Okay, good morning again and welcome to our investors call. Today we will be presenting the 2024 financial results of TXT Group. Today next to me we have Daniele Misani.
Good morning.
Our CEO of TXT Group. We're connected from Milan. Instead from Berlin, we have Andrea Favini, our financial, investor relator. Before starting discussing the results, I just wanted to let you know that if you have any questions, please feel free to add your question in the Q&A section, and we will be happy to reply and answer to all of your questions at the end of this call. Thank you very much. Now I'm going to give my word to Daniele Misani.
Thank you, Alice. Thank you. We are here to discuss the results of 2024. 2024 was another strong year for the TXT Group. Total revenues are above EUR 300 million, so EUR 300.5 million, with a growth of 36%. What is important to highlight is that, of course, the growth is part of aggregation, M&A of companies that joined the group, as we did in the last five years. We have strong results also on the organic growth side. 22% growth, EUR 50 million more. This is due to our sustainable plan of synergies between, among all the companies belonging to the TXT ecosystem. The strategy to do upsell and cross-sell and to do synergies is bringing results. We are growing in every sector we are present. We are very strong in making things happen and in making growth in terms of organic each company in the group.
The EBITDA result is positive, EUR 39.2 million, 24% more with respect to the last year. We registered a slight, let's say, decrease of the EBITDA margin, 13%, due mainly to the fact that the mix of the activity has changed during 2024. We sustained the growth with investments in terms of commercial investments and R&D investments. In terms of operational profits, so EBIT consolidated is EUR 25.5 million. It is 8.4% total revenues. If we look to the adjusted EBIT, so considering the fact that we have effects of PPA and, let's say, acquisition we did in 2023, the adjusted EBIT is about 10%. More detail will come with Andrea in the financial section. In terms of net profit, it is EUR 15.9 million, almost EUR 16 million, with a growth of 3% with respect to the last year.
The reduced growth was mainly due to impacts of, let's say, financial debts that we have to pay. Also, this part will be addressed by Andrea in the financial section. We proposed a dividend of EUR 0.25 per share that is in line with last year and our policy to distribute part of the net profit to the shareholders, of course, but to keep also the most part of the cash we generated in order to continue with our plan of M&A. In terms of growth, let's say the important things to highlight is that is common in all our divisions. 36% total growth, EUR 305 million comes from contribution for all the business lines. In particular, I want to highlight the Smart Solutions part that is growing very fast, so plus almost 50%.
We know that this part is contributing more for the EBITDA margin. If you look also to the EBITDA margin of the Smart Solutions division, we get plus 43%. A strong growth due to the investment we did in the past and the market position that is growing for the Smart Solutions division. Also the other division are growing fast. Digital Advisors, especially 41% growth with a contribution of 20% more EBITDA margin. We have a growth also for the software engineers. All the segments are growing. Of course, the mix of the growth in the segments brought to this dilution in the EBITDA margin. We will focus for 2025 to be more focused with respect to profitability with respect to growth. We will focus on the business lines that are more profitable in order to increase our overall EBITDA margin.
In terms of investment, we continue with our policy. The strong growth for the Smart Solutions division is due also to the investment we do in technology. We invested 65% more than last year in our technology, EUR 15 million in order to adopt the best of the breed technologies in our solution to improve the value for the customer. Revenues in Smart Solutions are growing, EUR 64 million plus almost 50% with respect to last year. In terms of, let's say, market exposure in terms of geography, we continue to grow also internationally. EUR 78 million comes from the international business. That is 25% of the total revenue. There is a slight decrease in terms of percentage because we grow a lot also in the domestic market. For us, it's strategic focus to continue to make growth, the international exposure, and our presence abroad.
Outside from the domestic and the Italian market. In terms of debt, we are investing. Last year was a particular year for M&A because we acquired, let's say, strong value and companies that improve a lot of our perimeter. The investment made for M&A in 2024 was quite strong. Our net financial position now is adjusted EUR 91 million. Still, we have treasury shares at 31 December was more or less EUR 11 million in our portfolio so that we will use to continue our investment plan. In terms of market incidence, our diversification strategy brought us to offer more in several segments. Last year was the year of investment for the MarTech domain. That is a new market segment that we added to our portfolio.
Now is still 5% because, you know, the consolidation of the perimeter was limited in 2024, will be stronger in 2025. We completed a little bit our vision of diversification by aggregating company to create value, to create synergies among the offerings that we have in our portfolio. What is important to highlight is that the growth is quite common in all the market segments we address. We have growth in almost all sectors. A little bit slower the industrial part because there are some market pressure on this kind of segment. It is a bit slow with respect to the rest of the, let's say, segments in which we are present. Let's say still we are growing.
