Welcome to Indra's nine-month 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 everyone for joining us today on our 22 results presentation. I'm Ezequiel Nieto, Head Investor Relations, and as usual, let me refer you to the disclaimer on slide number three that sets out the legal framework under which this presentation must be considered. The conference call will be led by Indra's CEO, Ignacio Mataix, our Minsait Managing Director, Luis Abril, and our CFO, Borja Alarcón, and the intended duration will be around one hour. Now let me turn the call to Ignacio Mataix, CEO of Indra. Ignacio, the floor is yours.
Thank you so much, Ezequiel. Good evening, everybody. Welcome to our conference, and thanks for being with us, today. Let me move to slide number four for the review of the main highlights of the results.
Our third quarter 2022 results bring an acceleration, improving our revenue growth and free cash flow of the first nine months of the year. Profitability improved 15% in the third quarter compared to the third quarter of last year. Let me start by saying that we are not seeing any weakness in our customer demands. The strength of the commercial activity is well reflected in the double-digit growth of our backlog and our order intake. The latter with double-digit growth both in Minsait and in the Transport and Defense division. As such, revenues increased by 14% in the first nine months of the year compared to the same nine months of 2021, mainly boosted by Minsait, which delivered 19% growth while Transport and Defense posted a 5% growth.
The third quarter revenues accelerated to a 19% growth versus the same three months of 2021. EBIT grew 19% year- on- year driven by revenue growth, the improved mix and the efficiencies achieved, and despite the environment of a strong wage inflation in the businesses and markets where we operate. Cash-wise, nine months 2022 was also very strong in terms of free cash flow generation. In fact, the best first nine months period of the last 10 years. It totaled EUR 54 million in the first nine months compared to EUR 5 million in the same nine months of 2021. As a consequence, the leverage ratio increased again to 0.6x compared to 1.7x one year ago.
In short, the positive trend seen in the first quarter of the year continues. Now, on slide number five, let me speak about the recent events around the corporate governance in the company. The extraordinary shareholders meeting held on October 28 delivered on the commitments of the board to restore Indra's corporate governance in accordance with best practices. Let me summarize. The number of members of the Board Directors has been set at 14, of which half of them are independent, following the recommendation 17 of Code of Good Governance . All of the Board is now in place since last Friday. It has been eliminated the provision of the casting vote of the chairman from the company bylaws. The role of the lead independent director is maintained, and the separation between the non-executive chairman and the CEO is consolidated.
With this agreement, we think we have taken the decisive steps to restore good governance, good corporate governance and provide market confidence. Now coming back to our financial results in slide nine, we show revenues performance for the first nine months of the year and the third quarter of 2022. On the left side of the slide, reported revenues amounted to EUR 2.694 million in the first nine months of the year and were up 14% vis-a-vis the first nine months of 2021. While revenues in local currency grew 12% with Forex contribution positively with EUR 50 million because of the appreciation of some Latin American currencies. Last year, this contribution was EUR 41 million negative.
Organic revenue growth, excluding the impact of last year acquisitions and the FX contribution, was 11% in the nine months of the year compared to the same months of 2021. On the right hand side, the third quarter revenues grew by 19% in reported terms and 16% in local currency. Organic growth for the quarter was 15%, and Forex contributed positively with EUR 22 million for the reasons already mentioned. On slide seven, we display the revenue breakdown by region, where you can see that we grew across all the boards. Europe grew by 5% and Spain printed a 9% increase, while Americas and AMEA delivered double-digit growth in local currency. The latter showed outstanding growth, mainly driven by elections projects in Angola.
Now turning to slide number eight, we see the group's operating margin and EBIT evolution in both periods. On the left graph, we display margins for the nine months of the year. You can see how operating margin improved to EUR 243 million compared to EUR 201 million in the nine months of 2021, equivalent to 9% operating margin compared to 8.5% operating margin in the same period of the year. Thanks to the operating leverage and improvement in profitability in both divisions, as we show later.
same happened to EBIT with EUR 204 million compared to EUR 188 million in the same period of last year, which is EUR 171 million in the first nine months of 2021, excluding the capital gain from the sale of San Fernando and Ares facilities. Mainly explained by higher profitability in both divisions and despite the increase in amortization of EUR 9 million and indemnity of EUR 7 million in the first nine months of 2021, which did not happen the same months of 2020. Moving to the graph on the right, you can see the operating margin in the third quarter, which amounted to EUR 93 million compared to EUR 76 million in the same quarter of 2021, equivalent to 10.5% margin compared to 10.2% in the same quarter of 2021.
