Good morning and welcome to Indra's First Quarter 2024 Results Presentation. And now hand the conference over to Mr. Ezequiel Nieto, Head of Investor Relations. Please go ahead.
Good morning and welcome to our First Quarter Results 2024 Presentation. I'm Ezequiel Nieto, Head of Investor Relations, and as usual, let me refer you to disclaimer on slide number three that shows the legal framework under which this presentation must be considered. First, let me introduce the participants of this call: José Vicente de los Mozos, CEO of Indra; Antonio Mora, Chief Control Officer; and Luis Abril, Managing Director of Minsait. José Vicente, the floor is yours.
Thank you, Ezequiel. Ladies and gentlemen, good morning. Welcome to our conference, and thanks for being with us this morning. I think it's fair to say that our first quarter results have been very strong and positive. I try never to go back, and are a great starting point for our strategy plan leading the future and the right first step to achieve this target. Let's start with slide number five, where we display our main business achievement for the quarter. First of all, we have taken our first step to deliver on our strategy presented in the Capital Market Day by creating our space subsidiary with the aim of making it the cornerstone of our business activity in the coming years. As we said, we have the commitment of becoming a tier-one European player in space.
We have also carried out the acquisition of the whole capital of Global Training Aviation to reinforce our position as one of the world's leading simulation companies. With this operation, Indra now covers the entire value chain of the business, from the manufacture of leading edge simulator to the provision of training services for pilots. Another very important milestone has been the joining of NAV CANADA into the iTEC alliance, where Indra is a major player in the global air traffic ecosystem. With this important partnership, iTEC has reached beyond the European border for the first time. We have also signed several agreements with top players of the defense industry, such as the Next Generation Radar in Emirates with Edge Group, the new industrial collaboration agreement signed with Lockheed Martin, or the collaboration agreement signed with Thales to boost the joint development and commercialization of vanguard defense systems.
Finally, we have achieved two new relevant milestones in ESG, which are the best scores in the technology sector in the S&P Yearbook, and the renewal of our top employer certification for the sixth consecutive year as one of the best companies to work for. On page six, we can see the headline of our financial result for the first quarter of 2024. Just let me highlight the following. First, the double-digit growth achieved in the order intake revenue, EBIT, and EPS. Second, the size and quality of our backlog, which grew 6.3%, providing good visibility for our near future growth. Third, the commercial momentum that the company is going through, with revenues growing at a 22% rate, strongly backed by all our divisions, among which it stands out the growth registered by defense +56%, and ATM +63%.
Besides that, this growth combined with our cost measures are driving our improvement in profitability, as our EBITDA and EBIT margins show, and cash generation, allowing us to maintain financial leverage at a very low level of just 0.2 times. On the slide seven, just let me remark the strength of our organic growth: 90%. Once removed the forecasting path and inorganic contribution. In terms of EBITDA distribution, Defense, Air Traffic Management, and Mobility represent 53% of the total for the first quarter of the year. On page eight, we display the evolution of our headcount. Let me highlight here that we have improved our revenue per employee by 14%, while our workforce has only increased by 2% compared to March 2023. The productivity becomes also a key element in our performance.
Now, once the big picture has been presented, let's dive into the performance of each of our four divisions, starting in page 10 with defense. In slide 10, this has been a very strong quarter for defense, as you can see in the key figure on the slide. Order intake grew by 4%, mainly due to the Eurofighter project and despite the worst FCAS project comparable. More important are the very strong figures of sale, which grew 56% in first quarter 2024, mostly driven by the contribution of the FCAS project. Excluding this contribution, sales would have increased by 10%. On top of this solid revenue growth, EBIT margin grew from 15.7% last year in the same quarter to 16.4% in first quarter 2024, improvement explained by the increasing contribution of the FCAS project. In air traffic management, also delivered very strong performance, as you can see on slide number 11.
