Disclaimer
This Integrated Annual Report 2023 has been translated into English solely forthe convenience of the international reader. In the event of conflict orinconsistency between the terms used in the Italian version of the report and theEnglish version, the Italian version shall prevail, as the Italian version constitutes
the sole official document compliant with the provisions of the Commission
Delegated Regulation (EU) 2019/815.

Report on operations at 31 December 2023
TABLE OF CONTENTSGUIDE TO THE DOCUMENT ..................................................................................................................... 5
LETTER TO STAKEHOLDERS ..................................................................................................................... 8
REPORT ON OPERATIONS AT 31 DECEMBER 2023.................................................................................. 11
PART 1 – GROUP PROFILE, STRATEGY AND RESULTS .............................................................................. 12
GROUP PROFILE ....................................................................................................................................... 13
Profile ....................................................................................................................................................................... 14
Business Model ........................................................................................................................................................ 17

STRATEGY AND OUTLOOK ........................................................................................................................... 19
Trend and vision ....................................................................................................................................................... 20
Materiality Analysis ................................................................................................................................................. 25
Industrial Plan .......................................................................................................................................................... 27
Objectives and Sustainability Plan ........................................................................................................................... 29
Guidance 2024 ......................................................................................................................................................... 33

GROUP RESULTS AND FINANCIAL POSITION ..................................................................................................... 34
2023 Performance and financial results .................................................................................................................. 35
ESG performance indicators ..................................................................................................................................... 43

SEGMENT RESULTS AND OUTLOOK ................................................................................................................ 46
Key Performance Indicators by segment.................................................................................................................. 47
1. Helicopters....................................................................................................................................................... 48
2. Defence Electronics & Security ........................................................................................................................ 51
3. Aircraft ............................................................................................................................................................ 57
4. Aerostuctures .................................................................................................................................................. 61
5. Space ............................................................................................................................................................... 64"NON-GAAP" ALTERNATIVE PERFORMANCE INDICATORS .................................................................................. 68
INDUSTRIAL AND FINANCIAL TRANSACTIONS .................................................................................................... 73
OTHER INFORMATION ............................................................................................................................... 78
Other performance indicators .................................................................................................................................. 79
Related-Party transactions ...................................................................................................................................... 79
CONSOB Market Regulation no. 20249/2017, Article 15 ......................................................................................... 80
Information pursuant to articles 70 and 71 of Issuers' Regulations ........................................................................ 80

PART 2 – CONSOLIDATED NON-FINANCIAL STATEMENT (NFS) ........................................................................... 81
PART 2 – CONSOLIDATED NON-FINANCIAL STATEMENT (NFS) ............................................................... 81
GOVERNANCE.......................................................................................................................................... 82
Corporate Governance ............................................................................................................................................. 84
Responsible business conduct .................................................................................................................................. 87
Risk management .................................................................................................................................................... 94
Stakeholder engagement ....................................................................................................................................... 103

PEOPLE ................................................................................................................................................ 105
Employment protection, people wellbeing and engagement ................................................................................ 108
Diversity, equity and inclusion ............................................................................................................................... 110
Employer Branding and talent attraction .............................................................................................................. 112

2

Report on operations at 31 December 2023
Skill management and enhancement..................................................................................................................... 113
Health and safety ................................................................................................................................................... 117
Respect for human rights ....................................................................................................................................... 119

PLANET ................................................................................................................................................ 122
Decarbonisation path............................................................................................................................................. 124
Circular economy ................................................................................................................................................... 131
Natural resources and biodiversity management .................................................................................................. 134

PROSPERITY .......................................................................................................................................... 142
Innovation .............................................................................................................................................................. 144
Supply chain value.................................................................................................................................................. 155
Customer intimacy, quality and safety................................................................................................................... 164
Value for communities and territories ................................................................................................................... 170

CORRELATION TABLE – NON-FINANCIAL STATEMENT .......................................................................... 176
PART 3 – OTHER INFORMATION ON THE REPORT ON OPERATIONS ..................................................... 180
PERFORMANCE OF THE PARENT COMPANY ................................................................................................... 181
RECONCILIATION OF NET PROFIT AND SHAREHOLDERS' EQUITY OF THE GROUP PARENT WITH THE CONSOLIDATED FIGURES AT
31 DECEMBER 2023 ............................................................................................................................... 187
PROPOSAL TO THE SHAREHOLDERS' MEETING ............................................................................................... 188
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2023 ........................................................ 189
CONSOLIDATED ACCOUNTING STATEMENTS................................................................................................... 190
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2023 .................................................... 195
ATTACHMENTS ...................................................................................................................................... 268
STATEMENT ON THE CONSOLIDATED FINANCIAL STATEMENTS PURSUANT TO ART. 154-BIS, PARAGRAPH 5 OF LEGISLATIVEDECREE 58/98 AS AMENDED AND SUPPLEMENTED ......................................................................................... 275
INDEPENDENT AUDITOR’S REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS AS AT 31 DECEMBER 2023 ............ 276
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2023 LEONARDO – SOCIETÀ PER AZIONI ........... 277
ACCOUNTING STATEMENTS TO THE SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2023 ........... 278
NOTES TO THE SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2023 ........................................................... 282
PROPOSAL TO THE SHAREHOLDERS’ MEETING ................................................................................................ 329
APPENDICES.......................................................................................................................................... 331
STATEMENT ON THE SEPARATE FINANCIAL STATEMENTS PURSUANT TO ART. 154-BIS, PARAGRAPH 5 OF
LEGISLATIVE DECREE 58/98 AS AMENDED ........................................................................................... 341
INDEPENDENT AUDITOR’S REPORT ON THE SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2023 ................... 342
REPORT OF THE BOARD OF STATUTORY AUDITORS TO THE SHAREHOLDERS’ MEETING ............................................. 343
INFORMATION PURSUANT TO ARTICLE 149 DUODECIES OF THE ISSUER REGULATION ................................................ 344
ANNEX TO THE REPORT ON OPERATIONS – NOTE TO THE NFS ............................................................. 345
Methodology note of the NFS ................................................................................................................................ 346

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Report on operations at 31 December 2023
Sustainability governance ...................................................................................................................................... 348
Materiality analysis ................................................................................................................................................ 348
Reporting scope ..................................................................................................................................................... 351
INDICATORS – DETAILS ............................................................................................................................. 353

GRI indicators ......................................................................................................................................................... 353
Other Indicators ..................................................................................................................................................... 366

CONTENT INDEXES .................................................................................................................................. 372
GRI Content Index .................................................................................................................................................. 372
SASB Content Index ................................................................................................................................................ 392
TCFD (Task Force on Climate-related Financial Disclosures) Content Index........................................................... 394

INFORMATION ON EU TAXONOMY FOR SUSTAINABLE ACTIVITIES ....................................................................... 395
Regulatory framework ........................................................................................................................................... 395
Leonardo reporting ................................................................................................................................................ 396

4

Report on operations at 31 December 2023

GUIDE TO THE DOCUMENT

5Report on operations at 31 December 2023
Since 2020 Leonardo (hereinafter also referred to as the Group, the Enterprise or the Company) has adopted
an integrated approach to reporting financial performance and environmental, social and governance (ESG)
information, with the aim of offering in a single document a complete, measurable and transparent view ofthe value generated by the company. The Integrated Annual Report describes in fact the development
strategies of Leonardo, driven by the vision for the next years expressed in the Industrial Plan, and theperformance achieved, the way in which the company creates innovative solutions with its supply chain
partners and the scientific research ecosystem, operating responsibly in the countries where it is present,
and enhancing the value of all its capital, people and expertise, technology and intellectual property, financial
resources, industrial assets, relations and partnerships, energy and natural resources.
The Integrated Annual Report is composed of:>>>

the Report on Operations, which includes the Consolidated Non-Financial Statement (NFS) pursuant
to Legislative Decree 254/2016, prepared in accordance with the GRI Sustainability ReportingStandards of the Global Reporting Initiative (GRI), including the correlation table and themethodology note of the NFS;
the Consolidated Financial Statements;
the Separate Financial Statements of Leonardo SpA.

Leonardo’s decision to integrate financial performance and ESG information somewhat anticipates what isenvisaged by the Corporate Sustainability Reporting Directive, the new European directive on sustainability
reporting that will gradually come into force in 2025 and will require companies to publish sustainability
disclosures in the Report on Operations. With this obligation, the European Union intends to pursue the goalof making the links between financial and sustainability information clearer and more evident while
increasing its availability, accessibility and reliability.
In preparing the Integrated Annual Report, the following have been taken into account: the priorities
reported by ESMA (European Securities and Markets Authority) for financial statements prepared according
to the International Financial Reporting Standards (IFRS) and for non-financial disclosures, the Integrated
Reporting Framework, the standards of the Sustainability Accounting Standards Board (SASB) for the
Aerospace & Defence sector, the Sustainable Development Goals (SDGs), the Ten Principles of the UN Global
Compact, the recommendations of the Task Force on Climate–related Financial Disclosure (TCFD) and thecore metrics laid down in the White Paper “Measuring Stakeholder Capitalism - Towards Common Metrics
and Consistent Reporting of Sustainable Value Creation” del World Economic Forum (WEF), as based on fourpillars: Governance, People, Planet and Prosperity.
The GRI, SASB, and TCFD content indices in the section of Annex attached to the Report on Operations –Notes to the NFS allow you to identify content with respect to the respective standards or recommendations.
Furthermore, in 2023, a selection of indicators (ref. Annex attached to the Report on Operations – Notes to
the NFS) was subjected to full examination (reasonable assurance) for the third year running, as required by
the International Standard on “Assurance Engagements ISAE 3000 (Revised) - Assurance Engagements Other
than Audits or Reviews of Historical Financial Information” (hereinafter “ISAE 3000 Revised”), issued by theInternational Auditing and Assurance Standards Board (IAASB), on the part of EY S.p.A.. The audit was carriedout according to the procedures set out in the “Independent Auditors’ Report of the Non-Financial Statement
at 31 December 2023”, which is included herein.

6

Report on operations at 31 December 2023
Content of the Integrated Annual Report 2023
Contents

Financial
Information

NFS
Information

Report on operations at 31 december 2023●●

Group profile●●

Strategy and outlook●●

Group results and financial position●●

Segment results and outlook●“Non-GAAP” alternative performance indicators●

Industrial and financial transactions●

Other information●

Governance●People●Planet●Prosperity●

Correlation table - NFS●

Performance of the Parent Company●

Consolidated financial statement at 31 december 2023●

Separate financial statement at 31 december 2023 – Leonardo SpA●

Annex to the Report on operations – Note to the NFS●

7

Report on operations at 31 December 2023

LETTER TO STAKEHOLDERS

8

Report on operations at 31 December 2023
Dear Stakeholders,
We are very pleased to present the Group’s fourth Integrated Report, providing you with an update on 2023
and the significant progress made by Leonardo over the last year.
2023 was an intensive year of transition which confirmed the growth path of the Company and laid thefoundations for a new phase of development. A new Board of Directors was appointed and a new
management team which immediately began working with clear three fundamental pillars: making theorganization more streamlined and efficient, making Leonardo a key player in the international geopoliticalscenario, and transforming the processes and products through innovation and digitalisation.
Over the last year, the geopolitical framework has been characterized by the continuation of the RussianUkrainian conflict and more recently by the worsening of tensions in the Middle East, which have resulted in
an increase in supply chain criticalities, and which have highlighted how energy insecurity, cyber insecurity
and war-related insecurity are now part of our daily lives.
We have therefore learned that the concept of "traditional" defense must evolve and adapt in favour of abroader concept of global security, which also includes cyber, energy, food and critical infrastructure security.
These are areas in which the cybernetic and space dimensions will take on ever greater importance:
conventional weapons will increasingly be joined by digital technologies, satellite applications and drones.
In terms of sustainable development, we are witnessing the worsening of the climate crisis at a global level,with a growing recognition of the importance of adopting adequate environmental strategies at corporate
level to face the challenges of decarbonisation and the efficient use of natural resources which in prospects
will become increasingly scarce.
These conditions confirm the consequence of a major modification of global balances, leading to an epochal
paradigm shift at a technological, cultural, social and economic level.
It is in this context that Leonardo has maintained a solid growth path, with particularly important results bothfrom a commercial and economic-financial point of view and with a particularly positive trend in terms ofcash generation.
2023 saw an increase in Order volumes (+3.8% vs 2022), confirming the strength of the Group's commercial
offering thanks to the diversification and quality of integrated products and solutions and the widespread
geographical distribution of the commercial organisation. The Order Backlog stood at €40 billion, with a bookto-bill of 1.2x, strengthening growth forecasts for the coming years and offering long-term visibility.
This growth was accompanied by the increase in Revenues (+3.9% vs 2022) and EBITA (+5.8% vs 2022), driven
mainly by Defense Electronics & Security, with a particular contribution from the European component, andby the recovery of Aerostructures, bringing the ROS to 8.4%.
These results were supported by solid cash generation, with an important improvement in FOCF (+17.8% vs2022), thanks to the effect of initiatives to strengthen operational performance, a careful investment policy
in a period of growth business, the rationalization and efficiency of working capital and an efficient financial
strategy.
The performance was also positive in terms of reduction in net debt, improved by 23% compared to 2022,
thanks to the significant cash generation and the sale of the minority stake in Leonardo DRS.
These results achieved have allowed us to reach our goal of investment grade rating by the three main rating
agencies (S&P, Moody's and Fitch). A result that we are committed to maintaining for the future.

9

Report on operations at 31 December 2023
The economic-financial performance becomes even more relevant if read in the light of the non-financial
one, from an integrated perspective, confirming the centrality that sustainability has in the Group's strategy.
In fact, during 2023, the decarbonisation process continued with the reduction of Scope 1 and 2 (marketbased) CO2 emissions in line with the commitment to the Science Based Targets initiative. The further
reduction of 9.5% was achieved, despite the increase in business volumes, mainly thanks to the progressive
replacement of SF6 gas with a gas with a lower environmental impact, to energy efficiency initiatives and to
the increase in the share of energy from renewable sources purchased from the grid.
We have continued to work to promote a work environment that values gender diversity, a commitment
demonstrated by the increase in both female managers and the hiring of women with STEM degrees
compared to 2022.
Looking at innovation as the cornerstone of our strategy, we have invested in internal developments andexternal collaborations, including with customers, increasing R&D expenses by approximately 10% compared
to 2022, with the aim of fuelling the product portfolio and improving competitiveness.
As evidence of how the digitalisation process is increasingly integrated into business and daily activities, wehave strengthened our digital infrastructure, thus generating an increase in computing power and storage
capacity per capita (+4.3% and +13.9% towards 2022).
Our actions with respect to environmental, social and good governance issues have been recognized by theassessments expressed by the ESG rating agencies which confirmed our role as a leader in sustainability inthe sector also for 2023. Among the main recognitions obtained, the inclusion for the 14th consecutive year
in the Dow Jones Sustainability Index and confirmed among the leaders in the fight against climate changeby the international non-profit organization CDP (former Carbon Disclosure Project).
In 2023, we have made great strides in terms of strategy and positioning on the European and international
scene. We began working with important players with the aim of forging international alliances anddeveloping strong synergistic models, aware that no company can move forward alone in Europe. With thisin mind, we have signed a Memorandum of Understanding with KNDS in the armaments sector and an
agreement for the joint implementation of the Main Battle Tank (MBT) based on the LEOPARD 2 A8 for the
Italian Army. At an international level, important progress has also been made in relation to the Global
Combat Air Program (GCAP) with the signing of the government agreement between Italy, Japan and theUnited Kingdom.
What we achieved in 2023 confirmed the Group's growth trend and represents a solid foundation for thefurther development path outlined in the new 2024-2028 Industrial Plan. And Leonardo is therefore in thebest conditions to face the next challenges and to operate as a key player in the global market with its
innovative technologies and solutions, seizing the best opportunities even in a highly challenging andchanging context.
The results achieved and those we aim to pursue cannot ignore the constant commitment of the
management and all the Group’s people, to whom we extend our thanks.
For the Board of Directors
The President

The CEO and General Manager

10Report on operations at 31 December 2023

REPORT ON OPERATIONS AT 31 DECEMBER 2023

11

Report on operations at 31 December 2023

PART 1 – GROUP PROFILE, STRATEGY AND RESULTSPART 1 – GROUP PROFILE, STRATEGY AND RESULTS

12

Report on operations at 31 December 2023

GROUP PROFILE PROFILE
 BUSINESS MODEL

13

Report on operations at 31 December 2023

ProfileLeonardo is a global industrial group that builds technologicalcapabilities in Aerospace, Defence & Security. The company plays aprominent role in major international strategic programmes and is atrusted technological partner of governments, defence agencies,
institutions and enterprises.

UNITED KINGDOMEMPLOYEES: 8,106
UNITED STATES OF AMERICAEMPLOYEES: 7,329

POLANDEMPLOYEES: 2,913

ITALY
EMPLOYEES: 33,306
REST OF THE WORLDEMPLOYEES: 1,912

Revenues€ 15.3 bil.

New orders€ 17.9 bil.

EBITA

Backlog€ 1.3 bil.

€ 39.5 bil.

R&D

€2.2 bil.

Employees

53,566

Leonardo operates in 150 countries in the world offering customised solutions and innovative, value-added
after-sales support services in order to be a trusted partner for its customers. It competes in the mostimportant international markets by leveraging technology and product leadership in its business areas(Helicopters, Aircraft, Aerostructures, Electronics, Cyber Security and Space).
ESG Leadership
Sustainability Leader in the Dow
Jones Sustainability Indices of S&P
Global for 14 years, with the highest
score in the Aerospace and Defence
sector for the fifth year running 1.

Among the companies included in
the MIB ESG INDEX of the Italian
Stock Exchange (Euronext), the first
Italian blue-chip index dedicated to
the 40 companies with the best ESG
performance 2.

Confirmed among the leaders in thefight against climate change by CDP(noprofitinternationalorganisation), among the best
Aerospace & Defence companies.

Ranked in A band in the Defence
Companies Index on Anti-Corruption
and Corporate Transparency (DCI) of
Transparency International.

Included in the Bloomberg GenderEquality Index 2023 for the thirdyear 3.

Awarded “Platinum
EcoVadis.

1 Evaluation based on the data of the Corporate Sustainability Assessment (CSA), as of 8 December 2023.
2 Review dated December 2023.

3 2024 GEI results are not yet available at the time of publication of this Report.

14

medal”

byReport on operations at 31 December 2023
Revenues by sector

Revenues by geographic area
4%
19%

United Kingdom
11%

24%
26%

30%

United States
Rest of Europe

47%

Rest of the world

Aerostructures

6.9%

Ministry of Economy
and Finance
30.2%

DefenceElectronics andSecurity
Aircraft

Institutional shareholders by geographicalarea

Shareholders
0.5%
19.0%

Helicopters

Italy

18%

21%

7.2%
4.4%
6.5%

Institutional investors

United Kingdom
France57.2%

Retail investors

17.8%

50.3%

North America

Italy
Rest of Europe

Company related
holdings

Rest of the world

Governmental / Non governmental
turnoverDefense / Civil turnover

18%

25%
Defense

Civil

Governmental
Non governmental

75%

82%

Leonardo share price4
Leonardo +138,2%

FTSEMIB +34,9%

STOXX 600 +15,3%

A&D EU +49,3%

220
170
120
70

Jan-23 Feb-23 Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24

4 Performance of the Leonardo stock from January 2023 to 29 February 2024 compared to the European sector index Bloomberg

EMEA Aerospace & Defense (BEUAERO, A&D EU) and to the main Italian and European stock market indices: the index of the 40 main
securities of the Milan Stock Exchange (FTSE -MIB) and the index representative of the 600 largest stocks in Europe (STOXX Europe
600).

15

Report on operations at 31 December 2023
Business sectors
Leonardo is organised into five business Sectors 5. It also operates through subsidiaries, such as Leonardo DRS(Defence Electronics), joint ventures and investees.
SECTORS

Helicopters

RESULTS 2023

DIVISIONS(€mil.)

MAIN LEGAL ENTITY

ORDERSBACKLOG

5,513

14,426REVENUES

EBITA

4,725

422

Helicopters Division

>
>
>
>
>

Electronics

ORDERSBACKLOG

9,717

16,844REVENUES

EBITA

7,483

852

Leonardo SpA
Leonardo UK Ltd
PZL-Swidnik SA
AgustaWestland
Philadelphia
Kopter Group AG

MAIN
COUNTRIES
Italy
United Kingdom
PolandUnited States
Switzerland

Electronics Division>>

Leonardo SpA
Leonardo UK Ltd

Leonardo DRS

Defence & Security

Cyber Security Division> Leonardo SpA> Leonardo UK Ltd

Italy
United Kingdom
United States
Germany
IsraelCanadaMBDA (25%*)

FranceElettronica SpA (31.33%)
Hensoldt AG (22.8%)

AircraftAerostructuresSpace

ORDERSBACKLOG

2,395

7,972

REVENUES

EBITA

2,938

419

ORDERSBACKLOG

644

1,095

REVENUES

EBITA

636

(151)

Aircraft Division>

Leonardo SpA

Aerostructures Division

>
>

EBITA

Leonardo SpA
GIE ATR (50%*)

Telespazio (67%*)

16

Thales Alenia Space (33%*)
Avio SpA (29.63%)

Italy

Italy
France

Italy
France(*) Joint Venture.
Other main subsidiaries and investee: Leonardo Global Solutions SpA, NHIndustries SAS., Orizzonte Sistemi Navali SpA.

5 The Space sector is consolidated under the equity method and does not contribute to the Group revenues. Still, as starting from 1

January 2024 the consolidation of the Telespazio group will be carried out, in this Financial Report at 31 December 2023 a set of proforma indicators is provided.

16

Report on operations at 31 December 2023

Business Model
Research & Development
Innovation, technology and sustainability are the factors
underlying Leonardo’s strategy which are integrated with eachother and on which its competitiveness and future growth arefounded. The company’s objective is to become a driver ofinnovation, through the creation of an ecosystem centred on
the research for product development and on technologicalresearch.

€bil. 2.2 in R&D and productengineering
Collaborations with 90 universities andresearch centres in the world

Solutions and customer support
Leonardo business model aims at partnerships with customers
offering customised products and solutions, as well as valueadded and innovative post-sale support services: from the offer
of integrated services to the ongoing update of hardware andsoftware, whereby it ensures its customers a long-lasting
performance, to training programs necessary to keep a directcontact with end-users and feed long-term strategic
relationships. The business model is based on the capital thatthe company is committed to enhancing - people and skills,
technologies and intellectual property, financial resources,industrial assets, relations and partnerships, energy andnatural resources - to create long-term value.

17

More than 50,000 training hours
through flight simulators
More than 13,000 pilots and operatorsof helicopters and aircraft trained
1st in the ProPilot’s ranking for qualityof after-sales support and in the
Product Support Survey’s ranking of
AIN (Aviation International News)
2023 data

Report on operations at 31 December 2023

MAIN TRENDS

Geopolitical tensions

Big data, AI and security

CAPITALSPEOPLE AND SKILLS• 53,566 employees• 13,000 people in R&D and engineering

Digital, environmental andtechnological transition

Reduction in strategic
dependence

BUSINESS MODEL
R&D

Solutions andcustomer support

Operations

INDUSTRIAL ASSETS• 111 sites and main plants• €543 million investments in tangible
assetsRELATIONS AND COLLABORATIONS• More than 90 Universities and research
centres• 12,000 suppliers
ENERGY AND NATURAL RESOURCES• 85% of electricity from renewablesources• 49% of waste recovered

People• 6,118 new hires, 43% hold a STEM
degree, 49% under 30 and 25%
women• 1.3 million hours of training
delivered to employees• 938 training opportunities includinginternship, apprenticeship,traineeship and school-to-workalternation programmes• 13% reduction in the injury ratecompared to 2022

Planet• 4.4% intensity of scope 1 and 2 CO2eemissions reduction (LB) (*)• 9.5% scope 1 and 2 CO2e emissions
reduction (MB)• 2.3% intensity of energy consumption
reduction (*)• 7.5% of water withdrawals reduction• 10.2% of waste produced increase and11.5% of hazardous share reduction

REVENUES€15.3 mld

€2.2 billion in R&D

Business sector

New skills andinclusion

IMPACTSFINANCIAL RESOURCES• €9.9 billion in purchase of goods andservices• €4.3 billion personnel cost• €10.9 billion of net invested capital
TECHNOLOGIES AND INTELLECTUAL
PROPERTY• 6.6 petaflop of computing power• 31.9 petabyte of storage capacity• 11 Leonardo Labs

Integrated sustainability andsustainable finance

Investments on people andcompetencies
Energy and industrial efficiency
Sustainable supply chain

27% of revenues from Customer
Support, Service and Training

RoS

Backlog

8.9%

37%

11.4%

42%

14.3%

20%

(23.7%)

3%

BACKLOG€39.5 mld(*) Calculated on revenues and vs 2022

The order backlog ensures acoverage in terms ofequivalent production equal
to about 2.6 years

Prosperity • 55% of sources of financing linked to ESG
parameters• 84% of purchases related to domestic
markets• 32% of investors are signatories to PRI(**)• Solutions for security and progress in 150
countries(**) It is linked to share capital owned by Leonardo's

Strategic vision: Leonardo’s Industrial Plan 24-28

institutional investors only

2023 data

18

Report on operations at 31 December 2023

STRATEGY AND OUTLOOK TREND AND VISION
 MATERIALITY ANALYSIS INDUSTRIAL PLAN
 SUSTAINABILITY PLAN
 2024 GUIDANCE

19

Report on operations at 31 December 2023

Trend and vision
The markets in which Leonardo operates, both nationally and internationally, are characterised by highly
complex ongoing transformation processes and an ever-increasing level of competition, which is exacerbatedby the entry of new players coming from countries that either do not traditionally have an AD&S industry or
for which the export of defence systems is gaining more importance as a tool of geopolitical and industrial
strategy. These are countries with experiences and capabilities of different nature and maturity, but which
are growing even in emerging technology segments, beginning to cover domestic demand and attacking, insome cases with increasing success, the international market: South Korea, Turkey, Iran and Israel can becited as examples.
To these new players in the defence sector must be added players from “adjacent” civil and commercial
sectors, which possess well-established expertise in innovative technologies, such as Artificial Intelligence(AI) and quantum technology, and which may gradually modify the traditional power relations and dynamics
of the AD&S industry with effects on competitive pressure and, consequently, on prices and profit margins.
The geopolitical environment and the international economic system, already strained by the Covid-19
pandemic, has deteriorated further as a result of the Russia-Ukraine conflict and, albeit to a lesser extent,
the more recent tensions in the Middle East region, resulting in increased supply chain criticality andmacroeconomic impacts, from the scope of protectionist policies to a resurgence of inflation, albeit
temporary for the time being. In addition, rising geopolitical and economic tensions in the Indo-Pacific region,
as well as the deepening climate crisis, are likely to further disrupt the global scenario. These conditions
confirm the profound and lasting change in the pre-existing balances, which started in 2020, leading to anepochal paradigm shift at a technological, cultural, social and economic level, the effects of which will still
continue for a long time.
In this scenario, Leonardo pursues its objectives concerning the improvement in the competitive positioning
on domestic and international markets, and the creation of long-term value through responsible businessconduct, the ongoing monitoring and an effective management of risks and opportunities, the protection ofbusiness continuity, a growing integration of sustainability into its business and listening to and collaboratingwith stakeholders.
The processes and technological solutions developed by the Group are marked by a sustainable and inclusive
development, in support of double transition, both digital and ecological, with the aim of safeguarding
citizens, companies, institutions, territories and strategic infrastructures, which are increasingly exposed to
the fragility of systems. However, the same solutions take on additional significance in the context of thepolitical crises mentioned above, as they are dedicated to contributing significantly to the security andsustainability of the citizens and institutions in the states to which they are provided.
The main technological and market trends and Leonardo’s related position, which is dealt with in detail in
the reference paragraphs, are reported below.

20

Report on operations at 31 December 2023
Main trends

Leonardo’s position

Geopolitical tensions – The Russia-Ukraine conflict is a disruptive event, with both shortand long-term effects. Furthermore, the conflict that erupted in the Middle East in 2023,
leading to increased friction in an increasingly critical area, is likely to further worsen theinternational scenario. To these must be added potential hotbeds in Africa and in the IndoPacific region. The most direct consequences of this situation are an increased focus on
security and defence issues in the political debate and the clear and stated willingness toincrease the defence budgets of major countries (primarily NATO/European countries)
compared to the past.

>
>
>

>

In 2022 the world military spending reached USDbil. 2,240, up by 7% compared
to 2021 6.
>
In 2022 there were at least 56 active armed conflicts (5 more than in 2021) and64 multilateral peace operations (1 more compared to the previous year) 7.
>
In 2023 the areas of friction in the immediate vicinity of Europe – in addition tothe ongoing high-intensity war in Europe with the Russian-Ukrainian war - weremainly related to regional crises in the Enlarged Mediterranean area, primarily
in the Middle East area (Israel, Syria, Iran and Yemen, in addition to lingering
tensions in North Africa) with new sparks in Nagorno-Karabakh. The Indo-Pacificregion became the scenario of greatest attention by the U.S. and other Allies in
the region.

Big data, AI and security – The scenario on the business side is increasingly characterisedby the opportunity and need to extract value from data, which has long since been called"The New Oil." On the other hand, in the context of international conflicts and frictions
that is also "hybrid" in nature, there is strong interest on the side of security for citizens
and institutions in countering disinformation and misinformation, which requires anintegrated approach from the technological, political and social perspectives. Big data
management technologies and the explosion from 2023 of content production throughgenerative artificial intelligence (GenAI) techniques will be increasingly important inmanaging opportunities and risks, flows and sensitive information. This very area is theobject of intense activity at the European level, with regulations that are coming tomaturity and will begin to generate impacts in the coming years, such as, for example, theData Act, the AI Act, and the Cyber Resilience Act, but also with development initiatives>
related to, for example, secure satellite communications, the European HPC network, andincreased cooperation on the cybersecurity front.

>

>
>
>

Segment results and outlook
Respect for human rights
Customer intimacy, quality and safety

Innovation
Cybersecurity and data protection

Sources estimate there will be 40 billion Internet of Things (IoT) devices
connected to the Internet and USDbil. 800 in investments worldwide, which will
exceed USDbil. 1,000 by 2026 8.
The size of the IoT security market is expected to grow from USDbil. 19.6 in 2023
to USD.bil 92.4 by 2030 9, confirming the universally recognized need to increase
the security of new data generation and processing technologies.
Although initial estimates of the use of GenAI techniques in 2023 are biased 10,
an initial structured research by McKinsey 11 shows a clear trend of adoption andidentification of focus areas to be monitored and mitigated to enable productiveuse, which can lead, in some cases, to reduced process times in the order of 50%.

6 Source: Jane’s Defence Budgets worldwide.
7 Source: Sipri, Yearbook 2023.

8 Source: International Data Corporation.
9 Source: 360 Research Reports Insights.

10 According to various research reports, about 50% of Internet users have heard of it, about 25% have tried it, and less than 10% use

it. About 70% of Generation Z is already an occasional user.
11 Source: McKinsey, What’s the future of generative AI?, 2023.

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Report on operations at 31 December 2023
Digital and environmental transition – The economic recovery is still driven, not only inEurope, by digital and ecological transitions, accelerated by urgency and extraordinary
programmes (such as the European Recovery and Resilience Facility, which translates in
Italy into the National Recovery and Resilience Plan - NRRP), with the aim of being theengine of a new technological development. The European quest for technologicalsovereignty to be understood as an effective and equitable collaboration with alliedindustries and countries, for supply chain security and optimisation of investments in
disruptive technology, may entail positive implications for the AD&S sector, and more soin the defence sector. Even before the Ukraine crisis, the issue was in fact at the centre of
the debate in the AD&S industry to support the renewed strategic ambition of Europe andits member states, including at international level.

>>>

Reducing strategic dependencies – Geopolitical instability and the Russian-Ukrainian
conflict have led, among indirect effects, to shocks with regard to the procurement ofenergy resources and various raw materials for the precision engineering and electronics
industry. The same issues have also emphasised the need to proceed with increasing
autonomous production capabilities in the defence sector. This has highlighted even more
prominently the importance of the concept of strategic independence, which alreadyemerged during the pandemic crisis with the disruption of global supply chains.
Technologies that, along with process innovation, have continued to be the drivers of
institutional, business and individual resilience, are also being characterized as one of thetools of geopolitics, offering new strategic significance to investments in frontier
technology and a key role for companies in hi-tech sectors.

>

>

>

>

To achieve Net Zero Transition, investments estimated at about USDbil. 275,000
will be required globally over the period from 2021 to 2050, equal to an average>of USDbil. 9,200 per year 12.
Air transport is essential for economic and social development, ensuring global>
connections. With the Destination 2050 initiative, the five major European>
aviation associations committed to achieve “net zero CO2 emissions” in theEuropean civil aviation sector within 2050 13; a similar commitment wasundertaken first by the International Air Transport Association (IATA) and thenby the International Civil Aviation Organization (ICAO) in October 2022, thusaligning the goals of industry and national governments.
Digitalisation now accounts for an extremely large share of the value generated
by the economy: the World Bank 14 estimates that digital economy alreadyaccounts for 15% of global GDP, and the World Economic Forum estimates that
70% of new value created over the next 10 years will be based on products,
services and solutions made possible by digitalisation 15.

>

In the automotive market, lower demand for high-volume (about 3,000 chips
per vehicle), low-value-added automotive components has resulted in>
manufacturers losing priority to the growing demand for chips for higher valueadded solutions (smartphones and computers) 16.
The importance of establishing a footprint in the business segment ofsemiconductor supply chain is further reaffirmed by the investment plans of theEuropean Union (Chips Act), which came into force in 2023, and the U.S. (Chips& Science Act) and, even more so, by the export control project put in place by
the U.S. to limit Chinese access to the most advanced semiconductors.
In 2023 the European Union launched initiatives and allocated funds, for the firsttime, to boost joint procurement of defence solutions and equipment 17,
although it has not yet significantly increased its investment, and has

Industrial Plan
Sustainability Plan
Decarbonisation path
Innovation

Supply chain value
Business continuity

12 Source: “The net-zero transition. What it would cost, what it could bring” – McKinsey.

13 Source: Destination 2050 website. For more details on the initiative, please also see the paragraph on Planet.
14 Source: World Economic Forum 2022, Why digital trust is key to building thriving economies.
15 Source: World Economic Forum website, “Discover the digital economy” section.
16 Source: IHS markit, New York Times.

17 European Defence Industry Reinforcement through common Procurement Act (EDIRPA), Act in Support of Ammunition Production(ASAP).

22

Report on operations at 31 December 2023
commenced work on the development of an industrial strategy dedicated to thedefence sector and to its industrial base.

Integrated sustainability and sustainable finance - Sustainability is increasingly being used as areference framework to assess how a company manages the risks and opportunities created bychanging market and context conditions. These changes can affect natural, social and economic
systems, altering the system in which a company operates. Sustainability is about the ability tocreate and sustain long-term value in a rapidly evolving marketplace and manage the risks andopportunities associated with these changes. The growing integration of ESG factors intobusiness strategies and processes also involves the AD&S sector, which must be recognised as a
key sector for sustainability from an environmental and social perspective. Indeed, work
continues on the process of gaining awareness of and commitment to sustainability issues, withrespect to which companies in the sector and financial institutions are being called upon to
direct their strategies. The integration of the ESG criteria into the investment decisions is afundamental step to create a sustainable strategy.

>

>

>

>

Based on the Green Deal and its related Net Zero strategy, the European Commission
has begun to build a new regulatory framework that aims to bring the European>industrial structure to integrate sustainability and finance. The European legislation
proposed and approved in recent years goes in this direction (for example, EU
Taxonomy, Corporate Sustainability Reporting Directive, Corporate Sustainability Due>
Diligence Directive), leading entities towards full integration of sustainability into>
strategy and management decisions on the part of European companies.
18
In a "joint statement" published in November 2023, the European Defence Agency(EDA) reiterated the need to facilitate access to public and private finance, both by
avoiding discrimination against Defence investments by investors and by giving properconsideration to the sector's role played in favour of the society within sustainablefinance policies, regulations and reporting requirements at the European level. The
EDA has also urged greater coordination between national and European institutions
on ESG issues in order to mitigate adverse effects and define alternative ways to makedefence investments more attractive to investors.
As of 2023 the investors that are signatories of the Principles of Responsible
Investment supported by the United Nations were 5,500 and managed assets undermanagement for more than USDbil. 131,000 according to the ESG criteria 19.

New skills and inclusion – The implementation and management of ecological and digitaltransition requires widespread development of new skills, scientific and digital above all, on
which the competitiveness of businesses depends. A recent McKinsey research on the healthand trajectory of the AD&S 20 labour market faces new challenges, including increasing>competition for talent and a gradual transition from a "gray" to a "green" workforce. Indeed,
while there is a strong wave of retirements, the sector is faced with attracting young talent with>very different preferences from its precursors, including a greater propensity to change jobs andaspire to more lucrative opportunities. The reskilling of workforce – more flexible working
conditions and the promotion of gender equality are among the main levers on which to act in>
the AD&S sector.

>

McKinsey predicts that demand for physical and manual skills in repeatable tasks, such>as those on assembly lines, will decline by nearly 30%, demand for basic math skills
will decline by nearly 20% while demand for technological skills, such as code>development, will increase by more than 50%. In Europe and the United States,
demand for physical and manual skills in repeatable tasks is expected to decline by
30% over the next decade, according to McKinsey, while demand for technologicalskills such as programming is expected to grow by more than 50%.

Sustainability plan
Financial planning andinvestment management
ProfileInformation on EU Taxonomy
for sustainable activities

Sustainability plan
Employment protection, people
wellbeing and engagement
Employer branding and talentattraction
Innovation
Value for communities andterritories

18 For more details, please see the joint statement on “Strengthening the EDTIB’s access to finance and its ability to contribute topeace, stability, and sustainability in Europe”, which was published by EDA on 14 November 2023 and is available at the following
link.
19 Source: PRI website.
20 Source: Europe’s gray-to-green workforce transition in aerospace and defense.

23

Report on operations at 31 December 2023>>

Goldman Sachs 21 predicts that 300 million jobs will be lost or varied due to theadoption of artificial intelligence techniques within business processes.
4 million jobs related to cybersecurity remain unfilled globally 22. In addition, morethan 30% of business leaders surveyed in a World Economic Forum study either do
not have or are not confident that they have the necessary skills to achieve
cybersecurity goals within their organisation 23.

21 Source: The Potentially Large Effects of Artificial Intelligence on Economic Growth, Briggs/Kodnani | Goldman Sachs, March 23,2023.
22 Source: study from the International Information System Security Certification Consortium (ISC2).
23 Source: Global Cybersecurity Outlook 2024.

24

Report on operations at 31 December 2023

Materiality Analysis
Listening to the Group's most relevant stakeholders, both internal and external, is key to Leonardo’s strategy
and business development. The materiality analysis aims precisely to establish Leonardo’s priority issues
while integrating the perspectives of major stakeholder groups with management's vision. The analysis
supports and guides the design of strategic objectives, the definition of the Sustainability Plan and the
preparation of the Integrated Annual Report. Under strong impetus from changes in the regulatory
framework and market trends, the process has focused on identifying the main impacts generated by theGroup, throughout the value chain, with respect to economy, environment and society, including humanrights. This approach incorporates the main requirements of the GRI Universal Standards. The materiality
analysis process directly involved more than 500 external and internal stakeholders, representing 13
categories of stakeholders that are relevant to the Group, as well as to its management and the Board of
Directors, in order to capture all the main instances of the ecosystem in which Leonardo operates. The
process was carried out in 3 stages: the analysis and understanding of the regulatory framework, theidentification of impacts and the assessment of their significance, which was also carried out by involving
internal and external stakeholders. The results of the analysis led to the definition of the following 15 material
issues for the Group.
List of material topics
PILLARTOPICS
Business integrity, compliance and anti-corruption

GovernanceProtection of human rights 24
Diversity, equity and inclusion
Health and safety

PeopleSkill development, talent attraction and wellbeing of employees
Climate change, adaptation/mitigation
Natural resources and biodiversity management

PlanetEnvironmental impact of the use of materials and circularity
Sustainable supply chain
Cybersecurity and data protection 25
Solutions’ quality, security and performance
Relations with local areas and communities

Prosperity

R&D, innovation and advanced technologies 26
Citizens’ security
Digital transformation 27

24 This topic is also covered in the pillar People.

25 This topic is also covered in the pillar Governance.
26 This topic is also covered in the pillar Planet.

22 This topic is also covered in the pillars People and Planet.

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Report on operations at 31 December 2023
The results that have been obtained show a correlation between the impacts regarded as priorities and thecore business activities of Leonardo and reflect the present security scenario and its connection withsustainability, the emerging applications of technology to combating climate change, the key role of cybersolutions, the technology and innovation environment, and the growing centrality of social impacts. The maindifferences from 2022 include the identification of a topic dedicated to the protection of human rights andthe elimination of topics related to tools and ways of conducting business, prerequisites of Leonardo’s value
creation process and foundational elements of the Group and for this reason not included in the enhanced
impact perspective in 2023.

26

Report on operations at 31 December 2023

Industrial PlanAs already described in the “Trend and vision” paragraph, the AD&S sector is undergoing a deeptransformation with increasingly challenging competitive scenario in terms of industrial structures andtechnological disruption. Notably, in a context that continues to experience epochal changes, with asignificant increase in conflicts and global crises, Countries are confronted with three major challenges withradical impacts on the Defence sector:
1.
More and more bullets and an avalanche of bytes - Warfare is changing, exploiting a combinationof traditional and new systems and digital technologies, satellite applications, and drones capable ofneutralizing targets valued many orders of magnitude higher;
2.
From conventional Defence to the broader concept of “global security” - Globalization as anelement of fragility, regional wars bringing massive repercussions on global security (energy, food, cyber, andinfrastructure security) exacerbating the need for global awareness based on secure data orchestration.
3.
Security as a continental problem rather than national - No single European Country can make it on
its own and the fragmented expenditure on Defence makes Europe even weaker. The pace of techadvancement and sudden shifts in the global geopolitical balance call for increased and optimized
investments and standardization / synergy.
On this basis, Leonardo's ambition and positioning are ready to evolve, adapting the strategic vision to
ongoing global changes. Over the Industrial Plan horizon, Leonardo aims to transform itself leaning towards
a two-fold strategic posture:>>

Strengthening the core business by sharpening strategic selectivity, via business/product portfolio
optimization and a renewed approach to innovation driven by focused R&I and massive digitalization,
meanwhile candidating as a catalyst for European Defence consolidation, steering international
alliances;
Paving the way to the future by investing in emerging markets, such as cyber and space domains andby focalizing its portfolio of solutions towards a more efficient capital allocation.

This new posture will drive Leonardo in its transformation, with the aim of being:
Electronics - Global player with European leadership and catalyst for European cooperation, leveraging
GCAP spillovers, alliances/JV (land and naval Defense systems), and a rationalized portfolio, with adistinctive US presence> Helicopters - Global civil leader and military key player, upgrading the portfolio, pioneering newtechnologies, and exploring strategic partnerships;> Aircraft - Leading Player in cooperative programs (next generation combat aircraft and UAV), withevolved proprietary products and boosted training services;> Aerostructures - Profitable supplier thanks to operational excellence and market recovery, further
scaling up via diversification and strategic partnerships;> Cyber Security - European key player in cyber security, Secure Digital Platforms and Mission CriticalCommunications, with a technology-based value proposition, focused on Defense, Space andNational Strategic Organizations;> Space - European leader on high-value segments, leveraging Group-wide and space alliancecapabilities, with an active role on a potential European consolidation.

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Report on operations at 31 December 2023
To deliver on this vision, Leonardo is setting its path on three horizons to boost inertial baseline, mapping an
arsenal of initiatives to achieve the full potential of the plan:>>>

guaranteeing an organic revenue growth and innovation potential with focused R&D andtechnological efforts, a massive digitization of solutions and operations, and a stronger emphasis onclient-centricity and service excellence;
boosting a company-wide efficiency through product and business rationalization/focalization, while
optimizing engineering and manufacturing and reducing group-wide procurement and Corporate
costs;
complementing growth with inorganic initiatives / M&A, steering international alliances to achieve
technological relevance in emerging techs and markets.

28

Report on operations at 31 December 2023

Objectives and Sustainability PlanPILLAR

GovernancePeoplePlanetProsperity

OBJECTIVESPROGRESSTARGET YEAR

SDG/Material topics

2023

Annual renewal/maintenance of the ISO
37001:2016 “Anti-Bribery Management System”
certification

2024-2026(renewal andmaintenance)

Women equal to at least 32% of total new hires

2025

Women equal to 30% of total new hires in STEM
areas

2025

20% female representation at management levels

2025

Women equal to 20% of total employees

2025

27% of women in succession plans

2025

10% reduction in consumption of electricity
withdrawn from external gridI2025

50% reduction in Scope 1 + Scope 2 emissions(market based) II

2030

25% reduction in water withdrawals III

2030

15% reduction in the amount of waste produced III

2030

Implementing
supplychain
development
programmes and medium/long-term partnerships,
focused on SMEs, to improve business sustainability
Raising awareness of/delivering training on SDGs
and supporting tools for reporting to more than 80%
of key suppliers (over 500 suppliers)
100% of LEAP partners with set targets and plans on
green energy, CO2 emission reduction, waste
recycling, water consumption
Training In sustainable supply chain issues to at least
500 key suppliers

Business
integrity,
complianceandanticorruption
Protection of human rights

Diversity, equity and inclusion
Health and safety
Skill development, talentattraction and employee
well-being

Climate change, adaptation/
mitigation
Natural resources andbiodiversity management
Environmental impact of theuse of materials andcircularity

2023

2023

2023
2027

Inclusion of ESG criteria/requirements in more than
70% of major new tenders awardediv

2028

Increasing computing power by 40% per capitaV

2025

Increasing storage capacity by 40% per capitaV

2025

Sustainable supply chain
Cyber security and dataprotection
Solutions’ quality, security
and performance
Relations with local areasand communities
R&D, innovation andadvanced technology
Citizen security
Digital transformation

I Calculated as a ratio to revenues. 2019 year

IV Calculated on tenders valued > 1 M€ managed through Leonardo portal, does notbaseline.
Reduction in absolute value. 2020 year
baseline.
III Reduction in absolute value. 2019 year
baseline.

include DRS, the Electronics Division of Leonardo UK and local purchases on thepart of foreign subsidiaries.
V Calculated as the number of flops (Floating Point Operations Per Second) and bytes inrelation to employees in Italy. 2020 year baseline.

II

Objective achieved

On track

New Objective

29

Report on operations at 31 December 2023
Guided by the Sustainable Development Goals (SDGs) of the United Nations 2030 Agenda and by the
integration of environmental, social and governance (ESG) dimensions into business, the sustainability goals
defined by Leonardo – covering the fields of Governance, People, Planet, Prosperity with specific targets andrelated monitoring KPIs for each area – underpin long-term growth and demonstrate the Company's
commitment to its stakeholders with regards to ESG issues. During 2023, work continued on its path todecarbonisation by submitting its direct and indirect CO2 emission reduction targets to the Science Based
Targets initiative, in line with the commitment made in 2022. The achievement of the goals to 2023 in the
Prosperity and Governance areas, related to the certification of anti-corruption management processes andsustainable supply chain training and development, under the programmes of dialogue and collaboration
with the main suppliers carried out for years by the Group, pushed Leonardo to set new and more ambitious
goals on training for key suppliers on sustainability issues, integration of ESG requirements in the selection
criteria of suppliers, certification of anti-corruption management processes and employee training on tradecompliance and human rights.

The Sustainability Plan
The first Sustainability Plan was defined in 2021, with the aim of translating the Group's sustainability visionand objectives into projects and initiatives that can be measured in the short, medium and long-term,
through a structured model guided by a data-driven approach measuring its performance through specific
ESG KPIs monitored also to achieve Sustainability Goals. The Plan is subject to an annual review and updateprocess to better target the strategy. With 2023, work was completed on the update cycle of the three-year
plan, which enabled the group to achieve important results across the entire value chain. The Plan was, infact, updated in 2023, in line with the guidelines provided in the 2022 materiality analysis counting 110
projects distributed on the eight clusters across the entire value chain and classified in two main types: 55“tactical” projects, which look at short- to medium-term benefits and contribute to the achievement of theGroup's Sustainability Goals, and other 55 “transformative” projects, which will produce medium- to longterm impacts. The robustness, consistency and coherence of ESG data are ensured by a bottom-up collection
and verification process. Both progress data on single projects and economic data are collected and analyzed
to verify the performance of the activity and to direct actions and resources towards the achievement of theobjectives communicated to stakeholders. The new strategic positioning of the Group sees Leonardo
increasingly involved in the energy and digital transition by developing products and solutions that ensure
the security and safety of communities, institutions and infrastructure. This commitment is reflected in the
new Sustainability Plan 2024-2028, approved by Top Management in the first months of 2024. It is alignedwith the strategic vision of the Group's Industrial Plan, gathering, according to a shared framework, projects
with the greatest impact across the entire value chain and a focus on specific priorities such as eco-designand digital twin, decarbonization, environmental footprint management, circularity and LCA, sustainablesupply chain, sustainable products and solutions and social impact.

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Report on operations at 31 December 2023

ESG Pillars Main streams of the Sustainability Plan
SocialCommitment,
Scientific
Citizenship andInclusion
Business Ethics& HumanrightsEarthmonitoring &Emergency
Response
Solutions for
Mobility & Systems
for Security

Research and Innovation as a cross driver

Research &Innovation

SDGs
Core

OthersDecarbonization - SBTi
› Implementing emission reduction initiatives in the operations› Improving energy efficiency initiatives in the operations

PlanetEnergy &Industrial
efficiency

Reduce operations environmental impact & improve circularity› Reduce water withdrawals and improve water efficiency› Improve circularity and reduce, reuse and recycle of waste› Increase plasticless - paperless projects & digitalization initiatives
Sustainable Supply Chain› Support the sustainable development of the supply chain› Promote ESG targets-actions along the supply chain (SBTi)

Prosperity

Environmental
management& Circular
economyGovernance

Sustainable Supply
Chain
PeopleSustainable Products and Solutions› Promote solutions for global monitoring and environmental protection› Develop new products with low environmental impact› Develop solutions for security and industry 4.0
Responsible and ethical business conduct› Improve trade control and governance in commercial transactions› Strengthen assessment and control measures over human rights issues
Attraction, Diversity & Inclusion, Education & STEM
› Attract, retain and manage talents› Foster gender equality and inclusion› Improve Education and Sustainability culture› Spread STEM awareness

The Plan focuses on six core SDGs: development of competencies (SDG 4), creation of decent work and growth of partners (SDG 8), support to innovation anddigital transformation (SDG 9), development of solutions for the security of people, infrastructures and territories (SDG 11) and climate action (SDG 13), adding
sustainable production models (SDG 12) to its business activity. The Plan also has significant impact on additional SDGs: the reduction of food waste (SDG 2), thedevelopment of solutions to combat health emergencies and promote well-being initiatives for people (SDG 3), the promotion of a culture that fosters genderequality (SDG 5), water resource optimization (SDG 6), energy efficiency and the higher use of renewable sources (SDG7), the mitigation of environmental impact
on the seas and in support of biodiversity (SDGs 14, 15), the continuous strengthening of the responsible business model and the protection of human rights(SDG 16). The following is a summary of the progress of the Sustainability Plan, on each of the pillars.
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Report on operations at 31 December 2023
Pillar

Progress of the Plan
The Governance and People pillars are associated with initiatives aimed at strengthening business integrity andrespect for human rights and those related to social engagement, promoting scientific citizenship and inclusion:>

GovernancePeopleBusiness integrity and human rights – It Includes some of the initiatives that underpin the responsible
business model. Among them are trade compliance guidelines that have been integrated with the Human
Rights Impact Assessment tool, which aims to assess the main risk factors of human rights violations in
Sensitive Countries and along the value chain.
> Social engagement, scientific citizenship and inclusion – It encapsulates initiatives to spread a culture ofsustainability, stimulate engagement, promote STEM disciplines, and foster diversity and inclusion (DE&I).
In 2023, particular attention was given to strengthening recruitment and skills management, and toseveral sustainability training initiatives aimed at all employees and the management. Several projects
involved the active involvement of employees, such as, for example, the SustainAble gamification
platform, the promotion of scientific culture among new generations and in support of the educational
system that was enhanced through role modeling, the free educational platform STEM Lab andcollaboration with the association Il Cielo Itinerante - with STEM workshops for young people indisadvantaged areas -, confirming the Group's commitment to the new generations, the community andthe local areas in which it operates. Finally, the culture of diversity, equity and inclusion was further
strengthened in 2023 with the publication of the relevant policy, the appointment of the DE&I Manager
and the commencement of work on the path to gender certification.
The Planet pillar is impacted by the Sustainability Plan's along all the value chain:>

PlanetResearch and development – The R&D cluster, which is an integral part of the Group's technology andinnovation DNA, contains most of the transformative initiatives linked to long-term goals, which also serve
as a cross-cutting driver for other clusters of the Plan: from reducing environmental impact of operations
to the study into new products and solutions with lower carbon footprint. These include projects in linewith the commitment to SBTi, such as the Next Generation Tiltrotor, virtual training technologies, and theuse of Sustainable Aviation Fuels, as well as the development of new materials and technologies forrecycling of carbon resins, which are key elements in the transition to a circular business model.
> Energy and Industrial Efficiency – It encompasses all tactical projects aimed at streamlining operations,improving industrial performance, decarbonising production activities, and reducing energy consumption,in line with the commitment to SBTi. The year 2023 saw the implementation of major energy efficiency
and saving projects, such as the LED full potential programme, the self-production programme, and thereplacement of gas SF6 in the helicopter production cycle.
> Environmental management and circular economy – It contains tactical initiatives aimed at minimising
environmental impacts and fostering the transition to a circular economy model. Among the major
projects are recycling of carbon fiber composite materials and of WEEE (Waste from Electrical andElectronic Equipment), as well as initiatives aimed at decreasing water withdrawals and waste. The Smart
Water project plays a key role, which, when fully implemented, will make it possible to reduce water
withdrawals, particularly at sites located in water-stressed areas.
The Prosperity pillar is associated with numerous initiatives that mainly concern the development of a sustainablesupply chain and the Group’s services and solutions that enable sustainability and safety of communities,
infrastructures and of the environment:>>
Prosperity>

Sustainable Supply Chain – It encapsulates the Plan's projects involving Leonardo's suppliers - mostly
SMEs - in initiatives focused on digital transformation, cyber security, and social and environmental
responsibility. During 2023 specific training initiatives were conducted to improve suppliers' awarenessof ESG issues and related sustainability performance, even with a view to decarbonisation, in line with the
Science Based Targets.
Earth observation and Emergency management – It contains projects that can monitor the condition of
the planet and improve the lives of citizens. These include satellite monitoring for precision agriculture
and that of infrastructure, Space Situational Awareness, for the study into security and sustainability ofspace, monitoring for climate change, and the development of digital platforms for coordinatinginterventions in emergency and disaster situations.
Mobility solutions and safety systems – It includes cutting-edge technologies to enable sustainable andsafe mobility. These include smart mobility solutions, which, through the use of technology such as 5G
and Machine Learning algorithms, enable improved efficiency in public transport, such as in the case of
the “Genova 4 assi” project.

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Report on operations at 31 December 2023

Guidance 2024
The expected 2024 performance confirms the sustainable growth path accompanied by increasing
profitability and cash flow generation, in a context characterized by high demand for defense and security.
The actions that have been promptly implemented by the Group allow the mitigation of effects generated
by inflationary pressures due to the Russia-Ukraine conflict.
Based on the current assessment of the effects deriving from the geopolitical situation on supply chain,inflation and global economy, and assuming no additional major deterioration, Leonardo expects to deliverin 2024:
•

•
•

•
•

Progressive growth in new orders of ca. € 19.5 billion, driven mainly by Defence Electronics & Security
and by the continuing recovery of the Aeronautics sector, confirming a strong positioning of the Group's
products and solutions and presence in key markets;
Revenues of ca. € 16.8 billion, up compared to 2023, thanks to the contribution of new orders and thedevelopment of portfolio activities, delivering off a backlog at a record value of ca. € 40 billion;
Increasing profitability, with EBITA of ca. € 1,440 million, driven by growth in volumes and confirmed
solid industrial profitability of the main business areas. The estimated improvement in profit also reflects
the progressive recovery of the Aerostructures business, and is notwithstanding the difficulties in the
manufacturing segment of satellites for commercial telecommunications through its subsidiary TAS;FOCF of ca. € 770 million, with the defence/governmental business delivering solid cash generation,
while Aerostructures continues to absorb slightly less cash than 2023;
Group Net Debt of ca. € 2.0 billion driven by cash flow generation and assuming the increased dividend
payment from € 0.14 to € 0.28 per share, new leasing contracts, strategic investments, and other minortransactions.

Below is the summary table:

FY 20232024 Guidance(2)(Proforma) (1)18.7
ca. 19.5
16.0
ca. 16.8
1,326
ca. 1,440652
ca. 7702.3
ca. 2.0

New Orders (€bn)
Revenues (€bn)
EBITA (€mln)
FOCF (€mln)
Group Net Debt (€bn)

Exchange rate assumptions: €/USD= 1.15 and €/GBP= 0.89
(1)

The values shown for the year 2023 enhance the full consolidation of Telespazio which will be operational from 2024

(2)

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

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Report on operations at 31 December 2023

GROUP RESULTS AND FINANCIAL POSITION 2023 PERFORMANCE AND FINANCIAL RESULTS
 ESG PERFORMANCE INDICATORS

34

Report on operations at 31 December 2023

2023 Performance and financial results
The financial results for 2023 confirm the excellent performance of the Group, with a particularly positive
trend in cash-flow generation in the period.
As described in more detail below, pro-forma KPIs are provided in addition to the ordinary KPIs to reflect theupcoming consolidation of the Telespazio group.
New orders showed steady, structural growth, nearing the threshold of €bil. 18 (€bil. 18.7 of the pro-forma
figure), with a particularly positive performance in the European component of the Defence Electronics &Security business. The sustainability of commercial growth is even more pronounced considering that New
orders in 2022 included the order from the Polish Ministry of Defence for the AW149 helicopters.
Revenues showed an increase of 3.9% (4.1% compared to the pro-forma figure), thanks also to theremarkable recovery of the Aerostructures (+34%) and the performance of Defence Electronics & Security
and of Helicopters. The growth of revenues is accompanied by an increase in EBITA of 5.8% (6.1% comparedto the pro-forma figure).
The EBITA continued to be driven by Defence Electronics & Security, with a particular contribution from theEuropean component, and by the recovery of Aerostructures, bringing ROS to 8.4 %.
Worth noting is the remarkable financial performance, with the free operating cash flows (FOCF) showing an
increase of 18% compared with the figure recorded in 2022, which demonstrates the Group’s ability to keepon the path to strengthen cash generation it has embarked on.
The Group net debt continued to decrease, with an improvement of 23% from 2022, standing at €bil. 2.3; thesignificant cash-flow generation and the proceeds from the sale of the minority stake in DRS allowed theGroup to continue the process of reducing its indebtedness.

35

Report on operations at 31 December 2023
Key Performance Indicators (KPI)
The KPIs for the period and the main changes in the Group's performance are shown below (for the definitionof ratios, reference should be made to the paragraph on “Non-GAAP Alternative Performance Indicators”).
Insights into the Business sectors performance are dealt with in the specific section dedicated to the trend ineach of them.
Pro-forma data are also provided in relation to some Key Performance Indicators which translate in numbers
the notional effect of the line-by-line consolidation of Telespazio. The aim is to already provide an indicatorwhich is representative of the KPIs that will be presented from 2024 28:

New orders
Order backlog
Revenues
EBITDA
EBITA
ROS
EBIT
EBIT Margin
Net result before extraordinarytransactions
Net result
Group Net Debt
FOCF
ROI

2022
17,26637,506
14,713
1,763
1,218
8.3%
961
6.5%

2023
17,92639,52915,291
1,883
1,289
8.4%
1,085
7.1%

697
932
3,016
539
12.0%

742
695
2,323
635
11.9%

Change
3.8%
5.4%
3.9%
6.8%
5.8%
0.1 p.p.
12.9%
0.6 p.p.

2022
18,041

Proforma
2023
18,668Change3.5%

15,354

15,982

4.1%

1,250
8.1%

1,326
8.3%

6.1%
0.2 p.p.

2,991
559

2,322
652

(22.4%)
16.6%

6.5%(25.4%)(23.0%)
17.8%(0.1) p.p.

For the definition of indices, reference should be made to the paragraph on “NON-GAAP Alternative
Performance Indicators”.
The Group data do not include the contribution given by the Joint Ventures (JVs) and associates invested in by the Group (mainly
including GIE-ATR in the Aerostructures sector, MBDA and Hensoldt in the Defence Electronics & Security sector and JVs in the Space
sector). The Group’s business conducted through the JVs and associates and their strategic and financial importance remainunchanged, while for reporting purposes the contribution given by the aforesaid companies is only reflected 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 2023 the Group strategic JVs and associates recorded total revenues of €bil. 3.3 (€bil. 3.0 in 2022) as concerns Leonardo’s
share: as a result, the Group’s aggregate pro-forma revenues would come to about €bil. 18.6 (€bil. 17.7 in 2022).

28 As described below, following the amendment made to the shareholders’ agreements between Leonardo and Thales, theTelespazio group will be consolidated on a line-by-line basis starting from 1st January 2024. Until the present financial statements
Telespazio was valued on the equity method being qualified as a jointly controlled entity. On that basis, the data pro-forma 2022 and2023 were presented simulating the line-by-line consolidation of the Telespazio group.

36Report on operations at 31 December 2023
Commercial and business performance
The graphs below show the main business and economic ratios, including with regard to proforma data:

New orders and backlog
39,52916,00030,00020,00010,00017,926

18,668Order backlog
New orders

2023 Proforma

15,291

15,982

1,500
1,400

14,0001,300

12,000

1,200

10,0002023

EBITA

Revenues

18,00040,000

1,289

1,326

2023

2023 Proforma

1,100
2023

2023 Proforma

1,000

New orders came to €bil. 17.9 (€bil. 18.7 of the pro-forma figure), showing a growth from 2022 (+3.8%, +3.5%
compared to pro-forma data), thanks to the major contribution given by Defence Electronics & Security, inall business areas of its European component. The increase in the year represents an important sign ofconsolidation for the Group considering that the comparative figure included the important acquisition of
the order for AW149 helicopters from the Polish Ministry of Defense (€bil. 1.4).
The trend in New orders clearly highlights the effectiveness of the Leonardo Group's commercial offer thanks
to a diversified offering, widespread geographic distribution of its sales organization and the competitivenessof the Group. Quality of products and integrated solutions that meet the complex operational requirements
imposed by the customers, and innovation are the Group's sound distinguishing features that have made it
possible to strengthen and expand the Group's market presence, which, despite the lack of major individual
orders, allow for the growth of the portfolio of future businesses.
The aforesaid level of new orders corresponds to a book-to-bill (ratio of New Orders to Revenues for theperiod) equal to about 1.2. The Order Backlog ensures a coverage in terms of equivalent production equal
to 2.6 years (2.5 years in 2022), nearing the threshold of €bil. 40 thanks to the success of the commercial
campaigns begun in the last years.
Revenues (€bil. 15.3, €bil. 16 of the pro-forma figure) were increasing compared to 2022 (+3.9%, +4.1%
against pro-forma data) in almost all business areas, including Aerostructures, which benefitted from theresumption of deliveries of B-787. Particularly significant is the contribution from the European componentof Defence Electronics & Security.
EBITA (€mil. 1,289, €mil. 1,326 of the pro-forma figure) reflects the solid performance of the Groupbusinesses and showed a growth on 2022 (+5.8%, +6.1% compared to pro-forma data) thanks to the major
contribution from the European component of Defence Electronics & Security and the lower loss in
Aerostructures, in line with the plan to revive the business and thereby confirming the gradual recovery incivil aeronautics.
EBIT, amounting to €mil. 1,085 benefitted, compared to 2022 (€mil. 961), from the improvement of EBITA,
as well as from the lower incidence of the restructuring costs due to the ongoing early retirement plans.
The Net result before extraordinary transactions, equal to €mil. 742 (€mil. 697 in 2022), reflects theperformance of EBIT, and the taxation that in 2022 mainly benefitted from a lower tax burden on foreigncompanies.
The Net Result, amounting to €mil. 695 (€mil. 932 in 2022) included, in addition to the Net result before
extraordinary transactions, the recognition for €mil. 57 of costs for the evaluation of the road transport
37

Report on operations at 31 December 2023
business in view of future disposal, net of a capital gain of €mil. 10 relating to the disposal of the ATM business
unit by Selex ES Llc set out in the “Industrial Transactions” section. The 2022 figure, on the contrary, reflected
the capital gain obtained from the sales of Leonardo DRS Global Enterprise Solutions and Advanced Acoustic
Concepts businesses.
Reclassified income statement(€ millions)
Revenues
Purchase and personnel expenses
Other net operating income/(expenses)
Equity-accounted strategic investments
Amortisation, depreciation and write-offs
EBITA
ROS
Non-recurring income/(expenses)
Restructuring costs
Amortisation of intangible assets acquired aspart of business combinations
EBIT
EBIT Margin
Net financial income/(expenses)
Income taxes

Note

(*)
(**)
(***)
(****)

2022
14,713(12,976)
(106)
132
(545)
1,218
8.3%
(114)
(119)

(*****)Net result before extraordinary transactions
Net result related to discontinued operations
and extraordinary transactions
Net result

Proforma(******)

15,354

1,250
8.1%

2023

Proforma Change

15,291(13,532)
(30)
154
(594)
1,289
8.4%
(110)
(59)

% Change

15,982

578

3.9%

1,326
8.3%

71
0.1 p.p.

5.8%

(24)

(35)

961
6.5%
(213)
(51)

1,085
7.1%
(214)
(129)

124
0.6 p.p.

12.9%

697

742

45

6.5%

235

(47)

932

695

(237)

(25.4%)

Notes to the reconciliation between the reclassified income statement and the statutory income statement (for more details, reference
should be made to the Note on "Non-GAAP alternative performance indicators”):(*)
Includes “Purchases and Personnel expense” (excluding restructuring costs and non-recurring costs) and “Accruals (reversals) for
onerous contracts (final losses on orders).”(**)
Includes the net amount of “Other operating income” and “Other operating expenses” (excluding restructuring costs, nonrecurring income/(expense) and accruals (reversals) for onerous contracts (final losses on orders).
(***) Includes the effects of the valuation at equity, classified under the “Share of profits (losses) of equity-accounted investees”, ofstrategic investments only;(****) Includes “Amortisation, depreciation and impairment losses and value adjustments to financial assets”, excluding theamortisation charge referable to intangible assets acquired as part of business combinations, goodwill impairment and writedowns regarded as “Non-recurring costs”;(*****) Includes “Financial income”, “Financial expenses” (net of the gains and losses relating to extraordinary transactions) and “Shareof profits (losses) of equity-accounted investees” (net of the results of strategic investments).
(******) Includes “Profit (loss) from discontinued operations” and gains and losses relating to extraordinary transactions (keyacquisitions and disposals).

38

Report on operations at 31 December 2023
Financial performance
The FOCF, amounting to of €mil. 635 (€mil. 652 of the pro-forma figure), showed an increase of 17.8%
compared to the 2022 FOCF of €mil. 539 (+16.6% on the pro-forma figure €mil. 559), confirming the positive
trend that had already been highlighted in recent years. The targets achieved are due to the actions aimed
at strengthening the performance of operations, a careful investment policy in a period of business growth,
to the streamlining and making working capital more efficient and to an effective financial strategy.

FOCF

700
680

652

660

635

640
620
600

2023

2023 Proforma

Reclassified cash flow statement(€ millions)

Note

2022

Cash flows generated from operating activities
Dividends received
Cash flows from ordinary investing activities
Free Operating Cash Flow (FOCF)

(*)

1,163
133
(757)
539

Strategic transactions
Change in other investing activities
Net change in borrowings
Dividends paid
Net increase (decrease) in cash and cash
equivalents
Cash and cash equivalents at 1 January
Exchange rate differences and other changes
Cash and cash equivalents at 31 December

(**)

(***)
(****)

Proforma

2023

559

1,206
186
(757)
635

(172)
(6)
(1,322)
(80)

352
(63)
71
(83)

(1,041)

912

2,479
73
1,511

1,511
(16)
2,407

Proforma

652

Change%Change

43

3.7%

96

17.8%

Notes on the reconciliation between the reclassified cash flow and the statutory cash flow:(*)
Includes “Cash flows generated from (used in) operating activities”, excluding debt payments pursuant to Law 808/1985;(**)
Includes “Cash flow generated from (used in) investing activities”, including payments and receipts related to Law 808/1985,
net of dividends collected;(***) Includes “Other investing or divesting activities” classified as “Strategic transactions”;(****) Includes “Other investing or divesting activities”, excluding dividends collected, the effect of transactions classified as“Strategic transactions” and receipts from Law 808/1985.

The Group Net Debt, equal to €mil. 2,323, showed an improvement compared to 31 December 2022 (€mil.
3,016); the figure benefitted from the aforesaid trend in the FOCF while also including the financial effects ofthe transactions that are described below:•

the sale completed in November of Leonardo DRS ordinary shares (a transaction widely described in
section “Industrial and financial transactions”), which resulted in a cash-in – after transaction costs –of about €mil. 327 (USDmil. 352);
39

Report on operations at 31 December 2023•

the sale, completed in May by the US subsidiary Selex ES Llc, of the business unit of Air Traffic
Management (“ATM”) to Indra Air Traffic, Inc., fully owned by the Spanish company Indra Sistemas
S.A., for a total amount of about USDmil. 37;•

the dividend that was paid in July for €mil. 83;•

the execution of new lease agreements for €mil. 92;•

the translation of foreign currency positions and other items.
Changes in Group Net Debt

635

352

83

92

119

3,016
2,323

31 December 2022

FOCF

Strategic transactions

Dividends paid40

New contract leasing
submission

Other effect andexchange rate

31 December 2023

Report on operations at 31 December 2023
Reclassified statement of financial position(€ millions)Note

Non-current assets
Non-current liabilities
Capital assets

31 December
2022

Proforma

31 December
2023

Proforma

13,943(2,174)
11,76914,295(2,248)12,047975
3,338(3,054)
1,259(1,078)(1,260)(1,079)596
3,685(3,268)1,013(1,087)(1,049)(1,123)

Net invested capital

10,69010,924Equity attributable to the Owners of the Parent
Equity attributable to non-controlling interests
Equity

7,183
516
7,699

7,800
761
8,561

Group Net Debt

3,016

Inventories
Trade receivables
Trade payables
Working capital
Provisions for short-term risks and charges
Other net current assets (liabilities)
Net working capital

Net (assets)/liabilities held for sale

(*)
(**)

(***)

(****)

(25)

2,991

2,323

2,322

40

Notes to the reconciliation between the reclassified and the statutory statements of financial position (for more details, reference should
be made to the Note on "Non-GAAP alternative performance indicators”):(*)
Includes all non-current assets and all non-current liabilities, excluding “Non-current loans and borrowings”.
(**)
Includes “Inventories”, “Contract Assets” and “Contract Liabilities”.
(***) Includes “Income tax receivables” and “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”.