For its part, EBIT for the same quarter, the same third quarter was EUR 81 million compared to EUR 88 million in the same quarter of 2021. 71 excluding the capital gain, equivalent to 9.1% margin in the third quarter compared to 11.8% in the third quarter of 2021. If we exclude the capital gain, which would be 9.5% excluding that capital gain. Almost unchanged profitability despite including higher indemnities, as I said before, EUR 7 million and amortization costs in the same third quarter of 2022. 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 September 2022 increased compared to both September 2021 and June 2022, explained by the very strong levels of demand that we continue to see in our main markets and the integration of the workforces from 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 remain very low for another quarter. Now let me move to slide number 10, where you can see the backlog and order intake evolution of our Transport and Defense division. Backlog in Transport and Defense amounted to EUR 4.12 billion, and increased by 11% in reported terms in the first nine months of 2022 compared to the same period of 2021.
Standing out Defense & Security, which amounted EUR 2.622 billion, while backlog over the last 12 months revenues increased to 3.19x in the first nine months compared to 3.10x in the same period of 2021. Order intake in the first nine months went up by 12% in local currency, registering both Transport and Traffic, a 22% increase, and Defense & Security, a 5% increase in local currency. That is thanks to the MK1 radar of the Eurofighter project in Spain, as well as a contract for the modernization of the Tiger MkIII helicopters in Spain in Defense & Security.
In Transport and Traffic, there was contribution with the contract of Avinor in Norway, a new contract with a Ryanair in Spain, as well as a system project in Spain and a communication system in Lima Airport. If we move to slide number 11, we show the revenues breakdown of the Transport and Defense division. In the first nine months, revenues increased by 4% in local currency, 5% in reported terms, pushed by a growth registered in Transport and Traffic, which was 6% in local currency, same growth as Air Traffic and Transport segments. Both due to the high activity with Ryanair in Spain and T-mobilitat data and several rail projects.
For its part, Defense & Security sales increased by 2% in local currency, mainly boosted by platforms, naval systems in Saudi Arabia and security systems, the Kuwait project, which implies a positive take into account the 16% growth for this vertical in the first nine months of 2021, and the small contribution from FCAS project in the same nine months of 2022. In the quarter, revenues accelerated and were 11% up in local currency, showing Transport and Traffic increasing by 14%, registering both verticals double-digit growth. Transport grew 15% with activity in America and EMEA, and Air Traffic up 13% thanks to the general recovery in Air Traffic showed in all geographies. For its part, Defense & Security also showed 8% growth, mainly pushed by higher one-off activity from the Eurofighter project in the quarter.
Let me move now to slide number 12 of the operating and EBIT for Transport and Defense . On the top left graph, operating margin in the first nine months reached EUR 155 million, compared to EUR 98 million in the same period of last year, equivalent to 12.2% margin, vis-a-vis 11.8% margin of last year in the same period. Moving to the top right graph, operating margin in the third quarter stood at EUR 40 million compared to EUR 42 million in the same period of last year, which translates into 14.7% margin in the third quarter of this year, compared to 17.2% margin in the same period of last year.
Minsait was extraordinarily high as a result of several sizable projects milestones, and Defense was concentrated in the third quarter of the previous year, as well as, the associated profitability to those projects. As you can see on the bottom left graph, EBIT in the first nine months of the year was EUR 98 million, compared to EUR 96 million last year in the same period. 89 we exclude the capital, which translates into 11.3% EBIT margin in the first nine months of the year, compared to 11.6% in the same nine months of last year, although it was 10.8% excluding the capital gain, backed by increasing profitability of Transport and Traffic. Moving to the bottom right graph, EBIT in the third quarter stood at EUR 37 million, compared to EUR 49 million in the same quarter of last year.
EUR 42 million exclude, if we exclude the capital gain, equivalent to 13.7% margin compared to 20.1% margin in the same quarter last year. It was 17% if we exclude the capital gain. Because the margin in the previous year was extraordinary, extraordinarily high for the reasons explained before, as well as the higher indemnity of EUR 3 million and amortization cost of EUR 3 million in the third quarter of the year, compared to the third quarter of 2021. Now that I've finished the Transport and Defense numbers, let me turn to Luis to follow on the presentation.
