Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the ENAV Full-Y ear 2025 Results Conference Call. As a reminder, all participants are in a listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Fabrizio Ragnacci, Head of Investor Relations. Please go ahead, sir.
Thank you. Good afternoon, ladies and gentlemen, and welcome to the full- year 2025 results presentation, which will be hosted by our CEO, Pasqualino Monti, and our CFO, Luca Colman. In the presentation, management will provide some highlights of the period, and then we'll walk you through the operational and financial performance for the group. Following the presentation, we will have the usual Q&A session. Before we start, let me remind you that media can be connected to both the presentation and the Q&A session. Thank you, and now let me hand over to Pasqualino.
Thank you, Fabrizio, and good afternoon, everybody. We start with a closer look at the operating performance. Since 2023, the Italian airspace has shown a full recovery and continued to grow year after year. In 2025, air route traffic for Italy stood at +24% versus 2019, up by more than 10 percentage points versus the comparator group in Europe. 2026 started on a strong note. As of February, air route traffic is up by 7.6% versus 2025. In this record growth environment, ENAV's operating performance has been remarkable and confirmed our role as best in class in Europe. Results in terms of quality of service are evident. The number of flights assisted has grown over the years, and still we have always beaten the regulatory target, even by quite some margin.
This track record gives us confidence that we will continue to overperform and achieve the performance bonus also in the coming years. The significant operating performance was coupled with visible results also on sustainability. We have achieved a reduction in CO2 emissions of 86.4% versus the 2019 baseline. We have been confirmed in the Climate A List by CDP for the second year in a row, and we have been included in the Sustainability Yearbook of Standard & Poor's for 2026. Besides the core business, the risk-return profile of the group has improved also thanks to the focus on the non-regulated business. Managerial efforts to valorize ENAV's expertise and know-how resulted in a growth of around 1.6 times in revenues from the non-regulated business. That now accounts for approximately 5% of total revenues.
The acceleration started in 2023, and in 2025, this business recorded revenues of EUR 52 million, positioning us well to reach our target of more than EUR 100 million by 2029. We have exposure to growing markets and technologies with almost 50% of the revenue stream generated outside of Europe and with a well-diversified portfolio of products. The growth has been achieved both organically and through M&A. In the defense sector, the higher spending planned by the government offered us the opportunity to contribute to modernization of radar surveillance systems at six Italian Air Force bases. In Malaysia, we have proven the commercial feasibility of the Remote Tower concept.
Ultimately, with the acquisition of AIView, which we expect to finalize in the coming days, we can expand further our presence in the drone segment, which we believe will grow significantly in the future. The solid trajectory of both core business and the non-regulated segment are mirrored by the performance of the stock. Since the start of the mandate, the re-rate of the stock has been consistent. The share price is up by 51% versus the average level recorded in 2023. Recorded a growth of 46% since the Capital Markets Day back in April 2025. The visibility of the path forward and our focus on shareholder remuneration resulted in a distribution of around EUR 430 million in dividends over the 2023-2025 period.
As a result, total shareholder return for the period is equal to 57%, higher than the TSR recorded by the Italia Mid Cap Index by 6 percentage points. As we are now at the beginning of a new year, the focus on shareholder remuneration remains unchanged and our dividend policy fully confirmed. Let's now start on full- year 2025 results. 2025 results show our ability to execute and be resilient. We have fully met the guidance upgraded as of last July and even outperformed in terms of net income. Luca will elaborate on the key drivers, but let me highlight the results at the EBITDA level. EBITDA came in at the higher end of the guidance range as we were able to extract additional efficiencies and react to the weaker traffic trend emerged from August 2025. Results were strong, also on cash generation.
Free cash flow reached a higher level than projected, with around EUR 260 million up by EUR 20 million versus the initial expectation of the year. These results are the best basis for the next steps in our path to 2029, but the external context is currently very difficult to predict. We are facing an extremely volatile environment with the recent turmoil in the Middle East, generating potential consequences that are difficult to forecast and are still evolving on a daily basis. In terms of our exposure, Middle East are accounted for only 10% of en-route service units in 2025. We are monitoring the situation. January and February have shown solid growth and en route traffic is at + 7.6%, but actual data for March will be available only at the end of April.
