FY 2018 Results Presentation
London, 14 March 2019
Investor Relations & Credit Rating Agencies - ESG
Agenda
• Introduction
Raffaella Luglini, Chief Stakeholder Officer
Part 1: FY 2018 and Industrial Plan
- Executing the Industrial Plan
- FY2018 Results & Outlook
Part 2: Focus on businesses
- Electronics: a gem in the crown
- Helicopters: delivering on promises
- Aircraft: a strong strategy to deliver the Industrial Plan in a high growth market
- DRS: growth outlook
- Q&A
Alessandro Profumo, CEO Alessandra Genco, CFO
Norman Bone, MD Electronics Division Gian Piero Cutillo, MD Helicopters Division Lucio Valerio Cioffi, MD Aircraft Division
William J. "Bill" Lynn III, CEO of Leonardo DRS
Executing the Industrial Plan
Alessandro Profumo Chief Executive Officer
London, 14 March 2019
Investor Relations & Credit Rating Agencies - ESG
Strong progress towards Industrial Plan objectives Building long term sustainable future
- 2018 targets delivered or exceeded
- Order growth ahead of Industrial Plan, with record backlog
- Strengthened international presence to drive export success
- Profitability to benefit from growth, efficiencies and cost control
- Increasing confidence in profitability and cash generation targets
- Creating a culture of continuous improvement
- 2018-2023 Industrial Plan targets underpinned
- Confirming or exceeding 2017-2022 objectives
We are tracking ahead of plan
2018 Orders and Revenues above Guidance range
5
© Leonardo - Società per azioni
Industrial Plan delivering the growth required for sustainable performance
2018 Orders and Revenues above Guidance range
- Oustanding achievement in 2018 delivered by:
- Growth ahead of our market:
- o Driven by DRS, (i.e Mounted Family of Computer Systems and "Thropy" Active Protection Systems)
- Success in international markets:
- o € 3 bn NH90 Qatar contract
- o EFA Qatar
- o M346 Poland
- o NATO Joint Electronic Warfare Core Staff
- o Land & Naval systems
- o Up to \$ 1.4 bn IDIQ MH-139 contract in US
• Support and services:
- o Contract with the UK MoD for the integrated operational support of the Apache
- o Aircraft Customer Support & Service
Growth in international markets
Well positioned in key-high growth markets
7
© Leonardo - Società per azioni
Insight into our key businesses
Moving to deliver strong growth, profitability and cash
ELECTRONICS
HELICOPTERS
Profitability to deliver growth benefits to the bottom line
RoS % EBITA € mln ELECTRONICS AIRCRAFT HELICOPTERS DRS CYBER AEROSTRUCTURES 1 0 1,000 1,000 TODAY TOMORROW
What we have done… …What we are planning to do
Leonardo investments as guarantee for the future growth of the business
© Leonardo - Società per azioni
Aerostructures: still draining cash but clear recovery path defined
- Identified and implementing initiatives aimed at improving industrial performance, recovering profitability and cash generation
- Clear targets and action plan to reach break-even in terms of operating cash flow by 2022/2023
|
2018 |
2019 -
onward |
One off
payments |
•
normalization of payment terms
to suppliers & probation costs |
- |
| B787 |
•
customer advances repayment
•
old claims payment |
•
reducing as per contract
•
reducing as per contract
•
price upward revision as per
Global Settlement from 2022 on |
| A220 |
•
loss making programme
•
cash out for non quality issues |
•
reduction of unit production cost by
≈30%
•
fixing industrial processes
•
price renegotiation |
Additional Work
Packages |
- |
•
growing contribution |
2019 Guidance in line with Industrial Plan
|
|
FY2018E
at
January
'18 |
FY2018E
at
July
'18 |
FY2018A |
|
FY2019
Guidance |
| New Orders |
(€ bn) |
12.5 -
13.0 |
14.0 -
14.5 |
15.124 |
↑ |
12.5 -
