Welcome to Indra's first half 2022 results presentation. I would like now to hand over to Ezequiel Nieto, Head of Investor Relations. Please go ahead.
Good afternoon, ladies and gentlemen. Thank you for joining us today in our 2022 first half results presentation. I'm Ezequiel Nieto, Head of Investor Relations, and as usual, let me refer you to disclaimer on slide number three that sets out the legal framework under which this presentation must be considered. Conference call will be led by Indra's CEO, Ignacio Mataix, our Minsait Managing Director, Luis Abril, and our new CFO, Borja García Alarcón, and the presentation will be around one hour. Now, let me hand the call to Ignacio Mataix, CEO of Indra. Ignacio, the floor is yours.
Thank you, Ezequiel. First of all, I'm delighted to introduce our new CFO, Borja García Alarcón, to all of you. Borja has a very strong professional track record in finance, developed in listed companies like Telefónica and Aena, where he has been CFO for the last nine years. Welcome, Borja. Now let me move to slide number four for the review of the main highlights of the results. 2022 first half results confirm the trends we saw in the first quarter of the year, which translates into the solid growth of our backlog, order intake, and revenues, combined with improvement of the company's profitability. As such, revenues increased by 12% in the first half of the year, mainly boosted by Minsait, which delivered 17% growth, while Transport and Defense posted a 2% increase.
Secondly, EBIT grew by 22% year-on-year, thanks to improvement in profitability in transport and defense. Thirdly, net income reached EUR 66 million in the first half of 2022, which is 20% more than in the first half of last year. Cash-wise, the first half of 2022 has been also very strong in terms of free cash flow generation. In fact, the best first half of the year in the last six years. It totaled EUR 24 million positive in the first half, compared to EUR 50 million negative, sorry, in the first half of last year. As a consequence, our leverage ratio increased again to 0.6x compared to 2.1, one year ago.
This positive performance of our operations during the first half of the year allows us to increase our 2022 revenues, EBIT, and free cash flow guidance, despite the worsening macroeconomic outlook all across the board, which we think might have a limited impact in the second half of the year. Now, in slide number five, let me speak about the recent events around corporate governance. As you know, our board met on the sixth of July and reached the agreements you can see on the slide in order to restore the corporate governance of the company as fast as possible. As such, Indra will call for an extraordinary general shareholder meeting to appoint the new independent board members around the end of October.
This shareholder meeting will propose, first, to set the number of members of the board of directors at 14, of which at least half of them will be independent, following the Recommendation 17 of the Code of Good Governance, and also complying with gender diversity best practices. Second, to eliminate the provision of the quality vote of the chairman from the company bylaws. The search process for the new board members will be led by the current independent directors supported by Korn Ferry. In addition, the separation between the non-executive chairman and the CEO is consolidated, and the role of the coordinating independent board member will also be maintained.
As you can guess, my main priority as CEO of Indra is now this, to bring back a good corporate governance and restore market confidence with this process while continue delivering on our financial targets and our strategic plan 2021, 2022. Now, coming back to our financial results in page six, to show our revenues performance for the first half of the year and the second quarter of 2022. On the left side of the slide, reported revenues amounted to EUR 1,805 million in the first half of 2022, and we're up 12% compared to the first half of last year, while revenues in local currency grew by 10%, with ForEx contributing positively with EUR 28 million because of the appreciation of some Latin American currencies. Last year, this contribution was EUR 39 million negative.
Revenues organic growth, excluding the impact of last year acquisitions and the ForEx contribution, was 9% up in the first half of 2022. On the right-hand side, the second quarter 2022 revenues grew by 10% in reported terms and 8% in local currency compared to the first half of last year. This is the second quarter of last year, sorry. Organic growth for the quarter was up 7%, and the ForEx contribution positively reached EUR 21 million for the reasons already mentioned. Now, in slide number seven, we display the revenues breakdown by region, where you can see that all of them grew across the board. Europe grew by 3% and Spain printed a 9% increase in local currency, while America and EMEA delivered double-digit growth.