Thanks, Ignacio. Good evening, everyone. Let's move on to slide number 13, where you can see the backlog order intake evolution of our Minsait division. Here in this chart, first on the left-hand side, backlog in Minsait went up by 13% in reported terms and totaled EUR 1,853 million. While backlog over the last 12 months revenues ratio stood at 0.76 times compared to 0.80 times in the first nine months of 2021, which implies a -4% decrease versus last year same period.
Second, in this chart, the graph on the right shows the evolution of our first nine months of 2022 Minsait order intake, which went up by 23% in local currency, boosted by the solid growth shown in all verticals, among which stood out public administrations and healthcare, that grew +50% in local currency, partially helped by the order intake of the elections project in Angola. Moving now to slide number 14. Here we show the revenues breakdown of Minsait.
Here on the left-hand side, sales in the first nine months of 2022 grew by 16% in local currency, with all the verticals registering very strong growth, standing out the growth posted in public administrations and healthcare, which was +35% in local currency, driven by the increased contribution from the elections business, and also standing out the growth in energy and industry, which was +14% in local currency. Here, in any case, what you can see is that all verticals grew at double-digit rate in reported terms.
Here on the right-hand side of the chart, we see that from the third quarter, and this is only the third quarter, sales accelerated to +19% growth in local currency in a market environment where customer demand continues to be strong, and again, with solid growth in all verticals, among which public administrations and healthcare also stands out. Finally, let's move to slide number 15, where we summarize Minsait's profitability. Here on the top left graph, we display our first nine months of 2022 operating margin, which stood at EUR 177 million compared to the EUR 103 million in the first nine months of 2021.
This is equivalent to an operating margin of 7.5% in 2022 versus 6.7% in 2021. If we move to the top right graph, here we see operating margin in the third quarter of 2022, that is, EUR 53 million versus the EUR 34 million in the third quarter of 2021, which translates into an 8.6% margin in the third quarter of 2022 versus a 6.8% margin in 2021. Let's go now, if you want to, EBIT margins. As you can see on the bottom left graph, EBIT in the first half of the year was EUR 106 million compared to EUR 92 million last year same period, which was actually EUR 82 million if you exclude the capital gain.
This translates into 5.8% EBIT margin in the first nine months of 2022 versus a 6.0% in the first nine months of 2021, which would be a 5.4% excluding the capital gain. This improvement is explained by a combination of several factors, being one, the contribution of the election business. Now if we move to the bottom right graph, here we see EBIT in the third quarter of 2022 that stood at EUR 40 million versus EUR 39 million in the third quarter of 2021, which if we exclude the capital gain would have been EUR 29 million.
This is equivalent to an EBIT margin of 7.1% in the third quarter of 2022. That compares to a 5.7% margin in the third quarter of 2021 if we exclude the capital gain. This is backed by the elections project in Angola. It is this way despite the high indemnities of EUR 4 million and the higher amortizations of around EUR half a million in the third quarter of 2022 versus the third quarter of 2021. As you can see, we are in line with our target of achieving more than 5% EBIT margin for this year, as we said in the previous conference call. With this, I leave the floor to Borja for the financial review.
Thank you, Luis. Good evening, everyone. On top of the strong business performance presented to you by our CEO and by Luis Abril, let me now take you through the financial section, where you will see how the operative improvements are converted into a strong cash generation. Having a look to page 16, 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 nine months of 2022 amounted to EUR 54 million. This is the best figure reported for the first nine months in 10 years.
Ladies and gentlemen, please hold your lines. Hello. Hello, dear speakers.
Yes.
You are now connected. Please go ahead.
Well, I was saying just that in page 16, there are three main messages. The first was on the top strip of the page, in the right-hand side. The free cash flow generated in the first nine months amounted to EUR 54 million, which is the highest figure for the first nine months in 10 years. Second, free cash flow that is usually negative, as you know, in the first nine months of the year. In 2022, this figure is driven by the performance of our two divisions and the improvement in the working capital needs. The same comment applies to the cumulative free cash flow in the last 12 months that has reached the figure of EUR 336 million.
