Leonardo S.p.A.

Earnings Release • Mar 10, 2022

Informazione Regolamentata n. 0131-18-2022		Data/Ora Ricezione 10 Marzo 2022 18:40:34	Euronext Milan
Societa'	:	LEONARDO
Identificativo Informazione Regolamentata	:	158317
Nome utilizzatore	:	LEONARDON04 - Micelisopo
Tipologia	:	2.2
Data/Ora Ricezione	:	10 Marzo 2022 18:40:34
Data/Ora Inizio Diffusione presunta	:	10 Marzo 2022 18:40:35
Oggetto	:	Leonardo: financial results FY2021
Testo del comunicato

Vedi allegato.

PRESS RELEASE LEONARDO: REVENUES OF € 14.1 BN (+5%), EBITA OF € 1,123 MLN (+20%), NET RESULTS OF € 587 MLN (+142%), FOCF OF € 209 MLN (+423%), NEW ORDERS OF € 14.3 BN (+4%). DOUBLING FOCF GUIDANCE.

Proposed dividend at € 0.14 per share

• Strong Defence-Governmental businesses accounting for 88% of Group Revenues
• Backlog of € 35.5 billion
• Book to Bill at 1x
• RoS at 7.9% (+0.9 p.p.)
• Group Net Debt of € 3.1 billion (-6%)
• CO2 emissions reduced by 23%
• Increased the hiring of young people and women with degrees in STEM disciplines
• 50% of our financial sources now ESG linked, with objectives fully aligned with our strategy and Long-Term Incentive Plan
• Aerostructures restructuring and relaunch plan presented in November

FY 2022 Guidance

Based on the current assessment of the effects deriving from the geopolitical and global health situation on the supply chain and the global economy and assuming no additional major deterioration

• Orders ca. € 15 billion
• Revenues € 14.5 – 15 billion
• EBITA € 1,180 – 1,220 million
• FOCF ca. € 500 million
• Group Net Debt ca. € 3.1 billion

Strong fundamentals at the basis of the medium / long-term objectives

Based on the current assessment of the effects deriving from the geopolitical and global health situation on the supply chain and the global economy and assuming no additional major deterioration

• Back to our growth path
• Mid-single digit New Orders and Revenues CAGR
• High-single digit EBITA CAGR
• Confirming ca. € 3 billion cash generation over 2021-2025,
• Group cash conversion rate >70% in 2024-2025

Rome, 10 March 2022 – Leonardo's Board of Directors, convened today under the Chairmanship of Luciano Carta, examined and unanimously approved the draft of Group consolidated and Leonardo S.p.A. financial statements at 31 December 2021.

Alessandro Profumo, Leonardo CEO, stated "In these times of much increased geo-political uncertainties, we are monitoring closely the situation and we are aligned to government policies across our geographies. We remain focussed on meeting the needs of our customers and we are well positioned given our strong business fundamentals. 2021 was an important year. We delivered FOCF above Guidance, doubling the expectations. We are back to our growth path and above pre-covid levels, excluding Aerostructures for which a restructuring and relaunch plan is running. Our Defence and Governmental businesses remain strong and account for 88% of 2021 Revenues, and we are seeing signs of recovery in our civil aeronautics business. We are fully committed to ESG: we have reduced CO² emissions by 23% and increased the percentage of women hired with STEM profiles and of young people under 30, 50% of our financial sources are ESG linked, with objectives fully aligned

with our strategy and Long-Term Incentive Plan. Based on the results delivered, we have also proposed the resumption of our dividend. Our strengths and core fundamentals are the basis of our confidence in the medium-long term: we are confirming our target of generating ca. cumulative €3bn of cash flow over 2021-2025, with a significant step up in 2022 and a cash conversion rate of ca. 70% in 2022, if we exclude Aerostructures, and >70% at Group level, including Aerostructures, in 2024-2025. The results achieved and the targets we have set show once again our focus on creating sustainable value for all our stakeholders".

During the 2021 financial year Leonardo continued and strengthened the path to growing its business and increasing profitability as envisaged in the financial statements at 31 December 2020, showing a gradual and continuous improvement in the Group's industrial performance.

Despite the continuation of the effects of the pandemic and of the consequent government rules restricting movements in 2021 too, Leonardo confirmed resilience with a growing commercial, industrial and financial performance, even compared to the pre-pandemic period, thanks to the strength and diversification of its portfolio of products and solutions and its widespread presence all over the world, excluding the civil aviation component of the Aeronautics sector, which was still affected by the continuation of the abovementioned effects.

The volume of new orders continued to stand at excellent levels, thus confirming the good competitive positioning of the Group's products and solutions, with Revenues rising in all the main Business areas and profitability increasing in all the Sectors, with the exception of the civil aviation component, which continued to be affected by low volumes of demand from the main market operators.

Cash flow recorded a significant improvement, reaching double the amount forecast at the beginning of the year, with a consequent benefit in terms of lower Group Net Debt compared to expectations.

2021 Key Performance Indicator

Group (Euro million)	2020	2021	Chg.	Chg. %
New orders	13,754	14,307	553	4.0%
Order backlog	35,516	35,534	18	0.1%
Revenues	13,410	14,135	725	5.4%
EBITDA(*)	1,458	1,626	168	11.5%
EBITA (**)	938	1,123	185	19.7%
ROS	7.0%	7.9%	0.9 p.p.
EBIT (***)	517	911	394	76.2%
EBIT Margin	3.9%	6.4%	2.5 p.p.
Net result before extraordinary transactions	241	587	346	143.6%
Net result	243	587	344	141.6%
Group Net Debt	3,318	3,122	(196)	(5.9%)
FOCF	40	209	169	422.5%
ROI	11.3%	12.4%	1.1 p.p.
ROE	4.5%	10.0%	5.5 p.p.
Workforce	49,882	50,413	531	1.1%

(*) EBITDA this is EBITA before amortisation, depreciation (net of those relating to goodwill or classified among "non-recurring costs") and adjustments impairment.

