Welcome everyone to the call with investors. And we'll share the results of the 1st half of the year. And so here I have with me, TXT Group CEO, Daniele Misani.
Good morning.
And also our Investor Relator, Andrea Favini. And so he'll share the 1st half of the numbers towards the end. And just before we do get started, if you do have any questions, please write to us in the chat, and we'll endeavor to get back to you at the end of the call. We already had some questions prior to the call, so one of our colleagues will just put them through in the chat. And now, I'll present you through to our CEO, Daniele Misani.
Thank you, Sanela. Thank you. Welcome, everybody. So I'm happy to share the results of the 1st half of the year for the TXT Group that are positive. So we continue with our plan of diversification and growth driven by synergies. And the good results are the good results that are coming from the work of a very strong team. So I want to thanks all our managers of our ecosystem, because in our collaborative environment, we can create value for the customers, as a consequence, also for all the shareholders. So thank you to all the team, all the managers, all the people that are working with us, because we are getting good results because the teamwork that we are putting together.
In terms of revenues, we have a strong growth, so EUR 138 million, with a growth of almost 30% with respect to the last year. The growth is driven by the synergies. The organic growth is an important KPI, because from the same perimeter, we grew by 21, almost 22%, so a growth of EUR 23 million that comes from the synergies of the group, within the group, at same perimeter of the last year. In terms of margins, the EBITDA margin is 12.7%, and we had EUR 17.5 million in the 1st half of the year. That is a growth of 25.7% with the same period of the last year, so good results in the main indicators.
Looking at the contribution of the different divisions of the group, what is important to say that the growth is given by all the segments that we have. So plus 28% in the Software Engineering division, in terms of top line, plus 32% in the Digital Advisory division, that is growing mostly organically, so very good results. And plus 31% in terms of growth for the Smart Solutions division. That has also some contribution from the acquisition that we did last years. In terms of EBITDA, so the EUR 17.5 million are also, in this case, driven by the contribution of all the divisions, with the best performance given by the Smart Solutions, let's say, division.
Our products that are generating more margins, because the growth of the top line in terms of number of subscription and licenses sold. The Smart Solutions division is growing 42%. The Digital Advisory is growing with a 35%, so with an increase in terms of also of EBITDA margin in general. The Software Engineering division is growing, but with some, let's say, impact on the top line EBITDA margin, because, let's say, we know we are growing faster, so the efficiency also of the overall performances has to be tuned.
This 1st half of the year, we put in place also some investment in terms of commercial investment that had an impact on this let's say KPI. As I said, we continue to invest, so in order to have a growth into the Smart Solutions division, so we invested more than last year. There is a 50% more investment in research and development of our proprietary solution, with a total of EUR 7.7 million. The Smart Solutions revenues, as sold, as told before, is growing, so 31%, and recording at EUR 25.7 million. It's important to highlight also the growth of the international revenue, also by the contribution of the international acquisition we did last year.
We recorded, for the 1st half of the year, almost EUR 40 million international revenues, that are 29% of the total revenues of the group. In terms of net financial position, so the debt is still sustainable, so we have an adjusted position of EUR 37 million debt. But I want to remember that our buyback program is still in progress, so we are still investing in acquiring our shares. So the treasury shares at 30 June were almost EUR 31 million. So if you look to the debt, we have treasury shares that compensate the debt in terms of debts to banks and let's say.
So we have still power to continue to invest and to grow also by external alliance with new acquisition in the 2nd half of the year. In terms of the core markets, still we have the strong let's say footprint in the aerospace and defense and the public sector that are the champions of the growth for the group. So aerospace and defense is growing 38% year by year and public sector is recording 35%. The industrial automotive let's say segment 57% of the total amount of the revenues of the group is stable with respect to the last year. The fintech domain is growing also +22%.
The telco media is also growing, that is recording a 31% growth with respect to the same period of the last year. So all the market segments are positive. There is positive outlook also to continue in the 2nd half of the year at the same speed. What is important to say also, we did some extraordinary operations that I will tell you later a little bit more details. We open up a new division, so a new market that is more cross-industries, is a market related to the MarTech offering, so the digital technology applied to marketing and sales. With two acquisitions, and we expect a pro forma, let's say, contribution of this new division of about EUR 30 million in 2024.
Some, let's say, more flavor about our outlook and, let's say, the M&A that we did in the 1st half of the year. So as I said before, one of the good results that we had in the 1st part of the year, driven by the synergies and driven by our strategy, is the growth in terms of organic growth, so same perimeter. The 22%, is pushed a lot, especially by the Digital Advisory division, because, especially in the public sector, as a result of the backlog that we acquired with big tenders in the past years, we are growing fast.
