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Group results and financial position

Key performance indicator (“KPI”)

 € millions20162015Change
New orders19,95112,37161.3%
Order backlog34,79828,79320.9%
EBITDA margin15.9%14.4%1.5 p.p.
ROS10.4%9.3%1.1 p.p.
EBIT margin8.2%6.8%1.4 p.p.
Net result before extraordinary transactions545253115.4%
Net result507527(3.8%)
Group net debt2,8453,278(13.2%)
ROI16.9%15.7%1.2 p.p.
ROE12.6%6.2%6.4 p.p.

Please refer to the section entitled “Non-GAAP performance indicators” for definitions”.

From 2014 the Group data no longer include the contribution given by the Joint Ventures invested in by the Group (which mainly include ATR in the Aeronautics sector, MBDA in the Electronics, Defence and Security Systems sector and JVs in the Space sector). The Group’s business conducted through the JVs and their strategic and financial importance remain unchanged, while for reporting purposes the JV’s contribution is only recognised at the level of profitability ratios (EBITA, EBIT and Net Result) as a result of the valuation at equity and, from a financial point of view, limited to the dividends collected. In 2016 the main Group’s JVs recorded total revenues of €bil. 2.9 as concerns Leonardo’s share: as a result, the Group’s aggregate pro-forma revenues come to about €bil. 14.9.

The 2016 results, which were particularly significant from the point of view of both commercial and business and financial performance, confirm the validity of the guidelines set out in the Industrial Plan prepared during 2014, which have led the Leonardo Group to mostly focus on its core business and have made it definitely stronger, despite the difficult situation of some target markets, including the civil aviation segment of Helicopters. The actions taken in the implementation of this plan have allowed the successful completion of the first phase of the project involving the reorganisation and relaunch of the Group. Leonardo is now a “new” Group, with a new brand, which is focused on its core business, has adopted a more effective and efficient governance structure and is characterised by an increasingly growing cash generation capacity, and, consequently, by a debt level that is most appropriate to its size. Finally, the Group is now able to achieve financial results that are highly considerable, in line with the main competitors, thanks to the first significant benefits arising from the actions taken to reduce costs and improve industrial processes. These actions were accompanied by successful sales result, while continuing to be strictly selective in acquiring new orders, mainly in Electronics sector, with a book-to-bill of higher than 1.2 during the two-year period from 2015 to 2016, and the EFA Kuwait contract, which is the largest order gained during the life of the Group.

These acquisitions, together with the full implementation of the actions taken during the three-year period from 2014 to 2016, represent a further step forward in the path to growth outlined in the new Industrial Plan covering the years from 2017 to 2021. The expectations are that Leonardo will continue to pursue its growth through an improved market coverage, based on a global footprint and a more competitive offer, and through actions targeted at its internal and external growth in its core businesses, with the support of an increasingly greater industrial efficiency.

Before analysing the results in more details, the main aspects of the EFA contract are described below, together with most significant events that occurred during the current financial year:

