the impact of the pandemic on our results in March 2020. First, looking at new order intake. We are pleased with our continued commercial momentum, EUR 3.4 billion of new orders in Q1, at a similar level to last year, nicely distributed across the group, plus looking forward with the prospect of attractive pipeline opportunities.

The standout commercial performance in the quarter was from Defense Electronics. In Europe, it was especially strong with new orders of EUR 1.5 billion, up almost 80%, including EFA Germany, involving 38 Typhoon aircraft, including orders to equip the near future submarines for the Italian Navy and, in cyber, contracts for the Italian governmental and military forces.

DRS also continued its strong commercial momentum with additional orders from the Mounted Family of Computer Systems for the U.S. Army as well as orders for vehicle protection equipment factories. Helicopters won new orders in Q1 for EUR 855 million, noting a high comparator in Q1 '20 because of the major U.K. Merlin support contract. And we saw the second order in the U.S. for 36 naval TH-73A helicopters.

In Aircraft, order intake rose to EUR 595 million, thanks to the important trainer export campaign for the M-346 as well as EFA support and others. While Aerostructures recorded a shortfall in orders, reflecting the current very tough environment and position of major customers. So overall, a good commercial performance.

Next, revenues. With group Q1 revenues of EUR 2.8 billion, up 7.7%, confirming our growth path as we see good performances in all divisions, except Aerostructures. Helicopters delivered revenues of EUR 792 million, up 12.5%, executing on its backlog, driven by ramp-up of military/governmental programs such as NH90 for Qatar and the navy trainer. Defense Electronics Europe saw revenues up 10% to EUR 931 million across all business areas. DRS showed strong progress with higher volumes up 80%, excluding FX effect.

Aircraft increased top line revenues by 18.3% to EUR 510 million, in particular driven by the M-346, while Aerostructures volumes were down, reflecting the current tough environment. So overall, a good top line performance in Q1, reflecting how we have been delivering well from our solid backlog.

Moving on to EBITA and profitability. I'll explain the drivers by business in a moment, but the key points here are Q1 EBITA was EUR 95 million, that's over double the level of last year in the first quarter, with higher volumes and improving profitability, with ROS at 3.4% versus 1.6% last year. But remember that Q1 last year was impacted by the sudden emergency of COVID halfway through the quarter.

Our results this year show the efforts we have made since then, achieving operational recovery from the worst of the pandemic impact, with productive hours 8% higher than in Q1 last year, if we exclude Aerostructures. So reducing the under-absorption of costs and achieving higher volumes -- by achieving higher volumes, profitability across the group is improving, except in Aerostructures.

Now let's look at the individual businesses. Helicopters showed an increase to EUR 31 million on the back of higher revenues and improved manufacturing efficiencies. Defense Electronics delivered a good positive performance. In Europe, increased EBITA to EUR 79 million, again driven by higher volumes and reduced order absorption. DRS in the U.S. delivered strong growth, in line with our margin expansion plan. EBITA at $58 million leading to a recurring sales higher at 8.5% in the quarter.

Aircraft increases EBITA to EUR 47 million, up strongly with a ROS of 9.2%, again driven by higher volumes and better manufacturing efficiency compared to the first quarter last year. Losses in Aerostructures increased to EUR 46 million, reflecting the expected reduction in volume, leading to production site running at lower capacity. Similarly, ATR continues to be heavily impacted by the challenges in the civil aerospace market with a negative contribution of EUR 14 million.

But we are taking actions, already beginning to reduce cost against a tough backdrop. Then in our Space joint venture, there was a slightly better result in the quarter, confirmed good results in Space services and improved manufacturing performance. So overall, we have maintained robust and solid profitability for the group despite the external environment and continued impact on the civil side.

Now moving to below the line items. You can see we have benefited from a higher EBITA and then in the quarter, there were EUR 11 million of nonrecurring costs related to COVID and restructuring costs and PP&A in line with last year. Financial charges were lower at EUR 46 million and taxes higher at EUR 31 million.