Now going to the main component of the free cash flow in page 17 contains the working capital evolution, first compared to 2022 to the first nine months in 2022, and then to September 2021. Compared to September 2021, there is a relevant improvement of 12 days, explained mostly by the better behavior of the accounts receivable due to the collection received in the second quarter from the elections projects in Angola, plus from a long list of smaller projects. Inventories and accounts payable remain almost stable in terms of days of sales. Compared to December 2021, working capital increased by 14 days, in line with the seasonality of the business due to the higher level of inventories, which increased by 11 days in the first nine months of 2022.
As well as higher level of accounts receivable, which also grew up by eight days. However, accounts payable contribute positively to the working capital, increasing by six days. Page 18 show the reduction in EUR 20 million in our net debt between December 2021 and September 2022. Starting at 244 million euros at the end of December 2021, the first step is the positive contribution of operating cash flow of EUR 283 million due to the strong performance of our two divisions. As mentioned on the previous page, working capital reflects the seasonality of the business in the first part of the year.
Even with the strong revenue growth delivered, it only increased by EUR 114 million compared to EUR 149 million in the first nine months of 2021. CapEx is EUR 30 million, above the EUR 21 million of CapEx reported in the same period of 2021, excluding the collection from the first payment of the sales of the facilities. This difference is due to the lower subsidies collection in the period. Next block in this bridge are taxes, EUR 38 million compared to EUR 22 million in the same period of 2021. EUR 3 million of this variation comes from the higher profit before taxes in the period. EUR 3 million due to the accounting recognition of the taxes, tax 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 related to IFRS 16 amounted to EUR 24 million, similar level to in 2021. Net interest was EUR 22 million, slightly below the EUR 27 million registered in the same period of 2021, mainly due to lower payments on financing explained by lower drawn debt volumes, together with slightly higher cash remittances. Partially offset by the payment derived from the partial repurchase of the bond executed in the second quarter.
Finally, financial investment effects impact and other, of EUR -34 million, includes M&A and other small items for EUR 28 million and EUR -26.5 million of dividend paid to our shareholders. All of them compensated by EUR 25 million, which is the contribution of the effects, mainly because of the Latin American currencies. Page 19 shows the evolution of the leverage since 2016. We closed September 2022 at 0.6 times net debt to EBITDA, with a significant improvement from September 2021. As in the past, factoring a standard EUR 187 million at the end of the quarter to make figures comparable. We have eliminated the impact of IFRS 16 and extraordinary items related to the employee restructuring plan and asset disposals.
Now to finish the presentation, let's have a look to our debt structure on page 20. Gross debt that amounts to EUR 973 million is well diversified, around 50% fixed, 50% floating, with average maturity exceeds two years, and cost of debt remains stable at 1.9%. As you can see, we reduced our debt by 30% in the last nine months due to the repurchase in May of part of the EUR 300 million euro corporate bond with maturity in 2024, as well as the cancellation of bond debt. Total cash position in September was EUR 752 million, and we also have EUR 186 million of undrawn credit facility.
All this financial position, together with the strength of the business, compare pretty well with the maturity profile shown in the page. With that, we finalize our presentation. Thank you very much for your attention, and let's now move to the Q&A session.
Thank you. Ladies and gentlemen, the Q&A session starts now. If you wish to ask a question, please press zero one on your phone keypad. The first question comes from Nicolas David from ODDO BHF. Go ahead.
Yes. Good evening. Thank you for taking my question. I have, actually, the first one is regarding Minsait profit, which has been quite strong this quarter, and congrats for that. Should we assume that it benefited from the underlying contract, which was kind of dilutive in H1, but accretive in Q3? What should we expect for Q4? My second question is regarding the Air Traffic Management business. It seems that you see some acceleration of recovery, or at least you won some new contracts you are delivering. But how does it translate in numbers? Do you see an acceleration of growth? Should we expect this growth also to get firmer and firmer as Air Traffic recovers going forward?
My last question is, now that the Board is elected, what should be, according to you, the two or three key strategic topic they would have to address in the short term? Thank you very much.
Nicolas, thank you for the questions. I was When I was hearing myself, I was thinking that we are delivering too many numbers and boring, you know, you all, but sorry for that. Coming back to your question, first of all, let me start by the last one, the strategy topics. I think that's something that we are going to start very quickly with the Board. Let me not answer that today, because I think we need some time on the Board discussions before we are able to have that discussion. I will avoid a direct answer on that one.