If we look to the overall growth organic, that is more than 20%, we are well above the market average because the overall ICT market last year was growing at about 5%. We are four times faster than the rest of the competitions that we address. The main segments that are growing and that will continue to grow in 2025 are related to aerospace and defense programs that are multi-year programs in which we are involved. There is investment in R&D, in new solutions, and we are, let's say, following the leaders in this kind of environment, providing technology for the main programs that are under investment in this period. This area is growing fast in a good way. The other, let's say, segment that is growing very fast is related to public sector.
You know that we invested and we gained a big backlog in tenders won in the past years. The team is starting to deliver at a high rate. Let's say we are growing very fast. Also, the acquisition that we did was to empower our portfolio to be, let's say, more effective also in this area that is an area that will give growth for the next few years, given also the strong backlog that we have in this area. As I said before, let's say the results are good. We have to look also to the pro forma results because the acquisitions were made in the second half of the year. The impact on the consolidated results is limited. If you look to the pro forma, we have already more than EUR 350 million in terms of total revenue.
We are starting the year with strong positionings in terms of pro forma results. Looking to EBITDA pro forma, we aggregate, let's say, high value and high profitable companies that bring us at EUR 50 million pro forma to 2024 results with a pro forma EBITDA margin of 14%. In line with our guidance, this lets us start 2025 very confident that we can improve profitability and continue to grow the size of the overall group. In terms of guidance, 2025 is in line with our strategic plan. We want to continue to grow. As I said before, we will focus more on more profitable business in order to keep the EBITDA margin above 14% on average. This year, as I said, the consolidated was not so in line, but we are now implementing several actions in order to continue to perform at higher profitability.
The contribution also of the last acquisition will give us a boost in this direction. We will, let's say, continue to grow in terms of organic growth. Probably 2025 will be a little bit slower with respect to exceptional result in 2024. Our guidance is to be above 8% overall. I want to highlight that we have also some one-off activity in 2024 that will be not in 2025. We have to compensate these. In terms of overall growth, our guidance is above 8%. Of course, we will continue to invest. We already announced an extraordinary operation in the last weeks. Our, let's say, guidance is not to overcome the 2.5 times the EBITDA pro forma.
There is this space with our, let's say, treasury shares and with the cash we generate to continue to grow by giving the guidance not to exceed 2.5 times the EBITDA pro forma. In terms of evolution of the business, what I want to highlight is that we are quite confident for 2025 to continue on the good momentum that we have. In the smart solution areas, there are opportunities to grow again, especially in the aerospace and defense, let's say, perimeter for which we have a strong value proposition and there are a lot of investments. It is an area that will bring benefit in terms of positioning of smart solution domain. Also the fintech is very important for us in 2025.
We strengthen the team by acquiring a strong manager from the market that was the former CEO of SIA, Nicola Cordone, that joined our team to coordinate the fintech offering and to make growth, especially the smart solution positioning of our portfolio that is positioned quite well, but has the opportunity to scale up faster than in the last few years. In particular, for the digital payments domain, will be an area in which we will invest to continue to grow and to create value. Also, the MarTech offering with our smart solution, let's say, offering is a potential growth driver, especially for international business, because the MarTech today exposed not so in a strong way outside from the domestic market, but we started initiatives in order to expand the geographic, let's say, presence of our offering across Europe and North America.
Digital advisory will continue to grow, driven by the public sector domain in which we have still to continue to deliver the projects that we want. We are still acquiring new contracts. As discussed in the previous calls, we acquired a big also contract for the cybersecurity in the space domain. We have all the possibility to continue to make profitable business with the backlog that we have already acquired. Also, the integration of the MarTech offering in the digital advisory domain will give a boost of growth of this division. In terms of software engineering, that is the, let's say, the division with the lower EBITDA margin. We reached very good, let's say, size.
Our focus will be not too much to make grow this area, but to capture more profitable, let's say, projects, especially in the defense area in which margins are better with respect to other areas. The Web Genesis contribution that will be consolidated in software engineering division will give a boost also to the overall profitability because Web Genesis is strong with the delivery team, very well structured. They manage complex projects at the fixed price. We have the possibility to position ourselves and to have better results in terms of profitability. In terms of M&A strategy step, we will continue. Our vision was to diversify in terms of market reach. We, let's say, completed a little bit our vision of diversification in terms of end market.
What we are doing now is to strengthen the offering of each segment by following the model to have these three divisions. Advisory capability, software engineering, and smart solutions. The last two acquisitions were made in order to strengthen the end market public sector by adding software engineering and smart solution capability to an area in which we were exposed mainly with digital advisory. We announced two weeks ago the signing of a contract to acquire ET Values. That is a small boutique but very profitable with a set of proprietary solutions, mainly, let's say, channeled towards the public sector domain. It is good, profitable, and opens up a lot of opportunities to bring value across, let's say, the value chain of the public sector domain also across by leveraging the tenders we won.