(**) EBITA is obtained by eliminating from EBIT the following items: any impairment in goodwill; amortisation and impairment, if any, of the portion of the purchase price allocated to intangible assets as part of business combinations, restructuring costs that are a part of defined and significant plans; other exceptional costs or income, i.e. connected to particularly significant events that are not related to the ordinary performance of the business.

(***) EBIT is obtained by adding to earnings before financial income and expense and taxes and taxes the Group's share of profit in the results of its strategic Joint Ventures (GIE-ATR, MBDA, Thales Alenia Space and Telespazio).

Commercial Performance

The following graphs show the performance of the Group's ratios in the last 4 years; they highlight the continued growth achieved by the Group, with results above pre-pandemic levels, net of the Covid-19 impact on the civil aviation segment. It should be noted that the figure of New orders in 2018 was particularly high thanks to the acquisition by the Helicopters Division in that same year of the NH 90 Qatar contract worth €bil. 3.

In light of the aforementioned considerations, below is also provided the Pro-forma EBITA figure, excluding the Aerostructures component:

• New Orders, amounted to EUR 14,307 million confirming the growth trend recorded throughout 2021. The commercial performance of the Aeronautics Sector was excellent (+15%), with the Aircraft component that more than offset the expected downturn in the civil aviation business component. There was also growth in the Defense Electronics & Security sector, which benefitted from a significant positive performance by the European component of the sector, as will be seen below. Helicopters recorded new orders that remained substantially in line with the previous year, due to having gained the IMOS (Integrated Merlin Operational Support) order during the comparative period
• Backlog, amounted to EUR 35,534 million, ensures a coverage in terms of equivalent production equal to about 2.5 years

The value of New Orders showed an increase of 4% compared with 2020 and of 1.4% compared with 2019.

Business Performance

• Revenues, amounted to EUR 14,135 million, the growth trend observed since the beginning of 2021 continued throughout the year, driven by the performance of the European component of Defense Electronics & Security, the Aircraft component of Aeronautics and - to a lesser extent - Helicopters. The aforesaid growth trend was only partly mitigated by the expected reduction in Aerostructures, which continued to be affected by the fall in production rates on the B787 and ATR programmes. Revenues showed an increase of 5.4% compared with 2020 and of 2.5% compared with 2019

• EBITA, amounted to EUR 1,123 million, (with a ROS of 7.9%) recorded a significant growth as a whole (20%), with a substantial increase in all business sectors, as a result of higher revenues and improved profitability, to which must also be added a higher contribution on the part of all the strategic Joint Ventures, with particular regard to the Space Alliance manufacturing sector and to the GIE ATR, due to a gradual resumption of deliveries. The pro-forma EBITA value of the Aerostructures component showed a sharp increase over 2020 (29.5%) and compared with 2019 (5.1%)

• EBIT, amounted to EUR 911 million, showed a very sharp increase of more than 76% compared to 2020 (€mil. 517), despite the Group continued to incur costs, for amounts substantially in line with the previous year, in complying with the Government's guidelines on health protection and the prevention of the spread of Covid-19. Furthermore, EBIT was affected by the impact of restructuring costs sustained under the agreements governing the early retirement of the Aerostructures division's workforce on a voluntary basis (approximately €mil. 70), as part of the broader reorganisation plan involving the Division, as well as of non-recurring costs associated with the settlement of the Indian case, following which Leonardo may gain a new commercial positioning in the area

• Net Result before extraordinary transactions, which posted a profit of EUR 587 million, recorded an increase of more than 140%, benefitting from the EBIT performance, as well as from a lower impact of financial costs; during the comparative period, the latter were heavily affected by the component linked to hedging the exposure to exchange risk and by the costs associated with the outstanding bond issues, which decreased during the period under consideration following a reduction in the bond exposure itself. The Net Result was also affected by the tax benefits arising from joining the tax concession schemes provided for in article 110 of Legislative Decree 104/2020 governing the realignment of tax values of goodwill

Financial performance

• Free Operating Cash Flow (FOCF), equal to EUR 209 million, showed a significant improvement compared to 2020 (€mil. 40), confirming the positive trend that had already been observed during the first three quarters of the year
• Group Net Debt, of EUR 3,122 million, showed an improvement compared to 31 December 2020 (€mil. 3,318), mainly as a result of the positive FOCF result, which also included the effects of strategic investments made during the period (€mil. 19) and of the recognition of liabilities for new lease agreements entered into in the year for €mil. 63

	2020	2021	Chg.
Social
Workforce (no.)	49,882	50,413	1.1%
Employees under 30 on total employees (%)	10.3	10.4	0.1 p.p.
Women in managerial positions on total managers and junior managers (%)	17.3	18.0	0.7 p.p.
Hires under 30 on total hires (%)	40.9	42.2	1.3 p.p.
Women hires on total hires (%)	23.1	23.7	0.6 p.p.
Women hires with STEM degree on total hires with STEM degree	15.9	19.4	3.5 p.p.
Average hours of training per employee (no.)	16.2	31.8	96.5%
Injury rate (injuries per 1,000,000 worked hours)	2.60	2.91	11.7%
Employees at ISO 45001-certified sites on total employees (%)	75	78	3 p.p.
Innovation
Total R&D expenses (€ million)	1,646	1,803	9.5%
of which self-funded	559	584	4.5%
Computing power per capita (Gigaflops on no. of Italian employees)	198	194	(2.0%)
Data storage capacity per capita (Gigabyte on no. of Italian employees)	874	857	(1.9%)
Environmental
Energy consumption intensity (MJ/euro) on revenues	0.41	0.40	(3.0%)
Water withdrawals intensity on revenues (l/€)	0.39	0.42	7.0%
Waste produced intensity on revenues (g/€)	2.57	2.11	(17.8%)
Scope I and II CO2 emissions intensity on revenues (g/€) market based	31.52	22.99	(27.1%)
Scope I and II CO2 emissions intensity on revenues (g/€) location based	45.39	33.88	(25.4%)
Employees at ISO 14001-certified sites on total employees (%)	76	77	1 p.p.