The public sector recorded a thirty-five percent, more or less, of growth year by year, but also the aerospace and defense is pushing with multi-year programs, and we recorded in the 1st half of the year, plus 28.3% of growth. That is also a sad contribution coming from the acquisition. These two areas are the most, let's say, pushing in terms of growth. Of course, we are growing also in the other segment, and we have a positive outlook to continue, even if in the 2nd half of the year, since the volumes are ramping up, there will be a slightly decrease in terms of percentage of growth. But looking for the whole year, let's say, we have a strong result that will come at the end of the year from both these divisions.
As I said before, we decided in our strategy of diversification to have the core in the technology. As you know, we are a digital innovator, so we use the technology in order to improve the processes and the products of the customer. Our decision is also to extend our reach to large customer by adding also competencies and technologies in the marketing and sales, let's say, domain. So opening up by acquisition, a new division, with acquisition of I MILLE, Uasabi, and Refine, that were completed at the end of the 1st half of the year, and that are now in the integration process of the group, and the benefit of this acquisition will be, will impact on our results for the 2nd half of the year and for the future, of course.
The total amount of this acquisition is a pro forma of EUR 30 million for 2024, with the good, let's say, margins, and they are, let's say, integrated, I MILLE and Uasabi, in our digital advisory division, because they are creative consultancy agency that use the technology in order to improve the performances of the customers. While, Refine is a company that has proprietary technology, and the business is based on the proprietary platform that contains, let's say, lot of innovative technologies, and it will be integrated into the smart solutions division in terms of segmentation.
Looking a little bit deep, deeper in these two acquisition, I MILLE and Uasabi are two creative agency, especially I MILLE, is a long story on the market in Italy and also abroad, with some operations in Europe in Spain and South America. Is a historical company with a very strong brand and very strong positioning on the market. Is a global creative consultancy agency. What we want to leverage on this, let's say, company, is the presence on the market with big customer, and to leverage the synergies also with the customer base of the other company of the group, in order to provide this kind of services, so this kind of advisory also to the lot, to the whole customer base that we have in the group, with a strong competence-based companies.
Uasabi, in particular, is a boutique very focused on the new generation, so, using the technology and creativity in order to address the new generation, the next gen, so by using the new media channel. So it's very focused, very particular also in terms of competencies within the competitor in the market. And we all together, these two company had a turnover of 2023, about EUR 11.6 million, growing, and with a margin, EBITDA margin, approximately about 13.5%. So they will be integrated, and they work together with our other companies in the Digital Advisory division, in order to offer to the large customer that we have in portfolio an holistic approach, so more competencies and more value.
Refine, instead, is a company operating in the same segment in terms of market, but with a proprietary platform. So it's a proprietary platform to automate marketing activity, empowered by artificial intelligence, and provide a wide range of services to primary customer and to primary player in the market. And we see a lot of opportunity of synergies, of the creativity given by I MILLE and Uasabi, together with the technology provided by Refine, in order to be to build, let's say, a unit that is unique in some way in the market that can address and capture opportunities stronger with respect also to the competition. 2023 revenues of Refine was about EUR 16.7 million, growing with respect to the past, and with the margin approximately 20%.
Our outlook for 2024 is continued in terms of performances, but growth in terms of top line, because the synergies that we have put in place since a few months, since they entered in the group. So our, let's say, strategic view on this unit, is to have a technology-based company that mix capabilities of creativity, consultancy, advisory, together with the technology, to propose to our large customer base more value, also in some departments that previously were not addressed by the TXT Group. I'm speaking about communication, branding, and marketing, and sales department, that before the opening up of this division, were not addressed by our offering. So it's complementary with also opportunity to grow at international level, because both, let's say, I MILLE and Uasabi, are already present internationally.
Refine has a technology that can be exported towards other countries, and so in our strategy is also to leverage on the group positioning at international level, in order to expand the market business outside from Italy very strongly. International is a part that is, let's say, important, very important in our strategic plan. I want to update you about two main, let's say, occurrences that we had in the 1st half of the year. First of all, we decided to increase our stakes in ProSim, that was already a minority stake, let's say, investment that we did several years ago. We are integrating ProSim into the PACE Group, so in order to strengthen a very specialized player for aerospace and aviation in terms of smart solution, in terms of products and technological products.
So we increase our stakes at 60%, taking the majority, and our goal is also to consolidate the results coming from ProSim, starting from the 2nd half of the year. We have, let's say, an outlook of pro forma of EUR 3.5 million. So it's a boutique with a very high level and highly technological programs that can help the aviation industry in order to innovate processes, and we want to exploit the synergies within the PACE in order to be more effective. Also, a small update about the acquisition that we did last year related to embedded graphics business that is growing fast globally. So 1st six months of 2024, this, let's say, business unit generated EUR 2.5 million that are consolidated in the number.