For us, it's strategic to have a smart solution offering dedicated to a segment for which we can deliver more. The strategic decision to acquire ET Values is made in order to bring assets toward an offering that for now is mainly based on services. This will improve the growth in the public sector domain and will improve the overall profitability of the group and of the division, of course. The closing of this, let's say, this M&A is planned to be completed in April. The results of ET Values will be consolidated starting from the second quarter. ET Values follow, let's say, the strong, let's say, impact of the acquisition of Web Genesis that we closed at the end of the year. Thirty-one, thirty December. End of the year, New Year's Eve, more or less.
Web Genesis for us is strategic because it adds software engineering capability to our public sector offering with a team very strong in terms of delivery organization and with a very strong also backlog for the next three to four years. With the acquisition of Web Genesis, we acquire a backlog of more than EUR 200 million in assigned tenders. Most of them, half of them are already operational. There is a strong opportunity to create value across a mid-long term by including this kind of offering within our portfolio. There is a substantial top line expected in 2025. The contribution from Web Genesis will be more or less EUR 45 million with the growth with respect to the past years.
The contribution in terms of profitability is significant because the efficiency and the capability to deliver that Web Genesis demonstrated in the last few years will continue and will give a boost also to the overall group results. This acquisition for us is also important to cover geographically more Italy. We have a strong presence in south and center Italy with Web Genesis. Of course, the competencies that are within the team will be an addition, a strong addition to the already strong technological capability of the group. Let's say the results of Web Genesis are not consolidated in 2024 since it was closed at the end of the year, but they will give a strong contribution to the overall group in 2025.
We will continue in this direction to aggregate competencies, to aggregate assets in order to have a more, let's say, complete offering towards the end markets in which we are present. We want to continue to grow in terms of geographical presence also international and bring value for all the stakeholders. I finished this part. That is the introduction, Alice.
Thank you very much, Daniele Misani. Now, Andrea Favini, our investor relator, will have the pleasure to discuss our financials.
Thank you, Alice. Thank you, Daniele. Welcome everyone to the financial section of this conference call. Starting from the profit and loss of 2024, we have revenues broadly discussed by Daniele at EUR 304.5 million with an increase of 25.7% compared to 2023. The organic growth was equal to 22% with a normalized organic growth, excluding the non-core activities, at approximately 17% compared to the previous year. Looking at the gross margin in 2024, it amounted to 33.5% of revenues, down from 36.2% in 2023, following the different mix of revenues recorded in the year, including EUR 12 million of non-core activities with a mid-single-digit margin below the average of 60. Excluding the non-core activities recorded in the year, the gross margin in 2024 was approximately at 35%.
Looking at the indirect cost, we have research and development investment that grew by 65% year over year, a really significant growth, which comes both from the organic investment in our smart solution portfolio, but also from the acquisition occurred in 2024. The commercial cost increased at a lower rate, 12.2%, also considering the strong investment already did in 2023 to support the growth of the year, followed by far better investment than in the current 2024. Looking at G&A cost, general administrative cost, we have an increase of 27.8%, but the incidence of the G&A on revenues decreased from 7.3% in 2023 to 6.9% in 2024. This result is coming from the efficiency of the holding structure, partially compensated by the effect of the increasing M&A cost that were of approximately EUR 1 million in 2024, up EUR 0.6 million compared to the previous period.
The EBITDA margin, as broadly explained by Daniele, was below the 2023 and below the target, mainly for the different mix of revenues, but also for the strong investment that happened in the year. Let's keep in mind the R&D is fully expensing the profit and loss of the year. The EBITDA margin of 2024 was at 12.9%, down compared to 14.1% in 2023, but with an absolute increase of 24%. Depreciation, amortization, and write-offs are equal to EUR 13.6 million in 2024, up 19% compared to 2023. Depreciation and amortization in 2024 consist of amortization of intangible assets for EUR 4.9 million, of which EUR 4.1 million are related to purchase price allocation, the latter being in line with 2023.
The depreciation of tangible fixed assets for EUR 6.6 million in 2024, of which EUR 4.6 million are related to IFRS 16. Write-offs in 2024 were equal to EUR 2.2 million compared to the EUR 0.6 million in 2023, primarily related to goodwill impairment from previous year acquisition for EUR 0.7 million. For EUR 0.6 million, related to accrual of better provisions, including EUR 0.6 million related to the bankruptcy proceeding of one of the main eVTOL European players that happened in Q4 of 2024. If we look at the operating profit, the EBIT reached EUR 25.5 million in 2024, growing by 26.5% compared to the EUR 20.2 million in 2023.
