Letter from the Chairman

Dear stakeholders,

In a historically and economically very difficult period, in which general economic conditions, inflationary pressures and rising interest rates give rise to fears of an economic slowdown, we would like to express our great satisfaction with the Group's excellent results in 2022, its best ever. We are presenting here our Sustainability Report to give everyone the opportunity to assess our commitment, goals and actions taken during the year, which testify to the solidity of our technical, financial and operational structures. These structures allow us to resolutely withstand adverse conditions without sacrificing future growth potential, and enable us to maintain our development plans thanks to the solidity of our business model, which is oriented towards sustainable medium- to long-term growth.

During the past year, demand remained solid in most markets, especially in the medical sector, with a robust order book throughout the period. In China, the hoped-for recovery of the local economy, which underpins the 2022 growth forecast for the laser cutting industry, has been hampered by continuing anti-Covid restrictions, Chinese isolation and the effects of the economic slowdown, from which our major business unit has suffered. In addition, supply chain difficulties for the procurement of numerous categories of components for all subsidiaries continued this year, subjecting us to an extraordinary commitment in terms of human resources to identify alternative solutions, with the R&D departments involved in both sourcing and redesigning. For some components, the situation has not yet normalised and our procurement functions often have to resort to emergency procedures to procure components that traditional supply chains cannot make available.

The Group once again demonstrated that it has the organisational and technical means to meet customer needs and to innovate its products. We are confident in the capacity and potential of our organisation and our people, and we are certain that we will continue to benefit in the future from the positive developments expected in the markets in which we operate: we have created the prerequisites for progressive, sustainable and far-reaching growth, and we have the right organisation and the necessary technology to meet the demands of the market and to seize the opportunities that arise.

The core of our strategy remains our constant commitment to research and development, which is the very essence of our Group: a commitment both from a technical point of view, aimed at launching new products, and from a documental and clinical point of view, in order to obtain the necessary certifications to sell our medical systems worldwide. We have been working constantly, on the one hand on clinical trials with medical centres and hospitals and on the other hand with facilities dedicated to the so-called Regulatory, a rather complex but indispensable process to launch our innovative systems on the market. The difficult context has not affected our ability to innovate and the attractiveness of our product range, which we have continued to expand, thus confirming the Group's solid competitive positioning and its great ability to differentiate itself in the markets with technical and application innovations. The launch of new products is one of the strengths of our strategy. The record levels of production and turnover have been achieved thanks to the significant investments in infrastructure made by the Group in recent years, which we have continued in 2022 with the expansion of several operating sites: the Quanta System site in Samarate, work at the Calenzano site and the Lasit site in Torre Annunziata, while at the Chinese subsidiary in Wuhan a new plant is being built in anticipation of positive market development. The interventions were also carried out ensuring high energy efficiency and designed to raise the quality of working life. We are convinced that working in a custom-built environment fosters a greater spirit of belonging, which is why we have decided to devote ample space to people's wellbeing, to accompany the training and career path with an investment that leads to the creation of an energetic and fulfilling working environment that stimulates teamwork.

In the plant of the parent company El.En., the logistics area was reorganised to optimise space and facilitate the flow of goods, and three new vertical warehouses were installed, interconnected to the company's management system and MES: these interventions are part of the planning started in 2020 of the plant with a view to Industry 4.0, which aims to include “smart” technologies within the production processes to advance the evolution of the “Smart Factory”. In addition, the fleet of radio frequency terminals within the company was replaced with new Wi-Fi terminals in 2022, pursuing the primary goal of facilitating the flow, integration and exchange of information in real time on an IT level, as well as reducing the use of paper. In the course of 2023, we have planned further Industry 4.0 investments for electrical safety test stations, with new, faster and better measuring instruments, which will bring benefits in terms of time reduction and compatibility between instruments on the production lines. Increasingly, the technological mix of robotics, sensors and network interconnections will change the management of the company and production models, and the factory will lose its concept of immobility and physicality thanks to the sharing of data even remotely, exploiting the opportunities of big data and the Internet of things. We want this transformation to be a tangible reality for the El.En. Group and to continue in the coming years within all production facilities, in which we will continue to invest for the future development of the Group. This year we continued to create employment, increasing the number of people working with us around the world by 11 per cent: an important growth not only in terms of numbers, but also sending out a clear signal of solidity and security. During the year, we did not stop in terms of training either: we increased the number of hours of technical and educational training, to promote the personal and professional growth of all employees, and continued to promote the dissemination and consolidation of the Group's ethics and values in all subsidiaries.

As envisaged in the Sustainability Plan, during this financial year the installation of three additional photovoltaic plants was completed: one at the Calenzano production site, one at the subsidiary Quanta System, and one at the subsidiary Giovanni Galli, and the fourth plant at the Calenzano site is nearing completion: they are all scheduled to be activated in 2023. The Group’s goal in the coming years will be to install further photovoltaic systems at other locations, in order to self-produce an increasing amount of electricity from renewable sources and to contribute more and more to its own energy needs, while decreasing its CO2 emissions into the atmosphere.

Our commitment to doing business has also continued to be expressed through initiatives in favour of the community: every day we work to make a positive impact in people's lives and, with some targeted projects, we donate our skills and tools to non-profit organisations, foundations or cutting-edge scientific laboratories, at the service of patient health as well as in the preservation and restoration of cultural heritage. The Group's companies are also very attached to the territories in which they operate and, as always, are committed to participating in solidarity initiatives and supporting cultural, social and educational initiatives with sponsorships, participation in associations and the promotion of alternating school-work projects, internships and apprenticeships.

During the year, the Group intensified its sustainability activities, which are also included in the performance indicators for Management compensation. The 2018-2022 Multi-Year Sustainability Plan has been successfully completed, and during 2023 the El.En. Group will approve the new Five-Year Plan, which will identify specific and measurable sustainability activities and goals, in particular on: combating climate change, circular economy, promoting a responsible supply chain, valuing people and contributing to the community.

I am proud to say that despite the complex scenario in which we find ourselves operating, the results we have achieved once again confirm our ability to continue along the path of sustainable development, combining economic growth and financial solidity with the principles of social and environmental sustainability, to represent a model of excellence.

The Chairman

Gabriele Clementi