DIVIDEND

Leonardo's Board of Directors has resolved to propose to the Shareholders' Meeting the distribution of a dividend of 0.14 euro, from the profit of the year 2021, gross of any withholding taxes. This dividend would be payable as of June 22, 2022, with ex-dividend date (coupon no. 12) on June 20, 2022 and record date (i.e. the date of entitlement to the dividend payment pursuant to art. 83-terdecies of TUF) June 21, 2022. The above with reference to each share of common stock that will be outstanding on the ex-dividend date, excluding the own shares held on that date, without prejudice to the regime of those that will be effectively assigned, pursuant to the current incentive plans, during the current year.

2022 Guidance

The expected 2022 performance reaffirms the resumption of the sustainable growth path accompanied by increasing profitability. The civil business will continue to be heavily affected by the effects of the pandemic, despite the gradual recovery.

Based on the current assessment of the effects deriving from the geopolitical and global health situation on the supply chain and the global economy and assuming no additional major deterioration, Leonardo expects to deliver:

• New Orders (approx. € 15 billion), confirming a strong positioning of the Group's products and solutions and the ability to effectively be present and penetrate in key markets;

• Revenues of € 14.5-15 billion, up compared to 2021 thanks to the contribution of new orders and the delivery of portfolio activities on defence/governmental programmes;

• increasing profitability, with EBITA (*) of € 1,180-1,220 million, driven by the growth in volumes and continued solid industrial profitability of the main business areas, despite the mix effect of programmes still under development and growing shares of prime contractor revenues; the estimate reflects also continued pressure in the civil sector, mainly Aerostructures and GIE-ATR;

• FOCF of approx. € 500 million, with the defence/governmental business that guarantees solid cash generation while the cash absorption by the Aerostructures continues, despite being slightly lower than 2021;

• Group Net Debt of approx. € 3.1 billion, includes the acquisition of 25.1% stake in Hensoldt, the assumptions of some business disposals and the expected payment of dividends

		FY2021A	FY2022 Guidance**
New Orders	(€ bn)	14.3	ca. 15
Revenues	(€ bn)	14.1	14.5-15
EBITA	(€ mln)	1,123	1,180-1,220*
FOCF	(€ mln)	209	ca. 500
Group Net Debt	(€ bn)	3.1	ca. 3.1

* Including COVID-related costs previously included among non recurring costs below EBITA

**Excluding the impacts of geopolitical and public health situation on the supply-chain and global economy Assuming €/USD exchange rate at 1.18 and €/GBP exchange rate at 0.90

Significant recent developments

Following the offensive launched by the Russian government against Ukraine, profound changes in the context of the world's geopolitical and economic equilibrium are looming up.

On the one hand, the process of integration and creation of a European Defence and Security and, at the same time, the increase in defence spending in EU and neighboring countries could be accelerated, creating opportunities for companies operating in the sector. On the other hand, Ukraine and Russia currently represent high-risk counterparts, partly due - in the case of Russia - to the numerous logistical and economic sanctions imposed by the European Union, other countries and other international bodies.

Leonardo currently has no significant exposure to these two countries. Specifically, the balance sheet exposure at 31 December 2021 to Ukraine is zero and the net balance sheet exposure to operators directly affected by the sanction regime against Russia is approximately €mil. 30. The order backlog with Russia is about €mil. 25, while the backlog with Ukraine is about €mil. 8.

SECTOR PERFORMANCE

2020 (Euro million)	New Orders	Order Backlog	Revenues	EBITA	ROS
Helicopters	4,494	12,377	3,972	383	9.6%
Defence Electronics & Security	7,374	13,449	6,525	537	8.2%
Aeronautics	2,552	10,696	3,393	200	5.9%
Aircraft (*)	2,031		2,634	355	13.5%
Aerostructures (*)	581		819	(86)	(10.5%)
GIE ATR	-		-	(69)	n.a.
Space	-	-	-	23	n.a.
Other activities	103	87	407	(205)	(50.4%)
Eliminations	(769)	(1,093)	(887)	-	n.a.
Total	13,754	35,516	13,410	938	7.0%

2021 (Euro million)	New Orders	Order Backlog	Revenues	EBITA	ROS
Helicopters	4,370	12,377	4,157	406	9.8%
Defence Electronics & Security	7,579	14,237	6,944	703	10.1%
Aeronautics	2,945	10,033	3,622	205	5.7%
Aircraft (*)	2,668		3,268	432	13.2%
Aerostructures (*)	365		442	(203)	(45.9%)
GIE ATR	-		-	(24)	n.a.
Space	-	-	-	62	n.a.
Other activities	102	48	377	(253)	(67.1%)
Eliminations	(689)	(1,161)	(965)	-	n.a.
Total	14,307	35,534	14,135	1,123	7.9%

Change %		New Orders	Order Backlog	Revenues	EBITA	ROS
Helicopters		(2.8%)	0.0%	4.7%	6.0%	0.2 p.p.
Defence Electronics & Security		2.8%	5.9%	6.4%	30.9%	1.9 p.p.
Aeronautics		15.4%	(6.2%)	6.7%	2.5%	(0.2) p.p.
	Aircraft (*)	31.4%		24.1%	21.7%	(0.3 p.p.)
	Aerostructures (*)	(37.2%)		(46.0%)	(136.0%)	(35.4 p.p.)
	GIE ATR	n.a.		n.a.	65.2%	n.a.
Space		n.a.	n.a.	n.a.	169.6%	n.a.
Other activities		(1.0%)	(44.8%)	(7.4%)	(23.4%)	(16.7) p.p.
Eliminations		10.4%	(6.2%)	(8.8%)	n.a.	n.a.
Total		4.0%	0.1%	5.4%	19.7%	0.9 p.p.

*ante Sector eliminations

Helicopters

Below is the performance of the sector during the last 4 years:

The performance in 2021 confirmed the growth trend in Revenues and EBITA, although on a scene that was still marked by the pandemic in the civil and commercial aviation business segments, which showed signs of recovery in terms of acquisitions. 128 new helicopters were delivered in 2021 (111 in 2020).

