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Leonardo S.p.A. Investor Presentation 2020

Jul 30, 2020

4038_ip_2020-07-30_4875fe6c-d601-467b-9324-ad0216680f09.pdf

Investor Presentation

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2Q/1H2020 Results Presentation

Alessandra Genco Chief Financial Officer

Alessandro Profumo Chief Executive Officer

Rome, 30 July 2020

Agenda

-

  • Sector Results

  • Appendix

© 2019 Leonardo - Società per azioni

Key messages Chief Executive Officer

1H 2020 Results Chief Financial Officer

Key messages Resilient 1H in face of unprecedented challenges. Confidence in the long term fundamentals unchanged

  • We have responded robustly to the pandemic and we remained resilient in extreme market conditions
  • We continue to actively manage the situation with mitigating actions and recovery plan in place, also benefitting from our business mix
  • Our robust response and our business resilience give us confidence in our new FY2020 Guidance
  • Looking forward, we expect certain challenges facing the civil side of our business to extend beyond 2020
  • The medium-long term fundamentals of our business remain unchanged and we remain confident in our ability to succeed

Demonstrating resilience in extreme market conditions

COMMERCIALLY •
Stable
orders
vs
2019,
reflecting
Group
weighting
to
military
/
governmental
programmes
across
businesses
•
Strong
support
from
governments
in
all
our
domestic
markets
OPERATIONALLY •
Leonardo
strategically
relevant
for
our
domestic
markets
•
Production
facilities
always
in
operation
except
for
2
days,
although
running
at
slower
pace
•
Month
over
month
improvements
in
productivity
and
efficiencies
since
March
challenges
•
Increasing
number
of
people
on
site
63%
46%
42%
43%
PEOPLE IN SMART WORKING
39%
39%
PEOPLE ON SITE
37%
14%
20th March
30th April
29th May
30th June*

Demonstrating resilience in extreme market conditions

•
1H
on
track
despite
extreme
market
conditions
•
In
FY2020,
excluding
COVID-19
resurgence
and
additional
lockdowns,
we
expect
•
Order
Intake
slightly
down
YoY
•
Revenues
substantially
flat
YoY
•
EBITA
not
immune
but
mitigation
actions
in
place
•
Identified
cost
savings
for
2020
from
FINANCIALLY BUDGET 2020 BASELINE FY2020 TARGET 1H2020 ACHIEVEMENT
LABOR COST € 2.9 bn ca. 10% ca. 50% of the total
CONTROLLABLE COSTS € 1.4 bn 10-15% ca. 60% of the total
NET INVESTMENTS € 700-750 mln 40-50% ca. 2/3 of the total
•
FOCF
neutral
•
Strong
liquidity
position
and
financial
flexibility
STRATEGICALLY •
Clear
strategic
path
and
solid
fundamentals
confirmed
•
Increasingly
international
footprint
strengthening
diversification
and
resilience
•
Significant
Backlog
of
€
36
bn
•
Investing
in
our
future,
leveraging
on
our
products
and
technologies,
both
existing
and
in
development,
well
recognised
and
value
adding
to
clients
•
Strong
support
of
our
key
stakeholders

Agenda

-

  • Sector Results

  • Appendix

© 2019 Leonardo - Società per azioni

Key messages Chief Executive Officer

1H 2020 Results Chief Financial Officer

1H 2020 highlights Resilient top line with COVID-19 impacting performance

• Our Group has remained resilient in the face of unprecedented market conditions

• We have continued to perform well

  • Orders at € 6.1 bn flat YoY with Book to Bill at ≈ 1
  • Solid Group Revenues at € 5.9 bn, flat YoY
  • EBITA at € 292 mln, down 40% YoY, due to COVID-19 and mix
  • FOCF at € -1.9 bn, in line with cash seasonality and partially affected by COVID-19

• We can rely on a strong financial and liquidity position

1H 2020 drivers for Orders and Revenues

1H 2020 drivers for EBITA and FOCF

  • Lower JV contribution (ATR and Space Manufacturing)
  • Lower activity and profitability on the civil side
  • Worse mix due to higher activities in developmental/low rate initial production or in contracts where we are prime contractor
  • Lower efficiency and productivity with reduced working hours and reduced ability to recover costs

  • Positive impact from cost saving measures

  • Higher cash absorption from operations and working capital

  • Cash-ins more weighted towards 2H
  • Lower investments and acceleration of cash-ins

Order Intake

Stable orders vs 2019, reflecting strength of domestic military / governmental business

€ mln ∆ % YoY
1H2019A 6,145
HELICOPTERS 2,526 +48.0% Higher domestic military/Governmental orders (IMOS UK, AW169 and NEES for
Italy and TH-73A in US)
ELECTRONICS EUROPE* 1,420 -29.3% Lower order intake due to large order in UK Airborne Systems in 1H19
LEONARDO DRS* 1,445 +3.5% Additional orders for Mounted Family of Computer Systems (MFoCS) for US
Army
AIRCRAFT** 669 -32.2% F-35, C-27J and EFA offsetting
large 1H2019 M-345 contract
for Italian
Air
Force
AEROSTRUCTURES** 343 -8.0% Affected by lower
demand
from ATR
ELIMINATIONS & OTHER -258 ORDER BACKLOG of € 36 bn
•
35% Helicopters
1H2020A*** 6,104 -0.7% •
35% Defence
Electronics & Security
•
30% Aeronautics