41Report on operations at 31 December 2023
Group Net Debt(€ millions)
Bonds
Bank debt
Cash and cash equivalents
Net bank debt and bonds

31 December2022

of which current

31 December2023

of which current

1,628
1,350
(1,511)
1,467

36
71
(1,511)

1,631
1,312
(2,407)536

635
87(2,407)

Current loans and receivables from related parties
Other current loans and receivables
Current loans and receivables and securities

(56)
(49)
(105)

(56)
(49)

(183)
(22)
(205)

(183)
(22)

Hedging derivatives in respect of debt items
Other related party borrowings
Lease liabilities
Other borrowings

19
962
570
103

19
862
78
35

6
1,292
610
84

6
1,192
79
51

Group Net Debt

3,016

2,323

The reconciliation with the net financial position required by CONSOB Communication no. DEM/6064293 of 28 July 2006, updated
by the provisions of ESMA Guideline 32-382-1138 of 4 March 2021 as implemented by CONSOB warning notice no. 5/21 of
29 April 2021, is provided in Note 21 of the Consolidated Financial Statements.

As at 31 December 2023, Leonardo S.p.A. had sources of liquidity available for a total of about €mil. 4,210 tomeet the financing needs of the Group’s recurring operations, broken down as follows:•

an ESG-linked Revolving Credit Facility for an amount of €mil. 2,400, divided into two tranches of€mil. 600 and €mil. 1,800 expiring on 7 October 2024 and 7 October 2026 respectively;•

additional unconfirmed short-term lines of credit of about €mil. 810;•

a framework programme for the issue of commercial papers on the European market (MultiCurrency Commercial Paper Programme) for a maximum amount of €bil. 1 expiring on 2 August 2025.

The Company also has a €mil. 260 Sustainability-linked financing granted by the European Investment Bank
(EIB) – with a contract signed in November 2022 – entirely unused at the date of this report.
Furthermore, Leonardo has unconfirmed lines of credit for a total of €mil. 10,877, of which €mil. 3,051, stillavailable as at 31 December 2023.
Finally, other Group subsidiaries have the following credit facilities:•

Leonardo DRS has a Revolving Credit Facility for an amount of USDmil. 275 (€mil. 249), which wasentered into at the same time as the completion of the merger with RADA, entirely unused at 31
December 2023;•

Leonardo US Corporation has short-term revocable credit lines, guaranteed by Leonardo Spa, for
USDmil. 210 (€mil. 190), which had been used for USDmil. 40 at 31 December 2023 (€mil. 36);42

Report on operations at 31 December 2023

ESG performance indicators
The ESG KPIs for the period and the main changes that characterised the Group’s performance are reported
below. More details of the management of these indicators are provided in the People, Planet and Prosperity
sections.

SocialWorkforce (no.)
Women on total workforce (%)
Employees under 30 on total employees (%)
Women in managerial positions on total managers and junior managers (%)
Hires under 30 on total hires (%)
Women hires on total hires (%)
Women hires with STEM degree on total hires with STEM degree (%)
Average hours of training per employee (no.)
Injury rate (injuries per 1,000,000 worked hours)
Employees at ISO 45001-certified sites on total employees (%)
Innovation
Total R&D expenses (€ million)of which self-funded
Computing power per capita (Gigaflops on no. of Italian employees)
Data storage capacity per capita (Gigabyte on no. of Italian employees)
Environmental
Energy consumption (TJ)
Water withdrawals (megaliters)
Waste produced (tons)of which hazardous (tons)
Scope 1 and 2 (market-based) CO2 emissions (ktons)
Scope 1 and 2 CO2 emissions intensity on revenues (g/€) location based
Employees at ISO 14001-certified sites on total employees (%)

2022

2023

Change51,392
19.0
11.2
18.7
43.9
24.1
22.1
20.6
2.35
80

53,566
19.6
13.0
19.5
48.7
24.5
22.4
24.1
2.03
81

4.2%
0.6 p.p.
1.8 p.p.
0.8 p.p.
4.8 p.p.
0.4 p.p.
0.3 p.p.
17.1%(13.4%)
1 p.p.

2,003
542
190
840

2,201
579
199
957

9.9%
6.7%
4.3%
13.9%

5,435
5,329
30,001
9,528
277
28.96
75

5,311
4,929
33,065
8,437
251
27.70
82

(2.3%)(7.5%)
10.2%(11.5%)(9.5%)(4.4%)
7 p.p.

The reported indicators are part of the Consolidated Non-financial Statement

In 2023 the workforce increased of 2,174 employees compared to 2022. Growth is mainly focused in Italy(about +1,000), in the UK (about +570) and in Poland (about +350), thanks also to the stabilisation of theemployment contracts. In other Countries, the workforce remained substantially in line with the previous
year.
In 2023, employees under 30 years of age account for 13.0% of total workforce (+1.8 p.p. compared to 2022),
confirming the positive trend of last years (hires under 30 years of age on total hires rose of +4.8 p.p. vs2022).
The commitment to creating an environment which enhances gender diversity is witnessed by the increasein the number of female managers who achieved 19.5% of total managers and middle managers, and by the
new female hires with STEM degrees, the ratio of which to total hires of workers with STEM degrees sligthly
increased compared to 2022 (+0.3 p.p.), standing at 22.4%.
The injury rate showed a reduction of 13.4% compared to 2022, confirming last years improvements. The
company's commitment continues to extend the sites that are ISO 45001 certified with a health and safety
management system where, as of today, 81% of employees work (+1.1 p.p. compared to 2022).
The 2023 figure on training hours per employee is higher than 2022 (+17%), thanks mostly to a relevant
upskilling funded plan aimed at strenghtening the skills needed by the Digital Transition (“Fondo Nuove
43

Report on operations at 31 December 2023
Competenze”) in the Aerostructures sector, and to induction initiatives in the Aircraft sector for new-hires
who are employed in new business opportunities outside of Italy.
Total R&D expenses increased of about 10% compared to 2022 and accounted for 14.4% of revenues,
allowing the Group to invest in internal developments and external collaborations, including with customers,
with the objective of fuelling the product portfolio and improving competitiveness.
Computing power and data storage capacity per employee showed an increase (of +4.3% and +13.9%
compared to 2022, respectively), thanks to upgrading investments made in 2023. Morevoer, in 2024,
implementation of further upgrading is expected, in line with the Group’s investment plan.
Reduction of Scope 1 and 2 market-based GHG emissions (-9.5% compared to 2022), achieved despite growthof business volumes, is mainly related to the progressive replacement of SF6 gas with a gas with minimal
environmental impact, used as an inert substance in a specific helicopteristic production process, and to theincrease of the share of energy from renewable sources purchased from the grid.
Also, water withdrawals and energy consumption showed a reduction (of 7.5% and 2,3% compared to 2022,
respectively), through industrial and energy efficiency interventions and projects to reduce water
withdrawals, confirming the company's commitment in managing natural resources, consistently with theobjectives set out in its sustainability plan. Regarding waste, an overall growth is shown (+10.2% compared
to 2022), mainly caused by the increase of the non-hazardous share related to maintenance activities andnon-ordinary works in some Italian sites, despite the relevant reduction of hazardous waste (-11.5%
compared to 2022).
More than 80% of employees works within sites with environmental management system ISO 14001
certified, with an increase of 7 p.p. compared to 2022.
Finally, from 2021, on a voluntary basis, Leonardo has required to the Independent Legal Auditors to performthe full assurance (“Reasonable assurance engagement”) on a set of non-financial performance indicators(ESG) that are considered important and strategic for the Group 29.

ESG financial planning and investment management
Leonardo's investments have a direct and indirect impact on various industrial sectors and areas of society,looking across the board at the needs of customers, citizens and territories and contributing to achieving the
Sustainable Development Goals (SDGs).
Financial planning and investment choices are aimed at supporting the Group's Industrial Plan, while taking
account of the identified risks and opportunities, the ongoing monitoring of market trends and binding andnon-binding regulations, as well as stakeholder expectations. The evaluation and selection of investments
takes into account strategic, economic-financial, technical, commercial and sustainability parameters.
Furthermore, within the scope of the participation in the CFO Coalition of the UN Global Compact, Leonardo
supports the Principles on Integrated SDG Investments and Finance to contribute to creating a sustainablefinancial model for the prosperity of businesses and communities.
At the end of 2023, 55% of the total sources of financing available to the Group are linked to ESG parameters.
This result was achieved thanks to:

29 For more information, please see Methodology note of the NFS.

44

Report on operations at 31 December 2023>>>

the execution of the first ESG-linked Revolving Credit Facility, amounting to €bil. 2.4,
the first ESG Term Loan, amounting to €mil. 600,
the first ESG-linked loan granted by the European Investment Bank, amounting to €mil. 260.

All sources described above are linked to specific KPIs, including the reduction in CO2 emissions through ecoefficiency of industrial processes, the promotion of female employment with STEM 30 degrees, and theincrease in Leonardo's per capita computing power as a key enabler and booster in research, numericalsimulation, big data analytics and artificial intelligence.
As regards capital allocation, Leonardo set the objective of having at least 50% of investments in support of
the SDGs in 2023-2025 out of a total investment value of approximately €mil. 750-850 per year, including
capitalised R&D expenses, capital expenditures (CapEx), Tooling and other investments in intangibles. In
particular, the main impacts reported for the investments are linked to SDG 8 "Decent work and economic
growth", SDG 9 "Industry, Innovation & Infrastructure" and SDG 12 "Responsible Consumption and
Production", giving a direct contribution to strengthening innovation processes, developing the supply chain,creating skilled jobs and to continuous research into innovative solutions for the society, the environment
and the safety of people, infrastructures, and territories.

30 For more details, please see Industrial and Financial Operations paragraph.

45

Report on operations at 31 December 2023

SEGMENT RESULTS AND OUTLOOK KEY PERFORMANCE INDICATORS BY SECTOR

1. HELICOPTERS
2. DEFENCE ELECTRONICS & SECURITY
3. AIRCRAFT
4. AEROSTRUCTURES
5. SPACE

46

Report on operations at 31 December 2023

Key Performance Indicators by segment
Leonardo continued the path to growth in all sectors of its core business.
As pointed out above, in this Annual Financial Report a set of Key Performance Indicators are provided for torepresent the business performance considering the entire contribution from Telespazio group, in
consideration of its upcoming consolidation in 2024.

December 2022
Helicopters
Defense Electronics &Security
AircraftAerostructures- of which GIE ATR
Space
Other activities
Eliminations
Total

December 2022
Order
New orders Proforma
Revenues Proforma
EBITA
Proforma ROS % Proforma
backlog
6,060
6,060
13,614
4,547
4,547
415
415
9.1%
9.1%
8,558

8,558

15,160

7,212

7,212

805

805

11.2%

11.2%

2,800
420

2,800
420
780
400
(977)
18,041

8,554
1,075

3,085
475

421
(189)
(6)
63
(265)
1,250

13.6%
(39.8%)

579(1,185)
14,713

421
(189)
(6)
31
(265)
1,218

13.6%
(39.8%)

360(1,257)37,506

3,085
475
650
579
(1,194)
15,354n.a.
(45.8%)
n.a.
8.3%

9.7%
(45.8%)
n.a.
8.1%

400
(972)
17,266

December 2023

December 2023
Helicopters
Defense Electronics &Security
AircraftAerostructures- of which GIE ATR
Space
Other activities
Eliminations
Total

5,513

Order
Revenues Proforma
backlog
5,513
14,426
4,725
4,725

9,717

9,717

16,844

7,483

2,395
644

2,395
644
763
534
(898)
18,668

7,972
1,095

2,938
636

375
(1,183)39,529760(1,251)
15,291

New orders Proforma

534
(877)
17,926

EBITA

Proforma

ROS %Proforma

422

422

8.9%

8.9%

7,483

852

852

11.4%

11.4%

2,938
636
701
760
(1,261)
15,982

419
(151)
12
16
(269)
1,289

419
(151)
12
53
(269)
1,326

14.3%
(23.7%)

14.3%(23.7%)

n.a.
(35.4%)
n.a.
8.4%

7.6%
(35.4%)
n.a.
8.3%

Change %Change %Helicopters
Defense Electronics &Security
AircraftAerostructures- of which GIE ATR
Space
Other activities
Eliminations
Total(9.0%)

Order
Revenues Proforma
backlog(9.0%)
6.0%
3.9%
3.9%

13.5%

13.5%

11.1%

3.8%

(14.5%)
53.3%(14.5%)
53.3%(6.8%)
1.9%

n.a.
33.5%
9.8%
3.8%

(2.2%)
33.5%
8.1%
3.5%

n.a.
4.2%
5.9%
5.4%

New orders Proforma

EBITA

Proforma

ROS %Proforma

1.7%

1.7% (0.2) p.p.

(0.2) p.p.

3.8%

5.8%

5.8%

0.2 p.p.

0.2 p.p.

(4.8%)
33.9%(4.8%)
33.9%

0.7 p.p.
16.1 p.p.

7.8%
31.3%
(5.6%)
4.1%(0.5%)
20.1%
300%(15.9%)(1.5%)
n.a.
6.1%

0.7 p.p.
16.1 p.p.

n.a.
31.3%
(5.6%)
3.9%(0.5%)
20.1%
300%
n.a.
(1.5%)
n.a.
5.8%

n.a.
10.4 p.p.
n.a.
0.1 p.p.

(2.1) p.p.
10.4 p.p.
n.a.
0.2 p.p.

The business sectors are commented on below in terms of competitive position, financial performance, total
market 31 and research & development. It should be noted that Leonardo has the objective of strengthening
31

Processed by Leonardo starting from Jane’s data.

47

Report on operations at 31 December 2023
its positioning in the more attractive markets in which the portfolio of its products can benefit from specificcompetitive advantage: the considerations reported below relate to the analysis of the present competitive
position, based on these two dimensions.

1. Helicopters
Leonardo is a leading group in some rotary-wing sectors at global level, delivering excellence in products
worldwide. In the defence sector, Leonardo has recognised expertise in multi-role (thanks to thedevelopment of dual-use platforms, as well as specialised ones), naval and combat applications, while its own
leadership remains on a sound footing in various applications such as Emergency Medical Service (EMS)
missions, Law Enforcement, offshore (Oil & Gas and Offshore Wind Farm) and passenger transport in the civil
market. On this last front Leonardo relies on its well-established expertise gained over the years, in particular
thanks to the AW109 models in the past and, more recently, the AW139, AW189 and AW169 models.
The trend in 2023 confirmed the solidity of the business, with a positive performance in line withexpectations. Revenues and EBITA were on the rise on 2022, with a high level of New orders, even though
lower than the previous year. New orders in 2022 were in fact affected by the acquisition of the contract forthe supply of 32 AW149 helicopters to the Polish Ministry of Defence worth €bil. 1.4.
185 new helicopters were delivered in the period compared to 149 recorded in 2022.
New orders. New orders, equal to €bil. 5.5, reflect the strong positioning of the AW Family with dual
employment, accompanied by major contracts signed in the military segment. Among the main acquisitions
for the period, we must note:•the contract, signed in December 2022 as part of the Italy-Austria Government-to-Government (G2G)
Agreement amendment, for the supply of additional 18 AW169M LUH (Light Utility Helicopter)helicopters for the Austrian Ministry of Defence;•the contracts relating to 3 AW159 helicopters and to 10 AW109 Trekker helicopters and the orderfor AW101 helicopters including mid-life update (MLU) for export customers;•

the contract with Boeing for the supply of 13 helicopters related to the starting of the production
phase of the MH-139 programme for the US Air Force;•the order for 6 AW139 helicopters from the operator Abu Dhabi Aviation (ADA), for 5 AW139
helicopters from the operator Weststar Aviation Services and for 4 AW189 helicopters from theoperator Omni Helicopters International (OHI), all of which to be used in offshore transport missions,as well as the order for 6 AW139 helicopters to be used in VIP rescue and transport missions fromthe operator The Helicopter Company in Saudi Arabia, and contracts for 7 AW169 with Babcock
Canada, also for rescue missions, together with other miscellaneous orders for helicopters in thecommercial sector.

Revenues. They were on the rise in dual use helicopter lines, as well as on the CS&T, mitigated by a lower
contribution of the NH90 Qatar programme.
EBITA. This figure increased due to higher revenues, with profitability substantially aligned.

48

Report on operations at 31 December 2023

Total market of the sector and 2023 Outlook
Market (*)
2023-2032

CAGR 2023-2032

Impact on the businesses in which Leonardo operates

Civil sector:€bil. 51

+3.1%

The market of civil helicopters – both private, public, and parapublic – returned to pre-Covid
volumes as early as in 2023, driven by the Intermediate class and the EMS, SAR and Law
Enforcement roles. On the other hand, the Energy sector showed evolving trends: while there is a
gradual reduction in Oil & Gas demand caused by the energy transition, the latter creates, on theother hand, new demand related to the need for new sources of energy supply (e.g., wind farms).
Even for the passenger transport segment, there was a recovery (in the second half of the period
under review) due to the resumption in passenger transport and the renewal of related fleets.
Defence sector:€bil. 134

+0.1%

The market remained stable as a whole, showing a trend estimated to grow in the first part of theperiod analysed due to the fleet replacement process already in progress in the main countries(e.g., the United States and various European and Asian countries). In the second part of theperiod under review, however, there will be a gradual decline due to the expected availability of
the new generation of medium multi-role machines, based on new technologies, which is
expected at the beginning of the new decade.

(*) deliveries of new helicopters only

Expectations for 2024 follow the positive trend of the Sector, with a stable high volume of new orders andcontinuous growth in deliveries and revenues. Profitability is also confirmed at good levels thanks to actions
aimed at containing costs and optimizing industrial processes.

Research, development and product engineering
Research into the field of helicopters as well is increasingly oriented towards sustainability, in line with theEuropean Green Deal plan, which sets out a roadmap for environmental objectives for 2050. In taking part inEuropean programs such as Clean Aviation, which is the successor of Clean Sky 2, Leonardo is developing andwill develop technologies and solutions to reduce emissions. Aircraft electrification and digitalisation are theother areas in research in this sector that will have favourable impacts also in terms of security, growth andprofitability.
The race to digitalisation is a further key aspect in all the product’s life cycle: from design, with theintroduction of digital certification criteria (Certification-by-Simulation), to advanced manufacturing systems(Digital Factory), autonomous flight operations and customer support, with the application of advanced Big
Data & Analytics algorithms for diagnostics and predictive maintenance. Furthermore, other digital
instruments have been developed for the training of pilots and to ease the work of maintenance workers andfleet managers using enhanced reality instruments for remote maintenance operations. Again within thedigitalisation of processes, work commenced on the development of the Digital Twin of the helicopter, which
exploits research into the simulation of Leonardo Innovation Labs 32 and the advanced calculation capabilitiesof the supercomputer davinci-1. Digitalisation also plays a key role in the definition of Life Cycle Assessment(LCA) methodologies that Leonardo is establishing to analyse the environmental impact of its helicopters,
putting eco-design at the heart of new product development.
Leonardo is also considering the development of a hybrid/electric propulsion system for light helicopters,
which will be implemented through the construction of a demonstrator equipped with hybrid-electric
propulsion, envisaging an architecture that allows for further future developments, including fuel cells. This32

For more details on Leonardo Innovation Labs, please see the chapter on Innovation of the “Prosperity” section.

49

Report on operations at 31 December 2023
demonstrator will be a first platform of a family of new light aircraft equipped with a conventionalarchitecture but with non-conventional propulsion and will also allow the validation and certification process
to be supported, while considering that regulations to govern new propulsion systems are still underdevelopment. Hybrid propulsion will not only reduce environmental impacts but also increase both flightsafety and aircraft performance. For example, the results obtained in the area of hybridisation will provide asignificant contribution to the development of the full-electric platform in Advanced Air Mobility (AAM LIBRA). In particular, electric propulsion enables the integration of a distributed propulsion architecture thatprovides the same thrust/weight performance with increased operability and efficiency.
The authorisation to operate its fleet by using Sustainable Aviation Fuels (SAFs) is another avenue Leonardo
is already pursuing to reduce the environmental impact of its products. All models of Leonardo helicopters
are to date compatible to fly with a SAF blend of up to 50%. Further developments in this area have led tothe successful flight of AW139 by using 100% SAF, with no performance change from conventional fuel.
In 2023, Leonardo started preliminary activities on the long-term "EU Next Generation Rotorcraft
Technologies Project (ENGRT)" project, which aims to lay the foundation for the development of the next
generation of European military rotary-wing aircraft, as part of the collaborative framework with key
European industrial players funded by the European Defence Fund (EDF). Common requirements for thedifferent countries involved, which are necessary for identifying the best architecture, are still in the processof being harmonised. Leonardo intends to focus its work on the Tiltrotor architecture.

Developments in 2023 – Helicopters
Next Generation Civil Tiltrotor (NGCTR) - Leonardo is developing
a new model of a more efficient, eco-friendly next generation civil
tiltrotor within the Clean Sky 2 Programme, with the objective of
reducing CO2 emissions up to 50% and noise emissions by 30% in
the take-off phase and up to 75% in the flyover condition
compared to the average values of rotary-wing aircraft that are
currently on the market. Leonardo develops eco-design
approaches to the development of specific NGCTR sub-systems
within the Programme. Life Cycle Assessment (LCA) models havebeen developed to quantify the environmental benefits obtained
from the design of additive manufacturing transmission
components and composite wing structures. Supported bydetailed LCA models, eco-design approaches will be graduallyextended to more complex macro-systems of products in the
Helicopters sector. Based on these activities, Leonardo will
implement, in the future, an approach in line with the standards
ISO 14040 and 14044, delivering training to the main partners inorder to gather the data required for LCA assessments. The work
performed will allow the first demonstrator flight to be carried out
during 2024.

50

Aircraft electrification - Research projects, in collaboration with
Leonardo Innovation Labs, for the introduction of new power
generation and distribution systems for primary functions, such as
in-flight power control, and in critical systems, such as rotor antiicing systems, will allow greater operational flexibility, efficiency
and cost reduction to be obtained, all in accordance with the moststringent safety requirements. The Emergency POwer System(EPOS) project involves the hybridisation of the AW09 singleengine platform to increase its performance and safety.
Advanced Air Mobility – Several technological developments areunderway to build a platform for the Advanced Air Mobility (AAM)and Urban Air Mobility (UAM) markets. In particular, batteries withhigh specific capacity, electric propulsion distribution architectures
and advanced materials are being studied. Developments of a
hybrid demonstrator and a full-electric demonstrator have also
been initiated, with the final concept planned to be full-electric.

Report on operations at 31 December 2023

2. Defence Electronics & Security
Leonardo designs, develops and manufactures advanced defence solutions in the air, land, sea, space andcyber domains, for the security of national borders and the management of complex civil infrastructures
while being able to take on a different role depending on contexts and contracts, from main contractor andprovider of complete systems to provider of apparatuses.
As for this sector, Leonardo participates in the main national strategic programmes and in major international
programmes, and is a technology partner of Governments, Defence Authorities, Institutions and Enterprises.
51

Report on operations at 31 December 2023
In particular, among the applications in the land domain, Leonardo’s portfolio includes battlefield commandand control and air and border defence systems, as well as weapon and ammunitions systems.
In the naval domain integrated systems are particularly important for combat and maritime surveillance,
installed both on board naval ships and in the command and control centres, and weapon and protection
systems for naval ships, completed by simulation and training solutions.
Leonardo creates advanced avionic solutions in the aircraft and space areas for surveillance and combat, thelatest generation of manned and unmanned aircraft, both company-owned and third-party vehicles, andcomponents for satellites or interplanetary probes.
As far as security is concerned, areas of greatest interest are focused on solutions for cyber- and physicalprotection and resilience for governments and critical infrastructure, based on advanced information analysis
and enhancement systems and secure communications.
The year just ended showed a remarkable commercial performance, with the book-to-bill above 1 in all themain business areas, and volumes and profitability on the rise with particular reference to the European
component. The subsidiary DRS reported a higher level of acquisitions on 2022, with an increase in volumes
and profitability, despite the unfavourable trend in the USD/€ exchange rate and the different perimeter (the2022 data benefitted from the contribution from the GES business sold on 1 August 2022).
Key Performance Indicators for the sector
December 2022
DES Europe
Leonardo DRS
Eliminations
Total

New orders

December 2023
DES Europe
Leonardo DRS
Eliminations
Total

New orders

Change %DES Europe
Leonardo DRS
Eliminations
Total

New orders
15.9%
8.5%
17.9%
13.5%

Revenues

5,628
2,997
(67)
8,558

Revenues

6,521
3,251
(55)
9,717

Revenues

4,712
2,558
(58)
7,212

4,907
2,613
(37)
7,483

4.1%
2.2%
36.2%
3.8%

EBITA

EBITA

EBITA

553
252
805

600
252
852

8.5%
0.0%
n.a.
5.8%

ROS %

ROS %

11.7%
9.8%
n.a.
11.2%

12.2%
9.7%
n.a.
11.4%

ROS %

0.5 p.p.
(0.1) p.p.
n.a.
0.2 p.p.

Average exchange rate €/USD: 1.0813 for 2023 and 1.0530 for 2022

Leonardo DRS data in USD
DRS ($mil.) December 2022
DRS ($mil.) December 2023

New orders
3,156
3,516

Revenues

2,693
2,826

EBITA

265
273

ROS %

9.8%
9.7%

New orders. These showed a sharp increase of above 13% in all business areas, despite the mentioned
different perimeter of the US component. Among the main acquisitions of the period, we note:52Report on operations at 31 December 2023
For the European component:•

the order to complete the development and integration of the new ECRS Mk2 (European Common
Radar System) radar for the Royal Air Force (RAF) Typhoon fleet in the United Kingdom. The newsensor will ensure that RAF aircraft can simultaneously detect, identify and track multiple targets onland and at sea, thus enabling increased capabilities in terms of air power;•

the domestic contract for the supply of tented Command Posts for Brigades and Regiments to the
Italian Army, which is part of the broader programme for the modernisation of land-based multidomain Command and Control (C2) Capabilities;•

as part of the SAMP/T NG next generation air defence ground systems programme, we note theorder for the supply of Kronos Grand Mobile High Power (KGM-HP) radars that will be integrated
with the FCU (Fire Control Unit) system provided by MBDA Italia for the Italian Air Force;•for the Cyber division, note the order for the formation of the Joint Operation Center (JOC) of the
Joint Operations Command (Comando Operativo di Vertice Interforze, COVI) of the Italian Defence,
through the setting up of Operations Rooms and Data Centres and the development of functionalities
such as Joint Common Operational Picture (JCOP), Political Military Economic Social Information
Infrastructure (PMESII) and Information Knowledge Management (IKM);•

the contract for the mid-life update (Ammodernamento di mezza vita - AMV) of no. 90 Ariete C1tanks to the C2 standard, and related logistics support. The upgrade to the new C2 standard includes– among others – the supply, for the electronics component, of digital optronics systems and a suiteof last-generation command, control and communication which, together with new surveillancesystems, will tangibly increase the day/night capacity of engagement. This new equipment has been
for most part taken from the armored vehicle Centauro II ensuring a shared logistics between the
two lines of vehicles.

For the subsidiary Leonardo DRS:•

the additional order, as part of the broader Ohio-submarine class Replacement Programme (ORP),
to supply integrated electric propulsion components for the next-generation Columbia-classsubmarine for the US Navy;•

the order for the production of the Family of Weapon Sights – Individual (FWS-I), that are sights withwireless connectivity with vision systems mounted on helmets, including the enhanced night vision
goggle-binocular (ENVG-B) and the new generation integrated vision system (IVAS). It also provides
users with target acquisition capability in day or night and in the presence of smoke or fog or in otherlow visibility conditions enabling strategic and tactical advantages.

Revenues. They showed growing volumes (+3.8%) in all the main business areas. The volumes of thesubsidiary Leonardo DRS, netted of the unfavourable impact of the USD/€ exchange rate, were increasing by
4.9%.
EBITA. This increased in all the main European business areas, with particular reference to the Cyber Security
Division and the major contribution from the Joint Ventures. The profitability of the European component
proved to be solid again and aligned with the previous year, despite the inflationary pressure. The profitabilityof Leonardo DRS also recorded an increase compared with 2022, offsetting the impact of the different
business perimeter and the unfavourable trend in the USD/€ exchange rate.
With regard to MBDA, the company recorded an improved profitability compared to 2022, thus confirming
operational and financial strength.

53

Report on operations at 31 December 2023

Total market of the sector and 2023 Outlook
Market2023-2032

CAGR
2023-2032

Impact on the businesses in which Leonardo operates
Civil sector:
Ever-growing demand, in particular in the cyber security and secure cloud & data valorisation
segments, driven by increasing needs in terms of physical and digital protection, criticalinfrastructure and institutions. The adoption of Artificial Intelligence (IA) techniques will be oneof the next drivers of business development.
Defence sector:
In the Air domain, we must note the growth in the avionics, electronic warfare and AESA (Active
Electronically Scanned Array) radar systems, driven by growing demand for air combat systems.

€bil 3,605

5.3%

In the Land domain, we must note the growth in C4ISR (Command, Control, Communications,
Computers, Intelligence, Surveillance and Reconnaissance) systems, radar and communication
systems in the face of increasing geopolitical tensions and threats to security; there was also a
growing demand for systems to counter threats from unmanned aircraft (Counter Unmanned
Aerial Systems).
In the Naval domain, we must note the growth in demand for command and control andintegrated solutions for radar and electronic warfare systems; new programmes for naval surface
and underwater vessels will drive demand for artillery and related ammunition; and, for theunderwater segment, demand for torpedoes and countermeasures.
The general trend toward multi-domain operations also opens up new developments in the areasof sensor and system integration, data fusion, and data analysis and presentation, including
through AI techniques.

For 2024 volumes and profit margins are expected to grow in all the main business area in both the European
component and in the subsidiary DRS, with a solid contribution from the interests in Joint Ventures. As
regards the supply chain, procurement times continue to be monitored in certain electronic components
which could undergo slight postponements within an inflationary environment that is expected to becontained compared to recent years.

Research, development and product engineering
A fundamentally important challenge for the Defence Electronics & Security sector is to gain the utmost
benefit from research and the latest technological innovations, many of which have come into being incommercial and civil contexts, with an increasing focus on the sovereignty of technologies, materials andsecurity of the entire supply chain. To this effect, it is now paramount to implement artificial intelligence,quantum sensing and security, big data analytics, 5G and 6G communications, and blockchain in platforms
and systems that operate in the field of Defence, at the same time as the development of technologies thatenable product size, weight and power (SWaP) to be reduced and extend the autonomy of platforms andsystems.
In order to meet requirements for greater autonomy of systems, digitalisation and cyber resilience of
products and information systems are essential elements for technological development and in order toremain competitive. The R&D and product engineering activities that are carried out by Leonardo aim toincreasingly insert these technologies in its products to meet a growing need for security and resilience, insynergy with the Group's Sustainability Plan.
As for development, great importance is attached to national and international defence programmes,
including: the Eurofighter Typhoon for the Mid Life Update phase, Forza NEC (Network Enabled Capabilities)
for the modernisation of the Italian Armed Forces (with the “Posti comando su tenda”, “Soldato sicuro” andVTLM2 vehicle projects), the "Naval Law" for the Italian Navy's Multipurpose Offshore Patrol Vessels (PPA,
Pattugliatori Polivalenti d'Altura) and the sixth-generation GCAP fighter aircraft, the Horizon-class naval units
for the Mid life Update phase, the development of Software Defined Radio systems and new broadband
54

Report on operations at 31 December 2023
waveforms, sensors, terminals and networks (narrowband and broadband on LTE / 5G networks), network
computing and cloud computing, as well as the evolution of receiver products within the scope of the Galileo
program of PRS (Public Regulated Service) geo-localisation, which are the main areas of research in the fieldof professional communications systems and secure satellite communications, with applications for public
security and defence. It should be noted that Leonardo participates in the European military research anddevelopment programmes, such as the EDF (European Defence Fund) programmes and, previously, the
EDIDP (European Defence Industrial Development Programme) programmes, with the aim to increase thecompetitiveness, efficiency and innovation of European Defence at both technological and industrial level
and thus make it autonomous with respect to countries that are outside the European Union.
Investments are aimed at a broad range of products and services: avionic, ground and naval radar systems,
new mission planning and command and control systems in the domains of air, land and sea, guided
ammunition, development of ground, naval and underwater weapon and defence systems, integrated
mission systems (including anti-drone technology), electronic warfare systems and laser and electro-opticalsystems, satellite systems for communication, positioning and navigation, logistics 4.0 for the Armed Forces,
integrated physical security solutions for critical infrastructure with command and control platform.
In the field of cyber security and intelligence services, Leonardo is continuing to invest to expand its
professional consulting solutions such as risk assessment, professional services to third parties for the designand development of cyber security solutions and systems, the management of security services delivered
through proprietary infrastructure for monitoring (SOC - Security Operations Centre), response (CERT - Cyber
Emergency Readiness Team) and identification of threats (Threat Intelligence) and training (Cyber trainer andCyber Range).
Under the European SESAR programme, innovative architecture for LeadInSky command and control centers
was finalised and a new air-ground data link prototype was developed. For the air traffic control radar family,
evolutionary maintenance was performed, in order to also mitigate interference from wind farms.
For baggage and parcel sorting, Leonardo continues its efforts to increase the modularity of facilities,
integrating robotic arms and AI capabilities in order to further reduce human intervention.
Finally, work continued on both the study to optimise turbulence detection functions (shear detection) withradar and lidar sensors in the weather systems environment and the integration of AI capabilities on remoteperipherals of license plate recognition systems.

Developments 2023 – Defense and Security Electronics
Radar Systems - The technologies developed and now available on
the flagship products of the Kronos family for the naval and landdomains - particularly the fully digital antenna of the Kronos
Powershield with GaN (gallium nitride) modules – are key elementsfor ongoing developments of next-generation radars and formodernisations of products already on the market. For the avionics
domain, work continued on the evolution of the latest generationof AESA radars in order to also meet the needs of the Typhoon and
GCAP programmes.
EO/IR turret – Work continued on qualification for the new highperformance electro-optical, gyro-stabilised, multi-sensor turret,designed for aviation applications and multi-role environments,
with two versions: for surveillance missions and for surveillanceplus target acquisition missions.

55

Global Combat Air Programme (GCAP) - The Electronics Divisionof Leonardo is engaged in the development of future technologies,
knowledge, capability and know-how for the sixth-generation
fighter aircraft, which will operate in the scenarios of 2040 andlater. Leonardo is developing vital technologies such as ISANKE &ICS (Integrated Sensing And Non Kinetic Effects & Integrated
Communication System) in order to be able to provide the next
generation of sensors and communication systems (“Cyber
Information Superiority”), which, through integration of a
proprietary EDR (Endpoint Detection and Response) into products,
are able to ensure ongoing monitoring and analysis of the mostadvanced threats.
Cyber resilience of products - The continuing demand for products
and systems capable of performing missions with increasing levelsof autonomy to respond to more integrated, faster and more
extensive threats requires an increasing focus on cyber resilienceof products from the very beginning of the system design, coveringReport on operations at 31 December 2023
Infra Red Search & Track (IRST) – Work continued on developmentof a smaller version of IRST, also compatible with Light Combat
Aircraft-type fixed-wing platforms.
Data-link – Work was completed on the development of thebroadband aeronautical datalink, in versions for direct fleet
communications and satellite-supported communications.
Helicopter pilot support – Developments of the rotary-wing
platform device for warning of static obstacles along the directionof flight are nearing completion, which will improve flight safety,
for example, in conditions of reduced visibility due to adverse
weather.
Electronic warfare systems – Work continued on developing
miniaturisation of high-performance devices and upgrading oftechnologies.
Kinetic effectors - Developments continued for countering evenemerging threats such as swarms of mini/micro drones and for theevolution of guided munitions in both land and naval domains.

56

the entire product life cycle. There is also a need to develop
capabilities for detecting security vulnerabilities and/or errors in
integrated products by monitoring and analysing data generated
by specialist probes deployed in subsystems.
Secure Cloud Management Platform - In order to ensure thesecurity and effective interoperability of Public Administration
data, including through Cloud Based application platforms, work
has commenced on the development of a Secure Cloud
Management platform for Multi Cloud environments, as well as on
tools and methodologies to support the migration strategy to the
Cloud, which may also be used to support the National Strategic
Hub (NSH) financed with funds under the NRRP.
Transportation – Work of development commenced on an
Android app for bus fleet management, with integrated services
such as vehicle location and health status, and communication
with the central station.

Report on operations at 31 December 2023

Sector carbon footprint and decarbonization levers
Defence/civil revenues

Main industrial
footprint(*)
Italy

16%

84%

Defense…

Civil

Relevant GHG emissions Main purchased goods
and services(**)
GHG emissions in
the operations

United Kingdom

Scope 1

United States

Scope 2Other

GHG emissions in
the value chain˃ Electrical and electronicequipment˃ Metallic assembly andstructural components
˃ Professional services

Scope 3 upstream

Products/ services revenues Main decarbonization levers(****)(***)

˃ Continued reduction of direct emissions through: renewable electricity purchasethrough Guarantees of Origin and self-production thanks to a specific program(within which the main sites involved are Cisterna di Latina and Campi Bisenzio),energy efficiency also through the replacement of lighting systems with LED
technology and electrification measures;

25%

75%

Products

Services˃ In the UK, Leonardo launched a Carbon Reduction Plan which include significant
measures such as: the achievement of ISO 14064-1 certified management systems at
all UK operations, achieving 25% of self-produced energy under power purchaseagreements, having 100% of executive cars and corporate fleet, implementing asystem to monitor and reduce electricity and gas consumption at all sites;˃ Structured engagement and support to the supply chain for the decarbonization also
by offering training to more than 500 suppliers on sustainability reporting,decarbonization topics and the Science Based Targets initiative.

(*) For more details on industrial presence, see 'Reporting Perimeter' in the Annex to the Report on Operations - Note to the NFS 2023.

(**) According to IAEG categories. IAEG, International Aerospace Environmental Group, is a non-profit organisation comprising 54 leading Aerospace, Defence and Security

companies that together account for over 70% of the industry at a global level.
(***) Perimeter DES Europe.
(****) For more information on Leonardo’s decarbonization levers please see the paragraph “Decarbonisation path” of the Planet Chapter.

3. Aircraft
The market is divided into two macro-segments, defence and civil, characterized by very different dynamics.
As regards the defence segment, there is an increase in demand, in particular for combat aircraft, driven byinternational tensions and the technological evolution of platforms.
In the field of military aircraft, Leonardo confirms itself as a major player, thus giving its contribution, atvarious levels, to all generations of air platforms: from the Typhoon, which remains, with more than 590 units
produced and 680 ordered, one of the most appreciated 4+ generation multi-role fighters, to the production
part of the 5th-generation F-35A and F-35B multi-role fighters, and to the new 6th-generation fighter, theGlobal Compact Air Programme (GCAP), previously known as Tempest, which will operate within a "systemof systems", which Leonardo is developing together with industrial partners in the United Kingdom andJapan.
The Aircraft Sector confirms high profitability with a reduction from the commercial point of view due to thepostponing of certain export orders.
57

Report on operations at 31 December 2023
From a production point of view:•

under the military programmes of the Aircraft division 43 wings and 14 final assemblies weredelivered to Lockheed Martin under the F-35 programme, in line with 2022;•

note 9 deliveries of Typhoon aircraft to Kuwait, compared to 4 recorded in the same period of 2022,
bringing the number of total aircraft delivered to 15 out of a total of 28 aircraft.

New orders: The Sector recorded a reduction in volumes mainly due to the postponement of some export
programmes. It should be noted that in 2022 there was the recognition of the first phase of design of theremotely piloted aircraft system Euromale and the order for the avionic upgrade of the C-27J fleet for the
Italian Military Aviation. Among the major acquisitions for the period we note, beside important acquisitions
for the supply of wings and final assemblies for the JSF programme of Lockheed Martin and various logistic
support orders in particular for the Typhoon aircraft:•

the supply of no. 2 ATR Long Range Patrol Aircraft (LRPA) to an export customer for special missionsin Maritime Patrol Aircraft (MPA) configuration;•

the supply of no. 2 C-27J tactical transport aircraft to the Azerbaijan armed forces;•

the supply of no. 1 C-27J tactical transport aircraft to Slovenia which follows the previous acquisition
occurred in 2022, under the new Fire Fighter configuration.

Revenues: Volumes were slightly lower than 2022, which had benefitted from the production ramp-up of theaircraft for Kuwait. High levels of revenues are confirmed in relation to the EFA, JSF programmes and the
proprietary platforms.
EBITA: The Sector profitability – albeit a reduction in volumes – was in line with 2022, confirming the doubledigit value of ROS.

Total market of the sector and 2023 Outlook
Market (*)
2023-2032
Civil€bil 1,566

Defence€bil 915

CAGR
2023-2032

Impact on the businesses in which Leonardo operates

4.1%

Civil sector: see the Aerostructures sector.

7.7%

Defence sector: more than half of the world's demand for military aircraft will be accounted forby next-generation combat aircraft such as F-35, GCAP (Global Combat Air Programme) and Future
Combat Air System (FCAS/SCAF), mainly concentrated in the USA, in the Indo-Pacific region andEurope. At the same time, demand for trainer aircraft will also grow, driven by the progress
towards the sixth generation and the introduction of multi-aircraft systems, which will result in a
substantial evolution in flight operations and therefore the need for pilot training.

(*) The “Civil” market includes commercial aircraft, aerostructures and components, net of MRO services. The “Defence” market
includes manned and unmanned aircraft, net of logistic support services.

A remarkable increase in new orders is expected for 2024 on the export market of proprietary platforms.
Moreover, forecasts confirm the solid contribution from the F-35 and EFA KW programmes (10 additionaldeliveries).
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Research, development and product engineering
In the aeronautics sector, products increasingly evolve towards complex systems that integrate high-techcomponents and systems and enable their functionality, even within highly integrated and cyber resilient
multi-domain environments. The next generation of aeronautical products/systems will need to be able tomeet even more stringent requirements in terms of product quality, cost competitiveness and sustainability
across the lifecycle. It is in this context that the technology upgrade and development initiatives affectingsome of Leonardo's key sectors such as trainers (345 and 346), fighter aircraft (EFA and F-35), and the tactical(C-27J) family of transport aircraft are included.
In fact, R&D activities have also been extended to the implementation of methodologies and thedevelopment of technologies that foster a reduction in environmental impact and the application of circular
economy logics; this approach has also been implemented at the production sites. The areas that are mostinvestigated are digitalisation, which involves all company processes and the entire product life cycle,
electrification, autonomy, simulation and innovative materials and production processes. Technologicaldevelopments and growth in the areas mentioned above are supported through enabling technologies suchas Artificial Intelligence and High Performance Computing.
Leonardo is committed to actively supporting technological transformation and growth with research
investments financed in the civil sector at national (Aerospace City - Turin) and European (Clean Aviation)level, aimed at producing technologies capable of enabling the development of solutions with reduced
environmental impact in line with the principles of the Green Deal, and at developing innovative solutions in
the Defence sector by enhancing the opportunities of the European Defence Fund.
R&D investments create value for Leonardo on a wide-ranging basis by providing the expertise and footprintin the technological frontier in order to ensure the competitiveness of current and future products andservices. For example, the Digital Twin in its different phases is now under development: the design phase inwhich simulation aims to optimise the aircraft design, the production phase that enables the optimisation of
manufacturing processes, and the service phase for which the Digital Twin enables the monitoring of healthof on-board equipment, and thus to organise maintenance activities and optimise missions. The developmentof Digital Twins is enabled by the advanced simulation capabilities of the davinci-1 supercomputer.

Developments in 2023 - Aircraft
Eurofighter Kuwait – A major upgrade of embedded weapon
system will be completed in 2028, which will aim to exploit thefull capabilities of the electronically scanned radar and keep theaircraft's operational capabilities appropriate to the context ofuse. In addition, the aircraft's long-term evolution plan will
enable it to sustain the fleet in service with customer countries
until its end-of-service date and is a natural technological bridgeto the sixth-generation air superiority fighter.
C-27J Fire fighter – In 2023, work commenced on thedevelopment of the Fire fighting (FF) version with the goal ofincreasing the C-27J's "multi-mission" capabilities by integratinga kit that also enables firefighting operations. The solution ispalletised, compatible with the existing cargo system, and allows
the aircraft to be transformed from a transport configuration to
an FF in less than two hours, providing maximum flexibility. In
the short to medium term, FF is proposed as an optimal solution
to: maximize the operational availability of firefighting assets;maximise situational awareness by operating as a net-centric
aircraft fully integrated to earth, sky and space resources;
minimise operating costs by leveraging the multi-mission
characteristics of C-27J; optimise territory coverage by taking

M-345 HET / FC&C - Numerous flight tests aimed at obtaining
Trainer certification were carried out in 2023, and work wasstrengthened on the development of the Leonardo Embedded
Training System (L-ETS), which enables advanced training withtactical scenario simulation. This development completes
Leonardo’s offer for basic and advanced training.
Falco Family – Work commenced on the second flight campaign(performed 47 flights between the first and second ones).
Preparatory activities were carried out for propulsion and avionics
system qualification. The mission system was integrated withelectro-optical turret for surveillance, radar and inertial system, IFF
transponder and Beyond Line Of Sight (BLOS) satellite data-link.
Work then commenced on insourcing production of critical aerostructural elements.
International Flight Training School - As part of the international
flight school, the service has evolved to also simulate aggressor
capabilities (Red Air) while strengthening the pay-per-use approach
to on-site exploitation for third-party customers.

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Report on operations at 31 December 2023
advantage of night hours for mission accomplishment; maximise
the effectiveness of operations through the concentrated
quantity, accuracy and release length of the embedded system;and provide an adequate backup solution for operations inadverse environmental conditions or water sources away fromthe fire.

GCAP (Global Combat Air Programme) – Leonardo is engaged in
the development of future technologies, knowledge, capability andknow-how for the sixth-generation fighter aircraft, which will
operate in the scenarios of 2040 and later. Also thanks to thePC2Lab-T laboratory, set up in Turin, the first scenarios, includingcore platforms and unmanned adjunct aircraft, were developed
and work commenced on strategic technological developments in
Digital Twin mode. The primary objective of the current phase of
the programme is to bring selected technologies of Italian interest
to maturity and enable their development consistent with Italy's
strategic ambitions.

Sector carbon footprint and decarbonization levers
Defence/civil revenues

Main industrial
footprint(*)

4%

Relevant GHG emissions
GHG emissions in theoperations

Main purchased goods andservices according to IAEG
categories(**)

Scope 1
Italy

Scope 2
GHG emissions in thevalue chain

96%

DefenseScope 3 upstream
Civil

Products/ services revenues

40%
60%

Products

Services

Scope 3 downstream

˃ Metallic manufactured
components
˃ Electrical and electronicequipment˃ Repair and overhaul

Main decarbonization levers(***)
˃ Continued reduction of direct emissions through renewable electricity purchasethrough Guarantees of Origin and self-production thanks to a specific program(within which the main sites involved are Cameri and Caselle), energy efficiency
also through the replacement of lighting systems with LED technology andelectrification measures, replacement of jet fuel used for tests and training withSAF;
˃ Development of new low carbon products and strong push on virtual productoffering, such as simulators, which consume only 1/10 of the GHG emissions ofreal flights;
˃ Structured engagement and support to the supply chain for the decarbonization
also by offering training to more than 500 suppliers on sustainability reporting,decarbonization topics and the Science Based Targets initiative.

* For more details on industrial presence, see 'Reporting Perimeter' in the Annex to the Report on Operations - Note to the NFS 2023.

** According to IAEG categories. IAEG, International Aerospace Environmental Group, is a non-profit organisation comprising 54 leading Aerospace, Defence and Security

companies that together account for over 70% of the industry at a global level.
*** For more information on Leonardo’s decarbonization levers please see the paragraph “Decarbonisation path” of the Planet Chapter.

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Report on operations at 31 December 2023
4. Aerostuctures
The civil aviation segment is completing its recovery, especially in the narrow-body segment, after the sharp
fall due to the pandemic that affected the wide-body aircraft segment more than others, which was alreadyundergoing a phase of profound change. The sector’s recovery is also driving the search for increasingly ecosustainable solutions from a Green Deal perspective.
In the regional transport segment, Leonardo strengthens its market leadership with the best-selling
turboprop ATR, which may further benefit from the main competitor's decision to postpone theimplementation of a new platform of similar engine size.
In the segment of aerostructures, Leonardo plays a significant role in the supply of large structuralcomponents both in traditional materials (aluminium alloys) and in advanced materials (composites andhybrids), for the commercial aviation programmes of the main world airliner manufacturers (Boeing andAirbus), for 787, 767, A321 and A220 aircraft, respectively, as well as for the production of ATR aircraft.
The increase in deliveries, resulting from a higher demand for OEM, accompanied by the gradualimprovement of the industrial sites working at a higher capacity (with particular reference to the Grottagliesite), confirms the continuous improvement in the performance of the Aerostructures Division supported by
the recovery of GIE ATR, even if below pre-Covid levels.
From an industrial point of view•

39 fuselage sections and 32 stabilisers were delivered under the B787 programme (22 fuselages and
13 stabilisers were delivered in 2022) and 31 fuselages were delivered under the ATR programme(24 in 2022);•

for GIE ATR we note 36 deliveries compared with the 25 recorded in 2022, confirming an upturn involumes.
Key Performance Indicators for the sector

December 2022
Aerostructures
GIE ATRTotal

New orders

December 2023
Aerostructures
GIE ATRTotal

New orders

Change %Aerostructures
GIE ATRTotal

New orders
53.3%
n.a.
53.3%

420
420

644
644

Revenues

Revenues

475
475

636
636

Revenues
33.9%
n.a.
33.9%

EBITA

EBITA

EBITA

(183)
(6)
(189)

ROS %
(38.5%)
n.a.
(39.8%)

(163)
12
(151)

ROS %
(25.6%)
n.a.
(23.7%)

10.9%
300.0%
20.1%

ROS %12.9 p.p.
n.a.
16.1 p.p.

New orders: Worth noting is a considerable increase in the commercial performance. In particular, neworders were recorded for the B787 and ATR series after the effect of the crisis due to the pandemic and to
new programmes (Vertical and Boom).
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Report on operations at 31 December 2023
Revenues: The year 2023 confirmed the growth in volumes thanks to higher activities to ready products on
all the lines.
EBITA: Profitability showed a remarkable improvement mainly thanks to an increased capacity of industrial
assets (in particular at Grottaglie) and workforce to work at a higher rate, resulting in a recovery of
profitability. The GIE ATR also reported a significant increase in the number of deliveries, improving all theperformances recorded in 2022.

Total market of the sector and 2023 Outlook
Market (*)
2023-2032
Civil€bil. 1,566

CAGR
2023-2032

Impact on the businesses in which Leonardo operates

4.1%

All the aviation programmes, primarily Airbus and Boeing, and, although to a lesser extent, thoseof ATR, were affected by a sharp decline in demand due to the pandemic. However, estimates forthe period under review indicate a market that is now recovering, as evidenced by a higher value
in absolute terms, together with a lower growth rate than estimates for previous years. Increased
demand for aircraft will consequently lead to increased demand for the supply of aerostructures
for airliners and regional transport aircraft.

(*) The Aerostructures sector market coincides with the civil aviation market, as already represented for the Aircraft sector, thus
including commercial aircraft, aerostructures and components, net of MRO services. The values stated above are therefore identicalto those reported in the market for the Aircraft sector.

In 2024 a further increase is expected in the volumes of the Aerostructures Division, linked to higher
production rates under the Boeing (i.e. B787) and ATR programmes with an improvement in profitability due
to a reduction in the rate of the main production sites working at a lower capacity. A gradual recovery indeliveries is confirmed for the GIE Consortium.

Research, development and product engineering
The Aerostructures sector paid great attention to the research and innovation projects envisaged under the
Sustainability Plan in the aeronautical sector, with particular focus on process improvement and recycling forpolymeric materials and epoxy matrix composites reinforced with carbon fiber. New Out-of-Autoclave
processes are being studied for the manufacture of these components with reduced energy consumptionthat allow the use of easily recyclable technopolymers. As part of sustainable mobility solutions, work has
been commenced on studies for the industrialisation and production of platforms structures for the Urban
Air Mobility (for example, fuselage, pylons and blades for Vertical Vx4 and fuselage and wings for Otto
Aviation) and HAPS (High Altitude Platform Systems) of the HTA (Heavier Than Air) type.
Low-cost and recyclable composite lamination tools have been developed and used for the purpose of
reducing non-recurring program start-up costs. In this way, prototype stages become more cost-effective
and faster with reduced environmental impacts. Studies and related demonstrators have also been started
for the use of Artificial Intelligence in the field of non-destructive inspection (NDI) on all types of materials.
Studies have also been initiated to use the potential of the davinci-1 for real-time monitoring of processparameters and part quality, so as to make the process itself stable by avoiding process drifts.

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Developments in 2023 - Aerostructures
Engineered Materials and Advanced manufacturing processes– Research work continued on the development of composite
materials for processes with a high production rate to target newmarkets in addition to strengthening the positioning in
traditional markets through advanced and proprietary
manufacturing processes. Research work also commenced onmaterials and processes for supersonic aircraft design andmanufacturing and in particular on technopolymer matrix
composites and advanced ceramics.
Thermoplastic Materials – Leonardo has developed processes
for the production of technopolymer and standard
thermoplastic matrix composite parts by using both highly
automated and single-step (press-forming) processes underEuropean and Italian funding programmes. Work wasstrengthened on the research and development campaign for a
new thermoplastic material (covered by its own patent), which
can be used for on-site consolidation, a technology that may
allow large, complex structures to be made in the future without
the use of autoclaves, with benefits in terms of lower energy
consumption. Additional benefits include the ability to greatly
increase the production rate of complex parts. In this regard, aprototype rolling plant with anthropomorphic robot andelectromagnetic induction heating has been developed(Leonardo Patent).
Integrated Smart Assembly factory - Digital twin solutions forthe assembly of large components. Automatic surface
generation and shim fabrication using subtractive and additive
digital technologies. In 2023 work was completed on the phaseof characterisation of the prototype material in preparation for
the test campaign in 2024 and subsequent introduction into the
production environment. Automatic installation of connecting
parts with quality control of installations, improving cycle times
and quality of assemblies.
Injection molding – Polymer and metal injection molding
techniques are used to manufacture structural components withgreater flexibility and lower energy consumption. This technique
is of fundamental importance for the recycling of carbon fiber
waste.
Robots and cobots - Robots and, especially, cobots are used inworking environments to assist operators in repetitive and lowadded-value operations (e.g., dust extraction and kit making), as
well as for performing part inspections such as visual inspection,
CND (non-destructive testing) and measurements. Generation of
proprietary alignment algorithms and automatic and simplified
cobot referencing. In 2023 work was completed on testing to
improve alignment accuracy while patenting of the system isnearing completion.

Recyclable Materials and environmental sustainability – Anagreement has been signed to enhance the study on recycling of
CFRPs (Carbon Fiber Reinforced Polymers) and subsequent start-up
of a carbon fiber recovery plant by pyrogasification. The fibers
recovered in this manner are used in the process of "Injection
molding" or 3D printing by impregnating them with thermoplastic
polymers, which are reusable and recyclable countless times, thus
making the production chain totally circular. Such processes will be
used for the production of secondary structures and equipment forcomposite manufacturing, as well as in other markets. Further
studies have been initiated for water savings in non-destructive
testing processes using laser systems, in addition to optimisations
on energy consumption through smart resource management
systems.
Artificial Intelligence and Big Data – Study and application of AI
algorithms for surface defect detection, map analysis related to
non-destructive testing and defect prevention on laminates andautomatic defect detection. Through initiatives related to the
Aerotech Campus, algorithms capable of analysing noise frommachining operations have been tested in order to optimise
working parameters and predict wear and tear of tools. These
projects aim to further increase the already high quality of products
and improve the operational comfort of inspectors. In fact, AIbased systems assist operators in searching for part imperfections.
In addition, systems based on the analysis of Big Data from thevarious process steps have been initiated to make direct
correlations between defects and the stage that generated them:this will allow total control of production by preventing thegeneration of non-conformities in a fully automated manner.
New Engineering & Manufacturing Enhanced System Innovation(NEMESI), LAMPO – This is a project that will allow thetransformation of Leonardo's Pomigliano d'Arco and Nola sites into
smart factories. Through a process of transformation of ATR aircraft
manufacturing processes based on digitisation, production
automation and application of technologies inspired by theIndustry 4.0 model. The NEMESI project is able to ensure highprocess optimisation, generating positive impacts also in terms ofsustainability. In 2023, automatic (AI-based) defect detection
functionality of 3D parts was integrated. With the LAMPO project,
the industrialisation and qualification of automated horizontal
stabiliser assembly processes, as well as the testing of advanced
and proprietary composite repair methods that will improve thequality of laminates are nearing completion.

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Report on operations at 31 December 2023

Sector carbon footprint and decarbonization levers
Defence/civil revenues

Main industrial
footprint(*)

14%

Relevant GHG emissions
GHG emissions in theoperations

Main purchased goods
and services according to
IAEG categories(**)

Scope 1
Italy

Scope 286%

GHG emissions in thevalue chain

DefenseScope 3
upstream

Civil

˃ Metallic manufactured
components
˃ Gases and chemicals
˃ Non-metallic assembly andstructural components

Products/ services revenues Main decarbonization levers(***)
˃ Continued reduction of direct emissions through renewable electricity purchasethrough Guarantees of Origin and self-production thanks to a specific program(e.g., in the site of Nola, a photovoltaic plant with an installed capacity of about 8
MWp is under construction), energy efficiency also through the replacement oflighting systems with LED technology and electrification measures;

4%˃ Launch of a project (NEMESI) based on new criteria of digitalization, humanmachine interaction and production automation which will allow to reduce also
technical inefficiencies and environmental impacts;

96%

Products

Services˃ Structured engagement and support to the supply chain for the decarbonization
also by offering training to more than 500 suppliers on sustainability reporting,decarbonization topics and the Science Based Targets initiative.

* For more details on industrial presence, see 'Reporting Perimeter' in the Annex to the Report on Operations - Note to the NFS 2023.

** According to IAEG categories. IAEG, International Aerospace Environmental Group, is a non-profit organisation comprising 54 leading Aerospace, Defence and Security

companies that together account for over 70% of the industry at a global level.
*** For more information on Leonardo’s decarbonization levers please see the paragraph “Decarbonisation path” of the Planet Chapter.

5. Space
The Sector is of supreme importance, both in the civil and in the defence segment, because it makes it
possible, on the one hand, to carry out ongoing monitoring of the planet's resources, both natural andartificial, as well as to offer communication and localisation solutions in remote areas, thus ensuring accessto basic services for communities and connecting activities and citizens, and on the other hand, is assuming
an increasingly important role in ensuring autonomy and independence, as well as the protection of national
interests. The market in this sector is divided between upstream (manufacturing of space and ground-based
systems), midstream (manufacturing of launch systems and services, satellite operations services) anddownstream (end-user services, including communication, geoinformation, navigation and related
infrastructure) activities.
Leonardo is present in this market through the Space Alliance with Thales - through its investment in Thales
Alenia Space (33%) and Telespazio (67%), with the abovementioned construction of electronic space systems
and its investment in Avio (29.63%). Specifically, Telespazio offers a complete series of services in the main
operational domains of the space market – from communications to navigation, from Earth observation to
space exploration. These services support various tasks from supporting healthcare institutions to logistics,
from monitoring vehicle fleets to monitoring critical infrastructure and hazardous sites, from precision64

Report on operations at 31 December 2023
agriculture to civil protection, from the prevention of hydrogeological instability and support in caring forarchitectural sites to monitoring natural resources and pollution. These applications have a key role ineveryday life, in the protection and sustainable development of the Planet, as well as in the safety of citizens,
readily supporting the Institutions with the capacity to combine big volumes of satellite data and very highresolution images with data from land-based sensors, at sea or in aeroplanes, and with archives and social
media.
Furthermore, Leonardo manufactures, through the Electronics Division, essential components of spacesystems, such as electro-optical payloads for Earth observation and planetary exploration (e.g., COSMO
SkyMed, PRISMA, MTG, EarthCare, Rosetta, ExoMars, LISA Pathfinder, BepiColombo), as well as attitude
sensors and atomic clocks, which are required for satellite navigation systems (e.g. Galileo).
The Sector underperformed compared to 2022 due to the manufacturing segment which recorded
significant costs for the development of commercial telecommunications business.
The business segment of satellite services recorded a growing operating result, which confirms the ongoingpositive trend marked by a solid performance of production volumes of Lob Satellite Systems and Operations,the improved performance of Lob GeoInformation, and by the remarkable recovery of the orders in the
Satcom business. The increase in the operating result offset the impact of costs due to the early retirement
plan under article 4 of the Fornero Act on net profits.
With regard to the Sector, it should be reiterated that, as from 2024, the Leonardo Group will fully
consolidate the contribution of the Telespazio group, following the subsequent contractual changes thatchanged its investment from a jointly-controlled company to a subsidiary.

Total market of the sector and 2023 Outlook
Market2023-2032

CAGR
2023-2032

Impact on the businesses in which Leonardo operates
Manufacturing: Growing market, driven by demand for smaller, more efficient and higherperforming satellite constellations of lower complexity.

€bil. 1,618

5.3%

Services: The increasing competition associated with the advent of NewSpace (privatecompanies established in a sector that was a de facto monopoly of governments) has
triggered the need for a statutory pattern of service offerings in the space sector as well,pushing the market towards increasingly higher value-added solutions and/or new
business models (HTS/IoT for telecommunications, data from innovative sensors to be
combined with traditional optical sensors for Earth observation, and as-a-Service businessmodels for the ground segment). There is also a growing interest in innovative services
especially related to space exploration, SATCOM sector, new integrated geo-information
solutions and Ground Segment.

2024 is expected to be characterised by growing business volumes supported by a robust backlog overall.
However, operating profitability is expected to worsen due to development delays as well as to low backlog
coverage resulting in excess capacity in the Telecommunications Domain of the manufacturing segment.
Excellent fundamentals are confirmed for the satellite services of Telespazio predicting growth in both toplineand operating results thanks to a consolidated leadership in Europe and Latin America.

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Research, development and product engineering
Space infrastructure and technology are an enabling factor, through new services and applications, for theattainment of each of the 17 Sustainable Development Goals (SDGs) of the 2030 Agenda. The various geoinformation applications and services that Leonardo is able to provide, in fact, have a strong environmental
and social impact. The fact that there is such a variety of possible applications shows that Space is, and willcontinue to be, an area of steadily increasing development with a continuous increase in players and services,with civil and military applications, borne witness to by the rapidly growing numbers of private firms
operating in all segments of space and which also develop launching or transport technologies that were theprerogative of governments for years; these newcomers are now starting to show that they have greater andgreater business potential for communication and surveillance of critical asset on the ground, both in militaryand civil sectors, while governments and space agencies increasingly focus their attention on space
exploration and the possible exploitation of extraplanetary resources, taking into high consideration theprotection of space assets that will contribute thereto.
In the area of satellite communications, the Group has initiated research studies for the creation of theinfrastructure for quantum key exchange in Europe.
In the area of space robotics, Leonardo is engaged in the definition of a broad portfolio of In Orbit Services(IOS), which includes operations such as space debris removal, raising the operational altitude of active
platforms, changing the orbit of satellites, maintaining in visibility from Earth for Geosatellites, in-orbit
refuelling, spare parts transportation with installation and removal of obsolete or damaged equipment, andin-orbit inspection or assembly. The IOS service portfolio also includes the development of the platform for
management from Earth. Finally, the definition of OTT (Over The Top) services dedicated to future space
exploration activities proves to be of considerable importance.

Developments in 2023 – SpaceSpace exploration - The theme originates from the ESA Moonlightinitiative aimed at the creation of Lunar Communications andNavigation Services (LCNS) and the related infrastructures tosupport commercial and institutional missions for the explorationof the Moon, thus creating the chance of a true Lunar Economy.
The Moonlight project, which is coordinated by Telespazio andstarted in 2021, aims, through a system of terrestrial stations anda network of satellites, coordinated by the Fucino’s Space Center,to provide communication and navigation services to all missions
in the cislunar domain. The technological challenge is to increase
efficiency and reliability by decreasing the complexity and cost of
sensors and communication systems to Earth. In this context,
Telespazio has also initiated preliminary studies for future valueadded services, such as for accurate navigation on the dark sideof the Moon or for scientific applications on future commercial
space stations. Another topic of interest is robust
communications between Earth and the Moon, for which
Telespazio is developing innovative protocols and standards. For
example, preliminary studies for a new protocol for spacecommunications were completed in 2023.

Space Domain Awareness - These activities are aimed at
protecting critical space assets from intentional andunintentional threats and managing the growing number oforbiting objects. Telespazio is advancing the developments of adigital platform, which, through the fusion of data fromheterogeneous sources, the adoption of AI on HPC for rapid
situation assessment and the subsequent proposal of any
possible compensatory manoeuvres, will deliver Space Traffic
Management, Space Intelligence and Space Weather services.
In-orbit services - In 2023, Telespazio launched a preliminary
study to define the necessary technology roadmaps, e.g. basedon space robotics, computer vision, flight dynamics, evolved
mission planning, and manoeuvre autonomy.
Navigation services - Interesting developments concern
positioning and navigation services in environments where
Global Navigation Satellite System (GNSS) is not available. In
such a case, the idea is to use hybrid techniques that make useof heterogeneous data from 5G, as well as measurements frominertial platforms, adopting interference mitigation methods
and ionospheric correction algorithms. Other significant
development activities, although preliminary, involve PNT(Positioning, Navigation, Timing) services from Low Earth Orbit(LEO) constellations, dedicated to future piloted or self-driving
vehicles on the Moon.

Quantum Communication - EuroQCI (European Quantum
Communication Infrastructure) is a European Commission projectthat aims to build an integrated terrestrial-satellite
communication network based on quantum technology. The
intended application is "quantum key distribution," one of thefirst uses of which is the construction of the security infrastructure66

Report on operations at 31 December 2023
for the communications of the Member States through the new
Iris satellite constellation planned by the European Commission.
In this context, Telespazio participated, in 2023 too, in the
preliminary design phases of the space component, which ismanaged by ESA under the parallel SAGA (Satellite Advanced
Global Architecture) programme. The future goal is to contributeto the realisation of the infrastructure and the definition of theservice, so that it can then bid for its management and operationsof the space component by exploiting the potential of its own
space centers.

Solutions for protecting environment and climate
Leonardo offer solutions capable of offering an effective response to the increasingly challenging demands of sustainabilityin space, as well as global security(*).

Emergency
response
solutions
Territory
management
solutions

Satellites tomonitor thesafety ofspace fromspace

Emergency Mapping services
˃ The service provides reference maps over the area affected by critical natural or man driven events
allowing to assess their impact with respect to pre-event situation, as well as to monitor evolution intime through post event damage assessment maps, in support to field intervention.
Land Monitoring and Displacement Monitoring Services
˃ The Land Monitoring service provides land cover and land change maps at different levels of detail foran extensive knowledge of the territory and its changes. The Displacement service provides
information on slow deformations on artifacts as well as on natural sites, to identify situations
potentially affecting territory resilience and population integrity (as landslides andinfrastructures/building collapses).
Space Situational Awareness˃ Telespazio is developing Space Situational Awareness services together with NorthStar to monitor all
near-Earth orbit regimes and improve tracking of space objects capable of damaging satellites andinterrupting the provision of critical services.
In Orbit Servicing
˃ Leonardo will develop enabling technologies to make space more sustainable and safer, forexample, refuelling satellites directly into space, or repairing or replacing their components, moving
them to other orbits or facilitating their smooth atmospheric re-entry.

* For more information on Leonardo’s decarbonization levers please see the paragraph “Decarbonisation path” of the Planet Chapter.

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Report on operations at 31 December 2023

"Non-GAAP" alternative performance indicators
Leonardo’s Management assesses the Group’s performance and that of its business segments based on anumber of indicators that are not envisaged by the IFRSs. Specifically, EBITA is used as the primary indicatorof profitability, since it allows us to analyse the Group’s marginality by eliminating the impacts of the volatility
associated with non-recurring, extraordinary items or items unrelated to ordinary operations.
It should be noted that in relation to certain of these alternative performance indicators, this Financial Reportat 31 December 2023 also presents a set of pro-forma indicators to give a view of the business that alreadyreflects the consolidation of the Telespazio group, which will be carried out starting from 1 January 2024.
The reconciliation with the Proforma KPIs is shown below:

Key Performance Indicator
Dividends received by
Telespazio
Telespazio Equity-accounted
Consolidation of Telespazio
Eliminations
Proforma

2022
New
Revenues EBITA FOCF Group Net Debt
orders17,266
14,713 1,218
539
3,016

2023
New
Revenues EBITA FOCF Group Net Debt
orders17,926
15,291 1,289
635
2,323

(21)
780
(5)
18,041650(9)15,354

(28)
60
1,250

(23)

41
559

(25)
2,991

763
(21)
18,668701(10)15,982

(29)
66
1,326

40
652

(1)
2,322

As required by CONSOB Communication no. 0092543 of 3 December 2015 in adopting the ESMA 2015/1415
guidelines on alternative performance indicators, below is a description of the components of each of these
indicators.
•
•
•

•

New orders: this includes contracts entered into with customers during the period that have commercial
substance and represent an obligation for both parties to fulfil the contract.
Order backlog: this figure is the sum of the order backlog for the preceding period and new orders, lessrevenues during the reference period.
EBITDA: this is given by EBITA, as defined below, before amortisation (excluding amortisation of
intangible assets from business combinations), depreciation and impairment losses (net of those relating
to goodwill or classified among “non-recurring costs”).
EBITA: it is arrived at by eliminating from EBIT, as defined below, 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, as required by IFRS 3;- restructuring costs that are a part of defined and significant plans. This item includes personnel costs
as well as any and all other costs deriving from the reorganisation (e.g., impairment of assets, costs
for the closure of sites, relocation costs, etc.);- other non-recurring or unusual costs or income, i.e., connected to particularly significant or
exceptional events that are not related to the ordinary performance of the business. The item
includes charges incurred during M&A transactions, charges linked to disposed businesses and/or
products and systems, and the recognition of losses on contracts that have become onerous as aresult of non-operating events.
EBITA is then used to calculate return on sales (ROS) and return on investment (ROI).