New Orders: They remained substantially in line, with the increase in new orders gained in the civil and commercial aviation sector offsetting a lower contribution given by those gained from government authorities, which was particularly significant during the comparative period. Among the main acquisitions for the period we must note:

• the second and third orders under the TH-73A (AW119) programme for the US Navy for a total of 72 helicopters;
• the second additional agreement for the completion of development activities and the supply of 4 series helicopters under the NEES (New Exploration and Escort Helicopter - Nuovo Elicottero da Esplorazione e Scorta) programme for the Italian Army;
• the contracts concerning the supply of 9 AW139 helicopters for the Saudi Royal Court in Saudi Arabia and of 16 AW139 helicopters for The Helicopter Company, a company established by the Public Investment Fund (PIF) as the first and only operator authorised for commercial flights in the Kingdom;
• contracts relating to the supply of 8 AW139 helicopters to the Finance Police in Italy;
• the contract signed within the scope of the Government-to-Government (G2G) agreement between Italy and Austria, for the supply of 18 AW169M LUHs (Light Utility Helicopters) intended for the Austrian Ministry of Defence;
• additional orders relating to the AW169 LUH programme for the Italian Carabinieri Corps and Army for a total of 17 helicopters;
• the contract relating to the 5-year extension of the WIST (Wildcat Integrated Support and Training) programme for the provision of logistic support and training services for the fleet of AW159 Wildcat helicopters to the UK Ministry of Defence

Revenues: they were on the rise due to increased work on orders gained from government authorities, in particular under the NH90 and TH-73A programmes for Qatar and the US Navy, as well as on the AW189/AW149 lines, which offset a slight decline in revenues expected in the civil and commercial aviation business segment, and specifically on the AW139 line.

EBITA: the increase was commensurate with higher revenue volumes, while profitability remained substantially in line with 2020.

Outlook: in 2022, revenue volumes are expected to grow, driven by the development of backlog activities on military/governmental programmes and a good flow of new orders. Profitability remained

at good levels, also thanks to the initiatives to optimise industrial processes and improve the competitiveness of the main products, even though it was affected by a production mix characterised by growing activities on contracts acquired as prime contractor

Defence Electronics & Security

Below is the performance of the sector during the last 4 years:

The 2021 results were marked by an excellent commercial performance, confirming the good positioning of the Sector's products and solutions, with revenues and profitability growing in all business areas, both for the European component and at Leonardo DRS.

2020 (Euro million)	New Orders	Revenues	EBITA	ROS %
Electronics – Europe	4,710	4,147	360	8.7%
Leonardo DRS	2,674	2,414	177	7.3%
Eliminations	(10)	(36)	-	n.a.
Total	7,374	6,525	537	8.2%
2021 (Euro million)	New Orders	Revenues	EBITA	ROS %
Electronics – Europe	5,392	4,519	485	10.7%
Leonardo DRS	2,194	2,434	218	9.0%
Eliminations	(7)	(9)	-	n.a.

Change %	New Orders	Revenues	EBITA	ROS %
Electronics – Europe	14.4%	9.0%	34.7%	2.0 p.p.
Leonardo DRS	(18.0%)	0.8%	23.2%	1.7 p.p.
Eliminations	30.0%	75.0%	n.a.	n.a.
Total	2.8%	6.4%	30.9%	1,9 p.p.

Average €/USD exchange rate: 1,1827 (2021) e 1,1422 (2020)

New Orders: they showed an increase compared to 2020, which had benefited from substantial acquisitions during the last quarter, with particular regard to Electronics in Europe. Among the major orders that characterised the excellent commercial performance were the supply of equipment for two

U212 Near Future Submarines (NFSs), which will join the Italian Navy's fleet as from 2027 and, within the scope of the broader Quadriga programme, the order for the supply of radars and air protection systems to equip the 38 Typhoon aircraft intended to replace the Tranche 1 planes that are currently provided to the German Ministry of Defence.

As part of the broader VBM plus programme, the Group gained an order to upgrade the firing system and supply a new digital intercom and a completely updated CIS system, as well as of the new Command and Control C2D/N EVO system.

In the Cyber field, there was an order for Phase 4 of the SICOTE (Sistema di Controllo del Territorio, Territory Control System) programme, which focuses on innovative solutions to support the institutional operations of the Carabinieri Corps and the Defence General Staff.

In the field of Automation, we must note the order to strengthen the logistics management of baggage handling systems, which will be equipped with security technology approved by the European Civil Aviation Conference (ECAC) for 10 Spanish airports.

Finally, as regards Leonardo DRS, additional orders were gained for the production of modular hardware systems known as Mounted Family of Computer Systems (MFoCS) to be installed on ground combat vehicles intended to support manoeuvrability and logistics for the US Army, as were the M-SHORAD (Maneuver-Short Range Air Defense) order for the initial supply of a Mission Equipment Package, which will be integrated into heavy Stryker-type vehicles and which will enable the neutralisation of low-altitude aerial threats, including remotely-controlled drones.

Revenues: showed an increase both in the European component, which had been affected by the application of measures to contain COVID-19 infection during the previous year, and at Leonardo DRS, excluding the unfavourable effect of the USD/€ exchange rate.

EBITA: there was an increase due to higher volumes and improved profitability compared to the values posted in 2020, which had been affected, particularly with regard to the European component, by the effects of the application of measures to contain COVID-19 infection. Leonardo DRS recorded results that showed marked growth, thus confirming the upward trend in profitability due to the entry into production of certain development programmes.

Outlook: in 2022, a further recovery is expected compared to the first period of pandemic, with revenue volumes growing and an improvement in profitability as a result of the continued focus on programme execution and cost containment, although with a mix of activities that are still characterised by programmes under development

	New Orders	Revenues	EBITA	ROS %
Leonardo DRS (\$ mln) – 2020	3,054	2,757	202	7.3%
Leonardo DRS (\$ mln) – 2021	2,595	2,879	258	9.0%

Aeronautics

Below is the performance of the sector during the last 4 years:

The Sector showed an excellent performance in the military business area, while also recording the first signs of recovery in the regional transport sector, with the GIE-ATR consortium that recognised an increase in terms of deliveries and orders. The Aerostructures Division continued working at lower capacity due to the slow recovery of the civil aviation business of major customers (Boeing and Airbus).