13.5 |
| Revenues |
(€ bn) |
11.5 -
12.0 |
11.5 -
12.0 |
12.240 |
↑ |
12.5 -
13.0 |
| EBITA |
(€ bn) |
1.075 -
1.125 |
1.075 -
1.125 |
1.120 |
✓ |
1.175 -
1.225 |
| FOCF |
(€ mln) |
ca. 100 |
300 -
350 |
336 |
✓ |
ca. 200 |
| Group Net Debt |
(€ bn) |
ca. 2.6 |
ca. 2.4 |
2.4 |
✓ |
ca. 2.3 |
|
|
|
|
|
|
ca. 2.8* |
2018 exchange rate assumptions: €/USD 1.25 and €/GBP 0.90
Including IFRS16 effect of ca. € 0.4 - 0.5 bn
© Leonardo - Società per azioni
On target to deliver the Industrial Plan communicated in January 2018
13
© Leonardo - Società per azioni
Sustainability as a base of the Industrial Plan
My vision for Leonardo
Strengthening multi-country presence in Aerospace, Defence & Security with growing international presence in the right markets
> Leading in our strengths > Driving value in the portfolio
Civil Helicopters
Defence Electronics
FY 2018 Results & Outlook
Alessandra Genco Chief Financial Officer
London, 14 March 2019
Investor Relations & Credit Rating Agencies - ESG
FY 2018 Highlights Delivering growth
Delivering growth: Orders and Revenues above Guidance
- Orders at € 15.1 bn, up 32% in constant currency, driven by NH90 Qatar and strong commercial performance across the portfolio
- Revenues at € 12.2 bn, up 5% in constant currency
Delivering profitability and cash, at high end of Guidance range
- EBITA at € 1,120 mln, RoS at 9.2% (RoS at 9.4% excluding TX tender costs), including pass-through activities
- Net Result at € 510 mln, up 83% YoY, benefitting from lower financial expenses and income taxes
- FOCF at € 336 mln, in line with raised Guidance
- Net Debt at € 2.4 bn
- 2019 Guidance: reflects continuous progress towards Industrial Plan targets
Order intake
Strong performance, up 32% in constant currency, mainly due to NH90 order
Revenues
Growth and positive momentum in Helicopters & DRS
EBITA and Profitability
Solid performance across all businesses
Net Result +83% YoY
Below the line benefitting from lower financial charges and taxes
- EBIT including ca. € 170 mln of one-off early retirement costs accounted for in 2Q 2018
- Lower net financial expenses due to buy-back transactions completed in 2017 and lower cost of funding
- Lower income taxes mainly due to impact of US tax reform accounted for in 2017
Net Result benefitting from the release of part of the risk provision set aside against guarantees given upon disposal of Ansaldo Energia
Investing where opportunities are
Focus on key products and technologies in order to achieve the target growth and guarantee medium-long term business sustainability
Investments in security, physical and IT infrastructures in order to preserve the Company's competitiveness
FOCF higher than old plan, stepping up in 2020
Reduced gross debt and cost of funding
Reduced Gross Debt by 20%1 one year earlier than forecasted through cash generation
Diversified Funding Pool
2018 Leverage Ratio Net Debt / EBITDA: 1.6x Lowered cost of funding by 30%, more than previously expected
COST OF FUNDING
GROSS DEBT
5.4% 4.0% 3.8% FY2016A FY2020E Old Plan FY2020E New Plan
1 Excluding IFRS 16 adjustments
© Leonardo - Società per azioni
Committed to investment grade
2019 Guidance in line with Industrial Plan
|
|
FY2018E
at
January
'18 |
FY2018E
at
July
'18 |
FY2018A |
|
FY2019
Guidance |
| New Orders |
(€ bn) |
12.5 -
13.0 |
14.0 -
14.5 |
15.124 |
↑ |
12.5 -
13.5 |
| Revenues |
(€ bn) |
11.5 -
12.0 |
11.5 -
12.0 |
12.240 |
↑ |
12.5 -
13.0 |
| EBITA |
(€ bn) |
1.075 -
1.125 |
1.075 -
1.125 |
1.120 |
✓ |
1.175 -
1.225 |
| FOCF |
(€ mln) |
ca. 100 |
300 -
350 |
336 |
✓ |
ca. 200 |
| Group Net Debt |
(€ bn) |
ca. 2.6 |
ca. 2.4 |
2.4 |
✓ |
ca. 2.3 |
|
|
|
|
|
|
ca. 2.8* |