68

Report on operations at 31 December 2023
A reconciliation of Income before tax and financial expense, EBIT and EBITA is shown below (thereconciliation by segment is reported in Note 8):(€ millions)
Income before tax and financial expenses
Equity-accounted strategic investments
EBIT
Amortisation of intangible assets acquired as part of business combinations
Restructuring costs
Non-recurring income
EBITA

2022

829
132
961
24
119
114
1,218

2023

931
154
1,085
35
59
110
1,289

The restructuring costs for the period are made up of €mil. 20 relating to the additions to the early
retirement of the Corporate and Staff functions’ workforce and €mil. 18 of the Aerostructure division’s
workforce. The 2022 figure reflected the preliminary estimation of the mentioned measure under theFornero Act within the Corporate and Staff functions only.
The amortisation of the Purchase Price Allocation included the component related to the acquisition of
RADA, which was completed in November 2022 and therefore encompassed in the comparative datafor immaterial amounts.
The non-recurring costs for the period reflected certain preliminary estimations in connection withpending litigation with the Norwegian customer and related to the DOHA contract. Without prejudiceof the position set forth in the Litigation Section (Note 22) but taking into account that it is ongoing a
mediation process, whose outcome is currently uncertain, regarding the termination requested by the
Norwegian Defence Materiel Agency (NDMA) with respect to contract for the supply of 14 NH90
helicopters entered into with NH Industries, Leonardo made a provision of €mil. 44 against the relevant
net working capital. The allocation of costs associated with the DOHA contract, including any estimatedlegal costs, was equal to €mil. 47.
In 2022 these costs mainly included the write-down of the exposure to the countries involved in theconflict existing between Russia and Ukraine (€mil. 36) and the transaction costs related to thecompletion of the acquisition of RADA and subsequent listing of Leonardo DRS (€mil. 31).
•••Return on Sales (ROS): this is calculated as the ratio of EBITA to revenue.
EBIT: this is obtained by adding to Income before tax and financial expenses (defined as earnings before“financial income and expense”, “share of profits (losses) of equity-accounted investees”, “income
taxes” and “Profit (loss) from discontinued operations”) the Group’s share of profit in the results of its
strategic investees (MBDA, GIE ATR, TAS, Telespazio and Hensoldt), reported in the “share of profits(losses) of equity-accounted investees”.
Net result before extraordinary transactions: this is the Net Result before the result from discontinued
operations and the effects of the extraordinary transactions (key acquisitions and disposals). Below is
the reconciliation:

69

Report on operations at 31 December 2023(€ millions)
Net result
Effect on extraordinary transactions
Net result before extraordinary transactions

•

•

•
•

•

2022

932
(235)
697

2023

695
47
742

Group Net Debt: this includes cash, financial receivables and current securities, net of (current and noncurrent) loans and borrowings and of the fair value of foreign exchange derivatives covering financial
debt items. The reconciliation with the net financial position required by the CONSOB communication
no. DEM/6064293 of 28 July 2006 and updated in accordance with the ESMA guidelines 32-382-1138 of
4 March 2021 as implemented in the CONSOB warning notice no. 5/21 of 29 April 2021 is reported in
Note 21 of consolidated financial statements.
Free Operating Cash-Flow (FOCF): this is the sum of the cash flows generated by (used in) operating
activities (excluding the changes in the Group Net Debt), the cash flows generated by (used in) ordinary
investing activities (investment and divestment of intangible assets, property, plant and equipment, andequity investments, net of cash flows from the purchase or sale of equity investments that, due to theirnature or significance, are considered “strategic investments”), dividends received and collections
received pursuant to Law 808/1985. The calculation of FOCF is presented in the reclassified statementof cash flows shown in the section “Group results and financial position”.
Return on Investments (ROI): this is calculated as the ratio of EBITA to the average net capital invested
in the two comparative periods.
Funds From Operations (FFO): this is cash flow generated by (used in) operating activities net of changes
in working capital and the repayment of debts under Law 808/1985, included within “Cash flow fromordinary investing activities” in the reclassified statement of cash flows. The FFO also includes dividends
received.
Net interest: this is calculated as the sum of the items “Interest”, “Premiums (paid) received on IRSs”
and “Commissions on borrowings” (see the Note on “Financial income and expense” of the consolidated
financial statements).

Below are also provided the reconciliation statements between the items in the reclassified tables reported
in the Report on Operations and the accounting statements shown in the notes to consolidated financial
statements:

70

Report on operations at 31 December 2023
SchemeRevenues
Purchase and personnel expenses
Other net operating
income/(expenses)
Equity-accounted strategic
investments
Amortisation, depreciation and writeoffs
EBITA

PPA amortis.

15,291(13,641)
(74)

67
86

(645)

35

Reclassified
scheme15,291(13,532)
(30)

42
(42)
154

154

16

(594)
1,289

Non-recurring income/(expenses)
Restructuring costs
Amortisation of intangible assets
acquired as part of businesscombinations
EBIT
Net financial income/(expenses)
Income taxes
Net result before extraordinarytransactions
Net result related to discontinued
operations and extraordinarytransactions
Net result

Onereous
Restruct. and noncontracts
Extraord.
Strategic JVs
recurring costs(losses at transactions.
completion)

(35)

(110)
(59)

(110)
(59)
(35)

1,085
(107)
(129)

(154)

-

47

(214)
(129)
742

(47)

(47)

695

695

SchemeNon-current assets
Non-current liabilities
Capital assets

14,295(5,133)Current assets
Current liabilities
Net working capital

16,398(16,959)

Total equity

Financialreceivables
and cashFinancialpayablesHedging
derivatives
on debt
items

14,295(2,248)12,0472,885(2,612)

2,044

(1)
7

(2,612)

Net (assets)/liabilities held for sale

40

71

13,785(14,908)(1,123)
8,561

8,561

Group Net Debt

Reclassified
scheme

4,929

6

2,323
40

Report on operations at 31 December 2023
SchemeCash flows generated (used) from operating activities
Dividends received
Investments in property, plant and equipment and intangible assets
Sales of property, plant and equipment and intangible assets
Cash flows from ordinary investing activities
Free Operating Cash Flow (FOCF)
Strategic transactions
Other investing activities
Cash flows generated (used) from investing activities
BEI Loan and Term Loan repayment
Net change in other borrowings
Net change in borrowings
Dividends paid
Cash flows generated (used) from financing activities
Net increase (decrease) in cash and cash equivalents
Exchange rate differences and other changes
Cash and cash equivalents at 1 January

1,186Royalties /Dividends Law no. 808 Strategic
received
payables investments
and receipts

186

(782)
13
(769)

507
(262)
(19)
90
71
(83)
(12)
912
(16)
1,511
2,407

Cash and cash equivalents at 31 December

72

(186)

Reclassified
scheme

20

1,206
186

12

(757)
635
352
(63)

(32)

352
(352)

71
(83)
912
(16)
1,511
2,407

Report on operations at 31 December 2023

INDUSTRIAL AND FINANCIAL TRANSACTIONS
Industrial transactions. It should be noted that on 1 May 2023 the US company Selex ES, LLC completed thesale of the business unit of air navigation radio aids (ATM) to Indra Air Traffic, Inc., which is wholly owned by
the Spanish company Indra Sistemas S.A., for an amount of, net of costs of disposal, around USDmil. 37. As aresult of this transaction, the Group recognised a capital gain of about €mil. 10, after transaction costs.
During the period work continued on concentrating the assets held by Leonardo in the USA in a single legal
entity started in 2022. During the period, the following transactions were completed:•

Leonardo US Corporation established Leonardo US Subholding, wholly owned;•

Leonardo US Corporation contributed its stake in Leonardo US Aircraft to Leonardo US Subholding;•

Leonardo International contributed its stake in Selex ES, LLC to Leonardo US Holding. The same stake
was subsequently transferred from Leonardo US Holding to Leonardo US Corporation, and from thelatter to Leonardo US Subholding.

On 13 December 2023, under the auspices of the Italian Ministry of Defense, Leonardo and KNDS signed astrategic alliance to create a European defense group through a structural partnership. Such strategic alliancewill enable the implementation of programs in cooperation among the European nations, by strengthening
their national industrial base and jointly developing the future generation of armored vehicle platforms,
including Main Ground Combat System (MGCS). Additionally, Leonardo and KNDS signed an understanding
calling for the joint implementation of the procurement programme named Main Battle Tank (MBT) basedon LEOPARD 2 A8 for the Italian Army. The companies will collaborate in the development, manufacturingand maintenance of LEOPARD 2 A8, as well as the support platforms. This partnership represents the naturaldevelopment of a cooperation between the industries of the respective nations, aimed at enhancing thecomplementarity of expertise, set-ups and investments as much as possible.
Finally, on 5 December 2023 Leonardo made known that it had not subscribed for the potential capitalincrease announced by Hensoldt AG as part of the acquisition of the German company ESG Elektroniksystem
und Logistik GmbH, although it was fully supportive of its strategic rationale. After this decision, Leonardo’s
equity investment in Hensoldt was slightly decreased (from 25.1% to 22.8%). This does not entail any waiverof the company governance which sees Leonardo as reference industrial investor; there is still, in fact, theambition to pursue the European partnership with Hensoldt in accordance with the prerogatives of eachcountry.
As touched on earlier, in January 2024 the Group amended the arrangements behind the incorporation of
the Space Alliance with Thales. As a result of this amendment, the Telespazio group is no longer subject tothe joint control by the two shareholders but is now under the control of Leonardo. Accordingly, startingfrom 2024, the Group data will include the line-by-line consolidation of Telespazio and its subsidiaries.
With reference to the Industrial Relations, in May 2023 Leonardo made supplements to the agreement
signed in December 2022 (early retirement plan under art. 4 of Law 92/2012, Fornero Act) up to a maximumof 490 employees and executives working in the Corporate and Staff functions of Leonardo S.p.a., Leonardo
Global Solutions and Leonardo Logistics, who will meet any requirement for retirement by 30 November
2028, with planned exits during the two-year period from 2023 to 2024. The expansion of the scope of thismeasure resulted in the recognition in the period of additional charges of €mil. 20.

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Report on operations at 31 December 2023
31 July 2023 saw the signature of the agreement with the Trade Unions for the regulation of the Performance
Bonus and Target Bonus 2023, as well as the distinct component of pay (in Italian, EDR 2021 – Elemento
Distinto della Retribuzione) for the portion related to 2023.
On 20 December 2023, the Company signed the agreement for renewal of Leonardo’s supplementary
contract. Such agreement sets for the three-year period 2024-2026 not just better economic conditions for
employees, but additional measures reinforcing corporate welfare and experimental solutions toreformulate working hours, finetuning the path to harmonization started in 2016 with the creation of the
One Company.
Financial transactions. During the 2023 financial year Leonardo completed the following capital market
transactions:•on 27 September 2023, Leonardo DRS Inc. announced and then voluntarily withdrew its ordinary
shares from the Tel Aviv Stock Exchange (TASE). Under Israeli law, this transaction took effect threemonths after the Company's request. During the transitory period, the ordinary shares of Leonardo
DRS continued to be traded on the TASE. This transaction did not affect Leonardo DRS listing on
Nasdaq under the DRS symbol and all the ordinary shares traded on the TASE were transferred to
Nasdaq. Furthermore, this transaction had no impact on the commitment of Leonardo and Leonardo
DRS to the Israeli market or any transaction in the country. The Company continued to file public
reports and to public information in compliance with the regulations of the US Securities andExchange Commission and Nasdaq;•

on 21 November 2023, Leonardo S.p.A. finalized, through the subholding Leonardo US Holding, LLC,(“LUSH”), the sale on the US market of a parcel of shares in Leonardo DRS (“DRS”).
As is known, 29 November 2022 marked the completion of the merger between DRS and the Israeli
company RADA Electronic Industries Ltd. (“RADA”) whereby Leonardo DRS was automatically listedon the New York Stock Exchange (“NASDAQ”) and on the Tel Aviv Stock Exchange ("TASE"). As a resultof this transaction, Leonardo retained – through LUSH – full ownership of a quota of 80.2% in DRS,
with the former shareholders of RADA owning the remaining stock. From the closing of the merger
with RADA up to the launch date of the secondary offering in the USA, the DRS share price recorded
significant growth.
Against this backdrop, on 15 November 2023 Leonardo S.p.A. announced the launch of secondaryoffering in the United States by LUSH of a minority stake of 16,500,000 (6.3%) of common stock of
DRS, granting the underwriters a 30-day option to purchase up to an additional 2,475,000 shares(equal to 15% of the offered shares). The transaction was completed on 22 November 2023 with thesale of 20,700,000 ordinary shares of DRS, at a price of USD 17.75 per share. The amount of theshares sold includes the sale of 18,000,000 ordinary shares (increased vis-à-vis the initial offering)and of an additional 2,700,000 shares (equal to 15% of the above-mentioned 18,000,000 shares)
subject to the exercise in full by the underwriter banks of their option to purchase the shares.
The shares sold, which represent approximately 7.9% of the ordinary shares issued by DRS at thedate of the transaction, brought Leonardo US Holding, LLC proceeds equal to about USDmil. 352,
after transaction costs. The proceeds from such transaction enable Leonardo to increase its financial
flexibility for investments and acquisitions and to maintain at the same time a solid financial structure
and a significant industrial and commercial footprint in the US Defense business;

74

Report on operations at 31 December 2023•

in May 2023 the EMTN (Euro Medium Term Note) programme was renewed for further 12 months,
which regulates possible bond issues on the European market for a maximum nominal value of €bil.
4. At the date of this report, the Programme could be still used for €mil. 2,400.

Following the early redemption (occurred in 2022) of bonds issued by Leonardo US Holding in the U.S. market,
Leonardo S.p.A. turns out to be the Group's only issuer in the bond market. Leonardo’s issuance programmes
are governed by regulations laying down standard legal clauses for this type of transactions carried out bycorporate entities in institutional markets, which do not require any commitment with respect to specificfinancial covenants, while they include, among others, negative pledge and cross default clauses. According
to negative pledge clauses, Leonardo and its Material Subsidiaries (i.e. entities in which Leonardo holds morethan 50% of the capital and whose gross revenues and total assets account for at least 10% of consolidated
gross revenues and total assets) are specifically prohibited from creating collaterals or any otherencumbrance as security for their debt comprised of bonds or financial instruments that are either listed orcapable of being listed, unless these guarantees are extended to all the bondholders. This prohibition shallnot apply to securitization transactions and to any set of assets intended for specific businesses pursuant to
Articles 2447-bis and ff. of the Italian Civil Code. On the contrary, cross default clauses grant the bondholders
the right to request early repayment of bonds in their possession upon the occurrence of an event of default
on the part of Leonardo and/or any of its Material Subsidiaries, the result of which would be their failure to
make payments above the established limits.
Financial covenants are also included both in the ESG-linked Revolving Credit Facility and in the Term Loan
ESG-linked signed in 2021, which provide for compliance by Leonardo with two financial ratios (Group Net
Debt, excluding payables to the joint ventures MBDA and Thales Alenia Space and lease liabilities/EBITDA,
including amortisation of the rights of use) of not more than 3.75 and an EBITDA (including amortisation of
the rights of use)/Net interest ratio of not less than 3.25), which are tested on an annual basis on consolidated
data. In relation to this Annual Financial Report financial covenants have been complied with in full: the two
indicators amount to 0.4 and 18.8, respectively.
These covenants, which are always tested on an annual basis, are also included in the loan agreement with
CDP for €mil. 100, as well as in any and all EIB loans in place (used for a total amount of €mil. 481 as at 31
December 2023).
In addition, the ESG-linked loans illustrated above envisaged margin adjustment clauses based on theachievement of certain indicators (KPIs) related to ESG objectives. Specifically•

Reduction in CO2 emissions of the Group; such KPI is included in the RCF and in the Term Loan signed
in 2021 as well as in the Sustainability-Linked Loan granted by the European Investment Bank in 2022;•

Promotion of female employment with STEM degrees; such KPI is included in the RCF and in the Term
Loan signed in 2021;•

Increase in per capita computing power of the Group; such KPI is included in the Sustainability-Linked
Loan granted by the European Investment Bank in 2022.

Financial covenants, in line with U.S. standard practices, are also provided for in bank loans granted in favourof Leonardo DRS, following its listing on the market. Also such financial ratios (Net debt / adj. EBITA no higher
than 3.75 and adj. EBITA /Net interest no lower than 3.0, to be determined based on the data obtainablefrom the US GAAP financial statements of the Leonardo DRS Group) were met at this reporting date.
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Report on operations at 31 December 2023
Outstanding bond issues (equal to a nominal amount of €mil. 1,600) are given a medium/long-term financial
credit rating by the international rating agencies: Moody’s, Standard & Poor’s and Fitch. In this regard, itshould be noted that:••on 3 May 2023 Moody's deemed it appropriate to upgrade Leonardo's rating, bringing it back to an
Investment Grade level, Baa3, compared to the previous rating Ba1, with stable outlook; thisimprovement was essentially due to:othe Group’s proper execution of the Business Plan, even during the pandemic period;oa significant debt reduction achieved in the last 12-18 months and the confirmed
commitment to further reduce it at a later time;othe maintenance of stable remuneration to shareholders;othe strong growth prospects for the Group in the geopolitical environment of reference.

on 4 August 2023, Standard&Poor's also decided to upgrade Leonardo’s rating back to theInvestment Grade, BBB- compared to the previous BB+, with stable outlook; this upgrade was mainly
due to:othe solid operating performance reported by the Group;othe management’s commitment to keeping solid accounts;othe strengthening of revenues and cash flows accompanied by a growing generation of cash
which will be used to reduce gross debt.

At the date of presentation of this report, Leonardo’s credit ratings, compared to those preceding the lastchange, were then as follows:

AgencyLast update

Moody's
Standard&Poor's
Fitch

May 2023
August 2023
January 2022

Previous
Credit Rating
OutlookBa1
positiveBB+
positive
BBBnegative76

UpdatedCredit Rating
OutlookBaa3stableBBBstable
BBBstable

Report on operations at 31 December 2023
With regard to the impact of positive or negative changes in Leonardo’s credit ratings, the only possible
effects deriving from further changes, if any, to the credit ratings refer to rate margins applied to certain
payables of Leonardo (Revolving Credit Facility and Term Loan).
Furthermore, it should be noted that the Funding Agreement between MBDA and its shareholders also
provides, among other things, that any change in the rating assigned to the shareholders will result in achange in the applicable margin.

77

Report on operations at 31 December 2023

Other information
 OTHER PERFORMANCE INDICATORS RELATED PARTY TRANSACTIONS CONSOB – MARKET REGULATION NO. 20249/2017, ART. 15
 INFORMATION PURSUANT TO ARTICLES 70 AND 71 OF ISSUERS'REGULATIONS

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Report on operations at 31 December 2023

Other performance indicators
2022

FFO
Net Interest

1,535
(104)

2023

1,441
(95)

Change(6.1%)
8.7%

For the definition of indices, reference should be made to the paragraph on “NON-GAAP Alternative
Performance Indicators”.

Related-Party transactions
In 2010 Leonardo adopted a specific “Procedure for Related Parties Transactions” (hereinafter referred to as
the “Procedure”), which was mostly recently updated in October 2023 pursuant to CONSOB Regulation no.
17221 of 12 March 2010, as amended and supplemented, containing provisions on “related party
transactions” (hereinafter referred to as the “Regulation”), as well as in implementation of Article 2391-bisof the Italian Civil Code. The abovementioned Procedure is available on the Company’s website(www.leonardo.com, under Corporate Governance section, “Related Parties” area”).
Pursuant to Article 5.8 of the Regulation, during 2023 the following transaction of greater importance, as
defined by Article 4.1.a of the Regulation and identified by the abovementioned Procedure pursuant toAnnex 3 attached to the Regulation, was carried out:

Parties to the transaction
Leonardo S.p.A

PZL Swidnik

Nature of relationshipwith related parties

Object of the transaction

Consideration for
the transaction

Subsidiary(100%)

Supply contract guarantee€mil. 570

Since it was carried out with a subsidiary, the aforesaid transaction benefited from the exemption provided
for in Article 14.2 of the Regulation, as well as in Article 11.2(e) of the aforementioned Procedure.
No changes or developments took place in relation to the related-party transactions described in the 2022
Report on Operations.

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Report on operations at 31 December 2023

CONSOB Market Regulation no. 20249/2017, Article 15
In accordance with CONSOB provisions contained in the Market Regulation adopted by CONSOB Resolution
no. 20249 of 28 December 2017 and subsequently updated by the latest amendments made by Resolution
no. 21624 of 10 December 2020, Leonardo S.p.a. performed the verifications on the Group subsidiaries thatwere incorporated and are governed under the laws of non-EU Member States and that, as a result, weredeemed “material” based on the requirements under Article 151 of the Issuers’ Regulations adopted with
CONSOB Resolution no. 11971 of 14 May 1999, as amended by CONSOB Resolution no. 2214421639 of 22
December 2021. As regards the non-EU foreign subsidiaries (Leonardo DRS Inc., Leonardo US Holding LLC.,
AgustaWestland Philadelphia Co., Leonardo UK Ltd) identified based on the above regulations and incompliance with the provisions of local laws, these verifications revealed that the administrative andaccounting system, which oversees the preparation of Financial Reports, falls within the scope of a control
environment that is effectively operating and substantially suitable to the requirements envisaged in said
Article 15. Therefore, it is not necessary to prepare an adaptation plan pursuant to the abovementioned
article.

Information pursuant to articles 70 and 71 of Issuers'
Regulations
By resolution of the Board of Directors on 23 January 2013, the Company adopted the simplification regime
under Articles 70/8 and 71/1-bis of the Issuers’ Regulations, adopted with CONSOB Resolution no.
11971/1999, as subsequently amended and supplemented. By this resolution, the Company chose the option
to make exceptions to the obligation to issue the documents required by the law when transactions of greater
importance (such as mergers, spin-offs, capital increases by means of the contribution of assets in kind,acquisitions or disposals) occur.

80

Report on operations at 31 December 2023v

PART 2 – Consolidated Non-financial Statement (NFS)

PART 2 – CONSOLIDATED NON-FINANCIAL STATEMENT (NFS)81

Report on operations at 31 December 2023

GOVERNANCE CORPORATE GOVERNANCE RESPONSIBLE BUSINESS CONDUCT RISK MANAGEMENT STAKEHOLDER ENGAGEMENT

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Report on operations at 31 December 2023
Leonardo’s corporate governance is aimed at protecting and maximising the long-term value of the Company
for the pursuit of sustainable success, via the optimal management of resources with respect to strategic
objectives, effective company risk control, utmost market transparency and integrity of decision-making
processes, in the interest of all stakeholders.
Priority topics> Business integrity, compliance and anti-corruption> Protection of human rights> Cybersecurity and data protection

Objectives>

SDGs

Progress

Annual renewal/maintenance of the ISO 37001:2016 “AntiBribery Management System” certification

Objective achieved

Target year2023
2024-2026 (renewal
and maintenance)

New objectives

Impact indicators
42% of women sitting on the Board of
Directors
40% on the Board of Statutory
Auditors
100% of women as chairmain ofboard committees

20% of long-term variable
remuneration and
10% of short-term variable
remuneration linked to ESG
objectives

55% of total financing sources
linked to ESG parameters,
for a total of € 3.26 billion“Our future together”, the new Supplier Code of Conduct
With the publication of the new Code of Conduct for Suppliers "Our future together" 33 at the beginning of2024, Leonardo reaffirms the importance of ethical principles in the conduct of business, promoting themmore decisively not only internally but also to external partners. In particular, the Code reaffirms the valueof respecting human rights, diversity and inclusion, both of direct and suppliers’ workers, as well as the rightto privacy and personal data protection. Moreover, it further emphasizes the importance of integrity andbusiness ethics, as well as the principles of environmental sustainability and decarbonisation, as necessary
prerequisites to ensure lasting progress for the benefit of people and the planet 34.

33 The Code is available at this link.

34 For more information on the new Code of Conduct for Suppliers, see the section Supply chain value in the chapter "Prosperity".

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Report on operations at 31 December 2023

Corporate Governance
Leonardo’s corporate governance model, based on a traditional organisational structure, complies with the
Corporate Governance Code (approved by the Corporate Governance Committee and promoted by, among
others, the Italian Stock Exchange) which is adhered to by the Company and with the international bestpractices.
As part of this model, the Board of Directors (BoD) is the main body entrusted with the power to definebusiness strategy and structures in coherence with the Company’s management and control activities. During
its term, the BoD may draw on support from the Board internal committees that make proposals and provide
advice.
The current BoD was appointed by the Shareholders’ Meeting held on 9 May 2023 for the three-year period
from 2023 to 2025, in compliance with the criteria for gender, age, skills and experience balance set in thepolicies on diversity. Following its appointment, the Board set up four committees from among its members,
with functions in the areas of Control and Risks, Remuneration, Nomination and Governance, Sustainability
and Innovation.
Corporate governance model
Shareholders’ meeting
Board of Directors

Board of Statutory
Auditors(for the 2023 – 2025 three-year period)

TRIFONE ALTIERI
Director (A,B)
GIANCARLO GHISLANZONI
Director (B,D)
Lead Independent Director
ENRICA GIORGETTI
Chiarwoman (B)Director (B,C)

MARCO DI CAPUA(for the 2021 – 2023 three-year period)

STEFANO PONTECORVO
Chairman
ROBERTO CINGOLANI
Chief Executive Officer andGeneral Director

Chief Audit Executive

Regular Statutory Auditors
LUCA ROSSI
Chairman
CRISTINA MANARA
Chariwoman (D)Director (A,D)

SARA FORNASIERO
AMEDEO SAGRESTANOLEONARDO QUAGLIATA
ANNA RITA DE MAURO

MARCELLO SALA
Director (A,D)

Alternate Statutory Auditors
EUGENIO PINTO
GIUSEPPE CERATISILVIA STEFINI
Chariwoman (A)Director (A,C)

DOMINIQUE LEVY
Director (A, C)

ELENA VASCO
Chairwoman (C)Director (B,C)

FRANCESCO MACRI’Director (C,D)

STEVEN DUNCAN WOOD
Director (B,D)A) Control and Risks CommitteeB) Remuneration CommitteeC) Nomination and GovernanceCommitteeD) Sustainability and Innovation
Committee

Independent legal
auditors
EY S.p.A.

(for the 2021 – 2029 period)

Coordination andconsultation body for theprevention of corruption*

Officer in charge offinancial reporting
ALESSANDRA GENCO

Surveillance Body

(for the 2023-2025 three-year
period)FEDERICO MAURIZIO D’ANDREA
Chariman
GIANDOMENICO CAIAZZA
External member
RAFFAELE CUSMAI
External member
ROMINA GUGLIELMETTI
External member
MARCO DI CAPUA
Chief Audit Executive* Made up of Leonardo’s Chairman and of the Chairmen of the Control and Risks
Committee, of the Board of Statutory Auditors and of the Surveillance Body

NOTE 1: The previous Board of Directors, whose term of office expired with the Shareholders' Meeting of 9 May 2023, was composed of the following: Luciano Carta (Chairman), Alessandro
Profumo (Chief Executive Officer), Carmine America, Pierfrancesco Barletta, Elena Comparato, Dario Frigerio, Patrizia Michela Giangualano, Paola Giannetakis, Federica Guidi, Maurizio Pinnarò,Ferruccio Resta and Marina Rubini.
NOTE 2: The previous Supervisory Board for the three-year period 2020-2022 expired on 25 June 2023 and was composed of RAFFAELE SQUITIERI (Chairman) GIORGIO BENI (External Member)
CHIARA MANCINI (External Member) CLAUDIA TEDESCHI (External Member) MARCO DI CAPUA (Chief Audit Executive) ANDREA PARRELLA (Group General Counsel).

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Report on operations at 31 December 2023
Features of the BoD 35
Leonardo

Average FTSE-MIB 36

12
4
10
5
56
1
13
100

12.3
2.3
7.8
5.3
58
4.9
14.1
96

Number of Directors
Number of Directors appointed by minority shareholders
Number of independent Directors
Number of women Directors
Average age
Average tenure (years)
Meetings held in 2023
Attendance rate (%)

Board committeesa) Control and Risksb) Remuneration
Directors: 5c) Nomination and
GovernanceDirectors: 5d) Sustainability andInnovation
Directors: 5

Directors: 5% independent: 80%% independent: 100%

% independent: 100%

% independent: 80%

Meetings held in 2023: 11

Meetings held in 2023: 8

Meetings held in 2023: 9

Meetings held in 2023: 8

Attendance rate: 100%

Attendance rate: 96%

Attendance rate: 100%

Attendance rate: 92%

BoD competences and experiences

Leonardo has adopted an engagement policy aimed at promoting and regulating opportunities to meet anddiscuss with financial stakeholders ("Policy for the management of dialogue with shareholders in general andwith other stakeholders"). The scope of the policy includes the requests for direct interaction with theCompany that are submitted by financial stakeholders on issues concerning the economic and financial
results and outlook, the Industrial and Strategic Plan, corporate governance, social and environmental
sustainability, the remuneration policy for directors and managers with strategic responsibilities, the internal
35 The indicators are related to the BoD appointed on 9 May 2023, except for the value relating to the number of meetings held,
which refers to the total for 2023. The attendance rate is calculated as the number of events attended/number of meetings convened.
The source of the FTSE MIB data is Assonime.
36 Year 2022.

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Report on operations at 31 December 2023
control and risk management system, and the Company's policies on ethics, transparency and anticorruption 37.

Remuneration policy
The objective of the remuneration and incentive policy in 2023 was to attract and motivate people with theprofessional skills to carry out assignments and fulfil responsibilities assigned to them, in line with the
management’s interests and with the priority objective of creating value in the medium- to long-term. To dothis, the policy has been designed in order to ensure a balance between the variable component of
remuneration and the fixed one, while also establishing a balance between short- and long-term incentives,and an alignment of the remuneration and incentive system with the pursuit of long-term interests (in termsof both economic-financial performance and ESG), ensuring that the variable component of remuneration isconnected with the results achieved and paying great attention to the objectivity of metrics used to measureperformance 38. In addition to the Chief Executive Officer, population involved in the Short-Term Incentive
Plan (MBO) of Leonardo Group is equal to about 1,070 Group executives, including Managers with Strategic
Responsibilities and Top Managers of Leonardo. Population involved in the Long-Term Incentive Plan of
Leonardo Group is equal to about 200 Group executives, including Managers with Strategic Responsibilities
and Top Managers of Leonardo. Starting from 2021, middle managers in Italy have been assigned a bonus
target, as agreed in the Company Supplementary Agreement on 21 May 2021. Furthermore, under the same
agreement, a portion of the remuneration of all other employees was linked to a variable component(performance bonus) linked to the Group's results of operations and, depending on the levels, to individual
performance.
20% of long-term variable
remuneration and
10% of short-term variable
remuneration linked to ESG objectives

98.19%
Favourable votes cast by the 2023
Shareholders’ Meeting on
Remuneration Policy

36x
ratio of total CEO remuneration toemployees’ median remuneration

37 For more details on the financial stakeholder engagement policy, please see 2023 Corporate Governance Report, paragraph“Investor Relations”.
38 Notably, long term remuneration of CEO and management is tied to the achievement of targets related to CO2 emissions Scope 1
and 2 location-based, calculated as a ratio to revenues, and to the increase of hires of women with STEM degree. For more details
please see Remuneration Report 2023.

86Report on operations at 31 December 2023

Responsible business conduct
Leonardo acts with integrity and transparency in compliance with regulations and with zero tolerance for any
type of corruption to ensure the most proper management of the business and to establish relationships oftrust and collaboration with employees, customers, suppliers and all other counterparties, asked to accept
and apply the principles and values stated in the Charter of Values, Code of Ethics and other codes ofconduct 39. In conducting its business, Leonardo confirms its commitment to respecting and promoting theTen Principles of the United Nations Global Compact related to human rights, labour, the environment andanti-corruption. Leonardo's model for the responsible conduct of business, inspired by national andinternational best practices, is based on company codes of conduct and a system of clear rules, periodically
updated, that guide compliant and responsible behaviour. Constantly raising the awareness and training of
employees and third parties, due diligence tools and internal audits, risk assessment methods, in addition to
the adoption of an increasingly transparent approach on corporate information and processes, help tostrengthen a governance and management system capable of preventing any possible risk, promoting anddeveloping an ethical business culture. Leonardo has also adopted the Common Industry Standards of the
Aerospace and Defence Industries Association of Europe (ASD) and the Global Principles of Business Ethics
for the Aerospace and Defence Industry of the International Forum on Business Ethical Conduct (IFBEC) andcollaborates with TRACE International.
Responsible business conduct model

39 Including the Anti-Corruption Code, the Whistleblowing Management Guidelines, Organisational, Management and Control models

and Compliance Programmes developed in accordance with the applicable regulations of each Country in which the Company
operates (Leonardo SpA adopted an Organisational, Management and Control Model pursuant to Legislative Decree no. 231/2001).

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Report on operations at 31 December 2023
Set rules and expected behaviours
Guidelines and procedures – main updates

>

>

>

>

>

Work has been commenced on the update of the231/2001 Model following the amendments made toLegislative Decree 231/2001, as well as theorganisational changes that have occurred since thedate of the last update of the Model (13 December2022).
The Whistleblowing Management Guidelines were
updated following the entry into force of Legislative
Decree 24/2023 implementing Directive (EU)2019/1937 on the protection of persons who reportbreaches of Union Law.
The new company rules on the matter of commercial
advisors, sales promoters, distributors and resellers
have been implemented through the adoption of asingle document for Leonardo and its subsidiaries.
The new company rules on the matter of Trade
Compliance have been implemented through the
adoption of a single document for Leonardo and its
subsidiaries, which incorporates the new international
norms and standards governing smuggling and respectfor human rights.
The procedure on the matter of personnel selection andrecruitment has been updated.

>
>

>

>
>

The update of the Operating Instructions on Supply
Chain Security Resilience Risk Management has been
published.
The Company Procedure for National Security Checks on
recruits (including Labs researchers) and/or applicantshas been set up in accordance with regulatory or
contractual requirements, identified as applicable inrelation to privacy, processing of personal data,
workers’ statute and information security.
The relevant company regulatory documentation has
been prepared in the application of the directives issued
by the Security Information Department, Central
Secrecy Office (DIS-UCSe), for the management ofclassified information in compliance with the Company
Security Rules and Operating Instructions.
The reference documentation has been drafted for theextension of the Security management system at theforeign offices of the Group.
Security strategies and measures have been extended
to geographical areas of interest for businessdevelopment through the implementation of the
management system, Foreign Entities Security
Management System.

Engage people
Continuous training

>
>

>

>
>
>

About 15,900 hours of business compliance training
delivered to more than 13,600 people in the year.
More than 16,900 hours of training on national andinternational trade compliance regulations delivered tomore than 8,800 people from various departments andexternal suppliers and providers.
More than 1,000 hours of training on Project andEnterprise Risk Management delivered to over 350
people, including through operational sessions
extended to several functions, designed on the peculiarfeatures of each operating entity involved and also
through innovative delivery modes.
More than 28,300 people involved in anti-corruption
training.
About 19,350 hours of training delivered on cybersecurity.
Involvement of employees and counterparties intraining activities related to anti-corruption, businesscompliance, with respect to the values and principles
laid down in the Code of Ethics, the Charter of Values,
and the Supplier Code of Conduct.

>
>
>
>

>

>

More than 10,000 people trained in the protection ofclassified information.
More than 25,700 people trained on the General Partand Special Parts of Model 231.
Training courses preparatory to the awarding of theassignment have been delivered to 102 commercial
intermediaries.
Live webinars on Supply Chain Security Meetings havebeen held, which have involved the Electronics, Cyber &Security Solutions, Aircraft and Aerostructures
Divisions. The initiative will continue in 2024 by
involving other Divisions/Subsidiaries.
In the area of Compliance the second edition of the
training and development project has been
implemented on the "Cross-Training Program," which
has involved more than 25% of the people from
Compliance department in the various roles provided(participants, internal lecturers and experts). There
have been 17 resources trained with a total of 680 hoursof training.
The Travel Security training portfolio has been enlarged
by adding online Travel Awareness courses on Workday.
Work has been continued on the specific Female
Travellers Awareness Training course 40.

40 For more information on Leonardo’s approach to travel security, please see the paragraph on Health and safety.

88

Report on operations at 31 December 2023>

The Traveler Leaflet Vademecum, providing tips forsafer and more conscious travel, has been madeavailable on the Security Portal.

Mitigate and reinforce
Certifications

Security

>

>

>

>

>

>
>

>

>
>

ISO 37001: 2016 “Anti-bribery Management System”
certification has been maintained following successful
completion of the annual surveillance audit conductedby the Certifying Body.
ISO 27001 certification of the information security
management system has been maintained at Grouplevel and for the perimeter of National Security (Physical
Security & T.U.L.P.S.). The ISO 27001 certification has
been extended to the perimeter of PSOC (Physical
Security Operation Center). ISO 27701 (Privacy
Information Management System) and ISO 27035
certifications have also been obtained for the Cyber &Information Security perimeter.
FIRST and Trusted Introducer certification of Leonardo's
CERT (Cyber Emergency Readiness Team) was
maintained, as was the recognition from Carnegie
Mellon University on the matter of Cyber & Information
Security.
ISO 22301 certification has been renewed for the threeyear period from 2023 to 2026 for the BusinessContinuity Management System in some perimeters
involving the Corporate of Leonardo (Administration
and Budget, Security – Travel Security, Supply Chain
Security and Security Threat, Research and Analysis
OUs), the Genoa and Pomigliano d’Arco Data Centres,
and the SOC (Security Operation Center) in Chieti.
Work has been completed on preliminary and audit
activities to obtain the 27001 certification in Travel
Security.
The Cyber Essentials and Cyber Essentials Pluscertifications have been renewed for the appropriate
perimeters of the Cyber, Electronics and Helicoptersdivisions of Leonardo UK, and of the Electronics divisionof Leonardo SpA, a prerequisite for bidding andcontracting with UK government agencies.
Quality certification for Internal Audit activities has
been maintained: 10 quality reviews have been
conducted, all of which have obtained GeneralCompliance with International standards IIA andactivities have been carried out on company selfevaluation and continuous improvement.
The Authorised Economic Operator (AEO) certification
has been maintained.
The Strategic Industrial Security Clearance (NOSIS) up to
the TOP SECRET level and NATO/EU/OCCAR/ESA
qualifications has been maintained.

89

>
>
>

In 2023 no data breaches were detected which
impacted or originated from company systems relevantin accordance with the regulations in force. Databreaches were detected on third-party systems(unrelated to Leonardo’s management) with potential
impact on employees' personal data. These events were
carefully monitored and addressed in terms of
information and security actions to protect thoseconcerned. Even with reference to the IT and cybersecurity services offered by Leonardo, no data breachnotices were received in 2023, which involved
customers' personal data relevant under current
regulations.
Developing security risk analysis management tools
with suppliers and providers.
An incident response/prevention automation system
has been maintained through malicious IP blocking.
Searching, monitoring, and analysing information for
subsequent collation, integration, interpretation, andprocessing of data useful for threat prevention toward
assets and employees.

Risk Management

>

>

>

Work has been completed on the process ofdissemination and implementation of risk managementof Leonardo’s subsidiaries against the backdrop of theactivity carried out in recent years.
The specialist risk and opportunity management verticalsystem in HSE has been updated and a dedicated riskscoring system has been implemented to support theidentification of main risks with any possible impact on
business objectives.
Work has been continued on the integration of risk
management
intobusiness
processes
withsimultaneous updating of company rules in order topromote risk-based thinking.

Report on operations at 31 December 2023
Detect and control
Risk assessment

>
>

>

>

Whistleblowing

More than 2,200 people involved in risk analysis
activities regarding business processes, investment
projects and projects in bidding and execution phase.
Risk assessment and monitoring activities carried out for
anti-corruption purposes involving more than 500
people and using a methodology with elements toassess each country in which Leonardo operates.
Work has been continued on the Independent Risk
Review programmes in relation to a selection of
medium/high-risk projects in which the project teamhas been supported by risk managers who are not
involved directly in activities.
Machine learning engines have been developed and put
in operation to support risk detection, as part ofArtificial Intelligence applied to the Risk Management
process, with the involvement of the Cyber & Security
Solutions division.

>
>
>

>

Third-party due diligence

>

>
>
>
>
>
>

115 enhanced due diligence audits on sales promoters,commercial advisors, distributors, resellers andlobbyists. The red flags reported have been mitigatedwith necessary remedial actions, and none of them have
led to the impossibility of awarding the assignments.
394 audits carried out before payments to sales
promoters, commercial advisors and lobbyists.
More than 400 audits on potential customers, service
centres and business partners.
210 reputational risk reports for sponsorships, supply
and commercial contracts.
200 enhanced anti-fraud due diligence audits carriedout on natural and legal persons of interest to Leonardo
SpA.
90 National Security Audits reports.
Analysing, producing and sharing more than 1,200
threat analysis reports with top management andbusiness and security operating structures in thedomestic and international context from more than
1,500 sources.

>>

A total of 58 reports were received in 2023, concerning
both Leonardo SpA and Group companies, both in Italy
and abroad.
The reports have been found to be of a qualified naturein 54% of cases.
From the analysis of the reported content, the reports
have concerned issues attributable to the following
business processes of Leonardo: Human Resourcesmanagement, procurement, corporate security(Security) management, administration, finance andcontrol, and residually other areas, including flight
operations management, as well as operational andPrivacy and Trade Compliance issues.
All of the reports have been involved in informationgathering activities and, of these, 23 have been
dismissed by the various Surveillance Bodies and theWhistleblowing Committee (on the grounds that they
are unfounded or too general and/or lacking theminimum elements to initiate any investigation).
46% of the reports for which an investigation work has
been completed provided evidence, some of which
partial.
The results of the audits carried out have made it
possible to take, where elements of well-foundedevidence have been found, disciplinary actions and/or
sanctions and to adopt organisational measures and/or
company rules aimed at improving and strengthening
the Internal Control and Risk Management System.

Scope of audits and follow ups

Status of the reports
Human resources management27%

Procurement

58%
58 reports

14%

15%

8%
5%

13%

109 audits andfollow ups

Security management

16%

Administration, Finance and Control

44%
Other (Flight activities management,
Managment aspects, Privacy andTrade Compliance )90

Operational

Compliance

ICT

FinancialReport on operations at 31 December 2023

Anti-corruption, business compliance and third-party risk
Leonardo has implemented a process for the vetting of counterparties that includes ethical-reputational
analyses and an in-depth assessment of the risks related to each specific engagement in accordance withcompany rules and in full compliance with applicable regulations. Due diligence audits are also carried out
on counterparties under industrial offset agreements 41.
In continuity with the path it embarked on 2021, Leonardo further strengthened the system to identify thelevel of risk associated with the positions of Sales Promotion, Commercial Advisory, Lobbying, Distribution
and Reseller. In particular, some risk factors ("red flags") on which the "Risk Grid" 42 is based were reshapedto achieve greater clarity and effectiveness of the risk assessment tool at the time of updating the company
Business Compliance rules in 2023 and in light of the experience gained in previous years.

197 counterparties
including sales promoters,commercial advisors, distributors,
resellers and lobbyists, with
contracts in place, 1 of which foroffset support

911 due diligence andreputational risk analyses
carried out on counterparties
and potential commercial
partners

More than 200 hours of training
delivered to sales promoters,commercial advisors and lobbyists
through 102 online courses

Leonardo carries out activities aimed at institutions to support its reputation and business strategy, present
the company's position on specific issues and seize potential future business opportunities. These activities,
which are carried out in compliance with current regulations, as well as with the principles and standards ofconduct set out in Leonardo's Code of Ethics, Anti-Corruption Code and other company rules, mainly consistof monitoring specific regulatory developments and organising meetings with government and parliamentary
representatives on matters of interest. Leonardo’s representatives who carry out these activities are enrolledin special public registers.
With the recent update of the company rules, Leonardo has confirmed its intention not to allow the ItalianGroup companies to sign lobbying contracts, on the basis of the current wording of Art. 346-bis of the Italian
Criminal Code and in consideration of the lack of organic regulations governing lobbying in Italy. This option
remains for subsidiaries under non-Italian law, albeit with reference only to those countries where theregulations permit the conclusion of such contracts.
In 2023, the expenses for lobbying activities carried out exclusively by the Group's non-Italian subsidiaries in
the countries in which it is permitted by the relevant regulations in force, amounted to approximately
USDmil.2 (about USDmil. 1.7 in 2022 and USDmil. 1.8 in 2021) and related to North America (mainly theUnited States), Canada, Germany and Poland. In particular, among the main areas for which the Group’s nonItalian subsidiaries made use of the support from lobbyists during 2023 are those involving technologies forinfrastructure and transport, the purchase and/or upgrade of helicopters on the part of government

41 For more information on the offsets, please refer to the paragraph Social collaboration value and industrial programmes.

42 This is a tool designed internally by Leonardo and used to assess the specific risks associated with awarding commercial brokerageassignments, with reference to two types of risk factors ("Red Flags"): the "Gates" related to cases that could give rise to the risk ofcommission of crimes and which, if found, determine the impossibility of proceeding with awarding the assignment and the "Drivers,"
which instead concern ethical and reputational issues.

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Report on operations at 31 December 2023
agencies, including those for firefighting, search and rescue missions, naval systems and research anddevelopment programmes for submarines, technology for advanced protection systems, ground-based andsatellite communication systems, air navigation support tools and laser systems.

Trade compliance
Leonardo has set out an internal compliance programme (ICP) - Trade Compliance Program – in order toensure full compliance with applicable laws and the provisions issued by the competent authorities in thefield of Trade Compliance. The programme allows for the prompt identification and implementation ofcompliance with any applicable Italian, EU and international regulations regarding the export and import ofdefence, dual-use or commercial goods and/or services subject to regulatory requirements, as well as
obligations related to embargoes, sanctions or other trade restrictions, including political commitments
made under the Common Foreign and Security Policy (CFSP) framework and international regulations andconventions signed by Italy and the European Union 43.
Furthermore, the Trade Compliance Program also provides for due diligence audits on potential customers
and end-users, verifying whether they are mentioned in restriction lists and additional checks in the case oftransactions linked to Sensitive Countries, as well as specific checks to verify that internationally recognised
human rights are respected. In this regard, the Human Rights Impact Assessment (HRIA) tool has been
introduced as a key element of Leonardo's Trade Compliance Program with the aim of setting out the main
risk factors with reference to the issue of human rights and the potential impact of the activities carried out
by the company 44.

Cybersecurity and data protection
Leonardo guarantees the security of data, sensitive information and intellectual property by managing theentire cycle from defining security requirements for information systems to detecting threats andestablishing the countermeasures to take in response to attacks that have taken place. The cyber defence
system provides for specific organisational measures - in compliance with regulations and standards that set
out specific requirements and time limits for reporting incidents or data breaches -, as well as continuous
training of operators and operational tools, concentrated in Italy, which are updated on an ongoing basis.
Leonardo also fosters a cyber risk prevention culture both inside the company and towards the outside world
through the participation in working groups at national and international level, with collaborations involving
institutional and governmental players and sectors such as telecommunications, banking/finance, energy,
manufacturing and services. Courses and awareness initiatives are provided periodically on cybersecurityrelated issues, including through bulletins and news published on the Security Portal accessible byemployees.

43 Leonardo operates in strict compliance with all international treaties and conventions signed and ratified by the ItalianGovernment, which include – but are not limited – to: “The Biological and Chemical Weapons Convention”, “The Anti-Personnel
Landmines Convention”, “1980 Convention on Certain Conventional Weapons (Protocol III and IV)”, “The Convention on Cluster
Munitions”, the “Treaty on the Non-Proliferation of Nuclear Weapons” (NPT) and the “Nuclear Suppliers Group (NSG.)”44 For more information please refer to the paragraph Respect of human rights.

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Report on operations at 31 December 2023
Cyber, physical and industrial security initiatives
Protection of classified information – Leonardo collaborates with
key institutional stakeholders to ensure the protection of classified
information. With about 800 classified contracts, Leonardo has
handled more than 10,000 provisional personal security, facility
security clearances and authorisations for CIFRA access, and hasdelivered training on a six-monthly basis.

Cyber protection of assets, networks and information Leonardo has designed advanced systems and devices to protect
company assets, networks and information through innovativetechnologies, which will be used to enhance capabilities to
identify, prevent and manage cyber threats.

PSOC (Physical Security Operation Centre) – The PSOC enables all
alarms and images from the video surveillance systems of more than
50 Italian sites to be handled centrally. The TSS (Travel Security
System) has also been integrated, allowing continuous operational
support in case of alarm, as has the Mosaic application for Security
Threat Research & Analysis. In addition, the prototype of theInternational Security Kit (ISK) has been completed, which will be
used to raise the security level of branch offices and representative
offices abroad through the remote support of the PSOC. Finally, thefirst French foreign site in Aix-En-Provence has been connected to
the PSOC.

Vulnerability analysis - Leonardo wages various types of cyberthreat prevention, including exercises with certified andinternational Cyber Defence specialists, security awarenesscampaigns for its employees, vulnerability assessments andpenetration tests on specific environments and parts of thecompany infrastructure. Furthermore, activities have been
carried out to improve the computer security of company
workstations, even if they are connected remotely to thecompany network (smart working).

Response to cyber threats – Leonardo has increased H24 staff inservice to cope with growing cyber threats, even in relation to theRussia-Ukraine conflict. Systems have been put in place to protect
company devices and automate incident response, thus improving
response times and process efficiency.

Business Continuity
Leonardo guarantees its business continuity and resilience through effective responses and reactions, inorder to safeguard the sustainability of its business, as well as the reputation and integrity of its organisation,in addition to the interests of its stakeholders. The Business Continuity Management System (BCMS), whichis certified ISO 22301 for some perimeters concerning the Corporate functions of Leonardo SpA(Administration and Budget, Security – Travel Security, Supply Chain Security and Security Threat Researchand Analysis OUs), the Genoa and Pomigliano Data Centres, and the SOC (Security Operation Center) in Chieti- supports the definition, implementation and handling of procedures that ensure continuity of its company
processes necessary for priority activities. In accordance with the provisions of standard ISO 22301, Leonardo
has updated its operational methodology, confirmed in company procedures, such as Policies, directives andOperational guidelines. In 2023 Leonardo started the BCMS cycle on the perimeters specified by the
management and continued work on the activities that had already started in 2022. The Business Impact
Analysis and related results have allowed strategies and solutions to be set out as countermeasures to any
possible business disruption, which are reported in the Continuity Plans, allowing a reduction in the insurance
premium on the properties of Leonardo.

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Report on operations at 31 December 2023

Risk management
The risk governance model is in line with national and international standards and best practices 45 and iscompliant with the Corporate Governance Code for Listed Companies, the Organisational, Management andControl Model and the Group’s Anti-Corruption Code. It has three levels, provides for clear-cut roles andresponsibilities for the various departments and ensures a suitable exchange of information flows, toguarantee effectiveness.
Risk governance model

The operating risk management, which involves the entire organisation, is based on the identification,assessment and monitoring of the enterprise and project risks and the related mitigation plans. It is
supported by specific methodologies, instruments and metrics for the related analysis and management. The
processes underlying Project Risk Management and Enterprise Risk Management, which are in turn
integrated into the company business and support processes, are regularly improved, with the aim ofinnovating and spreading an effective risk-based organisational culture. Risk management processes support,
in fact, the risk owners, along the entire corporate value chain, in identifying and managing risks andopportunities, including those linked to ESG factors. In particular, the Enterprise Risk Management
methodology fosters the identification and management of the cause-effect link between ESG factors andthe potential impact on the Company (strategic, operational, financial, compliance and reputational) andsupports the preparation of the Industrial Plan, which also includes the strategic vision and sustainability
initiatives.

Risks for the GroupThe Group is subject to a number of risks that may affect the achievement of its objectives and results.
Therefore, risk analysis and management processes are implemented systematically, including any related
treatment action, with specific methodologies and practices that consider the probability of occurrence andrelated impacts in accordance with international regulations and standards. The examination of risks andconsequent actions reported below is supplemented by the more detailed information provided in Note 37of the Consolidated Financial Statements for the component of merely financial risks.

45 Main references: ISO 31000:2018 - Risk Management - Principles and guidelines; PMI - Practice Standard for Project Risk
Management; Enterprise Risk Management Integrated Framework - CoSO ERM; ISO 37001:2016 - Anti-bribery management system;
ISO/IEC 27005:2018 Information Security Risk Management.

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Report on operations at 31 December 2023
Conflicts
andgeopoliticaltensions
increase
the complexity andinstability of the
global scenario

Main risks

Actions

The resurgence of violent military conflicts between
Israel and the Palestinians has led to a highly tense
situation, with the possibility of them extending tocountries in the Middle East region. The situation has
global repercussions, thus heightening tensions
between individual world and regional powers. In
addition to a deterioration of economy, any escalationof the conflict could shape new geopolitical balancesand change the markets eligible for Leonardo in themedium-to-long term. Growing instability in the Middle
East region also affects the security of shipping of goods
and cargo, primarily in the Red Sea, leading to the needto take alternative routes and incur increasing time andcosts for delivery to businesses and end customers.

The Group has an integrated strategic planning
process, aimed at supporting the achievementof a sustainable competitive advantage, basedon an in-depth knowledge of the markets andthe reference scenario, regularly fed by specificexternal analysis activities on the context and its
evolutionary dynamics, including in relation togeopolitical issues.

At the same time, degrading security conditions in thetarget geographic area could jeopardise the safety of
Leonardo's people, assets and business continuity in
Israel, as well as of the Israeli supply chain andcustomers.
The protracted Russian-Ukrainian war and thepossibility of conflict escalation bring Europe and NATO
into the centre of growing geopolitical tensions, which
increase the complexity and instability of the global
scenario, also from a geo-economic perspective. Facedwith the new bloc opposition, various countries,
including some of those closest to the conflict zones in
Ukraine, are seeking and allocating incremental
resources for defence, also in the wake of NATO
spending targets with regard to GDP. At the same time,
markets are experiencing increasing variability, fuelled
by repeated phases of insecurity and mistrust on thepart of citizens and businesses, still restrictive monetary
policies following inflationary trends, and growing
public debt which add up to the difficulties andbottlenecks of the post-Covid-19 recovery, with respect
to which smaller companies in particular have alreadyseen deterioration in their risk profile.

The change in thelevel of expenditureofnational
governments andpublic institutions
may affect businessperformance

The major customers of the Group are national
governments or public institutions. Moreover, theGroup takes part in numerous national andinternational programmes funded by the European
Union, governments or multinational collaborations.
Therefore, it is influenced by economic and geopoliticalfactors at global and regional level, the rating or risk
profile of countries, the expense policies of the public
institutions, also for research and development
programmes funding, in addition to the medium/longterm plans of the governments. Increases in defence
spending, identified by several countries as necessary
given the rising geopolitical tensions, may lead to peaks
in demand in the short/medium term and makeinternational competition even tighter, benefiting
companies with more immediately available production
capacity.

95

The Group pursues aninternational
diversification strategy, placing it in its mainmarkets, as well as in emerging markets marked
by significant growth rates, in the aerospace,defence and security sectors.
Development and production plans are updated
according to the demand evolution and theorder trend.

Report on operations at 31 December 2023
Main risks

Actions

In the civil sectors, customers’ spending remodulation
not only gives rise to delays in obtaining new orders or
falls in the numbers of orders themselves, but also
affect their economic and financial conditions. These
sectors are also characterised by the entry and successof competitors even from other fields of activity, mostly
with the help of anti-cyclical M&A transactions carriedout by international investment funds. The market
positioning of these players could have an impact on theGroup's volumes, results and debt, thus prospectively
enabling a growing competitive challenge on
government customers. The time-to-market of
products and their development and upgrade is a
critical success factor for market positioning, given thestrong competitive drive and speed of innovation.

In addition to balancing its customer portfolio
suitably between government and nongovernment entities, the Group systematicallypursues its objectives in order to increaseindustrial efficiency, diversify its customer baseand improve its ability to perform contracts,
while reducing overhead costs with a view toenhance its competitive capacity.

The capacity forinnovation
andgrowth depends onthestrategicplanning
andmanagementofskillsIncessant technological innovation and the growing
complexity of the Group's businesses require constantalignment of skills, in order to provide high added-value
products and services. Especially in a market
environment characterised by sharp demand forinnovation skills, any shortage of special expertise could
have impacts on the full achievement of short- andmedium/long-term business objectives, including
possible repercussions in terms of time-to-market of
new products and services, as well as of access toemerging business segments. Companies compete forskills and talent by leveraging, among other things, thedistinctiveness of the brand, the ESG (Environmental,
Social, Governance) profile, the welfare offer and thework-life balance, which are positively valued by the
new generations entering the labour market.

The
Group
monitors
andmanagescompetencies and professional skills by meansof plans of action directed at attracting,retaining and motivating its human resources,
managing talents, providing ongoing specialist
training and reskilling/upskilling, insourcing corecompetencies and defining succession plans,with the gradual adoption of state-of-the-art
tools of People Analytics and new Lifelong
Learning development and training platforms
for all personnel, particularly in the STEM
(Science,
Technology,
Engineering&
Mathematics) area.

The Group operates
in some businesssegments throughpartnerships or joint
ventures

The corporate strategies contemplate the possibility ofgaining business opportunities partly through joint
ventures or commercial alliances in order to integrate
its technology portfolio or strengthen its presence in themarket. The operation of partnerships and joint
ventures is subject to both strategic positioning andmanagement risks and uncertainties. Divergences canarise between partners about the identification andachievement of operational and strategic objectives, aswell as core business operations.

The Group systematically carries out due
diligence activities before and after thecompletion of partnerships and joint ventures.
At this purpose, the active involvement of its top
management in any related operation is aimed,among other things, at directing its strategies
and identifying and managing any critical issue
in a timely fashion.

The
Group
is
exposed to the riskof fraud or illegal
activities on the partof employees andthird parties

The Group adopts and updates its organisational,
control, procedural and training system to ensure fraud
risk monitoring and compliance with any and all anticorruption laws applicable in the domestic and foreign
markets in which it operates. However, the possibility of
employees or third parties behaving in an ethicallyincorrect or not fully compliant manner cannot be ruled
out, nor can be ruled out the possibility of judicial
authorities initiating proceedings aimed at establishing

The Group has set out a model of responsible
business conduct aimed at preventing,identifying and responding to the risk ofcorruption.

The Group operates
in civil sectors thatare highly exposed
to growing levels ofcompetition

96

The Group ensures highly qualitative andinnovative product standards, and an integrated
value proposition aimed at maintaining its
technological edge, including thanks to open
innovation and the interaction with innovative
startups and SMEs.

Thanks to its model, Leonardo SpA has reachedthe highest level of Transparency International’s
Defence Companies Index on Anti-Corruption
and Corporate Transparency (DCI), in addition toReport on operations at 31 December 2023

The settlement oflegal disputes canbeextremely
complex and might
requireaconsiderable periodof timeMain risks

Actions

any possible liability attributable to the Group, theresults and timing of which are difficult to determine
and which might entail temporary suspensions from themarket concerned.

having its ISO 37001 certification, the firstinternational standard on anti-corruption
management system, confirmed. Leonardo was
the first company in the world's top ten in
Aerospace, Defence and Security to obtain thiscertification. The model also provides for the
responsible management of the supply chain,through the qualification, selection andmanagement of suppliers, as well as the
adoption of a risk analysis tool within the scopeof due diligence audits within the process ofengagement assignation to sales promoters,commercial advisor and lobbyists.

The Group is party to judicial, civil and administrative
proceedings; for some of these, the Group has
established specific provisions for risks and charges in
the consolidated financial statements to cover any
potential liabilities that could derive. Some of theseproceedings in which the Group is involved – for whicha negative outcome is unlikely or that cannot be
quantified – are not covered by the provisions referred
to above.

The Group regularly monitors potential andexisting disputes, taking the necessary corrective
actions and adjusting its provisions for risks on aquarterly basis.

Further developments of judicial proceedings,
presently unforeseeable and indefinable, together withthe possible consequential impact on Leonardo’s
reputation, could also have a significant impact on its
relationships with customers.

The Group operates
inparticularlycomplexandregulated markets,whichrequirecompliancewith
specific regulations(e.g. export control)

Defence solutions are of particular importance in termsof compliance with regulatory obligations and,
therefore, their export is strictly regulated and is subject
to prior authorization, based on specific national andforeign regulations (such as, for example, Italian Law
185/1990 and the U.S. ITAR and EAR), as well as tocustoms formalities. The prohibition on, limitation or
any possible revocation (for example in the case ofembargoes, geopolitical tensions or the occurrence ofwars) of export authorisations for defence or dual-use
products, as well as failure to comply with any
applicable customs regime, may have substantial
adverse effects on the Group's business, financial
position, results of operations and cash flows.
Moreover, failure to comply with these regulations
could also make it impossible for the Group to operatein specific regulated areas.

The Group ensures, through specific functions, atimely implementation and management of theformalities required by the relevant regulations,monitoring their updating on an ongoing basis inorder to allow the day-to-day performance ofcommercial and operational activities, incompliance with the provisions of law and withany possible authorisation and/or limitation andof its Policy of respect for human rights. The
Group has promptly made arrangements tocarry out the changes necessary as a result ofBritain’s exit from the European Union and iscontinuing to follow developments in customs
regulations in order to carry out the necessary
modifications immediately.

Pandemics can havetime-varying effects
and lead to systemiccrises

A pandemic can undermine people's health to the pointof jeopardising the resilience of the health and socioeconomic systems of the countries involved, leading tosystemic or large-scale crises that may take a long time
to normalise. The duration and magnitude of apandemic depend, among other things, on thetimeliness and effectiveness of health actions taken at

The Leonardo Group guarantees every possible
effort to preserve the safety and health of its
people wherever they are located, in fullcompliance with the relevant regulations.

97

The Group has put in place and maintains
specific action plans to contain possible impacts

Report on operations at 31 December 2023
Main risks

Actions

global level, the possible mutations of the virus, and thecoverage and decay of immunisation. A single epidemic
event not properly addressed at regional or local levelcan quickly turn into a pandemic.

of new pandemics. These plans concern, among
other things: proactive management of relations
with customers, both institutional and noninstitutional, thanks to a widespread geographic
presence, balanced with the application of tools
to virtualise promotion and marketing action;
reorganisation of production lines, together
with the remotisation of certain technicalfunctions and constant monitoring of thecompany's supply chain and procurement
strategy.

As was the case with Covid-19, the Leonardo Group
performance, can be affected by declines in target
sectors, as well as by additional risk factors, including
economy and market trends, asymmetries between
demand for and supply of certain goods and services,
inflationary effects, shortages of certain professional
skills, the ability of customers and suppliers to meet
contractual obligations undertaken and to undertakenew ones, the revision, by customers, of purchasing
strategies, also by shortening supply chains or
insourcing services, restrictions resulting frommeasures to protect people's health, with repercussions
on the Group's commercial and industrial action.

The Group operates
through a number ofindustrial plants andprocesses that may
expose it to risks to
the health andsafety of workers
andtoenvironmental risks

The Group's activities are subject to compliance withlaws, rules and regulations governing the protection ofworkers’ health and safety. Specifically, Legislative
Decree 81/2008 provides for a preventive andpermanent health and safety management system atwork, through the identification of risk factors andsources, the elimination or reduction of risk, theongoing monitoring of preventive measures
implemented, the development of a corporate strategy
to be implemented through the participation of all
stakeholders in the working communities.
The Group's activities are also subject to compliancewith laws, rules and regulations governing theprotection of environment and energy management,
which imply specific environmental permits aimed atensuring the compliance with restrictions andconditions on emissions into the atmosphere, water
discharges, storage and use of chemical or hazardous
substances (e.g. REACH Regulation and RoHS Directive)
and waste management and disposal.

Climate change, theprotection of theenvironment
andconsequent
newdevelopments in the

The transition to a low-carbon and moreenvironmentally sustainable economy may entail risks
for the company, induced by greater severity ofenvironmental and climate policies, disharmony in theregulations of different countries with related

98

Risks to the workers’ health and safety are basedon the principle of zero tolerance, in strict
compliance with the relevant regulations, andare managed through targeted risk analyses,
which take account of injury frequency andseverity rates and related improvement
objectives, specific action and training plans,within the framework of a precise system ofproxies and powers for each relevant matter,
aimed at ensuring that the action takencomplies with the Group’s guidelines. The Groupalso confirms its commitment to extend thecoverage in terms of Health and Safety System,
for example through the ISO 45001 certification.
The Group is also committed to protecting thesafety of its people working on company sites
and in direct relations with customers aroundthe world from external threats.
The Group complies with the ever-increasing
limits and restrictions imposed by theenvironmental protection regulations as regardssites and production processes. The Group also
confirms its commitment to extend coverage interms of Environmental Management System,
for example through the ISO 14001 certification.
The Group regularly performs environmental
assessments of sites and monitoring, and it also
takes out specific insurance policies in order tomitigate the consequences of unexpected
events.

The Group pursues an industrial strategy aimed
at the environment and improving the efficiency
of its production systems and processes on an
ongoing basis for the reduction of energy
consumption and atmospheric emissions and,

Report on operations at 31 December 2023
scenario concerned
may require action
to be taken on
certain types ofprocesses
andproducts.

Main risks

Actions

competitive asymmetries between companies, theprogress of the relevant technology or the changing
confidence of investors and lenders in the relevantbusiness. In parallel, the importance of the sustainability
requirements of the supplier and its supply chain grows
in customer tenders, while the consumption of energy
and water resources becomes central along the entire
value chain of the company. Company processes,
particularly production processes, as well as products
and services offered to the market may be affected.

thanks also to the participation, as a partner of
excellence, in the main European programs forresearch and innovation, develops low
environmental impact technological solutions
which are functional to the fight against climatechange.

The impact of climate changes, in addition to modify theenvironmental context, exposes the Company to anincreased frequency of acute weather events, such as
floods, storms and wind, as well as droughts and fires,
which can endanger industrial sites and products being
prepared.

Breachesofinformation security
obligationscancause damage to theGroup,
itscustomers
andsuppliers and pose athreattothesecurity of citizens
andcriticalinfrastructures

Companies are required to face the risks associated withcyber resilience of their products and services and theirinformation&
communication
technology
infrastructure, taking into account the continuous
evolution of cyber threats in their numerous forms(from advanced persistent threat to the phishingcampaign), the sophistication of attack strategies andthe increase in the exposed surface area resulting from,among other things, the increasing digitisation ofprocesses, products and services for customers, as wellas the increased use of smart working. The criticalgeopolitical context, the deterioration of relations
between states or the occurrence of war conflicts may
increase the scope and number of cyber attacks, aimed
at institutions and companies.
Computer incidents and attacks, including any in the
supply chain, stoppages, leaks of personal data and theloss of information that may also be of strategic
importance may endanger business and even theGroup’s image, above all in the event of the theft ofthird-party data kept in the Group’s archives.

The Group
encounterdifficulties
protectingIntellectual
Property

could
in
its

Leonardo's success and results also depend on the
Company's ability to protect the innovations resulting
from its R&D activities through Intellectual Property. In
this respect, the Group mainly uses industrial secrets,
patents, copyrights. Nevertheless, the possibility cannot
be ruled out that the activity of a “disloyal” employee,
an improper action of a supplier or a legal but aggressiveact of a third party may lead to repercussions on thecompany’s Intellectual Property. Furthermore, there isa greater risk of counterfeiting in highly technologicalenvironments such as that in which Leonardo operates,
given the high number of patents held by third parties.

99

The Group puts measures in place against any
possible acute or chronic physical risks and has
specific insurance cover against the possible
consequences of disastrous climatic or natural
events.

The Group manages cyber security throughdedicated controls and training for the entire
corporate population, as well as processes,
procedures and specific technologies for theprediction,
prevention,
detection
andmanagement of potential threats and for
responding to them. Leonardo is ISO 27001
certified and is constantly engaged inmanagement and improvement activities aimed
at maintaining the certification itself.
Leonardo also benefits from substantial
experience in the field of cyber security, gainedon the market through the competent businessdivision. In addition to a continuous
improvement in the methods of managing
permissions of access to information, Leonardo
continues to take any action to extend data andinformation protection and processing methods
and processes to its own suppliers.

The Group is committed to the continuous
improvement of its Intellectual Property
protection processes, from the approval ofresearch and development investments,
through the definition and implementation of
measures to protect technical information andproprietary know-how. Appropriate monitoringand surveillance actions are taken to detect any
infringements by suppliers, partners orcompetitors. Of particular importance is thecreation, the expansion and the penetration of
the internal IP Correspondent networks in thebusiness divisions.

Report on operations at 31 December 2023
Main risks

Actions

The Group provides
highlycomplexproducts, systems
andservices,
includingunderlong-term
fixedprice contracts

The Group supplies products, systems and services thatare particularly complex due to their advanced
technological content, including under long-term
contracts at a fixed all-inclusive price. Terms andconditions of contracts generally include challenging
requirements and rigorous completion times, the failure
to honour which may entail the payment of penalties, inaddition to warranty liability and claims for damage thatare not covered in full by insurance policies.
Furthermore, an unforeseen rise in the costs incurred in
the performance of a contract, which may also be theresult of the occurrence of chance events, could lead toa lower profit. In this regard, attention must also be paid
to the effects of market phases characterised byinflation, over-demand, lack or discontinuity of supplyof services and goods (including energy commodities)
necessary for production and delivery to the customer,
inflation phenomena, with consequent greater
execution times and costs for the company. These
dynamics, which may also be determined, accelerated
or exacerbated by the deterioration of institutional andcommercial relations between sovereign states or by
the onset of war conflict, can also affect thecompetitiveness of the company's offer for theacquisition of additional long-term contracts as well asof new customers.

From the commercial offer phase and at regularintervals during the performance of thecontract, Leonardo considers the projects’ main
performance and financial parameters in order
to assess its performance and manage risks
throughout the entire life cycle through thedetection,assessment,
mitigation
andmonitoring of risks with the definition andmanagement of appropriate contingencies, inorder to protect the financial margins of the
projects themselves. Risk management is
supported by dedicated Risk Managers inproject teams. The Group is committed to thecontinuous improvement of its industrial
efficiency and its ability to meet customer
specifications. With reference to energy
commodities, the Group pursues, on an ongoingbasis, a strategy aimed at optimising purchases
and uses of resources.

The
risks
of
performanceofcontracts,
associated with theliability
tocustomers or third
parties, also dependon the supply andsub-supply chain

The Group purchases, in very substantial proportions
with respect to its sales, industrial products andservices, materials and components, equipment andsubsystems; it may therefore incur liability to its
customers for operational, legal or financial risks
attributable to third parties, who operate as suppliers or
sub-suppliers. The Group’s dependence on suppliers forcertain business activities might give rise to difficulties
in maintaining quality standards and meeting delivery
times. The risk profile of suppliers, mainly small andmedium enterprises, can deteriorate, also suddenly,
during downturns in economy, in the presence ofgeopolitical tensions and conflicts and during periods ofconvulsive recovery, also due to subsequent offer
shortages and discontinuity, bottlenecks andinflationary effects into the real economy, mainly on
raw materials and energy commodities. In addition,
third-party acquisitions of suppliers relevant to theGroup could change the terms and conditions ofcontract renewals, with costs or timing being lessconvenient for the Company.

Leonardo has been pursuing its policy ofstrengthening and improving the supply chain
for some years, leveraging a transparent andsustainable partnership relationship with theexcellences in its Supply Chain, to give rise to amore innovative, integrated and resilientindustrial eco-system. In addition to theprogrammes already in place or completed(LEAP, ELITE Leonardo Lounge), the Company
has defined a set of principles and rules for theassessment of key suppliers, specificallyoriented towards the development and growthof the Supply Chain with a view to long-termsustainability (Leonardo Assessment andDevelopment for Sustainability).