We have recently shown how we have managed cash flow well in these challenging external conditions. Our free operating cash flow in Q1 progressed in line with plan and shows the impact of our focus and discipline. At negative EUR 1.4 billion, it reflects our usual seasonality with cash inflows heavily weighted towards the second half. But you can see a year-over-year positive [Technical Difficulty] of EUR 173 million.

Moving to our balance sheet. We firmly maintained our continued strong liquidity position at EUR 4.2 billion. We are confident of maintaining the solid financial capital structure post the Hensoldt acquisition. We have the additional options of strengthening this further through potential disposal as well as through the potential strategic move to IPO a minority stake in the U.S.

So you have seen Q1 is a solid start to the year and on track with our expectations. Our main businesses on the military/governmental side are delivering and the year has started well, especially in order intake and revenue growth.

We are confirming the full year guidance that we recently gave you in March. And you can see here on the slide, continuing commercial momentum and new order intake, top line growing as we leverage off a solid backlog. EBITA improving and remained robust despite the civil softness and continuing COVID effects, while free operating cash flow up slightly with resilience on the Defense side, offset by pressures on the civil side and more normal levels of net investments.

So now to conclude, we are pleased with the start of the year. We are on track and delivering in an uncertain external context. While remembering that it is early in the year as it's only Q1 and it's our smallest quarter, but the key points are continued good commercial progress with continuous order intake distributed across the group, confirmed growth path in revenues, operational resilience, robust profitability and cash flow in line with plan.

Thank you, and now I'll hand it over to Q&A.

[Operator]

[Operator Instructions] Your first question is from David Barker with Bank of America.

[David Barker, analyst]

Can you hear me okay? There's a bit of feedback on the line.

[Alessandro Profumo, executive]

No, no. We can hear you well.

[David Barker, analyst]

Fantastic. I've got 2 strategic questions. Firstly, on the minority stake in Hensoldt. Obviously, we know that Leonardo is a major industrial partner for the U.K. Tempest program, and Hensoldt expects to be a major supplier for the FCAS. What does your stake in Hensoldt mean for Leonardo's participation in FCAS? And do you think that there's going to be some commonality there between the 2 platforms in terms of technology that you can exploit? That's my first question.

[Alessandro Profumo, executive]

Okay. Now Giovanni Soccodato will answer you.

[Giovanni Soccodato, executive]

Yes. Thanks. Tempest, it's clear that these 2 aircraft will operate in an alliance environment, net environment. So I think we strongly believe that whatever the developments will be in the future, there will be a strong level of commonality in basic technologies and capabilities, which should be delivered. So we expect that, that would allow us working within Leonardo and Hensoldt in account of more cooperative way to improve the development of technology and capabilities going forward.

I think this could be even strengthened [indiscernible], thanks to the fact that we are already operating on Eurofighter Typhoon. Eurofighter Typhoon will be operational for another 30 years at least [indiscernible] in Germany and is going to undergo through a long-term evolution program which will involve technology development enhancement.

And through that technology development enhancement, we'll be able to develop technologies to be -- possibly improvise this [indiscernible] into new development, EFA or Tempest. This, we think, is a great opportunity that we can capture working together in the future, irrelevant of whether the 2 programs will continue to be 2 separate programs or will eventually converge. If they would converge, that will provide even greater opportunities and the strength to our cooperation with Hensoldt in the future.

[Alessandro Profumo, executive]

Second question?

[David Barker, analyst]

Fantastic. And my second question was just touching on DRS. I think you've been very clear about the reasons why you paused the partial listing. When do you expect the conditions to be more favorable? And what are you looking for? And does the EUR 606 million cash outflow in the second half of 2021 for Hensoldt increase the urgency for you to visit this -- revisit this process?