I'm sure you have a few in mind, and we will address all those in the Board, but I think we deserve some time to the Board to think about it and come back. Regarding Air Traffic Management, I think we are seeing recovery. We are very close to the EUR 300 million we had in 2019 before COVID. I think it's been a strong recovery. I think we are very positive on new contracts. Actually, we will be announcing a new important contract in the next days, which I cannot disclose today. We continue to be positive on our various contracts like Eurocontrol and so on.
All in all, I think we are very positive in Air Traffic Management. We are having a strong recovery. We see traffic coming back, as you see, and we think that will be very relevant for our business. Luis, you can come back on the operating Air Traffic on Minsait.
Yes. Thank you, Nicolas. You know, on the profits on Minsait, that we have some help from Angola this quarter. But still, we have to bear in mind that, you know, this is not only Angola. We've been able to compensate in this quarter the impact not only of salary inflation, but also of high indemnities and higher amortizations and so on and so forth. So if we have to estimate what we will see by the end of the year, we would say that, basically, we stick to our guidance of 5.5% EBIT that we've stated in the past. That's at least the number we see. Okay?
We may be above that, you know, never below. The guidance is at least 5.5.
Okay. That's clear. Maybe a follow-up on Minsait is, so you are able to reflect a salary increase into prices. Should we understand that as a price increase effect accelerated a bit in Q3 compared to H1? Any details regarding the numbers would be helpful.
You know, there's been salary inflation that we've been able to compensate, okay? Not only with price increases. It's a mix of things, okay? You know that salary inflation not only for us, for the sector is relevant, and we've been able to compensate that through different measures. One is increasing prices to our clients, but there are lots of efficiency measures we've implemented. You know that we are the mix of products and services that we are selling towards a set of higher value added offering and so on and support. We are also, you know, playing with the pyramids. We, you know, we are actually applying lots of measures for compensating the salary inflation.
Salary inflation, which we believe that will not be higher in the future, probably in the fourth quarter. Okay. We believe that the peak of salary inflation has probably taken place this quarter.
Okay. That's helpful. Thank you very much.
Thank you. The next question comes from Laurent Daure from Kepler Cheuvreux. Please go ahead.
Yes. Thank you. Good evening, gentlemen. I also have three questions. The first one, I'm sure you were expecting it, is that you have not changed your guidance both in revenue and profit. Is it just cautiousness? Or, when I look in the past couple years, you had, except for last year, your Q4 margins were generally higher than the other quarters. Has something changed in the seasonality of profit? I remember last year in Q4, you had to provision more bonuses. Shall we expect the same now going forward, or can we expect your full year achievement to be relatively significantly higher than your guidance? That's the first point. The second point is, you've done quite a lot of small M&As this year. I think most of them were in IT.
Going forward, do you expect a change in strategy and to be much more cautious regarding IT and to focus much more on the Defense? Then my last question is on this. I remember more than a year back, you had a number of contracts that you could not deliver, and you had delays. I was wondering now by the end of Q3, most of the milestones and delivery of products have been done or if you still have some catch up to do. Thank you.
Thank you, Laurent. First of all, let me start with the guidance. First of all, there is no change to the way we look at things. Yes, I think that, I mean, if the performance is good, we should expect, you know, that the bonuses in the fourth quarter are the same as last year. That don't change also. We need to finish the year and see that we make the numbers very clearly. I think when into the guidance, we are always saying more than, okay? We are going to grow in the fourth quarter of the year in both divisions. It is true that we have some milestones in Transport and Defense , mainly Defense.
Some are new, two or three very large milestones that are expected to happen in December. If they happen, if those milestones happen, we comfortably beat our revenue guidance. You know, how much will depend if we are able to achieve those milestones. You know, we are just in the back of December, so we need to work very strongly on that. Mainly I refer to question three there. Yes, in the past and in Defense, we had some delays on milestones. I think that is improving, but continues to happen because it's still on supply chain issues. That's not completely fixed for annual p ast in the market as you've seen in the market.
We still have to work very strongly in the supply chain. Coming back to the guidance, we might sound conservative as maybe many times in the past. Okay. You need to take into account that last year, fourth quarter was very strong in revenues also. You need to take into account that we had very strong growth also in the previous year in Defense. I think we are positive. The guidance is more than, and we will work strongly in the fourth quarter to do more than. Okay. M&A. We will continue looking into acquisitions, bolt-on acquisitions in both Minsait and Transport and Defense. As you said, in the past, we've been doing more in Minsait.