*Excluding € 7 mln of Defence Electronics & Security eliminations

**Excluding € 34 mln of Aeronautics eliminations

© 2020 Leonardo - Società per azioni 10 *** Including ca. € 39 mln of positive forex

Revenues EFA Kuwait ramp up and Leonardo DRS offsetting COVID-19 effects

€ mln ∆ % YoY
1H2019A 5,962
HELICOPTERS 1,693 -10.7% Slowdown in operations and lower civil deliveries due to COVID-19, partially
offset by CS&T and NH90 Qatar
ELECTRONICS EUROPE* 1,812 -3.2% Reduction in volume growth due to COVID-19 effects
LEONARDO DRS* 1,107 +10.8% Higher volumes driven by higher activities relating to the equipment upgrade
provided to the US Army
AIRCRAFT 1,074 +24.7% Production slowdown more than offset by EFA Kuwait ramp-up and customer
support
AEROSTRUCTURES 473 -15.1% B787 and ATR production slowdown due to COVID-19
ELIMINATIONS & OTHER -225
1H2020A** 5,878 -1.4%

© 2020 Leonardo - Società per azioni 11

* Excluding € 22 mln of Defence Electronics & Security eliminations

** Including ca. € 28 mln of positive forex

EBITA and Profitability Slowdown driven by JVs, civil business and mix

€ mln (RoS) RoS ∆ % YoY
1H2019A 487 8.2%
HELICOPTERS 139 8.2% -30.5% Driven by slowdown in Revenues and lower efficiencies due to COVID-19. 1H2019
benefitted from revision of UK pension scheme
ELECTRONICS EUROPE 102 5.6% -40.7% Lower efficiency, delays in programme
execution, worse revenue mix and extra
costs in Automation
LEONARDO DRS 64 5.7% +14.3% Driven by higher Volumes
AIRCRAFT 122 11.4% -6.2% Lower productivity due to COVID-19, worse mix and prime contractor activities
(i.e.EFA
Kuwait)
AEROSTRUCTURES -12 -2.5% -50.0% Lower productive hours driving under recovery of fixed costs and manufacturing
efficiencies due to COVID-19, partially offset by settlement with Airbus for A380
termination
ATR -34 n.a. n.a. Lower deliveries due to COVID-19.
1 aircraft delivered in 1H20 vs 21 aircraft in 1H29
SPACE -10 n.a. -176.9% TAS lower productivity due to COVID-19 and lower activities in commercial
Telecommunication
CORPORATE & OTHER -79 -5.3%
1H2020A* 292 5.0% -40.0%

© 2020 Leonardo - Società per azioni 12

* Including ca. € 1 mln of positive forex

From EBITA to Net Result

Net Result affected by EBITA performance and higher financial expenses associated with FX hedging

  • EBIT down 50.9% due to EBITA decrease and COVID-19 extra costs
  • Net Result at € 60 mln mainly affected by EBITA performance with slightly higher financial expenses associated with FX hedging

Balanced debt maturity profile Successful issuance of € 500 mln bond

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+ / Positive Outlook April 2020
Fitch BBB-
/ Negative Outlook		 BBB-
/ Stable Outlook		 May 2020

* Pro forma at 30 June 2020 of the € 500 mil bond issued in July 2020 in order to refinance the bond expiring in January 2021

** Excluding the bond expiring in January 2021 and including the new bond issued in July 2020

Liquidity position remains robust, especially given these exceptional times

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

  • 30 June cash balance of approx. € 0.9 bn, pro forma cash-in associated with the €500mln early July bond issuance
  • Available Credit lines worth € 3.4 bn (confirmed and unconfirmed)
  • Bank Bonding lines of € 10.9 bn, of which approximately € 3.7 bn available to support commercial activity

30 JUNE 2020 PRO-FORMA FOR BOND ISSUANCE

* Pro forma for May 2020 Credit Facilities reduction due to the € 500 mln bond issuance in July 2020

2020 Guidance Assuming no COVID-19 resurgence and no further lockdowns in 2H 2020

FY2019A FY2020
Guidance
New Orders (€ bn) 14.105 12.5 –
13.5
Revenues (€ bn) 13.784 13.2 –
14.0
EBITA (€ mln) 1,251 900
–
950
FOCF (€ mln) 241 heading
to neutral
Group Net Debt (€ bn) 2.8* ca. 3.3**

*Including IFRS 16 effect of ca. € 0.5 bn

**Including € 0.1 bn higher IFRS16 effect, Kopter acquisition (ca. € 0.2 bn) and dividend payment

2020 exchange rate assumptions: € / USD = 1.15 and € / GBP = 0.88

SECTOR RESULTS

Helicopters

€ mln 2Q 2019 2Q 2020 % Change 1H2019 1H2020 % Change FY 2019
Orders 1,019 1,040 +2.1% 1,707 2,526 +48.0% 4,641
Revenues 1,082 989 -8.6% 1,895 1,693 -10.7% 4,025
EBITA 144 121 -16.0% 200 139 -30.5% 431
RoS 13.3% 12.2% -1.1 p.p. 10.6% 8.2% -2.4 p.p. 10.7%