[Alessandro Profumo, executive]

No. The answer to the second part of your question is no, in the sense that we are working on other disposal in order to fund the Hensoldt acquisition. So we are not under pressure. We don't know when the market condition will be at the right level. What we are focused on is to maintain the promise that in any case we made to the market during the roadshow of the management. You have seen the first quarter numbers, which are really good. So I think that now we have to be focused on that. Then clearly, we hope that on one side, the 2 elements of uncertainty that unfortunately arise the week of the listing; on one side, the inflation -- the growth of inflation and the [indiscernible].

On the other side, the approval, which got passed and -- of the -- I don't know how to call support package of our President Biden, the stimulus package of EUR 1.9 trillion that was creating the question if there would be a cut to the defense budget. In a certain period of time, we will be over these 2 uncertainty elements. I'm not saying this inflation won't be there, but at least will be digested by the market. So that -- hello?

So when the market condition will be the right one, we will reconsider the element. Clearly, we have a clear traction in terms of evaluation. So it depends on what market will do. As I said at the beginning of my answer, we are not under pressure.

[Operator]

Next question is from Alessandro Pozzi with Mediobanca.

[Alessandro Pozzi, analyst]

My first question is on disposals. I believe you mentioned that you're hoping to fund the stake in Hensoldt with the disposal. Can you give us maybe a bit more color? You mentioned automation, but is it fair to assume that potentially all disposal could add up to a few hundred million up to maybe EUR 600 million?

[Alessandro Profumo, executive]

Clearly, not -- clearly, not automation. We are working on the portfolio. Since people are involved, as always, is wise, we want to be heading up in the discussion with a potential partner in order to make announcement when we can manage as well our internal stakeholders.

[Alessandro Pozzi, analyst]

Okay. And on Hensoldt, could you -- maybe -- do you have in mind the level of synergies or additional order intake that potentially you can win by having a minority stake in the company?

[Alessandro Profumo, executive]

We have a very good exercise in terms of potential synergies. Clearly, this is something that we have not communicated to the market because it's a minority stake. So we have a clear view on what we can do together. I'm sure that you have noticed that Thomas Müller, the CEO of Hensoldt, asked to be part of our press release with a statement, just to give a strong signal of the fact that the management is fully supportive of that. And let me say, I do have some experience of working together with other companies when the management where the right mindset is always the best base in order to achieve great targets.

[Alessandro Pozzi, analyst]

Okay. That's very clear. And do you think that there is another angle to this acquisition of minority stake, like a geopolitical one, whereby potentially Italy is going to work closely with Germany in Defense Electronics or in Defense in general?

[Alessandro Profumo, executive]

You know perfectly that we are in a sector which, if possible, is even more regulated than the banking sector, than the financial sector from which you are coming, and I do have some experience as well. Defense is an incredibly sensible sector for any nation. We think that Europe is our horizon, but it's a process. The nations are still very important. You can do such kind of deal, even a minority, we have to go through the authorization by the German government without having an open clear discussion and engagement with the government of the 2 nations.

[Alessandro Pozzi, analyst]

Okay. And maybe last one, if I can, on the tax rate. It looks like it was a bit higher this quarter. Can you give us an update on the tax rate for the rest of the year?

[Alessandra Genco, executive]

Yes, Alessandro, this quarter is only a timing effect. So the tax rate for the full year is confirmed around 23%. What we have -- what you are seeing here is an effect of tax losses in the Italian entity, which will change sign over the course of the year and for which we did not account for deferred tax assets.

[Operator]

The next question is from Martino de Ambroggi with Equita.

[Martino De Ambroggi, analyst]

The first question is on the net debt. You started an acquisition season and we already know the covenant threshold. But what's the maximum leverage or, in absolute value, net debt you consider ideal before touching the threshold, taking into account with or without -- probably maybe without any divestiture?

[Alessandra Genco, executive]

The way we think about it, Martino, is in terms of -- the financial policy of the group has not changed. The strong commitment that the group has to become investment grade by all the rating agencies is confirmed. So there is no specific target in mind. We do have, as you were pointing out, adequate and abundant cushions on the covenant, and we intend to maintain it going forward.