In order to grasp better the potential size of the impact, we are also waiting for the update of traffic forecasts from Eurocontrol. For what concerns the impact, let me highlight that our regulatory framework foresees a balanced mechanism on traffic that protects in case of volatility. Beyond a 2% decrease in traffic versus the planned level, the downside will be shared with airlines, with only 30% left on ENAV's accounts and 70% borne by airlines. As a sensitivity, you can consider that each percentage point en-route traffic accounts for around EUR 6.5 million in revenues. In light of the ongoing crisis and the lack of actual data to elaborate on, we have decided to postpone the communication of our 2026 targets to the Q1 results at the beginning of May.
Operating variables are under our control. Bear with us as we develop a more refined view on traffic for the coming months. Despite the turmoil, we can look ahead to 2026. Our results have proven the resiliency and predictability of our business model and the solidity of our strategy. We improved our targets for 2025, delivered on expectations, and want to share the incremental results with our shareholders. To this end, we are upgrading the DPS curve for the next two years. We will propose to the next AGM in May a DPS of EUR 0.29 per share for 2025, and the Board of Directors approved a DPS of EUR 0.30 per share for 2026.
As I said, our dividend policy is fully confirmed and based on cash flow generation, which remains visible and supported by a protective regulatory framework. Now I hand over to the CFO that will walk you through the numbers of 2025. I will come back later for closing remarks.
Thank you, Pasqualino. Good afternoon, everybody. Let's start with the operating details. Traffic in 2025 continued to be robust and as said by the CEO, outperformed the European average. En-route service units grew by 5.89% year-on-year, driven by overflight and international, up respectively by 7.8% and 6.9% year-on-year, which mitigated the national traffic, which is down by -2.1% year-on-year. Terminal traffic increased by 3.4% year-on-year, with growth in both charging zones 1 and 2. Maybe driven by international traffic that more than offset the weakness in national traffic. As a result, terminal performance came in below plan expectation by 3.6 percentage points. Let's move now to the economic results, starting with revenues.
Total revenues for the period amounted to EUR 1.025 billion, supported by the continued strength of the core business regulated activities and the positive performance of non-regulated business. Looking at the regulated business, net regulated revenues amounted to EUR 12.1 million, driven by en-route revenues that increased by 15.5% year-on-year. Terminal revenues remain broadly stable, reflecting the slowdown in national traffic that we mentioned earlier. The non-regulated business contributed with +EUR 2.8 million, achieving the target for the year in line with the planned expectations. Balance for the period impacted for -EUR 32 million as a result of a positive balance for the period of around EUR 49 million in 2024, and only EUR 70 million in 2025.
Let me highlight the following. In 2024, we accrued a positive balance related to inflation worth of around EUR 64 million, which has been reset in 2025 for the start of the new regulatory period. In 2025, we record mainly a negative inflation balance for around EUR 5 million, a positive balance for traffic overall of about EUR 4.9 million, and EUR 13 million related to the en-route performance bonus, achieved thanks to the remarkable result in terms of punctuality versus the regulatory target set for ENAV. Moving to costs on slide 11. Total operating costs for the period amounted to EUR 772 million, up by 6.4%, well below the projected 9% increase mandated in the plan.
Thanks to the efficiency measures and the cost control initiatives that were also activated in response to the traffic dynamics in the second half of 2025. Personnel costs reached EUR 633 million, up by 6.8% versus the previous year as a consequence of higher fixed component due to contractual wage adjustments, mainly linked with inflation and higher variable component, mainly driven by union agreements to handle the higher traffic volumes. Other operating costs increased by 7.6% due to higher maintenance costs, Eurocontrol contributions, and other personnel expenses. Moving on to slide 12 on EBITDA. EBITDA for the period reached EUR 253 million, meeting the higher end of the guidance range for the year.
This result has been achieved thanks to the focus on the cost efficiencies that allow us to mitigate impact stemming from the soft end of en-route traffic started in August of 2025, as well as the weakness in terminal traffic. Moving now to slide 13 on the profit and loss statement. D&A decreased by EUR 10.4 million to EUR 109.3 million, as the negative impact from provisions of EUR 2.7 million was more than offset by lower depreciation following the full depreciation of some assets, as well as the dynamics related to the accounting of EU grants like PNRR funds and other forms of subsidized finance.