All the business is international, especially North America, and especially in the defense segment. We have a good outlook to continue to grow. The revenues of the 1st half of the year were better also than the budget, before the acquisition, and, let's say, they are taking benefits of the overall infrastructure of the ecosystem of the group, because also the embedded graphics business is integrated within the PACE Group organization, and we are creating, let's say, a significant player, international, providing value to customer by using the technology. These are the updates of the main events of the 1st half of the year, so I am happy now to introduce Andrea, our Investor Relator, that will go through the financials.
Please, post any Q&A in our chat, so just push the button on the top of the teams, on your browser, okay? And, I'm here after the review of Andrea about the financial, in order to answer any question that you want to make. Thank you very much. See you later.
Thank you, Daniele, and welcome everyone to the financial section of this conference call. Starting from the profit and loss of the 1st six months of the year, as broadly discussed by Daniele, revenue grew by 28.8%, to EUR 138.2 million. In terms of gross margin, we have, let's say, a reduction, a drop of two percentage points, from 34.8% in the 1st half of the previous year, to 32.8% in the 1st half of 2024. This is to be attributed to the different mix of, let's say, revenues, and to the growth of some of the activity with a lower profit margin, the gross profit margin.
This trend should be slightly recover in the 2nd half of the year. In terms of indirect costs, research and development costs grew significantly, plus 50%. This is both related to the 1st and the 2nd quarter, and is also related to the M&A plan that was implemented by TXT in 2023 and 2024, 2nd half of 2023 and 1st half of 2024, which includes also now new, let's say, product line, both, let's say, less mature product like Arcan or more mature products like the embedded graphics business.
So, in terms of commercial investment, there is also a growth of approximately 10%, with an overall investment for commercial marketing, let's say, activities, of EUR 11.5 million, equal to 8.3% of the overall top line of the period. General and administrative costs decreased in terms of incidence of revenues from 7.9% in the 1st half of 2023 to 6.9% in the 1st half of 2024.
Given this, let's say, trend in the gross margin and the indirect cost, the EBITDA margin was slightly lower, 0.3 percentage point, in the 1st half of 2024, compared to the 1st half of the previous year, with an overall, let's say, absolute value of the EBITDA, as of 30 June 2024, equal to EUR 17.5 million, +25.7% compared to the same period of the previous year.
In terms of amortization, depreciation, and write-offs, which amounted to a total of EUR 5.4 million in the 1st half of the year, those are mainly related to, let's say, depreciation related to PPA, so purchase price allocation, of EUR 1.9 million in the 1st six months of the period. Then there are EUR 2.2 million of depreciation related to the IFRS 16, so mainly building and car under lease. And the depreciation of fixed assets is at approximately EUR 0.9 million fixed tangible fixed assets other than lease, let's say, assets. In terms of other intangibles, other than those allocated through PPA, we have a EUR 0.3 million in the 1st six months of the period.
Given the 3.9% incidence of amortization depreciation, the operating profit is standing at 8.8%, as of end of June 2024, to EUR 12.1 million. Then, we have a significant growth course of 35.6%, also because the overall, let's say, growth of amortization depreciation is much, let's say, lower than the one of the revenues recorded in the period. In terms of financial results, the financial result in the 1st six months of 2024 had a negative net balance of EUR 1.3 million. Previous slide, please. Mainly due to interest expenses, bank charges, and the result of minority interest.
In the 1st half of 2023, the financial result shows instead a net positive balance of EUR 1 million, which was mainly related to one-off financial income related to acquisition. Financial expenses in the 1st semester of 2024 consist of EUR 2.2 million related to interest expenses and other bank charges, and EUR 0.5 million related to the share of negative result of associated, not consolidated in the TXT, let's say, profit and loss. The financial charges of the period are partially offset by financial income from the fair value of trading security held in the portfolio, and earn-outs for EUR 1.2 million, and the positive effect of the net exchange rate difference for EUR 0.2 million.
We have a pre-tax income of almost EUR 11 million, at 7.8% of revenues, with a tax rate at 26% approximately. So the six month close with a net profit of approximately EUR 8 million, equal to 5.8% of revenues, which equal to a 17.2% increase compared to the 1st half of the previous period. Of course, a strong effect is coming from the financial results, which, let's say, turn from EUR 1 million positive to EUR 1.3 million negative in the last say six months.
Moving to the next slide, we have the results of the 2nd quarter of this year, which showed revenue of EUR 71 million, with an increase of 29.2%, compared to the same quarter of the previous year, and also, in this case, the organic growth was really significant, really strong, at more than 22%, with a double-digit organic growth in all the operating division, which led to this, let's say, important effect in the quarter.