100Report on operations at 31 December 2023
The
Group
is
required to fulfil
direct or indirect
offset obligations incertain countries

Chips,
electronic
components
andcriticalrawmaterials available
on the market

Main risks

Actions

In the Aerospace and Defence sector, someinternational institutional customers require theapplication of some types of industrial offset related tothe award of contracts, sometimes with rigorous
requirements, linked to the development policy of eachcountry. Therefore, the Group may undertake offset
obligations that require procurement or manufacturing
support at local level, technology transfer andinvestments in industrial projects in the customer’s
country. Failure to meet offset obligations may result in
the application of penalties and, in certain cases, might
prevent the Group from participating in contract award
procedures in the countries concerned.

The Group manages offset risks by means ofappropriate analyses carried out from theoffering phase within the project teams, which
also appoint an Offset Manager for the division
concerned. A due diligence is performed before
dealing with a third party under an offset
agreement, which is conducted according to therelevant international best practices.

The production of chips and electronic components – ofgreat importance for industrial applications, especiallyfor high-tech applications - is still polarised on a few
countries, mostly outside the European Union. These
goods continue to be characterised by long delivery
times as a consequence, first, of the peaks in demand
generated by the Covid-19 lockdowns and, then, of the
convulsive and at times discontinuous post-pandemic
recovery, then impacted by the outbreak of the RussianUkrainian conflict and the consequent contrasts
between countries.

Leonardo, in addition to monitoring theprospective requirements of its supplies, takes
part in international working groups, such as
those at European and NATO level, which
reconcile the interests of both States(supporting the definition of recommendations
for member States) and the companies andsupply chains involved, in order to encourage
the identification of common strategies for
mitigating risks. Leonardo also engages in
activities having the purpose of enhancing theefficiency of the use of resources (for example
fostering circularity mechanisms) as soon as the
product technological research and sustainable
design phases start.

Critical raw materials, including rare earths, are adecisive enabler for both the technologies of certain
production sectors and the initiatives behind theEuropean Green Deal. Most of the critical raw materials
relevant to the Aerospace and Defence sector are notdirectly available in Europe, but rather in other mainly
non-NATO/EU countries. Availability and production ofmaterials are sometimes concentrated in a single
country, which may therefore be in a position to swaythe balance between global supply and demand, with
impacts on market prices and/or availability of goods, inparticular in scenarios marked by critical geopoliticalissues, the deterioration of institutional and commercial
relations between sovereign states or the occurrence of
war conflicts.

Leonardo has also set up a dedicated central
organisational unit to guide and supervise offset
activities.

A
substantial
amountofconsolidated assets
is attributable tointangible
assets,goodwillinparticular

The recoverability of amounts recognised in intangible
assets (including goodwill and development costs) is
linked to the implementation of future plans and thebusiness plans for the relevant products that, especiallyin case of long-term developments, may see the needsof customers and the competitive environment change,
given the speed of technological innovation.

The Group implements a policy of monitoring
and limiting amounts capitalised underintangible assets, with specific regard todevelopment costs, and carries out ongoing
monitoring of performance under scheduledplans, taking any necessary corrective action in
the event of unfavourable trends. These
updates are reflected in impairment tests.

The Group’s debt
could
have
an

The debt level, beside impacting the profitability as aneffect of the related borrowing costs, could affect theGroup’s strategy, limiting its operational flexibility.
Continued or new monetary tightening by central banks

In assuring a solid and balanced structure
between sources of funds and investments,
Leonardo continues to pursue the reduction ofits debt by paying steady attention to cash

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Report on operations at 31 December 2023
Main risks

Actions

its

could make new financing and current floating-rate
debt more expensive. Potential future liquidity crises
could also restrict the Group’s ability to repay its debts.

generation, which is used, based on the Group’s
orderly financial strategy, to partially reduce theexisting debt.

The Group’s credit
rating is also linked
to the opinions of
the credit rating
agencies

All Group bond issues are given a medium-term financial
credit rating by the international agencies. A possible
downgrade in the Group’s credit rating, also as aconsequence of the changed country of origin rating,could severely limit its access to funding sources, as wellas increase its borrowing costs for loans, which would
have a negative impact on the business prospects,
performance and financial results. Prospectively,
sustainability eligibility and performance will also
become increasingly important in determining
creditworthiness.

The Group continues to be engaged in reducing
its debt. The Group’s financial policies andselection of investments and contracts involve
being constantly alert to maintaining a balanced
financial structure.

The Group realises
part of its revenues
in currencies otherthan those in whichcosts are incurred,
exposing it to therisk of exchangerate fluctuations. A
part of consolidated
assetsisdenominated in US
dollars and poundsterling

The Group reports a significant portion of revenues andcosts in currencies other than euro (mainly in dollars
and pounds). Accordingly, any negative changes in thereference exchange rate might have negative effects(transaction risk).

The Group continuously applies an organised
systematic hedge policy to combat transaction
risk for all contracts in its portfolio by using thefinancial instruments available on the market.

The Group is asponsor of definedbenefit
pensionplans in the UK and
the US and of other
minor
plans
in
EuropeUnder the pension schemes reserved for employees
who mainly operate in the United Kingdom and in the
United States of America, the Group is required toensure a specific future retirement benefit level for
employees participating in the plan. In said countries
the pension funds in which the Group participates invest
resources in the plan assets (stocks, bonds, etc.) thatmight not be sufficient to cover the agreed-upon
benefits, mainly with strong market fluctuations. If thevalue of plan assets is less than the agreed-upon benefit
level, the Group duly recognises the amount of the
deficit among liabilities, with consequent adverse
effects on its financial position, results of operations andcash flows.

impacton
strategies

Moreover, the Group has made significant investments,
in particular in the United Kingdom, in Poland and in the
United States of America: this might have a negative
impact on the Group’s results of operations, financial
position and cash flows due to the translation of thefinancial statements of foreign investees (translationrisk).

102

Moreover, in intercompany financing activities
denominated in currencies other than the euro
individual positions are hedged at the centrallevel.

The Group monitors pension funds’ investment
plans and strategies on an ongoing basis andtakes immediate deficit corrective action whennecessary.

Report on operations at 31 December 2023

Stakeholder engagement
Continuous engagement with internal and external, domestic and international, stakeholders is a coreelement of Leonardo’s strategy to create shared value. The Company nurtures stable, long-lasting
relationships based on integrity and transparency, by dialoguing with and involving its stakeholders, throughorganisational units established to understand their interests and expectations. Stakeholder relations
moments (involvement of employees, materiality analysis, events for the financial community, tradeassociation meetings, collaborations within the scope of technology R&D programmes, support to projects
at local level and digital events, etc.) are opportunities to strengthening its bond with the industrial, economic
and social context while helping the company to improving its business management practices and increasing
its knowledge level.
In 2023, Leonardo actively participated in specific working groups coordinated by European associations tostrengthen oversight of sustainability issues. These include the Climate and Defence Task Force of the
Aerospace, Security and Defence Industries Association of Europe (ASD), which aims to build a common
Decarbonisation Roadmap for the aerospace and defence sector. Within the association, Leonardo leads theSustainable Supply Chain subgroup aimed at identifying common actions to decarbonise the supply chain. In
collaboration with CSR Europe, a leading European network of companies committed to corporate
sustainability and responsibility, Leonardo has contributed to the workstream Markets Hub aimed at theanalysis and compliance of European regulations governing reporting and materiality analysis. Leonardo also
participated in the Energy Transition and Climate Change task force of the European Roundtable ofIndustrialists (ERT) focused on the competitiveness of European energy-intensive industries. Given thegrowing interest of defence institutions - MoD and NATO - with respect to the issues of adaptation of themilitary instrument to climate change and decarbonisation, Leonardo has been involved in dedicated working
groups, such as the NIAG (NATO Industrial Advisory Group) study on "Ensuring Allied Capabilities Adaptationin the context of Climate Change." Leonardo is also a member of the Stakeholder Advisory Board of Edison(SAB) and the Advisory Board for Social Issues of Anima, demonstrating, within the Italian industrial context,
its relevance as a key stakeholder on issues related to sustainability.
Finally, Leonardo had the opportunity to be present at the COP28 held in Dubai in 2023, where it presented
the "Technology Driven Climate Action" panel, showing that its solutions can be enablers for climate andenvironmental transition. The event involved various stakeholders from the Society, including the Ministryof Environment and Energy Security, non-profit organisations such as CDP (formerly Carbon Disclosure
Project) and the UN Global Compact Network Italy, and associations such as ESA (European Space Agency).

Reputational risk analysis
In 2023 the issues concerning Leonardo were dealt with in more than 7,700 dedicated articles both in generaland specialist press, in 44 countries, thus further consolidating Leonardo's media coverage in the domestic
markets and increasing it in some key countries, such as France and Germany.
Sentiment analysis confirms the positive results achieved in previous years both in Italy, where 98% of thecoverage has a positive and neutral value, and at an international level, where the negative sentiment
component is about 1%. Leonardo can therefore boast a further strengthened image as a technological andinnovative player, with a sustainable organisation and with strong economic and financial indicators, among
the leaders in the AD&S sector. In Italy, particular attention was paid by the press to the change in thecompany's top management and the resulting reorganisation, the share price performance, and the Group's
positioning within the consolidation process of the European AD&S sector. On the issues front, the corporate
narrative focused on four technological areas: global monitoring, space, cybersecurity, and digitalisation.
103

Report on operations at 31 December 2023
On the digital side, the work on brand journalism, commenced in 2022, further grew through developing new
formats and strengthening those already in place while maintaining the multichannel strategy unchanged.
On Leonardo’s websites, there was a substantial improvement in key performance indicators, with a total of
4,997,646 active users (+89% compared to 2022) and 17,884,343 page views (+121.8% compared to 2022).
The presence on its X, LinkedIn and Instagram profiles was also positive, with a total of 1,176,594 followers(+16.7% compared to 2022), more than 22 million impressions and an engagement of about 1 million
interactions.

104

Report on operations at 31 December 2023

PEOPLE EMPLOYMENT PROTECTION, PEOPLE WELLBEING ANDENGAGEMENT DIVERSITY, EQUITY AND INCLUSION EMPLOYER BRANDING AND TALENT ATTRACTION
 SKILL MANAGEMENT AND ENHANCEMENT HEALTH AND SAFETY RESPECT OF HUMAN RIGHTS

105

Report on operations at 31 December 2023
Involvement, empowerment, and attention to people's well-being and safety are the cornerstones of
Leonardo’s culture. The company is committed to fostering and protecting an inclusive and stimulating
working environment, oriented towards flexibility and equity, in which everyone can demonstrate theirpotential to the fullest, contribute to the achievement of business objectives and to the sustainable
development of the communities in which it is present.
Priority topics

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>

SDGs

Diversity, equity and inclusion
Health and safety
Skill development, talent attraction and wellbeing of employees
Protection of human rights
Digital transformation

Objectives> At least 32% of women on total hires> 30% of women on total STEM recruitment> 20% of women in management levels> 20% of women on total employees> 27% of women in succession plans

Progress

Target year
2025
2025
2025
2025
2025

On track

Impact indicators
Around 3,000
people hired under 30

Over 1,500 women hired

Over 600 women hired in
STEM area
2023 data

Signature of the "Business for People and Society" Manifesto of UN Global Compact
In 2023 Leonardo continued to actively promote a corporate culture based on the respect for the dignity ofeach individual and the appreciation of the uniqueness of each person, and to be committed to preventing
and removing any form of discrimination at all stages of the employment relationship, inside and outside thecompany community and with all stakeholders. It is a commitment in line with the goals and the Sustainability
Plan, which is inspired by the main international standards and norms, from the SDGs of the United Nations
Common Agenda and joining the UN Global Compact in 2018 - a commitment that was strengthened in 2023
with the CEO/GM signing the "Businesses for People and Society" Manifesto.

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Report on operations at 31 December 2023
Leonardo is strongly oriented towards seizing all the opportunities and challenges of innovation in order tostrengthen its role as an accelerator of technological evolution and progress in the countries in which it
operates; for this purpose, it is working to attract talent on an ongoing basis and incorporate the best
technical and managerial skills into the company, guaranteeing people continuous professional
development, opportunities for internal mobility and international dialogue, including through the use ofinnovative digital processes and tools capable of involving the entire corporate population.
Employees worldwide
REST OF THE
WORLD
33,306

8,106

7,329

2,913

1,912

62%

15%

14%

5%

4%

Leonardo employs 53,566 people, 96% of whom are located in Italy, United Kingdom, United States andPoland. This human capital is mainly composed of staff with a STEM qualification, characterized by agenerational diversity that fosters the exchange of experiences and skills.
Employees by professional category, gender and age group
women %men %< 30 years

30 -50 years>50 years

Total Work force

20%

80%

13%

52%

35%

Managers

15%

85%

0%

32%

68%

Middle Managers

20%

80%

1%

43%

56%

White collars

24%

76%

16%

52%

32%

Blue collars

10%

90%

13%

58%

29%

In the last years the trend shows a constant growth of the number of employees (+4.2% vs 2022), in line withthe growth in business volumes, as well as the presence of employees under 30 (+1.8 p.p. vs 2022) andwomen in managerial positions (+0.8 p.p. vs 2022).
Human capital evolution indicators
Employees under 30

Women manager+4.2%

from 11.2% to 13%

from 18.7% to 19.5%

Growth of workforce

of work force

of total managers and middle managers(+2,174 employees)(+1,190 employees under 30)(+67 women managers employees)
2023-2022 variation

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Employment protection, people wellbeing and engagement
In December 2023 Leonardo signed an agreement with the Trade Unions for the renewal of the Company
Supplementary Agreement. The agreement is characterised not only by a general improvement in the pay
schemes reserved for employees and the continuation of the related harmonisation process within theGroup, but also by the additional measures to strengthen Corporate Welfare and the provision of new
experimental solutions aimed at rescheduling working hours.
With a view to fostering an ongoing commitment to caring for its people by creating a chain of shared value,
strengthening employees' sense of belonging and at the same time making the Group attractive to newtalent, significant regulatory measures aimed at specific needs have been put in place, which are especially
focused on the issues of parenting, fragility, inclusion and gender equality, care needs and support for victims
of gender-based violence.

Supplementary Company Agreement: key elements
Pay schemes – As early as in July 2023, Leonardo and the Trade Unions had reached an agreement on the main pay schemes,
including increases in the Performance Bonus and Collective Superminimum to be applied in the three-year period from 2024 to2026.
Welfare - With the aim of increasingly placing the enhancement of human capital at the heart of the company's strategy, new andconcrete general tools have been adopted to strengthen the existing system, such as: changes in the supplementary health caremodel; strengthening supplementary pension schemes, through the increase of company contributions; and the activation of newforms of protection in favour of all personnel in case of death or permanent disability due to illness.
Flexibility and work-life balance - The new agreement provides for the permanent adoption of Smart Working within thecompany’s structure as an element that is now naturally intrinsic to the work organisation model in the Group; furthermore,guidelines are set out which are aimed at experimenting with the rescheduling of working hours, also with a view to their
reduction, to be carried out in some "pilot" company areas directly linked to production or operational support activities. The
purpose of the experimentation is to find the best solutions capable of reconciling the work-life balance needs of the employees
involved with the objectives of strengthening the company's competitiveness and productivity.
Early retirement – In 2023 Leonardo recorded 449 voluntary personnel exits under the union agreements which provides for the
early retirement under Article 4 of Law 92/2012 (Fornero Act).

The year 2023 was a year of consolidation of the welfare and wellbeing system, which saw the expansion andenhancement of areas related to economic and physical wellbeing (on the side of both healthcare and illhealth prevention), including through putting in place measures and safeguards at the production sites andensuring the extension of services to the family members as well.

Major welfare and wellbeing projects
Work-life integration - Leonardo contributes to theenhancement of parenting by providing grants for day-care
centres, scholarships for employees' children and offering theopportunity to take short- or long-term leave from work forhealth reasons, affecting the employees or their family
members, childcare for both parents, and for reasons related to
study and training. Leonardo also promotes work-life balancethrough parenting enhancement plans (such as "Lifeed"). 200
schemes for parents with children up to age 18 were activatedin 2023. Furthermore, Leonardo encourages form of flexible
work, including the possibility of hybrid work, access to offices

Psycho-physical wellness - In Italy it is possible to access a
dedicated service platform (Gympass), which allows access tophysical facilities/gyms, online master classes, apps, and nutrition
and meditation activities. More than 7,000 employees have signed
up for the platform. Furthermore, Leonardo has launched a pilot
programme for cardiovascular prevention carried out at 3 sites,with more than 200 participants. Finally, Leonardo launched the"Apertamente" project in 2023, which is a psychological support
and guidance service both through the use of an online platform
and by delivering the service on site with a professional

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Report on operations at 31 December 2023
in a flexible time slot and make use of tools such as hourlycompensation. Finally, Leonardo allows the use of part-timeworking arrangements. In the United Kingdom, Leonardo haschanged, through the Custom Working project, the way work isdone, empowering employees, along with their managers,
team, and customers, to decide where and when they work.
This flexibility allows the company to maintain a focus on
customer needs while better balancing employees’ work needwith personal and family commitments. Leave policies allow
people to volunteer in addition to annual leave.

psychotherapist, with more than 600 people having used theservice.
Economic welfare – Leonardo has put in place the Flexible Benefits
plan in Italy, which has involved about 30 thousand employees,
supporting them with grants for the purchase of textbooks andpasses for public services, as well as services for the full or partial
reimbursement of various types of school, social welfare andtransport expense. 90% of the amount converted to Welfare wasused by employees. In the United Kingdom, Leonardo employees
are eligible for tax and insurance benefits if they purchase anelectric car under the Go Green Car Scheme. Flexible benefits
worth more than €mil. 12 were provided in Italy and the United
Kingdom in 2023 too.

In 2023 Leonardo also implemented a number of employee listening and engagement initiatives tostrengthen a sense of belonging, steer change towards a shared direction, and support the broader
community through solidarity projects.

Major employee listening and engagement
projects
People Survey 2023 - The survey involves all Group employees
and is aimed at exploring various aspects of life and work at
Leonardo: engagement (e.g., satisfaction, empowerment,
motivation, etc.), working environment (e.g., coworker
relations, collaboration and sharing, happiness and stressmanagement, etc.), relations with managers, innovation
orientation, diversity and inclusion, work-life balance andsustainability. The People Survey, launched in February 2023,
had more than 36,700 people from 20 countries participating,with an overall response rate of 69% (+5% from the last survey
in 2019). The survey, which was completely anonymous,showed that 71% of people are proud to work at Leonardo, 70%
recognise an inclusive and open-minded culture at thecompany, and 65% say managers know how to instill confidencein employees and stimulate a positive climate within work
teams (62%).

Move Together for the Planet – During the third edition of
Leonardo Challenge dedicated to the engagement and well-beingof people and the planet, employees around the world came
together, both physically and virtually, to walk as many kilometres
together as possible. As part of the project Leonardo joined areforestation project in Malawi (Africa) with the non-profit
organisation One Tree Planted, committing to planting around22,000 trees. The project also involves local communities in
educational and awareness-raising initiatives on sustainable
resources, climate change, agro-forestry and gender equality.
Sustain-Able - Interactive gamification platform aimed at raisingawareness of employees on sustainability issues through contests,
missions and thematic news (environment, circular economy, focus
on communities, etc.).

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Diversity, equity and inclusion
Turning every difference into an opportunity for growth through teamwork is for Leonardo a strategic factor
of competitiveness, talent attraction, human capital enhancement and innovation, which are all key toensuring the Group's sustainable growth and creating an increasingly collaborative and inclusive working
environment in which each person can feel free and safe to express themselves in order to realise theirpotential to the fullest.
Leonardo’s approach to Diversity, Equity and Inclusion (DE&I) is based on the fundamental principles ofrespect for Human Rights and promotion of equal opportunities, with the awareness that different
characteristics, and personal and cultural orientations are a valuable source of mutual enrichment.
This is an approach that has always been grounded in Leonardo’s Charter of Values and Code of Ethics andwas further strengthened in 2023 with the appointment of the Diversity, Equity and Inclusion Manager, theissuance of the Diversity, Equity and Inclusion Policy, and the confirmation of the Whistleblowing platform
as a channel for reporting any breaches (behaviours, acts or omissions) of the law or company protocols inthis area as well.
The Diversity, Equity and Inclusion Roadmap is developed through concrete actions that can be measured
over time: from awareness-raising and training initiatives to programs dedicated to women's empowerment,from the promotion of STEM disciplines among women and girls to actively listening to people's needs, fromoffering services and solutions for a better work-life balance to schemes and tools for valuing parenting andtraining on unconscious bias for recruiters.
A people-centered cultural model, which is further confirmed by the introduction of targets related to thehiring of women with STEM profiles in the long-term Remuneration Policy for CEO and Top Management 46.

Main DE&I projects
Talent attraction and inclusive recruitment - In the United
Kingdom, Leonardo has focused its work on Employer Branding
and recruitment strategy in order to increase diversity of bothcandidates and new hires. Recruitment managers have beenencouraged to complete training modules on inclusive
recruitment in order to attain the goal of diversifying talent andincreasing awareness of unconscious bias. In the United
Kingdom, Leonardo also continues to work with STEM
Returners, the program to bring back talent with STEM
backgrounds to work after a work hiatus, thus obtaining a totalof 29 returns. The partnership with the Association For BME
Engineers (AFBE) continues to support Leonardo in order toattract talent from different ethnic backgrounds. In the UnitedStates Leonardo carries out targeted activities for schools anduniversities with a high presence of African-American students(Historically Black Colleges & Universities - HBCUs).
GENERIamo Cultura – This is an awareness-raising campaign forthe prevention of workplace harassment and gender-based
violence launched on the occasion of the International Day
Against Violence Against Women. As part of this initiative,
promoted by the National Commission for Equal Opportunities,
established between Federmeccanica-Assistal and the Trade
Unions FIM-FIOM-UILM, Leonardo has organised an in-depth
discussion event to promote a corporate culture that is

Springboard Programme – This is an international Project
dedicated to women's personal and professional development, forwhich 3 international editions were completed in 2023, involving
about 100 women.
Navigator - In the United Kingdom Leonardo has finalised 3
development programmes dedicated to the male population to
explore topics such as masculinity stereotypes, mental health,wellbeing and stress management.
Network Group - Seven Employee networks have been establishedin the United Kingdom to raise awareness and promote D&I
strategy and make Leonardo an inclusive working environment for
all employees: Pride (LGBTQ+), to provide advice and promoteawareness of LGBTQ issues in the workplace; Equalise to offer
support to employees and increase awareness about genderequality; Carers to support employees with special care needs suchas for elderly parents, partners or children; Enable focused onneurodiversity and disability; Ethnicity Inclusion, to support ethnic
inclusion; Wellbeing, to promote the fundamentals of personal andorganisational wellbeing; Armed Forces, dedicated to employees
who have relationships with members of the military.
Inclusion 365 – The project consists of tailored training programs
developed in the United Kingdom and dedicated to creating
psychologically healthy teams and working environments as key
elements of a successful DE&I strategy.

46 For more details, please see the chapter on Governance, paragraph on Remuneration policy.

110Report on operations at 31 December 2023
increasingly respectful of diversity and to counter any form of
discrimination and violence.
Valore D - In Italy Leonardo cooperates with Valore D, which isthe first business association to promote gender balance,
offering its people the opportunity to access a range ofeducational and in-depth content in the DE&I area.

Disability – In 2023 Leonardo UK became a member of the Business
Disability Forum, providing employees with tools and information
to support disability inclusion, including training and best practices.

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Employer Branding and talent attraction
In 2023 Leonardo has implemented numerous initiatives in support of Employer Branding and Recruiting,with the aim of attracting the best talent to the labour market and sourcing the skills of interest for its various
businesses, including by leveraging all growth and work-life balance opportunities offered.
LinkedIn Top
Companies Italy
2023: fifth place inthe ranking thatrecognises the bestcompanies in whichto grow
professionally“Disability
Confident level 2
employer”:
recognition
obtained by
Leonardo UK for
attention toemployees withdisabilities

Investors in Peopleat Silver level,
Investors in Young
People and We
Invest in WellBeing
at Gold level in the
United Kingdom

In the Top 10 in theindustry for "young
professionals" and"new graduates in
STEM disciplines"
targets in
Universum's Most
Attractive Employer
ranking

Major projects
HR Graduate Programme – This is an approximately two-yeartraining programme, launched in April 2023, which is reserved
for the best new graduate talent and aimed at induction into
company HR functions with strong digital skills. The programmeis structured into several phases, from onboarding to training
delivered in collaboration with IE Business School in Madrid,from job rotation to an overseas experience.
Future Loading – This programme has been designed andimplemented in collaboration with Luiss Business School inRome, launched in September 2023, leading to the induction of
30 excellent resources into the company. The participants, hiredby one of the Group's entities, will undertake a 12-monthinterdisciplinary training course, including through one or moretraining experiences abroad. At the end of the course, the young
talents will earn a Master's degree in Advanced Management,
which is recognised at an International level.

Global Combat Air Programme (GCAP) - In 2023 Leonardo
launched an Employer Branding and Recruiting campaign to attract
the best skills needed to develop the GCAP programme 47, with theaim of hiring about 400 people with STEM profiles in the two-year
period from 2023 to 2024, mainly in the professional areas ofEngineering and Project & Programme Management.
Career Day – In 2023 Leonardo participated in 30 Career Days, andin Employer Branding and Recruiting events organised in the main
universities in Italy, both online and in-person. To support
recruiting, priority was given to STEM profiles and women. Morethan 40,000 students and new graduates visited Leonardo’s boothand stand.
Future Mission - Journey to discover the professions of Leonardo– In 2023 too, Leonardo’s employees continued to tell external
stakeholders about key professional skills and competencies, aswell as the main production sites in Italy and the technologies of
excellence that characterise them.

47 International cooperation programme to develop a next-generation air system together with British and Japanese partners. For

details please refer to Segment results and outlook.

112Report on operations at 31 December 2023

Skill management and enhancement
Leonardo's industrial strategy aims to attract and manage the job profiles and skills needed to meet the newchallenges posed by the market, including the risk of their obsolescence.
The company’s skill management and enhancement schemes support people throughout their career in thecompany, stimulating lifelong learning and activating upskilling and reskilling processes, also with asustainable perspective.
The use of innovative technology tools in the various areas of people management and development is a key
factor for change and radical improvement in the Group's overall performance. In particular, the most recent
initiatives for the development of new skills aim to align the competencies of our human resources with theneeds of the future, design training programmes and reduce outsourcing and recourse to the market,
leveraging a digital approach that combines data mining, artificial intelligence and Massive Open Online
Courses (MOOC) training platforms.

60% of employees hold a
STEM qualification

44.7% of new hires holda STEM qualification

About 1.3 milion hoursof training delivered

938 training courses
activated witheducational system 48
2023 data

Leonardo takes part in strategic initiatives focused on skill development at a European level too. Among these
are the ASSETs + (Alliance for Strategic Skills addressing Emerging Technologies in Defence) project, involves
about 30 European partners (industrial, academic, etc.); the project aims to create a system of observationand management of critical skills in the AD&S sector and a mechanism through which universities can bridge
the gap of misalignment on identified skills through new pedagogical approaches and training courses.
Participation in the ASSETs+ project enables Leonardo to contribute actively to the European education
system and to find funding lines to support business activities and in line with sustainable development goals.
In particular, Leonardo maintains a role of direct responsibility in carrying out any and all activities related tothe certification of the project's content and outputs, as well as the role of coordinating the Industry andchairing the relevant Steering Committee.
Leonardo has also adhered to the Pact For Skills, which is one of the 12 actions required to implement theSkills Agenda for Europe. The purpose of the programme is to mobilize stakeholders involved in the target
sectors in order to create better upskilling and reskilling opportunities for students and workers in Europe,
sharing specific commitments. This Pact will also help foster the transition to digital and automation andincrease the competitiveness in our continent. A working group dedicated to skills in the Aerospace andDefence Industries Association of Europe (ASD) sector has been formed to provide further support within the
sector.
Leonardo also participates in the Jobs, Skills & Impact Working Group of the European Round Table (ERT),
which is mainly focused on reskilling and upskilling programmes, needed to address digital and green
transitions that are underway 49. As part of this programme, the R4E (Reskilling for Employment) project was
launched to identify how best to address upskilling and reskilling needs in Europe.

48 Internships, apprenticeship programs, traineeships, school-to-work alternation.

49 For more details on Leonardo’s commitment to developing skills for the future, please also see the section on Digital education,scientific culture and technological expertise.

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Report on operations at 31 December 2023
Performance measurement
People analytics – Analysis and data mining tools have been adopted to identify and develop new skills, map the job profiles present
in its organisation and monitor the evolution and trends of the market, as well as the activities of its main competitors. The fact ofidentifying in advance any emerging role or roles affected by significant changes does in fact allow the company to take actions for the
recruitment of new profiles or training of resources in order to acquire or strengthen specific skills in a targeted manner, including
with a view to up/reskilling and especially targeted at digital technology and STEM disciplines. On the basis of the analyses carried out,
the use of the Coursera platform also makes it possible to select the best courses or the most suitable certifications. Specifically, indepth analyses of seven strategically important technologies have been conducted through this rationale, defining assumptions forthe development of the necessary roles and training required on impacted populations, supported by the Love for Learning project.
Digital transition – The Workday platform, which was launched in October 2022, has digitalised the main processes of people's
professional lives: from training to personal and professional data management and administration, from remuneration issues to realtime updated reporting for managers. During 2023, the platform was enriched with additional functionality, starting with the launchof the new individual performance appraisal process (Performance & Development Management - PDM), enriched with new features(e.g., Continuous Feedback).

Training and development
Love for Learning – Leonardo is the only Italian company that has made the training offer of Coursera, the world's leading platform
for MOOCs available to all of its employees around the world. Approximately 8,000 courses and 3,000 guided projects, which areproduced by the best universities in the world, are accessible from home and office. Participants can earn certifications for the courses
taken, thus improving their level of employability. In order to make the training experience even more targeted, training courses wereplanned for professional roles in the engineering area, particularly exposed to the danger of professional obsolescence.
UP - This is a high-level international managerial training course that has involved 79 new executives in 2 editions, with over 4,500
hours of training, to support the exercise of leadership, promote team building, networking and customer experience, a strategic visionand sustainability.
Skillgym – Leonardo has implemented a Digital Role Play SKILLGYM platform for soft skill development. The goal of the program is toimprove the ability to evaluate one's own behaviours in the workplace in an objective manner. Leonardo allows its people toparticipate in training schemes dedicated to specific roles useful for developing managerial skills on various topics, including, forexample, fostering a culture of responsibility and results orientation, enhancing leadership and management of one's team. With
regard to the latter topic, the increase in team management skills increased by 7% and in general resulted in an improvement in the
managerial skills of employees who took part. The programme as a whole involved 1,971 users engaged in 5,259 hours of attendance,
leading to an increase in the soft skills of the population involved.
Internal mobility – Position filled with internal candidates, including through the use of job posting: Italy 25%, Poland 4.2%, US 16%,
Switzerland 20.5%, UK 21%.
Sustainability Training Courses – In 2023 too, the interactive multimedia course on sustainability issues was made available toemployees, aimed at publicising the actions the company is implementing on the topic of sustainable development. Topics covered
within the course include raising awareness of water efficiency, waste reduction, and energy efficiency. Since its launch, the course
has been completed by 18,400 people.
You Challenge Me – The programme, intended for employees hired in Italy, consists of a customised course developed on themetaphor of the "Grand Prix." Objectives include strengthening the culture and knowledge of Leonardo as "One Company" anddeveloping distinctive competencies by identifying skills to be enhanced. The programme involved 661 participants for a total of 8,199
hours and among the skills that emerged as strengths and improved downstream from the programme are, flawless execution,customer satisfaction and energised employees. In particular, the latter, which refers to adaptability, involvement of others, andovercoming critical issues, even with a long-term view, experienced a significant increase in the score achieved, from a starting valueof 59.5 (percentile scale) to a final value of 70.54, demonstrating a significant improvement of this skill in the people involved.

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Change management models in the business
Leonardo Production System (LPS)
It is the agile production system inspired by the World Class Manufacturing (WCM) method, by which
Leonardo pursues the objective of optimising efficiency and productivity through an approach oriented tocontinuous improvement in the management of processes and programs, which is capable of ensuring more
and more quality and safety. The programme is in its fourth year of implementation, which has seen the
consolidation of the Leonardo Production System as the manufacturing management model for the Group.
The consistent application of the programme and its focus on the highest priority areas have made possible
important results in terms of Occupational Safety, Quality, Productivity and Sustainability.
LPS Framework
BUSINESS DRIVERS

PeopleInformation

Quality

SafetyCost

DELIVERABLES

SUCCESS INGREDIENTS

CashDigitalisation

Std Method-

Lost Time Accidents+ Customer Satisfaction+ Performance

Sustainability+ Sustainability

The enablers of the programme are people skills development, leadership of plant managers as a driver ofdisseminating the WCM methodology, and digital transformation. In 2023, the Business Intelligence platform
was strengthened to provide more immediate access to information analysis, reinforcing the data-driven
model.
LPS is managed by a governance and control system based on standardised evaluation criteria set out at aninternational level by WCM Association, which was joined by Leonardo in 2022, the first company in the A&D
sector. Each facility operated under the LPS model is audited every six months by a team of WCM-certified
company or third-party auditors. In 2023 22 audits were conducted, which certified that the model had been
properly implemented according to WCM standards. From the launch of the program at the beginning of
2019, LPS involved 18 manufacturing plants in Italy and made it possible to reduce injuries in the areas ofintervention by more than 90%, as well as to increase productivity on average by about 30%, achieve "zerofailure" condition on 50% of industrial plants and reduce the index of in-house problems by about 30% andthat on problems detected by the customer in terms of quality by 25%, allowing to contain the cost of "nonquality". These improvements have made it possible to adequately meet the demands of customers.
About 6,000 people
involved in 18
manufacturing
plantsAbout 14,000
projects forcontinuous
improvement

More than -90% of
injuries and +30% of
productivity in theareas in which the LPS
system has been
implemented

115

Quality: -30% of inhouse problems and-25% detected bycustomers

First company in the
A&D sector to
become a memberof the WCM
Association

Report on operations at 31 December 2023
Leonardo Project Management Model
The Leonardo Project Management Model (LPMM) is the new company process aimed at improving project
performance in terms of time schedule, costs, quality and customer satisfaction.
The model sets out a common set of innovative tools and methodologies aimed at strengthening the role,
decision-making autonomy and professional and managerial development of project managers and project
team members by spreading the culture of team working, collaboration and knowledge sharing.
As from the issue of the LPMM, the monitoring of Key Performance Indicators of process and project
performance, the ongoing implementation of Change Management and the gradual digitalisation of theprocess have enabled the improvement of the economic and financial stability of the programmes, a growing
application of best management practices, and a stronger cohesion and motivation of Leonardo ProjectManagement Community.

Over 2,000 people
involved in ChangeManagement andcross-fertilization
projects

500 strong-matrix
project teams(Integrated ProjectTeam) formalised

Launch of the Project3 digitalisation projects Management Academyof Project Management
for the personal andtools completed andprofessional
new projects underdevelopment of
Leonardo PM
development
Community

Leonardo UK Digital Enabler ModelIn the United Kingdom, Leonardo has set out a programme that aims to transform the production system todrive business evolution and digitise its products and services to maximise customer benefits while ensuring
modern and safe working environments where people's skills can be enhanced. Key elements of the
programme include: the Digital Employee Experience (DEX), which aims to improve employee engagement,
collaboration, productivity and wellbeing; and business transformation programmes such as Future Factory,
within which, in 2023, a team from Leonardo UK participated, as part of the programme, in an industry
consortium focused on digital technologies as a lever to reduce the use of energy in manufacturing processes
and contribute to the decarbonisation process.

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Health and safety
Leonardo considers the protection and safety of its workers as a priority, and therefore implements all
appropriate measures preparatory to the elimination and/or mitigation of risks related to the performanceof their professional activities and the resulting impacts. Among the objectives of Leonardo's Health, Safety
and Environment Policy 50 are those of ensuring safe working environments and operating conditions,preventing risks to the health and safety of its employees and of anyone who has access to the Group's sites,
raising awareness and providing continuous training to personnel on health and safety issues, in compliancewith the laws in force in the countries in which it operates, voluntary standards and stakeholder expectations,with a view to continuous improvement. Among the tools used to ensure compliance with adequate
standards are health and safety audits, both internal and external, which are mainly aimed at maintaining
Management System certifications, as well as at compliance, safety and hygiene audits.
81% of employees work at sites with
ISO 45001 certified Health and Safety
Management System (+1 p.p. vs 2022)

2.03 injuries per million ofhours worked

1,684 audits
conducted on health and safety, of
which 1,600 internal and 84 external(-13% vs 2022)

2023 data

Injury rate 2019-2023

Main causes for injuries in 2023

4.41
Injuries on site:

4%
2%
7%

Caution/Attention

3% 4%

2.60

2.91
2.35

Tools/Equipment
42%

2.03

Dangerous conditions

16%

Attitude/Behavior
6%
16%

2019

Procedures/Systems

2020

2021

2022

2023

Competences/knowledge
Management of employees
Injuries occurred during business trip
while in means of transportation
Other

2023 confirmed the trend of improvement in the accident rate compared to the last three years and inparticular a 13% reduction was recorded compared to 2022.

50 For more details on environmental safety, please also see the paragraph on Natural resources management and biodiversity.

117Report on operations at 31 December 2023
Occupational health and safety
Supplementary Health Care - Health coverage schemes were put inplace for employees and their entire households in Italy. In the
United Kingdom insurance coverage is on a contributory andvoluntary basis.
Employee assistance programmes – Leonardo, through a third-party
provider, offers support to employees in need of legal and financial
advice and counselling on domestic abuse and bereavement issues.
Workplace Health Promotion – It consists of health promotion
initiatives in Italy to launch prevention programmes and theconscious adoption of healthy lifestyles. Among the initiatives
implemented in 2023 are flu vaccination campaigns, breast cancer
prevention, and early prostate cancer diagnosis.

118

Travel security - Leonardo considers as a priority the protection
and safety of its workers who are called upon to perform theirprofessional work abroad on posting, secondment or relocation.
Among the preventive measures put in place to ensure adequate
information and preparation, Leonardo offers specific training
courses to its employees in travel security, safety and health, in
addition to a dedicated, 24/7 health care service; an automatedsystem for providing employees with the Health and Safety
information in the country of destination (Pre Travel Advisory);
and an app available to travellers with geolocation features incase of emergency. Travel Security processes are ISO27001
certified.

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Respect for human rights
Leonardo has defined specific principles and rules of conduct aimed at spreading a culture of respect forhuman rights universally recognised in line with the United Nations' Universal Declaration of Human Rights,
the International Labor Organisation (ILO) Conventions, the Organisation for Economic Co-operation andDevelopment (OECD) guidelines and the Charter of Fundamental Rights of the European Union. Leonardo’s
commitment to respect for human rights is expressed within its Code of Ethics, approved by the Board of
Directors 51, which extends to direct and indirect employees, suppliers, customers and anyone who has any
kind of relationship with the company. Moreover, this vision is referred to and reinforced in the Charter ofValues, the Group Policy on Human Rights, the Supplier Code of Conduct, and the recent adoption of theDiversity, Equality and Inclusion Policy. The management of its people, supplier relations and the sale anddistribution of products are the areas of the Group that, through a specific analysis conducted on the basisof the ISO 26000 guidelines, have been identified as most exposed to the risk of violations of human rights.
For each of these areas, the Group has put in place various measures to monitor the protection of humanrights in order to prevent any related risks, implementing specific mechanisms for the management ofreports, either signed or anonymous, setting up a specific dedicated communication channel 52.

People management
>

>
>
>

>

>

Prohibition on all discrimination
against gender, race, skincolour, language, religion,
political
opinions,
sexualorientation, nationality, social
status or background, tradeunion membership, age ordisability or any other type of
discrimination or intolerance
towards diversity.
Prohibition on all forms of
exploitation of child, forced orillegal labour.
Guarantee for political andtrade unions’ rights.
Protection of data of natural
persons, especially sensitive
data,
whethertheybeemployees,
collaborators,
visitors, customers or suppliers.
Protection of health and safetyof workers, in compliance withapplicable provisions and thehighest standards in terms ofsafety and hygiene.
Promotion of health and safety
and of diversity culture andinclusion, also through Working

Supply chain

Sale and distribution products

Through the Supplier Code of Conduct,
Leonardo requires from its suppliers:

>

>

>

>

Protection of the right to work
and
equal
opportunities,
promoting dignity, health,freedom, equality of all workers,
rejecting all the forms of
discrimination, whether directly
or indirectly, also with reference
to political or trade union
related aspects;
Non-involvement in forced
labour,humanbeingstrafficking, and exploitation ofchild labour and forced labour
generally speaking;
Payment of the minimum wages
and benefits legally mandated,
as well as working conditions,working
time
and
fair
compensation complying withthe laws and the standards
applicable in the countries
where the supplier operates;
Safety and protection of healthin the workplace in compliance

>

>

>
>

>

51 For more details, please see the Code of Ethics of Leonardo.

Development of technology
solutions for the security andprotection of citizens, national
institutions,
technologicalsovereignty, and the resilienceof countries.
Non-involvement
intheproduction,
development,
storage, trade and/or sale ofnon-conventional weapons (e.g.
cluster bombs, landmines,
biologicalandchemicalweapons,blinding
laser
weapons, incendiary weapons,
depleted uranium weapons);
Non-involvement in nuclear
weapons
productionormaintenance activities;
Ensuring, by means of the Trade
Compliance
Program,full
compliance with applicable laws
and provisions of competentauthorities
for
Trade
Complianceissues(i.e.
obligations for embargoes,sanctions or other trade
restrictions);
Due diligence on whether
potential customers and endusers are in blacklists and other

52 The Guidelines on the management of reports are available on the website. The dedicated channel is humanrights@leonardo.com.

119Report on operations at 31 December 2023
groups formed by company andlabour unions representatives.

withcurrent
regulations
regarding Health & Safety 53.
Leonardo,
moreover,carriesout
reputational checks of third parties withwhich intends to establish contractual
relationships and envisages social clauses
to protect workers in the case of contract
handovers.

99% of employees in OECD countries.

99% of purchases from OECD countries

77% of employees under collective
agreements.

Within the accreditation and prequalification process in Leonardo’s
supplier register and in Joscar, 100% of
suppliers accepts Supplier Code of
Conduct

31% of employees are members of tradeunions.
81% of employees operating in ISO 45001
certified sites.

>

checks in case of transactions
with Sensitive Countries;
Full-scale use of the Human
Rights Impact Assessment tool
to analyse, through specific red
flags, the conduct of businessactivities
to
check
for
compliance with internationallyrecognised human rights.

418 transactions monitored in Sensitive
Countries.

95% of key suppliers state that they haveno suppliers in countries considered atrisk 54.
More than 6,600 evaluated on social andethical-legal issues.

Human Rights Impact Assessment
Human Rights Impact Assessment (HRIA) is an analysis tool, which was adopted for the first time in 2021 and with which thecompany has defined, the main risk indices with reference to human rights and the potential impact of the activities carried out
by the Company , in order to apply the provisions of the Group's Policy on respect for human rights and to take action in line withthe objectives of the company Sustainability Plan. The analysis is carried out both "by Country" and "by transaction".
The introduction of the HRIA tool has expanded the list of Sensitive Countries (for which please refer to the link published on thecompany's website), allowing for expanded oversight of the Group's business transactions.
In particular, through the “by Country” analysis, the Countries are identified, which, despite the absence of specific sanction
programmes, have been reported by national and international bodies (e.g. UN and EU) due to violations of human rights, withspecific regard to: serious acts of internal repression, violations of international humanitarian law; belonging to conflict zones inthe trade of "3TG" minerals (so-called conflict minerals), thus including them in the list of Sensitive Countries for the company
and, therefore, establishing the obligation to notify any transaction involving them, either directly or indirectly.
On the other hand, the “by transaction” analysis has made it possible to implement the risk analysis tool relating to transactions
with Sensitive Countries, adding two drivers relating to the respect for human rights that are linked to the HRIA “by Country”.

On 23 February 2022, the European Commission published the proposed Corporate Sustainability Due
Diligence Directive (CS3D) with the aim of prescribing a due diligence requirement for companies, taking
appropriate measures to identify and address any adverse impact on human rights and the environment
along their value chain. In 2023, even in view of these legislative requirements encouraging responsible andsustainable business, Leonardo conducted an in-depth analysis, with the support of CSR Europe, a European
association focused on sustainability issues, concerning the legislative requirements of CS3D by identifying
53 For more details, please see Leonardo’s Supplier Code of Conduct.

54 The data relates to last LEADS assessment conducted on 600 key suppliers.

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Report on operations at 31 December 2023
gaps between the present situation and the due diligence elements required by the proposal. On the basisof this gap analysis, carried out on the basis of public and company documents, a roadmap was developed,
the outcomes of which were shared and discussed with all functions potentially impacted by the directive,
aimed at defining the improvement actions required for a more comprehensive oversight of the human rights
issue along the value chain while strengthening its commitment to corporate responsibility and sustainability.

121Report on operations at 31 December 2023

PLANET DECARBONISATION PATH
 CIRCULAR ECONOMY NATURAL RESOURCES AND BIODIVERSITY MANAGEMENT

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Report on operations at 31 December 2023
Leonardo is aware that the activities of its production sites and its entire value chain are in close connection
with surrounding ecosystems and societies. Responsible use of natural resources, monitoring andmanagement of waste produced, containment of emissions and energy consumption, as well as protectionof biodiversity are the drivers of Leonardo’s sustainable business strategy aimed at mitigating risks andseizing opportunities in the short, medium and long term by leveraging the efficiency of its processes,
products and services, digitalisation and new technologies. A key element of this strategy is combatingclimate change, which engages Leonardo in rethinking its production processes with the aim of promoting
the transition to a low-carbon economy, mitigating the effects of climate change-related risks and seizing theopportunities of its solutions by employing them as drivers of climate action. The pursuit of the Science Based
Target initiative (SBTi) commitment strengthens the efforts Leonardo is promoting to reduce its direct andindirect emissions. The transition to a circular business model, adopting technological solutions andresponsible behaviour, is a further goal of the Group's sustainable strategy, which aspires to respect thenatural capital and material resources used.
Priority topics

>
>
>
>
>

SDGs

Environmental impact of the use of materials and circularity
Management of natural resources and biodiversity
Climate change, adaptation/mitigation
R&D, innovation and advanced technologies
Digital transformation

Objectives> Reduction in electricity consumption taken from external grid by 10% 55> Reduction in Scope 1 + Scope 2 emissions (Market Based) by 50%> Reduction in water withdrawal by 25%> Reduction in the amount of waste produced by 15% 56

Progress

Target year
2025
2030
2030
2030

On track

Impact indicators
About 180,000 tons of CO2e

About 77,000 tons of CO2e

avoided thanks to the partial
replacement of gas SF6 from 2020

avoided through the use of virtual
training systems in 2023

Over 15,000 tons of waste
recovered in 2023

Leonardo’s participation in COP28
In December 2023, Leonardo had the opportunity to participate in the United Nations Climate Change
Conference (COP) 57 for the first time. The occasion allowed the company to present the "Technology Driven
Climate Action" event showing how the technology, solutions and products developed by the Group cancontribute to combating climate change. The event was attended by the Ministry of Environment and Energy
Security, non-profit organisations, such as CDP (formerly Carbon Disclosure Project) and UN Global Compact
Network Italy, and associations such as ESA (European Space Agency).

55 Calculated as a ratio to revenues. Baseline 2019.

56 Reduction in emissions, water withdrawals, and absolute amount of waste generated. Baseline year 2019.
57 Specifically, the 28th COP 28 conference was held in Dubai between 30 November and 13 December 2023.

123Report on operations at 31 December 2023

Decarbonisation path
The decarbonisation path undertaken by Leonardo is aimed at reducing direct and indirect climate-altering
emissions in line with the commitment made by joining SBTi. Technology, digitalisation, efficiency
improvement of its operations and involving the supply chain are the main drivers integrated into the
production model and the development of new products and solutions to promote this commitment. In 2023,
the Group promoted the submission of targets to the SBT initiative by following up on the commitment madein 2022.
Decarbonisation roadmap: a strategy in line with SBTi
Leonardo pursues the goal of reducing its carbon footprint by committing to lower direct scope 1 and 2
emissions. As early as in 2022, this commitment was strengthened by including a target of a 50% reductionin scope 1 and 2 (market based) emissions in 2030 compared to 2020 within the Group's Sustainability Plan.
This commitment is pursued through several initiatives, aimed at decarbonising and curbing the energy
consumption of its operations, including the energy self-production programme, the Full Potential LED
lighting programme, the replacement of SF6 gas with a less climate-altering gas, which avoided the emissionof about 180,000 tons of CO2e in 2023 compared to 2020, and the development of additional innovative
solutions. In 2023, the effort supported by the Group resulted in a 9.5% reduction in scope 1 and 2 (marketbased) emissions compared to 2022.

Major projects to reduce CO2 emissions in its operations (Scopes 1 and 2)
SF6 replacement – Leonardo is proceeding with the work to upgrade its manufacturing processes in order tosignificantly reduce the quantities used for the inert gas SF6 by replacing it with a gas with lower Global Warming
Potential (GWP), according to the methods envisaged in the related project of the Sustainability Plan. The objective
is, in fact, to replace SF6 gas (GWP: 24,300) with R134a (GWP: 1,530) as the inert gas used during the casting ofmagnesium alloys. In 2023, a direct emission reduction of about 180,000 tons of CO2e was achieved through thepartial replacement of SF6 with R134a, compared with 2020.
Energy self-production programme – Following the formalisation of an additional lot of contracts in 2023 for a total
installable capacity of 35.3 MWp, there are 16 agreements in place for the construction of plants at different stagesof implementation (2 with operations started at construction sites, 2 with operations still to be started atconstruction sites in early 2024, and 12 with design and permitting activities in progress). Furthermore, 15 additional
plants are in the process of being analysed with the aim of maximising electricity production from on-site plants,
reducing dependence on fossil fuels and diversifying the risk associated with volatile energy markets. The current
estimate of self-consumed PV energy relating to the plants at which operations have already been started may thenreach a value of about 50GWh/year when fully operational, equivalent to about 16,000 tons of CO2e per year
avoided. The outcome of the authorisation procedures, which are currently in progress, will confirm these values
and the timing of construction of the plants, with the aim of giving maximum acceleration to the project. The systems
hosted at Leonardo’s plants will be owned by a third-party partner who will make a portion of the energy produced
available to the sites, thus helping to reduce the withdrawal of electricity from the external grid and associated costs.
Finally, assessments have been initiated for the future installation of additional PV systems on other areas within
Leonardo’s sites and the potential development of plots of land that are not used at present.
Full Potential lighting Programme – Work is continuing on the massive programme to replace lighting systems with
LED technology, envisaged in the Sustainability Plan. In the period from 2021 to 2023, investments of about €mil.
20.1 were completed, which will allow, when fully operational, to save about 21.6 GWh/year, equal to more than
6,800 tons of CO2e avoided per year, which must be added to the 6,000 tons of CO2e avoided per year thanks to thefirst installations completed in the period from 2014 to 2020. The Programme, on which Leonardo has decided togive maximum acceleration and which will be completed in 2024, envisages an overall investment of about €mil. 31
and an estimated reduction in consumption of about 31 GWh/year when fully operational, equal to about 10,000
tons of CO2e avoided per year. The Programme will also make it possible to improve working environments, withregard to all impacted areas: industrial, office and outdoor areas.

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Report on operations at 31 December 2023
Thermal Energy Consumption Efficiency – At the end of August 2023 works were started on the new thermal plantat the Vergiate factory, which will replace the current steam generators with more energy-efficient machines. Asfrom October 2024, the plant will adopt hot-water thermal distribution, with the goal of completing the works by2025 consistently with production requirements. The new plant will be able to reduce gas consumption by about
900,000 m3 per year, equal to about 1,800 tons of CO2e avoided, through an investment of more than €mil. 6.
Digital energy monitoring – A digital platform connects about 1,200 smart meters through which about 74% of theenergy consumption is monitored at the Italian plants, enabling a structured and digitised management of energy
consumption and facilitating the identification of new projects to improve consumption efficiency. In 2023 Leonardo
prepared energy diagnoses based on the data collected by the platform in 2022, according to Legislative Decree
102/2014. Energy Diagnoses were conducted on 16 Leonardo sites and allowed for updating the energy
performance of the plants and take new actions on plant engineering efficiency improvement.
Electric and hybrid cars - Leonardo's corporate fleet (long-term rental) in Italy consists of 62% hybrid/electric drive
vehicles (+19 p.p. compared to 2022), with the goal of achieving 80% by 2024 58. Regarding the carpool, the current
share of green vehicles is 55%. In support of this objective, additional charging stations will also be installed at all
Leonardo sites, in addition to more than 330 that are already in use (including 134 in 2023).
A pilot car sharing project has also been launched at some sites, using only electric or hybrid cars, with the aim ofgradually extending it to the entire Group.

Major projects to reduce CO2 emissions in the value chain (Scope 3)
During 2023, Leonardo conducted a careful examination of the scope 3 emissions produced by the Group to
identify, in line with the SBTi methodology, the areas of greatest commitment towards which to promote its
decarbonisation actions, including its supply chain and its products and services.
Reduction in emissions in the supply chain
Leonardo aims to become a driver for reducing emissions in its supply chain. The supplier engagement
programme undertaken by the Group is aimed at creating a community that is aware of and committed toachieving increasingly ambitious sustainability goals 59. Among the actions taken, Leonardo has started
specific training, awareness and sustainability reporting planning support programmes to bring its suppliers'
decarbonisation path into line with SBTi. Leonardo plans to further support the decarbonisation of its supply
chain by supporting it through the creation of a community engaged in a common vision and goal; thedevelopment of the necessary skills, through training courses, workshops, and specific advice, involving
experts and market industry leaders for sustainable solutions and financial support initiatives for small andmedium-sized enterprises.
Reduction in emissions through the development of products and services
Leonardo is active in reducing scope 3 emissions related to the use of its sold products and services bypromoting innovative solutions, the use of alternative materials and state-of-the-art fossil fuel substitutes,
which enable the customer to reduce emissions generated in the phase of use. For example, Leonardo allows
virtual pilot training, through the creation of simulators, reducing real flight hours and the resulting
emissions. The use of alternative materials, on the other hand, allows the manufacture of lighter aircraft that
consume less and produce smaller amounts of emissions. Leonardo is investing to develop products that canuse alternative fuels to fossil fuels such as, for example, synthetic fuels and Sustainable Aviation Fuel (SAF).

58 This target, which has been proposed again in 2024, was not met in 2023 due to major delays in the delivery times of new cars on
the part of the suppliers, caused by global geopolitical contingencies that also affected the automotive market.
59 For more information, please see Partnerships and supplier development programmes in the paragraph “Supply chain value” ofthe chapter “Prosperity”.

125

Report on operations at 31 December 2023
In line with this strategy, Leonardo promoted the first flight of an AW139 helicopter in 2023, using 100% SAF
fuel at the Cascina Costa plant. The flight, which lasted about 70 minutes, showed no significant differencesfrom the performance of traditional fuel.
In addition, Leonardo manufactures systems to optimise air, urban and maritime traffic, which make theaeronautics and transport sectors more environmentally sustainable and participates in research anddevelopment activities for advanced solutions with low environmental impact promoted by major national
and European projects, such as, for example, Clean Aviation and Sesar.
Major projects to reduce Scope 3 emissions
Virtualisation – Virtualisation, which was originally created to only support cockpit
crew, has over the years seen growth in the share concerning training of both cabin
flight crew (e.g., MITHOS-related activity for winch operations training) and aircraft
maintenance personnel. Embedded Training Systems allow online training with real
1/10
and/or virtual actors in a tactical scenario shared between aircraft, ground simulatorsand monitoring and control stations, with real-time data exchange through data link CO2e emissions produced with
one hour of simulator(aircraft-to-ground) and communication networks (ground-to-ground). These
compared
to one hour of realtechnologies make it possible to significantly reduce the need for flights on real
flightplatforms, with consequent reduction in the use of fuels and production of climate
altering emissions. The virtualisation of product testing (Certification-by-Simulation)
will also drastically reduce the flight activities required to obtain certifications forplatforms and/or their subsystems.
Electric or Hybrid Platforms – The activities relating to the study of cutting-edge
technologies and impacts from hybrid/electric propulsion systems are in progress with
Leonardo Innovation Labs, including through the national H2Craft research initiative,
under the NRRP, with the Polytechnic University of Turin and cutting-edge entities suchas PowerCell and Punch. In the European civil sector, Leonardo is involved in the Clean
Aviation programme with participation in 9 research projects, 2 of which are companyled (HERA, HERFUSE), aimed at identifying regional aircraft configuration, innovative
system architectures and frontier technologies enabling a significant reduction ofenvironmental impact through hybrid-electric propulsion. The projects are incollaboration with a major European ecosystem involving, among others, Airbus, Safranand GE-Avio Aero.
Sustainable Aviation Fuel (SAF) - Environmentally sustainable fuel is one of thesolutions to contribute to reducing aviation's carbon footprint at global level. At
present, Leonardo has 12 helicopter models that can operate on fuels with up to 50%
Up to -80%
of SAF 60. In 2024 Leonardo will complete verification of the ability for in-service owner
aircraft to operate with drop-in fuels with up to 50% of SAF. Leonardo is also active in of CO2e emissions over thevarious national and international councils to monitor and analyse technological entire life cycle thanks to theadvances towards the definition of both 100% SAF drop-in fuels for in-service aircraft use of SAF with respect totraditional fuels 61
and newly formulated 100% SAF fuels for future aircraft. Within the ATR consortium,
the compatibility of the family of ATR 42/72 regional aircraft with drop-in fuels with up
to 50% of SAF has already been defined.
Emission Trading Scheme - In Italy, 9 sites fall within the scope of the ETS (Emission
9 Leonardo sites
Trading Scheme) regulations, compared to 12 sites in 2013, and must therefore offset
their CO2e emissions by acquiring allowances partly free of charge, and partly for fall within the scope of ETS
valuable consideration.
Air traffic management – Air Traffic Management (ATM) systems help optimise traffic
About 150,000
and reduce aircraft GHG emissions. Leonardo develops and produces ATM systems
within the European SESAR (Single European Air Sky ATM Research) programme, which tons of CO2e avoided in one
aims to realise the Digital European Sky by constructing large-scale demonstrators that year with Leonardo’s Free
aim to eliminate inefficiencies in all phases of flight to create a single European air traffic
60 Leonardo helicopters that can operate with fuels having up to 50% of SAFs without operational limitations or performancedegradation are the following: AW139, AW169, AW189, AW149, A109S, AW109SP, AW119MkII, A109A/AII, A109C, A109K2, A109E,
A119.
61 Depending on the mixture of SAFs used. More information can be found on the website.

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Report on operations at 31 December 2023
control system, which at present is still fragmented 62. In particular, Leonardo’s current Route ATM system in the sky
Air Traffic Control (ATC) system aims to adapt to the needs of its customers, based on ain Italyshared vision and a roadmap integrated with SESAR towards automation, digitalisation,scalability, optimisation and green transformation.
Sustainable employee mobility – Some plans have been prepared for 41 company sites
in Italy, 9 of which on a voluntary basis, which provide for the implementation of several
projects aimed at encouraging more sustainable home-to-work mobility. Almost 30,000
people work at these sites of Leonardo, equal to about 95% of the company population
3 mln € to support
in Italy. In 2023, Leonardo incurred expenses of about €mil. 3 to support employees in
employees in making
making sustainable mobility choices, including: the continuation of smart working, sustainable mobility choices
maintaining the shuttle service at numerous company sites, installing covered parking
spaces for bicycles and kick scooters, providing grants for the purchase of public
transport season tickets, the provision of an app specifically for sustainable mobility,
agreements to encourage the use of bicycles and with Trenitalia to offer favourable
terms for the purchase of train tickets.
Logistics – Implementation of the Transportation Control Tower to make the Group's
shipping management more efficient while reducing emissions under Scope 3, throughconsolidation of shipping and reduction of dedicated transport and, where possible,
with a shift to more sustainable modes of transport (e.g., maritime). A reduction of 5% -5% CO2 emissions throughin CO2 emissions was achieved in 2023, which is expected to increase to 7% in 2024 63.
the implementation of theTransportation Control Tower
Genova 4 assi – This project involves the construction of a trolleybus system along themain routes through Genoa. The route network will extend 96 kilometers from east to
west and into the valleys, passing through the city center, and will be covered by 138
trolleybuses and electric buses. Through Leonardo’s SIGMA+ system, the monitoring
solutions, supported by advanced AI-based video analysis algorithms, will enable dataprocessing and efficient traffic light control, thus ensuring safeguards for a proper useof infrastructure. The project will generate positive impacts for the environment and thecommunity, including a reduction in pollution and CO2 emissions through increased useof sustainable and efficient multimodal public transport compared to private vehicles
and improving the liveability of the city through reduced urban traffic.

62 SESAR 3, the current definition of the SESAR programme, linked to the Net Zero Emission policy strategy for aviation at the ICAO
and European levels, is focused on increasing gate-to-gate efficiency through a combination of dedicated solutions for European
airspace redesign and reuse, civil-military coordination, flight planning, integration of new types of energy-efficient aircraft into the
ATM ecosystem, and green management of airport surface and control and landing operations.
63 Baseline 2019.

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Report on operations at 31 December 2023
Leonardo's approach in the aeronautics sector supports the objectives of Destination 2050, the major
sustainability project in the aviation sector in Europe, which sets out a roadmap for net zero-emission airtransport by 2050, acting on all flights relating to Europe, the United Kingdom and the European Free Trade
Association, through the collaboration of airlines, airports, Aerospace companies and navigation service
providers.
Destination 2050 objectives-37% of CO2 emissions,improving aviation
technology-34% of CO2 emissions

through the use of SAFs

-8% of CO2 emissions

implementing financial
measures-6% of CO2 emissions,improving management of air
traffic and of aircraft
operations“Net zero” objective in the United Kingdom
In the United Kingdom Leonardo has committed to achieving Net Zero by 2030 for Scopes 1 and 2 emissions and across the value chain
by 2050, with a target to reduce CO2 emissions by 40% (for Scopes 1 and 2) by 2025 compared to 2018. The most significant measures
to reduce carbon footprint include:

>
>
>
>
>
>
>

Energy management standards – Implementing ISO 14064-1 certified management systems at all UK operations by the endof 2024 with the ambition to follow the PAS 2060 standard to demonstrate the credibility of the stated carbon neutrality
target.
Renewable energy - Ensuring that 100% of the electricity used on sites is from renewable sources, through certificates of the
Guarantees of Origin.
Self-produced energy – Making investments to achieve 25% of self-produced energy under power purchase agreements by2030.
Use of electric vehicles – Expanding charging stations, providing incentives for employees to transition to hybrid or electricvehicles.
Investments in energy efficiency at sites – Implementing a system to monitor electricity and gas consumption at all sites,
launching a Lighting-as-a-service (LaaS), significantly reducing fossil fuel consumption and promoting the use of low
greenhouse gas emission refrigerants.
Decarbonisation of heating systems - Replacing gas heating systems with electric systems to reduce climate-altering
emissions.
Employee engagement and training - Increased awareness among employees on climate action and sustainability issues
through campaigns, training courses and working groups.

Leonardo's advocacy activities and collaborations on environment and climate
Leonardo is a member and is part of the Board of Directors of the International Aerospace and Environment
Group (IAEG), an organisation including the industry's leading companies committed to advancing innovativeenvironmental solutions and standards for aerospace. Among the topics dealt with are hazardous substancemanagement, alternative technology development, authorisations related to chemicals (REACH Registration, Evaluation, Authorisation and Restriction of Chemicals), international regulations onenvironmental issues, and GHG emissions reporting and management. At the European level, Leonardo is afounding member of the Climate and Defence (C&D) task force of the AeroSpace and Defence Industries
Association of Europe (ASD) and its subgroups on Ecodesign and Sustainable Supply Chain. Within ASD theGroup also participates in the Economic, Legal and Trade Commission (ELT) and the Corporate Social
Responsibility (CSR) subgroup that monitors European dossiers concerning sustainability and reporting128

Report on operations at 31 December 2023
issues. With respect to decarbonisation and adaptation to climate change, Leonardo has been called upon toparticipate in dedicated working groups, contributing to the drafting of armed forces guidelines on thesubject. Leonardo also participates in the Energy Transition and Climate Change group of the European Round
Table (ERT). Finally, Leonardo is part of the Confindustria Environment Technical Group and of the TechnicalGroup on Corporate Social Responsibility in Italy.

Leonardo's contribution to climate change adaptation
The demand for Earth observation and monitoring services to verify climate conditions, and to deal withextreme events and emergency situations, is expected to increase. Adaptation to climate change requires
actions, skills and technologies that the Aerospace, Defense and Security sector can help provide through its
technological assets and an integrated, multi-domain approach.
Leonardo provides manned and unmanned helicopters and aircraft. In the second category, Leonardo has a
Medium-Altitude Long-Endurance class product portfolio consisting of the "Falco family" and a technology
evolution roadmap for use in environmental surveillance and monitoring, emergency management andborder control missions in a connected environment and highly integrated with other infrastructures.
Leonardo develops multi-mission configurations of aircraft for search and rescue and emergency medical
missions (SAR - Search and Rescue - and EMS - Emergency Medical Services, respectively), and designed forexcellent performance under the most demanding operating conditions in natural disasters, fires andhumanitarian relief (AW family, ATR Special Version and C-27J Firefighting).
Another category of services is global monitoring: timely and quality data analysis is essential for decisionmaking in a variety of areas. The real-time integration and processing of large amounts of data coming fromvarious sources (including satellites, drones, communication systems, sensors, and control rooms) is at theheart of global monitoring. Such satellite geo-information services are useful for monitoring emergencies
such as floods, fires, tornadoes, and other solutions aimed at facilitating climate change adaptation. Leonardo
also provides geospatial information to support emergency management through e-GEOS. Specifically, withreference to the phases concomitant to or immediately following the emergency, Leonardo operates theCopernicus Emergency Rapid Mapping Service, which provides standardised mapping products that enableverification of the pre-event situation, and an approximate assessment of the most affected locations, andthe intensity and severity of damage. Access to the service is centrally coordinated by the European
Commission and is granted free of charge to Civil Defence and Humanitarian Aid workers from member statesand international organisations such as the United Nations, the World Bank and specific NGOs. With regard
to the prevention, preparedness and containment of disaster risk and in the recovery phase, Leonardo is aleader in the Risk and Recovery Mapping Service component. Within the scope of the Copernicus programme,
Leonardo also provides the European Ground Motion Service (EGMS), which is created through state-of-theart spatial remote sensing technology, and enables the detection and measurement of ground movements
across Europe with millimetre accuracy, using InSAR (Interferometric Synthetic Aperture Radar) data derived
from Sentinel-1. This data is used both to monitor the structural integrity of dams, bridges, railways, buildings
and to identify areas where a new infrastructure can be built, assessing the likelihood of natural hazards suchas landslides or subsidence.
Among the products with an impact in terms of climate change adaptation is the X-2030 platform, which isa “system of systems”, a command and control, communication, cyber and intelligence solution formonitoring the territory, capable of processing and exploiting huge amounts of data from heterogeneous
sources in real time. The X-2030 platform provides, through collecting and correlating information fromavailable sensors and databases, an integrated and georeferenced view of both the territory in real time andits changes over time and is used, for example, for monitoring environmental and anthropic events,
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Report on operations at 31 December 2023
preventing risks (including those caused by climate change) and environmental crimes, monitoringarcheological sites and for city management and urban security purposes.
Satellite services by event type

Leonardo's helicopters by mission
type
Law enforcement

5%28%>1,200helicopters
29%

39%

2%

3%
11%

Emergency medical services
(EMS)

62
emergency
mapping

Search and rescue (SAR)

FloodsWildfires

StormsEarthquakes

44%

40%

Firefighting

Altro

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Report on operations at 31 December 2023

Circular economy
The transition to a circular business model forms an integral part of Leonardo's Sustainability Plan strategy and projects. Specifically, a transformative approachis being pursued across the entire value chain of the products and materials used: reuse, reconditioning, life extension, product as a service are already
implemented as best practices while other models such as circular supply chain, extended manufacturer’s liability, industrial symbiosis are opportunities for theGroup's evolving and increasingly circular business. The objective of Leonardo is to decouple business growth from the use of material resources, including inview of the intention to reduce strategic dependence on critical raw materials at the European level64. Leonardo’s circular economy strategy is based on fourmain interconnected areas: optimising the use and choice of materials since the design stage (through eco-design and additive manufacturing) to obtain productsthat reduce the use of resources throughout their life cycle and are prepared for circular reuse; dematerialising and virtualising by using increasingly digitalplatforms for industrial processes and solutions offered to customers (through the adoption of digital twins); extending the useful life of products byimplementing product as a service, enhancement of used products including through reuse, predictive maintenance, including through predictive models andArtificial Intelligence; promoting the recycling of materials, by managing the end of life of products. The following infographic shows examples of actions theGroup is taking to implement the strategy.
Leonardo proposes itself as a driver for the creation, through partnerships and industrial symbiosis, of circular supply chains which involve the supply chain andcustomers and are also extended to application domains outside the scope of AD&S, as witnessed by the project to recycle carbon fibre composite materials 65.
In addition to monitoring regulatory developments on the issue and requests from external stakeholders, including customers, Leonardo pursues thedissemination of circular business models, with the aim of implementing initiatives to increase the volumes of incoming recycled materials and reduce those of
non-recycled waste. In order to quantify these flows, one of the methods used is the Life Cycle Assessment (LCA), as a fundamental tool for optimising theresources and carbon footprint of products and for comparing circular and linear business models. Furthermore, Leonardo is developing projects to replace
hazardous substances in processes that tend to result in waste that is difficult to recycle. Finally, Leonardo pursues the reduction and recovery of materials in thecycle of its production activities, such as production waste and end-of-life materials (including recycling of carboresins or data centres), or end-of-life products(including reuse of avionics products used in helicopters and company mobile phones).

64 Including the “EU Critical Raw Material Act”.

65 For more information, please see “Composite Materials: A Hidden Opportunity for the Circular Economy in New Material & Circular Economy Accelerator” in Download Composite Materials: A

Hidden Opportunity for the Circular Economy — CSR Europe131Report on operations at 31 December 2023

Optimise>>>>>

Share and Dematerialise>

Reducing materials through advanced ecodesign systems
Using composite materials to reduce weight, consumption and impact [ofproducts
Additive Manufacturing to reduce critical raw materials, such as titanium, at theEuropean level
Applying the Product Life Cycle Management approach
Studying new materials to promote their reuse and limit their disposal

>
>
>
>

Extend Lifetime
>
>
>
>
>

Sale of simulated flight hours in lieu of flight hours performed on thehelicopter product for training purposes
Digital twin of the product during its development and Virtual producttesting
Virtual training systems
Removal of paper in production processes
Digitalisation of processes and industry 4.0

Recycle/Reuse>

Buy-back of used helicopters by second-hand market
Optimising maintenance cycle: replacing only those componentsthat reach end of life
Predictive maintenance on helicopters
Upgrading software to extend the life of hardware components
Regenerating and reusing used components and products>>>

Creating circular supply chains for composite and environmentally
sustainable materials that can be extended to other materials throughpartnerships
Employing recyclable metallic materials
Recycling of materials with high circular value and containing critical EU raw
materials such as WEEE
Recycling and reusing auxiliary materials, packages and metal equipment

Main results

Aircraft structures capable of maintaining a service life level in excess of 20 operating years 66.



