Leonardo S.p.A. — Investor Presentation 2018

Mar 15, 2018

FY2017 Results Presentation

Alessandro Profumo Chief Executive Officer Alessandra Genco Chief Financial Officer

Rome, 15 March 2018

Group Overview Chief Executive Officer

2017 Results and Outlook Chief Financial Officer

Outstanding achievement signed yesterday

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…strongly committed to strengthen business approach

Back to sustainable profitable growth

New 5 years Industrial Plan launched

Confident about the opportunity for Leonardo

We are going to set this business up to win

Sustainable financial strategy

Proposed dividend payment: 14 €/cents per share

…fully committed to execute this plan

2017 Results in line with revised Guidance

2018 planting the seeds for growth

		FY2017 Revised Guidance	FY2017 Results		FY2018E (as presented in January)
New orders	€ bn	11.3 – 11.7*	11.6		12.5 – 13.0
Revenues	€ bn	11.5 –12.0	11.5		11.5 – 12.0
EBITA	€ mln	1,050 – 1,100	1,066		1,075 – 1,125
FOCF	€ mln	500 – 600	537		ca.100
Group Net Debt	€ bn	ca. 2.6**	2.6		ca. 2.6

*As of January, to take into account the postponement of C27J export contracts **Including the effect of US bond buy back

Clear priorities set

Doing the right things for the long-term

Return to top-line growth

Strict cost control, reinvested in growth

Annualised savings identified

ca.€200mln

Sustainable improvement in profitability

Focus on cash and a stronger capital structure

ca.70bn ca.10% ca.50%

2018-2022 cumulated orders

5%-6% ca.80%

5 yr. Revenue CAGR

Reinvested in competitiveness & capability

ROS by 2020

8%-10%

Investment grade

Avg. 2015-2018 CF Conversion; Accelerating FOCF from 2020

5yr EBITA CAGR

Credit rating

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…2018 planting the seeds for growth

© Leonardo - Società per azioni

How to achieve double digit profitability by 2020

Electronics, Defence & Security Systems Helicopters Aeronautics

Increasing volumes

• Maturity of AW169 and AW189

• Specific issues addressed

• Increasing volumes

• Strong backlog
• DRS momentum

• Mix of activities

• Increasing volumes

• Strong Aircraft performance
• Normalised ATR (strong 2016)
• Aerostructures

RoS: Significant step up Remain strong Stable

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…benefits of operating leverage and cost control across all businesses

Group Overview

Chief Executive Officer

2017 Results and Outlook

Chief Financial Officer

Key messages

Entering a new phase: back to growth

2017 in line with revised Guidance

2018 planting the seeds for growth

Fully focused on Industrial Plan execution

Order intake

Book to bill at 1x; Building and exploiting our backlog is the foundation of future growth

Revenues

Broadly stable despite Helicopters softness

© Leonardo - Società per azioni

EBITA and Profitability

2017 mainly influenced by Helicopters short-term performance

© Leonardo - Società per azioni

Net Result Before Extraordinary Transactions

Below the line under control

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Deeper dive on FOCF

Short-term pressures; longer term improvement

Avg. FOCF 2015 – 2018

KEY DRIVERS

• EFA Kuwait working capital build up
• Higher investments
• Customer advances winding down
• Aerostructures underperformance

2018E – 2019E 2020E – 2022E

• Higher order intake
• Higher volumes
• Profitability improvement
• Helicopters recovery
• EFA Kuwait contribution
• Lower financial charges

Solid Financial Position

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	/ Stable Outlook BBB-	BB+ / Positive Outlook	October 2017

…fully committed to Investment Grade

2018 Guidance: planting the seeds for growth

		FY2017A	IFRS15 Impact	FY2017 Restatement	FY2018E
New orders	€ bn	11.6		11.6	12.5 – 13.0
Revenues	€ bn	11.5	0.2	11.7	11.5 – 12.0
EBITA	€ bn	1.07	0.01	1.08	1.075 – 1.125
FOCF	€ mln	537		537	ca.100
Group Net Debt	€ bn	2.6		2.6	ca. 2.6

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

……moving to growth

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THANK YOU FOR YOUR ATTENTION

SECTOR RESULTS

Helicopters

Short term issues affecting results, well positioned to capture growth opportunities

		4Q		FY
€ mln	2016	2017	% Change	2016	2017	% Change
Orders	2,199	1,443	(34.4%)	3,737	3,153	(15.6%)
Revenues	1,074	907	(15.5%)	3,639	3,262	(10.4%)
EBITA	145	22	(84.8%)	430	260	(39.5%)
ROS %	13.5%	2.4%	(11.1) p.p.	11.8%	8.0%	(3.8) p.p.