  • EFA Kuwait contract. This contract includes the supply of the EFA aircraft in their most advanced configuration and equipped with the E-scan electronic scanning radar system (developed by the European consortium EuroRADAR, led by Leonardo), as well as supplies in the sectors of logistics, operational support and training for flight crews and ground staff, which will be provided in collaboration with the Italian Air Force. The agreement also includes the upgrading of the infrastructures in Kuwait which are necessary for the operations of the aircraft. The contract is worth €bil. 7.95, with an economic impact that is negligible in 2016 and then gradually increasing and particularly significant starting from 2019 and is expected to be completed in about eight years. In financial terms, the effect arising from the collection of the contract advance entails an improvement of about €mil. 600 in the FOCF in the two-year period from 2016 to 2017, while the subsequent years will be affected by the absorption of this phenomenon associated with the working capital requirements arising from a peak in production activities. As a result of this acquisition, the Group updated its 2016 forecasts during the month of May, in terms of orders, cash flows and Net Debt, which had been initially made at the time of the preparation of the 2015 financial statements.
  • The transition to the One Company. On 1 January the transactions became effective in legal terms, which involved the concentration in Leonardo of the corporate business areas involved in the process of turning the companies into divisions, with the full entry of Leonardo into operation as a One Company. The Group is now structured into seven divisions (Helicopters, Aircraft, Aerostructures, Airborne & Space Systems, Land & Naval Defence Electronics, Defence Systems, Security & Information Systems), which have been provided with powers and resources so as to ensure a complete end-to-end management of the related scope of business, with consequent full responsibility of the relevant income statement and which operate, together with DRS, subject to a proxy regime, and the entities outside the One Company perimeter (mainly the JVs) within four sectors (Helicopters, Aeronautics, Electronics, Defence & Security Systems, Space) which are assigned coordination functions and tasks. To complete the well-known concentration of the Italian operations into Leonardo S.p.a., on 23 June 2016 the Board of Directors of Leonardo approved the plan involving the merger of Sirio Panel S.p.A. (a directly and wholly owned subsidiary) by incorporation into Leonardo, which became effective on 1 January 2017. Finally, in accordance with the objective of concentrating its business in the United Kingdom as well, Leonardo’s operations in the United Kingdom were combined into a single legal entity, named Leonardo MW Limited, between the end of 2016 and the beginning of 2017;
  • From Finmeccanica to Leonardo. Consistently with the implementation of the new Organisational and Operational Model of the One Company and the simultaneous replacement of the previous financial holding model, the Shareholders’ Meeting held on 28 April approved the change of the company name to “Leonardo – Società per azioni” (“Leonardo S.p.a.” in an abridged form). The new company name became effective on 4 May 2016.

The 2016 results showed the following aspects:

  • a significant increase in orders compared to 2015 (+61%), mainly as a result of the acquisition of the contract for the supply of 28 Eurofighter Typhoon aircraft to the Kuwaiti Ministry of Defence, for an overall value of about €bil. 7.95;
  • a further growth in operating profits, with an increase in the EBITDA margin from 14.4% to 15.9% and in the ROS from 9.3% to 10.4%, thanks to improvements reported in all sectors and stable results in the Helicopters sector, despite the difficulties encountered in target markets. This expansion allowed an increase of 11%, 4% and 2%, respectively, in EBIT, EBITA and EBITDA compared to the previous year, despite a decrease in revenues (-8%);
  • a net result before extraordinary transactions which more than doubled compared to 2015 (+115%), thanks to improved EBITA, a reduced volatility of costs excluded from EBITA and a reduction in financial costs and a lower tax impact;
  • a significant improvement in return on invested capital, which showed an increase of 100 bps from 15.9% to 16.9%;
  • a sharp improvement in the cash flow for the period, which recorded a more than doubled FOCF (+130%) compared to 2015, as a result of the collection of the first advance payment on the EFA Kuwait contract;
  • a reduction in the Group’s Net Debt (- 13%), which benefitted from an improved cash performance for the period, despite significantly negative exchange differences. This improvement and a greater financial soundness allowed a further reduction in the debt-to-equity, which returned to less than 1 from 2015, equal to 0.65 in 2016.

These improvements are even more significant when they are compared to the results posted in 2013, before the implementation of the actions described above. In fact, as shown by the charts reported below:

  • EBITA showed an increase of more than 40%, with an improved ROS of 400 bps;
  • Profitability ratios (EBITA per capita) showed a significant improvement, with an increase of about 70% (from €th. 16 to 27);
  • These improvements also impacted on the return on invested capital, which increased by more than 500 bps, from 11.6% in 2013 to the present 16.9%;
  • the net result before extraordinary transactions, which in 2013 had been heavily negative, went back to the highs throughout the three-year period, going up to €mil. 545 in 2016;
  • in financial terms, FOCF posted a positive result during the three-year period, showing a gradual and rapid growth of up to €mil. 706 in 2016 against a negative result of €mil. 220 posted in 2013. The Group’s debt showed a decrease of about 30%, despite significantly negative exchange differences, as a result of its fresh capacity to generate cash, as well as of the completion of the disposals in the Transportation sector.