The adjusted EBIT for financial year 2024, which neutralized extraordinary items related to impairment, write-offs for EUR 1.7 million, and amortization resulting from the purchase price allocation of companies acquired the previous year for EUR 4.1 million, would stand at EUR 31.3 million, up 29% from EUR 24.4 million in the previous year, 2023. The adjusted EBIT margin was 10.3%, 0.6 percentage point below the adjusted EBIT margin recorded in 2023. The net financial result of 2024 resulted in a negative net balance of EUR 3 million, a drop of EUR 3.8 million compared to the net positive balance of EUR 0.8 million in 2023. Financial expenses in 2024 amounted to EUR 5 million, increasing by EUR 1.9 million compared to 2023, and mainly due to interest expenses on new loans.
Among financial income in 2024, we have a total of EUR 2.4 million, significantly lower compared to the EUR 5 million in 2023. Among financial income for the year, the fair value effect of portfolio securities amounted to EUR 0.9 million, up compared to the EUR 0.6 million in 2023. The fair value effect of liabilities related to past M&A transactions was EUR 0.9 million, down compared to the EUR 2.9 million of 2023. The dividends received in 2024 were EUR 0.3 million, up compared to the EUR 0.2 million in 2023. 2023 financial income also includes the fair value assessment of the investment in Banca del Fucino for EUR 1.2 million, which was nil in 2024. There are also the results from non-consolidated minorities, primarily Reversal SIM, with a negative balance of EUR 0.6 million in 2024.
The net exchange effect on foreign currencies had a positive balance of EUR 0.1 million in 2024 against a negative balance of EUR 0.3 million in 2023. Looking at the net profit, it amounted to EUR 15.9 million in 2024, up 2.6% compared to 2023. The different trend of net profit compared to the operating profit in 2024 is mainly due to the different financial results reported during the year 2024 compared to 2023, and for a lower impact to the 2024 tax rate, which stood at 29.4% compared to the 26.2% in the fiscal year 2023. The adjusted net profit, which excluded the accounting effects related to PPA and the goodwill impairment from previous year M&A and the financial income related to M&A accounted for in the period, mainly related to the fair value of liabilities for an out-and-put call, is equal to EUR 20.9 million, up 24% compared to 2023, with an adjusted net profit margin at 6.8% in the year 2024.
If we look at the fourth quarter of 2024, to slide up, please. Up, up. One more up. Looking at the Q4 of 2024, we have revenue that amounted at EUR 85 million, with an increase of EUR 19.9 million compared to the EUR 65 million of the fourth quarter of 2023, plus 31%, with the EBITDA that was EUR 11.11 million, up from the EUR 10.2 million of the fourth quarter of 2023, with a plus 8.8%. The EBITDA margin for the fourth quarter of 2024 stood at 13.1%, down from 15.7% in the fourth quarter of 2023. With the net profit, it was EUR 3.9 million compared to the EUR 5.7 million in the fourth quarter of 2023. This is mainly to be attributed to the different financial results in the period. We have a net effect of EUR 1.3 million. Also, to the different tax rate that in the fourth quarter of 2024 was 32.1% compared to the 19.4% in the fourth quarter of the previous year, 2023.
Here is clearly, of course, the growth in the R&D cost, which is 91%. This growth, of course, includes also the acquisitions of ProSim Refine and PACE Canada, partially not included in the fourth quarter of 2023. Also, here it is important to mention the effect of the commercial cost, which shows a decrease of 3.1%. This is mainly related to the different effect of variable components in the fourth quarter of 2023, which grew also compared to the first nine months of the year, while in the fourth quarter of 2024, there was not a strong increase in the, let's say, bonus and the yearly, let's say, variable components. That drove a 3.1% drop in the commercial cost of the fourth quarter of 2024 compared to the same period of the previous year.
If we go to the next slide, we have, let's say, our net debt position, which is equal, the adjusted net debt position is equal to EUR 91 million as of 31st December 2024, with an increase of EUR 59.3 million compared to the EUR 31.4 million as of December 31st, 2023. This increase of EUR 59 million was mainly driven by cash outflow for acquisition, net of the acquired net cash for total EUR 56.5 million. The recognition of earnouts related to 2024 acquisitions, net of write-off of M&A-related liabilities from previous years for EUR 5.1 million. We have, let's say, effects of IFRS 16 for new leases contracted in the year, net of installments paid during the year for EUR 5.1 million.