The latter showed outstanding growth driven by the elections projects in Angola. Now turning to slide number 8, we see the group's operating margin and EBIT evolution in both periods. On the left graph, we display margin for the first half of the year. You can see how operating margin improved to EUR 149 million compared to EUR 125 million of last year, equivalent to 8.3% operating margin in the first half, compared to 7.7% in the first half of last year, thanks to the operating leverage and improvement in profitability in both divisions, as we will show later.
Same happened to EBIT with EUR 123.3 million compared to EUR 100 million of last year, mainly explained by higher profitability in the transport and defense division, despite the increase in amortization of EUR 6 million in the first half of this year compared to last year. Moving to the graphs on the right, you can see that operating margin in the second quarter amounted to EUR 77 million compared to EUR 73 million, equivalent to 8.1% margin in the second quarter compared to 8.4% margin in the second quarter of last year. For its part, EBIT for the second quarter was EUR 63 million. This is 6.6% EBIT margin compared to EUR 61 million of last year, which was 7.1% EBIT margin.
Turning now to slide number nine, please find the evolution of our workforce with a breakdown by division. Our total final headcount at the end of June 2022 increased compared to both December and June, explained by very strong levels of demand that we continue to see in our main markets and the integration of the workforces of our last bolt-on acquisitions. At the bottom of the page, we display the evolution of the number of employees not assigned to projects, which remains very low for another quarter. Now let's talk about the 2022 guidance in slide number 10. After the solid second quarter print, we have decided to upgrade our 2022 guidance for revenues in constant currency, reported EBIT and free cash flow.
On revenues in constant currency, we rise to more than EUR 3.6 billion, versus the previous guidance of more than EUR 3.5 billion. On reported EBIT, we upgrade to more than EUR 280 million compared to more than EUR 270 million that we had previously. On free cash flow, we increase our ambition to more than EUR 175 million compared to the previous more than EUR 170 million. If we move to slide 11, let's check out how the outlook for the defense sector has changed because of the outbreak of the war in Ukraine, and how this is going to impact on Indra defense businesses.
All major neighboring countries have announced an increase in defense spending, where it's worth highlighting the commitment of Germany with an additional program of EUR 100 billion. At the same time, many European countries have stated their willingness to support the development of future European defense programs. Spain has also announced its commitment to reach 2% of GDP in defense spending no later than 2029 in the last NATO summit in Madrid. With an immediate first step, which is to increase to EUR 1 billion the defense spending in 2022. For Indra, we expect that all these announcements will mean an acceleration of the existing national and European programs and the launch of new ones, both in the Navy and the Air Force in Spain.
As such, we believe that this will help to close the international agreement of FCAS Phase 1B and will accelerate the signing of new Eurofighters for Spain as early as 2022 or 2023. We also expect the renewal of more air defense systems, the acceleration of the Santiago II electronic intelligence program, and the new command and control terrestrial systems, all of them in Spain. All in all, the devastating war in Ukraine has turned the European defense landscape upside down and opened a new frontier of possibilities for Indra in the medium term. Now let me move to slide number 12, where you can see the backlog and order intake evolution of our transport and defense divisions.
Backlog in transport and defense amounted to EUR 4,066 million, an increase by 13% in reported terms in the first half of 2022. Standing out, defense and security, which amounted to EUR 2.667 million, while backlog over the last 12 months revenues increased to 3.31x in the first half of 2022, compared to 3x in the first half in the same half of last year. Order intake in the first half went up by 31% in local currency, boosted by the strong activity recorded in defense and security, 64% in local currency, thanks to the order intake registered in the MK1 roll-out of the Eurofighter project in Germany and Spain, as well as the contract for the modernization of the Tiger MK3 helicopters in Spain.
For its part, order intake in transport and traffic declined by 4% due to the relevant contracts that took place in the first half of last year, both in air traffic and transport. If we move to slide number 13, we show revenues breakdown of the two businesses on transport and defense. First half of 2022 revenues slightly increased by 1% in local currency, pushed by the growth registered in transport and traffic. It was 3% in local currency. Due to the higher activities with Enaire in Spain and T-Mobilitat, and in several rail projects. For its part, defense and security sales slightly decreased 1% in local currency as a consequence of the lower activity of the Eurofighter project and the lack of contribution from the FCAS project.