Net financial expenses of EUR 8.1 million decreased by 2.5% year-on-year, reflecting lower interest expenses on variable costs of debt due to falling interest rates, partially offset by the increased charge related to the first tranche of EIB loan. Cost of debt in 2025 was equal to 3.59%, down by 47 basis points versus the previous year. That was 4.06%. Let me highlight that at the beginning of 2026, we executed liability management exercise and subscribed two new loans, three- and five-year bullet with a pool of banks that fully cover our needs for the plan period. This liability management will help us drive further down the cost of debt in 2026.
Net result amounts to EUR 93.1 million, marking a 4% increase compared to the nine-month 2025. Let's move to cash flow and net debt on slide 14, where we can see the net debt for the period is equal to EUR 137.5 million. Down by EUR 120.8 million versus December 31st, 2024, and that was driven mainly by the strong operating cash flow generation of EUR 340.6 million, up 1.2x versus 2024. We had also the cash absorbed by investment activities for around EUR 77 million and the dividend payment of EUR 146.2 million.
Free cash flow for the period was equal to EUR 263.6 million, up by EUR 64.5 million year-on-year or 32%, confirming the company's strong and consistent cash generation profile. To the same extent, in 2026, we expect to generate a free cash flow of around EUR 250 million. Now hand over back to the CEO for the closing remarks.
Thank you. Thank you, Luca. 2025 results proved our ability to deliver the solidity of our business model and our technical excellence. 2026 will drive significant progress in the implementation of the key strategic initiatives at the core of our industrial plan. We are currently experiencing high levels of volatility in light of the situation in the Middle East. The year started on a strong note in terms of traffic, but we must monitor the evolution of the events and their implications. We are confident on the evolution of all the business variables under our direct control and will share with you the targets for 2026 in the Q1 results presentation of next May. Based on this confidence and the robust delivery of 2025, we have improved the DPS curve for both 2025 and 2026. Now let's open the Q&A session.
Thank you. This is the Chorus Call conference operator. We will now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. The first question is from Carlos Caburrasi , Kepler Cheuvreux. Please go ahead.
Pasq aulino, Luca, Fabrizio, thank you for the presentation, for taking my questions. Two from my side. First on the 2026 guidance, I understand your cautious stance. I don't know if you've said that more visibility will be provided in Q1, but at the same time you are providing a free cash flow target of EUR 250 million. I was wondering if you could at least provide some visibility on the key assumptions of that figure. Second, on dividends, well, here it's actually two quick questions. One is that while you haven't provided guidance for year 2026, how likely is that we see the EUR 0.01 upgrade or improvement continuing through the rest of RP4?
The second is that although it's still far away, how should we think about dividends in RP5, given that in RP4, these are largely supported by balance reversals? I mean, would it be something reasonable to expect higher debt to sustain dividend payments? Thank you.
Thank you. Thank you, Carlos.
Okay. Hi, Carlos. I will go directly to the second one and then back to the cash flow. I mean, if you look at what is our profile, our net debt on EBITDA ratio above all target in 2029, we have a lot of room to have a better. I mean, we can even, you know, have more debt without no problem. In general term, I would answer yes. There's a, you know, the possibility to. This will be decided by, you know, the future board of director in that time. Also looking what would be the, you know, the real free cash flow generation in that time.
In general terms, we would say yes, we definitely can use debt to pay our dividend also, to increase our dividend. That said, coming back to the cash flow, to just give you the, you know, flavor of what is the main item in 2026. If you think that in 2025 our forecast was around EUR 240 million of free cash flow and now we have 250 million, you should consider more or less the same assumption that we had last year, a little bit more range of improvement. It would be around EUR 10 million on the planned base. Mainly related to more traffic en route and related to the fact that the cash flow that is supposed to be cashed from, you know, the balance of the previous year in 2026 tariff is more or less the same in 2025. This doesn't really move too much the figures.
Grazie, Luca. Very clear.
The next question is from Nicolò Pessina, Mediobanca. Please go ahead.
