Leonardo S p A : 2021 Results (Comunicato stampa)

PRESS RELEASE

LEONARDO: REVENUES OF € 14.1 BN (+5%), EBITA OF € 1,123 MLN (+20%), NET RESULTS OF

• 587 MLN (+142%), FOCF OF € 209 MLN (+423%), NEW ORDERS OF € 14.3 BN (+4%). DOUBLING FOCF GUIDANCE.

Proposed dividend at € 0.14 per share

• Strong Defence-Governmental businesses accounting for 88% of Group Revenues
• Backlog of € 35.5 billion
• Book to Bill at 1x
• RoS at 7.9% (+0.9 p.p.)
• Group Net Debt of € 3.1 billion (-6%)
• CO2 emissions reduced by 23%
• Increased the hiring of young people and women with degrees in STEM disciplines
• 50% of our financial sources now ESG linked, with objectives fully aligned with our strategy and Long-Term Incentive Plan
• Aerostructures restructuring and relaunch plan presented in November

FY 2022 Guidance

Based on the current assessment of the effects deriving from the geopolitical and global health situation on the supply chain and the global economy and assuming no additional major deterioration

• Orders ca. € 15 billion
• Revenues € 14.5 - 15 billion
• EBITA € 1,180 - 1,220 million
• FOCF ca. € 500 million
• Group Net Debt ca. € 3.1 billion

Strong fundamentals at the basis of the medium / long-term objectives

Based on the current assessment of the effects deriving from the geopolitical and global health situation on the supply chain and the global economy and assuming no additional major deterioration

• Back to our growth path
• Mid-singledigit New Orders and Revenues CAGR
• High-singledigit EBITA CAGR
• Confirming ca. € 3 billion cash generation over 2021-2025,
• Group cash conversion rate >70% in 2024-2025

Rome, 10 March 2022 - Leonardo's Board of Directors, convened today under the Chairmanship of Luciano Carta, examined and unanimously approved the draft of Group consolidated and Leonardo S.p.A. financial statements at 31 December 2021.

Alessandro Profumo, Leonardo CEO, stated "In these times of much increased geo-political uncertainties, we are monitoring closely the situation and we are aligned to government policies across our geographies. We remain focussed on meeting the needs of our customers and we are well positioned given our strong business fundamentals. 2021 was an important year. We delivered FOCF above Guidance, doubling the expectations. We are back to our growth path and above pre-covid levels, excluding Aerostructures for which a restructuring and relaunch plan is running. Our Defence and Governmental businesses remain strong and account for 88% of 2021 Revenues, and we are seeing signs of recovery in our civil aeronautics business. We are fully committed to ESG: we have reduced CO2 emissions by 23% and increased the percentage of women hired with STEM profiles and of young people under 30, 50% of our financial sources are ESG linked, with objectives fully aligned

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with our strategy and Long-Term Incentive Plan. Based on the results delivered, we have also proposed the resumption of our dividend. Our strengths and core fundamentals are the basis of our confidence in the medium-long term: we are confirming our target of generating ca. cumulative €3bn of cash flow over 2021-2025, with a significant step up in 2022 and a cash conversion rate of ca. 70% in 2022, if we exclude Aerostructures, and >70% at Group level, including Aerostructures, in 2024-2025. The results achieved and the targets we have set show once again our focus on creating sustainable value for all our stakeholders".

During the 2021 financial year Leonardo continued and strengthened the path to growing its business and increasing profitability as envisaged in the financial statements at 31 December 2020, showing a gradual and continuous improvement in the Group's industrial performance.

Despite the continuation of the effects of the pandemic and of the consequent government rules restricting movements in 2021 too, Leonardo confirmed resilience with a growing commercial, industrial and financial performance, even compared to the pre-pandemic period, thanks to the strength and diversification of its portfolio of products and solutions and its widespread presence all over the world, excluding the civil aviation component of the Aeronautics sector, which was still affected by the continuation of the abovementioned effects.

The volume of new orders continued to stand at excellent levels, thus confirming the good competitive positioning of the Group's products and solutions, with Revenues rising in all the main Business areas and profitability increasing in all the Sectors, with the exception of the civil aviation component, which continued to be affected by low volumes of demand from the main market operators.

Cash flow recorded a significant improvement, reaching double the amount forecast at the beginning of the year, with a consequent benefit in terms of lower Group Net Debt compared to expectations.

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2021 Key Performance Indicator

	Group			2020		2021			Chg.		Chg. %
	(Euro million)
	New orders	13,754	14,307		553	4.0%
	Order backlog	35,516	35,534		18	0.1%
	Revenues	13,410	14,135		725	5.4%
	EBITDA(*)	1,458	1,626		168	11.5%
	EBITA (**)	938	1,123		185	19.7%
	ROS	7.0%	7.9%			0.9 p.p.
	EBIT (***)	517	911		394	76.2%
	EBIT Margin	3.9%	6.4%			2.5 p.p.
	Net result before	241	587		346	143.6%
	extraordinary transactions
	Net result	243	587		344	141.6%
	Group Net Debt	3,318	3,122		(196)	(5.9%)
	FOCF	40	209		169	422.5%
	ROI	11.3%	12.4%			1.1 p.p.
	ROE	4.5%	10.0%			5.5 p.p.
	Workforce	49,882	50,413		531	1.1%

1. EBITDA this is EBITA before amortisation, depreciation (net of those relating to goodwill or classified among "non-recurring costs") and adjustments impairment.

