Leonardo Spa · MIL:LDO
Leonardo Spa — Investor Day (October 2019)
51 slides from Leonardo Spa's investor day presentation, Oct 24, 2019
Slide 1: Leonardo Investor Day: Focus on US Business
Leonardo Investor Day Focus on US Business Investor Relations and Credit Rating Agencies Philadelphia, 24 October 2019
Slide 2: Agenda
Agenda • Executing our Industrial Plan Alessandro Profumo, Chief Executive Officer • Focus on businesses > Helicopters: on track for sustainable growth Gian Piero Cutillo, MD Helicopters Division > Electronics: a gem in the crown Norman Bone, MD Electronics Division > Leonardo DRS: poised to continu
Slide 3: Key messages
Leonardo Investor Day Key messages • The Industrial Plan is on track o We are delivering through our businesses across the Group • Helicopters turnaround progressing well • Defence Electronics businesses going from strengths to strengths • DRS strongly outperforming the attractive US market o Achiev
Slide 4: Agenda
Agenda • Executing our Industrial Plan Alessandro Profumo, Chief Executive Officer • Focus on businesses > Helicopters: on track for sustainable growth Gian Piero Cutillo, MD Helicopters Division > Electronics: a gem in the crown Norman Bone, MD Electronics Division > Leonardo DRS: poised to continu
Slide 5: On track for sustainable growth
Leonardo Investor Day On track for sustainable growth • Successfully achieving our Industrial Plan targets, notwithstanding challenging civil market • Performing pretty well in Military market • Weakening civil market, keeping our leadership position (especially 3-10 tonne) • Stronger offer for Cust
Slide 6: Fully focused on Industrial Plan Objectives: returning to sustainable growth
Leonardo Investor Day Fully focused on Industrial Plan Objectives: returning to sustainable growth LEONARDO HELICOPTERS REVENUES • Committed to top line increase, 2017-2020 CAGR ≥ 5% 3.4 €bn o Military and Customer Support & Training ahead of schedule… o …more than compensating current civil market
Slide 7: Attractive military market supported by new opportunities
Leonardo Investor Day Attractive military market supported by new opportunities GLOBAL MILITARY MARKET FOCUSED EFFORT ON KEY GEOGRAPHIES Total market value $ Indicative and not bn per year ~15 exhaustive ~14-15 Combat 101 Naval Poland Spain Utility/ Multi-Role Heavy MH-139 Qatar Utility/ Multi-Role
Slide 8: Civil Market reducing pace, we remain leader
Leonardo Investor Day Civil Market reducing pace, we remain leader CIVIL HELICOPTERS MARKET EVOLUTION Market Value $ bn • Civil market slightly decreasing trend in 2019-21 5.9 o Uncertain macro economic situation o Operating lessors financial issues +4% o Difficulties of some large operators with kn
Slide 9: Customer Support & Training is a priority business in a growing market
Leonardo Investor Day Customer Support & Training is a priority business in a growing market MARKET LEONARDO In service fleet evolution, # Helicopters >10,000 >50% >41,000 15% 600 2,900 2018A 2028E 2012 2018 2006 2018 2006 2018 Maintenance & Support Services market trend • Priority business: Civil O
Slide 10: Balanced orders across Commercial, Military and Customer Support & Training
Leonardo Investor Day Balanced orders across Commercial, Military and Customer Support & Training DIRECTIONAL* 100% 100% • Balanced volumes across the 3 core segment: Commercial, Military & Governmental, Customer Support & Training • Military & Governmental and Customer Support & Training offsetting
Slide 11: Investing in innovative products and disruptive technologies
Leonardo Investor Day Investing in innovative products and disruptive technologies Real-time Advanced Algorithms Advanced sensors & Materials & for Cyber- Power Advanced Processes Protection Management Analytics Noise Reduction and Passenger Comfort Improvement Payload fraction Improvement Green Tec
Slide 12: Safety is a core Company value
Leonardo Investor Day Safety is a core Company value • Strongly committed towards continuous improving our Safety PRODUCT • We look at helicopter as a “system”, not only as a platform PILOTS • New “Safety Systems Governance” in place SAFETY • Focus on state of the art processes, products and service
Slide 13: We have global reach
Leonardo Investor Day We have global reach GLOBAL INDUSTRIAL FOOTPRINT GLOBAL MARKET Leonardo Helicopters fleet distribution Higher contribution Lower contribution SESTO CALENDE I TA LY UK USA P O LA N D © 2019 Leonardo - Società per azioni 13
Slide 14: Increasing position in the US domestic market
Leonardo Investor Day Increasing position in the US domestic market: proud to serve our Customers in American skies AW609 Industrial • Our Philadelphia facility from assembly plant to Centre of Excellence Center of • ~500 Mln€ revenues from our US facility; Excellence • Home of innovative AW609 deve
Slide 15: Agenda
Agenda • Executing our Industrial Plan Alessandro Profumo, Chief Executive Officer • Focus on businesses > Helicopters: on track for sustainable growth Gian Piero Cutillo, MD Helicopters Division > Electronics: a gem in the crown Norman Bone, MD Electronics Division > Leonardo DRS: poised to continu
Slide 16: Agenda
Leonardo Investor Day Agenda 1. The change 2. The rationale – reminder 3. The journey – so far 4. The plan – update 5. The benefit © 2019 Leonardo - Società per azioni 16
Slide 17: Key messages
Leonardo Investor Day Key messages • A bigger Division, addressing the largest part of the A&D market • Bringing Business Units together to make them stronger, through TODAY o Internationalisation o Focus on performance o Product Development Synergies o Focus on performance • High quality businesses
Slide 18: One Electronics Division within One Leonardo
Leonardo Investor Day One Electronics Division within One Leonardo • On 1st February 2019 Leonardo creates a new Electronics Division, which brings together the former o Airborne and Space Systems Division o Land and Naval Defence Electronics Division o Defence Systems Division o Automation Systems
Slide 19: How we are going to do it
Leonardo Investor Day How we are going to do it… Organised for partnerships Become more International Coherent market offerings MARKET Change the culture PEOPLE Empower our people PROCESS Drive efficiencies Address the cost base Promulgate best practice © 2019 Leonardo - Società per azioni Fully foc
Slide 20: Transition Plan to be accomplished over the medium term
Leonardo Investor Day Transition Plan to be accomplished over the medium term 15 WORKSTREAMS CREATED (WS) • Two WS are Turnaround of 2 lines of business • Four WS relate Engineering including Research and Development • One WS in Marketing and Sales • Four WS in Operations and Procurement • One WS in
Slide 21: Turnaround
Leonardo Investor Day Turnaround AUTOMATION AS WAS FUTURE AUTOMATION • Good Technology • New Structure • Able to compete in the market • Integrated Project Team • Poor Execution • Configuration Control • Inadequate disciplines • Account management principles • Skilled resource shortage • Reviewing p
Slide 22: Our path to double digit profitability
Leonardo Investor Day Our path to double digit profitability… 2019 EBITA – ROS (%) Airborne and Space Systems Defence Systems TARGET RoS % Land and Naval Defence Electronics SIZE = REVENUES Security and Information Systems EBITA © 2019 Leonardo - Società per azioni Consistency of delivery to underpi
Slide 23: Diversity through internationalisation
Leonardo Investor Day Diversity through internationalisation Country 8 Country 10 Country 12 Country 13 1% Country 14 1% Country 11 1% • 1% Country 7 1% Country 9 1% 1% In 2019, the Division is forecasting to take around 800 Country 6 1% Other Countries 2% Country 5 5% new contracts, with 90% of the
Slide 24: Well Diversified Order Intake Full Year 2019
Leonardo Investor Day Well Diversified Order Intake Full Year 2019 MARKET BUSINESS UNIT 12% 7% 14% 26% 39% 49% 32% 21% Domestic Export Intercompany Land and Naval Airborne & Space Systems Electronics UK Defence Systems Other © 2019 Leonardo - Società per azioni 24
Slide 25: US Programmes and Platforms
Leonardo Investor Day US Programmes and Platforms • Capabilities complementary to Leonardo DRS • Positioning European Products in US through US Primes • Builds on Airborne Heritage Laser & repair/production + EW and Laser Designation UAS Services lighting solutions US Army Apache AH-64 FALCO UAV F-3
Slide 26: Key US Laser Programmes
Leonardo Investor Day Key US Laser Programmes • Next gen. rifle mounted laser rangefinder • STORM 2 • US Army • Directed Energy Components • Lasers for medical • Directed Energy aesthetic, diagnostic & Programmes (R&D) therapeutic • Missile Defence applications (e.g. laser Agency hair removal) • LiD
Slide 27: Tempest – Typhoon to Typhoon LTE and Beyond
Leonardo Investor Day Tempest – Typhoon to Typhoon LTE and Beyond • In July 2018 the UK Government launched its Combat Air Strategy, delivering an ambitious vision for the future • The strategy confirmed the UK’s intent to remain at the cutting edge of combat air systems development in order to meet
Slide 28: Electronics UK & Italy – Next Pillar
Leonardo Investor Day Electronics UK & Italy – Next Pillar • On the 10th September the Governments of Italy and the UK signed a Statement of Intent (SOI) as a broad pledge to cooperate on matters of “combat air capability.” The idea is to “deepen discussions on Tempest military requirements,” come u
Slide 29: Achieving our full potential
Leonardo Investor Day Achieving our full potential… ELECTRONICS ACCESIBLE MARKET LEVERAGING SUCCESS AND EXPLOITING OPPORTUNITIES € bn • Longevity of Typhoon Leonardo 3.9 4.9 captured • Tempest market 31.3 • Future Capabilities 24.5 • Future Support Models • Partnerships • Addressing the Export Marke
Slide 30: Key messages
Leonardo Investor Day Key messages • Our biggest Division, addressing the largest part of the A&D market • Bringing Business Units together to make them stronger, through o Internationalisation o Focus on performance o Product Development Synergies • High quality businesses with real momentum • Deli
Slide 31: Agenda
Agenda • Executing our Industrial Plan Alessandro Profumo, Chief Executive Officer • Focus on businesses > Helicopters: on track for sustainable growth Gian Piero Cutillo, MD Helicopters Division > Electronics: a gem in the crown Norman Bone, MD Electronics Division > Leonardo DRS: poised to continu
Slide 32: Overview
Leonardo Investor Day Overview NAVAL SYSTEMS AIRBORNE & COMMUNICATIONS We have eight lines of business organised Naval Power Naval Electronics Global Enterprise Solutions Airborne & Intelligence into three customer-facing sectors Systems • Leading U.S. mid-tier defence company with over 6,500+ emplo
Slide 33: DRS contributing to Leonardo's Industrial Plan targets
Leonardo Investor Day Leonardo DRS contributing to Leonardo’s Industrial Plan targets • US Defence Budget continues to rise o 2020 Projects healthy 3% growth o Growth curve ‘flattens’ in 2021 & beyond but spending at historically high levels with bipartisan support • Leonardo DRS uniquely positioned
Slide 34: US Defense Budget Outlook
Leonardo Investor Day US Defense Budget Outlook FUNDING FOR DEPARTMENT OF DEFENCE • New Two Year Budget Deal in Congress Billions of 2020 Dollars o Raises FY20 & FY21 budget caps and ends sequestration o Stabilised defence planning • DOD Budget Growth of 3%, from already high historical base levels,
Slide 35: Growth: Leonardo DRS outperforming US defence market
Leonardo Investor Day Growth: Leonardo DRS outperforming US defence market NEW ORDERS CONTINUE ABOVE MARKET LEONARDO DRS ALIGNED IN HIGH GROWTH SEGMENTS • Army Electronics & Sensors $ mln o Product alignment within Army’s key modernization priorities fueling continued growth o 2018 Revenue Growth –
Slide 36: Six Army Modernisation Priorities Driving Growth
Leonardo Investor Day Six Army Modernisation Priorities Driving Growth • Next-Generation Combat Vehicle o Aligned to be positioned for situational awareness and targeting, including next generation sensing and Active Protection System • Future Vertical Lift o Positioned to protect the platform throu
Slide 37: Army Growth: Quick Response = Rapid Growth
Leonardo Investor Day Army Growth: Quick Response = Rapid Growth • New environment has rewarded innovative companies that are quick to market and cost competitive o Leonardo DRS organisational structure affords both streamlined decision making coupled with a lean cost structure resulting above marke
Slide 38: Driving Improving Profitability
Leonardo Investor Day Driving Improving Profitability DOUBLE DIGIT EBITA GROWTH MARGIN EXPANSION $ mln • 17% EBITA CAGR supporting increased shareholder return • Increased EBITA margins drive free cash flow generation o Programme portfolio / required investments allow for above market conversion of
Slide 39: 4 Levers of Improved Profitability
Leonardo Investor Day 4 Levers of Improved Profitability TOP LINE GROWTH EXCEEDS COST BASIS OPERATIONAL EXCELLENCE • Revenue Growth Trend Secure • Project launched geared at enhancing returns through a combination of efficiencies and cost • Maintain lean environment to enable competitive cutting eff
Slide 40: Development Programme Transition
Leonardo Investor Day Development Programme Transition DRSDRS LEONARDO % OF%DEVELOPMENT REVENUE REVENUE OF DEVELOPMENT TIMELINE OF EVENTS • ‘War-Time’ spending drove large production bubble in 2008 - 2012 25% • 2015-2018 Leonardo DRS awarded ‘next generation’ design programmes geared at refreshing e
Slide 41: Key Takeaways
Leonardo Investor Day Key Takeaways • Optimistic on Growth Trajectory o Multi-year revenue CAGR and H1 2019 results confirm continued growth that exceeds industry peers o Leonardo DRS remains well aligned with Pentagon’s major procurement priorities • Army Electronics & Sensors well positioned withi
Slide 42: Agenda
Agenda • Executing our Industrial Plan Alessandro Profumo, Chief Executive Officer • Focus on businesses > Helicopters: on track for sustainable growth Gian Piero Cutillo, MD Helicopters Division > Electronics: a gem in the crown Norman Bone, MD Electronics Division > Leonardo DRS: poised to continu
Slide 43: Execution of sustainability plan to create long-term value
Leonardo Investor Day Execution of sustainability plan to create long-term value Governance, reporting and culture • A sound governance supports the achievement of sustainability targets • Alignment of the executive pay with sustainability performance strategy • Disclosure of non-financial informati
Slide 44: Q&A
Q&A © 2019 Leonardo - Società per azioni 44
Slide 45: Appendix
APPENDIX © 2019 Leonardo - Società per azioni 45
Slide 46: Increasing presence in international market
Leonardo Investor Day Increasing presence in international market • Well balanced worldwide footprint and well positioned in key-high growth market Strong industrial presence in four markets: Italy, UK, USA and Poland 46,462 employees in 170 sites and offices worldwide About 150 countries use our pr
Slide 47: 1H 2019 Results
Leonardo Investor Day 1H 2019 Results Group Performance 2Q 2018 2Q 2019 % Change 1H 2018 1H 2019 % Change FY 2018 € mln New Orders 2,440 3,627 +48.6% 4,604 6,145 +33.5% 15,124 Backlog 32,611 36,321 +11.4% 36,118 Revenues 3.138 3.237 +3.2% 5,589 5,962 +6.7% 12,240 EBITA 317 324 +2.2% 470 487 +3.6% 1,
Slide 48: Solid Financial Position as at end of June 2019
Leonardo Investor Day Solid Financial Position as at end of June 2019 Bond Dollar € mln Bond Sterling Bond Euro EIB DEBT MATURITY Term Loan Average life: ≈ 5.5 years (1) Repayment Conditions of The Term Loan Facility is characterised by a 5 years bullet repayment; the EIB New Debt Instruments financ
Slide 49: Availability of adequate committed liquidity lines as at end of June 2019
Leonardo Investor Day Availability of adequate committed liquidity lines as at end of June 2019 • In order to cope with possible € mln Undrawn at 30 June 2019 As of 30 June 2019 swings in financing needs, Leonardo can leverage: o 30 June cash balance of €1.2 Bn o Credit lines worth €2.5 Bn (confirme
Slide 50: Safe Harbor Statement
Leonardo Investor Day 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 stat
Slide 51: Contacts
Contacts Raffaella Luglini Chief Stakeholder Officer raffaella.luglini@leonardocompany.com Valeria Ricciotti Manuel Liotta Head of Investor Relations and Credit Rating Agencies Head of Sustainability +39 06 32473.697 +39 06 32473.666 valeria.ricciotti@leonardocompany.com manuel.liotta@leonardocompan