49% of waste generated recovered in 2023.



About 77,000 tons of CO2 avoided through the use of virtual training systems in 2023 (more than 50,000 training hours delivered in the year).



Divisional projects for paperless and digitized management of manufacturing/production document flow to reduce paper use by up to 90% on a single process basis.

66 Leonardo’s study presented to Cotec in November 2018: " Circular Economy in the Aviation Sector, a document for specific use by the Cotec Foundation.”132

Report on operations at 31 December 2023
Leonardo’s major circular economy projects
Digital twin and additive manufacturing – Primary enabler of
Leonardo's transition to a circular model is digitisation. The use of
the Digital Twin makes it possible to reduce the use of resources inprototyping, testing and training on developed products, and torethink production cycles. In 2023, work commenced on researchand innovation projects on the Digital Twin of products in the
Helicopters and Electronics divisions. It is possible to reduce waste
during production processes through additive manufacturing. In thiscase too, research and innovation projects have been started on
critical materials with a high circular value such as titanium powder.
Additive manufacturing will also be applied to recycled carboresin
for the manufacture of secondary structural parts and will also allow
parts of products to be replaced during their service life.
Composites Recycling – Leonardo has promoted, through theactivities of Leonardo Innovation Labs and in collaboration with its
suppliers and technology partners, such as Herambiente and Solvay,
the creation of the circular supply chain for recycling carbon resins,
which are materials that are complex to recycle but widely used inaeronautics because of their unique mechanical strengthcharacteristics. The project aims to maintain the technical quality ofaeronautical carbon fibre and the circular value of carbon resin
waste. The recycled carbon fibre will also become second raw
material for applications outside the aerospace and defence
domain. The pilot phase of the project at a medium-scale plant isnearing completion.
WEEE (Waste from Electrical and Electronic Equipment) - As partof IT Evolution consolidation, Leonardo has transitioned from 50
data centres to two next-generation computing hubs, virtualising
the services offered in the cloud and increasing computing power,
reliability, and security, with energy savings of about 20% comparedto the previous setup. Leonardo disposes of end-of-life electronicmaterials through qualified partners, which carry out waste sortingand conditioning of materials (such as electronic components,
plastics, metals, etc.), joining a supply chain to produce secondary
raw materials with efficiency greater than 85% by weight of waste.
In 2023, more than 10.5 tons of WEEE material was sent forrecycling, with a total of 35.5 tons since the project began. Recycling
also implements the practice of urban mining that allows therecovery of critical raw materials and conflict minerals.
Predictive maintenance - The use of predictive maintenanceenables the extension of product life. To this end, Leonardo has
developed a pilot process, which, using hyperspectral imaging andAI-based automation technologies, monitors and prevents
helicopter blade failures.

Multiple use of packages – Leonardo aims to reuse plastic
packaging used for products, parts and materials in production
processes, which accounts for the most significant portion ofwaste produced. Also thanks to this practice in the Aircraft
division, waste production was reduced by 1.8 tons/year, of
which 1 ton/year was plastics, in the JSF production process.
Reusing products and parts – As part of the activities in supportof integration and test (RIG) of mission equipment of the NH90
helicopter carried out by the Electronics Division, end-of-lifeelectronic materials made available by the Helicopters Divisionand the Electronics Division itself are used. Specifically, on the
one hand, most of the avionics equipment and cable harnesses
are recovered from decommissioned or discarded material,
thus allowing new use of equipment that is no longer suitablefor flight; on the other hand, PAC (Programmable Automation
Controller) actuators are converted from avionics equipment toequipment useful for simulating the platform. Since the start ofthe project, about 900 kg of electronic equipment has been
recovered and reused (repurposed). In addition, theimplementation of the new test bench allows the equipment tobe tested at the production site, lowering the emissions thatwould otherwise be produced by the travel of its employees.
Rationalisation of archives and digitisation of paper
documents - Work continued on the project aimed at reducing
and centralising Leonardo's paper archives, including for their
possible digitisation at a later time. More than 5.9 million pages
were digitised in 2023. The remaining paper is sent for recovery
and in particular, about 30 tons of paper and cardboard havebeen delivered to a paper mill that specialises in converting such
waste into new paper products for office use. This operation will
enable to free about 4,000 square meters of areas at company
sites, which may be allocated to uses with greater added value
for the business.
Sustainable canteens – Leonardo is committed to thedevelopment of circular models through the recovery of surplus
food from the main Italian factories in favour of non-profit
organisations, for the benefit of the local areas concerned. To
this end, Leonardo has activated the Responsible Canteens
Programme since 2013, in partnership with the Banco
Alimentare Onlus Foundation and canteen service providers, torecover surplus food 67.

67 For more details, please see the paragraph on Value for communities and territories in the chapter on “Prosperity”.

133

Report on operations at 31 December 2023

Natural resources and biodiversity management
Leonardo is committed to the efficient use of energy and natural resources and a reduction in emissions andpollution, operating in compliance with applicable laws and stakeholder expectations. Audit programmes,
risk identification and management processes in the area of environment and any related improvement andmitigation plans make it possible to ensure a safe working environment, as well as check for regulatorycompliance, maintain site management system certifications, certify emission allowances, and assess thecorrect application of monitoring, control and reporting tools to protect people, the environment andbusiness continuity. Specifically, environmental risks are also identified from the topics that emerged fromthe materiality analysis. As part of Leonardo's Sustainability Plan, energy and industrial efficiency
improvement measures have been planned to reduce GHG emissions and the pollution into the atmosphere(Volatile Organic Compounds), as have studies and initiatives to reduce water withdrawals, waste production
by implementing circular economy practices, the use of hazardous substances, and protect the soil andsubsoil and biodiversity. Specifically, Leonardo is implementing a standardised management model throughthe Leonardo Production System (LPS) continuous improvement programme, already active at 18 company
sites, which enables the efficiency and continuous improvement of operations, including with a view to
reducing environmental impact, in terms of lower emissions, water and energy consumption and waste
generation. Leonardo also studies applications of the Life Cycle Assessment (LCA) methodology to bothmanufacturing processes and products for resource optimisation (emissions, and water and material flows)
and decarbonisation monitoring. As part of the Clean Aviation project, Leonardo adopts the LCA methodology
developed in collaboration with project partners in order to quantify the decarbonisation and material
resource reduction of future sustainable aircraft, on some wing parts of the aircraft.
Efficiency indicators 68
Intensity of water
withdrawals

Intensity of energy
consumption

Intensity of CO2e emissions
Scope 1 and 2 (Location Based)

-11%

-6%

-4%
2023-2022 variation

Environmental management
82% of employees atsites with ISO 14001
certified environmental
management systems(75% in 2022)

1,519 environmental
audits (1,459 nel
2022), of which 1,440
conducted inhouseand 79 by third parties

85% of electricity
acquired fromrenewable sources(79% in 2022)

About 213,000 hoursof training inenvironmental,
health and safety(HSE) issues
2023 data

68 Indicators calculated as a ratio to revenues.

134Report on operations at 31 December 2023

Water and waste management
Leonardo is increasingly committed to the responsible management of natural resources, with specific regard
to water resources and waste. To this end, Leonardo has commenced work on projects to reduce water
withdrawals and increase the volumes of water to be recovered and reused, and to reduce the amount ofwaste produced and increase the amount of waste to be sent to recovery operations, with a view to circular
economy. In particular, Leonardo has launched the Water Audit Cycle (WAC) project, which has allowed
desktop studies to be conducted in relation to the analysis of factory water balance, primary water andwastewater treatment systems (both domestic and industrial), and technological systems (e.g., cooling
towers) that use water, with the aim of identifying actions for the recovery and reuse of water resources onsite (Water Circularity). In 2023 specific in-depth investigations were carried out at 9 production sites in Italy,
prioritised because of the volumes of water withdrawn and its use. Improvement actions have been taken
which involve both the upgrading of existing wastewater treatment plants and the installation of newtreatment plants. Systems for the recovery and reuse of water are already in place at several sites: at sites in
Puglia, the company has implemented treatment systems (e.g., reverse osmosis and filtration) and recoveryof rainwater, which is reused predominantly in production processes and technological systems; at theBrindisi and Pomigliano sites, evapo-concentration plants are operating to treat industrial wastewater,
resulting in recovery and reuse of water; at the Caselle Nord site, an ion-exchange resin plant is operating totreat washing water from galvanic processes in order to recover and reuse post-treatment water. At the sametime, Leonardo has launched the Waste Prevention Programme (WPP) project, which has enabled theimplementation of desktop studies related to a precise analysis of the types of waste produced at Leonardosites in order to identify any possible action aimed at reducing the quantities of waste and identifying
alternative forms of management, with a view to circular economy. In 2023, specific in-depth studies werecarried out at 9 production sites in Italy, prioritised because of the volumes and types of waste produced.
Improvement actions have been taken which concern on-site treatment, using evapo-concentration systems,of industrial wastewater that is currently managed as waste. The most notable projects are those focused onwater circularity, which involve the combined treatment of liquid waste that makes up the largest
contribution of waste destined for disposal and not recycled, and industrial wastewater. For example, at theNola site, a system is already in place to treat industrial wastewater consisting of oil emulsions, previously
managed as waste, by means of an evapo-concentration system. At the Anagni site, operations on an evapoconcentration system for the treatment of industrial wastewater, formerly managed as waste, were started
at the end of 2022. With the activation of this treatment, it was possible to reduce the amount of liquid wasteby 65 tons in 2023.
Furthermore, Leonardo adopts an approach aimed at enhancing the circular value of materials and increasingawareness of being part of a circular value chain, also in view of the increasing attention to traceability ofincoming and outgoing materials and due diligence audits covering respect for human rights (including topics
on conflict minerals), recycled and recyclable quantities, and protection of biodiversity at source ordestination sites. In addition to what is required by regulations from managing partners and consortia,
Leonardo is requesting evidence of the supply chain up to the "End of Waste" or the production of "secondary
raw materials" as part of the WEEE 69 project for waste from Urban mining that contains critical raw materials
and conflict minerals in order to further improve waste traceability.

69 For more details on WEEE, please see the paragraph on Circular economy.

135

Report on operations at 31 December 2023
Other projects to manage water resources
Smart Water project– After the initial phase of defining the water balance and setting out priorities for intervention on about 36
sites, the project has planned to start operations at work sites in 2023 to improve efficiency of water withdrawals and to install
new smart meters, aimed at real time monitoring of consumption, the audit of results of the actions taken, and the design ofefficiency improvement actions. The actions implemented in the period from 2022 to 2023, including the installation of about 50
smart meters, have allowed an estimated reduction of about 500,000 cubic meters/year of water supplied compared to 2019.
Water Site Risk Analysis – An innovative methodology has been developed to assess water risk to the business at Leonardo sites
and direct a proper management strategy; it is based on an assessment of risk exposure (dependent on geographical location,
characteristics of manufacturing processes and intensity of use of water resources), and the effectiveness of operational andorganisational measures put in place to guard water resources. The project covered 31 sites that amount to almost 90% of thewater withdrawal volume for the Group.
Water recovery project - At the Grottaglie site, a project has been launched to maximise the recovery of rain and condensate
water from Air Treatment Units (ATUs) through an accumulation basin. The water recovered through a reverse osmosis process
will be used in cooling towers. As a whole, a reduction in water withdrawals by about 25% is expected at the Grottaglie site in 2024
compared to 2019 values.

Soil and air emissions
Leonardo implements various activities to reduce pollutants emitted into the atmosphere through theapplication of new technologies and more efficient abatement systems. These include improving
management systems, eliminating or reducing diffuse and/or fugitive pollution in the atmosphere, andeliminating emission sources. These activities contribute to avoiding or completely eliminating relativeemissions, including NOx, SO2 and VOC emissions. Furthermore, Leonardo is committed to promoting
initiatives aimed at controlling and reducing the use of hazardous substances. Leonardo’s sites where
production processes are carried out, which involve the controlled use of hazardous substances operate inline with specific regulations to manage risks and any potential impact on the environment. The operation ofcontaminated sites and ongoing remediation procedures in the Group, 19 in 2023, is based on an approachof responsibility and sustainability to implement the best technical and operational solutions.
At its various sites in Italy and abroad, Leonardo has implemented processes to improve wastewater quality.
Produced domestic and industrial wastewater is sent to purification and treatment processes before
discharge into public sewers or surface watercourses. Domestic wastewater is sent to biological purificationand treatment processes prior to discharge, while industrial wastewater is treated through chemical andphysical processes, ion-exchange resins, and/or evapo-concentrators. Through these treatments, risks
associated with the quality of water leaving production processes are reduced and the impact of water
emissions on the terrestrial ecosystem and the waterways involved is also reduced 70.

Hazardous substance management
Leonardo, whose business is at the end of the supply chain, is committed to managing chemicals and mixtures
deemed harmful to human health and ecosystems through material procurement and supplier qualification
stages 71. The management of such substances is complex both because of the stringent performance, safety
and certification requirements of its products and because some hazardous substances are not universally
identified as such in materials entering production processes 72. In compliance with the REACH Regulationand the RoHS Directive and as an example of applied Ecodesign, Leonardo targets the reduction of the use

70 For more details, please see the paragraph on Water and waste management above.

71 For more details, please also see the in-depth study on paragraph “Supply chain value”, REACH and chemical substances.
72 Such as, for example, for Per- and Polyfluoroalkyl Substances (PFAS).

136

Report on operations at 31 December 2023of hexavalent chromium in processes for hard coatings of parts with high thermomechanical strength and aneed for corrosion protection in very challenging environments. As part of the working group on Critical Raw
materials 73, Leonardo has activated collaboration with RINA-Centro Sviluppo Materiali, one of the researchand development partners, concerning alternative coating creation techniques, preferring chemical
processes with reduced environmental impact in terms of use of materials and emissions.

Biodiversity protection
Leonardo contributes to the anthropisation of geographical areas and the modification of the natural
ecosystem with its products and production processes and of its supply chain. If "business as usual"
inexorably increases impacts on the natural capital on which one's business depends 74, Leonardo deploys
numerous actions that in some cases produce a reduction in impacts on biodiversity, such as those fordecarbonisation and optimisation of environmental resources 75 while in others they enable biodiversity
gains, as in the case of actions for active restoration and regeneration of ecosystems. The Group conducts a
precise mapping of production sites and their relative distance from protected natural areas in order to assess
any interconnections with ecosystems. In 2023 these sites amounted to 39 (26 in Italy, 6 in the United
Kingdom, 4 in the United States and 3 in the rest of the world). In addition, 26 sites owned in Italy are affected,
within a radius of 3 km, by additional landscape constraints, including archaeological ones (buffer strips, areasof public interest, etc.). The extent in hectares of sites located within 3 km of protected natural areas and/or
areas of high biodiversity is 743 hectares, equal to about 53% of the surface area occupied by Leonardo Groupsites. Among the actions taken to reduce impacts on ecosystems, some can be due to compliancerequirements with environmental regulations while others refer to the specific characteristics of thegeographical area or nature reserve near which the production site is located, including: forest reforestation
with native species (such as at the Cameri site in conjunction with new construction and in Foggia), operationof the runway at the Vergiate airport according to criteria for reducing impacts on flora and fauna,
phytodepuration of wastewater with native plants, and installation of oil/water separators to avoid soil orwater contamination. Furthermore, Leonardo acts as a provider of services and a supplier of products forbiodiversity protection, seizing its business opportunities. Technologies for monitoring and protecting natural
capital are mainly based on satellite monitoring and artificial intelligence. Many of Leonardo’s products are
flexible and multi-objective, enabling applications and services for both security and biodiversity; such as, forexample: SEonSE (Smart Eyes on the SEas), a geospatial platform that provides information related to illegal
activities or other anomalous events, such as oil spills, enabling the preservation of marine resources but also
monitoring the evolution of the marine and coastal environment; natural emergency response and disasterrecovery systems, including the C-27J Fire Fighter aircraft 76 and resilience system for floods and extreme
weather events for the island of Saint Lucia.

73 Within the scope of the Incubator Forum on Circular Economy in European Defence (IFCEED) project of the European Defence

Agency.

74 Such as the availability of water in local aquifers, soil, air thermoregulation, etc..
75 Including a reduction in water supply.

76 For more information, please see the chapter on “Sector results and outlook”, section on Developments in 2023 - Aircraft.

137

Report on operations at 31 December 2023

Other projects to protect biodiversity
Acoustic, electromagnetic and material dispersion impacts – Leonardo assesses and minimises the acoustic and electromagnetic
impacts of products, as well as the dispersion of harmful materials and substances into the environment, including during thetesting phases of products through the application of virtualisation and circular economy practices.
Reforestation and combating deforestation – Leonardo participates in projects to regenerate at-risk habitats of particular
relevance, such as the reforestation project in Malawi within the scope of the “Move Together for the Planet” project 77, in
association with other companies in the sector and with the active involvement and for the benefit of the local agriculturalcommunity. Leonardo, through Telespazio Brasil, also develops artificial intelligence for satellite image processing used for "lawenforcement" against deforestation by regulatory agencies, such as the UN Office on Drugs and Crime (UNODC), and for theEuropean Space Agency (ESA). These tools rely on artificial intelligence algorithms to identify areas of deforestation in therainforest and process massive data acquired from their satellite radars to qualify essential biodiversity variables such as treeheight and foliage quality, even in the presence of cloud cover.
PRISMA – “PRecursore IperSpettrale della Missione Applicativa” (Hyperspectral Precursor of the Application Mission) - Prisma
is the Italian Space Agency's Earth observation mission that embarks a hyperspectral sensor, developed by Leonardo. Since thebeginning of its operations in 2019, the hyperspectral payload, which operates in 240 bands in the visible and infrared spectrum,
acquires data with global coverage, which, when properly processed, can detect spectral signatures of specific materials, soil andvegetation conditions, water status, and many other phenomena, making it possible to monitor the Earth's most at-risk
ecosystems, including, water shortage due to drought, altered biodiversity, fire risk, air pollution, and assessment of damage
caused by natural disasters such as volcanic eruptions, landslides, and floods. PRISMA data, which are accessible to the scientific,
technological and business community, are exploited in numerous research and innovation projects: for example, Leonardo,
through e-GEOS, with national scientific teams and FAO support, leads a European Space Agency project to develop experimental
ElectroOptical analysis techniques for water resource management and food security in Africa, promoting technology transfer withlocal entities and communities.
Copernicus Security– External Action (SEA) service – Leonardo, through e-GEOS, has led SEA since 2017 as the leading companyof an international partnership. Among innovative SEA projects is ARCOS (Arctic Observatory for Copernicus SEA), whose goal isthe development and implementation of an early warning system, for critical, natural or man-made events, in the Arctic, based oncontinuous monitoring of the region. Such a system has become necessary because of the increased accessibility due to melting
glaciers and the consequent emergence of new economic opportunities, such as the opening of new transport routes and accessto natural resources, which has increased the risks to the preservation of the natural environment (as well as to security, given theparticular geopolitical situation in the area).
Satellites in Agriculture – Leonardo, through e-GEOS, in collaboration with the Italian Agricultural Payments Agency (AGEA) has
developed an automated and continuous process that uses data from the European Sentinel satellite constellation, to verify thecorrectness of the agricultural practices required for the payment of subsidies, linked to the market and environmental
sustainability requirements. For this purpose, more than 140 thousand square kilometres of area on the national territory aremonitored each year, making data available to support agri-environmental, forestry and management policies in line with climatechange impact mitigation. In addition, e-Geos develops technology solutions that combine satellite data and ground-based sensors
to provide modular services for monitoring the growth and health status of crops, planning agronomic work, assessing risks, saving
water and fertilizers, and targeted and sustainable use of pesticides, supporting farmers in the optimal management of their plotsof land and institutions in controlling production.

Energy resilience
Leonardo continues its efforts to ensure the energy resilience of both its operations and the power grid in
Italy. Specifically, the Energy Infrastructure Programme has been launched to increase the reliability of power
supply at the production sites, in support of their business continuity. In 2023, work progressed on the
projects concerning the new electrical substation serving the Nola site and infrastructure improvement
initiatives serving La Spezia, Caselle Nord and Caselle Sud. In addition, Leonardo has confirmed its
participation in the Demand Response programme, making 2 MWe of power available to the National
Electricity Grid with the Cameri site. This programme aims to make energy use more efficient on a national
77 For more details, please see the chapter on Employment protection, people wellbeing and engagement.

138

Report on operations at 31 December 2023
scale and provides for energy not absorbed by production activities to be fed into the national electricity gridon demand. The initiative, promoted by the European Commission, encourages the active participation ofend consumers in the electricity system in solving technical problems on the grid, including supporting the
emergency situation related to energy markets.

139Report on operations at 31 December 2023
Energy consumption by source

Energyconsumption
5,311 TJ

Electricity consumption by source
Natural gas

15%

11%
Purchased
electricity

46%

Other sources(including selfgenerated
electricity)

43%

85%

Non-renewable sources

Intensity of energy consumption on revenues: 0.35 (-6%compared to 2022).

Consumption and energy intensity(MJ/€)
0.42

0.41

0.40

0.37

Energy consumption: 5,311 TJ (-2% compared to 2022), of which
37% from renewable sources, of which:

>

0.35

>

2019

2020

2021

2022

>

2023

consumption of electricity acquired: 2,313 TJ, equal to643 GWh (-2% compared to 2022), of which 85% fromrenewable sources;
natural gas consumption: 2,434 TJ, equal to 68.6
million m3 (-6% compared to 2022), mainly used forheating;
Other sources (including self-generated electricity):
564 TJ, -6% compared to 2022.

Scope 1 and Scope 2 CO2e emissions bysourceScope 1 and 2 market based CO2eemissions

CO2e Scope
1 + 2 (MB)emissions
250,770 t

Renewable sources

15%
8%

22%

77%
78%

Scope 1

Energy consumption

Scope 2CO2e emissions Scope 1 and 2 (Market Based): 250,770 t (-9%compared to 2022, of which:

45.39
33.88

28.96

>
27.70

>

2019

2020

2021

2022

Other

Intensity of CO2e emissions Scope 1 and 2 (Location Based) on
revenues: 27.70 (-4% compared to 2022).

Intensity of CO2e Scope 1 e 2 emissions(LB, g/€)
43.55

SF6

2023

140

Scope 1 emissions: 195,682 t of CO2e (-8% compared
to 2022), of which 20,820 t connected with the use ofgas SF6 (-46% compared to 2022);
Scope 2 market based: 55,088 t of CO2e (-14%compared to 2022).

Report on operations at 31 December 2023
Water withdrawals by area

Water withdrawals by source

Water
withdrawals
4,929
megalitres

12%

8%

51%

41%

88%

Water withdrawal from other areas

Wells

Water supply systems

Water withdrawal from water-stressed areas

Rainwater

Intensity of water withdrawals (L/€)
0.43

0.39

Intensity of water withdrawals on revenues: 0.32 (-11%compared to 2022).

0.42

Prelievi idrici: 4,929 megalitres (-7% compared to 2022):

0.36

0.32

>
>
>

2019

2020

2021

2022

2023

Waste by disposal method

Waste produced

Waste
produced
33,065 t

The reduction in withdrawals is mainly due to leakrepair work on distribution lines and theimplementation of recovery and reuse systems;
Reused and recycled water is equal to 390 megalitres(about 8% of total water withdrawals);
Withdrawals from water stressed areas are equal to594 megalitri (+7% compared to 2022).

26%
51%

49%

74%

Non-hazardous waste

Waste recovered

Hazardous waste

Intensity of waste produced on revenues: 2.16 (+6% compared
to 2022).

Intensity of waste produced (g/€)
2.79

2019

Waste produced: 33,065 t (+10% compared to 2022), of which
8,437 hazardous with a reduction of 11.5% compared to 2022.

2.57

2020

2.11

2.04

2021

2022

Waste disposed

2.16

>
>

2023

141

Non hazardous waste: 74% of total amount.
Recovered and/or recycled waste: 49% of total (ofwhich 22% recycled).

Report on operations at 31 December 2023

PROSPERITY INNOVATION SUPPLY CHAIN VALUE CUSTOMER INTIMACY, QUALITY AND SAFETY VALUE FOR COMMUNITIES AND TERRITORIESReport on operations at 31 December 2023
Prosperity is the result of economic and social security that is achieved while respecting people's rights,
collective needs and in harmony with natural resources. Leonardo takes action on the entire value chain tocontribute to long-term prosperity. Technological innovation, mainly in its digital dimension, is among the
key enablers to sustainable development thanks to the resulting impacts and support to the entire researchecosystem. Partnerships, which are targeted at customer satisfaction and supplier resilience, are thefoundation for solid economic growth. Investments in the territory and the promotion of scientific andtechnological culture, generate a positive socio-economic impact on communities and future generations.
Priority topics> Citizens’ security> Solutions’ quality, safety and performance> R&D, innovation and advanced technologies> Sustainable supply chain> Relations with local areas and communities> Digital transformation> Cyber security and data protection

SDGs

Objectives

>
>
>
>
>
>
>

Progress

Target year

Implementing supply chain development programmes and medium/longterm partnerships, focused on SMEs, to improve business sustainability
Raising awareness of/delivering training on SDGs and supporting tools forreporting to more than 80% of key suppliers (over 500 suppliers)
100% of LEAP partners with set targets and plans on green energy, CO2
emission reduction, waste recycling, water consumption
Training in sustainable supply chain issues to at least 500 key suppliers
Inclusion of ESG criteria/requirements in more than 70% of major new tenders
awarded 78
Increasing computing power by 40% per capita
Increasing storage capacity by 40% per capita 79

Objective achieved

On track

2023
2023
2023
2027
2028
2025
2025

New objective

Impact indicators
2.2 billion euros spent for R&S
and product engineering 80

Over 26,000 jobs supported
in the supply chain in the United Kingdom,
in which 2/3 of 2,100 suppliers are SMEs

The new training campus based on virtualisation and lower emissions
With the inauguration of the new campus in Decimomannu in 2023, the International Flight Training School(IFTS), born in 2018 from the strategic collaboration between the Italian Air Force and Leonardo, has
increasingly become the international reference point for advanced training for air force pilots around theworld. The new training and education model also leverages on LVC (Live, Virtual and Constructive)
technology, which enables the creation of an integrated simulation environment and the reduction of actual
flight hours, with lower impacts in terms of fuel consumption and GHG emissions. 81

78 Calculated on tenders valued > 1 M€ managed through Leonardo portal, does not include DRS, the Electronics Division of Leonardo
UK and local purchases on the part of foreign subsidiaries.
79 Calculated as number of flops (Floating Point Operations Per Second) and bytes in relation to employees in Italy. 2020 year baseline.
80 R&D by sector: Helicopters € 562 mln, Electronics Defence and Security €1,255 mln, Aircraft €336 mln, Aerostructures €33 mln.
81 For more details see the following section Customer intimacy, quality and safety.

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Innovation
In order to achieve increasingly challenging objectives that allow continuous improvement of productcompetitiveness, in a perspective of long-term sustainable development, Leonardo has built an integrated
innovation ecosystem to intercept nascent technological innovation oriented towards an efficient crossfertilisation between different business sectors. This ecosystem actively supports the two internal innovationengines: the engineering and R&D areas of the Group's Divisions and Companies and Leonardo Innovation
Labs, which are the central laboratories set up in 2020 with the aim of anticipating technological innovation
by integrating long-term technological research and supporting the Company in introducing emerging andsustainable technology into products and services. Leonardo’s innovation system is powered by key tools
such as: open innovation, with its many channels of listening and discussion to capture new contaminations,contests on new and topical issues, networking with Universities and Research Centres, Innovation
Communities, internal working groups established with the objective of accelerating innovation culture bysharing best practices and skills, and the Intellectual Property (IP) Office for the management andmaintenance of the portfolio of patents and brands. At the end of the year, with the new organisational
structure, Leonardo's innovation vision embarked on a new path, strongly focused on digital technologies as
an essential element of innovation in all areas of Leonardo and across the entire value chain, fromlaboratories to market delivery.
Numbers of innovation
1st place in Italy and2nd place among theEuropean companies
in the A&D sector for
R&D investments 82

Collaborations withmore than 90
universities andresearch centres in
Italy and in the world

Over 150 PhD
scholarships, either
funded or cofunded, currently
active in Italy andthe UK

13,000 people
dedicated to R&D
work

6.6 petaflops ofcomputing power
31.9 petabytes ofstorage capacity

Leonardo Innovation Labs
Leonardo Innovation Labs are the technology incubators conceived to support the Group in long-term
research and development of the most innovative technologies, especially in the digital field, and transversal
competencies across the company's business areas. The laboratories are focused on 8 research areas:
Artificial Intelligence, Deep Digital Technologies (Big Data, High Performance Computing and Cloud), Digital
Twin and Advanced Simulation, Quantum Technologies, Autonomous and Robotic Systems, Electrification,
Materials and Optoelectronics.
11 laboratories in 6 Italianregions and 1 in the USA

150 researchers and PhD
students in the Labs
research group

4 joint laboratories incollaboration withthird-party entities

100 terabytes of data thatcan be used in the data
lakes

These facilities - some set up in collaboration with industrial partners and research centres that are world
leaders in their respective fields of expertise - are built close to Leonardo's main industrial sites with the aimof also facilitating technology transfer to the Divisions. The labs are thus fertilizers for local areas whileallowing Leonardo to centralise the development of frontier technologies. In 2023 a new model of Labs as aservice for the Leonardo Divisions was also introduced, in which the labs work as incubators on basic andpre-industrial research projects agreed and planned with the Divisions. Research activities are carried out by
Labs researchers, in collaboration with research centres and universities through dissertations and PhDs, thus
82 The 2023 EU Industrial R&D Investment Scoreboard | IRI (europa.eu).

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ensuring a real pipeline of researchers from academia to industry. This will make it possible to generate acontinuous flow of talent and to ensure flexibility and renewal in terms of professional competencies, which
will guarantee the ability to design and produce future products and solutions of Leonardo. Central Corporate
function Labs also ensure that all synergies between different research areas and between Leonardo
Divisions can be exploited in full based on an integrated innovation approach. The davinci-1 is at the base ofthis model with its computing and storage capabilities that are exploited by AI, Big Data, HPC and Cloudtechnologies, used by all other research areas.
Technology research areas

DAVINCI-1
The davinci-1 supercomputer, one of the most powerful supercomputers in Aerospace, Defence and Security, is Leonardo’s answer toaccelerate technological transformation towards industry digitisation. The architecture of the davinci-1 High Performance Computing(HPC) is an integrated supercomputing and cloud computing platform, which combines flexibility and computing power, thus allowing
the training of algorithms (from deep learning to Artificial Intelligence), customisation by technology platform and the calculation ofnumerous interactions between the data that are generated (data analysis and big data).
Progress 2023 - In 2023, in continuity with the work performed in 2022, the production model was strengthened, and the on-boarding
was implemented on the system of all Leonardo divisions with HPC computing and Big Data processing needs; work also continued tostrengthen resource usage monitoring, which will allow us to plan utilization and future updates in a better manner. The company Cloud
Computing service delivered by davinci-1 itself has been enhanced, on which several digital transformation services for use by Leonardo
divisions have been released. The set of services delivered is available to Leonardo Innovation Labs researchers and engineers andLeonardo researchers to leverage its computing power and storage space for research, numerical simulation, big data analytics andArtificial Intelligence activities.

ARTIFICIAL INTELLIGENCE
Artificial Intelligence (AI) is an essential technology in many domains and it is important to study it in order to seize new opportunities
to be applied to Leonardo's products and services. This research area is dedicated to the study of new AI models and analysis techniques
to monitor critical infrastructures, through the analysis of data derived from satellites and field sensors (audio, video, IoT), for security
applications, using images, video streams, audio, and for command and control applications based on the integration of data fromadvanced sensors, decision support systems adaptable to various operational environments. A particular research focus is on techniquesand methodologies to make networks and models certifiable and robust.
Progress 2023 – In 2023, techniques were refined and improved for the continuous training of neural networks, developing an
innovative technique applied to Computer Vision. A framework was finalised for the analysis of generic hyper-spectral imagery, andwork was developed on algorithms for the textual analysis of news and documents, weather nowcasting systems, techniques forclassifying drones/birds from radar and micro-Doppler images, anomaly detection, and Machine Unlearning techniques. New Super
Resolution algorithms were developed, applied to the naval sector, to increase the readability of texts and visual details of lowresolution images. An algorithm was developed to discriminate fake images, generated by generative AI systems, and real images, inthe context of the European H2020 ELSA project.

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DEEP DIGITAL TECHNOLOGIESBig Data
Dealing with data to analyse them and extract real information is key to each business. The Bid Data research area works in synergy
with the HPC/Cloud research area to study and investigate into new methods for information extraction and data fusion. In particular,
this research area is dedicated to designing and developing a prototype of a Leonardo framework for Big Data applications, which iscapable of exploiting the computing power of the davinci-1 supercomputer, specialising it for different cases of use, enablingindustrialization such as Flight Condition Recognition.
Progress 2023 – In 2023 innovative Big Data-based services were designed for the Divisions, innovative data management solutions
were implemented and new computationally intensive data-driven models (digital transformation) were enabled. At theimplementation level, data lake infrastructures for the Divisions were improved and upgraded to manage and analyse Leonardo's
product data. The Helicopters Division already has digital services in its catalogue based on leveraging the data lake infrastructure built
within davinci-1's cloud infrastructure.
High Performance Computing and CloudThis research area aims to support the Company in the process of innovation by directing it towards the adoption of cutting-edge digitaltechnologies, which are capable of exploiting the power of High Performance Computing (HPC) and the Cloud. In particular, this researcharea is dedicated to: deploying and running applications used for the design of Leonardo products; optimising applications to maximise
the exploitation of the HPC infrastructure, supporting code modernisation and porting of proprietary applications in a distributed
environment, implementing a Cloud solution for the Company and its customers adopting IaaS, PaaS and SaaS (National Cloud, Military& Space Cloud) paradigms.
Progress 2023 - In 2023 an HPC service for the collaborative digital design of future platforms was successfully tested and validated,which involved various Italian companies. Work also continued on the porting of both code and application divisions to HPC. In addition,
the portfolio of cloud services was expanded to enable the use of HPC infrastructure through standardised functionalities, virtualising
the hardware. These activities made it possible to proceed with a strong acceleration in the development of digital services for thedivisions.

Digital twin\Advanced Simulation
Leonardo is studying how to realise a digital copy of a product, a system or an industrial process that models its behaviour, thus allowing
an increase in safety, efficiency and sustainability (through a lower use of materials and energy), and a reduction in development costs.
The digital twin therefore offers new opportunities in the AD&S sector and applications that benefit the company, in areas such as
global monitoring, healthcare, smart cities, multimodal logistics.
Progress 2023 - During the year, work was intensified, in particular, on the development of digital twin capabilities such as multi-physics
and multi-scale simulation and the data-driven approach for surrogate models. With regard to the high-fidelity simulation stream,
several use cases were instantiated for fixed-wing and rotary-wing platforms and synthetic databases were created in three different
cases, integrating the data produced with the divisional data lake provided by the in-house private cloud on davinci-1.

Materials
Materials research area focuses on studying new materials and processes for applications on products, especially in the avionics field.
Progress 2023 – In 2023 various nanostructured graphene films with variable emissivity were investigated for adaptive IR camouflage
applications. Graphene-based films are also being developed for EMI shielding, and thermal and electrical management (Lightning StrikeProtection). In addition to graphene, new ceramic-based solutions were investigated to improve ballistic protection, developing new
multifunctional high-temperature coatings and erosion barriers. Other activities involved the development and validation of a new typeof joint to replace riveting in aircraft. The use of engineering polymers was also investigated for FDM additive manufacturing. Recently,
work commenced on a new line of research on innovative PV devices for space applications, with a specific focus on perovskite solar
cells. On the simulation side, a monitoring method was developed to identify delamination in laminates, bird strike simulation andballistic impact.

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Unmanned & Robotics
The U&R research area studies autonomous systems, both airborne and ground-based, based on intelligent and collaborative robots.
Researchers study advanced human-machine interaction technologies for specific missions, production tasks, operations in extreme
environments, maintenance and in the future even in the space environment. Special attention is given to research into new solutions
for robotic hardware development, manipulation control, mobility and locomotion, navigation, motion planning and interaction and AI
solutions for robots.
Progress 2023 – In 2023 work continued on the development and improvement of the Unmanned platforms developed in 2022 in orderto adapt them for experimentation and demonstration of quadruped robot and outdoor autonomous flight capabilities. At the sametime, advanced multi-modal sensing techniques were developed for flying platforms in synthetic environments and robotic perception
solutions to artifact mapping and multi-object tracking problems. In addition, a sorting system based on object recognition with cameras
and robotic arm was designed and installed. Work continued on the control of single and multiple mobile/fixed robots for industrial
environments, as well as on studies on AI-based identification and visual tracking of target objects and the development of autonomous
mapping and navigation for ground robots in non-structured environments. Finally, the researchers continued their work on Mission
Management Replanning for Manned Unmanned Teaming (MUM-T) and explored topics related to Adjustable Autonomy andestimation of pilots’ cognitive load.

Quantum Technologies
The research area studies quantum technologies to apply them to different areas such as secure quantum communication, quantum
sensing, inertial navigation sensors, and quantum computing with special focus on the study of algorithms, which by exploiting quantum
computers are able to demonstrate real computational advantage.
Progress 2023 – In 2023 work was completed on the installation of a QKD (Quantum Key Distribution) network in the Naples area, which
involved Leonardo’s Pomigliano site and other nodes of local and national institutions, and the setup for a system for viewing aroundcorners and behind obstacles (NLOS – Non-line-of-sight) integrated with a 3D LIDAR system for viewing through obscurants (fog, smoke,
dust, etc.) in a single module, and the design of a cold-atom clock design; work was then implemented on quantum algorithms for
tracking radar targets based on Multiple Hypothesis Tracker.

Optoelectronics
The research area studies optoelectronics, with a focus on advanced electromechanical systems for optical applications, neuromorphic
electro-optical vision, and meta-lenses for electro-optical systems.
Progress 2023 – In 2023 work was completed on the manufacture of a replacement metal lens of an optical unit within one of the legacy
products, having also identified, for this purpose, an Italian foundry to replace the French one previously operating.
Electrification
The electrification research area is focused on the study of new propulsion systems for the next-generation aircraft of the future. Study
activities focus on electric power management (distribution, conditioning, control and storage) and electric machines. Technology
modules are analysed in relation to energy storage (e.g., batteries, supercaps, fuel cells, H2, etc.), electrical distribution, power
management control, propulsion architectures and "out of the box" aircraft configurations enabled by electrification itself. The work
focused on electricity systems, both in merely architectural terms and in terms of power and energy management. This is because theelectrical system in avionics must meet the functional and performance requirements of on-board systems while ensuring safety andoperational reliability.
Progress 2023 – All existing solutions were examined to identify if and how state-of-the-art electrical networks (More Electric Vehicles(MEA)) can be adapted for MW-class electrical systems. Models and algorithms were developed for energy distribution systemmanagement and modelling at the “component level”, for 1) electrochemical energy storage, 2) hydrogen production, storage andhandling, 3) fuel cells/batteries, 4) electrical machines and drives. For each of the listed components/enablers, research has been
directed towards improving a number of key performance indices, including (but not limited to) power and energy density, safety andreliability, efficiency, and aircraft integration.

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Intellectual property governanceIn 2023 centralised Governance policies were implemented for Intellectual Property (IP) to promote thegrowth and sustainable management of IPRs portfolios, the Group’s competitive positioning, protection in
the dissemination of technical and scientific information, support for the protection and industrial
exploitation of results achieved in R&D work on the part of the researchers of Leonardo and of Leonardo
Innovation Labs. In 2023 work continued on updating and promoting the proprietary (online) Patent
Showcase. The patent offering is also geared toward dual use in technologies in sectors surrounding
Aerospace, Defence and Security, in support of the development of small- and medium-sized enterprises(SMEs) and start-ups of strategic interest. Work also continued on the Patent Showcase dedicated to
Mechatronics managed in collaboration with the technological hub of MESAP. The Intellectual Property
function regularly examines the company's patent portfolio for optimisation and assesses the degree of
utilisation of patents and the economic performance of generation, use, management and disposal of IPR
assets, as well as developments in the patent activity of competitors.
This approach to IP management activities required new editions of IP training, through webinars and inperson workshops, in order to create a corporate IP culture and strategy. Furthermore, in 2023 LIPM3 was
implemented, which is a dedicated IP maturity model for continuous monitoring of the status of IP
management and related improvement actions taken.
It should be noted that on 1 March 2023, the European Commission adopted a recommendation(Recommendation (EU) 2023/499 on a Code of Practice on the management of intellectual assets) for IP
management, addressed to all categories of players involved in research and innovation. Many of Leonardo's
processes, methodologies and initiatives respond to the instructions of the aforesaid recommendation.
Patents by key technology

Patent by sector

AeronauticalManufacturing
Processes&Materials
Automation
18%

17%

21%

8%
13%
4% 7%

3%

Electronics

Comms/Cyber/HS
3%

9%

3%

DefenceSystems

Aerostructures25%
46%

FixedWing

Aircrafts

Optronics
RotaryWing

20%

Cyber Security

OthersSurveillance&Targeting

Helicopters

3%

Automation

Funding programs for research and innovation
Leonardo participates in regional, national and supranational research and innovation funding projects andprogrammes, both military and civil, including major European programmes such as European Defence Fund
(EDF), European Defence Agency (EDA) Programmes, Horizon Europe, National Recovery and Resilience Plan
(NRRP) and National Military Research Plan (NMRP). Leonardo also takes part in strategic initiatives in
National and Regional Technology Clusters, in particular with the chairmanship of the National Cluster for
Aerospace Technology.
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Financed projects framework
1%

1%
2%

mil - EDF

9%

mil - EDA
mil - PNRM
civ - Horizon EU

87%

civ - PNRR

Military programmes
The European military research and development programme, with its 2021-2027 long-term programme andsignificant budget for research work (€bil. 2.6) and capacitive-demonstrative development (€bil. 5.3), is thereference programme for the growth of the EU's resilience and strategic autonomy, the reduction of technologicaldependence on third countries and the creation of an industrial and technological base for a strong, competitiveand innovative European Defence. Leonardo plays a leading role in EDF, as witnessed by the high success rateachieved in the 21st and 22nd editions. The programme allows Leonardo to address priority research anddevelopment issues, supporting the product development phases.

EDF

Projects awarded in 2023 – In 2023 Leonardo has been awarded 18 projects by the European Commission, themost significant of which include TIRESYAS, coordinated by Leonardo, for the study of a new family of multidomain sensors based on artificial intelligence, within which new approaches for radar surveillance and target
tracking will be developed through innovative algorithms capable of combining various radar architectures anddeveloping new multi-functional / multi-domain / multi-platform fully-digital radar systems.
Projects with execution launched in 2023 - In 2023 work commenced on the execution phase of several projects
awarded in the past (2021). Among the most significant on the topics of the digitisation and transformation of
defence systems by using new computational and software technologies are the development of cloudtechnologies in the multi-domain field of E-DOCC (European Defence Operational Collaborative Cloud), and thedigital twin in the naval domain (EDINAF, European Digital Naval Foundation), as well as artificial intelligence
topics (FARADAI, Frugal and Robust AI for Defence Advanced Intelligence). The ADEQUADE (Advanced, Disruptiveand Emerging QUAntum technologies for DEfense) Project on Quantum technologies needs to be highlighted in
the area of Disruptive Technologies.
In 2023, work continued on the collaboration with the 5th Department of Segredifesa (Italian Defence Secretariat
General) on the National Military Research Plan (NMRP), which involved:

NMRP

>
>

the awarding of the NMRP SEAFENCE project for the protection of critical maritime infrastructure,strengthening its role in the underwater sector;
the presentation of 4 projects in the areas of sustainability, space and multi-domain situationalawareness.

Projects awarded in 2023 – At European level, Leonardo entered into a contract with EDA concerning a projecton new ISR (Intelligence Surveillance and Reconnaissance) Electro-optical Systems.
EDA

NATO

Projects in the definition phase – 4 additional projects are in an advanced state of definition on space (opticaltechnologies, including hyperspectral ones and SAR), advanced data processing and Space Domain Awareness, on
new lightweight and impact-resistant materials for military applications, and the development of thin towedarrays.
At NATO level, Leonardo participates in 10 NIAG (NATO Industrial Advisory Group) strategic direction studies: aircombat/defence, counter-missiles, materials, climate change, maritime-defence, Data Centric Security / Zero
Trust Architecture, Modelling & Simulation.

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Civil programmes

Horizon Europe

Clean Aviation

NRRP

KDT/Chips JU

Sesar

EUROHPC JU

Horizon Europe is a European programme for funding of research and innovation
Projects awarded in 2023 - Leonardo was awarded projects in a number of fields in 2023 such as: spacetechnologies, the reduction of environmental impact to combat climate change, the technologies for a newgeneration of more efficient and environmentally friendly regional helicopters and aircraft, on-board electronics
in all areas of maritime, land, avionics and space transport, digitalisation, air traffic management infrastructures,
eco-design of electronic components and new environmentally sustainable materials.
Projects with execution launched in 2023 – In 2023 work commenced on the CONNECTOR project, in the field ofSecurity, which develops Data Structures and AI Algorithms to improve maritime border surveillance.
Clean Aviation is the institutional partnership, which, within the European framework Horizon Europe
programme, is focused on technological objectives for the green transformation of civil aviation, such as electricand hydrogen propulsion. Leonardo participates in the programme with a specific focus on fixed-wing aircraft in
the regional aircraft segment.
Projects awarded in 2023 - Leonardo was awarded two projects: HERFUSE, which will study the innovativefuselage and tail design of a regional hybrid-electric aircraft, and ODP4HERA, which will develop a digital platformto accelerate design and production of aircraft.
Projects with execution launched in 2023 – 7 projects were launched, which were aimed at designing the regional
hybrid-electric aircraft.
With regard to the National Recovery and Resilience Plan, Leonardo has participated in several projects with theaim of maximising and enhancing collaboration and technology transfer from academia to industry, leveraging
not only research programmes, but also funding grants for PhDs and research fellows. Leonardo is committed todeveloping skills, directing training activities in line with the needs of the Group's engineering and researchfacilities, especially on the most innovative and disruptive technologies, and strengthening the relationship andcollaboration with supply chains and ecosystems (SMEs, start-ups, clusters, etc.). Leonardo is involved in 2 of thefive National Research Centres: MOST (Sustainable Mobility) and ICSC (HPC, Big Data and Quantum Computing);
two innovation ecosystems (Rome Technopole and RAISE) and six extended innovation partnerships (Future
Artificial Intelligence Research - FAIR, National Quantum Science and Technology Institute - NQSTI, Security andRights in the Cyber Space - SERICS, 3A-ITALY, RESTART and SPACE-IT Up in the process of being established).
Projects awarded in 2023 - Leonardo was awarded two projects under the 2023 call for tenders issued by the
BiRex Competence Center: SEED, focused on green computing technology solutions to reduce the energy
consumption of data centers with high computing power, and MAM4HP, aimed at designing the most efficient
Metal Additive Manufacturing technologies based on real industrial use cases.
The institutional partnership focused on the development of electronic components and systems, including big
data, cloud, software and AI applications for embedded systems, Industry 4.0 and safety & security evolved into
the Chips JU at the end of 2023. Leonardo is a founding member of one of the 3 associations that make up the JU.
Projects awarded in 2023 - Leonardo was awarded the MATISSE project concerning the digital twin for robotics
In Orbit Servicing.
Projects with execution launched in 2023 – Work commenced on the execution phase of the ISOLDE project tosupport the research and design of the future family of processors and chips for a European RISC-V Open Sourcearchitecture ecosystem, enhancing Leonardo's expertise on High Performance Computing and Applied AI, and of
the EECONE and AfPVN projects, both in the avionics field with strong eco-sustainability and digitisation features;the former is oriented to innovative fixed-wing structures both in terms of materials and embedded electronics
to increase their lifespan and simplify their recyclability while the latter is carried out in the field of predictive
maintenance for electronics and on-board components, respectively.
Sesar is the digitisation and modernisation programme of the European ATM system and contributes to thecontainment of emissions and noise through specific flight procedures and paths.
Projects with execution launched in 2023 – Work commenced on 10 projects on the digitisation of the European
infrastructure for air traffic control.
EuroHPC Joint Undertaking (EUROHPC JU) is the institutional partnership created with the goal of establishing a
global European supercomputing ecosystem. EuroHPC aims to develop a federated, secure and hyperconnectedecosystem of supercomputing, quantum computing, data services and infrastructure by supporting thedevelopment of key technologies and competencies at the academic research and industrial development levels.
In line with the goals of technological autonomy and sovereignty addressed by European policies such as EU CHIPSACT and Digital Compass, Leonardo was confirmed again in 2023 as one of the key players in projects focused on
the study and design of future European technology CPUs and GPUs, which are co-funded by the EUROHPC Joint
Undertaking.

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Open innovation & multi-contest
During 2023, Leonardo continued to pursue the Open Innovation model, enhancing the expertise within theGroup and leveraging openness with third-party entities to ensure its competitiveness and ability to design
and manufacture future products and solutions and to be able to respond to technological, environmental
and social challenges. Cooperation with third-party entities allows for the integration of additional
capabilities and additional input that enriches Leonardo's overall vision and provides access to technology
and talent in the field of STEM disciplines.
In 2023 work continued on the several initiatives launched in previous years, involving third-party players incollaboration agreements with Customers, Universities, Research Centres, Spin-offs and Start-ups looking for
new technological trends. These include well-established projects such as the Innovation Award, now in its
17th edition, the AIrcraft Factory with the launch of a dedicated Artificial Intelligence theme project, direct
collaboration with Start-Ups and Spin-Offs, and scouting for solutions to innovation questions through the
proprietary "Solvers Wanted" platform. Leonardo has also pursued collaboration with third-party Innovation
ecosystems such as “Open Italy”, for the launch and management of various co-innovation projects with
Start-ups, and participates in ecosystems for dissemination of best innovation practices such as the Digital
Observatories of PoliMI (Polytechnic University of Milan) (Startup Thinking), the Innovation Roundtable and
BDR – Borsa Della Ricerca. Finally, Leonardo pays attention to the world of Start-ups as elements ofinnovation on certain technologies and participates in the Deal Flow of several Accelerators, including thosepromoted by CDP (Cassa Depositi e Prestiti) and ESA, and has concluded the second in-house accelerator
program of the Business Innovation Factory (BIF).
In addition, intensive training activities on Innovation issues were carried out through a Mentorship course
for a company community, a course on Open Innovation delivered together with LUISS and dedicated to thecompany's Innovation Focal Point community; finally, business modelling activities were also carried out withvarious company units to review the business from an innovation perspective.

Network with universities and research centres
Leonardo considers relations with Universities and Research Centers as of strategic importance andmaintains a mapping of more than 90 universities and research centres in Italy and worldwide, including
through indicators from third-party sources 83. This mapping makes it possible to identify the entities withwhich to enter into framework agreements and select partner Universities with which to enter into direct
collaboration agreements and to grant PhD scholarships for Leonardo Innovation Labs and Divisions. In 2023,
a framework agreement was entered into with the Federico II University of Naples, which must be added tothe pre-existing framework agreements with Alma Mater Studiorum University of Bologna, the Polytechnic
Universities of Milan and Turin, the Rome La Sapienza University, the University of Genoa, and CINI, CINECA
and CNIT. During 2023, Leonardo profitably continued partnerships with Imperial College London andUniversité du Québec en Outaouais (Canada), forming the basis for future high-level scientific andtechnological collaborations with qualified international partners (the universities and their innovation
ecosystems), the development of which is planned for 2024. With regards to PhD scholarships, Leonardo
awarded 32 grants with 17 different Italian universities in Italy in 2023, on topics such as Materials, Artificial
Intelligence, Robotics and Digital Technologies. The total number of PhD scholarships that are currently in

83 Among the third-party sources used: ranking of “Top 2% Scientists Worldwide” of Stanford University, other indicators such as Hindex, the conditions of “ERC Grant Recipient” or of “IEEE Fellow”, the list of 180 excellence departments of ANVUR for departments.

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place, funded or co-funded by Leonardo, exceeds 150 units, carried out in collaboration with 16 different
universities in the United Kingdom and 30 Italian universities.

STARTUP EQUITY ENGAGEMENTACCELERATORSEngineering / Operation /Manufacturing

BUSINESSINNOVATIONFACTORY

EXTERNAL SCOUTING

Low TRL Tech
TalentField of Application

Business
Financial Return

Leonardo’s open innovation model

INTERNALCONTESTSSOLVERS WANTED

Universities & Research Centers

Startup & SME

Internal Resources

Innovators Target
Contest, Challenges& Hackathons

Tech & Startup Scouting

Accelerators

M&A & Equity

Contests and Hackathon
Drone contest - The project, which has reached the beginning of its second cycle, entails a contest among different Italian
universities in order to make autonomous drone systems using artificial intelligence. This new 3-year cycle involved the following
universities: Turin Polytechnic, Milan Polytechnic and the Universities Alma Mater Studiorum in Bologna, S. Anna in Pisa, Tor
Vergata in Rome and Federico II in Naples, to which must be added the Polytechnic University of Bari.
World T TeC –In January 2023, during the 15th European Space Conference in Brussels, winners were awarded in the fourth editionof the #T-TeC - Telespazio Technology Contest, Telespazio and Leonardo's Open Innovation competition reserved for university
students and researchers in STEM subjects from around the world. This year, the winner of the Contest had the opportunity toform a Start-Up and participate in Leonardo's BIF Corporate Accelerator programme.
Solvers Wanted - Through the scouting platform, Leonardo offers challenges, technological contests and new ways of collaboration
to the sector of start-ups, universities, spin-offs, SMEs and research entities to find ideas and innovators, together with whom toface current and future challenges. Ten challenges were completed - 1 on Pilot performance Monitoring, 2 on quantum
technologies, 2 on 5G, 1 on structural batteries and 1 on Brain Computer Interface, 1 on Exploit My Patent – HPRD patent, 1 on
new prospects for green Radar and 1 on Bio-inspired sensors technology - during the three-year period from 2021 to 2023. In
addition, a technology network for the future aircraft, F2Link-Future Flight Leonardo Innovation Network, has been established,
involving more than 20 universities, start-ups, SMEs and large companies.

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External scoutingThis work allows the realisation of Proof of Concept (PoC) in collaboration with start-ups. Below are some examples:

>

>

>
>

Smart document digitisation – Start-up Altilia will enable Leonardo to address the need to automate the document
extraction and classification process in the field of Procurement. By using a platform based on artificial intelligence, rapid
classification of various types of documents and extrapolation of useful data to accelerate decisions and operations
became possible.
A fast and functional factory Digital Twin – By using a Digital Twin tool provided by start-up Utwin, Leonardo is enabled
to test innovative solutions to increase efficiency, such as optimising picking operations, checking product availability,and decreasing goods handling time. The ability to examine warehouse scenarios in virtual reality is essential, allowing
optimal strategic choices to be evaluated.
Evaluation of solid-state supercap technology - In collaboration with start-up NOVAC, it has been possible to test andevaluate a hybrid battery and supercap energy pack in the context of drones. NOVAC's solution is highly innovative, since
it involves the use of solid-state supercaps that can be adapted to the structure of the object.
Real-time monitoring of Aircraft hydraulic systems - In collaboration with start-up Sanchip, which makes sensors formonitoring oil health, a test bench has been realised, which allows a portion of the C27J aircraft's hydraulic system to be
simulated. This prototype allows some maintenance tasks to be alleviated and abnormal drifts to be detected in realtime.

Accelerators
In 2023 Leonardo confirmed membership as a partner in various Acceleration and Technology Transfer programmes:

>

>

>

Takeoff – This programme carries out acceleration services for start-ups that develop solutions and services in theaerospace and advanced hardware sectors. Leonardo, as Corporate Partner, had the opportunity to follow the deal flow
and dedicate some mentors for the start-ups selected for acceleration. The Takeoff programme has also been selected
for DIANA (NATO Defence Innovation Accelerator for the North Atlantic) and further enhances the competitiveness ofthe national aeronautics and aerospace system, even with a view to defence.
RoboIT – This initiative concerns a tool of Technology Transfer of Robotics in Italy, which is realised by CDP incollaboration with the Italian Institute of Technology (IIT) of Genoa while also involving the University of Naples Federico
II, University of Verona, and Scuola Superiore Sant'Anna of Pisa. Leonardo, as partner, had the opportunity to follow thedeal flow of selected projects and to connect the Leonardo Innovation Labs for robotics with each other to allow a
discussion on research initiatives.
Business Incubator Centre – The ESA BIC (European Space Agency Business Incubator Centre), based in Turin, supports
new Italian start-ups in the aerospace sector. The Polytechnic University, Incubator I3P and Fondazione LINKS are
responsible, on behalf of ESA, for the implementation and operation of the incubator. Leonardo and Telespazio, together
with other affiliated partners such as the Piedmont Aerospace District, Thales Alenia Space Italy, Avio and numerous
innovative industrial companies, have the opportunity to view the deal flow of supported projects, offering mentorships
with selected and properly trained colleagues.

Business Innovation Factory
The year 2023 saw the second edition of Leonardo Corporate Accelerator - Business Innovation Factory -, which aims to scout for
new products and technologies in Leonardo's areas of interest, as well as to accelerate new start-ups in the relevant industry inorder to attract and generate value in Italy. This year's scouting focused on two main technology themes: Networking &CyberSecurity and Simulation & Gamification. The call received more than 150 applications at an international level, and theacceleration programme was dedicated to the best 7 start-ups, the winner of Telespazio's #T-TeC challenge and two Leonardo
company projects in line with the strategic guidelines. The acceleration programme in this edition lasted 6 months with the direct
involvement of Leonardo Mentors and saw the implementation of a PoC between the start-ups and divisions, which brought tolight the integration of the innovation proposed by the start-ups with systems, products, services and solutions of Leonardo.

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Company contests
Innovation Award – The year 2023 saw the 17th edition of the Innovation Award reserved for all Leonardo employees who had
the opportunity to share ideas and solutions in line with company strategic guidelines, for a total of 800 proposals collected. The
Award was divided into several categories related to: Best Patent, Product & Technology Innovation, Idea, People First, Innovation
Factory and Innovative Supplier Collaboration. Colleagues were asked to highlight the sustainability of each initiative in line with
the Group's objectives, bringing out more than 200 solutions with impacts on this issue. Group Management also selected 3
proposals from the Idea category which were funded with a view to the realisation of the Proof of Concept.
New AIrcraft Factory challenge – A new challenge was implemented, which involved staff members from the Aircraft division on
topics related to Artificial Intelligence. The format included an initial phase of disseminating AI issues to the entire population of
the division, leveraging the expertise of company and third-party experts, a phase of collecting ideas from all colleagues in thedivision, a phase of selecting the best ideas, an in-person day according to the format of a hackathon for formalising and enhancing
any ideas previously collected, thus going to create valuable synergies between similar solutions, and the final phase of creating apitch deck and a video to be submitted to the evaluation committee composed of Top Management staff members from theDivision.

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Supply chain value
Leonardo’s supply chain is made up of 12,000 84 companies around the world, which provide goods andservices to all the entities of the Group and contribute on a daily basis to the competitiveness of the business,ensuring compliance with quality and safety requirements in the supplies and actively collaborating in the
management of contracts and open innovation processes. It is a supply chain that includes both international
players in the sector of AD&S, which supply highly complex systems and subsystems integrated into Leonardo
platforms and many small and medium-sized enterprises (SMEs), the technological specialisation of which
contributes to the creation and success of our products. Leonardo's considerable industrial footprint in its
domestic markets has in fact enabled the development of local supply chains with a high intensity ofknowledge and innovation, which are a key asset for the relevant local areas in terms of economic andemployment impact and even more so for the quality of the skills developed and the technological content
of the products and services we create. This is where most of the Group's purchases are concentrated andLeonardo acts as a driver to the growth of the chain, through the creation of partnerships and theimplementation of development programmes.
The supply chain in 2023
Purchase by country

Purchase by category

Italy

42%
58%

46%

Goods
Services

6%

23%

12%

13%

United Statesof America
UnitedKingdomRest of Europe
Rest of theworld€bil. 9.9

65%

84%

of purchases of goods andservices

incidence of purchases onrevenuesof purchases related to domestic markets,with a supply chain of more of 6,800 SMEs

Local supply chains – Incidence of National SMEs in domestic countries 85

86%

78%

59%

82%

84 Including 542 significant tier-1 suppliers, representing 58% of the total spent. Significant non-tier-1 suppliers, instead, amounts to50.

85 Calculated as the number of SMEs out of total suppliers by country.

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Supplier relations are managed by a professional family of over 1,700 Procurement & Supply Chain
professionals worldwide committed to create a quality, innovative, integrated, resilient and sustainablesupply chain 86. This objective relies on four key pillars within which projects, initiatives and concrete tools
are developed to support our Group's growth, building a sustainable partnership with the excellences in the
supply chain, while optimising costs and creating value, in compliance with Leonardo's security andcompliance standards.
4 Pillars of Leonardo’s procurement and supply chain strategy
Sustainable growth

Efficiency andvalue creation

Delivery / Excellenceof processes

Security & CompliancePartnerships and supplier development programmes
An essential prerequisite to achieve the growth envisaged in the Industrial Plan, is the excellence of the
supply chain, which must be able not only to ensure adequate operational performance, but also to be able
to cope with the new complex challenges posed by the market, which require financial strength, expertiseand rapid adaptation response. With this in mind, in 2018 Leonardo launched a programme for thedevelopment and growth of its suppliers - LEAP (Leonardo Empowering Advanced Partnership) with the aimof accelerating and supporting the growth of SMEs in the AD&S supply chain, making them more financiallystrong, able to invest and work on higher value-added projects and ready to compete on an international
scale. LEAP has marked a paradigm shift in relations with suppliers, moving beyond a management model
based merely on business relationships and cost reduction, with a view to establishing effective collaborative
engagement, medium- to long-term partnerships, capable of fostering investment and accompanying the
growth of the supply chain's excellences in terms of both service quality and size. In 2021, the programme
incorporated innovation and sustainability objectives into the supply chain development plan, raising the
supply chain's ambitions toward digital transformation, cyber security and green transition.
An improvement plan has then been prepared for each supplier, which makes use of the development
projects put in place by Leonardo, even in collaboration with third-party stakeholders, including: themanagerial training and mentoring Elite-Leonardo Lounge programme for entrepreneurs, developed with
the Italian Stock Exchange’s Elite scheme to improve managerial expertise and capabilities, strategic vision,internationalisation and sustainability of enterprises; the package of financial support tools for the supply
chain, developed with the Group's main banking partners; technical/specialist and managerial training
courses, provided free of charge to suppliers; assessments on digital maturity and cyber security to develop
Industry 4.0 projects, carried out in partnership with the Confindustria DIH network; workshops on sharing
the technology roadmap and the creation of an open innovation network to improve the ability to innovate;
the provision of shared services delivered by Leonardo (such as regarding raw materials and transport) anda performance appraisal model.

86 Specifically, the Chief Procurement Services & Operations has the responsibility to define and coordinate the development
strategies of all the organizational dimensions related to the Procurement and the Supply Chain (also including: the consolidationand continuous improvement of the integrated value chain, the increase of digitalization, the definition of management guidelines
and the evolution of the Group’s Register of Suppliers and Black List).

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LEAP – Supply chain development projects

MANAGERIAL TRAINING AND MENTORING FOR ENTREPRENEURS

In partnership with Elite
Borsa Italiana

FACTORING AND FINANCIAL SUPPORT TO THE SUPPLY CHAIN

With the Group’s mainbanking partners …

Capability
Building

Access to
FundingInnovation

TECHNICAL/SPECIALIST TRAINING – LEONARDO TECH. TRAINING

With the use of
Fondimpresa funds

DIGITAL-CYBERSECURITY ASSESSMENT & DIGITAL ROADMAPWith support from
Confindustria DIHs

DEVELOPMENT OF CAPACITY TO INNOVATE/OPEN INNOVATIONWith innovation
ecosystem, university andstart-ups

SHARED SERVICES PROVIDED BY LEONARDO (RAW MATERIALS, TRANSPORT, …)360° ASSESSMENT AND CONTINUOUS IMPROVEMENT PLAN (LEADS)With third-party partners
and Group companies
With support from third
parties / best practices

In 2023, as further evidence of the relevance of the LEAP program to the management of relations with
suppliers and its significant contribution to the community, Leonardo won the Best Supplier RelationshipManagement Initiative award, given by CIPS as part of the CIPS EXCELLENCE IN PROCUREMENT AWARDS 87.

206 suppliers involved indevelopment programs of
the supply chain in Italy
and the United Kingdom,of which more than 130
with LEAP (+25% vs. 2022)

Sustainability Assessment –1,100 suppliers 88, equal tomore than 50% of new orders
placed by Leonardo, both
Italian and foreign, subject to athorough sustainability
assessment within the past 3
yearsBest Supplier RelationshipManagement Initiative
2023 - LEAP word an award
within CIPS EXCELLENCE IN
PROCUREMENT AWARDS
2023

Leonardo relies on a supplier evaluation model named LEADS (Leonardo Assessment and Development for
Sustainability), with the aim of better understanding the performance and potential of its key suppliers, withspecific regard to sustainability and development issues and risks, by monitoring 3 axes: 1) performance,from the perspective of quality, punctuality and costs, 2) technical and operational capabilities and asset
availability, 3) sustainability, from the perspective of managerial and innovation capabilities, compliance with
ESG principles and compliance and risk management practices. With reference to the ESG Sustainability axisof the LEADS model, as from 2021 Leonardo evaluated more than 800 key suppliers, with 200 KPIs, identifying
strengths and areas for improvement in the supply chain regarding issues such as innovation capacity, STEM
and managerial skills, circularity, and reduction of environmental impacts. Based on the results of this87 CIPS (Chartered Institute of Procurement & Supply) is the leading global professional body promoting best procurement and supply
chain management practices worldwide with 64,000 members in 180 countries. For more details on the award, please see thefollowing link.
88 Include the 800 suppliers assessed through the LEADS model and more than 300 suppliers assessed through EcoVadis or otherplatforms.

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process, Leonardo then prepared and promoted the "Manifesto for Supply Chain Sustainability", to support
and accelerate the transformation of its supply chain. Among the 800 key suppliers analysed on the ESG
Sustainability component, 55 were included in a continuous improvement plan, which also includes othertwo LEADS assessment axes (Operational Performance; Technical Skills and Industrial Capabilities) and whose
progress is monitored by a multifunctional and multidivisional team on a quarterly basis. One year after the
first measurement, the results of the second sustainability assessment showed significant improvements inall areas of analysis, with an increase in the level of maturity of the supply chain on ESG issues and a
concurrent reduction in the reported risks while enhancing Leonardo's commitment to the LEAP
development programme.
>80% of the orderedvolume managed
through digitalcollaboration platforms.

About 650 suppliers
received training on SDGs
and tools for reporting(+93% compared to 2022).

Sustainability target wasachieved and exceeded(>75% in 2023).

Sustainability target wasachieved and exceeded(>500 in 2023).

100% of LEAP partners withtargets and plans to reduce
environmental impact(+60% compared to 2022).
Sustainability target wasachieved (100% in 2023).

Leonardo Sustainable Supply Chain Manifesto
Based on the results of the first LEADS assessment on supplier sustainability, Leonardo has published the Sustainable Supply Chain
Manifesto, which addresses three main themes, strongly in line with Italy's development guidelines: Digital Transformation, Cyber
Security, People & Planet. These priorities, which are structured into 18 concrete projects, with progressive and measurable
milestones, intend to support and accelerate the transformation of Leonardo’s supply chain that is largely made up of SMEs,
helping supplier companies to direct their efforts and investments to compete in international markets. The Manifesto waspresented during the digital event Leonardo for a Sustainable Supply Chain, an occasion on which the Company, with theparticipation of top management and leading market players, also illustrated the challenges and opportunities for the Italian AD&S
supply chain and shared the expectations and development guidelines to support an increasingly competitive, integrated,innovative and sustainable business ecosystem.

• Collaborative development using digital twin products• Production and maintenance supported by advanced technologicaltools• Collaboration on the AirSupply platform• Quality management with new technologies for defect prevention,
detection and analysis• Logistics and Transportation – Smart inventory, tracking systems(RFID, blockchain)• Big Data Analytics – Data generation and analysis to improve datadriven processes, products and services

Digital Transformation

Increase digital collaboration along the
supply chain, leveraging on the newtechnologies in order to speed up thedevelopment of new products, improve
the synchronisation of operations andthe offer of services to customers

•
•
•
•
•

Asset survey with automatic discovery tools
User terminals with security guarantee
Cyber security organisation and employee training
Policies and procedures for a digital businessCommunication protection - Firewall, Intrusion Prevention and
Intrusion Detection System (IPS, IDS), robust VPN• Cyber security rating with platforms which identify and analyse
the external perimeter vulnerabilities

Cyber Security

Ensure adequate security standards
along the supply chain to spot the
future requirements of the Defence
programmes• Safety first – Health & Safety on the workplace through advanced
management systems• Responsible business and talent development, in line with
Leonardo’s principles and rules and fostering gender equality andmanagerialization• Industrial efficiency, also through lean transformation
programmes• Action for planet – Mobilize resources to measure and reduce
GHG emissions, water consumption and waste production• Green energy , aiming at 100% renewable energy of guaranteed
origin• Ecodesign and circular economy – Conceive new products with
eco-friendly materials under a circular economy perspective

People & PlanetSocial and environmental responsibility
to reduce risks, mobilize resources andcreate value

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Supply chain training and growth programmes
ELITE Leonardo Lounge – This is a two-year development
programme targeted at entrepreneurs and top managers of
supplier companies to accelerate their resilience and growth byfacilitating access to capital, network and key skills. 67 key
suppliers participated in the programme, coming from 13 Italianregions, with an aggregate turnover of €bil. 1.3 and a total of 7,500
employees.
LEAP Technical Training - 70 training courses were delivered to
improve the technical and specialist skills of managers, white collar
and blue-collar workers employed by the companies in the supply
chain, in order to also respond to the demand for new skilled
labour expected in the coming years. Leonardo has extended thetraining services provided by its subsidiary Leonardo Skills &Training to include suppliers, delivering a training course in linewith the LEADS assessment model and customised through theparticipation of Group managers. Among the courses offered there
are: project management, design excellence, manufacturing
excellence, competitiveness and cost reduction, process andproduct quality, industry 4.0 and cyber security, sustainability andecological transition, data protection. In 2023, the programme,
which was launched in 2020 and is funded by Fondimpresa, saw
the completion of the second edition with 17 suppliers involved
and the preparation of the third edition expected to begin in 2024.
More than 900 employees from the companies involved
participated in the two editions already completed for a total ofmore than 22,000 hours of training.
Supplier 360 Capability Assessment – More than 70 key suppliersof the Electronics Division in the United Kingdom have been
involved in the Leonardo programme for evaluation anddevelopment of technical capabilities and performance, involving
27 SMEs and paying attention to ESG issues.
Leonardo DRS Supplier Sustainability induction project - Morethan 100 key suppliers have been involved in sustainability
induction project aimed at evaluating and improving suppliermaturity on ESG topics, with a special focus on Climate impact andresource usage. Supplier have been involved in specific workshops,
have conducted a specific assessment supported by Assent andhad access to training and toolkit to evaluate their GHG emissions,water and waste consumption and define improvement initiatives.