2020 (Euro million)	New Orders	Revenues	EBITA	ROS %
Aircraft	2,031	2,634	355	13.5%
Aerostructures	581	819	(86)	(10.5%)
GIE ATR	-	-	(69)	n.a.
Eliminations	(60)	(60)	-	n.a.
Total	2,552	3,393	200	5.9%

2021 (Euro million)	New Orders	Revenues	EBITA	ROS %
Aircraft	2,668	3,268	432	13.2%
Aerostructures	365	442	(203)	(45.9%)
GIE ATR	-	-	(24)	n.a.
Eliminations	(88)	(88)	-	n.a.
Total	2,945	3,622	205	5.7%

Change %	New Orders	Revenues	EBITA	ROS %
Aircraft	31.4%	24.1%	21.7%	(0.3) p.p.
Aerostructures	(37.2%)	(46.0%)	(136.0%)	(35.4) p.p.
GIE ATR	n.a.	n.a.	65.2%	n.a.
Eliminations	(46.7%)	(46.7%)	n.a.	n.a.
Total	15.4%	6.7%	2.5%	(0.2) p.p.

Aircraft

From a production point of view for military programmes, 43 wings and 12 final assemblies were delivered to Lockheed Martin under the F-35 programme (37 wings and 7 final assemblies delivered in 2020). Furthermore, we must note the first 2 deliveries of Typhoon aircraft to Kuwait.

New Orders: acquired substantial export orders for 16 M-346 aircraft, in addition to further orders on the JSF (Joint Strike Fighter) and logistic support programmes for Typhoon aircraft

Revenues: higher production volumes in the Division, specifically on the line of M-346 trainers and the Kuwait programme

EBITA: it benefitted from higher volumes, confirming the high level of profitability

Outlook: for the Division, revenue volumes are expected to increase further thanks to the growth of the activities on the proprietary platforms (M-345, M-346 and C-27J), while strong contributions are confirmed from the F35 and EFA Kuwait programmes (9 additional deliveries are expected in addition to the first 2 in 2021)

Aerostructures

From a production point of view, 28 fuselage sections and 16 stabilisers were delivered under the B787 programme (105 fuselages and 72 stabilisers were delivered in 2020) and 15 fuselages were delivered under the ATR programme (26 in 2020).

New Orders: The Division was affected by the lack of new orders from customers Boeing (B787 programme) and the GIE consortium, receiving orders only from customer Airbus on the A220 and A321 programmes, which confirmed the growth trend, while demand for B767 remained stable.

Revenues: a decline in the Division, which was affected by a reduction in the production rates of the B787 and ATR programmes.

EBITA: expected reduction in business volumes and the consequence of the production sites working at lower capacity led to the Aerostructures Division recording a sharply lower result compared to 2020. Outlook: for the Civil sector, the trend in 2022 will still be heavily conditioned by the effects of the pandemic, with repercussions on production activities associated with the drop in customer demand. In particular, in the Aerostructures Division, a slight increase is expected in the volumes for Airbus only. A recovery trend is confirmed for the GIE consortium in relation to the ATR programme.

GIE-ATR

EBITA: the consortium recorded improved results due to cost reduction measures and an increase in deliveries (31 deliveries in 2021 compared to 10 in 2020)

Space

Below is the performance on the sector during the last 4 years:

In 2021, the sector recorded values, in terms of key indicators, which were well above those of 2020, the year in which the effects of the pandemic had heavily affected its commercial performance, production volumes and profitability, specifically in the manufacturing segment.

The results of operations showed a sharp increase. In the manufacturing segment, thanks to revenues going back to pre-pandemic levels, a marked increase in profitability that was also due to a greater reduction of extra costs on telecommunications programmes, and the excellent performance of the Observation, Exploration and Navigation domain and in particular of TAS Italia.

There was also progress with the satellite services business segment, which recorded a solid performance this year too and extraordinary volumes of orders that was such as to guarantee a substantial order backlog to support volumes in the years to come.

To the aforesaid industrial performance must be added the significant economic benefit recorded on the Italian component of the manufacturing business arising from the effects of the realignment of the tax value of goodwill, in accordance with the concession schemes provided under the Decree on "Urgent measures to support and relaunch economy", as converted with amendments into Law 126 of 13 October 2020 and the subsequent Budget Law 2021.

Outlook: 2022 is expected to be characterised by growing business volumes supported by a robust backlog and improving operating profitability, especially on the manufacturing segment, which has been steadily recovering, albeit in a fiercely competitive context in terms of prices, timing of execution and innovation, particularly in the telecommunications domain. Solid fundamentals are confirmed for the satellite services segment in Europe and Latin America at commercial and operating level.

Industrial transactions

• Acquisition of GEM Elettronica. On 27 January Leonardo signed a contract with GEM Investment S.r.l. and two minority quotaholders in order to acquire 30% of GEM Elettronica S.r.l. ("GEM") for a consideration of €mil. 5. The company operates in the field of short- and medium-range sensors, navigation radar and coastal surveillance, which are a business that is highly complementary to the Group's products. Under a call / put option scheme, Leonardo will also be entitled to become the majority shareholder (from 65% to 100%) within 3 to 6 years. The closing of the transaction took place on 14 April 2021
• Acquisition of DPI S.r.l.. In February, Leonardo acquired a quota of 63% in DPI, a company specialising in the design, production and sale of personal and environmental protective equipment, through its subsidiary Larimart. As a result of this transaction, Leonardo's operations have been strengthened in the sector of technologies for personal protection and key infrastructure, thus reinforcing its footprint in the development of products and solutions for the security, emergency and

Defence markets. In April 2021, Larimart acquired an additional quota of 15% and paid a total amount of €mil. 6