Net result before extraordinary transactions


Group net debt

The primary changes that marked the Group’s performance compared with that of the previous period are described below. A more thorough analysis can be found in the section covering the trends in each business segment. In this regard, it should be noted that, consistently with the new organisation of the Group, the reporting by sector has been changed, with the consequent restatement of the comparative position of Electronics, Defence and Security Systems a sector in which the Defence Systems has converged (previously constituting a sector in itself).

31 December 2016
€ millions

New ordersOrder
Electronics, Defence & Security Systems6,72611,8405,46855810.2%77214.1%
Other activities88174327(160)(48.9%)(101)(30.9%)

31 December 2015
€ millions

New orders


Electronics, Defence & Security Systems6,97411,1165,6565129.1%75013.3%
Other activities110215298(211)(70.8%)(153)(51.3%)

% ChangeNew orders




Helicopters(4.4%)(9.3%)(18.8%)(22.9%)(0.7) p.p.(20.2%)(0.3) p.p.
Electronics, Defence & Security Systems(3.6%)6.5%(3.3%)9.0%1.1 p.p.2.9%0.8 p.p.
Aeronautics483.5%112.4%0.4%11.2%1.1 p.p.10.4%1,9 p.p.
Other activities(20.0%)(19.1%)9.7%24.2%21.9 p.p.34.0%20.4 p.p.
Total61.3%20.9%(7.6%)3.6%1.1 p.p.2.2%1.5 p.p.

Commercial performance

In 2016 new orders showed considerable growth, attributable to the abovementioned contract for the EFA supply to Kuwait. Net of this acquisition, the performance for the period also showed an increase in the Aeronautics sectors, against a slight decline in the sectors of Electronics, Defence and Security Systems, which was attributable in particular to the depreciation of the Pound against the Euro, and Helicopters, which was attributable to the persistent difficulties in the Oil&Gas segment and in other civil aviation markets, at a time that was also characterised by the launch of new products. In particular, the growth in the Aeronautics sector was attributable to the order for nine M346 trainer aircraft for the Italian Air Force, which had been postponed from 2015 and higher orders for ATR and B787 aircraft in the Aerostructures division.

The book-to-bill ratio was equal to 1.7, as a result of the abovementioned EFA order. The order backlog, considered in terms of its workability, ensures a coverage of about three years of production for the Group. The book-to-bill posted a result that was greater than 1 in all the sectors, thus confirming the positive commercial performance of the entire Group, even without taking account of the EFA contract.

Business performance

Revenues recorded a decrease of €mil. 993 compared to 2015, which was mainly attributable to the abovementioned difficulties encountered in the sector of Helicopters and, to a lesser extent, to a decline in the sectors of Electronics, Defence and Security Systems, which was attributable to a negative exchange rate effect and to the review of DRS’s scope of business that occurred during the second half of 2015. The profitability indicators showed an improvement supported by the results recorded in the Electronics sector, which benefitted from significant improvements arising from reorganisation actions, as well as by the good results recorded in the Aeronautics sector – thanks to an improvement in the Aerostructures Division, which were able to setoff, together with an improvement in other operations, the decline recorded in the Helicopters sector arising from the abovementioned lower volumes. Specifically, EBITDA and EBITA showed an increase of 2.2% and 3.6% respectively compared to 2015, while EBIT showed an even more considerable increase (+11.1%), as a result of the lesser impact of restructuring charges and non-recurring costs.

The net result before extraordinary transactions, equal to €mil. 545 compared with €mil. 253 in 2015, more than doubled compared to 2015 (+115%), due to the mentioned rise in EBIT, a reduced tax rate and lower financial costs, which included costs (€mil. 48) relating to the buy-back transactions on a portion of the Group’s bond issues in 2015. The further improvement in financial costs was attributable to lower interest arising from this transaction, as well as from exchange difference, which also positively affected the fair value through profit or loss from derivatives. Vis-à-vis this increase in the net result before extraordinary transactions, the result from extraordinary transactions is less material compared to 2015 (€mil. 312), as the comparative period had benefitted from a significant gain of €mil. 274 obtained from the disposals of operations to Hitachi in the Transportation sector. Conversely, financial year 2016 was affected by the effects arising from the reorganisation of operations carried out with Sukhoi in the Aeronautics sector and from the disposal of the Environmental business of DRS, net of the capital gain from the disposal of FATA (negative in the amount of €mil. 38). Therefore, the net result passed from €mil. 527 to €mil. 507, while the overall result increased, excluding the share attributable to minority interests, from €mil. 487 to €mil. 505.