The same effect that is, let's say, visible at the half year period is also, in terms of gross margin, present in the 2nd quarter, which earn a gross margin of 32.1% versus 35.6% in the same period of the previous year. Also the trend of the, let's say, indirect cost is, let's say, somehow following the trend recorded in the 1st quarter. We're having a strong acceleration in the R&D investment.
The commercial cost increased significantly as well, and instead, in terms of indirect G&A cost, we have a slight decrease, because last year there were many effort and investment for international acquisition and, let's say, due diligence, which impacted significantly on the G&A incidence on revenues, which 2nd quarter of 2022 stood at 9%, which is well above the trend and the average of the TXT Group. The EBITDA of the 2nd quarter of 2023 was EUR 8.7 million at 12.3%, and also in this case, we let's say discount the strong investment in commercial and the marketing activities in the quarter, in the period.
The group attended many exhibitions compared to the previous year, also to promote the new products and the new, let's say, entities that enter in the ecosystem recently. And also in terms of R&D investment, there is a strong, let's say, push to really promote the let's say the smart solution portfolio, with a return on the investment expected already from the 2nd half of the year. As described before by Daniele, the growth of the smart solution is, let's say, is lower than the growth of the R&D investment. We fully expand in our profit and loss the R&D, so we expect in the, let's say, short to mid-term to have to benefit from the investment done in this 1st six months.
If we look at the amortization, depreciation, and write-off, also in this case, the main, let's say, component for the intangible part is the PPA equal to EUR 0.9 million, and there is also IFRS 16 for EUR 1.1 million and EUR 0.5 million of depreciation on fixed asset. Those are, let's say, the main items of depreciation of the period or the 2nd quarter. The same, let's say, impact, let's say, discussed for the half year period in terms of financial result, it also affected in the 2nd quarter.
In fact, in the 2nd quarter of 2023, there was a strong, let's say, positive component coming from the, let's say, adjustment of the fair value of earn outs, put and call, or the securities, while in the 2nd quarter of 2024, we have approximately EUR 1 million of negative result, mainly attributable to the financial cost and financial interest for EUR 1.25 million. Also in terms of taxes. As to that, the tax rate at approximately 24%, with a net profit margin at 5.4%.
Also, in this case, the strong, let's say, different impact of the financial result has a strong impact on the net profit, which is, let's say, stable in the 2nd quarter of 2024 , compared to the same period of the previous year. In terms of net financial debt, the adjusted net debt as of June 30, 2024 , is equal to EUR 36.9 million, an increase of approximately EUR 5.5 million compared to the EUR 31.4 million as of December 31st, 2023.
This increase was mainly due to the disbursement during the period related to the purchase of treasury shares for EUR 2.7 million, the payment of dividends for EUR 2.9 million, and the cash outflow at closing for the acquisition of I MILLE and Uasabi for EUR 7.1 million, excluding the earn outs that are also reflected in the financial in the net debt. Those, let's say, disbursement has been partially offset by the cash generated from operating activities. The main items of the net debt as of end of June 2024 consist of cash, of course, for EUR 47 million, and with the major Italian banks, and up approximately almost 10 million compared to the year end of 2023.
Financial instrument at fair value at EUR 27 million as of end of the 1st half of 2024, with an increase of EUR 3.4 million compared to the year end 2023, mainly for the fair value valuation of those trading securities. The current financial debt is basically of EUR 58 million, mainly referring to the short-term portion of bank loans, and stable compared to year end of 2023. And in terms of non-current financial debt, as of June 30, 2024, it is equal to EUR 73 million, up EUR 16.6 million compared to the year end 2023.
It's also important to inform that the net debt as of end of June 2024 includes EUR 10.8 million of debt related to IFRS 16, with an increase of EUR 0.7 million compared to the year-end 2023. And now, EUR 9.7 million of debt for earn-outs and put-call option for the purchase of minority interest, with an increase of EUR 0.9 million compared to the value at year-end 2023. The consolidated reported net debt as of end of June 2024 amounted to EUR 56.2 million, an increase of 1EUR 9.3 million compared to the adjusted net debt of the period.
The main difference is related to the reclass of TXT investment in Banca del Fucino among fixed assets for EUR 17.8 million. If we move to the next slide, in terms of balance sheet as of end of June 2024, we have intangible assets at EUR 92 million, and those intangible assets consist mainly of goodwill, for EUR 73 million, and customer relationships and IP linked to PPA on M&A for approximately EUR 16 million, 16. Increase of the period is to be attributed to the acquisition of I MILLE and Uasabi, net of the amortization of the period.