Confindustria’s Digital Innovation Hub for digitaltransformation – Raising awareness of and training in 4.0
technologies, assessment of the level of digital maturity andcyber security, development of a roadmap and support to the
networking of suppliers in the Industry 4.0 ecosystem, fromsmart factories to Competence Centres. A total of 50 suppliers
have so far been involved in the Leonardo Digital Supply Chain
Project, with an aggregate turnover of €mil. 950 and a total ofmore than 5,100 employees.
Supply Chains for the 21st Century (SC21 Operational
Excellence) – In the United Kingdom, Leonardo relies on 69
suppliers, 17 of which are sponsored directly, involved in theindustry program that aims to improve industry performance,competitiveness and productivity by creating greater
customer/supplier collaboration based on continuous
improvement. In 2023, Leonardo supported theimplementation of the Supply Chain Solutions programme led
by ADS.
Supplier Relationship Management (SRM) – The objective of
the Leonardo SRM project in the United Kingdom is tocollaborate with key suppliers in indirect procurement,
through partnerships and continuous improvement, on five
key areas: resilience, cost efficiency and value generation,
innovation, sustainability and methods of collaboration. At
present, there are 18 suppliers that adopt SRM in full whileothers are taking part in the initiative with a light approach.
Leonardo for a sustainable supply chain – More than 600
Italian SMEs selected by Leonardo have taken part in the
training course using video sessions, created in collaboration
with The European House – Ambrosetti and made available
free of charge to suppliers through a specially developed elearning platform. The project aims to bring the supply chain
into line with the new regulations on sustainability reporting(CSRD - Corporate Sustainability Reporting Directive) and thedecarbonisation ambitions of Leonardo (SBTi – Science Based
Target initiative) 89, providing concrete support to suppliers in
preparing a sustainability plan and reporting progress througha dedicated toolkit. Additional 150 suppliers have taken part insimilar training courses in the United Kingdom and the UnitedStates.

89 For more details on Leonardo’s commitment to the Science Based Target initiative, please see the chapter on Planet.

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Report on operations at 31 December 2023
Collaboration with sector peers
In 2023 Leonardo, as a member of IAEG 90, promoted the voluntary adoption by major market players of ashared standard for measuring the ESG performance of suppliers in the AD&S sector, with the goal ofincreasing the sustainability of the operations of the aerospace industry and related supply chain. For thispurpose, IAEG has selected the EcoVadis platform, a world leader in sustainability assessments. The adoptionof a common approach will enable original equipment manufacturers (OEMs) to assess strengths andimprovements at the industry level and put in place collaborations to accelerate the expected improvementsin the industry. At the same time, such an approach will allow suppliers to conduct a single assessment, tobe shared with all international customers, thus avoiding the need to undergo multiple specific assessments,
ensuring a significant increase in the effectiveness and efficiency of the process. Furthermore, suppliers will
have the opportunity to access the EcoVadis platform on favourable terms and take advantage of theresources it contains to support the improvement of their ESG performance. In the first year of launch, 2023,
10 major AD&S groups joined the initiative and began to build a pool of more than 1,000 companies operatingin the sector, including 200 suppliers of Leonardo, which had been assessed by EcoVadis and which had madetheir scorecards available for the sector initiative 91.
10 major players in the
AD&S sector haveadhered to the IAEG
initiative with EcoVadis

1,000 companies in the
supply chain alreadymeasured by EcoVadis

Over 200 Leonardo’s
suppliers have madetheir Ecovadis scorecards
available

Sustainable supply chain management
Among key priorities for Leonardo is that of ensuring the sustainability of our supply chain, which represents
a strong commitment to the Group's stakeholders. In recent years our focus on environmental, social andgovernance (ESG) issues has gradually increased in all phases of collaboration with suppliers: from theapplication to become a supplier, to the pre-qualification and qualification phases to enter the register, fromselection criteria to the contractual Terms & Conditions, up to due diligence audits and development plansof suppliers. In the pre-qualification phase Leonardo verifies whether the economic, financial, ethical, legal,social and environmental requirements are met, while in the qualification phase it assesses the technical andoperational capabilities of the supplies, as well as the minimum requirements requested by Leonardo on
environmental management, protection of conditions and rights of employees, protection of health andsafety, cyber security and intellectual property protection. In 2023, reputational analysis of suppliers wasstrengthened through the extensive use of infoproviders, which, through specialised databases and media
analysis, make it possible to highlight risks or alerts on the counterparty and its representatives on theeconomic, financial, ethical, legal, social and environmental fronts. According to the product sector, an
additional verification on product qualification may be necessary to check compliance with the technicalrequirements of the component or part to be purchased. Furthermore, for some product areas, supplierselection takes account of the availability of specific additional ESG requirements, for example, the90 IAEG, International Aerospace Environmental Group, is a non-profit organisation comprising 54 leading Aerospace, Defence andSecurity companies that together account for over 70% of the industry at a global level.
91 At Leonardo, more than 80 employees of the Procurement & Supply chain professional family participated in a training course in
2023 to support the implementation of the initiative.

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possession of ISO 14001, ISO 45001, quality and cyber security certifications. Maintenance of therequirements is monitored via periodic checks throughout the entire duration of contractual relationships,
both through recurring audits (every two years for pre-qualification requirements and every three years for
qualification requirements) and through periodical audit plans, with serious or repeated non-compliancewith requirements resulting in temporary or definitive exclusion from the Register 92.

A new Code of Conduct for suppliers
During 2023, Leonardo prepared a new Code of Conduct for suppliers, published on its website 93. The new code reinforces theprinciple according to which suppliers are an integral part of Leonardo's business ecosystem and are a key determinant in theimplementation of its sustainability strategy so it is essential that they share the same values, principles and standards as Leonardo
and participate, in a partnership perspective, in Leonardo's commitment to developing a sustainable future for the Aerospace,
Defense and Security sector, considering the impacts of its operations on the entire value chain.

In the United Kingdom, Leonardo has been actively involved since 2015 in the JOSCAR (Joint Supply Chain
Accreditation Register) industry project to qualify joint suppliers and help guide the future development of
the Aerospace and Defence programme in the country. In 2023 the Group increased its participation in the
program to over 900 suppliers involved. JOSCAR, in which 50% of the participants are SMEs, maintains a
portal dedicated to small and medium-sized enterprises in order to rationalise the number of communication
channels used and provide a single point of access for both current Aerospace and Defence suppliers andnew firms that intend to enter the market 94. The initiative continues to evolve as more companies join thecommunity of buyers 95 and the evaluation criteria used are updated to reflect the latest industry
developments in the field of ESG 96. The Group has also launched specific projects that involve suppliers tointegrate environmental factors into supply chain management and reduce its environmental impact,
including working groups and workshops to promote decarbonisation and chemical and environmental
compliance, research projects to create more efficient products and materials that reduce atmospheric andacoustic emissions, and exploit technologies such as additive manufacturing, as well as pilot projects topromote the reuse of packaging 97.

92 For more details, please see the section on Other indicators.
93 The Code is available to the public at the following link.

94 About 550 companies have already registered on the portal.
95 At present they are equal to 28.

96 Additional details are available on the website of the initiative.

97 For more details on the fight against climate change and the circular economy model within Leonardo, please see the chapter on

Planet.

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Report on operations at 31 December 2023
Main phases of supplier selection and management 98
Portal registration

Pre-qualification

Code of
EthicsAnti-Corruption
Code

Economicfinancial
requirements
Environmental
responsibility

Qualification

Supplier Code of
Conduct

Pension andsocial security
contributions
No use of child,forced or illegal
labourNo criminal
sanctions
Compliance with
anti-corruption
regulations

Organisational, Management
and Control Model

Non–inclusion ininternational black
lists

Compliance with
Modern Slavery
regulations (*)

Compliance with
Trade Compliancerequirements (**)

Compliance with
anti-money
laundering
regulations

Technical andprofessional
requirements

Environmental
information (***)

Health and safety
certifications(ISO 45001)

Qualitycertifications

Cyber security

Protection of
intellectual property

2023 KPIs>6,000pre-qualifications of suppliers

34

denied pre-qualifications of new suppliers

79 revoked pre-qualifications of suppliers in
the renewal phase

2,900

qualifications completed

5,230
Selection/Callfor bids

Check of specifictender requirements

Management
and monitoring

Monitoring activities(documents, inspections,on-site audits)

Supply terms andconditions

Compliance with conflictminerals regulation

Check of existence andmaintenance ofreputational requirements

reputational due diligence916

suppliers selected based on environmental
criteria>6,000 environmental, health and safety
Improvementplans

Pre-qualification
revocation

Black list

Supplier Awards

audits on service providers (indirect suppliers)
conducted by Leonardo or third parties>1,500 audits on direct suppliers>4,200 performance improvement reviews
on direct suppliers(*) Modern Slavery Act 2015 in the United Kingdom and Code Title 22, chapter 78 in the United States.

1,100 suppliers subject to deep sustainability(**) Check carried out only for suppliers in at-risk countries(***) Of which in possession of environmental authorisations and certified management systems; compliance with REACH, RoHS, CLP( Classification, Labelling andPackaging) and RAEE and waste regulations.

assessment in the last 3 years

16 black listed suppliers

Leonardo engages suppliers on key and operational issues relating to the supply chain, including
obsolescence management, procurement of critical materials and the growing risk of cyber-attacks. An
increasing number of selected suppliers share their risk registers with Leonardo, and the company, in turn,shares the results of risk analyses with them as part of related projects.

Supplier engagement
Crisis teams - Leonardo has established a multi-divisional
management team for structured coordination amongprocurement managers across various countries to manage
communication, monitoring and action plan definition activities on
global procurement issues. The team, which started its operations
during the Covid-19 emergency in 2020, continued its work as from2021 with a focus on assessing and mitigating procurement issues
concerning critical materials and microchips and the impact of theRussia – Ukraine and Middle - East conflicts.
Electronic component analysis – In the United States Leonardo DRS
has maintained a tool to identify Circuit Card Assembly (CCA) related risks and improve supplier performance. The tool allows theanalysis of more than 1,500 CCAs associated with about 40,000
components, identifying risks of obsolescence, lead-time, price, or
related supply shortages. Additionally, this automated tool helps
improve CCA component obsolescence management and decisionmaking processes, for improved risk identification and action. In this

REACH and chemical substances - Leonardo acts incompliance with the REACH regulation with the objective of
reducing the use of hazardous substances from its processes
and products by 15% by 2025 and 50% by 2032 compared to2022, considering the specific features of each business inwhich it operates. The reduction is calculated based on theindicator “kilograms of SVHC substances purchased (in Annex
XIV of the Regulations as of 31/12/2022) per production
hours. The Company has identified the hazardous substancesused in industrial processes, started a rationalisation of thesubstances purchased, in compliance with the restrictions andexceptions provided for by the Regulation, and provided for
mitigation plans for each division, as well as specific objectives
for the reduction, and where technically possible, theelimination of hazardous substances from products, while
also taking advantage of eco-design initiatives that make itpossible to identify alternatives with lower impact right fromthe design phase. Leonardo collaborates with third-party

98 The figures refer to Leonardo SpA, Leonardo Global Solutions and Leonardo Logistics. At Group level, in 2023 about 7,300 suppliers

have been subject to ESG risk assessment, among which 459 significant suppliers.

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Report on operations at 31 December 2023
manner, Leonardo DRS has identified opportunities to ensure
product development and production despite procurement-related
challenges.
Security and resilience – Leonardo has strengthened security risk
management in the supply chain by requiring security requirementsfrom the qualification stage. For project supplies that must meet
specific security requirements or key projects, it has outlined ahomogeneous, cross-sector approach to identifying, assessing andmanaging security risks, monitoring identified risks and related
treatment actions on an ongoing basis, and fostering better
communication between divisions, as well as integration into theCompany's risk management process. In the United Kingdom,
Leonardo also participates in the cross-sector Supply Chain
Resilience Working Group, launched by the UK Ministry of Defence
to better manage risks and strengthen supply chain resilience; whilein the United States, to effectively respond to the US Department of
Defense’s regulations, aimed at mitigating cyber security risks in the
supply chain, Leonardo has developed new supplier cybermonitoring techniques to proactively identify risk mitigation actions
and achieve or exceeding compliance with the new regulations.
Regulatory compliance tracking systems continue to bestrengthened, making it easier to support the supplier and act tomitigate risks.
Climate Change and Sustainability Working Group (WG) –Leonardo collaborates in the cross-sector working group formed by
the UK Ministry of Defence to align the priorities of its key suppliersin combating climate change. The WG has jointly drafted a code of
conduct to steer the sector toward greater openness andcollaboration.
UK Defence ESG Charter – Leonardo is one of the signatories of the
new “UK Defence ESG” charter, which includes three key
commitments from the UK defence industry: climate transition andclean tech, impact on society and governance, and ethics. As one of
the largest investors in research and technology, the defence
industry will provide significant opportunities for the next
generation of scientists and engineers while exploiting the tools of
the new digital age to ensure a more secure and sustainable future.
As part of its commitment to promoting a sustainable supply chain
and consistent with its decarbonisation goals 99, Leonardo
encourages its suppliers to sign up to the initiative.

business partners to identify, develop and test together
alternative solutions, including within the framework ofnational and European research and funding programmes,
and involves suppliers in the management of hazardous
substances and compliance with REACH regulations throughcontractual clauses and training courses on the subject.
Leonardo participates and leads the working group of theEuropean Aerospace and Defence Association (ASD) on
REACH and chemical substances, supporting the actions
towards the European Commission and Parliament and the
dialogue with the European Defence Agency (EDA). Amongthe projects carried out in this context are the definition of aguideline to simplify the approach for waste management in
the sector (Waste Framework Directive; the creation of a
Working Group within the Chemical Strategy for Sustainability
REACH and Classification, Labelling and Packaging (CLP) to
inform the European Union of the needs of the sector in viewof the update of the REACH and CLP regulations; participationin the CEFIC (European Chemical Industry Council) roundtables to follow initiatives related to product sustainability
and safe and sustainable design. Leonardo also chairs AIAD's
REACH Working Group to coordinate dialogue with the Italian
Ministry of Defence and political counterparts andparticipates in the UK Ministry of Defence's Sustainable
Procurement Working Group to share best practices inmanaging industry policies, including REACH regulations and
GHG protocols. Leonardo also participates in the Aerospaceand Defence Chromium ReAuthorisation Consortium (ADCR),
contributing to specific reports, including a socio-economic
analysis in which it involved over 70 key suppliers that could
be impacted by the replacement plans, in order to mitigate
the risk of discontinuity in the business particularly linked to
the replacement of some chromates with alternative
solutions.
ASD – Workstream Supply chain decarbonisation – Within
the Climate and Defence Task Force established by ASD,
Leonardo coordinates, together with Saab, a workstream
centered on supply chain decarbonisation, with the goal of
sharing ways and initiatives – either currently in place orplanned for the future - and assessing the possibility of taking
collaborative actions to support the transition of theindustry's supply chain. At the first meeting held in November
2023, Leonardo shared its strategy and supplier engagement
projects implemented through the LEAP programme.

For more details on Leonardo decarbonisation goals in the United Kingdom, please see the chapter on Planet, in the
Decarbonisation section.

99

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Customer intimacy, quality and safety
Providing innovative technological solutions to contribute to the progress and safety of the world. From thedesign phase to the development of products, services and solutions and after-sales service, Leonardo
searches and applies high levels of quality, safety and sustainability, in compliance with the standards andregulations of a highly regulated sector, in order to become a trusted partner for its customers. For Leonardo,
customer centricity means in fact thinking every day about the positive impact of its business, responding toevery possible operational need of its customers and striving to anticipate what could become their criticalissues in the future.

Revenues by geographic area
21%

Turnover by market

Italy

18%

United Kingdom
11%

Customer Support,
Services & Training(CSS&T)

27%

United States

24%

Products

Rest of Europe

26%

73%

Rest of the world

Governmental / Non governmental
turnoverDefense / Civil turnover

18%

25%
Defense

Civil

Governmental
Non governmental

75%

82%

Governmental/nongovernmental by
sectorDefence/civil by sector

Defence

61%

84%

96%

14%

Governmental

68%

94%

96%

14%

Civil

39%

16%

4%

86%

Non-governmental

32%

6%

4%

86%

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Customer support and training solutions
Leonardo offers customised solutions and innovative, value-added after-sales support services: from theoffer of integrated services to continuous upgrading of Systems in order to ensure customers extended
operational availability and performance over time, from training programmes in complex and multi-domain
operational scenarios and training, in terms of both skills and expertise, collecting and processing any
feedback from the field which is required to maintain continuous and ongoing direct contact with end users
and build a strategic relationship in the long term. The development of the Customer Support, Services &Training business and the improvement in customer satisfaction are among the objectives of Leonardo's
Strategic Plan, which are pursued through a transformation that involves technologies, the organisation,
processes, procedures, compliance with standards and regulations, the way of doing business and, above all,people. Consolidation of the services business is focused on “customer capability”, to be ensured byleveraging some key concepts for greater resilience: customer centricity, their demand for technology to beprovided “as-a-service”, continuous improvement, development of hard and soft skills, data management
and analysis, through the application of smart technology and increasingly digitised processes and products.
With a view to sustainable innovation, Customer Experience and the use of advanced digital technologies
turn into a measurement of satisfaction in the use of the Systems, coupled with the ability to improve theproduct and its operations, ensuring the management integrity of information and transparency in customer
communication.
In line with the ever-increasing and more advanced market demands, customer support training is based oninteroperable and combined technologies – Live, Virtual and Constructive – to ensure an immersive
reproduction of systems in their operational use. The use of flight simulators allows for expanding training
effectiveness and reducing real flight hours, thus reducing environmental and acoustic impacts, and making
a more efficient use of the Defence budget. Virtual and augmented reality technologies, together withartificial intelligence, are also used for preventive and predictive maintenance, thus helping to mitigate
inefficiencies and reduce the environmental and logistics impacts, and enabling remote operations, thereby
reducing physical travel to support operations.

Over 50,000 training hours
delivered through flight
simulators

Over 13,000 pilots andoperators of helicoptersand aircraft trainedFirst place among helicoptercompanies in ProPilot's ranking
for quality of after-sales
support, for the fifth year
runningFirst place in Product Support
Surveyof
AIN(Aviation
International News) ranking in2032 too
Data 2023

Training pilots, technicians, and maintenance Digital Customer Service initiatives in support ofworkers according to new standards and customers
regulations
Customer Satisfaction – With the use of the Net Promoter System

International Flight Training School – The project, a (NPS) methodology during 2023, more than 300 customers werecollaboration between the Air Force and Leonardo to build an involved from the civil, military and government markets in moreadvanced flight training center for military pilots destined for than 70 countries all over the world in measuring Customer
the latest generation of aircraft, is fully operational at the Satisfaction. Leonardo has collected and analysed, as a whole, more
Decimomannu base in Sardinia and has been included among than 2,000 feedbacks since the start of customer satisfaction
the first two sites in the European network of "NATO Flight monitoring activities in 2019. The objectives have been achieved
Training Europe (NFTE)." The new campus was inaugurated in to obtain a deeper and more complete knowledge of the
May 2023, and the prestigious Air Forces of the United Kingdom perception of Leonardo solutions on the part of its customers andto identify and implement corrective measures, with a view to165

Report on operations at 31 December 2023
and Sweden have adhered to the IFTS, joining those of Saudi continuous customer service improvement. Measurements were
Arabia, Austria, Canada, Germany, Japan, Qatar and Singapore. also extended to training activities and some new digital services
The use of the M-346, the most advanced training aircraft compared to the previous 12 months.
currently available on the market, and the related ground-based
Digital Customer Service initiatives – Leonardo makes available totraining system "Ground Based Training System - GBTS," which
its customers advanced Customer Relationship Management and eat the state of the art integrates flight simulation and mission,commerce platforms, which enable better management of
has already made it possible to reduce actual flight hours bycustomers’ requests and ensure a single point of access (Leonardo
about 50% compared to similar training previously carried out
Customer Portal) for all after-sales services, including training
on fighter aircraft, achieving reductions in fuel consumption andactivities and new evolved support services from a data-driven
related emissions by 19,000 tons of CO2e in 2023.
perspective, with the aim of ensuring a renewed and better
Leonardo Academy for Basic Training (LABT) – Following the customer experience.
attainment of some certifications at the end of 2022 100 and with
WCC European Roadshow - In continuation of the Innovation andthe aim of further increasing its capabilities to deliver integrated
Excellence Award EMEA 2022, received from World Commerce &maintenance training through the involvement of more businessContracting, a global community for the promotion of standards
areas, Leonardo has established the Leonardo Academy forand continuous improvement in sales and contracting, Leonardo
Basic Training (LABT) to offer basic training courses forhosted the WCC European Roadshow in Rome in 2023, where it
maintenance workers and specialists in the Aerospace, Defense
shared the value of implementing the initiative for the benefit ofand Security industry, both in-person and remotely. In addition,business and customers.
LABT provides training for technicians based on the newstandards of ASD S-Series, issued by the Aerospace, Security and
Defense Industries Association of Europe related to productlifecycle data management in order to increase reliability,
system availability and reduce related operating costs. Finally,
LABT delivers any additional courses needed to complete thecultural background of Aerospace, Defense and Security
operators. Among the first programmes interested inmaintenance training in the military field are the AW139 and
AW169 helicopters, the International Flight Training School(IFTS) programme, the Falco Xplorer remotely- piloted system,
and components installed on military platforms.
The importance of complying with standards and regulations –Leonardo actively participates in activities within the ASD
Service Commission for the definition of the new S-Series
standards for data management of the entire product life cyclein the field of Integrated Product Support, through Integrated
Logistic Support analyses, for an effective management ofTechnical Publications, materials and spare parts, for thedefinition of Integrated Life Cycle Analysis, the management ofPreventive Maintenance, Training and In-Service Feedback inorder to increase the reliability and availability of systems andconsequently reduce the related operating costs. The
compliance of the S-Series suite and mandatory regulations isfor Leonardo an essential element, as well as a mandatory
requirement for participation in international cooperation
programmes.

Specifically, Leonardo obtained certification from the Directorate for Aeronautical Armaments and Airworthiness, being
recognised as a “Maintenance Training Organisation” according to the national AER(EP).P-147 standard and in line with the European
EMAR 147 standard issued by the European Defence Agency (EDA).
100

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Social value and industrial collaboration programmes
Leonardo is committed to generating positive impacts for the communities that host its sites and production
facilities. For this reason, sustainability topics are integrated into initiatives, projects and working methods.
Specific metrics are used to assess the effectiveness of these actions and quantify the impact produced on
local communities. Moreover, this approach becomes also relevant in relations with those governments that,on the occasion of public tenders, exploit their spending power by providing incentives to companies to
produce measurable social benefits in favour of communities, redesigning the relationship between public
and private entities.

The Social Value model in the United Kingdom
Leonardo has the objective of maximising the social value it produces, as evidenced by its commitment to supporting its people,
community, and economy. In the United Kingdom, the UK government has structured social value into 5 areas: equal opportunities,
reducing economic inequality, combating climate change, post-pandemic recovery, and wellbeing. During the selection process forawarding new contracts, the UK government gives a weight of at least 10% to the social value produced by individual companies.
In the United Kingdom, Leonardo contributes about GBP1.9 billion to the country's economy, employing more than 8,000 highlyskilled people and supporting more than 26,000 jobs. Leonardo also works with more than 2,100 local companies in the United
Kingdom, two-thirds of which are SMEs.

Indirect offset projects by type
Production/Manufacturing
9%14%

Products and services

12%

Maintenance, Repair &Overhaul (MRO)

14%

Others51%

Transfer of technologies

Furthermore, Leonardo collaborates with its international customers to generate economic and industrial
benefits, both in the civil and Defence sectors, under industrial offset agreements. In 2023, Leonardo had 43
indirect offset contracts in place around the world 101.

Quality and Safety
Leonardo pursues the goal of ensuring the highest safety and quality of products and services, striving todeliver them to customers on time and without any defects. For this purpose, the Group uses company
engineering and manufacturing processes based on recognised procedures and standards, promotes
continuous training and information of people on quality and safety of products and services, and integrates
methodologies of risk management, product life cycle management and crisis management. Leonardo
operates in accordance with ISO9001, AS/EN9100, AS/EN9110 quality management standards, as well as with

101 For more details, please see the section on Responsible business conduct and document on offset management on Leonardo

website.

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Report on operations at 31 December 2023
NATO AQAP 2110/2210/2310 standards, and those of design, production, and maintenance organisations incivil and military environments, and adopts and implements all customer specifications and procedures
within its management and related documentation to ensure utmost compliance with required quality
standards. This approach is to ensure the quality and safety of the design, implementation, maintenance,
testing, delivery and customer support, even in the phase of use.
In addition, the quality and safety of the Group's products and services are attested by company and thirdparty audits. In fact, the products made internally and those commissioned to third-party suppliers, selected
and qualified according to the standards adopted, are subject to internal audits and a final verification ofconformity by the quality function of each factory on an ongoing basis, in compliance with contract
requirements and/or other safety regulations. Furthermore, the quality and safety of the Group's products
and services is attested by third-party certifiers through specific audits on an annual basis. For the type of
products and services produced, Leonardo is also subject to certain audits on the part of the competent
Authorities, including government bodies and customers, in the field of Safety and, if applicable,
airworthiness.
Each Division or specific program within the Group is also supported by R&D activities geared towards theuse of state-of-the-art technologies and the generation of proprietary processes in addition to safety. Eachdivision adopts a centralised governance system, which provides for Safety Management Systems at the local
function level, control and risk assessment procedures and manuals, preventive tests to verify the quality
and safety of products and services, crisis management procedures involving recall systems and proceduresof products not complying with safety requirements, customer alert, product tracking and other specificprocesses. Of fundamental importance are the continuous improvement plans, which, in close connection
with the technology roadmap, improve the quality standard of parts, processes and services on an ongoingbasis. Should issues emerge in relation to aircraft and helicopters in service, Leonardo proceeds with risk
assessment, the identification of any possible mitigating measures, establishing their effectiveness andfeasibility, and preparing a recovery plan. In addition, the level of Safety performance of products delivered
to customers is continuously monitored, through the management of a database of significant incidents,
which allows their analysis, the generation of statistics and a register of "lessons learned," to be analysed at
the time of the implementation of a new design. The safety of maintenance operations is also subject toanalysis, providing for the assessment of the related risk and control through the adoption of appropriate
safety measures, procedures and personal protective equipment.
Leonardo is also committed to the training of all staff members involved in the quality and safety of thesolutions produced through specific training on an annual basis 102. Training activities are also implemented
annually to support customers and suppliers.
Compliance with high quality standards is also required from suppliers, to guarantee materials and goods
without any defect in design, manufacturing and installation, and verified during the qualification phase.

In the area of operational quality, special training courses related to root cause research tools, the identification ofcountermeasures and the assessment of their robustness are released. Trained people are evaluated with specific tests certifying
their learning; among them those who are directly involved in improvement activities and problem solving are evaluated andmonitored for their degree of knowledge with special 5-level radar charts on which the gap is also measured with respect to an
expected target.
102

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Report on operations at 31 December 2023
89% of employees operate atsites certified according to
the ISO9001 quality standard

90% of suppliers in terms of
total purchase value withcertificationofprocessquality

Furthermore, Leonardo plays an active role in the evolution of sector standards and regulations through its
participation in the main international organisations, including IAQG (International Aerospace Quality
Group), EAQG (European Aerospace Quality Group), RMS (Regional Management Structure) and SAE (Societyof Automotive Engineers), and contributes to designing the EPAS (European Plan for Aviation Safety
implemented by the European aviation authority with all Member States). Since 2018, it has guided the OPC
Operations Council, formerly IAQG’s Strategy Working Group, which defines quality standards and therelated certification scheme format, measuring effectiveness and developing the global database of bestpractices. In Italy, as a member of AIAD, Leonardo sits on the Quality Committee, which pays particularattention to supporting small-and medium-sized enterprises, with regard to mandatory regulations andcustomer-specific quality and safety requirements.

Process quality
A significant improvement was achieved in the quality management of processes and products through the use of a standardised QA
Matrix across all Divisions, which is a tool that allows the collection of all "non-quality" events, the assessment of their impact, the"root causes" and the prioritisation of the best solutions for process control and its standardisation. In 2023, the matrix was
implemented at 18 sites, and identified defects were prioritised based on related impact so that improvement projects could bedesigned on the most significant defects. Priority “non-quality” events were analysed through specific improvement projects, andmore than 70% of them were closed and resolved.

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Value for communities and territories
Leonardo generates value for communities by spreading a business culture that promotes sustainability
through the social, economic and environmental development of the territories in which it operates. For thispurpose, it launches, supports and incentivises projects with a strong social impact, aimed at disseminatingknowledge and technologies, as well as enhances diversity by promoting inclusion, supports gender equality
including through actions to disseminate STEM disciplines, invests in the growth of the community throughvolunteering skills and knowledge transfer, and safeguards environmental protection by promoting greaterawareness among people. To this end, Leonardo carries out numerous engagement and awareness-raising
activities in the territories that host the Group's production sites, collaborating with entities, associations andfoundations, partners and non-profit organisations.
Leonardo's commitment is also expressed through the Group's Foundations and the voluntary support fromits people, who thus contribute to activities targeted at the achievement of SDGs.
>>>

Leonardo Civiltà delle Macchine Foundation is committed to promoting human rights in the digitalsociety, combining scientific knowledge and research with culture and the arts, and fostering a
constructive debate on the impacts of digital transformation. It promotes STEM and ICT
competencies and digital education and supports economic growth and innovation by stimulating
public debate on the sustainable development of the territories and the prospects for industrial
development of the country. It supports research in the field of ethics and law of artificial intelligencethrough partnerships with institutions and universities.
Ansaldo-Leonardo Group Foundation has been working for over 20 years in the recovery, protection,
preservation and enhancement of the historical-cultural heritage consisting of its archival,
photographic and film collections - over 100 collections, either its own or entrusted by third parties-, which preserve the memories in the entrepreneurial, industrial, technological and communication
areas, in particular of those companies that have operated in the Liguria region.
Med-Or Foundation, founded in 2021, aims to promote cultural, research and scientific training
activities, to strengthen ties, exchanges and international relations between Italy and the countriesof the enlarged Mediterranean area. It is an innovative, global and collaborative entity that aims to
combine skills and capabilities of industry with the academic world for the development of geoeconomic and socio-cultural partnership with countries in the Enlarged Mediterranean, Sub-SaharanAfrica, the Middle East and the Far East with the aim of laying the foundation for sustainable andintegrated development.

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Social commitment, support to territories and promotion of culture
The Group's commitment to fostering the socio-cultural development of the territories in which it operates
also translates into economic action: in 2023, Leonardo invested about 3 €mil 103 in sponsorship initiatives
aimed at communities and the promotion of culture and scientific research. The choice of activities to be
carried out has favored wide-ranging projects that would allow the creation of partnerships andcollaborations, through the support of cultural institutions, initiatives of a social and solidarity nature as well
as research and innovation projects.

Scope of the initiatives
19%
39%

42%

9%

18%

Promotion ofLeonardo's
Capabilities andNetworking
Promotion ofScientific
Culture and support toLocal
Communities

Geographical breakdown

Type of contribution

ImageandCustomer
Intimacy

18%
91%

Sponsorships

Italy
44%

United Kingdom
United States

20%

Rest ofthe world

Investments in the community

Social commitment and support to territories

Promotion of culture

Avanchair - Collaboration work with Avanchair Startup, which has
created an innovative electric wheelchair whose new prototype
was presented in 2023. This project is a clear example of how
technology transfer between different sectors can improve
people's lives and reduce inequalities.

Leonardo Corporate Heritage – The company museums that arepart of Leonardo’s Museum System in Italy are the Agusta
Museum, with attached Villa in Cascina Costa di Samarate (VA),
the Breda Meccanica Bresciana Museum, the Officine Galileo
Museum in Campi Bisenzio (FI), the Radar Museum in Bacoli (NA),the headquarters of the Associazione della Melara in La Spezia,
where the OTO-Melara historical archive is located, theAeronautical Industry Museum in Turin and the Fucino Space
Center Museum of Telespazio. In 2023 the Corporate Heritage
programmes involved almost 8,000 visitors, accompanied by thecompany’s Seniors (over 200 active in the Museums and Archives)and volunteers.

WEEE (Waste from Electrical and Electronic Equipment) in prison– It is an electrical and electronic equipment recycling project witha goal of training and social re-education of inmates in Bollate
Prison - Milan. The recycling system, located inside the prison, hasbeen built and operates thanks to the collaboration of
institutional and private players 104.
Telethon Foundation – In 2023 Leonardo decided to support"Plug & Play," Telethon's technology platform for gene therapy,
which can optimise the time and resources needed to complete
the development of therapies in line with its commitment tosocial welfare and the promotion of scientific citizenship.
Volunteer bulletin board - Leonardo supports, with a dedicatedin-house platform, employees' offers and requests to volunteer infavour of non-profit organizations that operate throughout the
territory. The section on "volunteer stories" is connected to theplatform, which collects and recounts employees' experiences.
Responsible Canteens – This programme, in partnership with
Fondazione Banco Alimentare Onlus and canteen service
providers, has been designed for the recovery of surplus food

Digitalisation of archival, photographic and film heritage - The
Ansaldo Foundation supports a plan to digitise its archival
heritage, including photographs and films, by carrying out
restoration work on some films. In 2023, the Foundation signed anagreement with Istituto Luce-Cinecittà to digitise and promote
more than 300 period films related to the theme of work from thearchival collections of Ansaldo and Ilva which are owned by theFoundation and have been declared of "notable historical interest"by the Archival and Bibliographic Superintendent’s Office of the
Liguria region. Finally, the full digitisation of the Civiltà delle
Macchine magazine was completed in 2023.
Digital skills and technologies at the service of culture - In 2023,
the Ansaldo Foundation signed an agreement with the University

103

During the year, the company also financially supported, for a total value of about 2 €mil, two extraordinary activities related tothe promotion of its capabilities and the consolidation of brand reputation, such as the “Centenario dell’Aeronautica Militare” andthe international training activity "Formidable Shield" alongside the Italian Navy.
104 For more details, please see the paragraph on Circular Economy in the chapter on “Planet”.

171Report on operations at 31 December 2023
from the canteens of the main Italian factories in favour of nonprofit organisations. In 2023 more than 144,000 portions of foodwere distributed for a total economic value of about € 275,000(more than € 3.5 million since the start of the Programme).
Support to military families in the United States – More than 90%
of Leonardo DRS’ investments for communities support solidarity
programmes reserved for active duty and retired veterans andtheir families in the areas of financial assistance, adaptive sports,
medical research, community engagement, grief assistance andeducational scholarships. Among the organizations supported by
Leonardo there are Homes For Our Troops, the Fisher House
Foundation and Blue Star Families.
Plastic Free – Leonardo confirms its collaboration with Plastic
Free, the most important environmental volunteering associationin Italy created with the aim of informing people and raising theirawareness about the dangers of plastic pollution. During the year
Leonardo supported an event at Pineta di Ostia, on the occasionof World Ocean Day promoted by United Nations, which allowed
the collection of over 800 kg of waste. More than 200 employees
joined Plastic Free initiatives over the past two years, helping tocollect more than 2 tons of waste.
Solidarity campaign for Emilia-Romagna - In order to support the
population of Emilia-Romagna affected by the floods in May 2023,
Leonardo, joining to the solidarity initiative jointly promoted at
the national level by Confindustria and CGIL-CISL-UIL tradeunions, launched a campaign for all the italian employees todonate an hour of their work and the company contributed forthe equivalent amount. The total donation amounted to over €200,000.

of Genoa and provided more than 2,000 hours of training throughcurricular internships in the field of archival, digital andcommunication technologies for the enhancement of cultural
heritage. Likewise, the doctoral program on the theme of theevolution of Welfare and Corporate Identity in Ansaldo industries
continued, and a new doctoral program, funded by the Liguria
Region with the contribution of Ansaldo Energia, was launched on
the themes of the history of national industrial development in thefield of energy production.
Enhancement of cultural and artistic heritage – In 2023 the MedOr Foundation supported various projects to enhance the culturaland artistic heritage, including: the travelling exhibition'Mediterranea. Visions of an ancient and complex sea', realised incollaboration with MAECI - Directorate General for the Promotionof the Country System, Telespazio, the European Space Agency,
the Italian Space Agency and e-GEOS; the event on “Nouakchott,
Capital of Culture 2023 of the Islamic world: an Arab magic
between past and future”, organised in collaboration with the
Mauritanian Ministry of Culture and the Mauritanian Embassy in
Italy.
“Transizioni” exhibition - In 2023, the “Transizioni” exhibition
curated by the Ansaldo Foundation with the support of the
University of Genoa and the patronage of Genoa City Council was
set up and opened to the public at Palazzo Reale in Genoa. The
exhibition, which was attended by over 20,000 visitors, focused onthemes related to the changes that took place because of theindustrial revolutions in business, labour and society starting fromthe mid-19th century and throughout the 20th century.
“Carabinieri: Italian Biodiversity Keepers” exhibition - Leonardo
has contributed to the “Carabinieri: Italian Biodiversity Keepers”
exhibition, organised by the Italian Carabinieri Forces at the United
Nations Secretariat Building in New York, to raise public awarenessof the extraordinary biodiversity of Italy's territory and theindispensable need to preserve its integrity.

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Digital education, scientific culture and technological expertise
The promotion of digital education and sharing scientific knowledge, technological expertise, and innovation
with the communities concerned form an integral part of Leonardo's strategy to strengthen the innovation
chain and reduce the educational and social gap in the territories in which it operates.
Leonardo fosters upskilling and reskilling programmes dedicated both to keeping its people constantly up todate with technological developments 105, and to support the dissemination of scientific culture to external
communities by making available its wealth of knowledge and distinctive skills.
At Leonardo the valorisation of diversity and the promotion of social inclusion are a fundamental value, as
well as a distinctive factor in competitiveness to be also pursued by fostering the development of technicaland scientific skills in the communities concerned.
Over 400,000 people
reached with scientific anddigital citizenshipprogrammesMore than 30,000 maleand female students
visited Leonardo’s stands
and interacted withcompany representatives
during the Career Days

About 1,400 schools,
more than 1,900 teachersand 60,000 students
involved in the STEMLabprojectMore than 2,000 hours ofteaching by Leonardo
employees in Italianschools and universities

Leonardo has a network of STEM ambassadors operating in the various geographical areas, which, throughtraining and popularisation activities delivered in collaboration with Technical High Schools, encourage newgenerations to undertake STEM-related courses of study, spreading passion for science and technology.
Within the scope of the School-Business System project, promoted by the ELIS consortium, Leonardo has also
made available to students of 1st and 2nd degree secondary schools the testimonies of 25 Role Model female
employees with STEM backgrounds, who, through inspirational talks, have dedicated training sessions tostudents to support their future educational orientations. In this context, there is also the Young Women
Empowerment Program - YEP, dedicated to female students in Southern Italy and promoted by the Ortygia
Business School Foundation, which promotes training based on the skills of the future and a culture of genderequality, to counteract stereotypes and inequalities in the education and professional fields. The
commitment to promoting STEM education is also important in other geographical areas in which the Group
operates: in the United Kingdom career fairs, summer schools and dedicated contests have been organized,
which have led to an increase of almost 20% in female placement for internship, apprenticeship and industrial
placement roles.

Digital education
Digital High School – The adventure of the new “digital highschool” at the Matteucci Institute in Rome, started in 2022,
continued into 2023. The project, which is the result of a proposalby the Leonardo Foundation, was implemented in collaboration
with Leonardo, the Ministry of Education and the Matteucci
Institute in Rome. The goal is to develop digital and technical skills,
integrated and harmonised by humanistic knowledge, which are
fundamental to ensuring a sustainable future. This five-year
course of study includes a course in Artificial Intelligencedeveloped by Leonardo experts who also serve as tutors in the

STEM Lab – The project was created for the purpose of promoting
the dissemination of STEM education by providing content forteachers of 2nd-degree secondary schools in Italy and raisingawareness among boys and girls. The initiative reinforces
Leonardo's role as a hi-tech leader in support of the education
system, enhancing the company's wealth of knowledge to theoutside world and strengthening the relationship with theterritory. STEMLab offers teachers free video lessons in the formof webinars, with teaching guides and workshop sheets to explorewith students subjects and technologies connected with

105 For detalils please refer to paragraph Skill management and enhancement of “People” chapter.

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Report on operations at 31 December 2023
planning phase and company internships planned for the final
year of the course. In 2023, student enrolment in this course of
study doubled, leading the Ministry of Education to grant the
opening of a second section.
Digital Transition Laboratory - In collaboration with Bocconi,Trento and Florence Universities and the Privacy Guarantor, theLeonardo Foundation Laboratory is a space for study on thethemes of Artificial Intelligence and digitisation on the Italian,
European and global scene, through position papers, research andconferences.
Become a Digital Citizen - Born from the agreement between
Leonardo, Leonardo Foundation and the General Command of the
Carabinieri Corps, work continued in 2023 on this project whichaims to reduce the digital divide in Italy, encouraging access to
new technologies by the older social groups. With 33 offices insmall and medium-sized municipalities made available by the
Carabinieri, more than 300 citizens participated in the project in2023.

innovation, including content that is developed directly by
Leonardo experts. Contests such as the STEM Olympiad were alsoorganised and multimedia Apps made available. Among the topics
Artificial Intelligence, Big Data, Additive Manufacturing/3D
Printing, Drones, Electrification, Ports and Airports, Space
Robotics, Regulation on the use of chemicals (REACH), Cyber
Security. By the end of December 2023, two years and a half after
its launch, more than 1,900 teachers were enrolled and about
1,400 schools and more than 60,000 students were involved.
As part of the 59th edition of the Oscar di Bilancio awards,
promoted by FERPI (Federazione Relazioni Pubbliche Italiana),
Borsa Italiana and Bocconi University, Leonardo won the
Generation Z Award, for “the ability to involve younger
generations in achieving sustainability goals through innovative
projects such as STEMLab.”ITS Academy – Work continued on Leonardo’s commitment tocreating a national ecosystem of digital skills under the agreement
formalised between the Leonardo Foundation, the EmiliaRomagna, Liguria, Puglia and Umbria Regional Governments, theMinistry for Digital Transformation (MITD), the Cyber Security
Agency, Confindustria INDIRE, the National ITS Association and theMinister of Education at the end of 2022, with the aim of creating
ITS Academy curricular training programmes aimed at training
various profiles.

Scientific culture and technological skills
Outreach project – The Leonardo Foundation has started the
preparatory activities for the realisation of the Outreach Project,which will be fully implemented during 2024. It is an innovative
project that aims to raise awareness and bring a heterogeneous
public closer to the content of a scientific nature and relating to
the world of technological innovation, developed by Leonardo,
with the aim of disseminating them through multimedia
information tools and digital platforms with educational andtraining purposes. The project will make use of a dedicatedMultimedia Production Centre.
Treccani Scuola – The collaboration between the Leonardo
Foundation and Treccani also continued in 2023 for the
programming of online lessons and multimedia educational
content intended for the Treccani Scuola platform, with the aimof making Leonardo's advanced technological knowledge andskills available to the Italian school system.
Cielo Itinerante - Leonardo has collaborated in the realisation of
3 stages of the tour of Cielo Itinerante, an Italian non-profit
association founded with the objective of bringing children in
territories characterised by a higher rate of educational poverty
and school drop-outs closer to space and the study of STEM
disciplines. In these stages, dedicated to the promotion of scienceand technology with a focus on space, Leonardo brought thetestimony of its activities in local areas through its Sustainability

Precision Agriculture 4.0 – Even in 2023 work continued on the
Leonardo Foundation’s workshops and meetings on the subject ofPrecision Agriculture 4.0, following the 1st National Conference on
Precision Agriculture, sponsored by the Foundation, in partnershipwith the Polytechnic University of Bari and University of Bari Aldo
Moro, in order to present and deepen the innovative technologies
of Precision Agriculture and the enabling technologies of the
Impresa 4.0 programme for competitive and sustainableproduction.
Research Projects - In the course of 2023, the Med-Or Foundation
organised numerous research projects in cooperation with various
international research organisations and think tanks on topics
mainly related to security, energy transition and new technologies
in the wider Mediterranean region and the Middle East.
“Futuri Probabili” – Fondazione Leonardo, supported by Intesa
Sanpaolo Spa, launched in 2022 and continued in 2023 “Futuri
Probabili”, research project targeted to the new generations. The
aim is capturing young generations ideas on the next future
related to some key topics: city, digital, scientific and technologicalinnovation, space, demographics and migrations. The project also
includes the production and distribution of docu-movies, articles
and short clips which can be accessed via Fondazione Leonardosite and social media.
hackher - Leonardo supported the fourth edition of "hackher," amultidisciplinary project, which is also sponsored by the European

174

Report on operations at 31 December 2023
Managers, involving over a hundred children from local
communities and children/grandchildren of employees.

Parliament, with the aim of bringing girls closer to the STEM world
and promoting gender equality in Information Technology.

“Università per il Subacqueo” - The Leonardo Foundation, in
collaboration with the Italian Navy and with the support ofscholars and researchers from the National Research Council of
Italy (CNR) and La Sapienza University, presented in March 2023
at the Livorno Naval Academy, a Report dedicated to theunderwater dimension, which aims to regulate underwater
activities and proposes the creation of a National Authority for
Underwater Traffic.

Med-Or Foundation Scholarships – During 2023, the Med-Or
Foundation funded a total of 346 scholarships for students fromAfrica and Middle East, including: 22 for bachelor's degree
programmes, 27 for specialist courses, 7 for doctorates and postdoctoral research grants, 3 for master's degrees, 287 foreducational and language training.

Science Festival – Even in 2023, Leonardo, as historical partner ofthe event, sponsored the Genoa Science Festival, which featured
250 initiatives in 35 city locations and 200 thousand total
attendance.
Progetto Paese – Fondazione Leonardo organised “Progetto
Paese”, a cycle of meetings aimed at sharing the competencies ofthe state-owned public companies and contribute to developing
a new leadership. The training courses involved the Ufficialidell’Arma dei Carabinieri, the Scuola della Guardia di Finanza and
Scuola della Polizia Superiore.

Girls@Polimi – Also in 2023, Leonardo actively participated in the
Girls@polimi project, providing 4 scholarships for female highschool seniors interested in enrolling in courses in Aerospace,
Automation, Electrical, Electronic, Computer, Mechanical, andIndustrial Production Engineering at the Polytechnic University of
Milan for the 2023-2024 academic year. By supporting this further
initiative, Leonardo aims to further support the orientation of theyounger generation, and in particular women, towards the studyof STEM disciplines.

"Industry and Start Up for Space" Conference – In 2023, as well,
the Leonardo Foundation, in collaboration with central State
Institutions, Universities and Research Centres, promoted the"Industry and Start Up for Space" Conference, as part of the
National Space Day, in order to combine the debate on theaerospace domain with the training of new generations.

175

Report on operations at 31 December 2023

CORRELATION TABLE – NON-FINANCIAL STATEMENT
Leonardo's Consolidated Non-Financial Statement (NFS) 2023 is included within the Report on Operations of
the Integrated Financial Statements 2023 and is prepared in accordance with Legislative Decree 254/2016,
which in turn assimilates European Directive 2014/95. The topics required by Legislative Decree 254/2016
are covered in the document, consistently with the relevance of the topics themselves with respect to theGroup's characteristics, giving evidence of activities, performance, results and impacts. The NFS, moreover,is prepared in accordance with the GRI Standards 2021 and contains additional indicators, to be consideredadditional to the disclosure prepared in accordance with the GRI Standards to meet the requirements ofArticles 3 and 4 of Legislative Decree 254/16, which allow the Group's performance to be measured withrespect to the relevant issues (in this regard, see the sections "ESG performance indicators", "SASB content
index" and "Other indicators"). Below is a reconciliation table that identifies, for each area provided for by
Legislative Decree 254/2016, the material issues for Leonardo and the references to the GRI Standards.
Correlation table with Legislative Decree 254/2016
Topics of D.lgs.
254/2016

Scope
Document
Environment,RO

GovernanceParagraph
Materiality
analysis
Stakeholder
engagement

2-2, 2-3, 2-4, 2-5, 3-1, 3-2

Annex to the operations Methodology note
report – Methodology ofnote of the NFS
the NFS

rights,Corruption
RO
Environment,Group profile

Note 1Governance

Note 1

Organisational

Social,Business model for the
management
and Personnel,
organisation of company Humanactivities
rights,disclosures

Chapter
Strategy and outlook

Social,Reportingstandards Personnel,
and materiality analysis Human

GRI Standards

Reference

Model as per
CGR

Legislative Decree

Note 1

231/2001

2-1, 2-6, 2-9, 2-10, 2-11, 212, 2-13, 2-14, 2-15, 2-16,
2-17, 2-18, 2-19, 2-20, 222, 2-23, 2-24, 2-29

Additional corporate

Corruption

governance

Note 1

practices
Strategy and outlook
Company
policies,
including due diligenceprocedures, outcomes
Environmentand related key nonfinancial performanceindicators

Group’s results andROfinancial position
PlanetProsperity

176

Sustainability
Plan
ESG
performanceindicators
Note 1
Supply chainvalue

301-1, 302-1,3, 303-1,2,3,
304-1,
305-1,2,3,4,5,7,
306-1,2,3, 306-3 (2016),
308-1, 3-3 (for material
topics, see the following
table)

Report on operations at 31 December 2023

Topics of D.lgs.
254/2016

Scope
Document

RO
Prosperity
Strategy and outlook

Personnel

RO

Group’s results andfinancial position
PeopleStrategy and outlook

Human rights

disclosures

Chapter
Strategy and outlook

SocialGRI Standards

ReferenceRO
PeopleCode of Ethics
Strategy and outlook
RO

Paragraph
Sustainability
Plan
Note 1
Sustainability
Plan
ESG
performanceindicators

2-7, 2-8, 201-3, 401-1-3,
402,1, 405-1-2, 403-1-2-34-5-6-7-9, 401-1, 404-1-2,
3-3 (for material topics,
see the following table)

Note 1
Sustainability
Plan
Respect forhuman rights

2-30, 407-1, 414-1, 418-1,
3-3 (for material topics,
see the following table)

Sustainability
Plan
Responsible

Governancebusiness
conduct

Corruption
Additional corporate
CGR

2-21, 2-25, 2-26, 2-27, 228, 201-1, 203-1, 204-1,
207-1-2-3-4, 416-1, 3-3(for material topics, see
the following table)

governance

205-2-3, 206-1, 415-1, 3-3(for material topics, see
the following table)

Note 1

practices
Anti-Corruption CodeEnvironment,
Main risks, generated or Social,undergone,
includingtheirmanagement, Personnel,
relatedtothe Human
abovementioned
rights,matters

RO

GovernanceRO

ProfileRisk
management
Trend andvisionCorruption

Diversityinmanagement
andsupervisory bodies

GovernanceCorporate
governancePeopleSkill management
and enhancement 2-7, 2-8, 405-1

RO

CGR

Diversity criteria andpolicies

Note 1

LegendNote 1: Whole chapter included in the NFS

CGR = Corporate Governance Report 2024 (fiscal year 2023)

RO = Report on Operations

177

Report on operations at 31 December 2023

Correlation table between material topics, Legislative Decree 254/2016 and GRI indicators
Scope under Legislative Decree 254/2016

Environment

SocialPersonnel

Material topic

Reference to GRI topics

Climate change, adaptation/mitigation

GRI 302, GRI 305

Sustainable supply chain

GRI 308

Natural resources and biodiversity management

GRI 303, GRI 304, GRI 305

Environmental impact of the use of materials

GRI 301, GRI 306

Citizen security

Non GRI topic

Solutions’ quality, security and performance

GRI 416

R&D, innovation and advanced technologies

GRI 201, GRI 203

Cyber security and data protection

GRI 418

Sustainable supply chain

GRI 204, GRI 407, GRI 414

Citizens’ security

Non GRI topic

Relations with local areas and communities

GRI 203

Digital transformation

Non GRI topic

Business integrity, compliance and anti-corruption

GRI 205, GRI 206, GRI 207,
GRI 415, GRI 405

Health and safety

GRI 403

Diversity, equity and inclusion

GRI 201, GRI 401, GRI 402,
GRI 405, GRI 406

Skill development, talent attraction and wellbeing of GRI 401, GRI 404
employees

Human rights

Diversity, equity and inclusion

GRI 402, GRI 405, GRI 406

Sustainable supply chain

GRI 204, GRI 308, GRI 407,
GRI 414

Protection of human rights

GRI 403, GRI 406

178

Report on operations at 31 December 2023

INDEPENDENT AUDITORS' REPORT ON THE NON-FINANCIAL STATEMENT AT 31 DECEMBER 2023

179

Leonardo S.p.A.
Independent auditor’s report on the consolidated
disclosure of non-financial information in accordancewith article 3, par. 10, of Legislative Decree December
30, 2016, n. 254 and article 5, par. 1 item g), of
Consob Regulation adopted with Resolution n. 20267
of January 18, 2018
Independent auditor’s report on a selection ofindicators presented in the consolidated disclosure of
non-financial information

EY S.p.A.
Via Lombardia, 3100187 Roma

Tel: +39 06 324751
Fax: +39 06 324755504
ey.comIndependent auditor’s report on the consolidated disclosure of nonfinancial information in accordance with article 3, par. 10, ofLegislative Decree December 30, 2016, 254 and with article 5, par. 1
item g), of Consob Regulation adopted with Resolution n. 20267 ofJanuary 18, 2018
(Translation from the original Italian text)
To the Board of Directors of
Leonardo S.p.A.
We have been appointed to perform a limited assurance engagement pursuant to article 3, par. 10, ofLegislative Decree December 30, 2016, n. 254 (hereinafter "Decree") and article 5, par. 1 item g), of
Consob Regulation adopted with Resolution n. 20267 of January 18, 2018, on the consolidated
disclosure of non-financial information of Leonardo S.p.A. and its subsidiaries (hereinafter "Group" or“Leonardo Group”) for the year ended December 31, 2023 in accordance with article 4 of the Decree,presented in the specific section of the Director’s Report of the Group’s consolidated financial
statements and approved by the Board of Directors on March 12, 2024 (hereinafter "DNF").
Our limited assurance engagement does not cover the information included in the paragraph‘’Information on EU Taxonomy for sustainable activities’’ of the DNF, that are required by article 8 of
the European Regulation 2020/852.

Responsibilities of Directors and Board of Statutory Auditors for the DNF
The Directors are responsible for the preparation of the DNF in accordance with the requirements ofarticles 3 and 4 of the Decree and the “Global Reporting Initiative Sustainability Reporting Standards”
defined by GRI – Global Reporting Initiative (hereinafter “GRI Standards”), identified by them as areporting standard.
The Directors are also responsible, within the terms provided by law, for that part of internal control
that they consider necessary in order to allow the preparation of the DNF that is free from material
misstatements caused by fraud or not intentional behaviors or events.
The Directors are also responsible for identifying the contents of the DNF within the matters
mentioned in article 3, par. 1, of the Decree, considering the business and the characteristics of theGroup and to the extent deemed necessary to ensure the understanding of the Group’s business, its
performance, its results and its impact.
The Directors are also responsible for defining the Group's management and organization businessmodel, as well as with reference to the matters identified and reported in the DNF, for the policies
applied by the Group and for identifying and managing the risks generated or incurred by the Group.
The Board of Statutory Auditors is responsible, within the terms provided by the law, for overseeing
the compliance with the requirements of the Decree.

EY S.p.A.
Sede Legale: Via Meravigli, 12 – 20123 Milano
Sede Secondaria: Via Lombardia, 31 – 00187 Roma
Capitale Sociale Euro 2.600.000,00 i.v.
Iscritta alla S.O. del Registro delle Imprese presso la CCIAA di Milano Monza Brianza Lodi
Codice fiscale e numero di iscrizione 00434000584 - numero R.E.A. di Milano 606158 - P.IVA 00891231003
Iscritta al Registro Revisori Legali al n. 70945 Pubblicato sulla G.U. Suppl. 13 - IV Serie Speciale del 17/2/1998
A member firm of Ernst & Young Global Limited

Auditor’s independence and quality control
We are independent in accordance with the ethics and independence principles of the International
Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA
Code) issued by the International Ethics Standards Board for Accountants, based on fundamental
principles of integrity, objectivity, professional competence and diligence, confidentiality andprofessional behavior. Our audit firm applies the International Standard on Quality Control 1 (ISQC
Italia 1) and, as a result, maintains a quality control system that includes documented policies andprocedures regarding compliance with ethical requirements, professional standards and applicablelaws and regulations.

Auditor’s responsibility
It is our responsibility to express, on the basis of the procedures performed, a conclusion about thecompliance of the DNF with the requirements of the Decree and of the GRI Standards. Our work has
been performed in accordance with the principle of International Standard on Assurance Engagements
ISAE 3000 (Revised) - Assurance Engagements Other than Audits or Reviews of Historical Financial
Information (hereinafter "ISAE 3000 Revised"), issued by the International Auditing and AssuranceStandards Board (IAASB) for limited assurance engagements. This principle requires the planning andexecution of work in order to obtain a limited assurance that the DNF is free from material
misstatements. Therefore, the extent of work performed in our limited assurance engagement was
lower than that required for a full examination according to the ISAE 3000 Revised ("reasonableassurance engagement") and, hence, it does not provide assurance that we have become aware of all
significant matters and events that would be identified during a reasonable assurance engagement.
The procedures performed on the DNF were based on our professional judgment and included
inquiries, primarily with company’s personnel responsible for the preparation of the information
included in the DNF, documents analysis, recalculations and other procedures aimed to obtainevidences considered appropriate.
In particular, we have performed the following procedures:

2

1.

analysis of the relevant matters in relation to the activities and characteristics of the Group
reported in the DNF, in order to assess the reasonableness of the selection process applied inaccordance with the provisions of article 3 of the Decree and considering the reporting standard
applied;2.

analysis and evaluation of the criteria for identifying the consolidation area, in order to evaluate
its compliance with the provisions of the Decree;3.

comparison of the economic and financial data and information included in the DNF with thoseincluded in the Leonardo Group consolidated financial statements;

4.

understanding of the following aspects:•

Group's management and organization business model, with reference to the
management of the matters indicated in the article 3 of the Decree;•policies adopted by the Group related to the matters indicated in the article 3 of theDecree, results achieved and related key performance indicators;•

main risks generated or suffered related to the matters indicated in the article 3 ofthe Decree.

With regard to these aspects, we obtained the documentation supporting the information
contained in the DNF and performed the procedures described in item 5. a) below.
5.

understanding of the processes that lead to the generation, detection and management ofsignificant qualitative and quantitative information included in the DNF.
In particular, we have conducted interviews and discussions with the management of Leonardo
S.p.A. and with the personnel of Leonardo UK Ltd, Leonardo US Holding LLC, and Wytwornia
Sprzetu Komunikacyjnego “PZL-Swidnik” Spolka Akcyjna and we have performed limited
documentary evidence procedures, in order to collect information about the processes andprocedures that support the collection, aggregation, processing and transmission of nonfinancial data and information to the management responsible for the preparation of the DNF.
Furthermore, for significant information, considering the Group activities and characteristics:--

at group levela)with reference to the qualitative information included in the DNF, and in particular
to the business model, policies implemented and main risks, we carried out inquiries
and acquired supporting documentation to verify its consistency with the available
evidences;b)with reference to quantitative information, we have performed both analyticalprocedures and limited assurance procedures to ascertain on a sample basis thecorrect aggregation of data.

for Leonardo S.p.A. (Pomigliano site – Aerostructures division; Venegono Superiore –Aircrafts division), Leonardo UK Ltd (Edinburgh site – Electronics division - and Yeovil site
- Helicopters division), Leonardo US Holding LLC (Melbourne Babcock site – DRS), andWytwornia Sprzetu Komunikacyjnego “PZL-Swidnik” Spolka Akcyjna (Świdnik site –Helicopters division) that we have selected based on their activities, relevance to theconsolidated performance indicators and location, we have carried out site visits andremote interviews during which we have had discussions with management and haveobtained evidence about the appropriate application of the procedures and thecalculation methods used to determine the indicators.

Conclusion
Based on the procedures performed, nothing has come to our attention that causes us to believe thatthe DNF of the Leonardo Group for the year ended on December 31, 2023 has not been prepared, inall material aspects, in accordance with the requirements of articles 3 and 4 of the Decree and the GRI
Standards.
Our conclusion on the DNF of the Leonardo Group do not refer to the information included in theparagraph ‘’Information on EU Taxonomy for sustainable activities’’ of the DNF itself, that are requiredby article 8 of the European Regulation 2020/852.
Rome, March 15, 2024
EY S.p.A.
Signed by: Riccardo Rossi, Auditor

3

EY S.p.A.
Via Lombardia, 3100187 Roma

Tel: +39 06 324751
Fax: +39 06 324755504
ey.comThis report has been translated into the English language solely for the convenience of international
readers.

Independent auditor’s report on a selection of indicators presented in
the consolidated disclosure of non-financial information(Translation from the original Italian text)
To the Board of Directors of
Leonardo S.p.A.
We have been appointed to perform a reasonable assurance engagement on a selection of indicators(hereinafter "Selection of Indicators") for the year ended December 31, 2023, presented in the
consolidated disclosure of non-financial information of Leonardo S.p.A. and its subsidiaries(hereinafter "Group" or “Leonardo Group”) for the year ended December 31, 2023 (hereinafter‘’DNF’’), identified in the paragraph "Methodology note of the NFS" of the DNF itself and reported in
section “Auditor’s responsibility" of this report.

Responsibilities of Directors for the Selection of Indicators
The Directors are responsible for the preparation of the Selection of Indicators in accordance with the“Global Reporting Initiative Sustainability Reporting Standards” defined by GRI – Global Reporting
Initiative (hereinafter “GRI Standards”), as reported in the paragraph "Methodology note of the NFS"of the DNF.
The Directors are also responsible for that part of internal control that they consider necessary inorder to allow the preparation of the Selection of Indicators that are free from material misstatements
caused by fraud or not intentional behaviors or events.

Auditor’s independence and quality control
We are independent in accordance with the ethics and independence principles of the International
Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA
Code) issued by the International Ethics Standards Board for Accountants, based on fundamental
principles of integrity, objectivity, professional competence and diligence, confidentiality andprofessional behavior.
Our audit firm applies the International Standard on Quality Control 1 (ISQC Italia 1) and, as a result,maintains a quality control system that includes documented policies and procedures regarding
compliance with ethical requirements, professional standards and applicable laws and regulations.

Auditor’s responsibility
It is our responsibility to express, on the basis of the procedures performed, an opinion about thecompliance of the Selection of Indicators with the requirements of the GRI Standards. Our work has
been performed in accordance with the criteria of the principle International Standard on Assurance
Engagements ISAE 3000 (Revised) - Assurance Engagements Other than Audits or Reviews ofHistorical Financial Information issued by the International Auditing and Assurance Standards Board(IAASB) for reasonable assurance engagements. This principle requires the planning and execution ofwork in order to obtain a reasonable assurance that the Selection of Indicators are free from material
misstatements.
EY S.p.A.
Sede Legale: Via Meravigli, 12 – 20123 Milano
Sede Secondaria: Via Lombardia, 31 – 00187 Roma
Capitale Sociale Euro 2.600.000,00 i.v.
Iscritta alla S.O. del Registro delle Imprese presso la CCIAA di Milano Monza Brianza Lodi
Codice fiscale e numero di iscrizione 00434000584 - numero R.E.A. di Milano 606158 - P.IVA 00891231003
Iscritta al Registro Revisori Legali al n. 70945 Pubblicato sulla G.U. Suppl. 13 - IV Serie Speciale del 17/2/1998
A member firm of Ernst & Young Global Limited

As part of our engagement, we have carried out procedures aimed at obtaining evidence on the dataand information included in the Selection of Indicators. The procedures defined are based on theauditor’s professional judgment, including the assessment of the risks of material misstatement,
whether due to fraud or error. In performing these risk assessment procedures, the auditor considers
the internal control related to the Selection of Indicators in order to design assurance procedures thatare appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the Group’s internal control.
In particular, we have performed the following procedures:• conducted interviews with relevant personnel to understand the business and reporting
processes, including sustainability objectives, principles and management aspects related to
the Selection of Indicators;• conducted interviews with key personnel to understand the sustainability reporting system
during the reporting period, including the process for collecting, collating and reporting the
Selection of Indicators;• checked that the calculation criteria have been correctly applied in accordance with themethodologies outlined by the GRI Standards;• undertook analytical review procedures to support the reasonableness of the data;• identified and testing assumptions supporting calculations;• tested, on a sample basis, underlying source information to check the accuracy of the data;• inspected relevant documentation of the systems and processes for compiling, analyzing, andaggregating data in the reporting period and testing such documentation on a sample basis;• performing site visits to visually inspect operations and perform inquiries and inspect
documents on a sample basis.
Below is reported the Selection of Indicators on which a reasonable assurance engagement has been
performed:
•
•
•
•
•
•
•
•

GRI 302-1: Energy consumption within the organization;
GRI 302-3: Energy intensity – (measured on consolidated revenues);
GRI 303-3: Water withdrawal;
GRI 305-1: Direct (Scope 1) GHG emissions;
GRI 305-2: Energy indirect (Scope 2) GHG emissions;
GRI 305-4: GHG emissions intensity – (measured on consolidated revenues);
GRI 306-3: Waste generated;
GRI 401-1: New employee hires and employee turnover (including hires of women with STEM
degree);• GRI 403-9: Work-related injuries;• GRI 404-1: Average hours of training per year per employee;• GRI 405-1: Diversity of governance bodies and employees.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.

OpinionIn our opinion the Selection of Indicators for the year ended December 31, 2023, presented in the
DNF of the Group, identified in the paragraph "Methodology note of the NFS" of the DNF itself andreported in section “Auditor’s responsibility" of this report have been prepared, in all material aspects,
in accordance with the GRI Standards.
Rome, March 15, 2024
EY S.p.A.
Signed by: Riccardo Rossi, Auditor
This report has been translated into the English language solely for the convenience of international
readers.

2

Report on operations at 31 December 2023

PART 3 – OTHER INFORMATION ON THE REPORT ON
OPERATIONS

Report on operations at 31 December 2023

PERFORMANCE OF THE PARENT COMPANY
The KPIs for the period and the main changes that characterised the Parent Company’s performancecompared to 2022 are reported below.
New orders
Order backlog
Revenues
EBITDA
EBITA
ROS
EBIT
EBIT Margin
Net result before extraordinary transactions
Net result
Net Debt
FOCF
ROI
Workforce

2022

5.5%
3.7%

4.7%

9,060
25,866
9,556
968
525
354
1,701
1,701
4,442
484
30,457

2023

5.7%
4.1%

4.7%

11,78927,426
9,937
1,011
564
411
841
784
3,555
322

% Change

0.2 p.p.
0.4 p.p.

0.0 p.p.

30.1%
6.0%
4.0%
4.4%
7.4%
16.1%
(50.6%)(53.9%)(20.0%)(33.5%)

31,255

2.6%

For the definition of indices, reference should be made to the paragraph “Non-GAAP alternative performance indicators”.

The performance of Leonardo SpA’s key indicators in 2023 confirmed the forecasts of a recovery in growthreported in the financial statements as at 31 December 2022, showing an improvement in the Company's
industrial performance in 2023.
The volume of new orders stood at excellent levels, with revenues rising in all the main business areas.
In particular:•

the volume of new orders, equal to €mil. 11,789 , showed a significant growth of 30.1%, compared
to 2022, confirming the good competitive positioning of the Company's products and solutions;•revenues of €mil. 9,937 showed, compared to 2022 (€mil. 9,556 ), an increase of 4% mainly thanks
to the performance of the Helicopters segment;•

EBITA, equal to €mil. 564, showed an increase of €mil. 39 (+ 7.4%) against the comparative period.
Operating profitability stood at 5.7% with a slight increase of 0.2% on 2022;•

EBIT, equal to €mil. 411 , showed, compared to 2022, an increase of €mil. 57, benefitting from
improved EBITA and being affected by a lower incidence of restructuring costs compared to 2022;•

the net result before extraordinary transactions, equal to €mil. 841 (€mil. 1,701 at 31 December2022), recorded a decrease of €mil. 860 on 2022 which benefitted from the write-back, stated among
financial income, of the investment in the US subsidiary Leonardo US Holding for €mil. 1,290
following the transaction to restructure the Leonardo Group's investments in the United States. The
net result, amounting to €mil. 784, includes the charges, equal to €mil. 57, related to the negotiations
that have been started to dispose of the investment in Industria Italiana Autobus SpA.

181

Report on operations at 31 December 2023
Reclassified income statement(€ millions)

Note

2022

2023

ChangeRevenues(*)
Purchase and personnel expenses(**)
Other net operating income(expenses)(***)
Amortisation, depreciation and write-offs
EBITA
ROS
Non-recurring income/(expenses)
Restructuring costs
Amortisation of intangible assets acquired as part ofbusiness combinations
EBIT
EBIT Margin(****)Net financial income (expense)
Income taxes

9,556(8,505)
(83)
(443)
525
5.5%
(61)
(108)

9,937
(8,957)
32
(448)
564
5.7%
(103)
(48)

(2)
354
3.7%
1,416
(69)

(2)
411
4.1%
514
(84)

Net result before extraordinary transactions

1,701

841

-

(57)

1,701

784

Net result related to discontinued operations andextraordinary transactions
Net result(*****)% Change

381

4.0%

39
0.2 p.p.

7.4%

57
0.4 p.p.

16.1%

(860)

(50.6%)(917)(53.9%)

Notes to the reconciliation between the reclassified income statement and the statutory income statement (for details, reference is madeto the Note on “Non-GAAP alternative performance indicators”):(*)
Includes “Purchases and Personnel expense” (excluding restructuring costs and non-recurring costs) and “Accruals (reversals) for
onerous contracts (losses at completion)”;(**)
Includes the net amount of “ Other operating income ” and “ Other operating expenses ” (excluding restructuring costs, nonrecurring income/(expense) and accruals (reversals) for onerous contracts (losses at completion);(***) Includes “Amortisation, depreciation and impairment losses and value adjustments to financial assets”, excluding the amortisation
charge referable to intangible assets acquired as part of business combinations, goodwill impairment and write-downs regarded
as “Non-recurring costs”;(****) Includes “Financial income (expense)” (net of the gains and losses relating to extraordinary transactions);(*****) Includes gains and losses on extraordinary transactions (main acquisitions and disposals).

Financial performance
Cash and cash equivalents came to €mil. 1,791, up by €mil. 751 compared to 2022, while FOCF, equal to €mil.
322, decreased by € mil. 162 on the previous year mainly as a result of a higher use of cash flows fromoperations.