Below is shown the income statement for the two periods compared:

€ millionsNotes20162015Change%Change
Revenues 12,00212,995(993)(7.6%)
Purchase and personnel expense(*)(10,396)(11,448)  
Other net operating income/(expenses)(**)658  
Equity-accounted strategic JVs(***)295261  
EBITDA 1,9071,866412.2%
EBITDA margin 15.9%14.4%1.5 p.p. 
Amortisation, depreciation and impairment losses(****)(655)(658)  
EBITA 1,2521,208443.6%
ROS 10.4%9.3%1.1 p.p. 
Non-recurring income/(costs) (71)(112)  
Restructuring costs (102)(114)  
Amortisation of intangible assets acquired as part of business combinations (97)(98)  
EBIT 9828849811.1%
EBIT margin 8.2%6.8%1.4 p.p. 
Net financial income/(expenses)(*****)(279)(438)  
Income taxes (158)(193)  
Net result before extraordinary transactions 545253292115.4%
Net result related to discontinued operations and extraordinary transactions(******)(38)274  
Net result 507527(20)(3.8%)


Notes to the reconciliation between the reclassified income statement and the statutory income statement:
(*) I ncludes “Purchases and Personnel expense” (net of restructuring costs of non-recurring costs) and “Accruals (reversals) for final losses on orders”.
(**) Includes the net amount of “Other operating income” and “Other operating expenses” (net of restructuring costs, impairment of goodwill, non-recurring income/(expense) and accruals (reversals) for final losses on orders).
(***) Includes the effects of the valuation, classified under the “Share of profits (losses) of equity-accounted investees”, of strategic investments only.
(****) Includes “Amortisation, depreciation and impairment losses”, net of the amortisation rates referable to intangible assets acquired as part of business combinations and of write-downs regarded as “Non-recurring costs”.
(*****) Includes “Financial income”, “Financial expense” (net of the gains (losses) relating to extraordinary transactions) and “Share of profits (losses) on equity-accounted investees” (net of the results of strategic joint ventures).
(******) Includes “Profit (loss) from discontinued operations” - relating to disposals in the Transportation sector in 2015 equal to €mil. 274 - and “Gains (losses) relating to extraordinary transactions (key acquisitions and disposals)”.

Financial performance

€ millions20162015Change% Change
Funds From Operations (FFO) (*)1,3621,446(84)(5.8%)
Change in working capital(229)(596)  
Cash flows from ordinary investing activities (**)(427)(543)  
Free Operating Cash Flow (FOCF)706307399130.0%
Strategic transactions (***)-836  
Change in other investing activities (****)(10)(19)  
Treasury shares purchase(35)(3)  
Net change in loans and borrowings(237)(573)  
Dividends paid(4)-  
Net increase/(decrease) in cash and cash equivalents420548  
Cash and cash equivalents at 1 January1,7711,495  
Exchange rate differences and other changes(24)18  
Cash and cash equivalents at 1 January of discontinued operations-(290)  
Cash and cash equivalents at 31 December2,1671,771  


Notes to the reconciliation between the reclassified cash flow and the statutory cash flow:
(*) Includes “Cash flows used in operating activities” (net of “Change in working capital” and debt payments pursuant to Law 808/1985) and dividends collected.
(**) Includes “Cash flow generated from (used in) investing activities, net of debt payments pursuant to Law 808/1985 and dividends collected.
(***) Includes “Sales on Transportation segment” and the share of “Other investing activities” classified as “Strategic transactions”.
(****) Includes “Other investing activities” (net of dividends collected and operations classified as “Strategic transactions”).