2018 OUTLOOK

• Healthier market outlook driving higher volumes
• Well placed in most attractive segments, leveraging high quality product range

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Profitability gradual improvement; back to double digit in 2020

Electronics, Defence & Security Systems

Good 2017 commercial results, benefitting from growing outlook

		4Q		FY
€ mln	2016	2017	% Change	2016	2017	% Change
Orders	2,487	1,746	(29.8%)	6,726	6,146	(8.6%)
Revenues	1,901	1,846	(2.9%)	5,468	5,506	0.7%
EBITA	289	262	(9.3%)	558	537	(3.8%)
ROS %	15.2%	14.2%	(1.0) p.p.	10.2%	9.8%	(0.4) p.p.

Of which DRS:

		4Q			FY
\$ mln	2016	2017	% Change	2016	2017	% Change
Orders	439	475	8.2%	1,923	2,016	4.8%
Revenues	583	616	5.6%	1,753	1,914	9.2%
EBITA	65	62	(4.6%)	128	143	11.7%
ROS %	11.1%	10.0%	(0.9) p.p.	7.3%	7.5%	0.2 p.p.

2018 OUTLOOK

• Revenues and profitability almost flat YoY
• Upward trends in some business areas
• Efficiency improvement
• Lower Contribution of some profitable programmes

DRS benefitting from positive market trend

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Avg. exchange rate €/\$ @1.1293 in 2017

Avg. exchange rate €/\$ @1.1069 in 2016

Aeronautics

Aircrafts positive results and outlook offsetting Aerostructures

		4Q		FY
€ mln	2016	2017	% Change	2016	2017	% Change
Orders	368	652	77.2%	10,158*	2,615	(74.3%)
Revenues	1,070	920	(14.0%)	3,130	3,107	(0.7%)
EBITA	149	117	(21.5%)	347	324	(6.6%)
ROS %	13.9%	12.7%	(1.2) p.p.	11.1%	10.4%	(0.7) p.p.

*Including EFA Kuwait order

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

Offsetting

• Lower ATR contribution
• Unsatisfactory Aerostructures performance

Space 2017 benefitting from lower taxes

2018 OUTLOOK

Revenues and profitability expected almost in line with 2017

APPENDIX

No material impact from IFRS15

• Leonardo will apply retrospectively IFRS15 in 2018
• FY2017 and 2017 quarterly will be 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

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More exposed area of activity is civil helicopters

FY2017 Results

Group Performance		4Q			FY
€ mln	2016	2017	% Change	2016	2017	% Change
New Orders	4,447	3,650	(17.9%)	19,951	11,595	(41.9%)
Backlog				34,798	33,578	(3.5%)
Revenues	3,968	3,543	(10.7%)	12,002	11,527	(4.0%)
EBITA	506	363	(28.3%)	1,252	1,066	(14.9%)
ROS %	12.8%	10.2%	(2.6) p.p.	10.4%	9.2%	(1.2) p.p.
EBIT	351	262	(25.4%)	982	833	(15.2%)
EBIT Margin	8.8%	7.4%	(1.4) p.p.	8.2%	7.2%	(1.0) p.p.
Net result before extraordinary transactions	202	2	(99.0%)	545	274	(49.7%)
Net result	154	2	(98.0%)	507	274	(46.0%)
EPS (€ cents)	0.267	0.002	(99.3%)	0.879	0.474	(46.1%)
FOCF	1,094	1,509	37.9%	706	537	(23.9%)
Group Net Debt				2,845	2,579	(9.3%)
Headcount				45,631	45,134	(1.1%)

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.

Development costs capitalised as intangible assets at 31 December 2017

€ mln	Self Funded National Security	Self Funded Other	Total
01 January 2017 Opening Balance	1,472	490	1,962
Gross R&D capitalised Depreciation and write offs Disposals Other Changes	195 -44 0 9	43 -68 0 -9	238 -112 0 0
Net R&D capitalised	160	-34	126
31 December 2017	1,632	456	2,088

Return to double digit profitability 2020

Helicopter recovery

BUILDING BLOCKS OF THE RECOVERY

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Helicopters

2016 REVENUES BY CUSTOMER/SEGMENT

2017 REVENUES BY CUSTOMER/SEGMENT

BACKLOG BY PROGRAMME DELIVERIES BY PROGRAMME

Availability of adequate committed liquidity lines

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

• 31 December cash balance of ca. € 1.9 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. € 3.7 bn to support Leonardo's commercial activity

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(1) Based on rating as of 31/12/2017

(2) Average. Expected to be renewed at maturity

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.

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