The positive performance shown by order intake, +83% growth, was mainly due to the contract signed in Canada and Colombia, as well as some others in Europe and AMEA. It is worth noting, as we mentioned before, that NAV CANADA joined the iTEC alliance. Sales in first quarter 2024 grew by +63%, driven mainly by contracts carried out in Belgium and Spain, as well as the inorganic growth from the acquisition of Parker in the UK and the Celex business in the U.S. Finally, EBIT margin was in the double-digit range of 13.8%. If we move to the mobility division, backlog and order intake fell steadily: -3% and -1%, respectively. Outsource sales grew +19%, driven by double-digit growth in all geographies except for Spain. The EBIT margin in first quarter 2024 was 3.2%, steadily higher than -2.7% recorded in first quarter 2023.
But frankly, a big job done deeply in mobility session to prepare for the future. About Minsait: now, in Q1 23, Minsait also printed a very positive quarter. The good commercial momentum goes on with a +7% increase in order intake in first quarter 2024. For its part, revenue in first quarter 2024 grew by +12%, driven by the strong performance shown in public administration and healthcare, which grew +35% thanks to the positive activity with the public administration in Spain, while energy and industry posted +8% growth, and financial services registered a +3% increase. Finally, EBIT margin in first quarter 2024 improved to 5.5% versus 5.1% in first quarter 2023 thanks to higher operating leverage from steady sales growth, as well as improved revenue mix and the forthcoming efficiency initiative.
When we compare the concurrents of Minsait, you can see the good job done in first quarter for the team. On page 14, the breakdown of Minsait revenue by horizontal, where you can see that we have improved our mix with digital and solution growing by 15% compared to first quarter 2023, and now representing 50% of our sales. Finally, on page 15, we saw our order intake and revenue breakdown of Minsait. First quarter 2024, order intake was up 7%, with double-digit growth in three of the verticals, except for energy and industry, with decline by -8%. On the right-hand side, revenue in first quarter 2024 grew by +12%, driven by public administration and healthcare for +35%, energy and industry +8%, and financial services +3%. On the contrary, revenue in telecom and media decreased -4%.
Now, I leave the floor to Antonio Mora for the financial review.
Thank you, José Vicente, and good morning, everyone. Let's start the financial review with the evolution of the free cash flow on slide 17, that amounted to EUR 68 million, an excellent figure taking into account business seasonality and considering that we are more than doubling the already good figure for the same quarter last year. This level of cash generation, as we will see below, has allowed us to maintain our financial leverage in a very low level. Now, in page 18, we see how days of sale improved compared to both March 2023 and the end of last year. The good performance versus March 2023 can be explained by the improvement of accounts receivable minus two days and accounts payable minus five days.
Page 19 shows the net debt evolution of the quarter, the first step in a strong operating cash flow of EUR 108 million due to the excellent performance of the business. As mentioned, net working capital stood at -EUR 15 million, well below the -EUR 34 million posted in first quarter 2023. Other financial liabilities stood at EUR 9 million, similar figure as the previous year, and net interest at EUR 4 million, slightly higher than first quarter 2023. With all this, we have closed this third quarter with net debt at EUR 89 million and a leverage ratio of 0.2 net debt to EBITDA, as you can see in page 20. Slightly above the figure we presented in March 2023, but still at very low debt levels. And now, to finish my speech, a quick look to the debt structure in page 21.
In first quarter 2024, gross debt remains stable in EUR 697 million, average maturity below 2 years, and cost of debt at 4.2%. The cash position at the end of March was EUR 608 million, and we also have EUR 748 million of unwritten credit facilities so that we maintain liquidity while canceling gross debt with cash. Now, let me turn the call to José Vicente for the final slides.
Well, as you can see, that's the beginning of the strategic plan Leaders of the Future with results. First, I want to congratulate the team. I think this transformation of Indra, we start to see the result. I'm very proud of my team. We are working in a very solid way, and as you can see, the speed of the transformation. This month, we'll launch Capital Market Day, but we don't sleep. Now, I want to show you the eight work streams to implement Leaders of the Future. As we advance our vision 2024-2026 strategic plan Leaders of the Future, I'm eager to present to you how we have structured the implementation around eight critical work streams.