2018 exchange rate assumptions: €/USD 1.25 and €/GBP 0.90
Including IFRS16 effect of ca. € 0.4 - 0.5 bn
Electronics: a gem in the crown
Norman Bone MD Electronics Division
London, 14 March 2019
Investor Relations & Credit Rating Agencies - ESG
Key Messages
Agenda
- 1. The change
- 2. The rationale
- 3. The journey
- 4. The plan
- 5. The benefit
Creating the biggest division in the our portfolio…
- On 1 st February 2019 Leonardo creates a new Electronics Division, which brings together the former:
- Airborne and Space Systems Division
- Land and Naval Defence Electronics Division
- Defence Systems Division
- Automation Systems and Traffic Control Systems Lines of Business (both formerly under Security and Information Systems Division)
- Automation managed separately
- Long term strategic direction
- Execution issues to be addressed
- Cyber outside division specific focus area
- Addressed historical inconsistencies
- E.g. air traffic control
- Created the right structure to enhance commercial performance
One Electronics Division within One Leonardo
The rationale of the change…
- Evolving customer engagement approaches
- Increasingly complex end user mission requirements
- International cooperation / partnerships
- System and service solution offerings
- Need to maximise synergies and optimise investment
Airborne and Space Systems: Successful transformation from good to great 3
Continuous improvement leading to sustainable growth
Our path to double digit profitability…
EBITA
Consistency of delivery to underpin the Industrial Plan
32
…by driving best practices and focusing on delivery
RoS % SIZE = REVENUES Airborne and Space Systems Defence Systems Land and Naval Defence Electronics Security and Information Systems 2019 EBITA – FOCF
EBITA
33
How we are going to do it…
Fully focused on people, delivery and execution
34
Achieving our full potential…
LEVERAGING SUCCESS AND EXPLOITING OPPORTUNITIES
35
Key Messages
- Our biggest Division, addressing the largest part of the A&D market
- Bringing Business Units together to make them stronger, through:
- Internationalisation
- Focus on performance
- Product Development Synergies
- High quality businesses with real momentum
- Delivering on promises to execute to schedule
- Significant opportunity ahead
- Double digit profitability
- Cash conversion well above Group average
- CAGR in excess of market trend
- Delivering long term sustainable growth
Helicopters: delivering on promises
Gian Piero Cutillo MD Helicopters Division
London, 14 March 2019
Investor Relations & Credit Rating Agencies - ESG
Helicopters on track for sustainable growth Fully aligned to Industrial Plan ambition and objectives
- Winning in opportunistic military market
- No.1 in slightly growing civil market 40% value share
- Growth supported by increasingly international Customer base
- Progress underpinned by stronger offer for Customer Support & Training
- Targeted investment in our future products and services
- Increased financial discipline and agile industrial response
- Growth delivering positive economic results with improving profitability
Winning in highly opportunistic military market
Significant contracts awards in military market in 2018
>€3bn NH90 Qatar contract
- 28 NH90 (16 for land operations and 12 for naval missions), Customer Support & Training and Infrastructure
- Leonardo to act as prime contractor
~\$1.4bn MH-139 by U.S. Air Force
- To replace UH-1N fleet
- Indefinite Delivery Indefinite Quantity contract for up to 84 helicopters, training devices and associated support equipment (Soft Backlog)
- Initial operational capability by 2021
€ 280 mln AW169M with Guardia di Finanza