Maybe in the Transport and Defense is more difficult to find the targets. We are looking intensively into Transport and Defense and probably we would expect some news there in the coming weeks. We haven't changed our policy, and we are looking in all areas of the company.
Okay. Thank you.
That is.
That's very clear.
No questions?
Yeah, exactly. Thank you.
Thank you. The next question comes from Fernando Lafuente from Alantra Equities. Please go ahead.
Hello. Good afternoon to everyone. Thank you for taking the question. I'm gonna take it. The first one is on the, well, three. The first one is on the evolution of Minsait. Luis gave us already kind of a vision for margins in Q4, and also the fact of growing in Q4. I was wondering if you could be a little bit more specific on the expected performance in Q4 in top line for Minsait. Seeing how backlog is at the end of September, should we expect kind of a deceleration compared to the +23% that we've seen in? Or are these levels still reachable during the last quarter? The second question is on cash.
The evolution has been quite good on the working capital side as compared to last year. What should we expect in Q4? Should we expect a big recovery in working capital like other quarters? As a result, how do you expect the net debt to end the year? The third question is on the FCAS. I was wondering if you could give us some, I mean, actually some information or how negotiations to go ahead with the next phase are as of today. Thank you so much.
Thank you, Fernando. I will try to do it in your order. First Luis on Minsait, then Borja on cash, and I will come back on FCAS. Luis.
Yeah. I will take the Minsait one. Now here the main message is that, we're saying we see that the demand is solid. We do not expect changes in the short term. Basically, if we think about the numbers for the end, what we would say is that we are expecting basically double digit growth in sales, highlighting probably the higher growth in some specific pieces of offering, being the one, our digital division, and basically solutions. I mean, and here the what we call acceleration vectors will probably play a role or are playing a role.
You know, cybersecurity, digital, data, cloud, all those pieces of offering that you know are experiencing quite intense growth. You know, here the message is that for the year end, we expect double digit growth, and we highlight these results.
Borja.
Okay. Fernando, in terms of debt, as you know, well we expect to collect in the first quarter almost the same figure that we have been collecting in the past. That was something close to EUR 150 million. It may be higher. We maintain for the time being the same guidance that we have given, more than EUR 175 million, which is also consistent with the guidance at the level of EBIT. With this net debt to EBITDA by the end of the year will be below 0.4 times, net debt to the EBITDA.
Okay. Thank you, Borja. I take it, Fernando, on FCAS. I think I've been very positive on FCAS. I think I'm happy to say that things are moving fast in the right direction. We all, the industrial partners have achieved, I think, significant progress to sign the contract in the next weeks. As of today, I don't even see any blocking points on the horizon coming from the partners. Therefore, as I said, we expect to start signing the signing process in the following weeks.
I think we need to take into account that the process is long because it requires not only the signature of the industry, but also a formal acceptance from the three nations, and at the end of the day, ending with a signature of the DGA, which is the French DGA. The General Armament Director that will sign on behalf of the three nations. We all remain confident in the process, and we expect the process will finish by year-end.
Muchas gracias.
Thank you. The next question comes from Carlos Treviño from Santander. Please go ahead.
Hi. Good afternoon, and thanks for taking my questions. The first one it will be on Defense, specifically in Q4. You had commented that you had a stronger contribution from the Eurofighter project this quarter. In the first nine months, activity from Eurofighter has been flat on annual basis when before you were commenting that you were expecting lower revenues from Eurofighter in this year. I would like to ask you specifically on this, for Q4, do you expect also a higher contribution from Eurofighter or not? With a much long-term view, I will at least looking at 2023, I would like to ask you for with current business dynamics, do you see in your different businesses for next year?
If you could give us a bit of visibility on that. My third question will be on Minsait. You have a very strong new orders figure in Q3, growing more than 30% in local currencies. I would like to ask you if this is partially driven at least by some specific large contract that you have signed or is because of general business dynamics. Thank you.
Okay. Carlos, thank you for the questions. Unfortunately, I would say that we see a slightly lower contribution of Eurofighter in the whole year. Okay? This quarter has been strong, but in the whole year, we see a slightly lower number. Okay, when we look into dynamics on 2023, I think that I will continue to say that, you know, dynamics are good for our businesses in general in the different business lines. We are not in the position. As you know, we disclose numbers in February when we close the year on budget. We are in the process. Okay?