The first work stream, or control tower and operating model, is designed to oversee the overall stature of the plan's implementation and to deploy key organizational and operating model changes, and it will be shared by the chairman and myself. Second, the transformation work stream is set to drive improvement across several fronts, accelerating our business topline, boosting industrial and software development productivities, and laying the groundwork for the newly announced Indra Technology Hub, expected in 2026. These initiatives are crucial for our growth and efficiency. The focus of the strategic corporate operation work stream is to oversee the creation of the Space Newco , including the carve-out of current capability and leading the search for global long-term partners and new companies to be incorporated.
Additionally, this work stream will guide us in the portfolio rotation process, which includes the divestiture of non-core assets and the acquisition of defense and aerospace targets. It will also lead the search for new key strategic partnerships and alliances. Our geographic expansion work stream aims to position Indra as a stronger multinational company, enhancing local positioning and customer proximity by deploying 3 new clusters of home markets as announced in our Capital Market Day. The growth-wide digital capabilities work stream is focused on expanding Minsait's digital capabilities across the organization. The technological R&D work stream will prioritize investment in digital and cutting-edge technologies as part of our commitment to invest plus the EUR 3 billion in technology development up to 2030.
Our corporate enablement work stream is tasked with supervising the implementation of our new talent plan, which includes the deployment of the new Indra Way culture and initiatives in our key areas such as ESG, branding, and digitalization of corporate systems. Lastly, the booster work stream is where we will explore additional opportunities to further accelerate Indra's growth. If we go to the next slide, turning to the implementation phase of our strategic plan, we are currently in the activation period. Our focus is on making critical organizational adjustments and laying a robust foundation for all subsequent actions. Since the Capital Market Day, we have been structuring and planning meticulously all the subjects. New committees have been established, and we are implementing advanced monitoring tools to ensure transparency and control. We have also kickstarted prioritization with a dedicated sponsor.
It's for that we have defined the first 100 days, that we have the action, that we have the responsible for each committee direction or inside the team, with related data to be implemented. Looking ahead, we anticipate the rollout and execution phase of our strategic plan to commence by the third quarter of this year. This phase approach ensures that we are not only adequately prepared for the strategic plan's launch but also proceed in a manner that guarantees success. As you can see, first, we have defined the Chief Transformation Officer, that he will be responsible for monitoring, monitoring, following, supporting the team in each action. Also, we have defined the SCO to leading strategic corporate transaction work stream end to end, control tower I explained before, and the quick start with a +15 priority work stream to first 100 days with assigned sponsor.
The immediate priority activity to define is new thought management mid-term incentive scheme linked to guidance release on Capital Market Day that needs to be approved in the next shareholder and Space new co-operated as part of Indra core priority. I remind why we go to develop the Space because communication is part of our business. It currently needs to be autonomous. They need to control the communication. It's for that it makes sense we develop this new Space com. That's all for the first quarters. We continue to work. Thank you all for being here today and for your time. And thank you to those that are making this plan a reality. I see you at the end of July. Thank you very much. And now we are open to the Q&A.
Thank you. Ladies and gentlemen, the Q&A session starts now. If you wish to ask a question, please press star followed by five on your telephone keypad. Our first question comes from the line of Nicolas David from ODDO. Please go ahead.
Yes. Good morning. Thank you for taking my question and congrats for this very impressive set of Q1 earnings. Just maybe talking about the outlook in the process, you just retake the annual guidance for this year. How should we read that? Should we read that as a way you expect a way softer growth in the coming quarter, or it's just your internal processes which push you not to upgrade it while you see actually a better outlook than what is in your guidance? And we understand that Q1 was probably the strongest quarter of the year, but not only because FCAS comps are going to be tougher going forward. But could you please highlight some other potential exceptional items which push the growth in Q1 and we shouldn't see in the rest of the quarters? Notably, air traffic management.
How sustainable is the organic growth you have now, notably in those countries you mentioned and when the big contracts you've signed in Canada and Colombia are going to ramp up? And I have a second question. Could you please update us on the process to dispose of stake in Minsait where you stand now? There were some rumors in the press that you were more open to sell a majority stake. And when should we expect an update on that official? Thank you.