- Launch customer for the AW169M, with purchase of 22 helicopters for homeland security and rescue operation
- Includes training, spare parts and options for additional €100 mln
Winning in a highly opportunistic market
Focused sales effort in critical geographies
GLOBAL MILITARY MARKET
Avg. 2014-18A Avg. 2019-2023E
No.1 in Civil market
Significant contracts awarded in civil market in 2018
15 AW139s SINO-US
-
€ 150 mln order with SINO-US (China)
- Framework agreement for the supply of additional 160 helicopters, accounting for more than € 1 bn
- Additional 26 helicopters sold in China
- 70% market share in the fast growing Chinese HEMS market
21 AW139s Saudi Aramco
- Offshore and Search and Rescue configurations
- Deliveries in the 2018-2020 period
Success in all dual-use platforms
- Strong market recognition of all our Civil platforms (AW119, AW109 family, AW169, AW139 and AW189)
- Significant sales to multiple customers leveraging our configurability and operational capability in multiple roles
No.1 in Civil market
Leonardo focus on attractive segments
- 40% value share in 2018 (vs < 35% in 2017)
- No.1 OEM in US civil revenues second year in a row
- > 40% share in the VIP multiengine market
- Trekker increasing penetration in Light Twin
- Targeted presence in light classes Utility, EMS and VIP
No.1 in Civil market Leonardo focus on attractive segments
- ~ 5 % CAGR expected in the next five years
- US and EU will remain the most important markets
- Asia expected to grow materially
- Leonardo focused on attractive roles, segments and geographies:
- EMS/ SAR, VIP and Utility
- In the 3.2 – 10 tonnes class, expected to grow with a 6% CAGR, our product family (AW169, AW139, AW189) offers best value for money
- Higher Trekker contribution
- Investing in key geographies
CIVIL HELICOPTERS MARKET FORECAST
Market Value \$ bn
Growth supported by an increasingly international Civil customer base…
LEONARDO CIVIL HELICOPTERS IN SERVICE FLEET DISTRIBUTION BY MACRO REGION
44
© Leonardo - Società per azioni
… strengthening in new geographies, especially in Asia
45
© Leonardo - Società per azioni
Progress underpinned by Customer Support & Training offer
Strengthened our offer in 2018
- Service Customer satisfaction: ranked 1 st in Product Support by 2019 Pro-Pilot Survey
- Digital services: new and enhanced portfolio with a community of 10,000+ user
- Advanced services: 450+ civil helicopters enrolled into Power by the Hour
- Expanding global footprint: 100+ Service & Repair Centres
- New Gulf of Mexico Support Center in Lousiana
- New warehouse in Vergiate
- Customer proximity: 100+ onsite technical representatives
- Mission effectiveness and safety: featuring new training systems assets and portfolio in 2018
- 41,000+ Simulator Training Hours flown (vs 2,900 in 2006)
- 10,000+ students (vs. 600 in 2006)
Targeted investment in our future products and services Continued innovation in Helicopters, Tiltrotors, and RUAS
- Going green active MRB, electric TRB
-
Studying the helicopter of the future (HEMS)
-
Tiltrotors for unmatched performance
- Clean Sky2 NEXTGEN under development
-
Scalable technology
-
RUAS systems with unique integrated capabilities
- AWHERO progressing towards certification
Growth delivering positive economic results with improving profitability
Aircraft: a strong strategy to deliver the Industrial Plan in a high growth market
Lucio Valerio Cioffi MD Aircraft Division
London, 14 March 2019
Investor Relations & Credit Rating Agencies - ESG
Great position in high growth market
Double digit growth in military aircraft markets
REFERENCE MARKET
Source: Leonardo estimates based on HIS Jane's forecast International teal