We have also the effect of the repurchase of treasury shares for EUR 1.5 million and the payment of the dividend for EUR 2.9 million, plus the payments of interest for EUR 3.5 million. All those, let's say, cash outflows were partially offset by the increasing, by the, let's say, cash flow coming from the operation, which in the fourth quarter, the better trend compared to the first nine months of the period. The main items of the net debt as of year-end 2024 consist of cash of approximately EUR 58 million, mainly euro, held with major Italian banks, up EUR 20 million compared to the year-end 2023, while the financial investment at fair value were of EUR 17 million, with a decrease of EUR 7 million compared to the year-end 2023, mainly for the divestment incurring the year to sustain the M&A plan.
The current financial debt, net of current financial assets, was at EUR 66 million in 2024, up EUR 8 million compared to the year-end 2023. Among the non-current financial debt, we have EUR 119 million as of year-end 2024, with a significant growth, EUR 62 million compared to year-end 2023, mainly for new bank loans contracted in the year 2024. The adjusted net debt as of year-end 2024 includes EUR 15.5 million of debt related to IFRS 16 and about EUR 11 million of debt for earnouts and put call option for the purchase of minority interest. If we look at the reported net financial debt, so excluding the adjustments, it amounted at EUR 109 million in 2024, end of 2024, EUR 18 million higher compared to the adjusted net debt of the period, mainly for the effect of the Banca del Fucino stake, which is reclassed among the financial assets in the adjusted net financial debt shown in the current slide.
If we look at the balance sheet at year-end 2024, we have, let's say, total asset for EUR 215 million, more or less, with an increase of EUR 84 million, mainly related to M&A. Intangible fixed assets as of year-end 2024 are of EUR 160 million, EUR 159 million, and consist mainly of goodwill for EUR 138 million, and customer relationship and IPs linked to PPA on M&A for approximately EUR 17 million. The increase of the period is to be attributed to the acquisition of Web Genesis, I MILLE, Wasabi, and Refine, net of the amortizations of the period. Tangible fixed assets as of December 2024 are of EUR 28 million, EUR 29 million, and includes mainly hardware, one building, a rental and lease contract of offices, car, and printers, following the adoption of the accounting standard IFRS 16.
Tangible assets are up approximately EUR 8 million compared to the year-end 2023, mainly following the increase in IFRS 16 financial leads and following the acquisition of the period. The other fixed assets consist mainly of the investment in Banca del Fucino, with fair value of approximately EUR 18 million, and the remaining value consists mainly of investment in minority. The value of other fixed investment in minority is EUR 5.2 million as of year-end 2024, down EUR 0.4 million compared to the year-end 2023, mainly following the consolidation of ProSim Refine from Q3 of 2024. If we look at the networking capital, we have an increase of approximately EUR 15 million, but it's important to state that here it's included, of course, all the current assets and liabilities of Web Genesis and Refine and Emil, all the acquisition concluded in 2024.
If we look at the working capital as a percentage of the pro forma revenues, it's slightly better as year-end 2024, with a rate at approximately 16% down compared to the rate of the working capital as a percentage of the, let's say, pro forma revenues of 2023, which show a rate of approximately 17-18%. Looking at shareholder equity, the growth of approximately EUR 36 million is to be attributed to the profit of the period, plus the effect of the repurchase of the treasury shares and the transfer of the treasury shares in the context of the M&A plan. If we look at the next slide, starting from the shareholding structure as of year-end 2024, we have a drop in the treasury shares. We are at approximately 2.5%, but a significant increase in the stake of managers.
Within the 24% of managers, there are two, let's say, stakes which are above 3% and below 5%, which consist of stake transfer in the context of the acquisition of ProSim Refine and Web Genesis, respectively in Q3 and Q4 of 2024. Looking at the TXT market data, in 2024, the TXT share price recorded an official high of EUR 37.05 as of December 13, 2024, and a low of EUR 18.94 per share on January 4, 2024. As of December 31, 2024, the TXT share price was at EUR 35.10 per share. The treasury shares as of December 31, 2024 were about 314,000, representing 2.4% of the issued share. Treasury shares were 1.3 million as of December 31, 2023, and the decrease is to be attributed to the consideration paid in TXT share in the context of the M&A plan, net of the TXT share repurchase in the context of the buyback plan.
In particular, in 2024, approximately 1.2 million shares, equal to 9.3% of the share capital, were transferred to vendors and current managers of TXT, and around 230,000 shares were repurchased at an average price of EUR 24.12 per share for a total investment of approximately EUR 5.5 million, as stated before. In 2024, TXT paid a dividend of EUR 0.25 per share, which was paid on May 22, 2024, with a total outlay of approximately EUR 2.9 million. For 2025, based on 2024 results achieved by TXT, the board of directors proposed to the shareholders' meeting the distribution of a dividend of EUR 0.25 per share, same as per the previous year, for each of the outstanding shares, excluding treasury shares, for a total expected payout of EUR 3.2 million, with a dividend yield of approximately 0.7%, a payout ratio on the net profit of approximately 20%.