Hi, good afternoon. First question on CapEx. EUR 77 million of CapEx is or looks the lowest level since the IPO at least. I'm wondering if you can elaborate a little bit more why such a low figure and I'm also wondering if the target of EUR 570 million total CapEx plus recovery of the past delays over the 2025-2029 period that you provided a year ago with the update of the business plan is still valid, because it implies a sharp acceleration in the next few years. In particular, following on the previous answer, which amount of CapEx is included in these EUR 250 million free cash flow generation for 2026?
Second question on the defense spending by the Italian government you mentioned during the presentation. I'm wondering if you can provide maybe some example of additional opportunities of new contracts may be similar to the one you signed for the surveillance systems in the Air Force bases, and maybe there are other opportunities with the Italian military institutions or other government institutions. Many thanks.
Okay. Nicolò, for what concern the CapEx, just think that, we always think about cash CapEx. If you look in the sum of the cash flow, the impact on the cash flow. The cash CapEx of this year in 2025 was very close to EUR 2,000 and 2024, so we didn't have so different, and we believe to have more or less the same for the next year in term of cash CapEx. In term of, you know, CapEx of the year, we still have an amount of money that, I mean, amount, yes, of money that is affected of three things mainly. One, the discount that we have.
As you know, we do everything every time we buy something, but we're on investment side, on the CapEx side, we always go on bid. This allowed us to have a discount on the price that we planned in our figure, and this is affect positively in terms of, you know, the type of money that we spent. Actually we already do exactly the plan that we are thinking to do. This doesn't really impact in any way our investment in our maximum payment just to save money. If you look at the D&A, the D&A will be lower from the one that was planned just because we have two impact.
The first one comes from the PNRR and the PON and CEF. All the grants that we are getting from the European from the Italian state. This will, you know, reduce the amount of D&A in our P&L, also in our EBITDA. The second one was also the fact that we had actually fully amortized couple important asset that came out from our D&A. Actually this is impacted a bit more the value. In general terms, we don't see any particular impact on our plan of the CapEx. Just, you know, think that is more related to the discount that we are at and, you know, the other factor that I explained.
For the other point, we are always looking for new opportunities. We are working on some options. One example is the control of prize zones with drones, where we wait for a tender to be launched. Defense opportunity will grow also because then the initial contract is expected to extend to other Air Force bases. That's it.
Thanks a lot. Very clear.
The next question is from Marco Limite, Barclays. Please go ahead.
Hi, good afternoon. Thanks for taking my question. My first question is on M&A. You have announced an acquisition of AIView a few months ago. Any update you could provide on that front is the first question. The second question is more, let's say, on the strategy around M&A, because clearly, you know, this deal is not huge. Back at the CMD, you were planning for a pretty sizable firepower balance or pool for M&A. The two questions are, number one, if you are, you know, expecting more M&A activities, maybe of larger companies. Number two, if you don't, do you have, let's say, leverage target that you have in mind, and therefore, we should start thinking about extraordinary dividends or distribution to shareholder in order to have a slightly more efficient balance sheet? Thank you.
Thank you. Thank you, Marco.
Okay. For M&A, we expect to finalize in the coming days the acquisition of AIView. In the past, we shared with the market that we were running a due diligence also on another target. We are currently still evaluating, but there has been no further progress on that target. In general, we continue to scout the market for opportunities and keep looking at different potential targets, maybe bigger than the first one.
As Pasqualino said, in case we need to, you know, to raise money, so more debt, they will be focused on this M&A, you know, for even bigger targets and for CapEx. That's our profile at the moment.
Thank you.
The next question is from Luca Bacoccoli, Intesa Sanpaolo. Please go ahead.
Hello everyone. Could you hear me?
Yeah, yeah, we can hear you, Luca.
Okay, thanks. The first question regards the traffic trend on March. Looking at Eurocontrol data regarding the first week after the war in Iran and the third week, it seems that traffic or better, the average flight per day are still up in the region of 3%-4%. Can we assume these data as a proxy of the en-route service units for the whole March data? The other question regards the OpEx trend in 2026, on which you can probably have good visibility. I was wondering what should we expect in terms of cost efficiency, given the very positive results delivered in 2025.