Long term Revenue visibility from very significant Backlog and additional high potential opportunities
We have the right portfolio to deliver growth
Best in class aircraft portfolio ready to serve market demands
Leading the evolution of customer assets and processes through continuous service innovation and partnership approach based on a Customer-Centric Attitude
53
© Leonardo - Società per azioni
From platforms to services: complimentary meaningful and profitable growth
- Delivering world-class services and capabilities to our customers
-
1,100 aircraft supported in ~30 countries worldwide
- Industrial collaborations worldwide
- ~25% of aircraft division turnover and more than 30% of its profitability
- Full spectrum of support, services and "enlarged" training solutions for proprietary and non-proprietary products (e.g. F35 MRO&U, C-130J, AWACS)
- Increase use of digitalisation (big data analysis and customer demand forecasting)
- Opportunities related to continuous functional upgrade of the existing platforms (such as C-27J) to support our customers in competing against new operational scenarios
We are thinking and working on the future…
A real collaboration among the European industry with customers to provide future growth opportunities
Strong Outlook
- Great growth potential in the markets we serve supported by a strong and comprehensive product range
- Very significant backlog with plenty of opportunities to make it biggest still
- Best-in-class aircrafts already in the market, complemented by our integrated training services
- Balanced portfolio set to deliver growth over the start, medium and longer term
- Cash flow generation with solid double digit profitability
DRS: growth outlook
William J. «Bill» Lynn III CEO of Leonardo DRS
London, 14 March 2019
Investor Relations & Credit Rating Agencies - ESG
DRS contributing to Leonardo's Industrial Plan targets
US defence Budget continues to increase
• Projected increases in U.S. defence spending supports sustained revenue growth throughout the five-year plan
DRS well positioned in the market
- DRS revenue growth outperforming U.S. defence market
- Product alignment within Pentagon's major priorities driving results
- Opportunity to accelerate growth through International sales to U.S. allies
Profitability growth
- Current profits growing at double digit rates
- Stable 7-8% margins through 2018 (excluding TX bid costs)
- Converting existing 'soft Backlog' will increase revenue faster than costs
- Transitioning development programmes into higher margin production programmes
- Identifying additional efficiencies to reduce costs
U.S. defence budget provides opportunity for continued DRS growth through 2023
- FY 2020 Pentagon budget provides \$ 718 bn, an increase of +4.9% over FY 2019
- \$ 104.3 bn supporting R&D programmes and \$ 143 bn for procurement of new equipment
- DRS will benefit from opportunities in the Army Procurement budget of \$ 25 bn through:
- Advanced electronics
- Network systems
- Vehicle protection systems
- Aircraft survivability
- DRS will benefit from opportunities in the Navy Procurement budget of \$ 61 bn through:
- Shipboard electronics
- Power and propulsion
- Aircraft survivability
Growth: DRS outperforming US defence market
REVENUE TRENDS EXCEED US defence MARKET
DRS ALIGNED IN HIGH GROWTH SEGMENTS
- Army Electronics & Sensors
- Product alignment within Army's key modernization priorities fuelling continued growth
- 2018 Revenue Growth – 26%
- 2017 Revenue Growth – 35%
Long Range Electro-Optics/Infrared
Platform
Computing Protection & Countermeasures
Naval Systems
- Provides power propulsion and control technology as well as shipboard electronics and computing on the Navy's highest priority platforms