In terms of tangible fixed assets of end of June 2024, we are at EUR 22 million, and the amount consists mainly of hardware, one building and one rental, and lease contracts for offices, car, and printers, following the adoption of the accounting standard IFRS 16. Tangible fixed assets are up EUR 1.6 million compared to year-end 2023, mainly following the increased value of financial lease, IFRS 16, and recorded in the period, and of course, the acquisition of I MILLE and Uasabi. Of course, net of the depreciation of the period. Other fixed assets consist mainly of an investment in Banca del Fucino, with fair value of EUR 17.8 million, and the remaining value consists of investment in minority.
Value is stable compared to the year-end 2023. In terms of net working capital, the group recorded a growth of EUR 2.7 million, and this is to be attributed to, of course, the acquisition of I MILLE and Uasabi, partially offset by the absorption of the net working capital as of year-end 2023, which historically, let's say, at the group level, get reduced over the year, to then increase again, around the 4th quarter, around December. The main changes are related to the inventories, which are, let's say, the work in progress on the customer project, fixed price projects.
There is, of course, in the same context of a bit of absorption of the net working capital, a reduction of the trade receivables, and those, let's say, are the two main effect at the net working capital level. We have an increase on severance and other current liabilities, mainly related to the severance indemnities accrued on, let's say, Italian workforce. In terms of shareholder equity, we have an increase of EUR 4.4 million, which is basically, let's say, related to the profit of the period, plus the net effect of the changes in the treasury share, let's say, the net between the repurchase and the transfer of treasury shares in the period.
Of course, the net financial debt reported in the balance sheet is the unadjusted financial debt at EUR 56.2 million, discussed before. Moving to the next slide, we have the shareholding structure as of end of June, 2024 , which is basically in line with the one discussed over the end of the... So, end of March, treasury shares are stable at 10% of the share capital. Laserline, the financial vehicle of Enrico Magni, is also stable at 30%, and there are no, let's say, changes to be discussed within our, let's say, share capital.
In terms of performance and market data, performance of the stock and market data, in the 1st six months of 2024, the TXT share price recorded an official high of EUR 26.5 per share on 14th of June 2024, and a low of EUR 18.48 as of January 5th 2024. As of end of June 2024, the share price was equal to EUR 24.25 per share. Treasury shares as of 30 June 2024 were equal to EUR 1.27 million, representing 9.8% of the issued share. And treasury shares were EUR 1.3 million as of year-end 2023.
And the decrease is to be attributed to the consideration pertaining to TXT share in the context of the M&A in the 2023 M&A plan. Net of the share repurchase in the context of the buyback plan, and in fact, in the 1st six months of 2024, approximately 154,000 shares were transferred to vendors and current managers of TXT, and about 125,000 shares were repurchased at the average price of 21.89 per share, for a total investment of approximately EUR 2 million . Of course, the dividend of EUR 0.25 per share was paid on May 22nd of this year, with a total outlay of approximately EUR 2.9 million .
Let's say, the sum of dividends and treasury share repurchase sum up to EUR 5.6 million. I think that's all for the financial section of this conference call. Thank you so much for your time and your attention, as now is the Q&A section about to start. Thank you so much again. Talk to you later.
Thank you very much, Andrea, and thank you to all who sent their questions through, so we'll just get through some questions now, and so here I have with me, Daniele Misani.
I hope that are easy questions.
Let's hope.
Thank you.
So the 1st question we received in the emails is: What specific synergies do you anticipate will drive the growth and value creation?
Yes, as part of our strategy, is to build an ecosystem of companies that are, let's say, vertical excellencies. So in each company, we have a specific go-to-market, a specific offering, specific competencies, and, let's say, the value and the creation of the growth is made by synergies among these companies, so-
... for us, it's important to address a larger customer base, because when you add companies, you add also customers, of course, by offering, let's say, complementary solution to customers. And so we are investing also in terms of commercial activities in order to to exploit the commercial synergies among the company of the group. The growth overall of the 1st half of the year is related mainly to two segments, so public sector and aerospace and defense. The outlook is positive, and so for this year, they will be the major contributor of the growth of the entire group. And of course, we have also the benefits coming from the new division related to MarTech, that will be consolidated in the 2nd half of the year.
Fantastic, and so now we have the 2nd question here: where do you see the future growth of TXT Group?
It's the same as before.
Oh, sorry about that.
So you missed the first one, I think.
Okay, and so
No, no, this one.
Yeah.
So how much does the public sector business rely on the National Recovery and Resilience Plan?
Okay, so in terms of the business, the public sector, let's say we have a strong footprint on, let's say, main, central public sector, central entities of the public sector and also local entities of the public sector, that are not driven by the National Recovery Plan, but are mainly a business that has continuity, because it's based on the fundings that the government puts in order to innovate, transforming the technologies, the public institutions in general. So, we have a, let's say, an impact of the National Recovery Plan, especially on the healthcare segment, because the National Recovery Fund in Italy has been used in order to finance the activity of innovation of the healthcare segment.