The dividend will be paid starting from May 21, 2025, with the record date of May 20, 2025, and the next dividend date of May 19, 2025. That is all for the financial section of this conference call. Now is the Q&A section. Thank you so much for your attention.
Thank you very much, Andrea Favini. Now let's start our Q&A session. We received some questions, and let's start with a question from Andrea Randoni. It's a very long question, so we're going to cut it. Daniele and Andrea can answer to all of your questions. Let's start with the first question of Andrea Randoni. Working capital at year 2024 improved year over year. Can you comment what should we expect for 2025?
Yes. Working capital is increasing. Let's say the main effect is related to the growth that we had in the two industry end-user areas, industries that are known for longer payment terms. We continue to grow in defense environment and into the public sector domain in terms of cost structure because the growth is related also to the growth in terms of the team, in terms of suppliers. Costs grow, and let's say the payment terms are longer with respect to the average of the other areas. The main impact is due to that. 2025 will be in line, let's say. We expect to be in line with 2024. Of course, we are implementing all, let's say, the organizational infrastructure in order to minimize risks of delays in payments. The organization is also evolving in order to increase as much as possible all the process to improve the process in order to have as minimum as possible the impact in this area.
Okay. Thank you very much, Daniele. Let's go to the second question of Andrea Randoni. What are the general payment terms for newly acquired companies?
It's in line with already the previous, let's say, acquisition for the public sector. It's not particularly different from the past. We think that also Web Genesis has a strong organization in terms of, let's say, delivery and invoice process. We think that overall, we will not have an additional impact with respect to the current situation. I don't know, Andrea, if you want to add something about this topic.
No, absolutely. I think that there is a slight, let's say, improve if we look at the pro forma revenues for end of year-end 2024. The expectation, yes, is won't get, let's say, much different compared to that picture. We think that working capital as a percentage of revenues in the range of 16-19, 20% is something that we can expect also for 2025.
Thank you.
Also, we have some more, let's say, software business, which of course has better, let's say, working capital compared to the, let's say, service business. The year-end picture on the pro forma results should be sustainable also for 2025. Okay.
Thank you very much. Let's go to the third question of Andrea Randoni. Does the increasing exposure to the public administration represent a risk?
I think that the question is more related to working capital than business-wise. We think that on the business aspect, public sector is still an area in which, especially on the domestic market, there are strong investments. There are fundings coming also from European fundings that must be delivered also in the short, mid-term. We do not see a particular risk in terms of volumes, in terms of, let's say, business continuity. We are involved in major, let's say, digital transformation programs across all Italy, so both in the central public sector than the local one. We are very well positioned in order to have continuity for the short, mid-term with this kind of business, of course.
We are investing in it because we believe that there are also market opportunities that can be captured in this period that is also a changing period for the landscape of the public sector. We are very well positioned in order to continue to create value. In terms of payments, of course, like I said before, also the Web Genesis organization is very strong. We think that overall, we can have an improvement. Of course, there is the usual risk of this kind of segment for which, let's say, the payment terms are not historically so exciting, let's say, just to use some not proper word, okay? We think that internally, we can organize ourselves in order to capture the opportunity and not have a strong impact on our profit or loss.
Thank you very much, Daniele. We have the last two questions from Andrea Randoni. Another question is, are you considering deals such as Banca del Fucino disposure to increase your financial flexibility?
Yes, of course. Banca del Fucino is something that was made as a financial investment when the overall net financial position that was different than now. We are moving, we are negotiating now currently in order to dispose of this asset in order to have more flexibility. Overall, we are also looking for, within our ecosystem, some small area that maybe is not so focused in terms of growth and in terms of profitability. We can also implement some small dismissal within our perimeter in order to give us more financial flexibility and continue to invest in higher profitable and, let's say, strong competence-based or asset-based companies in order to continue to create value.
Thank you very much. We have the last question. It is, can you give us more details on the smart solution pipeline you are seeing for 2025 after the investments made in 2024?
Yes. In terms of, let's say, smart solution strategy, we are focused on very vertical solutions. Our business in this kind of division is a business also strategic to support our positioning with big customers and implement also synergies in our strategy of sell and cross-sell. Be positioned with smart solution, we can also grow in terms of services across the industries because we can position ourselves in a better way than the competition. In terms of, let's say, growth of revenues, most of our, let's say, vertical solutions are subscription-based. The impact of the, for us, the main impact of this kind of delivery is based on sustainable and recurrent business.