- 2018 Revenue Growth – 32%
- 2017 Revenue Growth – 7%
Naval Computing &
Combat Systems Propulsion Systems Power Conversion, & Distribution
Driving Improving Profitability
Stable EBITA 7-8% margins excluding TX investment 2016- 2018
Creating efficiencies to improve profit
- Eliminated management layers
- Facility optimizations
- Portfolio shaping
- Focused investing
- Product life-cycle transition from development type efforts to production on our 'soft Backlog' supports margin expansion
- Increased EBITA margins drive free cash flow generation
DRS to deliver +10% operating margins during the plan period
THANK YOU FOR YOUR ATTENTION
SECTOR RESULTS
Helicopters
Well positioned to capture growth opportunities
|
|
4Q |
|
|
FY |
|
|
|
|
$\epsilon$ mln |
2017
Restated |
2018 |
$\%$
Change |
2017
Restated |
2018 |
%
Change |
|
| Orders |
|
1,443 |
1,523 |
5.5% |
3,153 |
6,208 |
96.9% |
|
| Revenues |
|
1,025 |
1,154 |
12.6% |
3,438 |
3,810 |
10.8% |
|
| EBITA |
|
50 |
142 |
184.0% |
281 |
359 |
27.8% |
|
|
RoS |
4.9% |
12.3% |
$+7.4 p.p.$ |
8.2% |
9.4% |
$+1.2 p.p.$ |
|
2019 OUTLOOK
Well placed in most attractive segments Profitability strengthening; back to double digit in 2020 Continuing industrial processes optimisation to improve competitiveness
DELIVERIES BY PROGRAMME
Electronics, Defence & Security Systems Remain strong
|
4Q |
|
|
FY |
|
|
|
| $\epsilon$ mln |
2017
Restated |
2018 |
%
Change |
2017
Restated |
2018 |
%
Change |
|
| Orders |
1,345 |
2,448 |
82.0% |
4.388 |
4,409 |
0.5% |
|
| Revenues |
1,331 |
1,408 |
5.8% |
3,855 |
4,011 |
4.0% |
|
| EBITA |
203 |
176 |
$-13.3%$ |
408 |
394 |
$-3.4%$ |
|
| RoS |
15.3% |
12.5% |
$-2.8 p.p.$ |
10.6% |
9.8% |
$-0.8 p.p.$ |
|
| DRS |
|
4Q |
|
|
FY |
|
|
| \$ mln |
2017
Restated |
2018 |
$\%$
Change |
2017
Restated |
2018 |
%
Change |
|
| Orders |
475 |
930 |
95.8% |
2,016 |
2,880 |
42.9% |
|
| Revenues |
629 |
798 |
26.9% |
1,947 |
2,339 |
20.1% |
|
| EBITA |
61 |
67 |
9.8% |
146 |
151 |
3.4% |
|
| RoS |
9.7% |
8.4% |
$-1.3 p.p.$ |
7.5% |
6.5% |
$-1.0 p.p.$ |
|
| EBITA excluding TX costs |
63 |
67 |
6.3% |
153 |
169 |
10.5% |
|
Avg. exchange rate €/\$ @ 1.8525 in FY2018 Avg. exchange rate €/\$ @ 1.1293 in FY2017
Aeronautics
Aircrafts positive outlook offsetting lower ATR and Aerostructures
|
|
4Q |
|
|
FY |
|
| $\epsilon$ mln |
2017
Restated |
2018 |
$\%$
Change |
2017
Restated |
2018 |
$\%$
Change |
| Orders |
652 |
1.149 |
76.2% |
2.615 |
2.569 |
$-1.8%$ |
| Revenues |
918 |
871 |
$-5.1%$ |
3.093 |
2.896 |
$-6.4%$ |
| EBITA |
116 |
161 |
38.8% |
311 |
328 |
5.5% |
| RoS |
12.6% |
18.5% |
$-0.8 p.p.$ |
10.1% |
11.3% |
$-0.8 p.p.$ |
| EBITA excluding TX costs |
107 |
161 |
50.5% |
311 |
335 |
7.7% |
| RoS excluding TX costs |
11.7% |
18.5% |
$-0.8 p.p.$ |
10.1% |
11.6% |
$-0.8 p.p.$ |
2019 OUTLOOK
- Higher revenues compared to 2018
- Aircraft production increase (especially correlated to the EFA Kuwait contract)
- Good levels of profitability supported by
- Solid Aircraft performance
- Aerostructures unsatisfactory levels benefitting from efficiency improvement
Space Stable outlook
67
2019 OUTLOOK
Revenues and operating profit expected in line with 2018
APPENDIX
4Q/FY 2018 Results
Group Performance
| ICE |
|
4Q |
|
F۲ |
|
|
|
| $\epsilon$ mln |
2017
Restated |
2018 |
$\%$
Change |
2017
Restated |
2018 |
$\frac{9}{6}$
Change |
|
| New Orders |
3,650 |
5,734 |
57.1% |
11,595 |
15,124 |
30.4% |
|
| Backlog |
|
|
|
33,507 |
36,118 |
7.8% |
|
| Revenues |
3,686 |
4,000 |
8.5% |
11,734 |
12,240 |
4.3% |
|
| EBITA |
383 |
488 |
27.4% |
1,077 |
1,120 |
4.0% |
|
| RoS |
10.4% |
12.2% |
$+1.8 p.p.$ |
9.2% |
9.2% |
|
|
| EBIT |
282 |
343 |