• Cooperation agreement with CAE. On 29 March 2021 Leonardo and Cae Aviation Training B.V. (CAE) established a company named "Leonardo CAE Advanced Jet Training", in order to provide support services to the operations of the International Flight Training School (IFTS), ranging from technical and logistics support to M-346 aircraft and Ground-Based Training Systems to the operation of IFTS infrastructures
• Acquisition of 25.1% of Hensoldt AG. On 24 April 2021 Leonardo entered into an agreement with Square Lux Holding II S.à r.l., a company controlled by funds advised by Kohlberg Kravis & Roberts & Co. L.P., to purchase a 25.1% stake in Hensoldt AG. The company is the leading German player in the field of sensor solutions for defence and security applications, as confirmed by the recent important contracts acquired (e.g. EFA, Pegasus), and it already had a consolidated collaboration relationship with Leonardo in significant programmes such as EFA, MALE, IFF. The completion of the transaction, which entailed an outlay of about €mil. 606 (net of transaction costs), took place on 3 January 2022
• Acquisition of Alea. On 8 June 2021 Leonardo signed a preliminary agreement for the acquisition of 70% of the share capital of Alea, a company specializing in mission critical communication software for multimedia solutions compliant with international standards on LTE/5G broadband networks. Leonardo, thanks to this transaction, strengthens its offering portfolio in professional communications, in order to guarantee new features and advanced performances in support of emergency management, public safety, companies, critical infrastructures and transports. The closing of the transaction took place on 3 August 2021, with a total outlay of about €mil. 3
• Acquisition of Ascendant Engineering Solutions. On 23 July 2021 Leonardo DRS announced that it had acquired Ascendant Engineering Solutions (AES), a leading company in the design, development and manufacturing of high-performance multi-sensor gimbal systems for the growing market of Group 1, 2 and 3 UAS across U.S. military services. This acquisition will enable Leonardo DRS to integrate its own state-of-the-art electro-optical and infrared components and systems with the AES advanced gimbals to offer solutions that can address the fast-growing market for lightweight military platforms, including small unmanned aerial systems (UAS)
• Merger by incorporation of Vitrociset. On 30 September 2021 the Board of Directors of Leonardo approved the merger of Vitrociset S.p.A. by incorporation into the Company. The transaction became effective from 1 January 2022 - including for accounting and tax purposes – and entailed the completion of the integration process between the two companies that had been started in 2019 with the acquisition of the entire capital of Vitrociset

On 24 March 2021 Leonardo US Holding, Inc. postponed the initial public offering ("IPO") of a minority shareholding of Leonardo DRS, since, notwithstanding investor interest within the price range during the course of the roadshow, adverse market conditions did not allow an adequate valuation of the company. Leonardo DRS remains a core part of Leonardo's business portfolio and the IPO will potentially be revisited when market conditions are more favourable and a successful IPO at an appropriate valuation for this strategic business can be achieved.

In addition to these industrial transactions, there are numerous joint venture and partnership agreements, in line with the principles of the "Be Tomorrow - Leonardo 2030" Strategic Plan

Financial transactions

During the 2021 financial year Leonardo completed major capital market transactions. In particular:

• in January it used an amount of €mil. 200 of the loan taken out with the European Investment Bank (EIB) in December 2020, aimed at supporting some investment projects envisaged in the Group's business plan;
• again in January it proceeded with the early cancellation, which had been requested at the end of December 2020, of the remaining amount of about €mil. 250 of the Term Loan taken out with a pool of international banks during the Covid-19 emergency period in May 2020, but never used for this purpose;
• finally, again in January, it repaid the remaining portion (€mil. 739) of the bond issue for an initial amount of €mil. 950, which had been launched under the EMTN Programme in 2013 and which had reached its natural expiry;
• in October 2021 it entered, with a pool of international and national banks, into an ESG-linked Revolving Credit Facility agreement for an amount of €bil. 2.4, structured into a 5-year term tranche of €bil. 1.8 and a 3-year term tranche of €mil. 600. The new credit facility replaces the two existing Revolving Credit Facilities – amounting to €mil. 1,800 and €mil. 1,250 –, which have been cancelled at the same time, thus reducing the overall cost of the borrowing available to meet the Group's financial requirements and extending its term until 2026. The ESG-linked Revolving Credit Facility is subject to the same financial covenants as are already provided for in the other agreements signed by Leonardo.

In line with the sustainability strategy of Leonardo, the new credit facility is linked for the first time to specific ESG indicators, including the reduction of CO2 emissions through eco-efficiency of industrial processes and the promotion of female employment with degrees in STEM education. The aforesaid ESG indicators also contribute to the achievement of the Sustainable Development Goals (SDGs), which are behind about 50% of the Group's investments. The achievement of ESGlinked targets will trigger an adjustment to the margin applied to the credit facility;

• finally, in December it entered, with a pool of national and international banks, into a Term Loan ESG-linked credit facility for an amount of €mil. 600, with a term of 5 years and expiring at the beginning of 2027, aimed at repaying a bond maturing in January 2022. The credit facility is linked to specific ESG indicators, which are already included in the aforesaid ESG-linked Revolving Credit Facility signed in October; in this case too, the achievement of the ESG-linked targets will trigger an adjustment to the margin applied to the credit facility

Moreover, in June the EMTN (Euro Medium Term Note) programme was renewed for further 12 months, which regulates possible bond issues on the European market for a maximum nominal value of €bil. 4. At the date of this report, the Programme is used for a total of €bil. 2.2.

After the end of the 2021 financial year, and more precisely in January 2022, the bond issued for €mil. 556 in December 2009 was repaid, having reached its natural expiry. It should also be noted that in January 2022 Leonardo took steps to pay an amount of €mil. 606 (net of transaction costs) for the acquisition of a quota in Hensoldt AG, as detailed in the section on Industrial Transactions.

In addition to being the issuer of all the bonds in Euros placed on the market under the EMTN programme, Leonardo acts as a guarantor for the bond issues launched by Leonardo US Holding Inc. on the US market. The Group's issues are governed by rules with standard legal clauses for these types of corporate transactions on institutional markets that do not require any undertaking with regard

to compliance with specific financial parameters (financial covenants) but they do require negative pledge and cross-default clauses. Based on negative pledge clauses, Group issuers, Leonardo and their "Material Subsidiaries" (companies in which Leonardo owns more than 50% of the share capital and the gross revenues and total assets of which represent at least 10% of consolidated gross revenues and total assets) are expressly prohibited from pledging collateral security or other obligations to secure their debt in the form of bonds or listed financial instruments or financial instruments that qualify for listing, unless these guarantees are extended to all bondholders. Exceptions to this prohibition are securitisation and, as from July 2006, the establishment of assets for the use indicated in Article 2447 bis et seq. of the Italian Civil Code. On the contrary, the cross-default clauses give the bondholders the right to request early redemption of the bonds in their possession in the event of default by the Group issuers and/or Leonardo and/or any "Material Subsidiary" that results in a failure to make payment beyond pre-set limits.

