Leonardo S.p.A. — Investor Presentation 2018

Nov 8, 2018

3Q/9M 2018 Results Presentation

Alessandro Profumo Chief Executive Officer Alessandra Genco Chief Financial Officer

Rome, 8 November 2018

Investor Relations & Credit Rating Agencies

Executing the Industrial Plan

Chief Executive Officer

3Q/9M 2018 Results & Outlook

Chief Financial Officer

Steps forward in the execution of the Industrial Plan

FY2018 guidance confirmed

• Core divisions in line with our expectations
• Lower contribution from JVs

Executing our Industrial Plan aimed at long term sustainable growth

• Continued commercial momentum (NH90 Qatar, MH-139 US and AW139 China)
• Strong backlog to support sustainable long-term revenue growth
• Helicopters momentum confirmed
• Leonardo DRS growth underpinned by strong US market
• Solid contribution from Defence Electronics and Aeronautics
• Relentless focus on cost control
• Leonardo reconfirmed in the Dow Jones Sustainability Indices and joined the UN Global Compact

Doing the right things for the long-term

Strong backlog supporting revenue growth

ORDER BACKLOG as at 30 September 2018 = ca. € 35 bn

ORDER BACKLOG € 11.8 bn 33% of total

HELICOPTERS AERONAUTICS ELECTRONICS, DEFENCE AND SECURITY SYSTEMS

ORDER BACKLOG € 11.5 bn 33% of total

ORDER BACKLOG € 12.0 bn 34% of total

• Current Backlog covering almost 3 years of equivalent production

• Well balanced across all businesses

• Large orders providing long term visibility

• MH-139 Helicopter in US and DRS «soft backlog» not included

Outstanding achievements in military and civil helicopters

Continued commercial momentum

• € 3 bn NH90 Qatar contract booked in August (Q3)

• 28 NH90 (16 for land operations and 12 for naval missions), Customer Support & Training and Infrastructure
• Leonardo prime contractor
• Deliveries from 2022 to 2025
• U.S. Air Force selected MH-139 in September to replace UH-1N fleet
• Up to \$ 1.4 bn Indefinite Delivery Indefinite Quantity (IDIQ) contract for up to 84 helicopters, training devices and associated support equipment
• Initial operational capability by 2021
• Sino US ordered 15 AW139 for more than € 150 mln Heads of agreement for additional 160 helicopters for more than € 1 bn Orders and deliveries expected over the next 5 years Agreement signed on 5 th of November

Helicopters momentum confirmed

Well positioned for long term growth of the business

• Increasing order intake supported by military export campaigns
• Slight turnaround in civil market

Leader in 3.2-10 tonnes range

1H 2018 CIVIL MARKET VALUE*

On track to deliver improvement in profitability

*Latest data available refers to 1H 2018

9M 2018 DELIVERIES

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© Leonardo - Società per azioni

Leonardo DRS strong progress supported by US market

9M 2018 KEY DATA

• US Defence spending supporting long term growth
• Programmes awarded aligned within Pentagon's modernisation priorities
• Book to Bill at 1.3 confirms sustainable growth

• Strong «soft backlog» creates long term visibility

  • Large programmes awarded only partially funded and booked
  • Total opportunities up to 4-5x current funded backlog

• Revenue growth reflects ability to scale production to support new programme awards

• Improving underlying profitability, in the nine months, up 13% excluding TX bid costs
• Transition from development to full-rate production programmes supports long term profitability growth
• Targeting double digit profitability in the Industrial Plan horizon

Delivering results on cost control initiatives

• Over 60% of annualised savings identified delivered in the 9M
• Potential upside from further actions, mainly cost savings in staff functions
• Addressed areas:
• Efficiency increase in Manufacturing and Engineering
• Off-load optimisation
• Product Should Cost/Design to Cost
• Logistics and Supply Chain optimization

Early retirement plan signed with Italian Unions

LEAP 2020 Programme to optimise supply chain

Doing the right things for the long term

Sustainability as a base of the Industrial Plan

Membership of the United Nations Global Compact

For the 9 th year in a row in the Dow Jones Sustainability Indices

The 1 st company among the top 10 global players in the AD&S to obtain certification (Anti Bribery Management Systems Certification)

Fully focused on execution of the Industrial Plan

Sharper commercial focus (+20% YoY Order Intake)

Increasing commercial momentum

Strong backlog to support sustainable top-line growth (€ 35 bn as at end of September)

Solid financial strategy

Executing the Industrial Plan

Chief Executive Officer

3Q/9M 2018 Results & Outlook

Chief Financial Officer

3Q/9M 2018 Highlights

Good 9M 2018 performance

Orders at € 9.4 bn, up 20% in constant currency, driven by NH90 Qatar

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• Revenues at € 8.2 bn, up 4% in constant currency
• EBITA at € 632 mln, RoS at 7.7%
• Net Result at € 263 mln
• FOCF at € (800) mln, including NH90 Qatar downpayment
• Net Debt at € 3.5 bn

FY2018 Guidance confirmed, as revised upwards in July

Order intake

Strong performance, up 20%, mainly driven by NH90 Qatar

Revenues

Growth and positive momentum in Helicopters & DRS

*9M 2017 IFRS15 restated

EBITA and Profitability

Solid performance across all businesses; lower contribution from ATR

Net Result impacted by early retirement agreement

• Lower net financial expenses
• Net Result benefitting from the release of part of risk provision set aside against guarantees given upon disposal of Ansaldo Energia