The smart solution pipeline will bring us, let's say, not a so strong top-line growth. We are planning around 10% as a growth of the overall smart solution division. We will, let's say, have substantial recurrent revenue also for the mid-long term. In terms of pipeline, let's say the most growing one are related to aerospace. The best and the fast-growing is our solution for fuel optimization that we are selling to airlines. It is a software that is scaling up by implementation towards fleets. When we start with a big customer with a big fleet, of course, subscriptions are related to tails, so to aircrafts. More aircrafts start to implement our solution, more recurrent revenue will come for the future.
This area is fast-growing. We have a good expectation also for the fintech domain, especially for the digital payments segment for which we invested preparing with, let's say, innovative solution, also with the acquisition of minority stakes in PayDoo, with ASIO Pay, and all the, let's say, internal organization that we have focused on this kind of business. 2025 will be driven in terms of fintech growth, especially around our digital payment solution. Also for the RegTech part , our anti-money laundering software is growing in terms of recurrent revenues. There are open several, let's say, opportunities that we are addressing in order to make it grow. I hope that I have given some flavor, not so much, but some. Okay.
Thank you very much, Daniele. Now let's go to an anonymous question this time. How much was the dilutive impact on EBITDA margin from EUR 12 million non-core sales?
Yes. We already disclosed this that last year we decided also for some market dynamics to accept some deals with lower overall gross margin. The EUR 12 million we delivered in 2024 were more or less at 8% of gross margin, so gross margin. The calculation for the dilutive impact can be done by this. It is EUR 12 million at 8% gross margin.
Okay. Thank you.
I don't know, Andrea, if you want to add something about that and do more complex calculation because we are quicker with numbers.
It's approximately 0.2 percentage points, I believe, the effect. From the 12.9, if we cut from the revenues and from the, let's say, operating profit margin, it's about a 0.2 percentage point the effect of this non-core. It would be, let's say, 13.1-13.2% the margin.
Thank you, Andrea.
My pleasure.
Thank you. Now we have another question from Diego Esteban on the financial year 2025 guidance. Diego is asking, could you please give us some color on what is driving the deceleration in organic growth for revenue growth?
Yes. It is a guidance, of course, and is related to the fact that 2024 was exceptional in terms of organic growth, also including this one-off EUR 12 million, let's say, business that we made in 2024. Overall, let's say the size is bigger, so the growth has an impact in terms of percentage with respect to the size. Overall, we are still looking to some industry that are fast-growing, but there is uncertainty overall across the other industry segments. Especially for the industrial part that is lowering in general in terms of market segment, the telco business that was related towards telco customer and together with telco customer towards the market is also under a lot of changes. Our guidance is quite, let's say, more comfortable also with respect to the last year that was very exceptional.
Of course, the other point is that as a guidance, we are focusing all the management team, all the sales team to acquire higher value, let's say, and profitable business with respect to position on sides. Our focus will be to continue to have an offering of value creation. High profitable and business-wise, let's say we focus on high-value activity with respect to activities that gives us volumes. This is more a guidance in order to focus the management to get better deals in terms of value proposition with respect to focus on make grow less profitable business. Overall, there is an expectation of more or less 10% of organic growth. Of course, if we capture more opportunity, it will be better.
Okay. Thank you very much, Daniele. I'm going to continue with the question of with the questions with of Diego Esteban. Does the new guidance include the consolidation of Web Genesis and ET Values?
Let's say if we look to the organic growth, as a guidance, they are not included because it's a new perimeter with respect to last year. Overall, the growth of the group will be stronger, of course, in terms of consolidated revenues. In terms of EBITDA margin guidance, we are already considering them that are improving the overall mix. The pro forma was already 14%. By adding these two companies, we will have a slight improvement for ET Values and a stronger improvement also to Web Genesis to compensate also the investment we made in 2024. Overall, as a guidance, including them will be above 14% EBITDA margin.
Last but not least, we have the last question of Diego Esteban. Looking forward, should we expect a future medium-term revenue growth of HSD? Thanks. Just thank you.
I can see it's high single digit.
Yes. I was asking myself what is HSD, but now thank you, Andrea. Right now, in terms of growth, let's say we are planning to make a Capital Market Day. We already announced this news. We will publish this week the date. It will be held in the last week of May, okay? For sure, in this event, we will disclose also our mid and long-term vision with the three years, disclosing our three years plan we are working on with also some expectation for the future. Let's see that in that date, we will be more, let's say, open to share also the mid-term view in terms of growth and in terms of profitability.
Thank you very much, Daniele.
We have some other
happy if we have other questions.
Publish.
Let's publish. Okay. We have a question from Andrea Bonfa.
Yes.
He says, "Hi to everybody. Just to be sure to have understood properly the 8% organic growth when we have 11% of LFL or 5% LFL if we adjust for the low-margin business that you want to terminate."
I guess it's like for like, the LFL. Yes.
Andrea, I'll let you answer to Andrea Bonfa. So you share the name, you can be protagonist in the answer.