In the quarter, revenues decreased by 3%, showing declines both in transport and traffic, 4% in local currency, with 5% declines in traffic and 4% decline in transport, due to lower activity in both segments in international projects. In defense and security, the reduction was by 2% due to lower contribution of the Eurofighter project. Now, please let me go to slide number 14 of the operating margin and EBIT for transport and defense. On the top of the left graph, operating margin on the first half reached EUR 65 million compared to EUR 56 million in the first half of last year, equivalent to 11% margin compared to 9.6% last year in the same period.
Moving to the top right graph, operating margin in the second quarter stood at EUR 35 million compared to EUR 32 million in the same quarter last year, which translates into 11.3% margin compared to a 10% margin in the same quarter last year. As you can see from the bottom left graph, EBIT in the first half of the year was EUR 61 million compared to EUR 47 million last year in the same period, which translates into a 10.2% EBIT margin compared to an 8% margin in the first half of last year. Backed by increasing profitability in transport and traffic, both in air traffic and transport segment.
If we move into the bottom right graph, EBIT in the second quarter stood at EUR 33 million compared to EUR 28 million in the same quarter 2021, equaling to 10.6% margin compared to an 8.7% margin in the same quarter from last year. With this, I finalize the transport and defense, and I turn the call to Luis to follow on the presentation.
Okay. Thank you, Ignacio. Good evening, everyone. Now let's move to slide number 15, where you can see the backlog and the order intake evolution of our Minsait division. First of all, this page on the left-hand side of the slide, backlog in Minsait went up by 11% in reported terms and totaled EUR 1,977 million, while the backlog revenues ratio over the last twelve months stood at 0.86 times, compared to 0.90 times in the first half of 2021, which implies a -5% decrease versus last year's same period.
Second, the graph on the right shows the evolution of our first half 2022 Minsait order intake, which went up by 21% in local currency, boosted by the solid growth shown in all verticals, among which stood out public administrations and healthcare, that grew by 51% in local currency, helped by the order intake of the elections project in Angola. Moving now to slide number 16. Here we show the revenue breakdown of Minsait. Sales in the first half of 2022 grew by 15% in local currency, with all the verticals registering a strong growth.
Standing out again, the growth posted in public administrations and healthcare, which was +31% in local currency, driven by the increased contribution from the election business and also in energy and industry with a growth of +12% in local currency. On the right-hand side of the chart, we see the second quarter figures. Here we see that revenues went up by 14% in local currency in a market environment where customer demand continues to be strong and also with solid growth in all verticals, among which public administrations and healthcare stood out once again. Then finally on Minsait, let's move to slide number 17, which was on Minsait profitability.
Here on the top left graph, we display our first half of 2022 operating margin, which stood at EUR 84 million compared to the EUR 69 million in the first half of last year. This is equivalent to an operating margin of 6.9% in the first half of 2022 versus 6.7% in the first half of 2021. Moving to the top right graph, there we see operating margin in the second quarter of 2022 that stood at EUR 42 million versus EUR 41 million in the second quarter of 2021, and this translates into a 6.6% operating margin in the second quarter of 2022 versus 7.5% last year.
Going to the bottom of the slide, as you can see on the left graph, EBIT in the first half of the year was EUR 62 million compared to the EUR 54 million of last year's same period, which translates into a 5.1% EBIT margin this year, slightly lower than the 5.2% recorded in the first half of 2021, despite the sales growth, which is mainly explained by higher indemnities (+EUR 5 million), as well as higher amortizations (+EUR 3 million), in the first half of 2022 versus the first half of 2021. Moving to the right there in the bottom right graph, we see even in the second quarter of 2022, that is still at EUR 30 million versus the EUR 33 million of the second quarter of 2021.
This is equivalent to an EBIT margin of 4.7% in the second quarter of 2022 versus 6.1% in the second quarter of 2021, explained by the same reasons, higher indemnities and higher amortizations, and also salary increase. That's it on Minsait. Now I leave the floor to Borja for the financial review.