More or less, let's say, with the overall public sector, more or less 20% can be considered business, based on the National Recovery Resilience plans, mainly for the healthcare. Of course, we know that this part shall be substituted in order to continue to grow for the future. But also in terms of funding for the healthcare domain, they will be part also for, let's say, the strategy of the Italian government in order to provide funds that are not relying on the National Recovery Resilience plans, but will be generated in order to continue to improve the segment.
Out of all the business of the 1st half of the year in the public sector, let's say 20% is relying on the National Recovery Plan. Looking to the overall turnover of the group is a small part, so we are speaking about EUR 4 million out of EUR 138 million.
Fantastic, and so we do have another question, which is quite a long question, so I may just have to do it segmented.
It's from Andrea Randone, so he's asking too many questions. So it's not just one, it's a list of questions. Maybe split it because,
That's why.
Uh, okay.
And so I'll start with the first part of it.
Okay.
So in light of the 1st half of 2024-
Mm-hmm.
Your financial year 2024 guidance seems very cautious on revenues and more challenging on the EBITDA, the margins.
Yes, I co-
Can you elaborate on this matter?
Yes, in terms of guidance, let's say, we started the year also in the budgeting phase, looking for growth. Okay, and as far as today, the 1st half recorded strong results, better than, let's say, the expectation that we had during the budgeting phase. Let's say, the more contribution as, let's say, unexpected contribution, in some way, was related to the telco industry, because you know, especially in Italy, telco is undergoing a lot of merging of big companies, splitting of big companies. So the market is still in some way difficult to understand.
So, in our strategy, we preferred to get new business in order to position ourselves also for the future, because all these changes is a risk factor, of course. And so for us, it was very important to position ourselves, get business in order to give continuity independently of the new setting of the customer in this field, let's say. And so we recorded the strong growth also in this area, that was unexpected at the beginning of the year, but was made by the strong work of the team that allow us to position and take position in a market that is, let's say, stable in general. So it was a very good result by the telco team.
Of course, on the EBITDA margin, we get some pressure because the investment, because the cost are coming also for the acquisition that we made in the past, so, so the integration cost that mainly are related to commercial activities, so new initiative, new people, exploiting synergies among the company. And so this put us a little bit on pressure in terms of overall EBITDA margin, even if we have... As you know, our business is seasonal, and we historically had, we have historically a 4th quarter, very strong. So in the last year and the year before was like this. So it's a challenge, so we have still to do the results for the 1st quarter, and there is a risk factor, of course.
But if we can deliver as promised, the 4th quarter strong, we think that the overall year can meet also the EBITDA margin, let's say, that we have in the guidance.
Fantastic. And so you may have already answered this question, but I'll ask it anyways. So you've closed several acquisitions, and you're working on new deals. How do you internally manage the integration process?
Yes. Our governance models model is based on network of enterprises. So when we integrate a company, what we do is specifically integrate the general services, so administrative and administration, finance, HR, that are managed at holding level and offer the services to the company. Of course, there is a period in which we have costs, because there's a process to move, let's say, the activity related to general services toward the holding. Needs to change system, needs to implement projects of transition, migration, and so on. But in our approach, there is no strong integration in terms of go-to-market. There are strong integration in terms of general services, and what we put on top in terms of integration is a superstructure, let's say, in order to exploit synergies.
So we have people that try to put together different companies in order to make an approach more holistic the customer base, so we have commercial costs more. And of course, what we put together is competence centers in terms of technologies that are already in the group and are offered to the companies that enters in the group as a service, let's say. So the integration is more, as I said, related to general services, while is the commercial and technical synergies are driven by, let's say, initiatives that put together the competencies of the company of the group.
Fantastic, and so we have the 3rd question. Are you targeting new M&A activity more in Italy or abroad?
We are growing. In our strategy, we grow abroad on the areas in which we are strong. For this reason, the acquisition that we made also in the past were more related to the aerospace and defense. That is our bread and butter, let's say, because we are recognized as a strong player in this field, and for new business, we prefer to open up activities in Italy, so also the acquisition of the in Italy, Uasabi and Refine Italian-based business with some, let's say, footprint international, but we open up a new business local in order to have less risk in terms of governance and knowledge of the market. For the next future, we have a pipeline.
We are working to strengthen the division that we have already had, but mainly for, let's say, for 2024, the targets are Italian-based with a small business outside, because what we want to do is strengthen the aerospace and defense globally and empower, let's say, the other division that are very has already a small footprint outside of from Italy, strengthen them, in particular the market. One part, MarTech division, one part of the strategic plan is to leverage on the already existing small presence internationally, but to grow with this division also internationally.
Fantastic. And then we have the final question, and the very long one.
Yeah.
