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Profumo: "smell" of resignation

Tomorrow's Board of Directors could be the last for Leonardo's CEO

It will be an incandescent Board of Directors the one convened in videoconference tomorrow, on Thursday November 5, 2020 at 5:30 pm. Leonardo's board meets with the stock market closed, but on the table, we have known for days, there is a hot agenda, which at point one puts, at least on paper, the approval of the financial statements as at September 30, 2020. The expectations are for another point, much warmer: the resignation of Alessandro Profumo as CEO, requested by a part of the assembly. The whys and wherefores exist, starting with the first degree sentence inflicted on Profumo for the foul MPS. The accusations are stock manipulation and false corporate communications, in relation to the first half-year 2015 of the bank in which they were passed through BTP Alexandria and Santorini, 5 billion euros which instead were securities as collateral for derivatives with which MPS insured against the default of Italy counterparties Nomura and Deutsche Bank, with which they were signed. Six years of imprisonment and a fine of EUR 2.5 million with disqualification from public offices for 5 years and from managerial positions in companies for 2 years, the sentence, which the Court of Milan, second criminal section chaired by judge Flores Tanga, has inflicted on Profumo.

The second reason why some shareholders are asking for the resignation of the CEO is the management of Leonardo, criticized by many parties. In an article published on November 1st in "Il Tempo", Luigi Bisignani writes that the request to remove Profumo "is formally linked to his conviction in the first degree [...] but in reality it derives from the disastrous management of the group traveling between monstrous debt and an unprecedented loss of orders ". Looking at the accounts of the last half-yearly report as at June 30, 2020, we immediately notice how "the acquisitions of new orders amounting to € 6.1 billion -the report reports- are substantially in line with the first half of 2019" when it was 6.1 billion. “In particular - continues the half-year report- the significant increase in helicopters (48%) was offset by the decline recorded in defense and security electronics and in aeronautics”. Debts? Also from the half-year report: "Group net debt, equal to 5.047 billion euros, increased compared to December 31st, 2019", when it was 2.847. In practice, Leonardo's debt doubles in a year, “mainly due to the negative trend of the Focf”, says the report. The Focf, as we know, is the operating cash flow, what indicates "if a company is able to generate enough cash to maintain or increase its activities or if it is better that it also resort to external sources of financing (Wikipedia)". And the cash flow of the first half of 2020 is negative for 1,889 billion euros, from 1,050 billion in the first half of 2019. The covid has certainly affected these accounts, but it does not explain everything.

Not surprisingly, Giuseppe Bivona, 63, a past in merchant banks such as Morgan Stanley, Lehman Brothers, Goldman Sachs, founder of the activist fund Bluebell Capital Partners, a private shareholder of Leonardo, wrote on November 2 a letter to CEO Profumo from unequivocal object: request for resignation of CEO Profumo immediately after the approval of the results as at 30 September 2020 on 5 November 2020. "On November 5, Leonardo SpA will approve the accounts as of September 30, 2020. On that occasion, I expect your resignation to be announced -Bivona writes it- Your resignation, as I have already told you several times, is a duty for elementary reasons of opportunity, dignity and sense of the State”. Just Bivona dropped the load from eleven on November 4: again as part of the MPS proceeding, it deposited the ECB inspection report on MPS credits in the probative incident, an inspection that began in 2016 and ended with the final report of the 2017. Well, the results show that the Cet1 capitalization ratio would have been equal to 0.58% at the end of 2015 (instead of 8%, the minimum threshold imposed by the ECB). In other words: with the application of the stricter criteria applied by the ECB on NPLs, the capitalization index of MPS would have collapsed to almost zero. This is also why Bivona, in his letter to the board, invites Profumo to resign. “You are offered the opportunity to leave the helm of Leonardo SpA for reasons other than the disappointing company results which would also justify them”, Bivona writes it. And in these few words there is the whole sense of the matter.

There is no legal obligation, of course, that requires Profumo to resign. But, as the M5S deputies also declared in a note to the Finance Committee of the Chamber, "Profumo should resign as soon as possible from his position as CEO in a public and strategic company such as Leonardo" for a "question of opportunity". Here, that's it. It is ethics, what we are talking about. “Ethics is a sense of responsibility extended to everything that has life", Albert Schweitzer said it, who however was not a manager but a doctor and philanthropist. A sense of responsibility, in this case, would be very welcome, almost obligatory: towards the shareholders, towards the board itself, but above all towards the workers who every day undertake to keep a jewel going, because this is what it is about. (if handled well), like Leonardo. Sense of responsibility, ethics, morals also towards the market, the one that today, on Wednesday November 4, rewards the stock with a +2.6% but which made it fall by 56.37% in one year, by 26.98% in just six months, dragging it from € 15.9 three years ago, when Profumo took over the company, to € 4.6 today.

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AVIONEWS - World Aeronautical Press Agency
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