As we've been saying, I think our backlog is not in this quarter record high. If we continue with the good order intake, it will be a record high probably or close to that at the end of the year. That should give us solid growth for the future. As you know, we have different business dynamics in the Minsait and the Transport and Defense . On the Minsait, is shorter the period in which you take sales to revenues. In Transport and Defense , that's quite longer. I think we have positive news in all the markets, a strong order intake, and as I said, we have focus on the Defense business. That will be extremely strong.
I think we are looking positive. I mean, the growth in all the markets. That's what we can say up as from today. And Luis, maybe you can comment on the-
Yes. On the same point, actually. In all, linked to the last question that you posed, you know, I would say that, you know, the order intake evolution is quite good all across the board, in all verticals and in all business lines within Minsait. Probably the largest contract that you can see there in the numbers that we are posting is the Angola one. But it is not that relevant. I mean, I would say that the good numbers are a consequence of the general dynamics, positive dynamics of all the verticals and all the markets where we operate.
Thank you very much.
Thank you. Ladies and gentlemen, let me remind you again, if you wish to ask a question, please press zero one on your telephone keypad. The next question comes from Ben Castillo from Exane BNP Paribas. Please go ahead.
Thanks very much. Good evening. Two for me. Firstly, just on hiring in Minsait. It looks like the quarterly net additions have roughly halved over the last twelve-month average. How should we think about that slowdown in hiring in relation to the demand environment, and your expectations into next year? The second question on FCAS. Obviously encouraging update on your expectations of a signature in the coming weeks. Could you just help us on thinking about timing on revenue ramping up from that? Is that something that starts right away or is that a 2023 or late 2020 timeframe? Thank you.
Thank you. Okay. Let me come in on FCAS first, and I will pass then to Luis. Okay. Remember that you know, the contract is above EUR 500 million which need to be executed in four years. There's a period in which the contract needs to ramp up. I mean, even if we sign you know, by the end of the year, we'll not be able to ramp up the contract, the resources and so on, you know, straightforward. Three-four months of ramping up the contract. Okay? If you look into the numbers, above EUR 500 million in around four years. No? That's the type of number we should look at.
In 2023, I mean, you will have a slower month at the end and at the beginning of the contract because you need to put the people in place. You need to put, you know, everything in place, even some structures, you know. It will be a slower ramping up, let me say during the first quarter of next year, and then we'll stabilize throughout four or five years. Okay. That makes sense?
Yeah, that's very helpful. Thank you.
Okay, thank you. Luis, maybe you come back on the people side.
Yeah. On the workforce, basically here the message is that, you know, the workforce is growing because the demand is growing significantly. It is true that, you know, quarter on quarter, see that the number of hirings decreased a little bit. You know, you probably see that, workforce increased around 1,000, you know, around 1,000 employees in September 2022 versus June 2022. This number in June 2022 versus March 2022 was slightly higher, was around 1,600. So, you know, workforce has grown a lot. It is still growing because demand, you know, is very solid, and we are preparing for that, solid demand, in the future. I believe that's it.
Thank you, Luis.
Thank you. The next question comes from Manuel Llorente from Mirabaud. Please go ahead.
Hi, good evening. My first question is on working capital trend. There has been roughly EUR 60 million of working capital consumption in this quarter, with a meaningful improvement in inventories. Can you give us a little bit more indication on the quarter-over-quarter consumption on working capital? Is either top line support or is there reversal of previous down payments or
Hello?
Yes, dear speaker, you're next at the back. Please go ahead.
Manuel?
Yeah.
Hello. Sorry, our line was cut. Could you start from, I'm afraid, the very beginning?
All right. No, my question is on working capital trends. There has been a consumption on working capital of approximately EUR 70 million quarter-on-quarter. Any color on that, whether it's the logical evolution of the business regarding the top line evolution or is more a reversal of previous down payments or what is the movement?
Yeah. Okay, Manuel. Well, the reason is, first of all, the strong performance of the business that generate more inventories is normal. As you have seen in the presentation, we have improved with regard to the figures that we reported last year, 148 compared to 114. Also we have improved in terms of days of sales. Basically, the use of the working capital is improving with regard to the figures that we have been presenting in the past. We, you know, there will be an important also collection in the first fourth quarter, no? It has always been the case.
