For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Sesa SpA (FRA:1S3) achieved a resilient set of financial results in the first half of 2025, consolidating growth from the previous year.
System Integration revenues increased by 10% year-on-year, driven by strong performance in Cloud, Vertical Application, Cyber Security, and Data/AI sectors.
Business Services sector saw an outstanding 25% year-on-year growth, supported by the development of Vertical Banking Applications and Digital Platforms.
The company has made significant investments in high-margin sectors, which are expected to drive mid-single-digit growth starting from the second half of 2025.
Sesa SpA (FRA:1S3) has a strong commitment to ESG initiatives, maintaining high sustainability ratings and certifications, which enhances its appeal to long-term investors.
Negative Points
Consolidated pro forma EBITDA decreased by 4.5%, primarily due to unfavorable market trends in value-added ICT distribution and reengineering processes in the Digital Green sector.
Earnings after taxes adjusted before minorities declined by 12% due to the EBITDA trend and higher financial charges from rising market interest rates.
Value Added Solutions sector experienced a 7.6% decline compared to the first half of 2024, with a negative trend in the second quarter.
Net financial position reported a net debt of EUR122 million, reflecting significant buyback, dividend distributions, and M&A investments.
The Digital Green sector faced a 40% year-on-year revenue decline on a like-for-like basis due to price downturns over the last 12 months.
Q & A Highlights
Q: You mentioned expecting mid-single-digit growth in the next six months. Is this the new normalized growth level for Sesa for 2026 and beyond? Also, what is your M&A strategy for the next 6 to 12 months? A: Yes, we anticipate mid-single-digit growth in both revenues and profitability as the new normal for Sesa, particularly in Business Services and Software and System Integration. Regarding M&A, we are focusing on high-margin sectors and have intensified activities in Business Services and Software and System Integration. We closed eight deals in FY25 and will continue with bolt-on acquisitions, focusing on marginality and strategic sectors.
Q: Can you comment on the net working capital at the end of October and expectations for cash generation for the full year? Also, why was the performance in value-added services lower in the second quarter? A: Our net working capital did not perform well in Q2, closing at EUR17 million compared to EUR36 million in Q2 2024. We expect to stabilize by year-end. The value-added services segment faced a challenging comparison with Q2 2024, which saw over 15% growth. Despite this, our EBITDA margin remains stable at 4.4%, and we expect a stable trend from Q3 onwards.
Q: Could you elaborate on the factoring increase and its relation to interest rates? Also, any updates on cash pooling and interest income generation? A: Factoring increased during the period, and interest rates impacted financial costs, which rose by 15% compared to H1 2024 but decreased by 10% from H2 2024. We expect to benefit from lower interest rates starting Q3. We reduced securitization by EUR40-50 million to save on financial costs. Our cash pooling efforts are ongoing to improve interest income generation.
Q: What is the outlook for the Business Services line, given the 25% growth and 40% EBITDA growth expectations? A: Business Services is performing well, with new customer acquisitions and investments in digital platforms for financial services. Our EBITDA margin improved to over 16% from 14.5% last year. We expect continued EBITDA growth exceeding revenue growth, with potential expansion to EUR300 million in revenues in the three-year period post-2025.
Q: Can you provide more details on the expected margin expansion in the Business Services line for the second half? A: The Business Services sector is seeing significant growth due to new customer acquisitions and investments in digital platforms. We expect EBITDA margins to continue improving, driven by scale opportunities and bolt-on M&As. The sector has great potential for further expansion, targeting EUR160 million in revenues with a potential to reach EUR300 million in the next three years.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