The other question is on the non-regulated business, for this year, if you have any target that you can share with us. Finally, a question for Mr. Monti. For several months now, the Italian press has been reporting that you might be moving to another listed company controlled by the government. My question is, do you feel that you have successfully completed your mission at ENAV? Thank you.
On traffic, as you said, Luca, we only have the number of flights for the first half of March, so two weeks, since you know the war start actually. I confirmed that the flights for the first few weeks, so f light, not service units of March are up by low- to middle- single-digit year-on-year, so still positive. If we compare this to the last year period, the same period, you know, we had an increase. We are having an increase. But we don't see how, I mean, we don't have the information now to understand what will be an impact on service units.
We believe it could be still positive, but for the service unit of March, we need to wait the second half of April, when Eurocontrol publish the actual value. Also Eurocontrol, as you see that normally they publish the update on traffic in the middle of March. The new update, the forecast for traffic, they haven't published yet. That's the reason why they still are. They also want to see what is happening in this, in these couple weeks. The couple weeks of March.
We need to wait a little bit more to be more precise, even if, you know, the impact at least in terms of flights seems to be not bad at the moment. For what concerns costs, let me see. You should consider that, you know, we haven't anticipated most of the costs that, I mean, part of the cost efficiencies that we could have done in 2026, also for, you know, the traffic impact above what we had in 2025 for the terminal. We anticipated part of this effect. This is part of why we are, you know, performing so well in 2025 costs.
You should translate part of this efficiency also in 2026, but you should also add the part of the consolidation of cost of AIView Group that, you know, is the company that we are acquiring. Also the increase of, you know, the cost that we have starting from 2025 related to the agreement on the performance bonus sharing with the air traffic controller. You remember that this year we had this agreement with them that, you know, push them to get the performance plan. The performance bonus and this is, it works very well. We will also apply this year. In general terms, you should consider an increase around 6%, probably more or less, you know, an average that you could consider in your assumption.
On the non-regulated business, the not regulated business will grow by around EUR 10 million from EUR 52 million of 2025 to around EUR 62 million in 2026. On my mandate, the decision will be taken by the majority shareholder. I'm happy at ENAV, and I'm focused on the implementation of the strategic plan.
Okay. Thank you. Very clear.
The next question is from Amal Patel, UBS. Please go ahead.
Hi, Luca. Hi, Pasqualino. Thank you very much for the presentation and taking my questions. Just two from me. Just on AI, can you articulate a bit more how you're leveraging AI to achieve cost savings in the business? Clearly, the shift from Digital to Remote Towers will be a tailwind to OpEx towards the end of the decade. You already have the AMAN system which you're employing. Can you maybe talk about any new AI initiatives you expect to implement in the coming years and what incremental cost savings you expect these to achieve? My second question is, can you help me understand a bit better the age distribution of your workforce? Approximately what proportion of your workforce do you expect to retire in the next five to 10 years? Thank you.
Thank you, Amal.
Okay. We'll conserve the, you know, the curve of the retirement. Let me see that we have several, a number of important controllers that we retired. Our purpose is not to substitute all these controllers, so thanks to the fact that the implementation of our business plan related above all in Remote Tower and, you know, digitalization of the tower will help us to optimize the number of people. Depending on the trajectory and, you know, the respect of the timing of the, of the, this, you know, ten years project, we've adjusted the number of hiring controller, the number of controllers that we will hire in the period.
In the moment, above all by the end of this business plan, 2028 and 2029, we've foreseen to have a very positive impact on personnel costs thanks to the, you know, what I just said. Technology and the capability not to hire new controller when they will go to retire. That is more or less our strategy on this point.
On AI, digitalization is one of the strategic pillars for us, and we are already one of the more advanced in Europe from a technology standpoint. Artificial intelligence can be a lever to improve over time the efficiency and capacity of the airspace. It's important to highlight that in our sector, technological evolution can only happen progressively and in line with the safety standards and regulatory framework defined at EU level.
Ladies and gentlemen, there are no more questions registered at this time. I turn the conference back to you for any closing remarks.
Thank you. Thank you to all who participated and, we'll be in touch at the Q1 results in May. Thank you. Bye-bye.
Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.