My question was more quarter-on-quarter rather than year-on-year. Anyway, my second question is on the Angola elections. There has been certainly some impact on the third quarter. Is the Angola project finally end both from on revenue contribution and cash collection, or is there any last tail in the coming quarters?
Okay. Thank you, Manuel. I will take that one. Well, you know that the elections took place in August, okay? Probably the most intense quarter in terms of revenue recognition for the Angola project has been this one, the third one. You know, you have the numbers there. I think that in the first nine months of the year, we've already seen EUR 92 million in terms of revenues, out of which half of them, you know, have been recognized in this third quarter, okay? And you know, looking into the future, there are still a few million pending, which are associated to guarantees and knowledge transfer and so on and so forth. You know, the majority of the contract has already taken place. And that's it, I think.
The vast majority of the contracts already taking place, both in terms of revenue recognition and cash flow?
In terms of cash flow, I mean, it's been all recognized already. They've already paid the bill. In terms of revenue recognition, there is still some missing amounts.
Just my final question, sorry to come back on Defense trends going forward. With the FCAS phase I as Ignacio was telling, it will probably be signed at some point in either Q4 or Q1 next year. The massive increase in Defense budget, clearly two thousand next year, should be a wonderful year in terms of the Defense vertical, no? Because again, in the current backdrop, it remains tricky the fact that Defense is the worst performing Indra's vertical.
I think we will have very positive news on FCAS, as I said. I think also in terms of, as you've seen, the growth of the budget, the Spanish budget on Defense above 35%, which is spectacular, and that's very well done. I think the market and the citizens are looking into Defense, Security & Defense in a different way. That's all the positive. I will continue to be positive, but you know that, you know, the projects take a lot of time to generate.
That's probably the only not positive thing I would say, because if we are. And maybe FCAS is slightly different because it's very much a technology project. But if we look into any project in which we need to deliver goods, I mean, how the project goes through the revenue recognition is very small revenue recognition in the first years because you are doing the engineering work, and therefore, and that's man-hours, while the bulk of the revenues is when you deliver the goods. That's usually in the second half of, you know, towards the mid of the project, depending on how much revenue then you need to do. Okay. I think in general, very positive. We'll be very positive for the backlog.
We are saying that we have EUR 3.19 billion of backlog now. It has increased substantially. We'll see revenue increase, okay? I mean, to be cautious, I think we need also always to look at this type of projects. I mean, it has a period of between, you know, two to five to 10 to 15 years. I mean, we are talking of very long projects. In any case, I think, Manuel, that we will be in a much better position to give you details both on which kind of projects we think Indra can benefit on the budget and on revenues in February when we have, you know, a little bit more of details.
Thank you. I mean, it's not a question of numbers. It's a question of how we look at the things. When I see your answer, and it's a kind of multi-annual type of answer, I understand that perfectly in the context of the standard type of Defense project. For next year, we are already talking about a specific amount of a budget. I still think that, let's say, 50% or 60% of that budget is not going to be implemented, which in Spain is not a very unlikely scenario.
Otherwise, that is something that should flow to the sector, not in a multi-annual standpoint, but in one year, in 2023. I mean, we are not talking about a multi-annual project. We are talking about the amount of a specific budget for next year.
Yeah. I think, Manuel, it's partly what you say. Part of the budget of next year will be expended in the year, okay? That's partly. You know, when we talk of the large projects, they are multi-annual projects, okay? You might book this year, but you will execute throughout the period. I mean, for example, we booked this year Eurofighters. Okay? We booked the Eurofighters, but unfortunately, deliveries of the Eurofighters we booked this year in the budget are going to be delivered in 2025 or 2026, no? Maybe. I mean, there is a mixture here between what you spend in the year and what you book in the year, no?
Sometimes maybe Indra is less benefited there from the expenditure on the year because, I mean, if you talk of munition, or if you talk a very short-term deliveries, maybe we are not the most benefited company there, eh? Because any type of delivery we have has a longer-term period. Okay? Maybe we try to get some more details for you on that. As I said, we need more time for everyone when we see how the budget is coming through for us, okay, in terms of the projects in which we are going to be involved.
Okay. Thank you, Ignacio.
I don't sound very convincing to you, but I try, Manuel.
Thanks.
Thank you very much. There are no further questions.
Okay. Thank you. Thank you very much to all of you for the one hour being together. Obviously our Investor Relations team is at your disposal for any further question you may have, and we look forward to seeing you in our February call. Thank you so much.