The Board of Directors approves 2017 results in line with expectations

Leonardo's Board of Directors, convened today under the Chairmanship of Gianni De Gennaro, examined and unanimously approved the draft of Group consolidated and Leonardo S.p.A. financial statements at 31 December 2017

Rome 14 March 2018

2018 Guidance reconfirmed, planting the seeds for growth.
€ 14 cent. dividend distribution proposed.
Signed today a contract with Qatar for more than € 3 billion in the Helicopters.

FY2017 results delivered in line with Guidance revised in January

New order intake at € 11.6 billion
Revenues at € 11.5 billion
Book to bill at 1
EBITA at € 1.07 billion and Profitability (RoS) at 9.2%
FOCF at € 537 million

Proposed dividend distribution of € 14 cent., unchanged compared to 2016

2018 expected to be a consolidation year: 2018 Guidance presented in January confirmed

Entering 2018 with strong order backlog of € 33.6 billion
Planting the seeds and investing for sustainable growth
Exploiting major benefits from Aircraft business including Eurofighter programme
Building steady improvement in world class Helicopters business
Building on solid progress within Electronics, Defence and Security Systems

Now fully focussed on executing Industrial Plan to drive long term solid and sustainable growth

Well positioned in more positive international markets expected to growth
Able to leverage «One Company» model and enhanced commercial strategy
Exploit market opportunities to drive top line growth and higher profitability
Investment plan targeted on technologies and products with the best commercial opportunities
Strict cost control and disciplined financial strategy
Stepping up cash generation from 2020

Alessandro Profumo, Leonardo CEO commented “2017 results are in line with expectations; 2018 will be a consolidation year and we are entering a new phase of solid and sustainable growth in the longer term based on top-line and profitability improvement and also on an increasing cash-flow generation from 2020. We are focused on achieving all targets of the 2018-2022 Industrial Plan with the key objective of creating value for all our stakeholders. This year we are proposing the distribution of the dividend as a fundamental element of the remuneration of the shareholder”.

2017 full year results are in line with the Guidance revised and, as expected, were affected by some non-structural issues in the Helicopters. This sector represents an outstanding business with leading product ranges in reference markets, increasing market shares in the most attractive segments and relevant growth opportunities, as highlighted in the 2018-2022 Industrial Plan. The Plan is based on solid and sustainable long-term growth of all the Group's key businesses; Leonardo will be able to exploit its favourable market positioning, the solid order portfolio (over € 33.5 bn as at 31 December 2017) and the «One Company» model through the application of a new commercial strategy combined with a rigorous cost control and selection of investments and a disciplined financial strategy focused on cash generation, all aimed at achieving long-term and sustainable growth.

2017 results highlights are as follows:

New Orders: amounted to EUR 11,595 million (-3% vs 2016 after adjusting for the effecting of the major EFA Kuwait contract of € 7.95 bn. In 2016). The overall slight decrease was mainly attributable to the abovementioned difficulties that affected the sector of Helicopters and to the decline recorded in the sector of Electronics, the results of which were also affected by the negative exchange rate effect, in particular on the pound sterling.
Order Backlog: amounted to EUR 33,578 million (-3.5% vs. 2016). The order backlog ensures coverage of production of just under 3 years (based on 2017 revenues).
Revenues: amounted to EUR 11,527 million, a slight decrease (-4%) compared to 2016, also due to the effect of an unfavourable exchange rate arising from the conversion of revenues into GBP and, to a lesser extent, into USD (about € 160 mln.). Helicopters revenues felt because of delayed production on some product lines, as well as by the abovementioned exchange rate effect. Electronics and Aeronautics (the latter began to benefit from revenues arising from the EFA Kuwait programme) posted revenues in line with 2016. The book-to-bill ratio was equal to 1, in line (excluding the effect of the EFA Kuwait contract) with 2016.
EBITA: amounted to EUR 1,066 million, showed a decrease of 14.9% compared to 2016, with a decline of 1.2% in ROS, affected by lower volumes and profits in the sector of Helicopters, as well as, to a lesser extent, by the results achieved in the sectors of Aeronautics and Electronics, against a lower loss recorded in the segment of other activities compared to 2016.
EBIT: amounted to EUR 833 million; the decline in EBITA was partly absorbed by a reduction in non-recurring costs and costs for restructuring (- € 47 mln.), thus entailing a decrease of € 149 mln. in EBIT compared to 2016.
Net Result before extraordinary transactions: amounted to EUR 274 million, showed a decline compared to 2016, which was due to the performance of EBIT, as well as to higher financial costs. The increase in financial costs of € 157 mln. compared to 2016 was attributable to costs (€ 97 mln.) arising from the buy-back transactions on a portion of the Group’s bond issues (these transactions are largely dealt with in the section on “Financial transactions”); 2016 financial year also benefitted from positive exchange differences which were also reflected in the fair values of the derivatives, with a delta of + € 75 mln. compared to 2017. The Group’s tax position was affected by the US taxation system reform launched by Trump’s government, as a result of which deferred tax assets recorded in the United States of America were redetermined on the basis of the new federal tax rate (decreased from 35% to 21%), with a charge of about € 50 mln. accrued in the 2017 financial year. While excluding this effect, the tax rate showed an improvement in 2017, which was attributable to a reduction in the IRES (Corporate Income) tax rate from 27.5% to 24% in Italy.
Net Result: amounted to EUR 274 million, equal to the net result before extraordinary transactions, in the absence of extraordinary transactions (on the contrary, the 2016 financial year was affected the transfer of operations carried out with Sukhoi on the Superjet programme in the Aeronautics sector and from the disposal of the Environmental business of DRS, net of the capital gain from the disposal of FATA).
Free Operating Cash Flow (FOCF): amounted to EUR 537 million, posted a positive result of € 537 mln., showing a deterioration compared to 2016 (€ 706 mln.), which had benefitted from a lower level of investment spending.
Group Net Debt: amounted to EUR 2,579 million, an improvement of 9% compared to 2016, despite the outlays arising from the acquisition of Daylight Solutions and of the additional stakes of Avio (for a total of € 168 mln.), as well as of the payment of dividends (€ 81 mln.). The negative change in loans and borrowings was attributable to the repayment of the debenture loan due December and to the repurchases of bonds made in 2017, net of the placement of new bonds of € 600 mln.

Leonardo's Board of Directors has resolved to propose to the Shareholders' Meeting the distribution of a dividend of € 14 cent, from the profit of the year 2017, gross of any withholding taxes. This dividend would be payable as of May 23, 2018, with ex-dividend date on May 21, 2018 and record date (ie the date of entitlement to the dividend payment ) May 22, 2018.

The above with reference to each share of common stock that will be outstanding on the ex-dividend date, excluding the treasury shares held on that date, without prejudice to the regime of those that will be effectively assigned, pursuant to the current incentive plans, during the current year.