1. EBITA is obtained by eliminating from EBIT the following items: any impairment in goodwill; amortisation and impairment, if any, of the portion of the purchase price allocated to intangible assets as part of business combinations, restructuring costs that are a part of defined and significant plans; other exceptional costs or income, i.e. connected to particularly significant events that are not related to the ordinary performance of the business.

1. EBIT is obtained by adding to earnings before financial income and expense and taxes and taxes the Group's share of profit in the results of its strategic Joint Ventures (GIE-ATR, MBDA, Thales Alenia Space and Telespazio).

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Commercial Performance

The following graphs show the performance of the Group's ratios in the last 4 years; they highlight the continued growth achieved by the Group, with results above pre-pandemic levels, net of the Covid-19 impact on the civil aviation segment. It should be noted that the figure of New orders in 2018 was particularly high thanks to the acquisition by the Helicopters Division in that same year of the NH 90 Qatar contract worth €bil. 3.

In light of the aforementioned considerations, below is also provided the Pro-forma EBITA figure, excluding the Aerostructures component:

• New Orders, amounted to EUR 14,307 million confirming the growth trend recorded throughout 2021. The commercial performance of the Aeronautics Sector was excellent (+15%), with the Aircraft component that more than offset the expected downturn in the civil aviation business component. There was also growth in the Defense Electronics & Security sector, which benefitted from a significant positive performance by the European component of the sector, as will be seen below. Helicopters recorded new orders that remained substantially in line with the previous year, due to having gained the IMOS (Integrated Merlin Operational Support) order during the comparative period
• Backlog, amounted to EUR 35,534 million, ensures a coverage in terms of equivalent production equal to about 2.5 years
  The value of New Orders showed an increase of 4% compared with 2020 and of 1.4% compared with 2019.

Business Performance

• Revenues, amounted to EUR 14,135 million, the growth trend observed since the beginning of 2021 continued throughout the year, driven by the performance of the European component of Defense Electronics & Security, the Aircraft component of Aeronautics and - to a lesser extent - Helicopters. The aforesaid growth trend was only partly mitigated by the expected reduction in Aerostructures, which continued to be affected by the fall in production rates on the B787 and ATR programmes. Revenues showed an increase of 5.4% compared with 2020 and of 2.5% compared with 2019
• EBITA, amounted to EUR 1,123 million, (with a ROS of 7.9%) recorded a significant growth as a whole (20%), with a substantial increase in all business sectors, as a result of higher revenues and improved profitability, to which must also be added a higher contribution on the part of all the strategic Joint Ventures, with particular regard to the Space Alliance manufacturing sector and to the GIE ATR, due to a gradual resumption of deliveries. The pro-forma EBITA value of the Aerostructures component showed a sharp increase over 2020 (29.5%) and compared with 2019 (5.1%)

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• EBIT, amounted to EUR 911 million, showed a very sharp increase of more than 76% compared to
  2020 (€mil. 517), despite the Group continued to incur costs, for amounts substantially in line with the previous year, in complying with the Government's guidelines on health protection and the prevention of the spread of Covid-19. Furthermore, EBIT was affected by the impact of restructuring costs sustained under the agreements governing the early retirement of the Aerostructures division's workforce on a voluntary basis (approximately €mil. 70), as part of the broader reorganisation plan involving the Division, as well as of non-recurring costs associated with the settlement of the Indian case, following which Leonardo may gain a new commercial positioning in the area
• Net Result before extraordinary transactions, which posted a profit of EUR 587 million, recorded an increase of more than 140%, benefitting from the EBIT performance, as well as from a lower impact of financial costs; during the comparative period, the latter were heavily affected by the component linked to hedging the exposure to exchange risk and by the costs associated with the outstanding bond issues, which decreased during the period under consideration following a reduction in the bond exposure itself. The Net Result was also affected by the tax benefits arising from joining the tax concession schemes provided for in article 110 of Legislative Decree 104/2020 governing the realignment of tax values of goodwill

Financial performance

• Free Operating Cash Flow (FOCF), equal to EUR 209 million, showed a significant improvement compared to 2020 (€mil. 40), confirming the positive trend that had already been observed during the first three quarters of the year
• Group Net Debt, of EUR 3,122 million, showed an improvement compared to 31 December 2020
  (€mil. 3,318), mainly as a result of the positive FOCF result, which also included the effects of strategic investments made during the period (€mil. 19) and of the recognition of liabilities for new lease agreements entered into in the year for €mil. 63

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