On the other hand, it should be noted that financial covenants are included in the abovementioned ESG-linked Revolving Credit Facility and the Term Loan ESG-linked entered into in 2021, and require Leonardo to comply with two Financial ratios (the ratio of Group net debt - excluding payables to the joint ventures MBDA and Thales Alenia Space and lease liabilities/EBITDA including amortisation of the right of use of no more than 3.75 and an EBITDA, including amortisation of the right of use/ net interest ratio of no less than 3.25) which are tested on an annual basis on year-end consolidated data and which had been complied with in full at 31 December 2021. These covenants are also included in the loan agreement with CDP for € mil. 100 and in the Term Loan of €mil. 500 (entered into in 2018); furthermore, in accordance with contractual provisions providing for this option, these covenants have also been extended to all the EIB loans in place (used for a total amount of €mil. 546 at 31 December 2021), as well as to certain loans granted in past years to Leonardo DRS by US banks.

In relation to this Annual Financial Report, there was full compliance with the covenants (the two ratios are 1.2 and 11.1, respectively).

Outstanding bond issues are given a medium/long-term financial credit rating by the international rating agencies: Moody's Investors Service (Moody's), Standard & Poor's and Fitch. In view of the possibility that Leonardo's cash generation may improve in the following 12-24 months, in January 2022 Fitch improved the Leonardo' outlook from negative to stable. On the reporting date, Leonardo's credit ratings, compared to those preceding the last change, were as follows:

Agency	Last update	Previous		Updated
		Credit Rating	Outlook	Credit Rating	Outlook
Moody's	October 2018	Ba1	positive	Ba1	stable
Standard&Poor's Fitch	April 2020 January 2022	BB+ BBB-	positive negative	BB+ BBB-	stable stable

With regard to the impact of positive or negative changes in Leonardo's credit ratings, there are no default clauses linked to the credit ratings. The only possible effects deriving from further changes, if any, to the credit ratings refer to higher or lower finance costs on certain payables of the Group, especially with reference to the ESG-linked Revolving Credit Facility, the Term Loan ESG-linked and to the Term Loan (entered into in 2018) as provided for in the related agreements. Finally, for the

sake of completeness, it should be noted that the Funding Agreement between MBDA and its shareholders provides, inter alia, that any downgrade of the rating assigned to the shareholders will result in a gradual increase in interest rates. Additionally, under a pre-set rating limit (for at least two out of three rating agencies: BB- from Standards & Poor's, BB- from Fitch and Ba3 from Moody's) MBDA is entitled to determine the applicable margin each time. Finally, the agreement provides for rating limits the achievement of which allows MBDA to request the issue of a bank guarantee from its shareholders.

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The officer in charge of the company's financial reporting, Alessandra Genco, hereby declares, in accordance with the provisions of Article 154-bis, paragraph 2, of the Consolidated Law on Finance, that the accounting information included in this press release corresponds to the accounting records, books and supporting documentation.

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Shareholders' Meeting

The Board of Directors established the dates of the Ordinary Shareholders' Meeting, for 23 and 31 May 2022 (in first and second call respectively); the Board will resolve about the convocation at a next meeting.

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At today's meeting the Board of Directors also approved the Report on Corporate Governance and Shareholder Structure, to be published together with the Integrated Report.

CONSOLIDATED INCOME STATEMENT
€mln.	2020	2021	Var. YoY	4Q 2020	4Q 2021	Var. YoY
Revenues	13,410	14,135	725	4,385	4,571	186
Purchases and personnel expense	(11,973)	(12,575)	(602)	(3,838)	(3,956)	(118)
Other net operating income/(expense)	(2)	(58)	(56)	(16)	8	24
Equity-accounted strategic JVs	23	124	101	61	82	21
Amortisation and depreciation	(520)	(503)	17	(151)	(189)	(38)
EBITA	938	1,123	185	441	516	75
ROS	7.0%	7.9%	1.0 p.p.	10.1%	11.3%	1.2 p.p.
Non recurring income (expense)	(333)	(101)	232	(273)	(56)	217
Restructuring costs	(61)	(89)	(28)	(40)	12	52
Amortisation of intangible assets acquired as part of Business combinations	(27)	(22)	5	(6)	(6)	-
EBIT	517	911	394	122	466	344
EBIT Margin	3.9%	6,4%	2.5 p.p.	2.8%	10.2%	7.4 p.p.
Net financial income/ (expense)	(264)	(158)	106	(57)	(26)	31
Income taxes	(12)	(167)	(155)	41	(83)	(124)
Net result before extraordinary transactions	241	587	346	106	358	252
Net result related to discontinued operations and extraordinary transactions	2	-	(2)	-	-	-
Net result	243	587	344	106	358	252
attributable to the owners of the parent	241	585	344	105	357	252
attributable to non-controlling interests	2	2	(1)	1	-	(1)
Earning per share (Euro)
Basic e diluted	0.419	1.019	0.598	0.182	0.621	0.439
Earning per share of continuing operation (Euro)
Basic e diluted	0.416	1.019	0.601	0.183	0.621	0.438
Earning per share of discontinuing operation (Euro)
Basic e diluted	0.003	-	(0.003)	(0.001)	-	0.001

CONSOLIDATED BALANCE SHEET
€mil.	31.12.2020	31.12.2021
Non-current assets	11,883	12,810
Non-current liabilities	(1,996)	(2,216)
Capital assets	9,887	10,594
Inventories	1,164	1,292
Trade receivables	3,033	3,203
Trade payables	(3,619)	(3,372)
Working capital	578	1,123
Provisions for short-term risks and charges	(1,318)	(1,111)
Other net current assets (liabilities)	(598)	(1,046)
Net working capital	(1,338)	(1,034)
Net invested capital	8,549	9,560
Equity attributable to the Owners of the Parent	5,267	6,428
Equity attributable to non-controlling interests	11	27
Equity	5,278	6,455
Group Net Debt	3,318	3,122
Net (assets)/liabilities held for sale	(47)	(17)

