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Dear Shareholders,
the financial year that has just ended marked a significant turning point for the MAG group.
The anti-cyclical phase of the helicopter market in the last three years has been overcome with a general re-launch of the orders of the main OEMs, allowing to resume the path of growth in which MAG is projected in the medium term. Phase to which MAG has courageously responded, keeping all the commitments made with customers and also the investment intensity necessary to protect the essential factors of its competitiveness, rationalizing without restructuring.
Compared to the previous year, revenues increased significantly as did the level of profitability. The financial position has also improved and investments in Research and Development, which have always been a competitive lever, have found greater balance, with the prospect of a reduction in the value of intangible assets which will be the natural consequence of the launch of new programs.
The above was possible thanks certainly to a favorable market trend but also to a focus on improving the fundamental elements of the Group’s business, so I would like to mention:
- a constant attention to the quality of our products and services and compliance with delivery dates,
- a concentration on activities considered “core”,
- a constant commitment to liquidating trade receivables, increasing their turnover ratios.
These actions have matured consistently with the new 2019-2023 Budget Plan which the Board of Directors approved immediately after the end of 2018 and are based on the new organization which sees the two Strategic Business Units each entrusted to a new manager.
The Budget Plan, widely respected with the 2018/19 results, confirms the fundamentals of the previous edition, with organic growth that should bring the Group to the 170 million sales target with an EBIT that tends to exceed the 10 percent threshold and a constantly improving financial position.
The focus on the “core” business areas, which constitutes one of the foundations of the Plan, essentially identifies them:
- in flight controls and in hydraulic and electromechanical actuation,
- in landing gear for helicopters and small-medium sized aircraft (business jets and trainers),
- in interiors for helicopters and aircrafts, whether they are in VVIP-Corporate, EMS or utility-offshore configuration,
- in the maintenance of helicopters and related completion, transformation or reconfiguration.
If still in 2019 the Group distinguished itself, thanks also to the favorable performance of the related market, as one of Leonardo’s main suppliers – with a turnover of around 60.5% of the total -, the diversification actions put in place over time and the first commercial results acquired during the year 2019 adequately support the assumptions of the Budget Plan which outline a reduction in the concentration on the Leonardo customer to around 40 percent in the year 2023, albeit in a context of overall growth.
The commercial effort aimed at diversification, already underway and partly obtained over the past five years, is the prerequisite for reducing the Group’s vulnerability with respect to possible future contractions or re-distributions of the reference markets.
This effort found further realization in 2019 with the acquisition of new contracts both with Bell Textron, for the development of landing gear for helicopters and drones destined for the US Departement of Defense (DoD), and with an American manufacturer for the development of a landing gear for a new business jet, as well as with VR-Technologies of the Russian Helicopters group for the development of flight controls for the new VRT500 light helicopter.
A collaboration was started with Russian Helicopters to adopt the Group’s proprietary technologies for soundproofing and VVIP / Corporate interior development on its civil helicopters.
The position of the Group as a helicopter interior supplier to all the main OEMs worldwide, namely Leonardo Elicotteri, Airbus, Bell-Textron and Russian Helicopters, is therefore increasingly consolidated, crowning a multi-year market penetration effort.
In the future, the product line of the interiors for helicopters and medium-light aircraft will also benefit from significant new initiatives launched during the last year for an improvement in product quality and, in parallel, for the continuous development of new technologies with the adoption of innovative and high-tech materials, to strengthen the Group’s international leadership position in the sector.
On the horizon of the Budget Plan, this business area should benefit, starting from 2020, from the entry into service of new helicopter models such as the Airbus H160 and the Bell-Textron 525, for which the Group has contracts in place for the development and production of various VVIP / Corporate and Utility / offshore interior configurations.
The landing gear business area will also benefit from the gradual entry into service of these new models as the Group is its exclusive supplier.
The estimates on the performance of the helicopter market for the next five years are positive and this context should allow the Group to continue to benefit from the market success of Leonardo Helicopters’ AW139 helicopter, which should be affected only to a small extent by the entry into production of competing models. The AW139 platform is in fact the one for which the Group supplies its widest range of products, from flight controls, to damper, to the interiors in the most varied versions.
The proprietary products form the basis of the Group’s strategy to be able to consolidate and also increase its engineering capabilities, even if there is a significant contribution to the portfolio and revenue base of the make-to-print programs, through which MAG operates as sub – supplier of landing gear and the related implementation of the main world producers Collins Aerospace and Safran, against which new programs have recently been acquired.
Significant is also the Group’s entry, for the first time in its history, in helicopter and aircraft programs for the US DoD, which remains the first market in the world for military products, very demanding in terms of performance and quality. of the product but very interesting for continuity over time and profitability.
The remaining make-to-print component production programs, in particular at the Laval plant, confirmed the growth trend that is expected to continue along the horizon of the Budget Plan thanks also to the fact that the relevant main product lines Gulfstream to Airbus should not be subject to any market risk.
As regards the business area relating to the maintenance of helicopters, the year 2019 was the subject of an action aimed at improving the efficiency of the performance so as to obtain a significant reduction in the flow times of internal activities compared to historical ones, thanks to an action to reduce inactivity and lead time for spare parts. These actions will further improve performance standards, becoming the basis for an increase in the volumes of this sector, both with reference to the models already served, which are being replaced during the next decade, and with reference to newer models of helicopters that will enter service at the Public Administration. The growth of the Monteprandone plant may also be linked to another ongoing initiative which consists in the refurbishment of used fleets through the configuration update of helicopters that have just been discontinued from the service.
Finally, I would like to mention the partnership established with the Ferretti Group, which has made it possible to start a new business line for high-value boating through the development and production of some interior components for which aviation technologies offer substantial advantages in terms of quality and reliability.
In an overview of future prospects, a thought cannot be missing for the people who within the Group make their valuable contribution to the achievement of each stage of the growth path and who have represented the engine through their contribution of energy and skills.
The affirmation of MAG as a company also passes through a profitable interaction in the territorial contexts in which it operates, with its own supply chain, with communities, with universities and institutions, each of them having a strategic importance in pursuing the business model, in the construction of identity and in the recognition of this mutual interdependence as a vital system.
Borgomanero (Novara), 20 December 2019
Bruno Spagnolini
Chairman and CEO
