Leonardo S.p.A.

Earnings Release • Jul 30, 2018

1H 2018 Results Presentation

Alessandro Profumo Chief Executive Officer Alessandra Genco Chief Financial Officer

Rome, 30 July 2018

Executing the Industrial Plan

Chief Executive Officer

1H 2018 Results & Outlook

Chief Financial Officer

Key messages

Steps forward in the execution of the Industrial Plan

Doing the right things for the long-term

Sharper commercial focus Solid backlog Making progress on NH90 Qatar contract Helicopters recovery plan on track and successfully executed DRS benefitting from strong US market backdrop Focused on cost control and profitability 2018

Sharper commercial focus

To be closer to customer needs

• More export
• Focus on key strategic campaigns
• Customer Support, Service & Training

Product LEADERSHIP to win with our customers

Strong backlog supporting revenue growth

ORDER BACKLOG as at 30 June 2018 = ca. € 33 bn

ORDER BACKLOG € 9.3 bn 28% of total

HELICOPTERS AERONAUTICS ELECTRONICS, DEFENCE AND SECURITY SYSTEMS

ORDER BACKLOG € 11.8 bn 35% of total

ORDER BACKLOG € 12.2 bn 37% of total

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TOP LINE GROWTH DRIVEN BY

• Current Backlog covering almost 3 years of equivalent production
• Large orders providing long term visibility

DRS «soft backlog» not included

Helicopter markets recovery

Progress on Helicopters

JULY 2018 DELIVERIES OVERTAKING JULY 2017

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© Leonardo - Società per azioni

DRS top-line growth outpacing strong US market

	2Q
\$ mln	2018	2017 Restated	% Change		2018	2017 Restated	% Change	FY2017 Restated
Orders	826	529	56.1%		1,250	930	34.4%	2,016
Revenues	504	401	25.7%		959	796	20.5%	1,947
EBITA	25	26	-3.8%		46	51	-9.8%	146
RoS	5.0%	6.5%	-1.5 p.p.		4.8%	6.4%	-1.6 p.p.	7.5%
EBITA excluding TX costs	31	26	19.2%		57	51	11.8%	153
RoS excluding TX costs	6.2%	6.5%	-0.3 p.p.		5.9%	6.4%	-0.5 p.p.	7.9%

• Well positioned on key programmes supporting growth and higher margins
• Currently investing in development programmes expected to turn into production phase in coming years
• Improving underlying profitability, excluding TX campaign

Strong «soft backlog» creating long term visibility

• Including large programmes only partially funded and booked
• 10 programmes generating ca. \$3 bn of «soft backlog»
• Total opportunities up to 4-5x current funded backlog

Delivering results on cost control initiatives

• 40% of annualised savings identified delivered in the 1H (ca. € 80 mln)
• Potential upside driven by further actions being implemented

Key Initiatives:

• Efficiency increase in Manufacturing and Engineering
• Off-load optimisation
• Product Should Cost/Design to Cost
• Logistics and Supply Chain optimisation

Strict cost control to support future growth: recent achievements

• Early retirement plan signed with Italian Unions
• Up to 1,100 employees and 65 managers involved
• Ca. € 170 mln one-off provision taken in 1H 2018
• Positive Net Present Value
• No impact on 2018 FOCF

Supporting competence mix change to meet evolving requirements of the market

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LEAP 2020 Programme launched

To optimise supply chain

Prime contractor business supporting long term visibility and growth

Lower margin pass-through but without capital invested

Large prime contractor business wins supporting long term visibility and better positioning in reference markets

• Higher margin activities under our responsibility
• Lower margin pass-through business but with no capital invested

Rising level of pass-through activities due to large prime contractor wins

• 2017 pass-through revenues > € 1 bn (ca. 9%)
• 2017 profitability at 9.2%, up to 10.1% excluding pass-through

Executing the Industrial Plan

Chief Executive Officer

1H 2018 Results & Outlook

Chief Financial Officer

1H 2018 Highlights

Solid 1H 2018 performance driven by Helicopters & DRS top line growth

• Orders at € 4.6 bn
• Revenues at € 5.6 bn
• EBITA at € 470 mln, RoS at 8.4%
• FOCF at € (809) mln
• Net Debt at € 3.5 bn

FY 2018 Orders and FOCF Guidance revised upwards

IFRS15 impact affecting quarterly results in Helicopters, as anticipated

Order intake

Good performance mainly driven by Helicopters & DRS

Revenues

Positive momentum in Helicopters & DRS

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*1H 2017 IFRS15 restated

EBITA and Profitability

Steady recovery in Helicopters

*1H 2017 IFRS15 restated

Net Result affected by € 170mln one-off early retirement costs

To improve competence mix

*1H 2017 IFRS15 restated

EBIT and Net Result including € 170 mln of one-off early retirement costs to improve competence mix to meet evolving requirements of the market