Can you remind us your current cost of debt financing, the maximum leverage you're considering, and the market conditions for new credit lines?
Okay. So I ask help from our investor relator, that is more a financial guy, but I can start to answer to you. She's laughing because Andrea is not, let's say, in the main screen, but he's not so happy I call him inside. No, but in general, besides the cost of debt, the leverage, as we said in the guidance, is to have a debt that is up to 2 times, 2.5 times the EBITDA as a maximum. Today, we have a net financial position that with the projected EBITDA of 2024 is less than 1 time, so we have still the ability to continue to invest in order to reach this.
Moreover, we have our treasury shares that we can use in order to do other M&A. So... And in terms of credit lines, so, you know, now is in a period in which it's not convenient, like, in the past, even if we are able to get credit lines at good, let's say, in a good way. I don't want to tell too much because, you know, it's part of our job also to get this good relationship with the banking institutions, that they are happy to provide us credit lines, and we are also having conditions that are, in some cases, better than the average market conditions.
So, Andrea, I don't want, if you want to add something about this topic, I let you.
Yeah, of course, we have, let's say, open constant, let's say, discussion and negotiation with the banks. Of course, depends also on the size of the new credit lines that we are demanding to the banks. But in general, yes, we're also waiting maybe a slight, let's say, reduction of the rates, but for now, it's of course close to more or less 5%, let's say, rate. And again, we are trying to combine, let's say, different institution with, let's say, different duration and so on to better, let's say, to-
... make it as efficient as possible, and of course, that also depends on the size of the new borrowing. But this is a question from Andrea's, of course, so we can then, with the financial report, provide a bit more visibility on the new, let's say, loans that have been, let's say, granted to TXT recently, and a few more information. But in general, yes, now we are also negotiating for new credit lines. It's not a surprise that we are still active and looking for new M&A, so based also on the size of, let's say, the M&A and the loans, we are, let's say, somehow having different options on our table.
Thank you, Andrea.
Thank you, Daniele.
So I want also to highlight a little bit on this. If you look to our EBIT, it's better than the same period of the last year. We have, let's say, more impact about, let's say, interests, and, and so, I ask maybe to show the slide. Okay.
Let's say there is an impact if you look to the results of 2024 with respect to 2023 about the net financial extraordinary income. That is also related and not only to the money we spent for interest for the credit lines, but also because in 2024 we had let's say a discounting of an earn-out of one of our company, and so in last year we had a positive impact on this part, while this year we are in a negative impact. So, this discounting of this earn-out was about EUR 1.2 million.
So if you look, of course, we increased the credit line, so we have an impact of increased volumes of credits, and so increased volume of interest. But the main, let's say, impact was related to the discounting of this earn-out of one of the company that we are in the group.
Fantastic. And, now we'll move on to the next question. So can you please explain to us what is the main focus of your R&D spending?
Okay. So in terms of R&D, we recorded an increase with respect to the last year. The increase is partially also given by the fact that we are starting to consolidate the Canadian entity that is a product entity with an R&D, so there is an inorganic, let's say, increment of R&D. But our strategy in R&D is to improve our Smart Solutions portfolio. So the R&D investment is related to the Smart Solutions division, mostly, so 95% less some initiative internal to the other division in order to create competencies or to create assets. And this because we want to increase the value of the Smart Solutions portfolio that we have in our, let's say, offering. And as you know, our Smart Solutions portfolio is based on innovative technologies.
We are speaking about artificial intelligence. We are speaking about cybersecurity. So all these, let's say, platforms need continuous investment to improve and to stay ahead in front with respect to the market. So, if you look last year, we invested also in some companies with less mature, less maturity of the smart solution itself. I'm speaking about the artificial intelligence-based companies that are Arcan and Paladin AI for two solution in different market segment based on artificial intelligence. Of course, the investment are tuned also to the maturity of the product itself, so product more mature, like our, let's say, Flight Plan Optimizer have less investment in percentage with respect to the less mature products.
There is a mix, and the total mix is increasing, because we want to have more effective and more valuable products in order to address strongly the market. The results so far are good, because if you look to the growth of the Smart Solutions division, is, let's say, taking market share, so it's growing. And of course, also the margins of this unit, after expanding all the R&D costs, are increasing, because increasing the volumes of subscription and licenses, of course, there is an improvement of the overall margin.
Okay, and then there is another one. So how do you envision the integration of I MILLE Group and Refine into the existing TXT ecosystem? And what are the key synergies that you anticipate will drive the value, creation, and growth?
Yes, as I said during the presentation, for us is a complementary offering with respect to the existing offering of the group, even if the common, let's say, factor is the technology. So the synergies that we look in short terms are more related to the market, so have the possibility to address large customer not yet in the customer portfolio of TXT Group, by approaching them and offering the rest of, let's say, the competencies that we have within the team.