Defence Electronics & Security

ELECTRONICS - EU

€ mln 2Q 2019 2Q 2020 % Change 1H2019 1H2020 % Change FY 2019
Orders 1,185 558 -52.9% 2,008 1,420 -29.3% 4,444
Revenues 997 966 -3.1% 1,871 1,812 -3.2% 4,289
EBITA 96 56 -41.7% 172 102 -40.7% 427
RoS 9.6% 0.6% -9.0 p.p. 9.2% 5.6% -3.6 p.p. 10.0%

LEONARDO DRS

\$
mln		 2Q 2019 2Q 2020 % Change 1H2019 1H2020 % Change FY 2019
Orders 797 914 +14.7% 1,577 1,592 +1.0% 2,923
Revenues 605 643 +6.3% 1,129 1,219 +8.0% 2,729
EBITA 36 33 -8.3% 63 70 +11.1% 208
RoS 6.0% 5.1% -0.9 p.p. 5.6% 5.7% +0.1 p.p. 7.6%

Avg. exchange rate €/\$ @ 1.1023 in 1H2020 Avg. exchange rate €/\$ @ 1.1298 in 1H2019

Aeronautics

AIRCRAFT

2Q 2019
€ mln		 2Q 2020 % Change 1H2019 1H2020 % Change FY 2019
Orders 578 155 -73.2% 987 669 -32.2% 1,904
Revenues 479 643 +34.2% 861 1,074 +24.7% 2,329
EBITA 71 95 +33.8% 130 122 -6.2% 320
RoS 14.8% 14.8% +0.0 p.p. 15.1% 11.4% -3.7 p.p. 13.7%

AEROSTRUCTURES

€
mln		 2Q 2019 2Q 2020 % Change 1H2019 1H2020 % Change FY 2019
Orders 315 199 -36.8% 373 343 -8.0% 948
Revenues 282 245 -13.1% 557 473 -15.1% 1,125
EBITA 0 14 n.m. -8 -12 -50.0% -11
RoS 0.0% 5.7% +5.7 p.p. -1.4% -2.5% -1.1 p.p. -1.0%

ATR

€
mln		 2Q 2019 2Q 2020 % Change 1H2019 1H2020 % Change FY 2019
EBITA 13 -16 -223.1% -1 -34 -3,300% 53

Space

€ mln 2Q 2019 2Q 2020 % Change 1H2019 1H2020 % Change FY 2019
EBITA 12 -8 -166.7% 13 -10 -176.9% 39

APPENDIX

2Q/1H 2020 Results Group Performance

€ mln 2Q 2019 2Q 2020 % Change 1H2019 1H2020 % Change FY 2019
New Orders 3,627 2,683 -26.0% 6,145 6,104 -0.7% 14,105
Backlog 36,321 35,920 -1.1% 36,513
Revenues 3,237 3,287 +1.5% 5,962 5,878 -1.4% 13,784
EBITA 324 251 -22.5% 487 292 -40.0 % 1,251
RoS 10.0% 7.6% -2.4 p.p. 8.2% 5.0% -3.2 p.p. 9.1%
EBIT 306 197 -35.6% 462 227 -50.9% 1,153
EBIT Margin 9.5% 6.0% -2.5 p.p. 7.7% 3.9% -3.8 p.p. 8.4%
Net result
before
extraordinary
transactions		 175 118 -32.6% 252 59 -76.6 %
Net result 272 119 -56.3% 349 60 -82.8 %
EPS (€ cents) 0.473 0.206 -56.4% 0.607 0.103 -83.0% 1.428
FOCF 64 -294 -559.4% -1,050 -1,889 -79.9%
Group Net Debt 4,098 5,074 +23.8 % 2,847
Headcount 48,755 49,733 +2.0 % 49,530

© 2020 Leonardo - Società per azioni 24 Free Operating Cash-Flow (FOCF): 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

Covenant FY2019

FY2019A
Post IFRS 16		 FY2019A
Post IFRS 16
EBITDA(1) € 1,743 mln Group Net Debt € 2,847 mln
Net Interest -
€ 182 mln		 Leasing (IFRS 16) -
€ 451 mln
Financial Debt
to
MBDA		 -
€ 651 mln
Group Net Debt
for Covenant		 € 1,745 mln
EBITDA € 1,743 mln
EBITDA / Net Interest 9.6 Group Net Debt
/ EBITDA		 1.0
THRESHOLD > 3.25 THRESHOLD < 3.75

(1) EBITDA net of depreciation of rights of use

Contacts

Valeria Ricciotti

Head of Investor Relations and Credit Rating Agencies

+39 06 32473.697

[email protected]

Leonardo Investor Relations and Credit Rating Agencies

+39 06 32473.512

[email protected]

© 2019 Leonardo - Società per azioni 26

leonardocompany.com

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