Thank you, Luis. Thank you, Ignacio Mataix, for your kind introduction, and good evening to everyone. It's a pleasure for me to address again the financial community, but now for the first time as CFO of Indra. On top of the strong business performance presented to you by our CEO, Luis Abril, let me now guide you through the financial section, where you will see how the operative improvement are converted into a strong cash flow generation. Having a look at page 18, there are three main messages that I would like to highlight. The first is on the top strip of the page in the right-hand side. As you can see here, the free cash flow generated in the first half of 2022 amounted to EUR 24 million, and this is the best figure reported for the first six months in the period 2017 to 2022.
Second, it is important to mention that free cash flow is usually negative in the first semester. In this sense, figures for 2022 are driven by the performance of our two divisions and the improvement in the working capital needs, as you will see now. Finally, same comment applies to the cumulative free cash flow that for the last twelve months reached our highest historical level at EUR 356 million. As you know well, consistent with our guidance and the figures reported in the previous years, cumulative free cash flow excludes extraordinary items related to employees' restructuring plan, as well as cash incoming from asset disposal. Now, going to the main components of the free cash flow, page 19 contains the working capital evolution in the first half of 2022, first compared to the first half of 2021, and then with December 2021.
Compared to June 2021, there is a relevant improvement in 19 days explained by the collection received in the second quarter from the election projects in Angola, plus a long list of smaller clients. Inventories and account payables remain as almost stable in terms of days of sales. Compared to December 2021, working capital increased by four days in line with the seasonality of the business, as we accumulate work in progress through the year and build up stock filling. In line with seasonality, inventories increased by seven days in the first half of 2022, while other items remain almost stable. Page 20 shows a reduction in EUR 30 million in our net debt between December 2021 and June 2022.
Starting at EUR 240 million at the end of December 2021, the first step is the positive contribution of operating cash flow of EUR 163 million due to the strong performance of our two divisions. As mentioned in the previous page, working capital reflects the seasonality of the business in the first part of the year, and even with a strong revenue growth delivered, it only increased by EUR 52 million compared to EUR 128 million in the first half of 2021. CapEx stood at eighteen million euros, above eleven million euros of capital reported in the same period of 2021 due to higher investment in tangible assets as well as lower subsidy collections.
Next block is the bridge, in this bridge are taxes, EUR 30 million compared to EUR 15 million in the same period of 2021. Five million of this variation comes from the higher profit before taxes in the period, three million due to the accounting recognition of the tax inspection in Spain related to the period 2015 to 2018. The last part of the increase comes from different countries, mainly from Mexico, where tax assets available in the past were already consumed. Variation of other financial liabilities amounted to EUR 17 million, the same figure than in 2021. Net interest, EUR 22 million, below EUR 25 million registered in the same period of 2021.
The savings in EUR 3 million is a combination of lower interest payments related to the reduction in gross debt, partially offset with the payment derived from the partial repurchase of the bond executed in the second quarter. Finally, financial investment, FX impact and other of -EUR 7 million includes M&A and other small items for EUR 13 million, all of them compensated by EUR 20 million of positive contribution of the effects, mainly because of the real in Brazil. Now, page 21 shows the evolution of the leverage since 2016. We closed June 2022 at 0.6 net debt to EBITDA, with a significant improvement compared to June 2021.
As in the past, factoring stands at EUR 187 million at the end of the quarter to make figures comparable, and we have eliminated the impact of IFRS 16 and extraordinary items related to employee restructuring plans and asset disposals. Now, just to finish the presentation, let's have a look to the debt structure on slide 22. Gross debt amounts to EUR 972 million. It's well diversified around 50% fixed and 50% floating. Its average maturity exceeds 2.5 years, and cost of debt remain stable at 1.9%. As you can see, we have reduced our gross debt by 30% in the last six months due to the repurchases in May of part of the EUR 300 million corporate bonds with maturity in 2024, as well as the cancellation of bank debt.
Total cash position in June was EUR 762 million, and we also have EUR 183 million of undrawn credit facilities. All this financial position, together with the strong performance of the business, compares pretty well with the maturity profile shown on the page. With that, we finalize our presentation. Thank you very much for your attention, and let's now move on to the Q&A session.