Thank you, Nicolas. Okay. About your three questions. First one, about the guidance. It's just one quarter, and we prefer to be conservative. Bear also in mind we have the positive delta of FCAS, EUR 56 million in the quarter. This delta disappears to the remaining quarters. But I explained before, I don't want to never go back, okay? I think the key point is the speed the team to improve. This year is the first year to implement the plan. I think for the moment, I prefer to be conservative. About air traffic management, frankly, to put air traffic management that clear division has been very good input for all the customer and shareholder because before, air traffic management, I remember we are the second company in the world, and maybe we are the most advanced solution for the airports worldwide. They put in relevance air traffic.
I can tell you, for example, when I visited Geneva in the aerospace exposition, that Indra today is a reference in this domain worldwide, that I'm very confident about air traffic management now and that we explained in the Capital Market Day. For us, the key point is to entry in the U.S. market, that in the following years, the airport will be renewed. But also, I can tell you in the last month, we have won a small project for MARDA(uncertain), 40 small airports for anti-choke planes in the U.S. That's the beginning that we are confident. About Minsait, frankly, after one year, if I listen to all the rumors, I never can work, okay? We have taken commitment, I think step by step. I explained to you we have more than 15 answers in the 100 days. We are looking for a partner for Minsait.
We are studying non-core business. Instead of being a little patient, we don't stop, but I think we have clear direction where we want to finish.
Understood. On Minsait, beyond the rumors, I mean, is it true that you are in the phase of receiving offers yet, or it's really too early in the process? Yeah.
Give us time. Please, give us time, okay? It's under control. Also, this project is led by Luis Abril, that you know is the head of Minsait division. We have the schedule, and we know how to do in the following months.
All right. That's true. Given the very strong performance, we are happy to let you start. Thank you.
Next question, please.
The next question comes from the line of Laurent Daure from Klepper. Please go ahead.
Yes. Thank you. Good morning, gentlemen. A couple of questions from me as well, starting with Minsait. Could you give us an update on what you see on the market, on your key regions, Spain and LATAM, as you probably saw most of your competitors are not growing anymore, and you are still delivering 10% organic growth? So I know Spain has been more resilient, but do you see the first sign of weakness? And more particularly, you were boosted by the public sector. Do you expect the same inflows of revenue from large government contracts for the rest of the year? So that's the first point. The second question is on the election business. It's always very hard for us to forecast. So if you could give us your best guess for 2024 versus 2023 on this business.
My final question is back to the good working cap control in the first quarter. I was wondering if the shift towards more defense business can have an impact going forward, not only this quarter but for the next years, on the speed of cash collection. In other words, the receivables, I think there's quite a difference between IT and defense. So if you could clarify a little bit on that topic, that would be useful as well. Thank you.
Laurent, before to give the floor to Luis for Minsait, about the Indra. In Indra, we spent lower contribution around EUR 55-60 million versus EUR 69 million in 2023. But we are in May. We don't know political overview in the following months. Maybe we'll be lower. Maybe we'll be higher because more and more we are invited to more RFQ to prepare an Indra worldwide. Now, Luis will answer you about Minsait.
Thank you, José Vicente. Yes. I mean, just to comment on elections, elections this year shouldn't be very different from 2023. 2022 was quite good for elections. 2023 and 2024 should be similar. And on Minsait, effectively, as you see in the numbers, we still see no significant signs of a slowdown. It is true that in this quarter, the fastest growing vertical has been public administrations. In public administrations, not only do we have the Spanish public administration, we have many other things. We have health. We have actually elections and some other things. But as you can see, with the exception of Telco and Media, there is growth. There is what we consider solid growth in all the verticals. So overall, we see, as I was saying, no signs of a slowdown.
It is true that some of our peers have been more pessimistic in the last months, and actually, some of them have been having some problems. It's not our case. For the future, we are still cautiously optimistic. We have a good pipeline. We are seeing solid demand from our customers. It is true that we probably do have some advantages versus our most relevant peers, such as the fact that most of our customers are large customers who are suffering the crisis less, or the fact that many of our contracts are multi-annual contracts, which give us some baseline, which is interesting from a growth perspective. We are typically in very core activities of our customers. We are relatively confident with the fact that we can keep on growing. It is true that public administration in this quarter has been relevant from a growth perspective.
We keep on relying not only on public administration, but in all the sectors that compose Minsait. And as I was saying, we are cautiously optimistic. Still, given that we are cautious, what we see for this year, for the end of the year in Minsait, is still growth figures of mid-single digit and no more. But we feel that we can comfortably fulfill that kind of figures.
