Leonardo to invest in digitalization, AI for security activities

Italy’s Leonardo will invest in digitalisation, artificial intelligence and interconnected platforms over the next five years as it focuses on security activities, the defence group said on Tuesday.

“The world geopolitical scenario calls for a new global security paradigm, where we aim to play a proactive role in the evolution of the European defence sector,” Chief Executive Roberto Cingolani said in a statement.

Presenting its 2024-2028 industrial plan, Leonardo said it would strengthen its core businesses – helicopters, electronics and aircraft – while also leveraging opportunities in cybersecurity and space – sectors seen as key to defence in the future.

Shares in Leonardo rose as much as 6.8% on Tuesday morning as analysts welcomed the profit and cash flow forecasts in the plan. The shares are up some 40% so far this year in what is a buoyant market for defence stocks.

J.P. Morgan said the market would “respond positively” to the strategy given that guidance had been provided for each one of the five years of the plan, “unusual for most companies and shows real accountability.”

A former government minister who became CEO last May, Cingolani has been pushing for alliances with other defence groups in Europe, to take advantage of the bloc’s rising military budgets, in a more efficient and less fragmented way.

Growth through M&A, not included in the plan, will further boost the group, with “the expansion of the alliance policy and possible targeted bolt-on transactions in specific areas with high margins”, the statement said.

The state-controlled conglomerate said orders at the end of 2028 would amount to a cumulative 105 billion euros ($114.8 billion), with compound average yearly growth of 4%.

Revenues will rise by an average of 6% yearly in the 2024-2028 period, reaching 95 billion euros, while core profits should reach 2.5 billion euros, up from the 1.44 billion euros expected at the end of this year. Reuters