Lower financial charges, due to 2017 bond buyback

Working Capital under control while supporting FOCF

• Actions to improve Working Capital Performance identified, launched and monitored through KPIs
• First half progress in line with expectations, delivering ~50% of 2018 targets
• FY targets confirmed

FY TARGET / % ACHIEVED TO DATE

2018 Guidance revised upwards for Orders and FOCF

		FY2017A Restated	FY2018E at January '18	FY2018E at July '18
New orders	€ bn	11.6	12.5 – 13.0	14.0 – 14.5
Revenues	€ bn	11.7	11.5 – 12.0	11.5 – 12.0
EBITA	€ bn	1.08	1.075 – 1.125	1.075 – 1.125
FOCF	€ mln	537	ca.100	300 – 350
Group Net Debt	€ bn	2.6	ca. 2.6	ca. 2.4

2018 exchange rate assumptions: €/USD 1.20 and €/GBP 0.90

© Leonardo - Società per azioni

THANK YOU FOR YOUR ATTENTION

SECTOR RESULTS

Helicopters

Well positioned to capture growth opportunities

		2Q
	€ mln	2018	2017 Restated	% Change	2018	2017 Restated	% Change	FY2017 Restated
Orders		718	683	5.1%	1,329	1,142	16.4%	3,153
Revenues		1,080	1,167	-7.5%	1,830	1,754	4.3%	3,438
EBITA		100	153	-34.6%	153	187	-18.2%	281
	RoS	9.3%	13.1%	-3.8 p.p.	8.4%	10.7%	-2.3 p.p.	8.2%

2018 OUTLOOK

• Healthier market outlook driving higher volumes
• Well placed in most attractive segments, leveraging high quality product range
• Profitability gradually improving; back to double digit in 2020

Electronics, Defence & Security Systems Remains strong

		2Q
	€ mln	2018	2017 Restated	% Change	2018	2017 Restated	% Change	FY2017 Restated
Orders		1,390	1,321	5.2%	2,355	2,360	-0.2%	6,146
Revenues		1,372	1,318	4.1%	2,521	2,474	1.9%	5,550
EBITA		134	120	11.7%	207	208	-0.5%	537
	RoS	9.8%	9.1%	+0.7 p.p.	8.2%	8.4%	-0.2 p.p.	9.7%

Of which DRS:

	2Q				1H
\$ mln	2018	2017 Restated	% Change	2018	2017 Restated	% Change	FY2017 Restated
Orders	826	529	56.1%	1,250	930	34.4%	2,016
Revenues	504	401	25.7%	959	796	20.5%	1,947
EBITA	25	26	-3.8%	46	51	-9.8%	146
RoS	5.0%	6.5%	-1.5 p.p.	4.8%	6.4%	-1.6 p.p.	7.5%
EBITA excluding TX costs	31	26	19.2%	57	51	11.8%	153
RoS excluding TX costs	6.2%	6.5%	-0.3 p.p.	5.9%	6.4%	-0.5 p.p.	7.9%

Avg. exchange rate €/\$ @1.2108 in 1H2018 Avg. exchange rate €/\$ @1.0825 in 1H2017

2018 OUTLOOK

• Revenues and profitability almost flat YoY
• Upward trends in some business areas
• Efficiency improvement
• Higher contribution from development programmes

DRS benefitting from positive market trend

Aeronautics

Aircrafts positive outlook offsetting lower ATR and Aerostructures

	2Q
€ mln	2018	2017 Restated	% Change		2018	2017 Restated	% Change	FY2017 Restated
Orders	406	543	-25.2%		1,129	1,780	-36.6%	2,615
Revenues	787	788	-0.1%		1,426	1,444	-1.2%	3,093
EBITA	76	82	-7.3%		123	128	-3.9%	311
RoS	9.7%	10.4%	-0.7 p.p.		8.6%	8.9%	-0.3 p.p.	10.1%
EBITA excluding TX costs	80	82	-2.4%		127	128	-0.8%	311
RoS excluding TX costs	10.2%	10.4%	-0.2 p.p.		8.9%	8.9%	-	10.1%

Offsetting

2018 OUTLOOK

Revenues expected almost flat YoY

• Aircraft benefitting from EFA Kuwait and C-27J export
• Aerostructures volumes expected to decline