Ladies and gentlemen, the Q&A session starts now. If you wish to ask a question, please press zero one on your telephone keypad. Thank you. The first question comes from Bosco Ojeda from UBS. Please go ahead.
Hi. Good afternoon. I wanted to ask first on the IT division, on the cost front. If I'm not wrong, your costs are up something like 19% year-on-year. You had a good revenue for this quarter, but the cost seems to be escalating. If you could give us a bit of detail on what's going on. Second question on the Eurofighter. I mean, you have a very good backlog, a number of things on the defense side. If you could give us a bit of detail on how is the timing for revenues on the Eurofighter over the next quarter or years. I think you mentioned you have a positive expectation for FCAS. If you could also give us a bit of color on what could be the timing for that.
Finally, a question, once again, if you don't mind, on ITP. There was early this morning also news on the potential investment from Indra. If you continue to think that is not the base case for your investment. Thank you.
Ladies and gentlemen, please hold your line.
Yes.
Dear speakers, you are on line. Please go ahead.
Okay. Bosco, could you please repeat your questions? Well, you have two questions. I don't know, maybe you make a third question or just two questions.
Yes, I think. I mean, I asked first on IT costs. Second was on the Eurofighter. The third question was about the ITP Aero, the company, if you could give us also some reassurance, if you continue to think that that's not a potential investment for Indra. I'm asking because this morning there was news saying that you could take a stake on that company. Thank you.
Okay. Thank you, Bosco. Luis, any-
I'm gonna start with IT, yeah. On the cost side, okay, here effectively there are some costs that increase higher than well, that increased this year in this quarter. The most relevant figures that increased in terms of costs are, we've mentioned some already. Indemnities, which are higher in this second quarter than in the second quarter last year by around EUR 3 million. Then in this quarter, we also have higher amortizations like plus EUR 2 million or something like that. Also, salary inflation is higher than what we had last year. Even though looking forward, what we see is that you know, the salary inflation is starting to slow down.
There is another relevant thing, which is that in the Angola project, we are starting to have relevant sales around EUR 40 million in the first half, but they go at a quite low margin for different reasons. We are being conservative here, basically. You know, basically because there are guarantees and there are some costs which are not easy to estimate until the elections take place, and this will be in August. Therefore, we're being conservative here. Probably with these four or five things, we can explain the slight drop in the percentage margin that you see in this second quarter. Still, here we are confident. The message is that we are confident that we will be meeting the target of EBIT and margin that we've stated for Minsait by the end of the year.
Thank you, Luis. Bosco, regarding Eurofighter. We are having a lower contribution in the year, clearly, compared to last year. I think all the news are positive in Eurofighter. You've seen the signature of new Eurofighters in ILA in Germany a few weeks ago. You've seen we signed large contracts on the radar. We look forward into 2023 and onwards on increasing our Eurofighter business. How that goes through the PNL, difficult to show because you know that, you know, a Eurofighter takes, let's say between two and three years to be delivered because of the time of the supply of the different components on the aircraft. That's more difficult to give you some more flavor.
Obviously, strong demand on the product need upgrades on the product. I would say good tailwind on Eurofighter for the next years. Regarding the ITP news this morning, those are news in the newspapers. We can reassure you, as you asked, that we are not looking into ITP and that a minority stake for us or a financial investment is not what we would seek in ITP nor in any other you know company we would look into.
Okay. Thank you.
Thank you, Bosco.
Thank you. The next question comes from Carlos Treviño from Santander. Please go ahead.
Yes. Good afternoon, and thank you for taking my questions. Mainly three. You are increasing the guidance by EUR 10 million in EBIT. However, your free cash flow increases by EUR 5 million. I would like to ask you for the moving parts in the free cash flow, which could mean that you are expecting this will increase in the guidance as lower free cash flow level than the EBIT. As a follow-up to Bosco Ojeda, the previous question on the Eurofighter, I would like to ask you for how do you see the contribution from the FCAS projects during the second half of the year?
Finally, you are commenting in your earnings report that very likely you are going to put out on your backlog the contract with Lockheed Martin for the F-110. I would like to ask you for this topic, how is evolving and if you expect that you can recover some additional, a part of this business, a part of this contract, or you could have additional business from the F-110 program in your backlog over next year. Thank you.