The cash performance showed a considerable increase compared to 2015, with a particular improvement in the sectors of Aeronautics (in particular as a result of the collection of the first advance payment relating to the EFA Kuwait contract) and Electronics, Defence and Security Systems which was partially offset by the performance recorded in the sector of Helicopters. FOCF posted an overall positive result of €mil. 706 (€mil. 307 in 2015), which more than doubled compared to 2015 (+130%) as a result of cash flows generated from operating activities and, to a lesser extent, to lower investments.

This improvement in performance had a positive impact on the overall value of the Group net debt, which decreased by 13% compared to 31 December 2015, despite significantly negative exchange differences arising from the translation of the items expressed in GBP and, to a lesser extent, in USD. Compared to 31 December 2015, there were the following changes, which were also affected by the buy-back of treasury shares serving incentive plans:


Net invested capital showed a decrease as a result of a reduction in net working capital, as well as in fixed assets, arising from the exchange rate effect on assets and liabilities denominated in GBP.

€ millionsNotes31 December 201631 December 2015
Non-current assets 12,11912,558
Non-current liabilities (3,373)(3,676)
Capital assets(*)8,7468,882
Inventories 4,0144,337
Trade receivables(**)5,9656,375
Trade payables(***)(9,295)(9,962)
Working capital 684750
Provisions for short-term risks and charges (792)(736)
Other net current assets/(liabilities)(****)(1,434)(1,320)
Net working capital (1,542)(1,306)
Net invested capital 7,2047,576
Equity attributable to the Owners of the Parent 4,3574,280
Equity attributable to non-controlling interests 1622
Equity 4,3734,302
Group net debt 2,8453,278
Net (assets)/liabilities held for sale(*****)(14)(4)

Notes to the reconciliation between the reclassified and the statutory statements of financial position:
(*) Includes all non-current assets (for 2015 net of “Fair Value of the residual stake in Ansaldo Energia”, which became a current item in 2016) and all non-current liabilities, net of “Non-current loans and borrowings”, respectively.
(**) Includes “Contract work in progress”.
(***) Includes “Progress payments and advances from customers”.
(****) Includes “Income tax receivables”, “Other current assets” (excluding “Hedging derivatives in respect of debt items”), net of “Income tax payables” and “Other current liabilities” (excluding “Hedging derivatives in respect of debt items”).
(*****) Includes the net amount of “Non-current assets held for sale” and “Liabilities associated with assets held for sale”.

Group net financial debt breaks down as follows:

€ millions31 December 2016Of which 
31 December 2015Of which 
Bank debt2975938996
Cash and cash equivalents(2,167)(2,167)(1,771)(1,771)
Net bank debt and bonds2,505 3,015 
Fair value of the residual portion in portfolio of Ansaldo Energia(138) (131) 
Current loans and receivables from related parties(40)(40)(122)(122)
Other current loans and receivables(58)(58)(45)(45)
Current loans and receivables and securities(236) (298) 
Non-current financial receivables from Superjet(65)---
Hedging derivatives in respect of debt items35354141
Related-party loans and borrowings502502401399
Other loans and borrowings1046811983
Group net debt2,845 3,278 


The reconciliation with the net financial position required by CONSOB Communication no. DEM/6064293 of 28 July 2006 is provided in Note 19 to the consolidated financial statements.

In the course of the financial year the Group factored receivables without recourse for a total carrying value of approximately €mil. 1,586 (€mil. 1,262 in 2015).

To meet the financing needs for ordinary Group activities, Leonardo obtained a revolving credit facility renegotiated with a pool of Italian and international banks in July 2015 for €mil. 2,000. The terms and conditions of this agreement are described in the section “Financial Transactions”. At 31 December 2016, in the same way as at 31 December 2015, the credit line was entirely unused.

Leonardo had additional unconfirmed short-term lines of credit of €mil.725, which also were entirely unused at 31 December 2016, as well as unconfirmed, unsecured lines of credit of approximately €bil. 3.8 at such date.

Below are the key performance indicators by sector: