Slide 1: FY 2016 Results & 2017-2021 Industrial Plan
FY 2016 Results & 2017-2021 Industrial Plan Mauro Moretti CEO & General Manager Gian Piero Cutillo Chief Financial Officer London, 16 March 2017
Slide 2: 2013-2016 Key Achievements; 2016 Results and Outlook; 2017-2021 Industrial Plan
2013 – 2016 KEY ACHIEVEMENTS (CEO and General Manager) 2016 RESULTS AND OUTLOOK (CFO) 2017-2021 INDUSTRIAL PLAN: DEVELOPMENT AND GROWTH (CEO and General Manager)
Slide 3: Key messages
Key messages Great evidence of the good progress we have made on our journey We have changed We have delivered on promises and targets….. We are in a better place …. And we are now going to move forward …. and develop and grow 2016 was another year of very good performance…That enables us to restart
Slide 4: Delivering on our promises: Key achievements 2013-2016
Delivering on our promises Key achievements 2013-2016 ASSESS STRENGTHEN DEVELOPMENT & GROWTH 4Q 2014 2015 – 2016 2017 - 2021 Detailed analysis of competitive positioning and performance of all business/ product lines INDUSTRIAL New Organisational and Operating Model and new EFFICIENCY «Leonardo» bra
Slide 5: So this is what I told you we would do in January 2015
So this is what I told you we would do in January 2015… Profitability Below the line Working capital Investments Much lower volatility + Net income FOCF Net Equity + Net Debt More balanced and flexible Capital Structure to support DEVELOPMENT 5
Slide 6: ... and this is what we delivered
… and this is what we delivered 2016 vs. 2013 Profitability EBITA +43% From €878mln to €1,252mln RoS +400bp From 6.4% to 10.4% SG&A -25% €1,278mln to €961mln Below the line Operating WC Investments Much lower volatility -13% + -56% -368% From ca. €6bn to ca €5.2bn From €962mln to €427mln From €809ml
Slide 7: Finmeccanica in 2013
Finmeccanica in 2013* EBITA (€M) - EBITA% ROS% EBITA 7 *Space sector consolidated under the Equity Method
Slide 8: Leonardo today
Leonardo today* EBITA (€M) - EBITA% ROS% EBITA 8 *Space sector consolidated under the Equity Method
Slide 9: 2013-2016 Key Achievements; 2016 Results and Outlook; 2017-2021 Industrial Plan
2013 – 2016 KEY ACHIEVEMENTS (CEO and General Manager) 2016 RESULTS AND OUTLOOK (CFO) 2017-2021 INDUSTRIAL PLAN: DEVELOPMENT AND GROWTH (CEO and General Manager) 9
Slide 10: Key messages
Key messages Strong delivery of Industrial Plan Continued benefits from a stronger, more solid and better balanced portfolio ca.€20bn of new orders, book to bill at 1.7x Aeronautics and Electronics, Defence & Security Systems continue to outperform vs expectation Helicopters ended 2016 strongly, eve
Slide 11: New Orders
New Orders All the Sectors with book-to-bill above 1 - 4.4% -3.6% +483.5% +61.3% % Ch. vs. FY2015 € Mln Net of ca. €400mln of negative exchange rate FY 2016 New orders benefitting from the €7.95bn Eurofighter Kuwait contract Also excluding the EFA-Kuwait, Aeronautics (M346, ATR and B787) increases Y
Slide 12: Revenues
Revenues Lower YoY due to change in perimeter, shortfall in Helicopters and forex - 18.8% - 3.3% +0.4% - 7.6% % Ch. vs. FY2015 € Mln Net of ca. €300mln of negative exchange rate FY 2016 12
Slide 13: Profitability improvement: EBITDA
Profitability improvement EBITDA improving trend continues, margin 150bp higher YoY - 0.3 p.p. +0.8 p.p. +1.9 p.p. + 1.5 p.p. Ch. vs. FY2015 € Mln FY 2016 EBITDA per capita +50% vs 2013, at 40k 13
Slide 14: Profitability improvement: All Sectors above 10% RoS
Profitability improvement All Sectors above 10% RoS - 0.7 p.p. +1.1 p.p. + 1.1 p.p. + 1.1 p.p. Ch. vs. FY2015 € Mln Net of ca. €30mln of negative exchange rate FY 2016 EBITA increases despite lower volumes and negative impact of €/GBP Continuous improvement in Electronics, Defence & Security Systems
Slide 15: SG&A
SG&A Target exceeded and further optimisation to come SG&A reduction target of >10% from 2013 to 2015 exceeded, leveraging on cost cutting initiatives Additional 7% reduction achieved in 2016 vs 2015 € Mln % of Revenues Further optimisation expected in 2017-2021 thanks to the full implementation of
Slide 16: Net Result Improvement
Net Result Improvement More than doubled on lower below the line and net financial expenses FY2015 FY2016 +3.6% +11.1% +115.4% € Mln € Mln 1,252 1,208 982 884 545 253 “Below the line” materially reduced, with volatility fully under control Significant reduction of net financial expenses Lower financ
Slide 17: Net Invested Capital streamlining
Net Invested Capital streamlining Target exceeded on investments and on track to deliver Working Capital reduction -13% Working Capital net of Customer Advances Customer Advances expected to decrease YoY (approx - On track to 6% per year), excluding EFA Kuwait deliver >15% reduction in Net of Custom
Slide 18: Balance Sheet solidity
Balance Sheet solidity Financial position and Credit Rating (as of end of December 2016) FINANCIAL POSITION Bond 4.292 EIB Loan 278 Cash Available (2.167) Other financial assets/liabilities 442 2.845 Debt maturity profile (€mil) Average life: ≈ 7 years 371 Dollar Bond 739 Sterling Bond 521 500 556 4
Slide 19: FY2017 Guidance
FY2017 Guidance New Orders: increasingly selective with tighter return criteria, to reduce execution risk and improve quality of results FY2016A FY2017E* Revenues: expected to be broadly flat EBITA: further improvement confirmed also in profitability New orders € bn 20.0 12.0 – 12.5 Below the line:
Slide 20: Development and Growth based on solid foundation
Development and Growth based on solid foundation Leonardo is now a much different Group… More focused Better balanced between Sectors With improved financial solidity … based on solid foundations for Development and Growth 20
Slide 21: 2013-2016 Key Achievements; 2016 Results and Outlook; 2017-2021 Industrial Plan
2013 – 2016 KEY ACHIEVEMENTS (CEO and General Manager) 2016 RESULTS AND OUTLOOK (CFO) 2017-2021 INDUSTRIAL PLAN: DEVELOPMENT AND GROWTH (CEO and General Manager) 21
Slide 22: The new phase: Development and Growth
The new phase: Development and Growth 2017 – 2021 Industrial Plan INDUSTRIAL CUSTOMER EFFICIENCY FOCUS LEADING SUSTAINABILITY INNOVATION Supportive market environment Strong order backlog 22 Financial flexibility
Slide 23: Strong Foundations: A supportive market environment
Strong Foundations A supportive market environment PROCUREMENT E RD&TE (2016 – 2021) – VALUES % (€ bn) CAGR 2017 - 2021 Procurement e RDT&E 425 390 360 Fonte: IHS Jane’s and Leonardo estimates Exchange rate $/€= 0,9012 2017-2021 cumulated Procurement and RDT&E Defence spending expected to grow
Slide 24: Strong Foundations: Robust Order Book
Strong Foundations Robust Order Book AERONAUTICS ELECTRONICS, DEFENCE & HELICOPTERS SECURITY SYSTEMS Eurofighter Kuwait Italian Naval Law AW Family B787 FSOM (avionic support services New Exploration and Escort for the Typhoon aircraft) helicopter IFF (Identification Friend or Foe) UK IOS and Custom
Slide 25: Strong Foundations: Capital strength to invest
Strong Foundations Capital strenght to invest Disciplined financial strategy in using our resources Investment grade Debt reduction Strategic investments Shareholders’ remuneration 25
Slide 26: Development & Growth Actions: Four Growth Pillars
Development & Growth Actions Four Growth Pillars Continuing on the efficiency path Engineering, exploiting commonalities of transversal INDUSTRIAL EFFICIENCY technologies Manufacturing, focusing on centers of excellence (CENTRES OF EXCELLENCE) Increase the centralisation of Procurement Extending uni
Slide 27: Industrial Efficiencies
Industrial Efficiencies To be leveraged from phase 1; more opportunities in phase 2 2014 – 2016 actions Further opportunities Common rules One single centralized process (register, supplier SUPPLY CHAIN portal, black list) Continue to execute on long-term efficiency PROCUREMENT Direct costs efficien
Slide 28: Customer focus
Customer focus At the heart of our growth agenda INTERNATIONALISATION CUSTOMER INTIMACY CUSTOMER FOCUS AFFORDABILITY & NEW BUSINESS COMPETITIVE MODELS PRODUCT PORTFOLIO 28
Slide 29: Core Business Growth: Aeronautics and Helicopters
Core Business Growth Opportunities in Existing Programmes AERONAUTICS HELICOPTERS Leader in trainers, also leveraging on new Becoming a technology leader to play a business models (i.e. Service) key role in the industry consolidation process Areas of excellence in proprietary Portfolio of innovative
Slide 30: Core Business Growth: Electronics, Defence & Security Systems and Space
Core Business Growth Opportunities in Existing Programmes ELECTRONICS, DEFENCE & SPACE SECURITY SYSTEMS European leader with enhanced capacity Strengthen positioning by managing of international penetration effectively the value chain Technologies and solutions in all domains Review the business mod
Slide 31: Core Business Growth Underpinned By Key Innovations
Core Business Growth Underpinned By Key Innovations Across Our Divisions MAIN MEDIUM-LONG TERM DRIVERS NETWORKED CAPABILITIES Battlefield of Things Manned-Unmanned Advanced platforms with Integration networked capabilities NEW TECHNOLOGIES Directed Energy Nano Devices Cyber Security Weapons NEW HUMA
Slide 32: Core business growth complemented by acquisitions
Core business growth Complimented by acquisitions Acquiring full control of “Sistemi Dinamici” to further HELICOPTERS strengthening the unmanned business Increase stake in Avio from 14% to about 28%, aimed at SPACE boosting the space launchers sector DEFENCE Acquisition of the US company Dayli
Slide 33: Medium-Term Targets
Medium-Term Targets Development & Growth Book to bill at ca. 1x 2017-2021 Revenues CAGR of 3%-5% driven by new orders, despite challenging markets strong backlog (i.e. large orders in Aeronautics and Electronics expected to contribute by 2018) Continuous improvement in profitability, with RoS at 11%
Slide 34: Q&A
Q&A 34
Slide 35: Sector Results
SECTOR RESULTS 35
Slide 36: FY2016 Sector results: Helicopters
FY2016 Sector results Helicopters 4Q FY % % 2016 2015 2016 2015 € Mln Change Change Orders 2,199 1,029 113.7% 3,737 3,910 (4.4%) Revenues 1,074 1,267 (15.2%) 3,639 4,479 (18.8%) EBITA 145 177 (18.1%) 430 558 (22.9%) ROS % 13.5% 14.0% (0.5) p.p. 11.8% 12.5% (0.7) p.p. Strong order intake in Q4, as ex
Slide 37: FY2016 Sector results: Electronics, Defence & Security Systems
FY2016 Sector results Electronics, Defence & Security Systems* Good commercial performance, with book to Bill at 1.2x 4Q FY % % Sharp improvement in profitability due to 2016 2015 2016 2015 benefits from Industrial Plan actions and € Mln Change Change profitability recovery in some areas Orders 2,48
Slide 38: FY2016 Sector results: Aeronautics
FY2016 Sector results Aeronautics 4Q FY % % 2016 2015 2016 2015 € Mln Change Change Orders 368 482 (23.7%) 10,158 1,741 483.5% Revenues 1,070 978 9.4% 3,130 3,118 0.4% EBITA 149 149 0.0% 347 312 11.2% ROS % 13.9% 15.2% (1.3) p.p. 11.1% 10.0% 1.1 p.p. Very good order intake even excluding the Eurofig
Slide 39: FY2016 Sector results: Space