Profitability in line with 2017

• Efficiency improvement
• Higher Aircraft performance

Expected lower ATR contribution

Unsatisfactory Aerostructures performance

Space Stable outlook

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2018 OUTLOOK

Revenues and profitability expected almost in line with 2017

APPENDIX

1H 2018 Results

Group Performance

		2Q
	€ mln	2018	2017 Restated	% Change	2018	2017 Restated	% Change	FY2017 Restated
New Orders		2,440	2,414	1.1%	4,604	5,061	-9.0%	11,595
Backlog					32,611	33,918	-3.9%	33,507
Revenues		3,138	3,135	0.1%	5,589	5,496	1.7%	11,734
EBITA		317	350	-9.4%	470	505	-6.9%	1,077
	RoS	10.1%	11.2%	-1.1 p.p.	8.4%	9.2%	-0.8 p.p.	9.2%
EBIT		119	300	-60.3%	240	423	-43.3%	844
	EBIT Margin	3.8%	9.6%	-5.8 p.p.	4.3%	7.7%	-3.4 p.p.	7.2%
Net result		56	164	-65.9%	106	213	-50.2%	279
EPS (€ cents)		0.098	0.286	-65.9%	0.185	0.371	-50.2%	0.482
FOCF		248	-104	338.5%	-809	-531	52.4%	537
Group Net Debt					3,474	3,577	-2.9%	2,579
Headcount					45,989	45,655	0.7%	45,134

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

No material impact from IFRS15

• Leonardo applies retrospectively IFRS15 in 2018 FY2017 and 2017 quarters fully restated in accordance with IFRS15 when presenting the 2018 corresponding quarterly accounts Not material preliminary impacts on FY2017 KPI's (higher revenues by ca. 2% and higher EBITA by ca. 1%)
• Cumulative estimated catch-up adjustment to be recognised in equity; ca. 5% reduction of Group net equity as of 31 December 2017
• More exposed area of activity is civil helicopters

*Confirmed on May 2018

Solid Financial Position as end of June 2018

RCF renegotiated lowering margin (from 100 bps to 75 bps) and amount (from € 2.0 bn to € 1.8 bn). The facility will expire in 2023

CREDIT RATING

	As of today	Before last review	Date of review
Moody's*	Ba1 / Positive Outlook	Ba1 / Stable Outlook	May 2017
S&P	BB+ / Stable Outlook	BB+ / Negative Outlook	April 2015
Fitch	BBB- / Stable Outlook	BB+ / Positive Outlook	October 2017

*Confirmed on May 2018

…fully committed to Investment Grade

Availability of adequate committed liquidity lines as end of June 2018

In order to cope with possible swings in financing needs, Leonardo can leverage:

• 30 June cash balance of € 976 mln
• Credit lines worth € 2.5 bn (confirmed and unconfirmed)
• Revolving Credit Facility renegotiated on 14 February 2018, lowering margin (from 100 bps to 75 bps) and amount (from € 2.0 bn to € 1.8 bn). The facility will expire in 2023
• Bank Bonding lines of ca. € 3.6 bn to support Leonardo's commercial activity

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(1) Based on rating as of 30/06/2018

(2) Average. Expected to be renewed at maturity

Balanced Remuneration Policy

Aligned with stakeholders interests

• Clear link between pay and degree of achievement of targets
• Aligning the remuneration package with international market best practices
• Reducing risk-oriented behaviour
• Attracting / retaining resources regarded by the Company as key performers
• Complying with Transparency and Merit system behind Leonardo strategy
• Including Sustainability/ESG objectives, consistently with business strategy

CEO REMUNERATION

CEO performance: Management by Objectives

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 bonus

AWARD

• Max 53.6% € 500.000 CEO
• Max 140% of gross annual remuneration ESR

1 year LOCK UP

VESTING PERIOD

3 year

PAYOUT

• Shares only for Management, Key Management Personnel and other Top Executive
• Shares & Cash for other Beneficiaries (70% shares and 30% cash or vice versa)

LTIP Performance conditions

© Leonardo - Società per azioni

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 forward-looking 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.

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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.

External Relations, Communication, Italian Institutional Affairs, Investor Relations and Sustainability

Contacts

Raffaella Luglini

EVP External Relations, Communication, Italian Institutional Affairs, Investor Relations and Sustainability +39 06 32473.066 raffaella.luglini@leonardocompany.com

Valeria Ricciotti

Equity & Fixed Income Analysts & Investors and Relationship with Credit Rating Agencies +39 06 32473.697 valeria.ricciotti@leonardocompany.com

Manuel Liotta

Group Sustainability & ESG +39 06 32473.666 manuel.liotta@leonardocompany.com

Company Documentation

www.leonardocompany.com

Sustainability

We do business in a sustainable manner, with a continued commitment to economic and social development and the protection of public health and the environment.