Well. Okay, Juan, on the cash conversion.
Okay.
Okay. Hello, Carlos Treviño. Well, initially our guidance was, as you know, EUR 170 million for free cash flow with EUR 270 million for EBIT. The cash conversion was 60%, and that's what we have maintained. Now for EUR 175 million, we go to EUR 280 million, and that's what is behind this free cash flow guidance.
Okay.
Carlos, regarding the two difficult questions on FCAS. Well, we were expecting to have signed FCAS throughout the first half of the year. That has not happened, and therefore, you know, with how you transform a contract into actual sales and what you need to, you know, put the people to work and so on, we will see zero contribution or very limited contribution on FCAS on the second half of the year. We still expect to sign FCAS, you know, the last quarter of the year, and we still expect that will contribute from first of January onwards.
We are positive on that, but I think we expect very limited contribution on FCAS, if any, in the last half of the year. Regarding the F-110, I think that's disappointing in the sense that we have let's say closed the contract. We will continue negotiating with Lockheed Martin on having a scope on the contract. Okay. We expect to manufacture and have a scope, but we'll have to work on that throughout the second half of the year and on next year. I cannot tell you, I mean, how much we are going to able to recover.
That's been a large contract for us in which we expect some contribution but far away from the EUR 160 million plus we had on the contract initially. Okay? We continue to have other contracts with the F-110. This is only the contract we had with Lockheed Martin, but we have other direct contracts with Navantia on the program, and we deliver a lot of other sensors on the program, which will continue and which we are working on.
Thank you. Okay.
Carlos?
Okay. Yeah. That's better. Thank you.
Next question, please.
Thank you. The next question comes from Beatriz Rodriguez from BNP Paribas. Please go ahead.
Hi. Good evening. Thanks very much for taking my question. Can I come back to the cost base in IT? Yeah, to the point earlier, I think it looks like costs were up around 20% year-over-year in Q2, despite IT revenues up around 14% constant currency. I guess, if this cost base we're seeing in Q2 with salary increases and so forth, is that what we should be looking at for the rest of this year? I guess, is there any change to your confidence in achieving those margin targets for the IT business? I have a follow-up on the guidance. Thanks.
Okay. Yes. I mean, there is part which has to do with salary increases, but we are quite optimistic with the evolution of salaries looking forward, because we are starting to see some slowdown regarding this matter. Here in this context, what we can say is that we maintain the guidance that we've given in terms of EBIT for the IT division, which is achieving figures which are above 5.5%. Probably the next two quarters will be better in terms of salary increases. Plus we have other good things for the rest of the year.
Got it. Just to follow up on the guidance raise on the top line, I guess. It seems to imply the revenue growth would slow down to sort of around 3%, given you've just grown 10% in H1. I guess, what are your assumptions in there that are sort of baking in that slowdown in H2? Perhaps expand that to the macro, you know, those assumptions, things remain the same, improving from here or some deterioration. Be interested to hear what you're baking in there. Thank you.
Okay. I don't think we'll see major changes going down in the second half. I think obviously that some of the growth we had in mid-term will be reduced slightly. We think that obviously there's going to be some difficulties on the two quarters that will not affect us in the short term, but in terms of the longer view, there are some uncertainties. I think we are growing at a good path. We are growing more than 6% in constant currency. Remember that we are saying more than, so we need to see how we develop through the second half of the year.
As we were saying, I think we are quite keen on the backlog we have, the business performance, the EBIT evolution, and the profitability of the business. Despite of, you know, the uncertainties in the market, we are quite confident on our guidance and in all the lines, in growth, in EBIT, and in cash flow generation.
Got it. Thank you.
Thank you. Next question, please.
Thank you very much. Ladies and gentlemen, let me remind you again, if you have any comments or questions, please press zero one on your telephone keypad to enter the queue. Thank you. The next question comes from Laurent Daure from Kepler Cheuvreux. Please go ahead.