CONSOLIDATED CASH FLOW STATEMENT
€mln.	2020	2021
Cash flows used in operating activities	275	742
Dividends received	58	63
Cash flow from ordinary investing activities	(293)	(596)
Free operating cash flow (FOCF)	40	209
Strategic investments	(200)	(19)
Change in other investing activities	(3)	11
Net change in loans and borrowings	541	30
Dividends paid	(81)	0
Net increase/(decrease) in cash and cash equivalents	297	231
Cash and cash equivalents at 1 January	1,962	2,213
Exchange rate gain/losses and other movements	(46)	35
Cash and cash equivalents at 31 December	2,213	2,479

CONSOLIDATED FINANCIAL POSITION
€mil.	31.12.2020	31.12.2021
Bonds	3,220	2,481
Bank debt	896	1,648
Cash and cash equivalents	(2,213)	(2,479)
Net bank debt and bonds	1,903	1,650
Current loans and receivables from related parties	(149)	(45)
Other current loans and receivables	(18)	(16)
Current loans and receivables and securities	(167)	(61)
Hedging derivatives in respect of debt items	(6)	(8)
Other related-party loans and borrowings	30	30
Leasing liabilities	881	856
Related-party leasing liabilities	525	538
Other loans and borrowings	152	117
Group net debt	3,318	3,122

EARNINGS PER SHARE
	2020	2021	Var. YoY
Average shares outstanding during the reporting period (in thousands)	575,076	575,229	153
Earnings/(losses) for the period (excluding non-controlling interests) (€ million)	241	586	346
Earnings/(losses) - continuing operations (excluding non-controlling interests) (€ million)	239	586	348
Earnings/(losses) - discontinued operations (excluding non-controlling interests) (€ million)	2	0	(2)
BASIC AND DILUTED EPS (EUR)	0.419	1.019	0.598
BASIC AND DILUTED EPS from continuing operations	0.416	1.019	0.601
BASIC AND DILUTED EPS from discontinuing operations	0.003	0.000	(0.003)

2020 (Euro million)	Helicopters	Defence Electronics & Security	Aeronautics	Space	Other activities	Eliminations	Total
New orders	4,494	7,374	2,552	-	103	(769)	13,754
Order backlog 31.12.2020	12,377	13,449	10,696	-	87	(1,093)	35,516
Revenues	3,972	6,525	3,393	-	407	(887)	13,410
EBITA	383	537	200	23	(205)	-	938
EBITA margin	9.6%	8.2%	5.9%	n.a.	(50.4%)	n.a.	7.0%
EBIT	347	448	(90)	23	(211)	-	517
Amortisation	81	152	126	-	74	-	433
Investments	176	219	(23)	-	93	-	465
Workforce (no.) 31.12.2020	12,326	24,504	11,278	-	1,774	-	49,882

2021 (Euro million)	Helicopters	Defence Electronics & Security	Aeronautics	Space	Other activities	Eliminations	Total
New orders	4,370	7,577	2,945	-	102	(689)	14,305
Order backlog	12,377	14,237	10,033	-	48	(1,161)	35,534
Revenues	4,157	6,944	3,622	-	377	(965)	14,135
EBITA	406	703	205	62	(253)	-	1,123
EBITA margin	9.8%	10.1%	5.7%	n.a.	(67.1%)	n.a.	7.9%
EBIT	352	647	108	62	(258)	-	911
Amortisation	86	168	65	-	78	-	397
Investments	234	261	86	-	96	(1)	676
Workforce (no.)	12,392	24,871	11,342	-	1,808	-	50,413

4Q 2020 (Euro million)	Helicopters	Defence Electronics & Security	Aeronautics	Space	Other activities	Eliminations	Total
New Orders	1,340	2,875	1,380	-	14	(365)	5,244
Revenues	1,330	2,107	1,108	-	110	(270)	4,385
EBITA	164	220	105	24	(72)	-	441
EBITA margin	12.3%	10.4%	9.5%	n.a.	(65.5%)	n.a.	10.1%
EBIT	155	189	(174)	24	(72)	-	122
Amortisation and depreciation	22	52	27	-	20	-	121
Investments	84	87	(93)	-	53	-	131

4Q 2021 (Euro million)	Helicopters	Defence Electronics & Security	Aeronautics	Space	Other activities	Eliminations	Total
New Orders	1,979	2,120	1,037	-	4	(101)	5,039
Revenues	1,438	2,207	1,130	-	92	(296)	4,571
EBITA	183	278	114	25	(84)	-	516
EBITA margin	12.7%	12.6%	10.1%	n.a.	(91.3%)	n.a.	11.3%
EBIT	144	253	129	25	(85)	-	466
Amortisation and depreciation	26	60	16	-	21	1	123
Investments	91	111	23	-	61	1	285

Leonardo, a global high-technology company, is among the top world players in Aerospace, Defense and Security and Italy's main industrial company. Organized into five business divisions, Leonardo has a significant industrial presence in Italy, the United Kingdom, Poland and the USA, where it also operates through subsidiaries that include Leonardo DRS (defense electronics), and joint ventures and partnerships: ATR, MBDA, Telespazio, Thales Alenia Space and Avio. Leonardo competes in the most important international markets by leveraging its areas of technological and product leadership (Helicopters, Aircraft, Aerostructures, Electronics, Cyber Security and Space). Listed on the Milan Stock Exchange (LDO), in 2020 Leonardo recorded consolidated revenues of €13.4 billion and invested €1.6 billion in Research and Development. The company has been part of the Dow Jones Sustainability Indices (DJSI) since 2010 and has been confirmed among the global sustainability leaders in 2021. Leonardo is also included in the MIB ESG index.

Press Office Ph +39 0632473313 leonardopressoffice@leonardo.com

Investor Relations Ph +39 0632473512 ir@leonardo.com

leonardo.com

Fine Comunicato n.0131-18	Numero di Pagine: 26
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