21.6% |
844 |
715 |
$-15.3%$ |
|
| EBIT Margin |
7.7% |
8.6% |
$+0.9 p.p.$ |
7.2% |
5.8% |
$-1.4 p.p.$ |
|
| Net result before extraordinary transactions |
14 |
257 |
1736% |
279 |
421 |
50.9% |
|
| Net result |
14 |
247 |
1665% |
279 |
510 |
82.8% |
|
| EPS ( $\in$ cents) |
0.089 |
0.427 |
379.5% |
0.482 |
0.881 |
82.8% |
|
| FOCF |
1,509 |
1,136 |
$-24.7%$ |
537 |
337 |
$-37.2%$ |
|
| Group Net Debt |
|
|
|
2,579 |
2,351 |
$-8.8%$ |
|
| Headcount |
|
|
|
45,134 |
46,462 |
2.9% |
|
Free Operating Cash-Flow (FOCF): this is the sum of the cash flows generated by (used in) operating activities (which includes interests and income taxes paid) and the cash flows generated by (used in) ordinary investment activity (property, plant and equipment and intangible assets) and dividends received
IFRS 16
- IFRS 16 redefines recording methods of operating leases in the financial statements imposing a single recognition method for all types of leasing, with the consequent recognition in the balance sheet of the tangible assets and liabilities for future payments
- The main impacts deriving from the application of the new principle are:
- recording of non-current assets equal to rights of use on tangible and intangible assets against existing leasing contracts
- recognition of financial liabilities equal to the present value of future rentals
- The Group will apply this principle starting from 1 st January 2019
- The estimated impact on the Group Financial Debt at 1 January 2019 will be ca. € 0.4 bn
Successful financing achievements
Term Loan Facility signed in November 2018 to refinance existing debt:
- € 500 mln credit line
- 5 years maturity
- 110 basis points above 6 months Euribor
- Bullet redemption of total amount at maturity
- Same terms and conditions of Revolving Credit Facility
European Investment Bank (EIB) loan for € 300 mln signed in November 2018:
- To fund projects aimed to support innovation and technological development
- 4 main areas:
- o Development of technologically advanced products
- o Cyber Security
- o Advanced Manufacturing
- o Production efficiency
Solid Financial Position as end of December 2018
Repayment Conditions of New Debt Instruments
The Term Loan Facility is characterized by a 5 years bullet repayment; the EIB financing is a 12 year amortizing loan with a 4 year grace period
72
| CREDIT RATING |
As of today |
Before last review |
Date of review |
| Moody's |
Ba1 / Stable Outlook* |
Ba1 / Positive Outlook |
October 2018 |
| S&P |
BB+ / Stable Outlook |
BB+ / Negative Outlook |
April 2015 |
| Fitch |
BBB-
/ Stable Outlook |
BB+ / Positive Outlook |
October 2017 |
© Leonardo - Società per azioni *Moody's stated that this review is not due to Leonardo's stand-alone credit rating but is the consequence of Italy's country downgrade
Availability of adequate committed liquidity lines as at 31 December 2018
Development costs capitalised as intangible assets as at 31 December 2018
| € mln |
Self Funded
National Security |
Self Funded
Other |
Total |
01 January
2018 restated1 Opening Balance |
1,641 |
459 |
2,100 |
Gross
R&D capitalised
Depreciation
and write
offs
Disposals
Other
Changes |
196
-78
0
1 |
47
-33
-1
4 |
243
-111
-1
5 |
Net R&D
capitalised |
119 |
17 |
136 |
31 December
2018 |
1,760 |
476 |
2,236 |
1 IFRS15 restated
CEO REMUNERATION
Balanced Remuneration Policy
Aligned with shareholders interests
- Clear link between pay and degree of achievement of targets
- Aligning the remuneration package with international market best practices
- Reducing risk-oriented behavior
- Attracting / retaining resources regarded by the Company as key performers
- Complying with transparency and merit system embedded in Leonardo strategy