Yes, thank you. Good evening. Just have two questions. The first is on the balance sheet. You are now almost fully leveraged. My question is more on capital deployment and so what happens if you still consider bolt-on deals in terms of acquisition in the IT side? Or if you really want to refocus much stronger towards the defense sector. My second question is on the global environment. I understand that at this time you're still enjoying strong growth in IT, but do you start to see a lengthening sales cycle, slight delays in closing deals in any of the verticals or any of the regions? Or at this stage, you still do not see any sign of slowdown anywhere?
Any granularity on what could happen in next three months would be very useful. Thank you.
Okay, Laurent. I think regarding M&A, I think we will continue looking into bolt-on acquisitions on both segments, both in IT and transport and defense. We will continue applying, you know, our very strict policy of being conservative on what we look at, and looking at them, you know, very closely. We are not going to change our policy there. I think there are good deals, and we have a good pipeline on M&A on the table, and we will continue with that. Regarding Luis, IT.
I mean, so far basically we haven't seen anything weird here or any slowdown in the demand despite the macro trends, which are what they are. It's true that we have to consider that IT companies are late cyclical, so basically we have to keep an eye on everything that is happening. For the coming two quarters, we expect to continue to perform well and to achieve our new guidance for 2022, and you know, we are quite comfortable with that. For what is going to happen in 2023, we will see probably. It's too soon to say. We have an eye on everything so that we can react if it is needed.
I think we have, Luis, a strong pipeline of good opportunities ahead of us.
Yeah.
We are not seeing any slowdown in that sense.
Maybe a follow-up on this. Assuming 2023 was to be tougher than we think on the macro side, compared to previous cycles, where it took quite some time, given the location of your headcounts, to adjust your headcount with a weakening top line, do you believe that today the company is in better position to react faster and adjust the cost base when you will compare with 2020 or even in previous years?
Yes, I think we are better positioned than a while ago. If you take a look at the growth of our workforce in the last months, a relevant part of that growth comes from Latin America. You know, and that gives us a view to how the different human resources markets behave. We have now more flexibility than what we had before.
I think in terms of flexibility, our workforce is more flexible, so skilled, with more flexibility.
Also-
We can move more our workforce than maybe we could three or four years ago. We've been working in the pyramids, in having young people. I think the flexibility of the workforce itself is larger. We can move people, I think, quicker than we were able to do it two or three or four years ago.
Great. Thank you very much.
Thank you. The next question comes from Manuel Lorente from Mirabaud. Please go ahead.
Hi. Good afternoon. My first question is on security and defense, right? I believe that among the companies that I'm following, you are the exceptions in terms of no growth on security. And especially in the current backdrop. Do you think there is something wrong in your commercial front, in your go-to-market strategy, in your portfolio mix? Or this is just a matter of demand in comms or to the escalation and backlog? Looks strange, this muted performance in security and defense in the current backdrop. As you were saying, there is a massive improvement in defense budgets, so why you are not being able to jump into this new trend?
Okay, Manuel, thank you for the question. I mean, let me say, first of all, I think we have a very strong backlog. If you look into last year, the growth was 22%, so very strong growth. I mean, the defense projects, which are, you know, five to seven years average, I mean, unfortunately, they don't grow the same every year, so sometimes you have peaks and bottoms, and that's what is happening this year in terms of defense. We have lower contribution of Eurofighter, as we mentioned. We have no contribution on FCAS, but we are continuing to increase our backlog, which will produce revenues along the road. So there is nothing negative. We have peaks and valleys.
I think we have a very strong looking forward with the growth in spending in defense. I think we'll benefit very much from that, but it takes time, unfortunately. I think we need to be patient. It takes time for you and for us. Nothing wrong with the pace of the business and, you know, this is a number of projects that some of them are slower, as you can imagine, with engineering taking place in the beginning with lower amounts. If you get into the production, you get massive volumes. I would say the normal pace of the business and we do have other financing.
I see. Just a follow-up then on margins on T&D, right? You were mentioning that Eurofighter contribution is lower than in previous year. My understanding of current circumstances is that Eurofighter is one of the largest contributors in terms of profitability of the division. How do you explain then the increase in EBIT quarter-on-quarter or versus last year in the context of muted sales evolution and lower contribution from Eurofighter?