Yeah. No, that's correct. This is the 8%. It's already, let's say, after the compensation of the approximately EUR 12 million. Let's say if we normalized, let's say, the 2024 revenues, yes, it's double-digit, let's say. It's a double-digit growth expected for 2025. If we just,
No, it's correct.
The 8% is basically after the compensation of the EUR 12 million from, let's say, these telco non-core activities that we are planning to, let's say, reduce or completely end in 2025. It would be more, let's say, 11%. That's correct.
Thank you, Andrea.
Thank you very much. We have another question from Thibaut [Mycene]. I hope I pronounce it in the correct way. He says, "Good morning, Daniele. Andrea, thank you for the presentation. Few questions on my side." Okay. We have a long question here. You've done significant acquisitions end of 2024. Now the financial position is more levered. Treasury shares were disposed of, meaning you have less leeway for further M&A in the short term. Would you confirm that priority now is developing the balance sheet, integrating the targets and small bolt-on M&As than do other significant deals?
Yes. Thibaut, I confirm. We invested a lot last year. 2024 was, let's say, I think also historically the strongest year in terms of aggregations, in terms of revenues, in terms of EBITDA, and also complexity of the companies that joined the TXT ecosystem. Still, we are looking for good opportunities on the market to consolidate our offering and to have complementary, let's say, assets and capabilities to add to our portfolio. The net financial position is, let's say, more levered with respect to the past, for sure. We still have the opportunity to dismiss, as I said before, some assets to continue to grow.
There is, let's say, ET Values that we already signed. We are working on other opportunities, but 2025 probably will be slower in terms of aggregation with respect to 2024. We will focus in, let's say, improve the operational efficiency over all the new acquisition that we did, and we will focus also in increment synergies and upsell and cross-sell opportunity to the existing customer base with the overall portfolio that we have aggregated.
Thank you very much, Daniele. Always Thibaut asks, we mentioned a few times a potential CMD. Any news on that?
Yes. I already said before probably. We will announce the formal date during this week. We have decided in our board meeting that will be held in the last week of May. It is confirmed. During the week, we'll, let's say, send the information about the event and the organization of the event and the right date.
Okay. Thank you very much. Another question, always from Thibaut. Can you remind us your actual exposure to the defense sector in percentage of revenue, type of projects you work on, considering what's happening in Germany?
Yes. In terms of market, let's say, exposure, we have also communicated for the Aerospace and defense division that is 27% to the overall total of the revenues in terms of consolidated revenues of 2024. Aerospace and defense is including both civil aviation business and, let's say, defense business. Let's say we are focused mainly on aviation in the defense business, and mainly the defense programs are dual-use. We provide software for helicopters, aircrafts that run both in military and in civil aviation.
It is not so easy to make a very sharp division between what is civil and what is defense. As you know, there are a lot of investments also in terms of public, let's say, money spent for the defense business. We have to consider that we are positioned on long-term programs. We are delivering our technology in order to build, let's say, future, next, let's say, next generation of aircraft, next generation of helicopters. Our focus is more on mid-long term. We have a good positioning. The improvement in terms of top line will be, let's say, not so strong with respect to the investment the government are doing in defense. Also because we start with new projects and the duration of these kinds of programs are mid-long term.
We are involved in the new generation of aircraft that will be produced in Europe on the defense side. We are also involved in the new programs related to land and naval systems. Of course, being an engineering company, providing software and the timeline of this kind of program since long, our involvement in the programs is, let's say, on a long term. We start and, let's say, the growth will come during the next few years. For sure, we strengthen our positioning as a European supplier.
Especially for a European program, we have a boost also with respect to big competitors that are in terms of services and software that are outside from Europe. We will capture opportunities that will come from that. Of course, our, let's say, also smart solution that we aggregated in the last few years are worldwide used by defense main players. We expect also to capture opportunity worldwide with this kind of solutions that can be delivered across borders. I hope that I explained a little bit.
Okay. Thank you very much, Daniele.
We do not have any more questions, Alice. If someone wants to send the last one, we will answer. Otherwise, we are very happy to share with you this sustainability of our growth plan. It is several years that we are growing. We are bringing value in terms of, let's say, competencies and assets toward the market. The market recognizes us as, let's say, a new player that can deliver complex systems and large programs.
We can be a reliable partner in terms of technology for many players in the market. We are still willing to continue to grow, to continue to create value for the next period. I would like to have you as soon as we define the date of our capital market day to share directly with you more about our strategy, about our, let's say, plan for the mid and long term. Thank you very much for your time. I would like to thank Alice for the booth here with us and Andrea from Berlin.
Thank you, everyone. See you next time.
See you next time. Thank you so much. Bye-bye.
Thank you. Bye-bye.