2018 Guidance confirmed

		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

THANK YOU FOR YOUR ATTENTION

SECTOR RESULTS

Helicopters

Well positioned to capture growth opportunities

				3Q		9M
	$\epsilon$ mln	FY2017 Restated	2017 Restated	2018	$\%$ Change	2017 Restated	2018	% Change
Orders		3,153	568	3,356	490.8%	1,710	4,685	174.0%
Revenues		3,438	659	826	25.3%	2,413	2,656	10.1%
EBITA		281	44	64	45.5%	231	217	$-6.1%$
	RoS	8.2%	6.7%	7.7%	$+1.0 p.p.$	9.6%	8.2%	$-1.4 p.p.$

DELIVERIES BY PROGRAMME

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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

			3Q			9M
	$\epsilon$ mln	FY2017 Restated	2017 Restated	2018	$\%$ Change	2017 Restated	2018	$\%$ Change
Orders		6,146	2,040	1,214	$-40.5%$	4,400	3.569	$-18.9%$
Revenues		5.550	1.205	1.334	10.7%	3.679	3.855	4.8%
EBITA		537	74	81	9.5%	282	288	2.1%
	RoS	9.7%	6.1%	6.1%		7.7%	7.5%	$-0.2 p.p.$

Of which DRS:

		3Q			9M
\$mln	FY2017 Restated	2017 Restated	2018	% Change	2017 Restated	2018	$\%$ Change
Orders	2.016	611	700	14.6%	1,541	1.950	26.5%
Revenues	1.947	522	582	11.5%	1.318	1.541	16.9%
EBITA	146	34	38	11.8%	85	84	$-1.2%$
RoS	7.5%	6.5%	6.5%		6.4%	5.5%	$-0.9 p.p.$
EBITA excluding TX costs	153	37	45	21.6%	90	102	13.3%
RoS excluding TX costs	7.9%	7.1%	7.7%	$+0.6 p.p.$	6.8%	6.6%	$-0.2 p.p.$

Avg. exchange rate €/\$ @ 1.1949 in 9M2018 Avg. exchange rate €/\$ @ 1.1132 in 9M2017

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

		3Q			9M
$\epsilon$ mln	FY2017 Restated	2017 Restated	2018	% Change	2017 Restated	2018	$\frac{9}{6}$ Change
Orders	2.615	183	291	59.0%	1,963	1.420	$-27.7%$
Revenues	3.093	731	599	$-18.1%$	2.175	2.025	$-6.9%$
EBITA	311	67	44	$-34.3%$	195	167	$-14.4%$
RoS	10.1%	9.2%	7.3%	$-1.9 p.p.$	9.0%	8.2%	$-0.8 p.p.$
EBITA excluding TX costs 311		76	47	$-38.2%$	204	174	$-14.7%$
RoS excluding TX costs	10.1%	10.4%	7.8%	$-2.6 p.p.$	9.4%	8.6%	$-0.8 p.p.$

Offsetting

2018 OUTLOOK

Revenues expected almost flat YoY

• Aircraft benefitting from EFA Kuwait
• Aerostructures volumes expected to decline

Profitability in line with 2017

• Efficiency improvement
• Higher Aircraft performance

ATR contribution lower than expected

Unsatisfactory Aerostructures performance

Space Stable outlook

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2018 OUTLOOK

Profitability slightly lower compared to 2017

APPENDIX

3Q/9M 2018 Results

Group Performance

			3Q			9M
$\epsilon$ mln	FY2017 Restated	2017 Restated	2018	$\%$ Change	2017 Restated	2018	% Change
New Orders	11,595	2,884	4,786	66.0%	7,945	9,390	18.2%
Backlog	33,507				34,032	34,501	1.4%
Revenues	11,734	2,552	2,651	3.9%	8,048	8,240	2.4%
EBITA	1,077	189	162	$-14.3%$	694	632	$-8.9%$
RoS	9.2%	7.4%	6.1%	$-1.3 p.p.$	8.6%	7.7%	$-0.9 p.p.$
EBIT	844	139	132	$-5.0%$	562	372	$-33.8%$
EBIT Margin	7.2%	5.4%	5.0%	$-0.4 p.p.$	7.0%	4.5%	$-2.5 p.p.$
Net result before extraordinary transactions	279	52	58	11.5%	265	164	$-38.1%$
Net result	279	52	157	201.9%	265	263	$-0.8%$
EPS ( $\in$ cents)	0.482	0.089	0.271	204.5%	0.460	0.456	$-0.9%$
FOCF	537	$-441$	9	N.S.	$-972$	$-800$	17.7%
Group Net Debt	2,579				4,004	3,503	$-12.5%$
Headcount	45,134				45,737	46,413	1.5%

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
• Not material impacts on FY2017 KPI's (higher revenues by ca. 2% and higher EBITA by ca. 1%)
• Cumulative 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

Solid Financial Position as end of September 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 / Stable Outlook*	Ba1 / Positive Outlook	October 2018
S&P	BB+ / Stable Outlook	BB+ / Negative Outlook	April 2015
Fitch	/ Stable Outlook BBB-	BB+ / Positive Outlook	October 2017

*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

…fully committed to Investment Grade

Availability of adequate committed liquidity lines as end of September 2018

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

• 30 September cash balance of € 1.0 bn
• 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. € 3.0 bn to support Leonardo's commercial activity

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(1) Based on rating as of 30/09/2018

(2) Average. Expected to be renewed at maturity

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

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.

C o n t a c t s

Raffaella Luglini Chief Stakeholder Officer raffaella.luglini@leonardocompany.com

Valeria Ricciotti Head of Investor Relations & Credit Rating Agencies +39 06 32473.697 valeria.ricciotti@leonardocompany.com

Manuel Liotta Head of Sustainability +39 06 32473.666 manuel.liotta@leonardocompany.com

Investor Relations & Credit Rating Agencies +39 06 32473.512 ir@leonardocompany.com

www.leonardocompany.com Leonardo Social Hub