- Including Sustainability/ESG objectives, consistently with business strategy
CEO REMUNERATION
CEO performance: Management by Objectives
MBO remuneration is paid in cash on a yearly basis
Remuneration scheme: methodology
CLAW-BACK CLAUSE
- Provided for all the variable incentives assigned starting from 2014
- Leonardo is entitled to request repayment of the variable remuneration paid in the event of incorrect or misstated data
SEVERANCE
- If CEO appointment is:
- revoked
- terminated early
- terminated by CEO with just cause
- He will receive the total remuneration (fixed and variable elements) as would have been until the natural expiry of the term of office (descending down to zero upon natural expiry)
TSR PEER Group (LTIP)
- Leonardo's performance will be measured in relation to a "peer Group" selected on comparability
- Aerospace and Defence companies
- Industrial companies in the FTSE MIB
Long Term Incentive Plan (LTIP)
BENEFICIARIES
• Chief Executive Officer
• Executive directors, employees and/or associates with a decisive impact on the achievement of business results (210 people)
FREQUENCY
• 3 year cycles assigned yearly on a rolling basis
AWARD
- Max 53.6% € 500.000 CEO
- Max 140% of gross annual remuneration ESR
LOCK UP
• 1 year
VESTING PERIOD
• 3 year
PAYOUT
• Shares only for Management, Key Management Personnel and other Top Executive
79
• Shares & Cash for other Beneficiaries (70% shares and 30% cash or vice versa)
LTIP Performance conditions
SAFE HARBOR STATEMENT
NOTE: Some of the statements included in this document are not historical facts but rather statements of future expectations, also related to future economic and financial performance, to be considered forward-looking statements. These forward-looking statements are based on Company's views and assumptions as of the date of the statements and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Given these uncertainties, you should not rely on forwardlooking statements.
The following factors could affect our forward-looking statements: the ability to obtain or the timing of obtaining future government awards; the availability of government funding and customer requirements both domestically and internationally; changes in government or customer priorities due to programme reviews or revisions to strategic objectives (including changes in priorities to respond to terrorist threats or to improve homeland security); difficulties in developing and producing operationally advanced technology systems; the competitive environment; economic business and political conditions domestically and internationally; programme performance and the timing of contract payments; the timing and customer acceptance of product deliveries and launches; our ability to achieve or realise savings for our customers or ourselves through our global cost-cutting programme and other financial management programmes; and the outcome of contingencies (including completion of any acquisitions and divestitures, litigation and environmental remediation efforts). These are only some of the numerous factors that may affect the forward-looking statements contained in this document. The Company undertakes no obligation to revise or update forward-looking statements as a result of new information since these statements may no longer be accurate or timely.
CONTACTS
Raffaella Luglini Chief Stakeholder Officer [email protected]
Valeria Ricciotti Head of Investors Relations and Credit Rating Agencies +39 06 32473.697 [email protected]
Manuel Liotta Head of Sustainability +39 06 32473.666 [email protected]
[email protected]
www.leonardocompany.com Leonardo Social Hub