182

Report on operations at 31 December 2023
Reclassified cash flow statement(€ millions)

Note

Cash flows generated/(used) from operating activities
Dividends received
Cash flows from ordinary investing activities
Free Operating Cash Flow (FOCF)(*)

Strategic transactions
Change in other investing activities
Net change in loans and borrowings
Dividends paid
Net increase (decrease) in cash and cash equivalents

(**)

(***)
(****)Cash and cash equivalents at 1 January
Exchange rate differences
Cash and cash equivalents at 31 December

2022

2023

Change

821
131
(468)
484

576
185
(439)
322

(616)
141
(766)
(79)
(836)

667
(153)
(81)
755

1,875
1
1,040

1,040
(4)
1,791

(162)

% Change(33.5%)

Notes on the reconciliation between the reclassified cash flow and the statutory cash flow:(*)
Includes “Cash flows generated from (used in) operating activities”, excluding debt payments pursuant to Law 808/1985;(**)
Includes “Cash flows generated from (used in) investing activities”, including payments and collections under Law 808/1985
and net of dividends collected;(***) Includes “Other investing or divestment activities” classified as “Strategic transactions”;(****) Includes “Other investing or divestment activities”, excluding dividends collected from non-consolidated companies, theeffects of transactions classified as “Extraordinary transactions” and collections under Law 808/1985.

Reclassified statement of financial position(€ millions)Note

Non-current assets
Non-current liabilities
Capital assets

31 December 2022

31 December 2023

15,342(1,745)
13,597

15,177(1,798)13,379(421)
3,140(2,475)
244
(786)
(954)
(1,496)

(658)
3,634
(2,802)
174
(804)
(741)
(1,371)

Net invested capital

12,101

12,008Equity

7,659

8,413

Net Debt

4,442

3,555

-

40

(*)

Inventories
Trade receivables
Trade payables
Working capital
Provisions for short-term risks and charges
Other net current assets (liabilities)
Net working capital

(**)

(***)

Net (assets)/liabilities held for sale(****)

Notes to the reconciliation between the reclassified and the statutory statements of financial position (for details, reference ismade to the Note on “Non-GAAP alternative performance indicators”):(*)
Includes all non-current assets and all non-current liabilities, excluding “Non-current loans and borrowings” and the main
non-current financial receivables;

183

Report on operations at 31 December 2023(**) Includes “Inventories”, “Contract Assets” and “Contract Liabilities”;(***) Includes “Income tax receivables” and “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”.

The Company’s net debt as at 31 December 2023 came to €mil. 3,555 with a decrease of 20% (€mil.4,442 at
31 December 2022) and breaks down as follows:
Nel financial debt(€ millions)
Bonds
Bank debt
Cash and cash equivalents
Net bank debt and bonds
Current loans and receivables from related parties
Other current loans and receivables
Current loans and receivables and securities
Forex derivatives covering debt items
Non current financial receivables from Group's
consolidated entities
Other related parties loans and borrowings
Lease liabilities from related parties
Lease liabilities
Other financial debts
Net Debt

31 December 2022 of which current

31 December 2023 of which current

1,628
1,103
(1,040)
1,691

36
22
(1,040)

1,631
1,084
(1,791)924

635
41(1,791)

(277)
(49)
(326)

(277)
(49)

(507)
(14)
(521)

(507)
(14)

19

6

(75)

(113)

2,387
580
81
85
4,442

2,230
107
19
26

2,614
498
97
50
3,555

2,459
117
19
16

The reconciliation with the net financial position required by CONSOB Communication no. DEM/6064293 of 28 July 2006, updated
by the provisions of ESMA Guideline 32-382-1138 of 4 March 2021 as implemented by CONSOB warning notice no. 5/21 of 29 April
2021, is provided in Note 21 of the Separate Financial Statement.

Net debt decreased by €mil. 887; such improvement is mainly attributable to the cash inflows realized by theCompany during 2023.
At 31 December 2023, Leonardo SpA had cash resources available for a total of about €mil. 4,210, to meetthe financing needs of the Group’s recurring operations, broken down as follows:•

an ESG-linked Revolving Credit Facility totaling €mil. 2,400, divided into two tranches of €mil. 600
and €mil. 1,800 maturing on 7 October 2024 and 7 October 2026, respectively;•

additional unconfirmed short-term lines of credit of about €mil. 810;•a Framework Programme for the issuance of Multi-Currency Commercial Papers on the European
market, for a maximum amount of €bil. 1 with maturity 2 August 2025.

The Company also has a Sustainability-Linked loan of €mil. 260 granted by the European Investment Bank –whose contract was signed in November 2022 – entirely unused at the date of this document.
Furthermore, Leonardo has unconfirmed lines of credit for guarantees for a total €mil. 10,479, €mil. 3,019 ofwhich was still available at 31 December 2023.

184

Report on operations at 31 December 2023
Below are reported the statements of reconciliation between the line items of the reclassified statementswith the statutory financial statements for financial year 2023 of Leonardo SpA.
Onereous
Restructuration and
Extraord.
contracts (losses
non recurring costs
transactions.
at completion)

PPA
amortization

Reclassified
scheme(€ millions)

SchemeRevenues

9,937

Purchase and personnel
expenses(9,066)52

57(8,957)

6

83

(57)

32

Other net operating
income/(expenses)
Amortisation, depreciation
and write-offs
EBITA
Non-recurringincome/(charges)
Restructuring costs
Amortisation of intangible
assets acquired as part ofbusiness combinations
EBIT
Net financial income(expense)
Income taxes
Net result before
extraordinary transactions
Net result related to
discontinued operations
and extraordinarytransactions
Net result

9,937

(466)

2

16

(448)
564

(103)

(103)

(48)

(48)

(2)

(2)
411

457

57

(84)

(€ millions)Non-current assets
Non-current liabilities

(84)
841

(57)

SchemeFinancialreceivables andcash

15,290(4,483)(113)

13,065(15,419)(2,311)

Financial payables

Hedging
derivatives on
debt items

Reclassified
scheme15,177(1,798)2,685

13,3793,288

6

Net working capital
Total equity

10,760(12,131)(1,371)

8,413

8,413

(2,424)

Net Debt
Net (assets)/liabilities held for sale

(57)
784

784

Capital assets
Current assets
Current liabilities

514

40

5,973

6

3,555
40

185

Report on operations at 31 December 2023(€ millions)
Cash flows generated/(used) from operating
activities
Dividends received
Investments in property, plant and equipment
and intangible assets
Sales of property, plant and equipment andintangible assets
Cash flows from ordinary investing activities
Free Operating Cash Flow (FOCF)
Other investing activities
Cash flows generated (used) from investing
activities
Bond buy repayments
Net change in other loans and borrowings
Net change in loans and borrowings
Dividends paid
Cash flows generated (used) from financing
activities
Net increase (decrease) in cash and cash
equivalents
Exchange rate differences
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December

Dividends
received

SchemeRoyalties / Law no. 808
payables and receipts

556

20
185

Reclassified
scheme

576
185

453
(2)
(451)

12

884

(185)

(32)

(439)
322
667

433
(153)
(153)
(81)

(153)
(81)

755

755

755

755

(4)
1,040
1,791

(4)
1,040
1,791

THE PARENT COMPANY’S OFFICESThe Parent Company’s offices are:•

Registered Office: Rome, Piazza Monte Grappa, 4•Secondary office: Genoa, Corso Perrone, 118

186

Report on operations at 31 December 2023

RECONCILIATION OF NET PROFIT AND SHAREHOLDERS' EQUITY OF THE GROUP PARENT
WITH THE CONSOLIDATED FIGURES AT 31 DECEMBER 2023(€ millions)

EquityGroup Parent equity and net profit (loss)
Excess of shareholders’ equities in the annual financial statements compared with thecarrying amounts of the equity investments in consolidated companies

2023
of which: Net profit(loss) for the year
8,413
784
(4,071)526

Consolidation adjustments for:- difference between purchase price and corresponding book equity- elimination of intercompany profits- dividends from consolidated companies- Translation differences

3,602
78
(222)

91
(743)
-

Group equity and net profit (loss)

7,800

658

761

37

8,561

695

Non-controlling interests
Total consolidated equity and net profit (loss)

187

Report on operations at 31 December 2023

PROPOSAL TO THE SHAREHOLDERS' MEETING
Dear Shareholders,
The 2023 financial statements, which we submit for your approval, close with a net profit of Euro783,697,113.66 . In light of the foregoing, we submit the following proposed resolution for your approval:“The Ordinary Shareholders’ Meeting of LEONARDO - Società per azioni:−

considering the Report of the Board of Directors;−

considering the Report of the Board of Statutory Auditors;−

having examined the financial statements at 31 December 2023;−

having acknowledged the report of EY S.p.A.

resolves−

to approve the Directors’ Report on operations and the financial statements at 31 December 2023;−

to approve the proposal posed by the Board of Directors of allocating the profit of €783,697,113.66 for the 2023 financial year as follows:−

as to € 39,184,855.68, equal to 5% of the profit, to legal reserve;−

as to € 0.28, on account of dividend, by paying it, including any withholding prescribed by law, asfrom 26 June 2024, with "detachment date" of coupon no. 14 falling on 24 June 2024 and "record
date" (i.e. date on which the dividend is payable, pursuant to Art.83-terdecies of Legislative
Decree no. 58 of 24 February 1998 and Art. 2.6.6, paragraph 2, of the Regulations for the Marketsorganized and managed by Borsa Italiana S.p.A.) falling on 25 June 2024; the above provisions
refer to each ordinary share that will be outstanding at the detachment date of the coupon,
excluding treasury shares in portfolio at that date, without prejudice to the regime of those thatwill be actually awarded, under the current incentive plans, during the current financial year.

−with regard to the remaining amount, to retained earnings.”

For the Board of Directors
The Chairman(Stefano Pontecorvo)

188

CONSOLIDATEDDECEMBER 2023

FINANCIALSTATEMENTS

AT

31

Consolidated Financial Statements at 31 December 2023

CONSOLIDATED ACCOUNTING STATEMENTS
Consolidated separate income statementsof whichwithrelatedpartiesof whichwithrelatedparties(€ millions)

Note

2022

Revenues
Other operating income
Purchase and personnel expenses
Amortisation, depreciation and financial assets value adjustments
Other operating expenses
Income before tax and financial expenses

27
28
29
30
28

14,713775(13,154)
(627)
(878)
829

2,187
4
(1,478)Financial income
Financial expenses
Share of profits/(losses) of equity-accounted investees
Operating profit (loss) before income taxes and discontinued operations

31
31
12

392
(380)
142
983

1
(9)

Income taxes
Profit (loss) from discontinued operations
Net profit/(loss) for the period attributable to:

32
33

(51)
932

(129)
695

927
5

658
37

1.611
1.611
n.a

1.144
1.144
n.a

- owners of the parent- non-controlling interests
Earnings/(losses) per share- basic and diluted from continuing operations- basic and diluted from discontinued operations

34

190

2023

-

15,291
650(13,641)
(645)
(724)
931

2,237
3
(1,247)

166
(421)
148
824

6
(46)

-

Consolidated Financial Statements at 31 December 2023
Consolidated statement of comprehensive income(€ millions)

Note

2022

2023
932

Profit (loss) for the period
Other comprehensive income (expenses):Comprehensive income/expense which will not be subsequently reclassified
within the profit (loss) for the period:- Measurement of defined-benefit plans:- revaluation- exchange rate gains (losses)- Tax effect

20
(304)
(20)
20

Comprehensive income/expense which will or might be subsequently
reclassified within the profit (loss) for the period:- Changes in cash flow hedges:- change generated in the period- transferred to the profit (loss) for the period- exchange rate gains (losses)

(44)
20
20

- Tax effect and other movements

20

(83)
6

88
(236)

20

- Translation differences- change generated in the period- transferred to the profit (loss) for the period

(324)

695

12
-

(24)

12

(77)

17
(60)

89
(17)
-

(74)
-

72

(74)

6
(6)

(18)
(20)

Current portion of “Other comprehensive income (expenses)”, equityaccounted investees

130

(30)

Total other comprehensive income (expense), net of tax:

(112)

(110)

Total comprehensive income (expense), attributable to:

820

585

- Owners of the parent- Non-controlling interests

815
5

572
13

Total comprehensive income (expense), attributable to Owners of theparent815

572- from continuing operations- from discontinued operations

815
-

572
-

191

Consolidated Financial Statements at 31 December 2023
Consolidated statement of financial position(€ millions)

Note

Intangible assets
Property, plant and equipment
Investment property
Right of use
Investments accounted for under equity method
Receivables
Deferred tax assets
Other non-current assets
Non-current assets

910Inventories
Contract assets
Trade receivables
Income tax receivables
Loans and receivables
Other assets
Cash and cash equivalents
Current assets

15
16
17

Non-current assets held for sale33

of which
31 December 2022 with relatedpartiesof which
31 December 2023 with relatedparties

7,410
2,368
49
536
2,099
276
1,133
72
13,943

7,565
2,548
44
560
2,087
231
1,213
47
14,295

11
12
13
32
13

5,338
3,652
3,338
60
105
598
1,511
14,60217
18
19

Total assets

56
3

28,582

30,693

2,499
5,301
7,800
761
8,561

2,499
4,684
7,183
516
7,699

Borrowings (non-current)
Employee benefits
Provisions for risks and charges
Deferred tax liabilities
Other non-current liabilities
Non-current liabilities

21
23
22
32
24

3,531
315
752
246
861
5,705

Contract liabilities
Trade payables
Borrowings (current)
Income tax payables
Provisions for short-term risks and charges
Other current liabilities
Current liabilities

16
25
21

8,015
3,054
1,082
127
1,078
1,810
15,166

Liabilities associated with assets held for sale

33

192

720

5,693
3,636
3,685
91
205
681
2,407
16,398-20

Total liabilities
Total liabilities and equity-

37

Share capital
Other reserves
Equity attributable to the owners of the parent
Equity attributable to non-controlling interests
Total equity

22
24

13

100

-

317
862

47

2,885
301
778
268
901
5,133
8,733
3,268
2,044
104
1,087
1,723
16,9591240

20,88328,582

22,132
30,693

17
-

826
183
5

100

-

437
1,192

42

Consolidated Financial Statements at 31 December 2023
Consolidated statement of cash flowsof whichwithrelatedparties2022

of whichwithrelatedparties(€ millions)

Note

Gross cash flows from operating activities
Change in trade receivables/payables, contract
assets/liabilities and inventories
Change in other operating assets and liabilities
and provisions for risks and charges
Interest paid
Income taxes received/(paid)
Cash flows generated (used) from operating
activities

35

1,883

35

(239)

(89)

(49)

12

35

(265)

46

(372)

-

(169)
(58)

(8)
-

(173)
(200)

(40)
-

Investments in property, plant and equipment
and intangible assets
Sales of property, plant and equipment andintangible assets
Other investing activities
Cash flows generated (used) from investing
activities

Net increase (decrease) in cash and cash
equivalents
Exchange rate differences and other changes
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December

193

1,980

1,152

1,186

(762)

(782)

16

13

(45)

BEI Loan and Term Loan repayment
Bond redemption
Net change in other borrowings
Dividends paid
Cash flows generated (used) from financing
activities

2023

-

507

(791)

(262)

(547)
(841)
66
(80)

(19)
90
(83)

84

(1,402)(12)(1,041)

912

73
2,479

(16)
1,511

1,511

2,407

-

183

Consolidated Financial Statements at 31 December 2023
Consolidated statement of changes in equity(€mil.)

1 January 2022
Profit (loss) for the period
Other comprehensive income (expenses)
Total comprehensive income (expenses)
Dividends resolved
Repurchase of treasury shares less shares soldTotal transactions with owners of the parent,
recognised directly in equity

EquityNonCash Revaluation
attributa
Translati
control
Share Retained flow
reserve of
ble to
Total
on
ling
capital earnings hedge
definedowners
equityreserveinteres
reserve benefit plansof thets
parent
2,499

4,185

(53)

55

(258)

6,428

27

6,455

-

927
(13)
914

(22)
(22)

(93)
(93)

16
16

927
(112)
815

5
5

932
(112)
820

(79)
-

(1)

(80)
-

(79)
-

Acquisition (Disposal) of NCI without change incontrol
Other changes

(79)

-

(68)

-

-

(79)

(1)

(80)

13

67

12

475

487

23

1

(13)

(4)

7

10

17

31 December 2022

2,499

4,975

(74)

(38)

(179)

7,183

516

7,699

1 January 2023

2,499

4,975

(74)

(38)

(179)

7,183

516

7,699

-

658

58
58

(89)
(89)

(55)
(55)

658
(86)
572

37
(24)
13

695
(110)
585

(81)
-

(2)

(83)
-

Profit (loss) for the period
Other comprehensive income (expenses)
Total comprehensive income (expenses)
Dividends resolved
Repurchase of treasury shares less shares soldTotal transactions with owners of the parent,
recognised directly in equity(81)-

Acquisition (Disposal) of NCI without change incontrol
Other changes
31 December 2023

658

(81)

-

103

-

-

(81)

(2)

(83)

6

12

121

217

338

5

17

22

7,800

761

8,561

5
2,499

5,660

194

(16)

(121)

(222)

Consolidated Financial Statements at 31 December 2023

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2023
1. GENERAL INFORMATION
Leonardo S.p.A. (hereinafter also “the Company”) is a company limited by shares based in Rome (Italy), at
Piazza Monte Grappa 4, and is listed on the Italian Stock Exchange (FTSE MIB).
The Leonardo Group (hereinafter also “the Group”) is a major Italian high technology organization operatingin the Helicopters, Defence Electronics and Security, Aircraft, Aerostructures and Space sectors.

2. FORM, CONTENT AND APPLICABLE ACCOUNTING STANDARDS
In application of EU Regulation 1606/2002 of 19 July 2002 and of Legislative Decree 38 of 28 February 2005,
the consolidated financial statements of the Leonardo Group were prepared in accordance with theinternational accounting standards (IFRS) endorsed by the European Commission, supplemented by therelevant interpretations (Standing Interpretations Committee - SIC and International Financial Reporting
Interpretations Committee - IFRIC) issued by the International Accounting Standard Board (IASB) and in force
at the year-end.
The general principle used in preparing these consolidated financial statements is the historical cost method,
except for those items that, in accordance with IFRS, are obligatory recognised at fair value, as indicated in
the valuation criteria of each item.
The consolidated financial statements are composed of the consolidated separate income statement, theconsolidated statement of comprehensive income, the consolidated statement of financial position, theconsolidated statement of cash flows, the consolidated statement of changes in equity and the related notes
to the financial statements.
Among the options permitted by IAS 1, the Group has chosen to present its balance sheet by separating
current and non-current items and its income statement by the nature of its costs. Instead, the statement ofcash flows was prepared using the indirect method.
The International Financial Reporting Standards (IFRS) used for preparing these consolidated financial
statements are the same that were used in the preparation of the consolidated financial statements at 31
December 2022 except for what indicated below (Note 5).
All figures are shown in millions of euros unless otherwise indicated.
Preparation of the consolidated financial statements under the going-concern assumption required
management to make certain evaluations and estimates. The main areas affected by estimates orassumptions of particular importance or that have significant effects on the balances shown are described in
Note 4.
The consolidated financial statements at 31 December 2023 of the Leonardo Group were approved by the
Board of Directors on 12 March 2024 that authorised their distribution. Publication is scheduled for thesame day.
The consolidated financial statements are subject to a statutory audit by EY SpA.

195

Consolidated Financial Statements at 31 December 2023
3. ACCOUNTING POLICIES
3.1 Standards and scope of consolidation
The consolidated financial statements include the statements at 31 December 2023 of companies
consolidated on a line-by-line basis, which have been prepared in accordance with the IFRSs as applied within
the Leonardo Group. The consolidated entities and the respective shares held either directly or indirectly by
the Group are reported in the attachment “Scope of consolidation”.
Subsidiaries
The entities over which Leonardo exercises a controlling power, either by directly or indirectly holding amajority of shares with voting rights or by exercising the right to earn the variable profits deriving from its
relations with those same entities, impacting on such profits and exercising its power on the company, also
regardless of the nature of the shareholding, have been consolidated on a line-by-line basis. With regard to
the activities of the Group in the USA, it is noted that some of them are subject to specific governance rules(such as the Special Security Agreement and the Proxy Agreement), which were agreed with the Defense
Counterintelligence and Security Agency (“DCSA”) of the US Department of Defense (in charge of theprotection of information related to the national security or, however, subject to special confidentiality
restrictions). In particular, the Leonardo DRS group is managed through a Proxy Agreement, which provides
for the appointment by Leonardo US Holding (the parent company of Leonardo DRS) – after consultation
with Leonardo S.p.A. - of the US Proxy Holders subject to the approval of the DCSA. These Proxy Holders (withUS nationality and residence, security clearance and independent with respect to Leonardo DRS and the
Leonardo Group), besides acting as the directors of the company, together with Non-Proxy Holders directors(including the CEO) appointed by them according to the designation by Leonardo US Holding, are also entitledto vote on behalf of the latter, in the context of a trust relationship on whose basis their activity must protect,on one hand, the legitimate interest of the shareholders, and, on the other hand, the need for national
security in the United States. The Proxy Holders are always in a number greater than the Non-proxy Holders
and cannot be discharged by the shareholder, except in case of fraud or gross negligence or, subject to theapproval of the DCSA, if their conduct infringes the principle of preservation of Leonardo DRS assets and thelegitimate interests of the shareholders. Moreover, the Proxy Holders are committed to implementing
specific governance procedures in order (i) to guarantee shareholders their rights and an adequate flow of
information, above all with regard to the results of operations and financial data, with the consent of the
DCSA and in compliance with the restrictions under the Proxy Agreement in relation to “classified”
information, as well as (ii) to protect the management against any possible influence exercised by the foreign
partner as to “sensitive” information. On the contrary, the decisions on M&A transactions and the transfer
of intellectual property rights, as well as extraordinary debt assumption and intercompany businessreorganizations are the direct competence of the shareholder.
Not consolidated on a line-by-line basis are those entities which, because of the dynamics of their operations(e.g. consortia without shares and controlling interests in equity consortia which, by charging costs to theirmembers, do not have their own financial results and the financial statements of which do not, net ofintercompany assets and liabilities, have material balances) or their current status (e.g. companies that are
no longer operational, have no assets or personnel, or for which the liquidation process appears to be
essentially concluded), would be immaterial to the Group’s situation in both quantitative and qualitative
terms.

196

Consolidated Financial Statements at 31 December 2023
All controlled entities are consolidated at the date on which control was acquired by the Group. The entities
are removed from the consolidated financial statements at the date on which the Group loses control.
Business combinations are recognised using the purchase method where the purchase cost is equal to thefair value, at the date of the purchase of assets acquired, of liabilities incurred or assumed, as well as thecapital instruments, if any, issued by the purchaser. The cost of the transaction is allocated recognising assets,
liabilities and the identifiable contingent liabilities of the acquired company, at their related fair value at thepurchase date. Any positive difference between the cost of the transaction and the fair value at the date of
the purchase of the assets and liabilities is allocated to goodwill. In the event the process of allocating thepurchase price should result in a negative difference, this difference is recorded in the income statement.
Any capital gains or negative differences arising from business combinations between entities under common
control ("transactions under common control") are not recognised through P&L but directly in equity in theseparate financial statements.
Additional charges related to the acquisition are recognised in the income statement at the date whenservices are rendered.
In the case of purchase of controlling stakes other than 100% stakes, goodwill is recognised only to the extent
of the portion attributable to the Group Parent. The value of the non-controlling interests is determined inproportion to the non-controlling equity investments in the identifiable net assets of the acquired company.
In case the business combination is carried out through more than one phase, at the moment of the taking
over the equity investments previously held are re-measured at their fair value and the difference (positiveor negative), if any, is recognised in the income statement.
In the case of purchase of non-controlling stakes, after control is obtained, the positive difference between
the acquisition cost and the book value of the non-controlling stakes acquired is recorded as a reduction of
the net equity of the Group Parent. In the event of disposal of stakes while control is retained, the difference
between the cashed consideration and the book value of the stakes sold is recorded directly as an increaseof the net equity, without recording in the income statement.
Amounts resulting from transactions with consolidated entities have been eliminated, particularly whererelated to receivables and payables outstanding at the end of the period, as well as interest and other income
and expenses recorded on the income statements of these enterprises. Also eliminated are the net profits orlosses posted between the consolidated entities along with their related tax adjustments.
Jointly controlled entities and other equity investments
Joint Arrangements, based on which joint control over an arrangement is assigned to two or more parties,
are classified as either a Joint Operation (JO) or a Joint Venture (JV), on the basis of an analysis of theunderlying contractual rights and obligations. In particular, a Joint Venture is a joint arrangement whereby
the parties, whilst holding control over the main strategic and financial decisions through voting mechanisms
requiring the unanimous consent on such decisions, do not hold legally significant rights to the individual
assets and liabilities of the JV. In this case joint control regards the net assets of the joint ventures. This formof control is reflected in the financial statements using the equity method, as described below. A Joint
Operation is a joint arrangement whereby the parties have rights to the assets, and obligations for theliabilities. In this case, individual assets and liabilities and the related costs and revenues are recognised in
the financial statements of the party to the arrangement on the basis of the rights and obligations to each
asset and liability, regardless of the interest held. After initial recognition, the assets, liabilities and related
costs are valued in accordance with the reference accounting standards applied to each type of asset/liability.
The Group’s joint arrangements are all classified as joint ventures.
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Consolidated Financial Statements at 31 December 2023
Entities over which significant influence is exercised, which generally corresponds to a holding of between
20% (10% if listed) and 50% (equity investments in associates), and Joint Ventures (as qualified above) areaccounted for using the equity method. When the equity method is applied, the value of the investment isin line with shareholders’ equity adjusted, when necessary, to reflect the application of IFRSs, and includes
the recognition of goodwill (net of impairments) calculated at the time of purchase, and to account for the
adjustments required by the standards governing the preparation of consolidated financial statements. Gains
and losses realized among consolidated entities valued at equity and other Group entities consolidated on aline-by-line basis, are eliminated. In the event the Group has evidence of an impairment loss of theinvestment, in excess of the amount accounted for under the equity method, the Group will proceed withcalculating the impairment to be recorded in the income statement which is determined as the difference
between the recoverable amount and the carrying amount of the investment.
Any value losses in excess of book value are recorded in the provision for risks on equity investments, to theextent that there are legal or implicit obligations to cover such losses, which are in any case within the limitsof the book equity.
The fair value of equity investments, in the event this method applies, is calculated based on the bid price ofthe last trading day of the month for which the IFRS report was prepared or based on financial valuation
techniques for not listed instruments.
Investments available for sale, like those acquired with the sole purpose of being disposed within thesubsequent twelve months, are classified separately within “Assets held for sale” applying the recognition
criteria described in Note 3.23.
3.2 Segment information
In accordance with the compliance model followed, management has adopted operating segments that
corresponds to the business sectors in which the Group operates (Helicopters, Defence Electronics andSecurity, Aircraft, Aerostructures, Space and Other Activities).
3.3 Currency translation
Identification of the functional currency
The balances of the financial statements of each Group entity are presented in the currency of the primaryeconomy in which each enterprise operates (the functional currency). The consolidated financial statements
for the Leonardo Group have been prepared in euros, as this is the functional currency of the Group Parent.
Translation of transactions denominated in a foreign currency
Items expressed in a currency other than the functional currency, whether monetary (cash and cash
equivalents, receivables or payables due in pre-set or measurable amounts, etc.) or non-monetary (advances
to suppliers of goods and services, goodwill, intangible assets, etc.), are initially recognised at the exchange
rate prevailing at the date on which the transaction takes place. Subsequently, the monetary items aretranslated into the functional currency based on the exchange rate at the reporting date, and any differences
resulting from this conversion are recognised in the income statement. Non-monetary items continue to be
carried at the exchange rate on the date of the transaction.
Translation of financial statements expressed in a currency other than the functional currency
The rules for translating financial statements expressed in a foreign currency into the functional currency(except where the currency is that of a hyper-inflationary economy) are as follows:198

Consolidated Financial Statements at 31 December 2023
• the assets and liabilities presented are translated at the end-of-period exchange rate;• costs and revenues, charges and income presented are translated at the average exchange rate for theperiod in question, or at the exchange rate on the date of the transaction in the event this issignificantly different from the average rate;• the “translation reserve” includes both the exchange rate differences generated by the translation ofbalances at a rate different from that at the close of the period and those that are generated by thetranslation of opening equity balances at a rate different from that at the close of the period. The
translation reserve is reversed to the income statement upon the full or partial disposal of the equity
investment that results in loss of control.
Goodwill and adjustments deriving from the fair value measurement of assets and liabilities related to theacquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at theend-of-period exchange rate.
With reference to data comparability, the current year has been marked by the following changes in the euro
against the main currencies of interest for the Group:

U.S.A. Dollar
Pound Sterling

31 December 2022
averagefinal
1.05301.06660.85280.886931 December 2023
averagefinal
1.0813
1.10500.86980.8691% Changeaverage
final
2.7%
3.6%
2.0%
(2.0%)

3.4 Intangible assets
Intangible assets are non-monetary items without physical form, but which can be clearly identified andgenerate future economic benefits for the company. They are carried at purchase and/or production cost,
including directly related expenses allocated to them when preparing the asset for operations and net ofaccumulated amortisation (with the exception of intangibles with an indefinite useful life) and any
impairments of value. Amortisation begins when the asset is available for use and is recognised systematicallyover its remaining useful life. In the period in which the intangible asset is recognised for the first time, theamortisation rate applied takes into account the period of actual use of the asset.
Development costs and non-recurring costs are recognised in the item. For further details reference is madeto Notes 4.1 and 4.2.
Industrial patent and intellectual property rights
Patents and intellectual property rights are carried at acquisition cost net of amortisation and accumulated
impairment losses. Amortisation begins in the period in which the rights acquired are available for use and is
calculated based on the shorter of the period of expected use and that of ownership of the rights. The usefullife changes according to the business of the company and its range is between 3 and 15 years.
Concessions, licences and trademarks
This category includes: concessions, i.e. government measures that grant private parties the right to exclusive
use of public assets or to manage public services under regulated conditions; licences that grant the right touse patents or other intangible assets for a determinate or determinable period of time; trademarks that
establish the origin of the products of a given company; and licences for the know-how or software owned
by others. The costs, including the direct and indirect costs incurred to obtain such rights, can be capitalized
after receiving title to the rights themselves and are amortised systematically over the shorter of the period
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Consolidated Financial Statements at 31 December 2023
of expected use and that of ownership of the rights. The useful life changes according to the business of thecompany and its range is between 3 and 15 years.
Intangible assets acquired as a result of business combinations
The intangible assets acquired as a result of business combinations essentially refer to the order backlog andcommercial positioning, customer portfolio and software/know-how; they are valued during the purchaseprice allocation. The assets’ useful life changes according to the business of the acquired company and ranges
as follows:
Years
7-15
10-15
3

Customer backlog e commercial positioning
Backlog
Software/know how

Goodwill
Goodwill recognised as an intangible asset is associated with business combinations and represents thedifference between the cost incurred to acquire a company or division and the sum of the fair values assigned
at the purchase date, to the individual assets and liabilities of the given company or division. As it does nothave a definite useful life, goodwill is not systematically amortised but is subject to impairment tests
conducted at least once a year, according to a specific procedure approved each year by the Board of
Directors, unless market and operational factors identified by the Group indicate that an impairment test isalso necessary in the preparation of interim financial statements. In conducting an impairment test, goodwill
acquired in a business combination is allocated to the individual Cash Generating Unit (CGU) or to groups of
CGUs that are expected to benefit from the synergies of the combination, in line with the minimum level atwhich such goodwill is monitored within the Group. Goodwill related to unconsolidated associates, joint
ventures or subsidiaries is included in the value of investments.
3.5 Property, plant and equipment
Property, plant and equipment is measured at purchase or production cost net of accumulated depreciation
and any impairment losses. The cost includes all direct costs incurred to prepare the assets for use, as wellas any charges for dismantlement and disposal that will be incurred to return the site to its original condition.
Charges incurred for routine and/or cyclical maintenance and repairs are expensed in full in the period inwhich they are incurred. Costs related to the expansion, modernization or improvement of owned or leased
structural assets are only capitalized to the extent that such costs meet the requirements for being classified
separately as an asset or part of an asset. Any public grants related to property, plant and equipment arerecognised as a direct deduction from the asset to which they refer.
The value of an asset is adjusted by systematic depreciation calculated based on the residual useful life of
the asset itself. In the period in which the asset is recognised for the first time, the depreciation rate applied
takes into account the date in which the asset is ready for use. The estimated useful lives adopted by theGroup for the various asset classes are as follows:200

Consolidated Financial Statements at 31 December 2023
Years
Indefinite useful life
20-33
5-10
3-5
5-8

Land
Buildings
Plant and machinery
Equipment
Other assets

The estimated useful life and the residual value are revised at least annually.
Depreciation ends when the asset is sold or reclassified as asset held for sale.
In the event the asset to be depreciated is composed of significant distinct elements with useful lives thatare different from those of the other constituent parts, each individual part that makes up the asset isdepreciated separately, in application of the component approach to depreciation.
This item also includes equipment intended for specific programmes (tooling), although it is depreciated, aswith other non-recurring costs (Note 4.2), on the basis of units manufactured in relation to those expected
to be produced.
The gains and losses from the sale of assets or groups of assets are calculated by comparing the sales pricewith the related net book value.
3.6 Investment properties
Properties held to earn rentals or for capital appreciation are carried under “Investment properties”; they
are valued at purchase or construction cost plus any related charges, net accumulated depreciation andimpairment, if any.
3.7 Impairment of intangible assets and property, plant and equipment
Assets with indefinite useful lives are not depreciated or amortised but are rather subject to impairment tests
at least once a year to ascertain the recoverability of their book value. The test is carried out at each interim
reporting date as well, when there are internal and/or external indicators that an asset may be impaired.
For assets that are depreciated or amortised, an assessment is made to determine whether there is any
internal or external indication of a loss in value. If so, the recoverable value of the asset is estimated, withany excess being recognised in the income statement.
The recoverable value of an asset is the higher of its fair value less costs to sell and its value in use calculatedon the basis of a model of discounted cash flows. The discount rate encompasses the risks peculiar to theasset which have not been considered in the expected cash flows.
Assets which do not generate independent cash flows are tested as Cash Generating Units.
If the reasons for such write-downs should cease to obtain, the asset’s book value is restored within the limitsof the book value that would have resulted if no loss was recognised due to previous years’ loss of value. The
write-back is also taken to the income statement. Under no circumstances, however, is the value of goodwillthat has been written down restored to its previous level.
3.8 Inventories
Inventories are recorded at the lower of cost, calculated with reference to the weighted average cost, andnet realisable value. They do not include financial costs and overheads. The net realisable value is the sales
price in the course of normal operations net of estimated costs to finish the goods and those needed to make201

Consolidated Financial Statements at 31 December 2023
the sale. Inventories include, within “Point in time contract assets”, the production progress related tocontracts which do not meet the requirements for revenue recognition over time.
3.9 Revenues and contract assets/liabilities with customers
Revenue from contracts with customers is recognised when the performance obligations are satisfied
through the transfer of control over the good or service to the customer which may occur either over timeor at a point in time.
Contracts that meet the requirements for the recognition of revenue over time are classified under “contract
assets” or under “contract liabilities” based on the relationship between the Group’s performance and thecustomer’s payment. In particular:•“net contract assets” represent the entity’s right to consideration in exchange for goods andservices that the entity has transferred to a customer;• “(net) contract liabilities” represent the Group’s obligation to transfer goods or services to thecustomer for which the entity has received consideration (or for which the amount is due) from thecustomer.
If a contract provides for more than one performance obligation, representing a contract promise to transfer
a specific good or service to the customer (or a series of specific goods or services that are substantially thesame and are transferred according to the same methods), the classification under assets or liabilities iscarried out on an overall basis and not by each single performance obligation.
Contract assets and liabilities with customers in which the transfer of control over the goods or services tocustomers occurs over time are recognised using the percentage-of-completion measuring method,
according to which costs, revenues and margins are recognised based on the progress of production. The
state of completion is determined on the basis of the ratio between costs incurred at the measurement date
and the total expected costs for the programme or based on the production units delivered.
Vice versa, if the requirements for the recognition of contracts over time are not met, revenue is recognised
at a point in time; in such cases, the production progress related to contracts with customers is recognised
under contract assets at a point in time within “inventories”. Such case is mostly related to certain sales in
the helicopter sector where the transfer of control over certain types of goods coincides with the moment of
actual delivery of the same.
Contract assets (recognised under a special item or within inventories) are stated net of any provisions forwrite-down.
The assumptions upon which the estimates are made are periodically updated. Any impact on profit or loss
is recognised in the period in which the updates are made. If a contract is an “onerous” contract, the methods
for recognition are reported in note 4.4.
Contracts with payments in a currency other than the euro, the functional currency of the Group, aremeasured by converting the portion of payments due, calculated using the percentage-of-completion
method, at the exchange rate prevailing at the close of the period in question. However, the Group’s policy
for exchange-rate risk calls for all contracts in which cash inflows and outflows are significantly exposed to
exchange rate fluctuations to be hedged specifically. In such cases, the recognition methods described in
Note 4.3 below are applied.

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Consolidated Financial Statements at 31 December 2023
3.10 Financial assets
The Group classifies its financial assets into the following categories:•••

amortised cost;financial assets at fair value through profit or loss;
financial assets at fair value through other comprehensive income.

The Group determines such classification based on the business model used in the management of financial
assets and the contractual cash flow characteristics of the financial asset.
Financial assets are initially measured at fair value plus or minus, in the case of a financial asset or a financial
liability not at fair value through profit or loss, transaction costs that are directly attributable to theacquisition or issue of the financial asset. Trade receivables are initially measured at their transaction price,
since this is representative of the fair value.
At initial recognition financial assets are classified in one of the categories listed above and can be
subsequently reclassified in other categories, only when the Group changes its own business model for their
management.
The Group recognises as value adjustment the expected losses related to financial assets measured atamortised cost, to contract assets and to debt instruments measured at fair value through othercomprehensive income. Expected losses are calculated over the credit lifetime.
The classification of assets as current or non-current reflects management expectations regarding theirtrading.
Financial assets at amortised cost
Such category includes financial assets held to collect contractual cash flows (Held to Collect), which aresolely payments of principal and interest, calculated on the principal amount outstanding. All receivables areincluded in this category.
Such assets are measured at amortised cost, in compliance with the effective interest method, decreased by
impairment losses. Interest income, exchange profits or losses and impairment losses are recognised in profit(loss) for the year as well as profits or loss from derecognition.
Financial assets at fair value through other comprehensive income
Such category includes financial assets that are possibly held by the Group with the twofold objective ofcollecting contractual cash flows on one hand, which are solely payments of principal and interest calculatedon the total of the principal amount outstanding and selling them on the other (Held to Collect and Sell).
Financial assets at fair value through profit or loss
This category includes financial assets that are not classified as measured at amortised cost or at fair value
through other comprehensive income. Such category includes all derivatives (Note 3.11) and financial assets
held for trading.
The fair value of financial assets held for trading is calculated by drawing from the market prices at the annual(or interim) reporting date o through financial techniques and models.

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Consolidated Financial Statements at 31 December 2023
3.11 Derivatives
Derivatives are still stated at fair value through profit or loss unless they are deemed effective hedge for
specific risk in respect of underlying assets, liabilities or commitments undertaken by the Group.
In particular, the Group uses derivatives as part of its hedging strategies to offset the risk of changes in thefair value of financial assets or liabilities on its balance sheet or the risk associated with contractual
commitments (fair-value hedges) and the risk of changes in expected cash flows in contractually defined or
highly probable operations (cash-flow hedges). For details regarding the methodology for recognising hedgesof the exchange rate risk on long-term contracts, see Note 4.3.
The effectiveness of hedges is documented and assessed both at the start of the operation and periodicallythereafter (at least every time an annual or interim report is published) and measured by comparing changes
in the fair value of the hedging instrument against changes in the hedged item (“dollar offset ratio”). For
more complex instruments, the measurement involves statistical analysis based on the variation of the risk.
Fair value hedge
Changes in the fair value of derivatives that have been designated and qualify as fair-value hedges arerecognised in profit or loss, in the same manner as the treatment of changes in the fair value of the hedged
assets or liabilities covered with the hedge.
Cash flow hedge
Changes in the fair value of derivatives that have been designated and qualify as cash-flow hedges arerecognised – with reference to the “effective” component of the hedge only – in the statement ofcomprehensive income through a specific equity reserve (“Cash-flow hedge reserve”), which is subsequently
recognised in the income statement when the underlying transaction affects profit or loss. If the occurrenceof the underlying operation ceases to be highly probable, the relevant portion of the cash-flow hedge reserveis immediately recognised in the income statement. If the derivative is sold, expires or ceases to function as
an effective hedge against the risk for which it was originated, the relevant portion of the “cash-flow hedge
reserve” is kept recognised until the underlying contract shows its effect. The recognition of the cash-flow
hedge is discontinued prospectively.
The cash flow hedge reserve also includes the recognition of fair value changes in the forward component offorward contracts, taken to the separate income statement at the time when the underlying affects profit or
loss.
Determining fair value
The fair value of instruments quoted on public markets is determined with reference to the bid price for the
instrument in question at the reference date. The fair value of unquoted instruments is determined withfinancial valuation techniques. Specifically, the fair value of interest-rate swaps is measured by discounting
the expected cash flows, while the fair value of foreign exchange forwards is determined on the basis of themarket exchange rate at the reference date and the expected rate differentials among the currencies
involved.
Financial assets and liabilities valued at fair value are classified in the three hierarchical levels described
below, on the basis of the materiality of inputs used in the fair value measurement. In particular:• Level 1: financial assets and liabilities whose fair value is determined on the basis of the unadjusted
quoted prices in an active market for identical assets and liabilities that Leonardo can access at themeasurement date;204

Consolidated Financial Statements at 31 December 2023
• Level 2: financial assets and liabilities whose fair value is determined on the basis of inputs other than
the quoted prices as in Level 1, that are directly or indirectly observable;• Level 3: financial assets and liabilities whose fair value is determined on the basis of unobservable
inputs.
3.12 Cash and cash equivalents
The item includes cash, deposits with banks or other institutions providing current account services, post
office accounts and other cash equivalents, as well as investments maturing in less than three months fromthe date of acquisition. Cash and cash equivalents are recognised at their fair value, which normally coincides
with their nominal value.
3.13 Equity
Share capital
Share capital consists of the capital subscribed and paid up by the Group Parent. Costs directly associatedwith the issue of shares are recognised as a decrease in share capital when they are directly attributable tocapital operations, net of the deferred tax effect.
Treasury shares
Treasury shares are recognised as a decrease in Group shareholders’ equity. Gains or losses realised in theacquisition, sale, issue or cancellation of treasury shares are recognised directly in shareholders’ equity.
3.14 Financial liabilities
Financial liabilities are initially recognised at fair value and subsequently classified as “measured at amortisedcost” or at “fair value through profit or loss”. Financial liabilities are classified at fair value through profit orloss when these are held for trading, represent a derivative or are so designated at the time of initialrecognition. Other financial liabilities are measured at amortised cost, using the effective interest method.
All payables are included in this category.
Financial liabilities are classified as current liabilities unless the Group has the contractual right to settle its
debts at least 12 months after the date of the annual or interim financial statements.
3.15 Taxation
The Group’s tax burden is made up of current and deferred taxes. If these taxes are related to income andexpense recognised in equity in the statement of comprehensive income, a balancing entry is recorded under
the same item.
Current taxes are calculated in accordance with the existing fiscal legislation applicable to those countries inwhich the Group operates and in force at the balance-sheet date. Any risks connected with a different
interpretation of the positive and negative components of income, together with ongoing disputes with the
tax authorities are regularly assessed, in order to adjust the provisions made.
Deferred tax assets and liabilities are calculated based on temporary differences arising between the carrying
amounts of assets and liabilities and their value for tax purposes, as well as on fiscal losses. Deferred tax
assets and liabilities are calculated by applying the tax rate that is expected to be in force at the time thetemporary differences will be reversed. The estimation is made based on tax laws in effect or substantially in
205Consolidated Financial Statements at 31 December 2023
effect at the reporting date. Deferred tax assets, including those deriving from tax losses, are recognised tothe extent that, based on the company plans approved by the directors, it is probable the company will post
future taxable income in respect of which such assets can be utilised.
If there are uncertain tax treatments, the Group determines whether they are likely to be accepted by the
tax authorities. If acceptance is considered probable, the tax values must take account of the uncertain tax
treatment, while, if acceptance is considered unlikely, the Group calculates the effect of this uncertainty
using the most probable amount or expected value method.
3.16 Employee benefit obligations
Post-employment benefit plans
Group companies use several types of pension and supplementary benefit plans, which can be classified asfollows:••

Defined-contribution plans in which the company pays fixed amounts to a distinct entity (e.g., a fund)but has no legal or constructive obligation to make further payments if the fund does not havesufficient assets to pay the benefits accrued by employees during their period of employment withthe company. The company recognises the contributions to the plan only when employees rendered
their services to the company specifically in exchange for these contributions;Defined-benefit plans in which the company undertakes to provide agreed benefits for current andformer employees and incur the actuarial and investment risks associated with the plan. The cost of
the plan is therefore not determined by the amount of the contributions payable in the financial
period but, rather, is redetermined with reference to demographic and statistical assumptions andwage trends. The methodology used is the projected unit credit method. Accordingly, the Group
recognises a liability for the same amount arising from the actuarial estimation, and recognises
actuarial gains and losses immediately and in full in the period in which they occur in the statementof comprehensive income through a special equity reserve (in the “Remeasurement reserve”). To
determine the amount to be entered in the balance sheet, the fair value of the plan assets is deductedfrom the current value of the obligation for the defined-benefit plans. This fair value is calculatedusing the interest rate adopted for discounting back the obligation.
Other long-term benefits and post-employment benefits

Group companies grant employees with other benefits (such as seniority bonuses after a given period ofservice with the company) that, in some cases, continue to be provided after retirement (for example,
medical care). These receive the same accounting treatment as defined-benefit plans, using the projected
unit credit method. However, for “Other long-term benefits” net actuarial gains and losses are both
recognised to profit or loss immediately and in full as they occur.
Benefits payable for the termination of employment and incentive plans
Termination benefits are recognised as liabilities and expenses when the enterprise is demonstrablycommitted to terminating the employment of an employee or group of employees before the normal
retirement date or to providing termination benefits as a result of an offer made in order to encourage
voluntary redundancy. The benefits payable to employees for the termination of employment do not bringany future economic benefit to the enterprise and are therefore recognised immediately as expenses.

206

Consolidated Financial Statements at 31 December 2023
Equity compensation benefits
In case the Group uses stock-option and stock-grant plans to compensate the senior management, thetheoretical benefit attributable to the recipients is charged to the income statement in the financial periods
for which the plan is operative with a contra-item in an equity reserve. The benefit is quantified by measuring
at the assignment date the fair value of the assigned instrument, using financial valuation techniques thattake account of market conditions and, at the date of each annual report, an updated estimate of the numberof instruments expected to be distributed. Vice versa, the fair value initially calculated is not updated in thesubsequent recognitions.
3.17 Provisions for risks and charges
Provisions for risks and charges are recognised when, at the reporting date, the entity has a present
obligation (legal or constructive) to other parties as a result of a past event, and it is probable that, in order
to settle the obligation, whose amount can be reliably estimated, an outflow of resources will be required.
The amount reflects the best current estimate of the cost of fulfilling the obligation. The interest rate used
to determine the present value of the liability reflects current market rates and includes the additional effects
relating to the specific risk associated with each liability. Changes in the estimates are recognised in theincome statement of the year in which the change occurs. With regard to some disputes, the information
required by IAS 37 “Provisions, contingent liabilities and contingent assets” is not reported, in order to notjeopardize the Group position in the context of such disputes or negotiations.
Risks for which the emergence of a liability is merely a possibility are reported in the section in the notes oncommitments and risks and no provision is recognised.
The item includes provisions for onerous contracts. For further details reference is made to Note 4.4.
3.18 Leasing
Group entities as lessees
The Group recognises the right-of-use assets and the lease liability for a lease agreement or an agreementthat contains a lease component.
Right-of-use assets are valued at cost, net of accumulated amortisation and impairment losses (if any) (Note3.7), as adjusted by any re-measurement of lease liabilities. The cost includes the value of lease liabilities,
any initial direct costs sustained and the lease payments made on the commencement date or before theinception of the same agreement, net of incentives received (if any). Right-of-use assets are amortised on astraight-line basis from the commencement date to until the end of the lease term. If the agreement transfers
the ownership of the underlying asset, the Group will amortise the right-of-use assets until the end of theuseful life of the underlying asset at the end of the lease term.
Lease liabilities are measured at the present value of the lease payments due and not yet paid as at thecommencement date of the agreement. The due payments include fixed payments, net of any lease
incentives to be received, variable payments (linked to an index or an interest rate) and the amounts theGroup expects to pay as security on the remaining value. Lease payments also include any possible exercise
price of a purchase option that is reasonably certain to be exercised by the Group and the payment ofpenalties that the latter believes it shall incur for any possible early termination of the agreement. The Group
restates the lease liabilities in the event of subsequent amendments being made to the agreement.

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Consolidated Financial Statements at 31 December 2023
In calculating the present value of due payments the Group uses the incremental borrowing rate prevailingat the commencement date of the agreement when the implicit interest rate cannot be determined easily.
Group entities as lessors in a finance lease
At the date on which a lease is first recognised, the value of the leased asset is eliminated from the balance
sheet and a receivable equal to the net investment in the lease is recognised. The net investment is the sumof the minimum payments plus the residual unguaranteed value discounted at the interest rate implicit in
the lease contract. Subsequently, financial income is recognised in the income statement for the duration of
the contract in an amount providing a constant periodic rate of return on the lessor’s net investment.
The unsecured residual value is reviewed periodically for possible impairment.
Group entities as lessors in an operating lease
Receipts in respect of contracts qualifying as operating leases are recognised in the income statement overthe duration of the contract on a straight-line basis.
3.19 Government grants
Once formal authorisation for their assignment has been issued, grants are recognised on an accruals basis
in direct correlation with the costs incurred. Specifically, set-up grants are taken to the income statement in
direct relation to the depreciation of the relevant goods or projects, and in the balance sheet, grants arerecognised as a reduction of the capitalised assets, for the amount not yet recognised to profit or loss. For
the analysis of the aspects related to grants under Law 808/1985, reference should be made to Note 4.2.
3.20 Costs
Costs are recorded in compliance with the accrual principle.
3.21 Financial income and expenses
Interest is recognised on an accruals basis using the effective interest-rate method, i.e. the interest rate that
results in the financial equivalence of all inflows and outflows (including any premiums, discounts,
commissions, etc.) that make up a given operation.
Financial expenses attributable to the acquisition, construction or production of certain assets taking asubstantial period of time to get ready for their intended use or sale (qualifying assets) are capitalised
together with the related asset.
3.22 Dividends
Dividends are recognised in the income statement as soon as the right to receive payment arises, which isnormally when the shareholders’ meeting approves the distribution of dividends.
Dividends distributed to Leonardo shareholders are reported as a change in the shareholders’ equity and arerecognised as liabilities for the period in which their distribution is approved by the Shareholders’ Meeting.
3.23 Discontinued operations and non-current assets held for saleNon-current assets (or disposal groups) whose carrying amount will be recovered principally through a saletransaction rather than through continuing use, are classified as held for sale and presented separately in thestatement of financial position. For this to be the case, the asset (or disposal group) must be available for208Consolidated Financial Statements at 31 December 2023
immediate sale in its present condition subject only to terms that are usual and customary for sales of such
assets (or disposal groups) and its sale must be highly probable within one year. If these conditions are met
after the year-end, the non-current asset (or disposal group) is not classified as held for sale. However, if
these conditions are met after the year-end but before the financial statements are approved for publication,
appropriate information is provided in the explanatory notes thereto.
Non-current assets (or disposal groups) classified as held for sale are measured at the lower of carrying
amount and fair value less costs to sell; the corresponding values of the prior year balance sheet are notreclassified.
A discontinued operation is a component of an entity that either has been disposed of, or is classified as held
for sale, and:•••represents a separate major line of business or geographical area of operations;is part of a single coordinated plan to dispose of a separate major line of business or geographicalarea of operations; or;is a subsidiary acquired exclusively with a view to resale.

The results of discontinued operations – whether they have been disposed of or classified as held for sale orunder disposal – are presented separately in the income statement, less tax effects. The corresponding valuesof the prior year, if any, are reclassified and shown separately in the income statement, for comparative
purposes, net of tax effect.
3.24 New IFRS and IFRIC interpretations
It should be noted that, as from 1 January 2023, the new accounting standard IFRS 17 Insurance Contracts
and the amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, IAS 12 Income
Taxes, IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 became applicable. Suchamendments have no material impact on the Group’s financial statements.
Some considerations concerned the specific provisions introduced by the amendments to IAS 12 whichnarrowed the scope of application of the exemption for the initial recognition of deferred tax liabilities; thisexemption is no longer applicable to transactions that give rise to equal taxable and deductible temporary
differences (i.e., leases and decommissioning liabilities) and to the effects of “Pillar Two” international tax
reform. With reference to this reform, it should be noted that with Legislative Decree no. 209 of 27 December
2023, implementing the tax reform on international taxation, the EU directive 2022/2523 of 14 December
2022 has been adopted as from financial years commencing on 1 January 2024, by which the EU Council
adopted the Global Minimum Tax (GMT) rules in the European regulations. The Leonardo Group promptly
took action to evaluate the possible impacts of the abovesaid regulations and guarantee that the current
regulatory requirements are correctly met. The analyses, still underway, are based on the 2022 results andup to now, if the regulations had already been applied in the financial year 2023, they would not lead tosignificant impacts.
At the reporting date, the European Commission had endorsed certain standards and interpretations thatwere not yet compulsory, which will be adopted by the Group in the following financial periods, if applicable.
We expect no material effects on the Group’s financial statements deriving from those amendments tostandards and interpretations.
There are a number of standards or amendments to existing principles issued by the IASB or new decisionsof the International Financial Reporting Interpretations Committee (IFRIC) for which the revision andapproval project is still under way.
209

Consolidated Financial Statements at 31 December 2023
4. SIGNIFICANT ISSUES AND CRITICAL ESTIMATES BY MANGEMENT
The preparation of the Group's financial statements requires directors to make discretionary assessments,
estimates and assumptions that affect revenues, costs, assets and liabilities, and the disclosure of contingent
liabilities. Uncertainty about these assumptions and estimates could lead to outcomes that will requiresignificant adjustments in the future. The aspects that required greater subjectivity by the directors in making
the estimates are described below.
4.1 Research and development costs
This account includes costs related to the application of the results of research or other knowledge in a planor a project for the production of materials, devices, systems or services that are new or significantly
advanced (including higher set-up costs incurred compared to the costs of the asset once fully operating),
prior to the start of commercial production or use, for which the generation of future economic benefits canbe demonstrated. These costs are amortised according to the units-of-production method, over the period
in which the future earnings are expected to be realised for the project itself. The useful life changes
according to the business of the company and it exceeds 5 years on average. If such costs fall within the scopeof costs defined by Group standards as “non-recurring costs”, they are recognised in a specific item underintangible assets (Note 4.2).
The initial recognition and subsequent assessment of their recoverability require complex estimates bymanagement which estimates are influenced by a number of factors, such as the timeline of the productbusiness plans, the company’s ability to anticipate the commercial success of the new technologies andtechnological obsolescence.
Research costs, on the other hand, are expensed in the period in which they are incurred.
4.2 Non-recurring costs“Non-recurring costs” under intangible assets are the costs incurred in designing, prototyping, starting-up
and upgrading to the technical and functional specifications of clearly identified potential clients – including
higher set-up costs compared to costs for the asset once fully operating –, if they are financed, in particularunder Law 808/1985 governing State aids to support the competitiveness of entities operating in the
Aeronautics and Defence segments. These costs are shown excluding the benefits collected or to be collectedunder Law 808/1985 for programmes qualified as functional to national security and similar. The aid underLaw 808/1985 is deducted from capitalised costs, and the royalties to be given to the grantor are recognised
as the requirements are met (sale of products embedding the technology for which the Law permits aids).
For the programmes other than national security programmes and programmes treated as such, the funds
received are recognised as “Other liabilities”, making a distinction between the current portion and the noncurrent portion, based on the date of repayment. In both cases, non-recurring costs are carried among
intangible assets and are amortised within job orders on the units-of-production method.
The main capitalised costs are tested for impairment at least once a year until development is complete;after that, as soon as contract prospects change, when expected orders are no longer made or delayed. The
impairment test is conducted on assumed sales plans.
The initial recognition and subsequent assessment of the recoverability of these costs require estimates,
which are by their own nature complex and marked by a high level of uncertainty as they are influenced bya number of factors, such as the time-line of the product business plans, which in some cases is particularly
long, and the company’s ability to anticipate the commercial success of the new technologies. Theseestimates therefore imply significant assessments by management which take into account the reasonable
210

Consolidated Financial Statements at 31 December 2023
certainty that funds are received and the effects of time value in the case of deferment over more than one
year of the granting of funds.
In the case of programmes that benefit from the provisions of Law 808/1985 and that are classified asfunctional to national security, the portion of non-recurring costs capitalised, pending the fulfilment of thelegal requirements for the recognition of the amount receivable from the Ministry, is shown separately under“other non-current assets”. The related amount is calculated based on an estimate made by managementthat reflects the reasonable certainty that funds are received and the effects of time value in the case ofdeferment over more than one year of the granting of funds.
4.3 Hedging long-term contracts against foreign exchange risk
In order to hedge exposure to changes in flows of receipts and payments associated with long-term
construction contracts denominated in currencies other than the functional currency, the Group enters into
specific hedges for the expected individual cash flows in respect of the contracts. The hedges are enteredinto at the moment the commercial contracts are finalized, except where the award of the contracts is felt
to be highly likely as a result of existing framework contracts. Exchange-rate risk is normally hedged withplain vanilla instruments (forward contracts): in some cases, however, in order to protect the Group against
any possible persistent adverse trend in some currencies, the Group might enter into more highly structured
operations that, while substantively hedging the positions, do not qualify for hedge accounting under IFRS 9.
In these cases, as in all cases where hedges prove to be ineffective, changes in the fair value of such
instruments are taken immediately to the income statement as financial items. The effects of this recognition
policy are reported in Note 31. Hedges in the former case are reported as cash-flow hedges.
4.4 Estimate of revenues and final costs of long- term contracts
The Group operates in sectors and with contractual arrangements that are especially complex. They arerecognised on a percentage-of-completion basis in case the requirements for the revenue recognition overtime are met. Margins recognised in the income statement are a function of both the state of progress on
performance obligations included in the contracts and the margins that are expected to be recognised forthe completed contract.
Any requests for additional considerations arising from contractual changes, including those arising fromhigher costs incurred for reasons attributable to the customer, shall be incorporated in the total amount of
the considerations, if it is highly probable that this will be recognised by the customer, up to the expectedvalue of such recognised amount.
Estimating the expected overall costs of contracts in progress is marked by a high degree of uncertainty as
they can be influenced by a number of factors such as the engineering complexity of the products, the ability
to precisely fulfil specific technical requests made by customers and to meet the manufacturing timeframe
provided for in the contract. Failure to comply with such contractual terms and conditions may imply
penalties and extra-costs of a remarkable amount to be considered in estimating total costs. In order toenhance support for management’s estimates, the Group has adopted contract management and risk
analysis tools designed to identify, monitor and quantify the risks associated with such contracts. The
amounts posted in the financial statements represent management’s best estimate at the reporting date
supported by said tools.
In case the reassessment of the economic plans (whole life estimates) during the progress of a contract
highlights the presence of elements that make them onerous, the amount of costs considered necessary to
fulfil the obligations that is higher than the economic benefits arising from the contract is recognised in fullin the financial period in which it becomes reasonably foreseeable and allocated to a “provision for onerous
211

Consolidated Financial Statements at 31 December 2023
contracts” under provisions for current risks and charges. The reversal of such accruals is recognised asabsorption under “Other operating income”.
4.5 Liabilities from defined-benefit pension plans
The Group is sponsor to two UK defined-benefit pension plans and to various US and other minor European
plans. It has the obligation to ensure a given level of benefits to the plan participants and carries the risk thatthe plan assets are not adequate to cover the benefits promised. In case these plans are in a deficit position,
the trustee responsible for the management requests the Group to fund the plan.
The deficit resulting from the most updated actuarial valuations made by independent experts is recognised
as a liability: these valuations stem from actuarial, demographic, statistical and financial assumptions thatcan vary over time.
4.6 Impairment of assets
Group assets are tested for impairment at least annually if their lives are indefinite, or more often if there
are indications of impairment. Similarly, impairment tests are conducted on all the assets with definite usefullife showing signs of impairment, even if the amortisation already commenced.
The recoverable amount is generally based on the value in use calculated according to the Discounted CashFlow method, which is characterized by a high level of complexity and the use of estimates, which are by
their nature uncertain and subjective in relation with the expected cash flows and the financial parameters
used to determine the discount rate.
For these valuations, the Group uses the estimated cash flows based on the plans that have been approvedby corporate bodies and financial parameters that are in line with those resulting from the current
performance of reference markets. The relevant plans take into account all business assessments of risks
related also to technological innovations, emerging global scenarios, customer needs and expected
regulatory requirements.
The business plans used in order to assess the recoverability of capitalized assets are prepared by also
considering additional investments related to the search for innovative solutions in sustainable business,
reduction in emissions and decarbonization. Likewise, any prospective aspects and impacts related to climatechange are already considered. Leonardo's plan on these issues is explained in more detail in the "Planet"
section of the Report on Operations, to which reference should be made.
Details about the methods for the calculation of the impairment tests are reported in Note 9.
4.7 Disputes
The Group’s operations regard sectors and markets where many disputes, both as petitioner and plaintiff,are settled only after a considerable period of time, especially in cases where the customer is a government
entity. In case management deems it probable that following the litigation an outflow of resources, whoseamount can be reliably estimated, will be required, this amount that has been discounted in order to consider
the timeline for the disbursement, is included in the risk provision. The estimate for the developments ofthese disputes is particularly complex and requires significant estimates by the management. Disputes wherea liability is deemed possible but not probable are shown in the relevant informative section on commitments
and risks; against such disputes no allocation is made.

212

Consolidated Financial Statements at 31 December 2023
5. EFFECTS OF CHANGES IN ACCOUNTING POLICIES ADOPTED
There were no significant changes in the Group's application of accounting standards during the period.

6. SIGNIFICANT EVENTS AND TRANSACTIONS DURING THE YEAR
With reference to the request for termination for default due to alleged delays and non-compliant products
formalised during 2022 by the governmental Norwegian Defence Materiel Agency (NDMA) under thecontract for the supply of 14 NH90 helicopters entered into with NH Industries (NHI, whose shareholders are
Leonardo, Airbus Helicopters and Fokker Aerostructure), the parties started a mediation process in April
2023, which should be completed in the next months. The NHI position, confirmed by Leonardo, is unchanged
compared to what was reported in the financial statements as of 31 December 2022, considering this request
to be legally ungrounded and reasonably disputable in the appropriate forum due to a lack of factual andlegal basis and misinterpretation of the contract and Norwegian law, as well as due to a breach ofconfidentiality obligations. As noted above, in April 2023, the customer and NHI initiated a mediation
procedure in an attempt to reach a mutually satisfactory agreement. In the period from October 2023 to
February 2024, the parties exchanged significant claims and counterclaims and took steps to file deeds anddocuments required under the mediation procedure; the hearing before the mediators is scheduled for thesecond half of March 2024. At this stage of the mediation neither NHI nor Leonardo considers that it shouldchange its position.
In May 2023 the Group completed the sale of the ATM business unit of the US company Selex ES, LLC to Indra
Air Traffic, Inc., wholly owned by the Spanish company Indra Sistemas S.A., for an amount of, net of costs ofdisposal, around USDmil. 37. As a result of this transaction, the Group recognised in the period a capital gainof about €mil. 10.
Again in May 2023 supplements were made to the agreement for early retirement under art. 4 of Law
92/2012 (Fornero Act) up to a maximum of 490 employees and executives working in the Corporate and Staff
functions of Leonardo SpA, Leonardo Global Solutions and Leonardo Logistics. The expansion of the scope of
this measure resulted in the recognition of additional charges for €mil. 20.
With reference to the most important industrial and financial transactions completed in 2023, work
continued on concentrating the assets held by Leonardo in the USA in a single legal entity started in 2022,
through the completion of the following transactions:•••

Leonardo US Corporation established Leonardo US Subholding, wholly owned;
Leonardo US Corporation contributed its stake in Leonardo US Aircraft to Leonardo US Subholding;
Leonardo International contributed its stake in Selex ES, LLC to Leonardo US Holding. The same stake
was subsequently transferred from Leonardo US Holding to Leonardo US Corporation, and from thelatter to Leonardo US Subholding.

Since this was a mere reorganization, there was no impact on this financial report.
In November 2023, Leonardo S.p.A. finalized, through the subholding Leonardo US Holding, LLC, (“LUSH”),
the sale on the US market of a minority stake in Leonardo DRS (“DRS”), equal to 18,000,000 ordinary shares(increased vis-à-vis the initial offering through a secondary offering of 16,500,000 of common stock), and ofan additional 2,700,000 shares (equal to 15% of the above-mentioned 18,000,000 shares) at the price of$17.75 per share. The shares sold, which represent approximately 7.9% of the ordinary shares issued by DRS
213

Consolidated Financial Statements at 31 December 2023
at the date of the transaction, brought Leonardo US Holding, LLC proceeds equal to about USDmil. 352, after
transaction costs.
With reference to the comparative period, it should be remembered that the year 2022 saw the start of theRussian offensive, still underway, against Ukraine. In consideration of the profound changes in the world’s
geo-political and economic equilibriums that have come out, Leonardo had written down its financial
exposures to the two countries involved in the conflict for a total amount of €mil. 41, including tax effects.
With regard to NDMA, as described above, it should be recalled that the request for termination for default
in relation to the contract for the supply of 14 NH90 helicopters entered into in 2001 with NH Industries (NHI)
had been formalised in the comparative period due to alleged delays and non-compliant products.

7. SIGNIFICANT POST-BALANCE SHEET EVENTS
In January 2024 the Group amended the arrangements behind the Space Alliance with the shareholder Thales
in relation to the Telespazio component. The nature of the amendments to the shareholders’ agreementschanged the qualification of the Telespazio group from a joint venture to a subsidiary. Accordingly, startingfrom 2024, the Group data will include the line-by-line consolidation of Telespazio.
With regard to the arbitration proceedings involving, on the one hand, Leonardo S.p.a. and PSC S.p.A.
(hereinafter collectively referred to as unincorporated joint venture, “LP”) and, on the other, Galfar Misnad
Engineering & Contracting W.L.L., Salini-Impregilo S.p.A. (now Webuild) and Cimolai S.p.A. (hereinaftercollectively referred to as unincorporated joint venture, “GSIC”), on 7 March 2024, the Court of Arbitration
issued the petition for correction of the award filed by LP, ordering GSIC to pay an additional amount ofapproximately €mil. 11 to LP with respect to an initial net amount of approximately €mil. 146.5 under theaward issued on 6 October 2023; for more details, reference should be made to the Note 22 to these
consolidated financial statements.

8. SEGMENT INFORMATIONThe Divisions and companies through which the Group operates are aggregated, for the purposes of internaland external reporting, into the five business sectors of reference: Helicopters, Defence Electronics andSecurity, Aircraft, Aerostructures and Space. The segment of Other activities includes the Corporate andremaining activities.
The Group assesses the performance of its operating segments and the allocation of its financial resourceson the basis of revenue and EBITA (please also see the paragraph on “NON-GAAP Alternative Performance
Indicators” included in the Report on Operations). For the purpose of a correct interpretation of theinformation provided we note that the results of the strategic Joint Ventures and associates have been
included within the EBITA of the sectors to which these JVs and associates belong; conversely, these sectors
do not reflect the relevant share of revenue.

214

Consolidated Financial Statements at 31 December 2023
The results for the operating sectors at 31 December 2023, as compared to 2022, are as follows:
Defense
Helicopters Electronics & Aircraft Aerostructures
Security
Revenues
4,547
7,212
3,085
475
Inter-segment revenues (*)
(14)
(681)
(29)
(68)
Third party revenues
4,533
6,531
3,056
407
EBITA
415
805
421
(189)
Investments (***)
253
280
97
50
Non-current assets (**)
3,832
4,092
699
284
31 December 2022

Defense
Helicopters Electronics & Aircraft Aerostructures
Security
Revenues
4,725
7,483
2,938
636
Inter-segment revenues (*)
(7)
(688)
(69)
(89)
Third party revenues
4,718
6,795
2,869
547
EBITA
422
852
419
(151)
Investments (***)
279
278
81
67
Non-current assets (**)
4,076
4,065
719
289
31 December 2023

Other
Eliminations
Activities

Space
31
-

579
(393)
186
(265)
121
920

(1,185)
1,185
-

Other
Eliminations
Activities

Space
16
-

760
(398)
362
(269)
154
1,008

(1,251)
1,251

-

Total
14,713
14,713
1,218
801
9,827

Total
15,291
15,291
1,289
859
10,157(*) Inter-segment revenue includes revenue among Group consolidated undertakings belonging to various business sectors.
(**) The portion of fixed assets relates to intangible assets and property, plant and equipment as well as to investment property.
(***) Investments relate to intangible assets and property, plant and equipment as well as to investment property (net of grants
ascertained on these items).

215

Consolidated Financial Statements at 31 December 2023
The reconciliation of EBITA, EBIT and earnings before income taxes and financial expense for the periods
concerned is shown below:

2022
EBITA
Amortisation of intangible
assets acquired as part ofbusiness combinations
Restructuring costs
Non-recurringincome/expense
EBIT
Equity-accounted strategic
investments
Income before tax andfinancial expenses

2023
EBITA
Amortisation of intangible
assets acquired as part ofbusiness combinations
Restructuring costs
Non-recurringincome/expense
EBIT
Equity-accounted strategic
investments
Income before tax andfinancial expenses

DefenseElectronics &Security
415
805

Helicopters

AircraftAerostructures

Other
Activities

Space

Total

421

(189)

31

(265)

1,218

(5)

(19)

-

-

-

-

(24)

(8)

(46)

(6)

(2)

-

(57)

(119)

(28)

(64)

(2)

(1)

-

(19)

(114)

374

676

413

(192)

31

(341)

961

-

(107)

-

6

(31)

-

(132)

374

569

413

(186)

-

(341)

829

DefenseElectronics &Security
422
852

Helicopters

AircraftAerostructures

Other
Activities

Space

Total

419

(151)

16

(269)

1,289

(5)

(30)

-

-

-

-

(35)

(1)

(21)

(2)

(18)

-

(17)

(59)

(44)

(52)

-

(14)

-

-

(110)

372

749

417

(183)

16

(286)

1,085

-

(126)

-

(12)

(16)

-

(154)

372

623

417

(195)

-

(286)

931

216

Consolidated Financial Statements at 31 December 2023
Below is the breakdown of revenue by geographical area (based on the customer’s home country) andrelevant sector:
31 December 2022
Italy
United Kingdom
Rest of Europe
United States of America
Rest of the world
Revenues
Inter-segment revenues (*)
Third party revenues

31 December 2023
Italy
United Kingdom
Rest of Europe
United States of America
Rest of the world
Revenues
Inter-segment revenues (*)
Third party revenues

DefenseElectronics &Security
707
1,567
518
1,237
1,012
1,073
396
2,740
1,914
595
4,547
7,212
(14)
(681)
4,533
6,531

Helicopters

DefenseElectronics &Security
1,003
1,805
490
1,220
1,142
1,069
459
2,695
1,631
694
4,725
7,483
(7)
(688)
4,718
6,795

Helicopters

Aircraft
338
856
615
1,276
3,085
(29)
3,056

Aircraft
490
1,083
493
872
2,938
(69)
2,869

Aerostructures
71
3
129
209
63
475
(68)
407

Aerostructures
80
6
169
313
68
636
(89)
547

Other
Eliminations
Activities
417
51
110
1
579
(393)
186

2,061
1,679
3,176
3,952
3,845
14,713
14,713(1,039)
(130)
(4)
(9)
(3)
(1,185)
1,185
-

Other
Eliminations
Activities
465
5
284
6
760
(398)
362

Total

Total

(1,156)
(70)
(15)
(6)
(4)
(1,251)
1,251
-

2,687
1,651
3,732
3,954
3,267
15,291
15,291(*) Inter-segment revenue includes revenue among Group consolidated undertakings belonging to various business sectors.