[Martino De Ambroggi, analyst]

Okay. The second question is on the -- well, maybe just a housekeeping question on the automation division.

[Alessandro Profumo, executive]

Don't worry. We have the windows open because we are now in a room and there is an ambulance which is going through.

[Martino De Ambroggi, analyst]

You're close to a hospital.

[Alessandro Profumo, executive]

No, no, no, no. We are not close to a hospital, fortunately. We are on the [indiscernible] and main connections to the cities go through this way. So.

[Martino De Ambroggi, analyst]

Yes. The second is, let's say, more difficult question, probably without a real answer today. But the Hensoldt investment, could it be the first step to build anything larger? I don't know, a joint venture or what else? Or it remains just a minority stake in a listed entity going forward?

[Alessandro Profumo, executive]

Martino, Hensoldt is a listed company, and so we cannot comment on that.

[Martino De Ambroggi, analyst]

Okay. But except Hensoldt, so the business -- the division in which Hensoldt is involved is very large. So you are looking for other potential partners, potential in different businesses inside the division? Or it's just one shot?

[Alessandro Profumo, executive]

No. We think that with Hensoldt, we have a very complete range of products. We don't need to enlarge business lines. Maybe on the contrary, we can consider some disposal of some very specific business lines. So this is the focus we have. Clearly, is an important step in order via the cooperation to create a strong entity in the European market.

[Martino De Ambroggi, analyst]

Okay. And the very last is on the Aerostructures. I don't know if you are willing to disclose the free cash flow for the first quarter of the Aerostructures stand-alone?

[Alessandro Profumo, executive]

No. I think that the numbers we have shown are quite good overall. So we are working, even Aerostructures, we expect in call to have a specific presentation, Aerostructures, because we are continuously working on redesigning activities. So I have to say that the Aerostructures division is ramping quite well, with all the problems we have because the market is still weak, but we are seeing some signals from the OEM that they are less pessimistic, I would say, in this way.

[Operator]

The next question is from Harry Breach with Stifel.

[Harry Breach, analyst]

Can I -- can I please just ask 3 questions? Maybe if I can start, Alessandra, for you. Maybe understanding or thinking about the goal of achieving an investment-grade rating, is it possible to think about what level of financial benefit that could bring Leonardo in terms of its interest cost and the fees it pays for performance bonds on export contracts? Can you give us some sense of the financial benefit to you when you get to investment grade?

Maybe secondly, maybe one for Mr. Profumo. When I think about the portfolio now, we have a large number of stakes of 50% or less. When we bring Hensoldt, when the acquisition closes, there'll be the 26%, 25.1% stake in Hensoldt. We have the 50% in ATR, 33% in Thales Alenia Space, 25% in MBDA. When you think about the portfolio, are you comfortable with the capital that is being consumed by these minority stakes and the access to the cash flows of these JVs? Do you see that as being a satisfactory end state for those overall?

And then maybe just finally, when we're thinking about the large defense export contracts, whether it's Typhoon, NH90 elsewhere, in terms of milestone achievement so far this year, first quarter, maybe comparing it especially to last year. How happy are you in terms of on-time milestone achievement so far?

[Alessandra Genco, executive]

Yes. Well, the goal of the investment grade, it's definitely an important question. Now I have to recognize that with bank counterparts, for many of them, we are already viewed, considered as an investment-grade company. And the pricing that we are awarded both for financing cash lines as well as for bonding lines are reflecting this. So honestly, there would be some benefits financial -- strictly financial benefits on the loans where we have a margin grid reflecting credit rating.

For example, the revolver credit facility has these terms. But broadly speaking, I would say that more than the financial costs which per se are already pretty competitive, I would say, it's the opportunity to have a lower level of debt on the balance sheet and be able to bring forward after as the opportunity arises.