Yeah, Manuel. Yes, thank you. No, good question. I mean, remember we've been saying the last, I would say a couple of years, that we had a number of projects in transport that were dragging, no? And that we have issues.
Mm-hmm.
Haramain and T-Mobilitat, we have a number of them, no? I think one of the efforts during the last couple of years has been to remove all the problems we had in those projects, put them in profitability and so on and so on. I think that's what has happened now. What we see in the first half is that projects in transport that were dragging results are contributing. There is a big move from negative results into positive results in those projects. We have turned them around. They've been very large projects. That happened already last year with, you know, the Saudi Arabian project. It has happened with T-Mobilitat in Spain this year.
I think the difference is that positive contribution that was negative in the past of those transport projects. Because as you mentioned, I mean, we have lower contribution of some defense or especially Eurofighter project.
I see. Just moving on to Minsait. Can you give us the revenue and operating margin contribution for Angola? Free cash flow, if it is possible as well. It was EUR 40 million. That was correct?
Yes. The amount of the year is around EUR 40 million.
Mainly in Q2?
Sorry?
Mainly in Q2.
Mainly in Q2. For the second half of the year, we're still gonna have around EUR 60 or something like that in terms of revenues. In terms of free cash flow, remember that this is a multi-year project. There is a piece of the revenues that may come next year. Regarding cash flow, a relevant part of the project has been cashed in already. On margins, for confidentiality reasons with the customer and so on and so forth, we cannot say much. It should be a good project, but we cannot say much.
I understand that. You were mentioning that these EUR 40 million revenues on Q2 was at low margin. Is it fair to assume that the EUR 60 million revenues from the second half of the year is going to be with, let's say, a nice margin. Because my understanding was that previous allocation in Angola was a very relevant project, revenues and profitability-wise.
Right. Yeah. That's right. That's exactly right.
Okay. Thank you.
You are welcome. Next question, please.
Thank you. The next question comes from Nicolas David from Oddo BHF. Please go ahead.
Yes, good evening, and thank you for taking my question. I would like to come back on the ITP story. You mentioned that you are not interested in a minority or financial investment into ITP. Does it mean that... Would you be interested in kind of a more strategic investment, like, I mean, like investing 30%, having board member at the board? Or would you only be considering maybe a majority investment, above 51%? It would be interesting to understand how we define what is a minority investment for you and could you be interested in a more strategic or even a majority investment there? Thank you.
Okay. I understand that this is not on the table, so there is an agreement which needs to be approved according to public information by the Spanish government. Therefore, this possibility is not on the table.
Okay. How would you define minority investments from your standard, for instance, maybe just to understand better, what we're talking about? I understand that you can't comment any potential interest further than that, but how would you define financial investment?
Well, I mean, difficult to define, but you know, what we've been talking and we've been saying, which is, you know, 15%, what is in the table. According again to public information, is not something that is something which is for us an investment which is appealing at all.
Okay. That's clear. My second question is regarding Minsait's backlog and order intake. Well, H1 has been solid, but nevertheless, backlog is going down. What do you see currently in terms of commercial activity for H2? Do you think that backlog has bottomed out substantial revenue which continue to go down? Or do you think that you can fuel again this metric and to fuel the growth for 2023? Thank you.
I mean, we're comfortable with the figures that you see there, and we believe that the order intake is gonna grow at double digits for the whole year, and that's it. You know, you see, you know, minor drops in some figures, but you know, the overall feeling and the overall numbers are these. We see clear strong growth for the year.
Specifically for Minsait, right?
Yeah. Right.
Yeah. Perfect. Thank you very much.
Okay. Any more questions?
Thank you. Ladies and gentlemen, just as a reminder, if you have any question, please press zero one on your telephone keypad. Thank you. There are no further questions. Dear speakers, back to you for the conclusion.
Thank you so much again for attending the call. Thank you for the questions. Hopefully, we have answered all the questions. In any case, our investor relations team, led by Ezequiel Nieto, is at your disposal to answer any further questions or any detail you may have. Thank you very much for attending the call, and for the ones that are going to have some days, have a good break and enjoy the summer. Thank you.