And of course, empower also I MILLE, Refine, and Uasabi to offer more to their existing customer, because all the technologies and the product lines that we have in the group are, let's say, in some way can be vehiculated to customer by using the existing relationship of these companies toward the market. In terms of technological synergies, of course, there is the possibility of this company also to leverage on the competence center of the TXT Group, related especially artificial intelligence, that is a domain for the market industry that requires investments, so the competence center that we have within the group will help these companies in order to improve their go-to- market and their own offering towards the market.
The two main lines are the commercial synergies and the technology as a group we can provide to them in order to be more effective.
Okay, fantastic. And so circling back to R&D, which we've already discussed, what was the focus of the R&D investments, which made it grow so much? Is there any portion of the decline in the EBITDA margin?
EBITDA.
EBITDA, sorry. Margin, which is related to recent acquisitions.
So, two, these are two different questions. R&D, I already explained before, so the investment growth because is growing the portfolio solution, and we push more on the less mature products in order to make them profitable in shorter terms. These are the drivers. In terms of the portion of decline in EBITDA margin is related to recent acquisition. So, more than the recent acquisition, is more related to a mix of activities and the fact that we increased volumes also in the Software Engineering division that is less, let's say, performant also with respect to the same period of the last year. This because we increased the volumes.
We acquired also, as I said before, a positioning stronger in the telco domain in order to de-risk the future, since there are many, let's say, movement in this kind of segment. So there is a mix of contribution about the overall margin that is slightly less than the same period of the last year, driven by some business activities and the cost of the acquisition in terms of, let's say, initiative and progress that starts in order to integrate, for example, general cost related to the transaction itself, the cost of the transaction, plus, let's say, all the cost that comes from the integration of the IT system, ERP and all the staff in order to make them, let's say, in line with the group policies.
I think that, you know, as I said before, the 4th quarter usually is stronger for the TXT Group, so the overall guidance for the year can be met if you work properly and if we deliver on promises. Also the overall business in the 2nd half of the year.
Okay, and we do have two new questions here.
Okay.
Can you provide some update on the potential sale of the Banca del Fucino? Sorry, and the Banca del Fucino stake. Similar question with regards to the multi-insurance products.
Okay, about Banca del Fucino, as I said in the previous calls, we are working in order to dismiss it. Of course, because we are growing, we need more also capital in order to do extra, more M&A, let's say. And so we are in negotiation in order to dismiss it. We plan to dismiss before the end of the year, if not all, a strong part of this kind of investment. In terms of the multi-insurance products, also for this question, I am more a businessman, so I ask to Andrea to help me on this topic, please.
Yes, here, basically, we are not, of course, investing anymore. Those are products that are coming from the past, so we are, let's say, quarter by quarter, evaluating those that, let's say, are coming to their maturity. Of course, we monetize them. But, yes, so we can expect, within, this and next year, those amount to go significant- I mean, to go down significantly in the range, up to, one year and a half, so up to the end of 2025 . So if this year it's, like, Banca del Fucino, by the end of 2025 , the amount should be, maybe not, zero, but, close to, that.
Thank you, Andrea.
Now, we do have the final question here. So what-
I know, maybe someone will post something else.
Let's hope. And so, what about the C apital Market Day? I believe September was an option. Should we expect something before the year end?
Yes. So we are discussing in order to present it before the end of the year. So for, let's say, organizational issues, also because we decided this year to close, let's say the 1st half of the year later, with respect to the past. If you remember, we usually close in this, in August. This year, also for the acquisition we made, we decided to do it in September. So there are some blank periods. We are also undergoing with other M&A, so we are still working. Our team is strongly working on other M&A, so we decided to shift from September. As far as today, we haven't yet communicated the date, but we are planning, let's say, and our plan is to do for sure before the end of the year.
Now, the target date is end of November. That is a good period, because we close also the 3rd quarter, and, if everything, we will have some, other M&A that, if we close also this kind of deal, is a period in which we can, disclose our, business plan with more, let's say, with, with more information, in order to avoid to, to overlap some blank period or, to not provide the full information also related to the M&A pipeline that we have. So end of November, as far as today, is, the target, period. So no more question?
No, no questions.
Okay, no. So if everybody needs more information, of course, we are more than open to share this kind of information to you. Please forward and contact directly our investor relator, Andrea, that will be happy to answer to you. Thank you very much. It's many quarters that we are giving positive results. We are working hard in order to continue with this kind of, let's say, results quarter by quarter. Thank you very much. Thank you, Andrea. Thank you, Daniele.
Thank you, Daniele. Thank you, everyone.
Thank you, everyone.
Thank you, Daniele.
See you for the Q3 call, investor call. Thank you very much.
Thank you.
Bye-bye.