[Alessandro Profumo, executive]

On our comfort position with the minorities. You are right, we have a bunch of minorities, but we have to go through them. So -- Hensoldt is slightly different from the others because, clearly, we are assured that -- down the road that there will be a European consolidation and not to be where I would be really to hamper our position in the Electronics Division in the long term. So we can like or not, but it's very important to have -- you know that there were 4 players. The other are competitors of us. So to be the investor is also not to have the other investors. And this would create weakening of our long-term position in electronics. So we are sure that it's important.

Talking of the others, and we have 3 in realty, because you said you have 33% of Thales, but we have 67% of Thales. This is the Space Alliance, which is an important presence for us in the long run for being present in the Space domain. The Space domain is a very important one. You know also the multiples that have the Space business in other countries. So perhaps it is relevant. We are also present as Leonardo in the sector with our Electronic Division. So it's relevant for us as overall market.

Then we have MBDA. MBDA is the first step for a European consolidation. As you know, we have the same government rights of the other 2 players. It is a company which generates a lot of cash, and we have a benefit out of that. And on top of that, this is a strong integration with our Naval business because when we have a comfort for combat management system, usually the others were having a government contract, as well as the platform business because we have many MBDA sites on our Helicopter/solar aircraft. And when you go to negotiate in a country as prime, you have named NH90 or Eurofighter, we can say Qatar or Kuwait where the armament as well is an important component.

So there are strong strategic meanings. You have also to consider, and close to that, the fact that Europe is still, we've mentioned, so it's not U.S. We have a very clear European view, but this will [indiscernible]. We have to define if Leonardo is a player or not. We are a player. We want to be a player. We can bring your attention to our shareholder value. As you know, our return on invested capital is going up continuously. And we have achieved very good numbers. And so I think that this is an important element.

Milestones. We are -- we were in 2020 as well. This is one of the reasons why 2020, at the end of the year, despite of COVID, we are very satisfied on how we are achieving the demand on some important programs. So it's something which is relevant for us. This is the reason why also we have the good numbers we are showing.

[Operator]

The next question is from Gabriele Gambarova with Banca Akros.

[Gabriele Gambarova, analyst]

The first one regards the Eurofighter program. I was wondering what is the, let's say, the perspective for your assembly line? Now you are working on the Kuwait planes. And I was wondering what are the perspectives for this specific program? And if you can share with us, if you are, let's say, competing as prime in any area? I know you are part of the consortium in Finland. There are good perspectives and so on. But I was wondering if you have also an involvement as prime somewhere?

And the second one -- the second question was about the Q1 results. When I look at the eliminations or other activities item at EBITA level, I see that there is EUR 53 million, pretty high in comparison to the EUR 37 million last year. So I was wondering if there are -- there is any reason for this increase? And if you can provide me guidance for the full year 2021?

[Alessandro Profumo, executive]

Relevant to the Eurofighter question, really, we have never had a stop in our assembly line due to wait order. And at the same time last year, at the end of last year, we had also the Germany order of additional aircraft. So really, we are absolutely not planning a stop over the assembly line in Caselle. At the same time, Finland is not one of our prime campaign, but we have a strategic campaign because as we said in other occasions, we are planning at least another 200 of orders in the next year on Eurofighter that, as Giovanni said before, has a long life, also considering long-term evolution programs and the bridging needed in order to jump in the Tempest or FCAS program.

So really, we are working on campaign as prime. And as you said, during the consortium, we have different roles in any campaign. We are supporting, obviously, Finland and the other potential acquisition, but we have not a real problem in assembly line, absolutely not.

[Alessandra Genco, executive]

Gabriele, on the other activity lines, what you see reflected in there is the result of what we have discussed in the past, which is the centralization of a number of activity and the strengthening of the corporate structure in order to better coordinate a number of initiatives and projects taken throughout the group. So that increase will be following a similar trend throughout the year.

[Operator]

Excuse me, there are no more questions registered at this time.

[Valeria Ricciotti, executive]

So thank you very much for being with us today. As usual, if you have follow-up questions, the IR team is available.

[Alessandro Profumo, executive]

Many thanks. Bye.

[Operator]

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.