FY2016 Sector results Space 4Q FY % % 2016 2015 2016 2015 € Mln Change Change EBITA 34 10 240.0% 77 37 108.1% Increase in Manufacturing volumes driven by Telecommunication and Earth Observation; Space Services in line with 2016 EBITA materially recovered, as expected 2017 Profitability expected in l
Slide 40: Appendix
APPENDIX 40
Slide 41: FY2016 results: Group Performance
FY2016 results Group Performance 4Q FY % % 2016 2015 2016 2015 Change Change € Mln New Orders 4,447 4,580 (2.9%) 19,951 12,371 61.3% Backlog 34,798 28,793 20.9% Revenues 3,968 3,994 (0.7%) 12,002 12,995 -7.6% EBITDA 714 692 3.2% 1,907 1,866 2.2% EBITDA Margin 18.0% 17.3% 0.7 p.p. 15.9% 14.4% 1.5 p.p
Slide 42: Development costs capitalised as intangible assets
FY2016 results Development costs capitalised as intangible assets at 31 december 2016 Self Funded Self Funded Total €mln National Security Other 01 Jan 2016 Opening Balance 1,437 520 1,957 Gross R&D capitalised 160 44 204 Depreciation and write offs -126 -65 -191 Disposals 0 0 0 Net R&D capitalised
Slide 43: Liquidity Position
FY2016 results Liquidity Position (as of end December 2016) In order to cope with possible swings in financing needs, Leonardo can leverage – 31 December cash balance of approx. €2.2Billion Availability of – Credit lines worth €2.7 Billion (confirmed and unconfirmed) adequate The Revolving Credit
Slide 44: Helicopters: revenues by customer/segment
Helicopters 2015 REVENUES BY CUSTOMER/SEGMENT 2016 REVENUES BY CUSTOMER/SEGMENT Military/Governmental CS&T /Other Military/Governmental CS&T /Other Commercial OE Commercial OE UNITS ORDERED UNITS DELIVERED 44
Slide 45: Acquisition of Daylight Solutions
Acquisition of Daylight Solutions Significant step forward in achieving the objectives of Growth and Development of the Industrial Plan 2017-2021 Leonardo DRS extends leadership in infrared technology and supply of dual-use integrated solutions for civil and military customers Leonardo DRS will pay
Slide 46: Market environment: Domestic defence budgets
Market environment Domestic defence budgets - Italy continues to decline CAGR CAGR CAGR -2,3% 0.6% 1.7% 4,7 4,3 4,1 43,6 44,2 580 600 42% 43,2 565 56% 49% 42% 56% 49% 58% 44% 51% 58% 44% 51% 2014 2016 2018 MoD MiSe Source: DPP (Documento Programmatico Pluriennale) Source: IHS Janes - Jan. 2017 Sourc
Slide 47: Market environment: European Defence Action Plan
Market environment European Defence Action Plan On 15 Dec. 2016, the European Council welcomed the "package" of initiatives presented by the European Commission known as "EDAP» (European Defence Action Plan) in order to make most effective the spending of the Member States in common defence capabili
Slide 48: What if all the NATO countries reach the 2% GDP target?
Market environment What if all the NATO countries reach the 2% GDP target? € Mln NATO countries Total 2016 Budget Δ "NATO 2% Target" Total Δ% Among the largest EU France 43,864 11,316 55,180 25.8% conuntries Italy Germany 85.5% has the largest 39,743 33,980 73,723 gap with the 2% Netherlands 8,952 8
Slide 49: A&D market dimension and sector evolution
Market environment A&D market dimension and sector evolution WORLDWIDE MARKET EVOLUTION BY MACRO-BUSINESS SECTOR (2016 - 2025) - € BN CAGR % CAGR % 2016-2021 2021-2025 Segment 628 reduction mainly 584 88 8 Elicotteri civili CIVIL HELICOPTERS 4,9 3,0 due to US market, with limited effects 8 7 10
Slide 50: Safe Harbor Statement
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 Co
Slide 51: Contacts
Investor Relations & Sustainable Responsible Investors (SRI) ir@leonardocompany.com www.leonardocompany.com/investors Contacts Raffaella Luglini Head of Investor Relations & SRI +39 06 32473.066 raffaella.luglini@leonardocompany.com Valeria Ricciotti Alessio Crosa Manuel Liotta Equity Analysts & Inv