Okay. Thank you. And the last point was on the working cap.
Yes. Regarding your question about the working capital, we'll be better in defense and ATM thanks to the prepayments and the very good collection during first quarter 2024.
Okay. Thank you.
Next question, please.
The next question comes from the line of Carlos Iranzo from Bank of America. Please go ahead.
Hey, guys. Good morning. I actually have three questions. The first one on free cash flow, very strong quarter, your reiterated guidance. I just wonder, how should we think about free cash flow generation in the next three quarters? Is 2024 a year in which you are not going to generate most of your free cash flow in the last quarter of the year? Then second question on defense, 70 basis points of margin expansion at the EBIT level despite the strong contribution from FCAS. So I just wonder if you can give a bit of color on the revenue mix and how have you been able to increase margins despite the strong contribution from FCAS? And then last one, if you can help me in terms of modeling on air traffic management, could you please give us the inorganic contribution from Selex and Parker, please? Thank you.
Carlos, first, before to give the floor to Antonio answer you about the free cash flow and the contribution for Selex and Parker, in defense, I request to monitor defense without Eurofighter and without FCAS, okay? Defense, we have increased 10% without FCAS revenue, okay? About the EBIT, or margin EBIT in defense has been 16.4% versus 15.7% improving thanks to operating leverage and FCAS contribution. For example, I can explain to you, for example, cost reduction in manufacturing has been important. We are improving efficiency. And now we are forecast to establish the second shift in September. This operational point also supporting us to improve our EBIT margin. Antonio?
Okay. We reiterated our guidance in EUR 250 million for the total years in free cash flow. And we'll hope the fourth quarter will be the stronger generation of free cash flow.
Carlos, your questions are already answered.
I think they're clear. On ATM and the inorganic contribution?
Selex and Parker. Parker, yes. Okay. Carlos?
Selex and Parker.
Yes, Ezequiel.
The contribution Selex and Parker has been EUR 9 million for this first quarter.
Thank you.
Thank you. For Selex, EUR 7 million of Selex and EUR 2 for Parker. Next question.
Thank you. Ladies and gentlemen, please be reminded that in order to ask the question, you may press the star key followed by five on your telephone keypad. Our next questions come from the line of Michael Briest from UBS. Please go ahead.
Yes. Good morning. Congratulations as well from me on the strong start. On space, what's the significance of creating this standalone company? And can you make any comments on the press speculation regarding Hispasat ? And secondly, on Minsait, the revenues are obviously strong, but headcount was flat year-over-year. Does that suggest a lot of the growth was products, subcontracting, maybe the election business? Because normally, we'd see a stronger margin drop through if headcount was flat on that sort of growth rate. Thank you.
A space, when we have explained our concept, a new space, to the shareholder consultant, that has been very open, interesting, because we have in mind a very agile Space Newco that his company will have his autonomy. In some cases, we can buy also, but also for maximum the synergy and the same potential sell strategy. Today, for example, we are in the process to affiliate our communication growth. We are in the discussion of different companies around the value chain that, for the moment, I cannot give you the name. And Hispasat that I explained is an option. But it's not the only option, okay? Because we want to become European partners. Hispasat can be in the operator part of the newco? Yes. Can be other non-Spanish company? Yes.
It depends in the following months that the discussion we have with different companies in Europe and also, in some cases, with U.S. companies.
I take the one on Minsait. Michael, thank you for the question. You mentioned the headcount, which is constant. Effectively, it is constant despite the growth. This has to do not that much with extraordinary effects or peaks of things like the election business. It has to do basically with the fact that sales are more high-quality sales than before. We are selling more digital. We are selling more projects and services, which are less intensive in people. We are selling less BPO and things like that. This allows us to grow without significantly increasing headcount.
But wouldn't that create a bigger margin benefit? I know margins were up, but 10% growth without any headcount should have a bigger effect, I'd have thought.
Well, actually, if you take a look at operating margin and EBIT, the margin is better than in the first quarter of 2023. It is actually significantly better. It's like 4, 5, or 6 percentage points better.