Below is the breakdown of fixed assets (intangible assets, property, plant and equipment and investment
property) according to the geographical area in which the Group companies are based:
31 December 2022
Italy
United Kingdom
Rest of Europe
United States of America
Rest of the world

5,326
1,672
556
2,253
20
9,827

217

31 December 2023
5,512
1,744
676
2,206
19
10,157

Consolidated Financial Statements at 31 December 2023
9. INTANGIBLE ASSETS
Goodwill
1 January 2022
Cost
Depreciation
Impairment losses
Carrying amount

Nonrecurring
costs

Development
costs

Concessions,licences andtrademarks

AcquiredOtherthroughintangible
business
assetscombinations

Total

6,478
(2,642)
3,836

1,742
(749)
(144)
849

2,481
(524)
(197)
1,760

687
(459)
228

1,363
(1,103)
260

583
(411)
(26)
146

13,334(3,246)(3,009)
7,079

-

133
(1)
(39)
(1)

98
(64)
(21)

10
(23)
-

(24)
-

72
(37)
(1)

313
(1)
(187)
(23)

269

-

-

-

124

-

393

Investments (net of grants)
Sales
Amortisation
Impairment losses
Increase for businesscombinations
Scope deconsolidation
variance
Other changes
31 December 2022

(201)

-

-

-

-

-

(201)

21
3,925

2
943

1
1,774

28
243

(5)
355

(10)
170

37
7,410

broken down as follows:
Cost
Depreciation
Impairment losses
Carrying amount

6,742(2,817)
3,925

1,862
(784)
(135)
943

2,580
(588)
(218)
1,774

709
(466)
243

1,524
(1,169)
355

628
(432)
(26)
170

14,045(3,439)(3,196)
7,410

Investments (net of grants)
Sales
Amortisation
Impairment losses
Other changes
31 December 2023

(26)
3,899

146
(4)
(31)
(4)
85
1,135

88
(54)
(25)
6
1,789

8
(28)
20
243

(35)
(3)
317

73
(40)
(21)
182

315
(4)
(188)
(29)
61
7,565

broken down as follows:
Cost
Depreciation
Impairment losses
Carrying amount

6,626(2,727)
3,899

2,083
(815)
(133)
1,135

2,674
(642)
(243)
1,789

733
(490)
243

1,493
(1,176)
317

663
(458)
(23)
182

14,272(3,581)(3,126)
7,565

31 December 2022
Gross value
Grants

4,814
3,040

31 December 2023
Gross value
Grants

4,828
3,039

The investments for the period are stated net of related grants. Commitments were in place for the purchaseof intangible assets for €mil. 21 at 31 December 2023 (€mil. 19 at 31 December 2022). The impairment of
non-recurring costs mainly refers to write-downs linked to programmes in the Aircraft sector.
As set out in Note 4.1 of the consolidated financial statements, to which reference is made, development
costs and non-recurring charges are tested for impairment, if the conditions obtain, using the discounted
218

Consolidated Financial Statements at 31 December 2023
cash flow method. The cash flows used are those under the product business plan, as discounted on the basisof a weighted-average cost of capital (WACC) basis calculated using the Capital Asset Pricing Model method.
Goodwill
Goodwill is allocated to the Cash Generating Units (CGUs) or to groups of CGUs concerned, which are
determined on the basis of the Group’s organisational, management and control structure, which coincides,
as is known, with the Group’s five business segments.
Below is the breakdown of goodwill by CGU at 31 December 2023 and 2022:
31 December 2022

Helicopters
Defense Electronics & Security
DRS
Leonardo Divisions
Aircraft

1,647
979

1,241
2,626

60
3,927

31 December 2023

1,591
993

1,255
2,584

60
3,899

The net decrease compared to 31 December 2022 was mainly due to the foreign currency translationdifferences on goodwill denominated in USD, partially offset by the positive effects of the items denominatedin GBP.
Goodwill is subject to impairment testing to determine any loss in value. This is done by individual CGU bycomparing the carrying amount with the greater of the value in use of the CGU and amount recoverable bysale (fair value). The Group has established an operational hierarchy between calculating the fair value netof transaction costs and value in use, where the value in use is estimated first, and then only after, if it islower than the carrying value, is the fair value net of transaction costs determined. In particular, the value in
use is measured by the unlevered discounting of the cash flows resulting from the Group’s five-year businessplans prepared by the management of the CGUs and incorporated into the plan approved by Leonardo’s
Board of Directors, projected beyond the explicit time horizon covered by the plan according to theperpetuity growth method (terminal value), using growth rates (“g-rate”) no greater than those forecast forthe markets in which the given CGU operates. The cash flows used were those provided for in the plansadjusted to exclude the effects of future business restructurings, if any, not yet approved, or future
investments for improving future performance. Specifically, these cash flows are those generated before
financial expense and taxes – determined on a notional basis, and include investments in capital assets andmonetary changes in working capital, while excluding cash flows from financial management, extraordinary
events or the payment of dividends. The underlying macro-economic assumptions were made on the basisof external information sources, where available, while the profitability and growth estimates used in theplans were calculated by management based on past experience and future developments in the Group’s
markets.
These cash flows are discounted on a weighted-average cost of capital (WACC) basis calculated using theCapital Asset Pricing Model method. The following factors were taken into account in calculating WACCs,
which were also determined by using the data referable to the main competitors operating in each sector:
•
•
•
•
•

the risk-free rate was determined using the 10- and 20-year gross yield of government bonds of thegeographic market of the CGU;
the market premium, determined using computations of external providers;
the sector beta;
the cost of debt;
the debt/equity ratio.
219

Consolidated Financial Statements at 31 December 2023
The growth rates used to project the CGU’s cash flows beyond the explicit term of the plan were estimatedby making reference to the growth assumptions of the individual sectors in which said CGUs operate. Theseassumptions are based on the internal processing of external sources, making reference to a period of timethat is usually ten years. The g-rates used for the purposes of the impairment test were equal to 2%,
consistently with the actions taken in previous financial years, even in the presence of higher expected
growth rates in some sectors.
The mostly important assumptions for the purposes of estimating the cash flows used in determining thevalue in use are:
•
•
•
•

WACC;
g-rate;ROS;
the trend in Defence budgets.

In estimating these assumptions, the management made reference, in the case of external variables, tointernal information processed on the basis of external surveys, as well as on its knowledge of the markets
and of the specific contractual situations.
The following WACCs and (nominal) growth rates were used at 31 December 2023 and 2022:

Helicopters
Defense Electronics & Security
DRS
Leonardo Divisions
Aircraft

31 December 2022
Wacc
g-rate8.6%
2.0%

31 December 2023
Wacc
g-rate
9.3%
2.0%

9.0%
7.5%
8.1%

8.5%
8.2%
9.2%

2.0%
2.0%
2.0%

2.0%
2.0%
2.0%

Testing revealed no signs of impairment but showed, on the contrary, significant positive margins(headroom). The results of the tests were subjected to sensitivity analysis, taking as reference thoseassumptions for which it is reasonable to believe that their change could significantly modify the results ofthe test. In this regard, it should be noted that in all sectors the large positive margins recorded are such thatthey cannot be significantly modified by changes in the assumptions described; however, for information
purposes the results for all CGUs are reported below. The table below shows for the 2023 and 2022 financial
years the positive margin relating to the base scenario, compared with the results of the following sensitivity
analyses: (i) increase in interest rates used to discount cash flows on all CGUs by 50 basis points, the otherconditions remaining equal; (ii) reduction in the growth rate in the calculation of terminal value by 50 basis
points, the other conditions remaining equal; (iii) reduction in operating profitability applied to terminal valueby half a point, the other conditions remaining equal.

220

Consolidated Financial Statements at 31 December 2023
31 December 2022

910

Margin post sensitivity
Wacc
g-rateROS TV
556
630
724

2,129
8,623
5,774

1,800
7,625
5,433

Margin (base case)

Helicopters
Defense Electronics & Security
DRS (USD millions)
Leonardo Divisions
Aircraft
31 December 2023

1,998
8,332
5,631

962

Margin post sensitivity
Wacc
g-rateROS TV
637
712
780

2,951
9,203
5,842

2,528
8,276
5,535

Margin (base case)

Helicopters
Defense Electronics & Security
DRS (USD millions)
Leonardo Divisions
Aircraft

1,891
7,812
5,499

2,638
8,466
5,606

2,790
8,902
5,707

Development costs and non-recurring charges
Investments in “Development costs” mainly refer to the Defence Electronics and Security and Helicopters
sectors (€mil. 47 and €mil. 93, respectively). The increase in “Non-recurring charges” mainly refers to the
Helicopters sector for €mil. 65 and the Defence Electronics and Security sector for €mil. 16. Total investments
were affected by the grants received during the year, recognised as a decrease in the related item. As regards
programmes that benefit from the provisions of Law 808/85 and that are classified as functional to national
security, the portion of capitalised non-recurring costs, pending the fulfilment of the legal requirements forthe classification under receivables, is separately disclosed under other non-current assets (Note 13).
Receivables for grants assessed by the grantor in relation to capitalised costs (shown here net of the related
grants) are illustrated in Note 28.
Impairment for the year mainly related to impairment losses on Aircraft programmes. Impairment tests of
non-recurring costs and development costs are performed on the most significant programmes in terms ofcapitalisation or risk or when impairment indicators emerge. They are carried out – if conditions obtain- using
the discounted cash flow method. The cash flows used are those of the product business plans, discounted
on the basis of a WACC rate determined by applying the Capital Asset Pricing Model. As noted in the section
on accounting policies, product business plans include any investments related to climate change issues.
Total research and development costs, comprising also “Development costs” and “Non-recurring charges”
just mentioned, are equal to €mil. 2,201.
Other items of intangible assets“Concessions, licences and trademarks” include in particular the value of licenses acquired in previous years
in the Helicopters sector. With regard to the full acquisition of the AW609 programme, this value also
comprises the estimated variable fees due to Bell Helicopter on the basis of the commercial performance ofthe programme (Note 24).
Below is a breakdown of the intangible assets acquired as part of business combinations:
31 December 2022
Know-how
Trademarks
Backlog and commercial positioning

155
41
159
355

221

31 December 2023
134
39
144
317

Consolidated Financial Statements at 31 December 2023
The item “Other intangible assets” mainly includes software, intangible assets under development andadvances.

10. PROPERTY, PLANT AND EQUIPMENT

1 January 2022
Cost
Amortisation, depreciation and writeoffs
Carrying amount
Investments
Sales
Depreciation
Impairment losses
Increase for business combinations
Other changes
31 December 2022
broken down as follows:
Cost
Amortisation, depreciation and writeoffs
Carrying amount
Investments
Sales
Depreciation
Impairment losses
Other changes
31 December 2023
broken down as follows:
Cost
Amortisation, depreciation and writeoffs
Carrying amountLand andbuildings

Plant andmachinery

Equipment

Other tangible
assets

Total

1,647

1,762

2,450

1,716

7,575

(792)

(1,387)(2,140)(1,134)(5,453)

855

375

310

582

2,122

8
(1)
(44)
4
40
862

38
(2)
(78)
20
27
380

53
(81)
(1)
94
375

388
(5)
(65)
2
(151)
751

487
(8)
(268)
(1)
26
10
2,368

1,689

1,775

2,539

1,879

7,882

(827)

(1,395)(2,164)(1,128)(5,514)

862

380

375

751

2,368

11
(1)
(51)
122
943

23
(1)
(82)
(3)
98
415

58
(92)
(10)
58
389

451
(17)
(63)
(2)
(319)
801

543
(19)
(288)
(15)
(41)
2,548

1,807

1,877

2,640

1,955

8,279

(864)

(1,462)(2,251)(1,154)(5,731)

943

415

389

801

2,548

The 2023 investments were related to the sectors of Defence Electronics and Security for €mil. 192, Aircraftfor €mil. 63, Aerostructures for €mil. 66, Helicopters for €mil. 97 and Other Activities for €mil. 125.
“Other tangible assets” also include the value of tangible assets under construction (€mil. 399 at 31
December 2023 and €mil. 391 at 31 December 2022).
Purchase commitments of property, plant and equipment were recorded in the amount of €mil. 217 at 31
December 2023 (€mil. 206 at 31 December 2022).
The future receipts attributable to operating leases were equal to €mil. 2 (€mil. 9 at 31 December 2022), of
which €mil. 1 between 2 and 5 years.

222

Consolidated Financial Statements at 31 December 2023
11. RIGHTS OF USE
Rights of use of land Rights of use ofand buildings
plant and machinery

Rights of use ofother tangible
assetsTotal

1 January 2022
Cost
Amortisation, depreciation and write-offs
Carrying amount

666
(183)
483

17
(7)
10

86
(49)
37

769
(239)
530

New Contract submission
Closing and contract modifications
Depreciation
Increase for business combinations
Other changes
31 December 2022

65
(8)
(69)
12
10
493

10
(4)
1
17

5
1
(19)
2
26

80
(7)
(92)
12
13
536

broken down as follows:
Cost
Amortisation, depreciation and write-offs
Carrying amount

728
(235)
493

28
(11)
17

84
(58)
26

840
(304)
536

New Contract submission
Closing and contract modifications
Depreciation
Other changes
31 December 2023

74
43
(73)
(23)
514

6
(5)
18

12
5
(15)
28

92
48
(93)
(23)
560

broken down as follows:
Cost
Amortisation, depreciation and write-offs
Carrying amount

809
(295)
514

33
(15)
18

76
(48)
28

918
(358)
560

During 2023 this item showed an increase due to the signature of new contracts and to the changes in existing
contracts.
The leases with a term of less than 12 months and those concerning assets of modest value were recognisedamong “costs for purchases” (Note 29).
At 31 December 2023 there were no lease commitments (€mil. 36 in 2022). Short-term lease commitments
amounted to €mil. 3 (€mil. 3 in 2022).

223

Consolidated Financial Statements at 31 December 2023
12. EQUITY INVESTMENTS AND SHARE OF PROFITS (LOSSES) OF EQUITY-ACCOUNTEDINVESTEES
2022
EquityRisk provisions
investments
1,843

Strategical investments
Joint venture not individuallymaterial:- Rotorsim Srl- Polo Strategico Nazionale SpA- Closed Joint Stock Company
Helivert- Orizzonte - Sistemi navali- Other minor
Associates not individuallymaterial

61

Total
1,843

(5)

37
2
(5)

2023
EquityRisk provisions
investments
1,787

56

70

37
2

38
9

(5)

17
5

Total
1,787

(7)

63
38
9

(7)

(7)

17
5

18
5

-

18
5

195

(7)

188

230

(1)

229

2,099

(12)

2,087

2,087

(8)

2,079

The Leonardo Group operates in certain sectors also through entities jointly controlled with third parties andvalued under the equity method, since they qualify as joint ventures.
Below are reported the joint ventures considered material in terms of volumes and from a strategic viewpoint
for the Group:
Company nameNature of the relations

Main operating
location

Registered office

Ownership%

Telespazio GroupJV con Thales, among the main global providers ofsatellite services

Rome, Italy

Rome, Italy

67%

Thales Alenia
Space GroupJV with Thales, among the main European leaders inthe satellite systems and at the forefront of orbit
infrastructures

Toulouse, France

Cannes, France

33%

GIE ATRJV with Airbus Group, among the global leaders inregional turboprop aircraft with a capacity of
between 50 and 70 seats

Toulouse, France

Toulouse, France

50%

MBDA GroupJV with Airbus Group and BAE Systems (through theparent AMSH BV), among the world leaders in
missiles and missile systems

Paris, France

Paris, France

25%

With reference to the Space Alliance, which univocally regulates the governance of Telespazio and Thales
Alenia Space, it should be noted that in 2024 Leonardo and Thales signed an amendment which modified theoriginally agreed arrangements and resulted in the acquisition by Leonardo of control over the Telespazio
group, as well as the ensuing line-by-line consolidation of the same starting from the 2024 financial
statements.
On the contrary, based on the agreements in place until 31 December 2023 and following an in-depth analysis
thereof, Leonardo had established that both companies were to be considered as joint ventures.
224

Consolidated Financial Statements at 31 December 2023
As regards the associates, the Leonardo Group considered the investment in Hensoldt as a key investment
which, given its relevance, is comparable to that in the Strategic Joint Ventures from both a strategic andeconomic standpoint. Below is some relevant information concerning the company:

Company nameNature of the relations

Main operating
location

RegisteredofficeOwnership %Hensoldt Group

Associate

Taufkirchen,
Germany

Taufkirchen,
Germany

22.8%

225

Consolidated Financial Statements at 31 December 2023
Accordingly, the company's economic and financial data are reported below, in the same way as any otherstrategic Joint Venture, in accordance with the provisions of IFRS12:
31 December 2022
MBDA
Thales(throught GIE ATR
Telespazio (JV) Alenia
Hensoldt
AMSH BV) (JV)Space (JV)
(JV)

Total

Non-current assets
Current assets- of which cash and cash equivalentNon-current liabilities- of which non-current financial liabilities
Current liabilities- of which current financial liabilities
NCI net equity (100%)
Group net equity (100%)

358
420
14
70
23
373
14
18
317

1,958
1,881
14
228
1,858
294
1,753

2,748
8,160
136
40
11
9,338
22
(1)
1,531

239
860
4
186
74
712
115
201

1,335
1,644
460
1,160
621
1,203
16
13
603

Revenues (100%)
Amortisation, depreciation and impairment losses(100%)
Financial income (expenses) (100%)
Income taxes (100%)

650

2,175

4,210

821

1,707

26

59

194

42

103

3
(16)

(21)
(19)

14
(123)

4
(2)

(39)
(49)

Profit (loss) from continuing operations (100%)
Profit (loss) from discontinued operations, net of taxes(100%)
Other comprehensive income (expenses) (100%)
Total comprehensive income (expenses) (100%)

42

11

386

(11)

78

-

-

-

-

-

3
45

(22)
(11)

334
720

7
(4)

147
225

% Groups' interest in equity at 1 January% Groups' interest in profit (loss) from continuing
operations% Groups' interest in profit (loss) from discontinued
operations, net of taxes% Groups' interest in other comprehensive income(expenses)% Groups' interest in total comprehensive income(expenses)
Dividends received
Subscriptions and capital increases (decrease)
Acquisitions
Disposals
Exchange differences and other movements

205

608

265

61

-

1,139

28

4

97

(6)

20

143

-

-

-

-

-

-

2

(7)

84

4

37

120

30

(3)

181

(2)

57

263

(21)

(27)

(62)

(7)

(1)

3

2

(117)
38
100
4
1,427
416
1,843

38

100

% Groups' interest in equity at 31 December
Consolidation adjustments
Equity investments at 31 December

213
1
214

578
(209)
369

384
116
500

100
100

152
508
660

% Groups' interest in profit (loss)
Consolidation adjustments
Share of profits (losses) of equity-accounted
investees

28
-

4
(1)

97
-

(6)
-

20
(10)

143
(11)

28

3

97

(6)

10

132

226

Consolidated Financial Statements at 31 December 2023
31 December 2023
MBDA
Thales(throught GIE ATR
Telespazio (JV) Alenia
Hensoldt
AMSH BV) (JV)Space (JV)
(JV)

Total

Non-current assets
Current assets- of which cash and cash equivalentNon-current liabilities- of which non-current financial liabilities
Current liabilities- of which current financial liabilities
NCI net equity (100%)
Group net equity (100%)

388
441
23
93
39
392
25
18
326

2,020
1,788
10
247
1,981
229
1,580

3,022
10,111348
39
17
11,457
749
(1)
1,638

244
802
9
184
71
680
61
182

1,405
2,155
802
1,266
631
1,470
30
16
808

Revenues (100%)
Amortisation, depreciation and impairment losses(100%)
Financial income (expenses) (100%)
Income taxes (100%)

701

2,184

4,451

1,052

1,847

26

65

196

47

120

1
(16)

(26)
(21)

155
(146)

(6)
(3)

(72)
(35)

43

(45)

497

24

54

-

-

-

-

-

(2)
41

10
(35)

(51)
446

(6)
18

(50)
4

213

578

384

100

152

1,427

29

(15)

124

12

12

162

-

-

-

-

-

-

(1)

3

(13)

(3)

(11)

(25)

28

(12)

111

9

1

137

(23)

(44)

(85)

(16)

(8)
55
(61)
(1)

(176)
55
(61)
(2)
1,380
407
1,787

Profit (loss) from continuing operations (100%)
Profit (loss) from discontinued operations, net of taxes(100%)
Other comprehensive income (expenses) (100%)
Total comprehensive income (expenses) (100%)% Groups' interest in equity at 1 January% Groups' interest in profit (loss) from continuing
operations% Groups' interest in profit (loss) from discontinued
operations, net of taxes% Groups' interest in other comprehensive income(expenses)% Groups' interest in total comprehensive income(expenses)
Dividends received
Subscriptions and capital increases (decrease)
Acquisitions
Exchange differences and other movements

1(2)% Groups' interest in equity at 31 December
Consolidation adjustments
Equity investments at 31 December

219
1
220

522
(208)
314

410
116
526

91
91

138
498
636

% Groups' interest in profit (loss)
Consolidation adjustments
Share of profits (losses) of equity-accounted
investees

29
-

(15)
2

124
-

12
-

12
(10)

162
(8)

29

(13)

124

12

2

154

227

Consolidated Financial Statements at 31 December 2023
The recoverability of the carrying amount of investments is verified, when conditions obtain, also throughimpairment tests. With regard to Hensoldt AG, listed on the Frankfurt Stock Exchange, below is reported acomparison of the value of the equity investment and the average market price in December:
Listed entity

No. shared owned

Hensoldt AG

26,355,000€ per unit

Stock Exchange

24.14

Total €mil.

EquityInvestment

636

€mil.
636

Below is provided a summary of the aggregate economic and financial data of other associates which are notindividually material for the Group.

% Groups' interest in equity at 1 January% Groups' interest in profit (loss) from continuing
operations% Groups' interest in profit (loss) from discontinued
operations, net of taxes% Groups' interest in other comprehensive income(expenses)% Groups' interest in total comprehensive income(expenses)
Dividends received
Subscriptions and capital increases (decrease)
Acquisitions
Disposals
Exchange differences and other movements

31 December 2022
Other JV not
Associates notindividuallyindividuallymaterialmaterial
87
182

31 December 2023
Other JV not
Associates notindividuallyindividuallymaterialmaterial
61
195

2

20

4

5

6

25

(1)

15

(8)

(8)
3

(2)
10

(8)
28

(7)

2

(24)

(1)

16

(1)

% Groups' interest in equity at 31 December
Consolidation adjustments
Equity investments at 31 December

61

195

70

230

61

195

70

230

% Groups' interest in profit (loss)
Consolidation adjustments
Share of profits (losses) of equity-accounted
investees

2

20

(1)

16

2

20

(1)

16

1

(13)

(2)

(19)

Share of profits (losses) of equity-accounted
investees (risk provisions)228

Consolidated Financial Statements at 31 December 2023

13. RECEIVABLES AND OTHER NON-CURRENT ASSETS
31 December 2022

Deferred grants under Law no. 808/85
Defined benefit plan assets, net (Note 23)
Related party receivables (Note 36)
Other non-current receivables
Non-current receivables

31 December 2023

6
215
13
42
276

Prepayments - non-current portion
Equity investments at cost
Non-recurring costs pending under Law no. 808/1985
Non-current assets

6
167
17
41
231

20
23
29
72

4
14
29
47

The net decrease in non-current assets is attributable to the actuarial valuation of net assets related todefined benefit plans, for which details reference should be made to Note 23 on “Employee benefit
obligations”.

14. BUSINESS COMBINATIONS
No business combinations took place during the financial year.
In 2024 the Leonardo Group and Thales signed an amendment which modified the arrangements originallyagreed in the Space Alliance and resulted in the acquisition by Leonardo of control over the Telespazio group,
as well as the ensuing line-by-line consolidation of the same starting from the 2024 financial statements.
Therefore, Leonardo started a purchase price allocation process in order to determine the fair value related
to the first line-by-line consolidation of Telespazio that is expected to have material effects. In this Financial
Report the contribution of Telespazio was equal to €mil. 29 in terms of EBITA, deriving from the valuation at
equity. If the Telespazio group had been already consolidated on a line-by-line basis in 2023, the impact interms of Revenues and EBITA would have been equal to €mil. 691 and €mil. 37 respectively.
With reference to the previous year, the Leonardo Group had finalised the merger between the U.S.
subsidiary Leonardo DRS, Inc. (“Leonardo DRS”) and the Israeli company RADA Electronic Industries Ltd.
(“RADA”), active in the business of tactical radars for short-range and low-cost defence, particularly suitablefor ground-based Short Range Air Defense and Counter-UAV applications.
The consideration associated with the transaction, against which a 19.1% stake in Leonardo DRS was assigned
to RADA shareholders, was determined to be USDmil. 513 (€mil. 481 at 31 December 2022), generating
goodwill preliminarily determined to be USDmil. 283, then defined as equal to USDmil. 285 (€mil. 258 at 31
December 2023). The purchase price allocations process determined the following entries:($mil.)

Book values

ADJ Fair value

Fair value

Assets acquired

156

127

283

Liabilities acquired

(39)

(14)

(53)

Net assets acquired, escluding goodwill

230

Total consideration

513

Goodwill

283

229

Consolidated Financial Statements at 31 December 2023
As a result of the transaction, the shares of Leonardo DRS have been listed on NASDAQ and on the Tel Aviv
Stock Exchange (TASE) under the “DRS” symbol. In the course of 2023 trading on TASE was voluntarily
cancelled.

15. INVENTORIES
31 December 2022
2,314
1,601
336
1,087
5,338

Raw materials, supplies and consumables
Work in progress and semi-finished goods
Assets deriving from at point in time contracts
Advances to suppliers

31 December 2023
2,532
1,805
361
995
5,693

Inventories are shown net of impairment charges of €mil. 753 (€mil. 757 at 31 December 2022).
Point-in-time contract assets includes the production progress recognised on contracts that do not meet therequirements for the recognition of revenues on an over-time basis.

16. CONTRACT ASSETS AND LIABILITIESContract assets (gross)
Contract liabilities
Contract assets (net)

31 December 2022
7,346
(3,694)3,652

31 December 2023
6,406
(2,770)
3,636

8,119
(104)
8,015

8,847
(114)
8,733

Contract liabilities (gross)
Contract assets
Contract liabilities (net)Contract assets include the net value of the work executed for amounts exceeding the advances received
from customers. Similarly, contract liabilities include the opposite case.
This setoff was made limited to contract assets and liabilities and not also to assets arising from at point intime contracts classified in inventories. If the progress payments and advances from customers have notbeen collected at the reporting date, the corresponding amount is recognised as a receivable from
customers.
In 2023, the portion of Revenues deriving from the exposures classified at the start of the period within
contract liabilities amounted to €bil. 3.2.

17. TRADE AND FINANCIAL RECEIVABLES

Receivables
Cumulative impairments
Related party current receivables (Note 36)

31 December 2022
Trade
Financial
3,205
82
(587)
(33)
720
56
3,338
105

31 December 2023
Trade
Financial
3,375
55
(516)
(33)
826
183
3,685
205

The ageing of receivables together with an analysis of how the Group manages credit risk is reported under
Note 37.

230

Consolidated Financial Statements at 31 December 2023
18. OTHER CURRENT ASSETS
31 December 2022
224
110
59
35
64
2
3
101
598

Derivatives
Prepaid expenses - current portion
Receivables for grants
Receivables from employees and social security
Indirect tax receivables
Deferred receivables under Law no. 808/85
Other related party receivables (Note 36)
Other assets

31 December 2023
207
140
61
36
94
5
138
681

The fair value performance of portfolio derivatives is broken down below:

Interest rate swaps
Trading
Fair value hedge
Cash flow hedge
Currency
forward/swap/option
Trading
Fair value hedge
Cash flow hedge

AssetsFair value at

31 December 2022
Liabilities

Net

31 December 2023
Liabilities

Assets

Net

30

(1)
-

(1)
30

18

(1)
-

(1)
18

1
193

(20)
(275)

(19)
(82)

1
188

(7)
(167)

(6)
21

19. CASH AND CASH EQUIVALENTS
The change in the year is shown in the statement of cash flows. Cash and cash equivalents at 31 December
2023 included €mil. 1 of term deposits (€mil. 5 at 31 December 2022).

20. EQUITY
Share capital

Outstanding shares
Treasury shares
31 December 2022

578,150,395(2,843,120)
575,307,275

2,544
2,544

Costs incurred(net of tax
effect)
(19)
(26)
(26)
(19)

Repurchase of treasury shares less shares sold
31 December 2023

575,307,275

2,544

(26)

(19)

2,499

broken down as follows:
Outstanding shares
Treasury shares

578,150,395(2,843,120)

2,544
-

(26)

(19)
-

2,525
(26)

Number ofordinary shares

Par value

231

Treasuryshares

Total
2,525
(26)
2,499

Consolidated Financial Statements at 31 December 2023
The share capital, fully subscribed and paid-up, is divided into 578,150,395 ordinary shares with a par valueof € 4.40 each, including 2,843,120 treasury shares.
At 31 December 2023 the Ministry of Economy and Finance owned around 30.204% of the share capital.
The statement of changes in other reserves and equity attributable to non-controlling interests is presented
in the accounting statements section.
Cash-flow hedge reserve
This reserve includes changes in fair value of the effective portions of derivatives used by the Group to hedge
its exposure to currency net of the effect of deferred taxes until the moment in which the “underlying
position” is recognised in the income statement. When this condition is met, the reserve is recognised in theincome statement to offset the economic effects of the hedged transaction. In accordance with theprovisions of IFRS 9 governing hedge accounting, the reserve also includes the fair value change in theforward component of forward contracts (premium points), taken to the income statement when the hedged
item affects profit or loss.
Translation reserve
The reserve relating to consolidated companies showed the following changes:
2022

US dollar
Pound sterling
Other currencies

150
(141)
3
12

2023

(73)
46
(22)
(49)

Overall, the reserve is negative for €mil. 222, mainly for the translation differences on the components
denominated in Pound sterling.
Gain and loss items recognised in equity and related tax effect2022
Revaluation of defined-benefit plans
Changes in cash-flow hedges
Foreign currency translation difference
Fair value to OCI
Total
2023
Revaluation of defined-benefit plans
Changes in cash-flow hedges
Foreign currency translation difference
Fair value to OCI
Total

Group - consolidated entities
AmountNet amountTax effectbefore taxes(*)

Group - equity accounted investments
AmountTax effect Net amount
before taxes

(324)
(24)
12
(336)

87
7
94

(237)
(17)
12
(242)

183
(7)
4
(13)
167

(39)
2
(37)

144
(5)
4
(13)
130

(78)
72
(49)
(55)

17
(18)
(1)

(61)
54
(49)
(56)

(31)
7
(6)
(30)

3
(3)
-

(28)
4
(6)
(30)

(*) The net value includes the Group's share of the components that may not be reclassified to profit (loss) for the period, amounting to -€mil. 60
at 31 December 2023 (-€mil. 236 in 2022), and the components that may be reclassified to profit (loss) for the period, amounting to -€mil. 20 at
31 December 2023 (-€mil. 6 in 2022).

Below are the details of the tax effects related to profit and loss recognised in equity attributable to noncontrolling interests:
232Consolidated Financial Statements at 31 December 2023
Non-controlling interest

Amount before
taxes

2022
Revaluation of defined-benefit plans
Changes in cash-flow hedges
Foreign currency translation difference
Total
2023
Revaluation of defined-benefit plans
Changes in cash-flow hedges
Foreign currency translation difference
Total

Tax effect

Net amount

-

-

-

1
(25)
(24)

-

1
(25)
(24)

21. BORROWINGS

Bonds
Borrowings
Lease liabilities
Other related party
borrowings (Note 36)
Other borrowings

31 December 2022
Non-current
Current
1,592
36
1,279
71
492
78

Total

31 December 2023
Non-current
Current
996
635
1,225
87
531
79

1,628
1,350
570

Total

1,631
1,312
610

100

862

962

100

1,192

1,292

68
3,531

35
1,082

103
4,613

33
2,885

51
2,044

84
4,929

Changes in borrowings are as follows:
1 January 2022 New borrowings
Bonds
Borrowings
Lease liabilities
Other related party
borrowings
Other borrowings

Bonds
Borrowings
Lease liabilities
Other related party
borrowings
Other borrowings

Repayments/Pay
ment of coupons

Other netincrease(decrease)

Exchangedifferences

31 December
2022

68
7

21
(3)
8

1,628
1,350
570

-

106

-

962

9
292

(19)
(1,552)

(5)
176

1
27

103
4,613

1 January 2023 New borrowings

Repayments/Pay
ment of coupons

2,481
1,648
568

203
80

(942)
(498)
(93)

856

-

117
5,670

Other netincrease(decrease)

Exchangedifferences

31 December
2023

49
49

(9)
(7)

1,631
1,312
610

-

330

-

1,292

(19)
(188)

1
429

(1)
(17)

84
4,929

1,628
1,350
570

92

(46)
(29)
(94)

962

-

103
4,613

92

Net changes for current liabilities. The items also include changes resulting from the application of the effective interest-rate method,which may not correspond with actual cash movements.

233

Consolidated Financial Statements at 31 December 2023
Following the early repayment, occurred in 2022, of the bonds issued on the US market by Leonardo US
Holding, Leonardo SpA was the sole issuer of the Group on the bond market. Leonardo’s issues are governed
by rules with standard legal clauses for these types of corporate transactions on institutional markets that
do not require any undertaking with regard to compliance with specific financial parameters (financial
covenants) but they do require negative pledge and cross-default clauses. Based on negative pledge clauses,
Leonardo and its “Material Subsidiaries” (companies in which Leonardo owns more than 50% of the sharecapital and the gross revenues and total assets of which represent at least 10% of consolidated grossrevenues and total assets) are expressly prohibited from pledging collateral security or other obligations tosecure their debt in the form of bonds or listed financial instruments or financial instruments that qualify forlisting, unless these guarantees are extended to all bondholders. Exceptions to this prohibition are
securitisation and the establishment of assets for the use indicated in Article 2447-bis et seq. of the Italian
Civil Code. On the contrary, the cross-default clauses give the bondholders the right to request early
redemption of the bonds in their possession in the event of default by Leonardo and/or any “Material
Subsidiary” that results in a failure to make payment beyond pre-set limits.
Financial covenants are included in the ESG-linked Revolving Credit Facility and in the ESG-linked Term Loansigned in 2021 which require Leonardo to comply with two Financial ratios (the ratio of Group net debt excluding payables to the joint ventures MBDA and Thales Alenia Space and lease liabilities /EBITDA, including
amortisation of the right of use assets, must be no higher than 3.75 and the ratio of EBITDA, including
amortisation of the right of use assets / Net interest must be no lower than 3.25), tested annually based on
consolidated data. These covenants, which are always tested on an annual basis, are included in the loan
agreement with CDP, as well as in all EIB loans in place (they had been used for a total amount of €mil. 481
at 31 December 2023). In relation to this Annual Financial Report, there was full compliance with thecovenants (the two ratios were 0.4 and 18.8, respectively).
In line with the US standard practices, financial covenants are also provided for in the bank loans granted infavour of Leonardo DRS. These financial ratios (Net debt / adjusted EBITA not more than 3.75 and adjusted
EBITA /Net interest not less than 3.0, to be determined on the basis of the data inferable from the US GAAP
financial statements of the LDO DRS Group) are also met in relation to this Annual Financial Report.
Below is the reconciliation of the changes in borrowings with the cash flows from financing activities:
2022

2023

Balance at 1 January

5,670

4,613

Changes included in cash flows from financing activities of the statement:- Repayments of bonds- BEI Loan and Term Loan repayment- Net change in other borrowings(1,131)
(841)
(547)
257

190
(19)
209

Non-monetary changes:- Non monetary items of lease liabilities- Exchange rate effect- Accrued interest

74
80
27
(33)

126
140
(17)
3

Balance at 31 December

4,613

4,929

234

Consolidated Financial Statements at 31 December 2023
Bonds
Below is the detail of the bonds at 31 December 2023:
IssuerYear of issue

Maturity

Currency

LDO (*)LDO (*)LDO (*)

2005
2017
2020

2025
2024
2026

€
€
€

Outstanding nominal
amount (mil.)
500
600
500

Annualcoupon4.875%
1.500%
2.375%

Type of offer
European institutional
European institutional
European institutional(*) Bonds listed on the Luxembourg Stock Exchange and issued under the EMTN programme of up to €bil. 4. The transaction was
authorized pursuant to Article 129 of Legislative Decree No. 385/93.

Movements in bonds are as follows:
1 January
2022€mil. 500 LDO 2025 *€mil. 600 LDO 2022 *USDmil. 300 LH 2039 *USDmil. 500 LH 2040 *600 €mil. LDO 2024*€mil. 500 LDO 2026 *Interest

518
583
110
163
602
505
2,481

1 January
2023€mil. 500 LDO 2025 *600 €mil. LDO 2024*€mil. 500 LDO 2026 *Interest

518
603
507
1,628

Effect of
Repayments/ Payments of
31 December
exchange
Fair value
Repurchases
coupons
2022
rate
24
(24)
518
509
2
(556)
(29)
8
(115)
(12)
9
10
(170)
(15)
12
10
(9)
603
586
14
(12)
507
475
68
(841)
(101)
21
1,628
1,570
Effect of
Repayments/ Payments of
31 December
exchange
Fair value
Repurchases
coupons
2023
rate
25
(25)
518
508
10
(8)
605
593
14
(13)
508
489
49
(46)
1,631
1,590

(*) Maturity date of bond.

The fair value of the bonds was determined on the basis of the quoted prices of the existing issues (Level 1of the fair value hierarchy).
The Group’s financial liabilities are subject to the following exposures to interest-rate risk:
Bonds
31 December 2022
Within 1 year
2 to 5 years
Beyond 5 years
Total

Floating

Borrowings

Fixed

-

36
1,592
1,628

Floating

50
800
269
1,119

Fixed

21
210
231

Other related
Lease liabilities party borrowings(Note 36)
Floating

1
4
8
13

235

Fixed

77
364
116
557

Floating

841
100
941

Fixed

21
21

Other
borrowings
Floating

35
58
10
103

Total
Floating

Fixed

-

927
962
287
2,176

Fixed

155
2,166
116
2,437

Consolidated Financial Statements at 31 December 2023

Bonds
31 December 2023
Within 1 year
2 to 5 years
Beyond 5 years
Total

Floating

Borrowings

Fixed

-

Floating

635
996
1,631

46
784
830

Fixed

41
235
206
482

Other related
Lease liabilities party borrowings(Note 36)
Floating

Fixed

-

79
422
109
610

Floating

1,171
100
1,271

Fixed

21
21

Other
borrowings
Floating

Total
Floating

Fixed

51
30
3
84

-

1,268
914
3
2,185

Fixed

776
1,653
315
2,744

Below is the financial information prepared in accordance with the “Indebtedness statement” scheme
required under CONSOB communication DEM/6064293 of 28 July 2006 and updated in accordance with the
ESMA guidelines 32-382-1138 of 4 March 2021 as implemented in the CONSOB warning notice no. 5/21 of
29 April 2021. The scheme is provided below:
31 December 2022
(1,511)(105)(1,616)31 December 2023
(2,407)(205)(2,612)E - Current financial debt (*)
F - Current portion of non-current financial debt

1,046
36

1,409
635

G - Current financial debt

1,082

2,044

H - Net current financial debt (funds)

(534)

(568)

I - Non-current financial debt (*)
J - Debt instruments (**)
K- Trade payables and othe non-current debt
L - Non-current financial debt

3,531
19
170
3,720

2,885
6
212
3,103

M - Total financial debt

3,186

2,535

A - Cash
C - Other current financial assets
D - Liquidity

(*)
(**)

Includes payables for leases of €mil. 610, of which €mil. 79 current (€mil. 570 as at 31 December 2022, of which €mil. 78
current)
Includes the fair value of hedging derivatives in respect of debt items

Based on current interpretations, the item “Trade payables and other non-current payables” of the abovesaid
scheme includes the value of payables for grants received from MEMiT for the development of programmes
not related to national security eligible for benefits under Law 808/1985, even though such value is not, by
its very nature, a financial caption. The reconciliation between Net Financial Debt and Group Net Debt, used
as KPI, is as follows:Note
Net financial debt com. CONSOB n. DEM/6064293/ESMA
Payables to MEMiT (Law no. 808/85)
Group net debt (KPI)

24

236

31 December 2022
3,186
(170)
3,016

31 December 2023
2,535
(212)
2,323

Consolidated Financial Statements at 31 December 2023
22. PROVISIONS FOR RISKS AND CHARGES AND CONTINGENT LIABILITIESGuarantees
given
1 January 2022
Current
Non-current

Allocations
Uses
Reversals
Other changes
31 December 2022
Broken down as follows:
Current
Non-current

Allocations
Uses
Reversals
Other changes
31 December 2023
Broken down as follows:
Current
Non-current

Restructuring

Tax

Product
guarantees

Onerouscontracts(losses atcompletion)

Other
provisions

Total

21
10
31

56
65
121

62
16
78

168
97
265

398
398

406
395
801

1,111
583
1,694

2
(1)
32

104
(36)
(6)
183

13
(20)
(4)
67

98
(20)
(65)
1
279

167
(55)
(184)
74
400

342
(25)
(191)
(58)
869

726
(137)
(460)
7
1,830

22
10
32

51
132
183

61
6
67

188
91
279

400
400

356
513
869

1,078
752
1,830

(1)
31

49
(40)
(5)
2
189

10
(4)
73

86
(25)
(49)
(3)
288

138
(43)
(180)
22
337

291
(52)
(59)
(102)
947

574
(161)
(297)
(81)
1,865

21
10
31

81
108
189

68
5
73

205
83
288

337
337

375
572
947

1,087
778
1,865

“Other provisions for risks and charges” mainly include provisions related to offset obligations and criticalissues on contracts.
With regard to risks, below is a summary of the criminal proceedings that are currently underway against
Leonardo Spa and certain former directors and executives, concerning acts committed during theperformance of their duties at the Company, with specific reference to the events that occurred in 2023 andin early 2024:•

On 22 May 2019 the Supreme Court rejected the appeals submitted against the judgment wherebyon 8 January 2018 the Milan Court of Appeal had acquitted the former Chairman and Chief Executive
Officer of Leonardo and the former Chief Executive Officer of AgustaWestland S.p.A. of the charges
for the crimes under Articles 110, 112, paragraph 1, 318, 321 and 322-bis, paragraph 2(2) of the
Italian Criminal Code and Article 2 of Legislative Decree 74/2000, within the proceedings brought inrelation to the supply of twelve AW 101 VIP/VVIP helicopters to the Indian Government.
In respect of these companies, it is recalled that on 25 July 2014, pursuant to Article 58 of Legislative
Decree 231/2001, the Public Prosecutor dismissed the proceedings against Leonardo, holding
groundless, following the conclusion of investigations, the Company’s involvement from both afactual and legal point of view. The Prosecutor also acknowledged that since 2003 the Company has
adopted, actually implemented and regularly updated an Organisational, Management and Control
Model that is conceptually suitable to prevent offences like the one in question and is also focused237

Consolidated Financial Statements at 31 December 2023
on compliance processes as to guarantee adequate standards of fairness and ethical conduct. In
addition, on 28 August 2014 the Judge for Preliminary Investigations (GIP, Giudice delle Indagini
Preliminari) of the Court of Busto Arsizio – in granting the motions put forth by the companies –imposed administrative penalties pursuant to Article 63 of Legislative Decree 231/2001 and Article
444 and ff. of the Italian Code of Criminal Procedure, amounting to €80,000 for AgustaWestland
S.p.A. and €300,000 for AgustaWestland Ltd, and ordered the confiscation of the equivalent of €mil.
7.5. In this regard, on 20 April 2021 the Court of Appeal of Brescia, following the requests by
AgustaWestland SpA and AgustaWestland Ltd for the review of the abovementioned rulings, revoked
the rulings challenged and acquitted the abovesaid companies. Since times for a possible appeal to
the Supreme Court expired, the ruling became definitive.
As regards the investigations started by the Indian Judicial Authority (CBI) in February 2013 for thesame facts referred to above, on 2 February 2018 a notice was served on AgustaWestland
International Ltd., whereby the latter was invited to appear at the hearing to be held on 30 May 2018
before the Rouse Avenue Court in New Delhi within the criminal proceedings brought therein against
the aforesaid company and other entities and persons, including Leonardo Spa.
On 13 April 2018 the Milan Public Prosecutor’s Office served the abovementioned notice of invitation
to appear at the hearing on 30 May 2018 on Leonardo Spa. The Company submitted an applicationfor enforcement review before the Judge for Preliminary Investigations (GIP) of the Court of Milan,
which was rejected on 22 May 2018, as well as an appeal before the Lazio Regional Administrative
Court. The Company also took the same legal actions with respect to the service of the notice ofinvitation to appear in court at the hearing on 10 September 2018. By a judgment dated 3 July 2019,
the Lazio Regional Administrative Court rejected the appeals submitted by Leonardo Spa; theCompany then filed an appeal against the abovementioned measures. By a judgment dated 7 May
2020 the Council of State granted the appeals submitted by Leonardo.
Leonardo SpA. has brought the same lawsuits before the administrative Court and before the Judgefor Preliminary Investigations of the Court of Milan, including with reference to the services of noticeof invitation to appear at the hearings set on 18 September 2019 and 18 December 2019. The Lazio
Regional Administrative Court, by judgment dated 24 September 2021, rejected the appeals
submitted by Leonardo. The Company filed an appeal with the Council of State, which, by judgment
handed down at a plenary meeting on 6 December 2022, granted the appeal filed by Leonardo,
annulling the orders issued by the Ministry of Justice.
With regard to objecting to the execution of a judicial measure, the Judge of Preliminary
Investigations of the Court of Milan granted the claims submitted by Leonardo by an order filed on
22 March 2022 while revoking the decrees whereby the notifications had been ordered by the Milan
Public Prosecutor's Office.
On the contrary AgustaWestland International Ltd appeared at the hearings set within theproceedings brought by the Central Bureau of Investigation (CBI) and the proceedings are continuing.
On 28 August 2019 the Public Prosecutor’s Office of Milan served on Leonardo Spa a notice ofinvitation to appear at the hearing of 18 September 2019 within further proceedings brought by the
Indian Judicial Authority (Directorate of Enforcement) in relation to the supply of 12 AW 101 VIP/VVIP
helicopters to the Indian Government. The Company submitted an application for enforcement
review before the Judge for Preliminary Investigations of the Court of Milan, as well as an appeal
with the Lazio Regional Administrative Court, even in relation to this notice. The Lazio Regional
Administrative Court, by the same judgment of 24 September 2021, rejected the appeal submitted
by Leonardo which filed an appeal with the Council of State. The latter granted the appeal submitted
238

Consolidated Financial Statements at 31 December 2023
by Leonardo by a judgment handed down at a Plenary Meeting on 6 December 2022. With regard to
objecting to the execution of a judicial measure, the Judge of Preliminary Investigations of the Courtof Milan revoked, in the same order of 22 March 2022, the decree whereby the notification had beenordered by the Milan Public Prosecutor's Office.
Finally, it should be noted that on 11 February 2020 a notice was served on AgustaWestland
International Ltd whereby it was invited to appear in court within the proceedings brought by the
Directorate of Enforcement.
The proceedings initiated by the Indian Authorities (CBI and Directorate of Enforcement) arecurrently pending in the preliminary stage before the Rouse Avenue Court, New Delhi.
•

On 6 June 2023 a search and seizure warrant was executed against the former Chief Executive Officer
of Leonardo Spa, who terminated his office on 9 May 2023. The warrant was issued as part of theproceedings, conducted by the Public Prosecutor’s Office with the Court of Naples, where the former
Chief Executive Officer is under investigation for the crime under articles 110, 61 bis, 322 bis para. I
and II, no. 2 of the Italian Criminal Code in relation to the supply of the Company’s products to
Colombia.

•

On 20 September 2023 Leonardo Spa, during the preliminary hearing, entered an appearance in thecivil action within the criminal proceedings pending before the Court of Gorizia, in which are involved,
inter alia, certain former directors of the then Ansaldo Componenti S.p.a., the then Ansaldo S.p.a.
and the then Ansaldo Industria S.p.a., in office in the period between 1979 and 1991, charged withhaving committed the crimes under Articles 589 paragraphs 1, 2 and 4, 40 and 41 of the Italian
Criminal Code for violation of the rules governing the prevention of occupational diseases, and inparticular Article 2087 of the Italian Civil Code, Presidential Decree 547/55 and Presidential Decree
303/56. The proceedings are at a trial stage still pending before the Court of Gorizia.

Based upon the information gathered and the results of the analysis carried out so far, the Directors of
Leonardo did not allocate any specific provisions in relation to these cases. Any negative developments which cannot be foreseen, nor determined to date - arising from any internal investigations or judicial
investigations being conducted, will be subject to consistent assessment for the purposes of provisions (ifany).
********
With regard to the provisions for civil, tax and administrative disputes, it is underlined that the Company’s
operations regard industries and markets where many disputes, both as petitioner and plaintiff, are settled
only after a considerable period of time, especially in cases where the customer is a government entity.
Pursuant to the IFRSs, provisions have only been set aside for risks that are deemed probable and for which
the amount can be determined. No specific provisions have been set aside for certain disputes in which theCompany is defendant as these disputes are reasonably expected to be settled, based on current knowledge,
satisfactorily and without significantly impacting the Company. Of particular note are the following disputes:•

the proceedings brought by Firema under extraordinary management before the Court of Naples
against the directors and statutory and independent auditors of Firema Trasporti (General Register32257/13) in order to have them declared responsible for the financial collapse caused to thecompany, who then summoned Leonardo and AnsaldoBreda requesting for direct compensation infavour of the plaintiff for the damages that should be ascertained (presumptively €mil. 262, equal toFirema’s statement of liabilities).
239

Consolidated Financial Statements at 31 December 2023
As to the action brought by GMR against Leonardo and AnsaldoBreda due to abuse of economic
dependence before the Court of Naples (General Register 16312/15), at the hearing held on 1
October 2020 the President of the Division first pointed out some issues connecting the twoproceedings and then referred the present case before the judge of the proceedings under General
Register 32257/13 in order for the proceedings to be possibly joined.
In both proceedings Leonardo and AnsaldoBreda appeared before the court requesting that, on the
merits, the claims submitted against them be dismissed as clearly groundless as of fact and as ofright.
It should be noted that, within these proceedings, the plaintiff states that Firema Trasporti wasallegedly subject, during the period in which Leonardo held an investment in it (from 1993 to 2005),
to management and coordination activities that were carried out to its detriment and in the soleinterest of the Leonardo Group and that, even after the sale of the aforesaid investment, Firema
Trasporti was allegedly de facto subjected to an abuse of economic dependence from theabovementioned Leonardo Group in performing the various agreements existing with AnsaldoBreda.
Following the reservation taken at the hearing on 19 October 2023, the Court (i) ordered the joinderof the aforementioned proceedings, and (ii) admitted a technical ascertainment/accounting audit inorder for the expert to analyze the corporate events concerning the company subsequently
subjected to Extraordinary Management and verify whether statutory auditors and directors acted
in a proper manner. The Court-appointed expert took an oath at the hearing held on 7 December
2023 and technical experts were appointed by the parties.
By an order dated 18 December 2023, the Court, having read the briefs pursuant to Article 101,
paragraph 2, of the Italian Code of Civil Procedure and the written discussion notes filed by theparties, noted that, in an application filed on 6 December 2023, the defence counsels to Giorgio Fiore
had "submitted objections concerning the expiry of the proceedings due to the fact that Firema
under extraordinary management had joined the criminal proceedings Rg. (General Register) no.
21567/10/2021 as an aggrieved party to recover damages on the assumption that the latter,although it declared (in order to avoid effects on the ongoing civil action) that it had appeared withregard only to item D), had also specifically dealt with item C) during the pre-trial investigation", and,
therefore, set the hearing on 24 January 2024 for the relevant discussion. At this hearing, the Court
asked the attorneys to inform the Court of whether there would be the possibility of pursuing asettlement agreement in relation to any individual situations and positions and, for this purpose, set
the hearing on 14 March 2024 for possibly submitting a settlement proposal.
As a result, the technical ascertainment was suspended.
•

the proceedings brought by Mr. Pio Deiana (to have a deed of settlement entered into with former
Ansaldo Industria declared null and void) before the Rome Court of Appeal, which had beensuspended following Mr. Deiana’s death and then resumed by his sister. During the proceedings, theexistence of another heir of the deceased person was ascertained; accordingly, at the last hearing
held on 26 October 2022, the Court declared the latter's contumacy and set the final hearing on 18
December 2024.
********

Moreover, given their complexity, their cutting-edge technological content and the nature of the customers,
the Company’s long-term contracts are sometimes affected by disputes with customers in relation to thecompliance of works with customer specifications and product performances. The Company adjusts the240Consolidated Financial Statements at 31 December 2023
estimated contract costs for foreseeable issues, also taking into account the possible developments in therelevant disputes. With regard to contracts in progress affected by uncertainties and issues under discussion
with customers, there are:•by a request for arbitration filed on 25 October 2019, Leonardo S.p.a. and PSC S.p.A. (collectively
referred to as “LP” unincorporated joint venture,) initiated arbitration proceedings against Galfar
Misnad Engineering & Contracting W.L.L., Salini-Impregilo S.p.A. (now Webuild) and Cimolai S.p.A.
(collectively referred to “GSIC” unincorporated joint venture) to seek an order imposing them to pay,among others, the outstanding amounts and all the additional costs relating to the subcontract
entered into between the parties on 22 September 2016, whereby GSIC appointed LP to provide
supplies and carry out certain manufacturing operations. These electrical, mechanical and plumbing
plant engineering works are included in the general contract, awarded to GSIC, for the design andconstruction of the Al Bayt Stadium in Al Khor City (Qatar). The regular progress of the subcontracted
works was strongly affected by a number of delays not attributable to LP, as well as by numerous
additions and variations to the works that had been initially agreed and the shortcomings of thetechnical documentation prepared by GSIC. On the other hand, the latter submitted allegations tothe contrary, while also charging LP with having caused damages to its organisation. In this context,
on a preliminary basis LP asked the court to order GSIC to pay the remaining amounts provided by
the subcontract, as well as any and all additional costs incurred, for a total of approximately QAR mil.
1,500 (about €mil. 388 at 17 February 2023). On the other hand, GSIC contested each and every
charge and asked the court, as a counterclaim, to order LP to compensate for any damage the latter
had allegedly caused, for a total of QAR mil. 721 (approximately €mil. 186 at 17 February 2023).
On 6 October 2023 the Court of Arbitration issued the award ordering GSIC to pay LP a net amountof approximately €mil. 146.5; on 7 March 2024 this amount was modified by the granting of thepetition for correction of the award filed by LP for an additional amount of approximately €mil. 11.

•

With reference to the request for termination for default due to alleged delays and non-compliant
products formalised during 2022 by the governmental Norwegian Defence Materiel Agency (NDMA)
under the contract for the supply of 14 NH90 helicopters entered into with NH Industries (NHI, whose
shareholders are Leonardo, Airbus Helicopters and Fokker Aerostructure), the parties started a
mediation process in April 2023, which should be completed in the next months. The NHI position,
confirmed by Leonardo, is unchanged compared to what was reported in the financial statements asof 31 December 2022, considering this request to be legally ungrounded and reasonably disputablein the appropriate forum due to a lack of factual and legal basis and misinterpretation of the contract
and Norwegian law, as well as due to a breach of confidentiality obligations. As noted above, in April
2023, the customer and NHI initiated a mediation procedure in an attempt to reach a mutuallysatisfactory agreement. In the period from October 2023 to February 2024, the parties exchanged
significant claims and counterclaims and took steps to file deeds and documents required under the
mediation procedure; the hearing before the mediators is scheduled for the second half of March
2024. At this stage of the mediation neither NHI nor Leonardo considers that it should change its
position.

23. EMPLOYEE BENEFIT OBLIGATIONS
The classification of employee benefit obligations is affected by the net balance, per each plan, of the plan
assets and liabilities. The Group recognised on its balance sheet the liabilities (net of related plan assets) as
well as the assets (net of related liabilities), depending on whether the plans are in a deficit or surplus
position.
241

Consolidated Financial Statements at 31 December 2023
Net assets under defined-benefit plans are classified among other non-current assets (Note 13) and otherlong-term benefits are classified under other non-current liabilities (Note 24). Below is a breakdown of the
net liabilities and assets:

Severance pay provision
Defined-benefit plans
Definedcontribution
plans

Liabilities

31 December 2022
Assets
219
56
215

Net

219
(159)

Liabilities

31 December 2023
Assets
204
53
167

Net

204
(114)

40

-

40

44

-

44

315

215

100

301

167

134

The surplus for defined-benefit retirement plans is broken down below:
31 December 2022
(213)
5
41
8
(159)

GBP areaEuro area
USD areaOther

31 December 2023
(165)
5
33
13
(114)

The change in defined-benefit plans was mainly linked to the plans applicable in the United Kingdom, due tothe changes in the financial assumptions and to more contained results of the plan assets.
Below is a breakdown of defined-benefit plans and statistical information regarding the excess(deficit/surplus) of the plans:Present value of obligations
Fair value of plan assets
Plan deficitof which, related to:- net liabilities- net assets

242

31 December 2022
(2,121)2,280
159

31 December 2023
(2,257)
2,371
114

(56)
215

(53)
167

Consolidated Financial Statements at 31 December 2023
Changes in the defined-benefit plans are shown below:

3,489
69
68
(1,307)(3)(1,394)

Net liability (asset)
defined benefit
plans
4,001
(512)
(5)
74
75
(7)
(1,623)316(3)(1,394)90

90

Present value of Fair value of plan
obligations
assets31 December 2022
Opening balance
Costs of benefits paid
Interest expenses
Remeasurement- Actuarial losses (gains) through equity - demographic assumption- Actuarial losses (gains) through equity - financial assumptions- Actuarial losses (gains) through equity resulting from adjustments
based on the experience- Expected return on plan assets
Contributions paid
Contributions from other plan participants
Exchange rate differences
Benefits paid
Closing balanceof which, related to:- net liabilities- net assets

11
(110)
(99)
2,121

(1,623)
50
11
(130)
(99)
2,280

1,623
(50)
20
(159)

205
1,916

149
2,131

56
(215)

2,121
34
100
61
(70)
47

Net liability (asset)
defined benefit
plans
2,280
(159)
(4)
38
108
(8)
(14)
75
(70)
47

84

84

Present value of Fair value of plan
obligations
assets31 December 2023
Opening balance
Costs of benefits paid
Interest expenses
Remeasurement- Actuarial losses (gains) through equity - demographic assumption- Actuarial losses (gains) through equity - financial assumptions- Actuarial losses (gains) through equity resulting from adjustments
based on the experience- Expected return on plan assets
Contributions paid
Contributions from other plan participants
Exchange rate differences
Benefits paid
Closing balanceof which, related to:- net liabilities- net assets

243

10
36
(105)
2,257

(14)
55
10
41
(105)
2,371

14
(55)
(5)
(114)

210
2,047

157
2,214

53
(167)

Consolidated Financial Statements at 31 December 2023
Changes in severance pay are shown below:
Opening balance
Costs of benefits paid
Interest expenses
Remeasurement- Actuarial losses (gains) through equity - demographic assumption- Actuarial losses (gains) through equity - financial assumptions- Actuarial losses (gains) through equity resulting from adjustments based on theexperience
Benefits paid
Closing balance

31 December 2022
256
2
2
(12)

31 December 2023
219
2
8
8

(28)

3

16

5

(29)
219

(33)
204

The amount recognised in profit or loss on defined-benefit plans (including the severance pay provision) was
calculated as follows:
2022

Current service costs
Past service costs
Costs booked as “personnel expenses”
Interest expenses
Costs booked as “financial expenses”

77
(1)
76

2023

41
(1)
40

(5)
(5)

-

71

40

The main actuarial assumptions used in the valuation of defined-benefit plans and of the portion of severance
pay provision that has maintained the nature of defined-benefit plan are as follows:

Discount rate (annual)
Rate of salary increase
Inflation rate

Severance pay provision
31 December
31 December
2022
2023
3.70%
3.25%
n.a.
n.a.
2.20%
2.00%

Defined-benefit plans
31 December
31 December
2022
2023
4.75% - 5.06%
4.55% - 4.85%
3.20% - 3.65%
3.45% - 3.50%
2.65%
2.50%

The discount rate utilized to discount the defined benefits plans is determined with reference to expected
returns of the AA-rated bonds.
The sensitivity analysis for each significant actuarial assumption, which shows the effects on bonds inabsolute value, is as follows:

Discount rate (annual)
Inflation rate

Severance pay provision
31 December 2022
31 December 2023
-0.25%+0.25%-0.25%+0.25%
3
(3)
2
(2)
(2)
2
(1)
1

Defined-benefit plans
31 December 2022
31 December 2023
-0.25%+0.25%-0.25%+0.25%
84
(81)
80
(76)
(52)
52
(48)
44

The average duration of the severance pay is about 5 years while that of the other defined-benefit plans isabout 15 years.
The estimate of the contributions to be paid in 2024 related to defined-benefit plans is about €mil. 23.

244

Consolidated Financial Statements at 31 December 2023
As regards the strategies of correlation of assets and liabilities in defined-benefit plans, there is theprevalence of investing in diversified assets in order to limit the negative impact, if any, on the total returnon the plan assets. Assets of defined-benefit plans include:
31 December 2022
113
347
1,683
11
(62)
188
2,280

Cash and cash equivalents
Shares and investment funds
Debt instrument
Real properties
Derivatives
Other

31 December 2023
36
307
1,810
11
16
191
2,371

The item “Other” included €mil. 107 (€mil. 111 in 2022) of assets held by insurance companies.

24. OTHER CURRENT AND NON-CURRENT LIABILITIES

477
184
224
-

31 December 2023
Non-current
Current
54
84
212

517
206
217
1

185

45

209

21

374

124
296
413

342

128
175
416

-

47

-

42

861
1,810
(*) Non-current item includes other employee benefits related to seniority bonuses

901

1,723

Employee obligations (*)
Deferred income
Amounts due to social security institutions
Payables to MEMiT (Law no. 808/85)
Payables to MEMiT for royalties (Law no.
808/85)
Indirect tax liabilities
Derivatives
Other liabilities
Other payables to related parties (Note36)

31 December 2022
Non-current
Current
53
79
170

The payables to the Ministry of Enterprise and Made in Italy (MEMiT) under Law 808/1985 relate tomonopoly costs accrued on national security and similar projects, as well as payables for grants received from
MEMiT for development of other programmes eligible for benefits under Law 808/1985.
“Other liabilities” included, in particular, the non-current payable due to Bell Helicopter amounting to €mil.
258 (€mil. 268 at 31 December 2022), deriving from the acquisition of 100% of the AW609 programme. This
amount also included the reasonably estimated potential consideration due to Bell Helicopter based on thecommercial performance of the programme.

25. TRADE PAYABLES
31 December 2022
2,737
317
3,054

Suppliers
Trade payables to related parties (Note 36)245

31 December 2023
2,831
437
3,268

Consolidated Financial Statements at 31 December 2023
26. GUARANTEESThe Group has existing guarantee for €mil. 14,505 (€mil. 13,615 at 31 December 2022). The item mainly
includes guarantees given to third parties, banks and insurance companies as well as commitments in favorof lenders, tax authorities and customers.

27. REVENUES
2022

Revenues from contract with customers
Change in contract assets
Revenues from related parties (Note 36)

2023

12,158368
2,187
14,713

14,030(976)
2,237
15,291The breakdown by geographical area and business sector is reported in Note 8. The breakdown of revenue
by timing is reported below:
2022

Revenues at point in time
Revenues over time

2023

2,342
12,371
14,713

2,653
12,63815,291

28. OTHER OPERATING INCOME (EXPENSES)

Grants for research and development costs (*)
Other operating grants
Gains/losses on sales of intangible asset, property,
plant and equipment
Reversals (accruals) to provisions for risks
Exchange rate difference on operating items
Restructuring costs
Indirect taxes
Other operating income (expenses)
Other operating income (expenses) from/to relatedparties (Note 36)

Income28
34

2022
Expenses

-

Net

28
34

Income37
51

2023
Expenses

-

Net

37
51

-

-

-

4

(5)

(1)

432
185
92

(604)
(179)
(38)
(57)

(172)
6
(38)
35

284
179
92

(456)
(171)
(3)
(33)
(56)

(172)
8
(3)
(33)
36

4

-

4

3

-

3

775

(878)

(103)

650

(724)

(74)

(*) To which must be added assessments for "Deferred receivables for measures under Law 808/1985”, including current and non-current portions(Note 13 and Note 18) equal to €mil. 17 (€mil. 5 at 31 December 2022, including current and non-current portions), in addition to assessmentsfor "Non-recurring costs for measures pending under Law 808/85” (Note 13) equal to €mil. 15.

246

Consolidated Financial Statements at 31 December 2023
29. PURCHASES AND PERSONNEL EXPENSES
2022

Purchase of materials from third parties
Change in inventories of raw materials
Costs for purchases from related parties (Note 36)
Purchases

4,544
(48)
1,057
5,553

2023

5,239
(231)
784
5,792

Services rendered by third parties
Costs of leases of low value and short term
Royalties
Services rendered by related parties (Note 36)
Services

3,434
67
25
421
3,947

3,587
68
13
463
4,131

Wages and salaries
Social security contributions
Costs related to defined-contribution plans
Costs related to severance pay provisionand other defined-benefit plans (Note23)
Employee disputes
Restructuring costs - net
Other personnel expenses
Personnel expenses

3,043
584
151

3,270
622
158

76

40

(5)
118
149
4,116

(2)
56
163
4,307

Change in finished goods, work in progress and semi-finished products

(164)

(261)

Internal work capitalised

(298)

(328)

Total purchases and personnel expenses

13,154

13,641

The net restructuring charges for the year derive, in the amount of €mil. 18, from the supplement of therestructuring plan launched in 2021 with regard to the Aerostructures segment and in the amount of €mil.
20, from the additions to the agreement for early retirement under Article 4 of Law 92/2012 (Fornero Act),
up to a maximum of no. 490 employees and executives in the Corporate and Staff functions of Leonardo
S.p.a., Leonardo Global Solutions and Leonardo Logistics. The data for the comparative period, the charge
resulting from the start of such measure, signed in December 2022, was equal to €mil. 100.
The exact and average workforce at period-end showed, compared to 2022, a significant increase in the
Defence Electronics & Security (+ 995 exact resources and + 827 average resources), Helicopters (+ 793 exact
resources + 576 average resources) and Aircraft (+ 216 exact resources and + 164 average resources) sectors,
in line with the growth of the related businesses. In the Aerostructures sector, the downsizing processcontinued linked to the early retirement scheme through the agreement under Article 4 of July 2021 (163exits in the year). Moreover, there was an increase in the Other Activities sector (+ 306 exact resources and+ 483 average resources).

247

Consolidated Financial Statements at 31 December 2023
Below is the breakdown of workforce by category:

Senior managers(*)
Middle managers
Clerical
employees
Manual labourers(**)

Average Workforce
31 December 2022 31 December 2023

Total Workforce
31 December 2022 31 December 2023

ChangeChange

1,218

1,252

34

1,274

1,220

(54)

6,216

6,496

280

6,512

6,579

67

29,29430,996

1,702

30,30232,3362,034

13,417

13,298(119)

13,304

13,431

127

50,14552,042

1,897

51,39253,5662,174(*) Includes pilots(**) Includes senior manual labours

30. AMORTISATION, DEPRECIATION AND FINANCIAL ASSETS VALUE ADJUSTMENTS

2022

Amortisation of intangible assets
Development costs
Non-recurring income
Acquired through business combinations
Concessions, licences and trademarks
Other intangible assets
Depreciation of property, plant and equipment andinvestment properties
Depreciation of rights of use
Impairment of other assets
financial assets value adjustments

39
64
24
23
37

187

2023
31
54
35
28
40

188

272

288

92
20
56
627

93
45
31
645

The increase in amortisation from business acquisitions was affected by the merger between the subsidiary
Leonardo DRS and the Israeli company RADA that was finalised in December 2022 and entailed therecognition of intangibles subject to amortisation (€mil. 12 in 2023).
The impairment of other assets for the period included impairment losses on certain programmes in the
Aircraft business and specific equipment (tooling) related to the Aerostructures segment.
The decrease in value adjustments to financial assets is influenced by the write-down, performed in the prioryear, of the exposure to the countries involved in the conflict between Russia and Ukraine, equal to about€mil. 36.

248

Consolidated Financial Statements at 31 December 2023
31. FINANCIAL INCOME AND EXPENSES
Below is a breakdown of financial income and expense:

Interest
Interest on lease liabilities
Premiums received (paid) on IRS
Commissions on borrowings
Other commissions
Fair value gains (losses) through profit or loss
Premiumsreceived (paid) on forwards
Exchange rate differences
Interest cost on defined-benefit plans (Note 23)
Financial income (expenses) - related parties (Note36)
Other financial income and expenses

5
26
36
47
-

2022
Expenses
(96)
(20)
(4)
(9)
(2)
(7)
(58)
(48)
5

1

(9)

277
392

(132)
(380)

Income

Net

32
1
6
19
39
38
-

2023
Expenses
(122)
(25)
(11)
(3)
(14)
(52)
(38)
-

(8)

6

(46)

(40)

145
12

25
166

(110)
(421)

(85)
(255)

(91)
(20)
(4)
(9)
(2)
19
(22)
(1)
5

Income

Net

(90)
(24)
6
(11)
(3)
5
(13)
-

The trend in financial income and expenses was heavily affected by the “extraordinary” transactions linked
to the sales of the Group businesses. Specifically, the figure for the year reflected the effects of the valuationof Industria Italiana Autobus, in light of the sale expected in 2024, for an amount of €mil. 57. The 2022 figure
benefitted, vice versa, from the capital gains realized on the sales of the GES business and of the investment
in AAC by the subsidiary Leonardo DRS, for €mil. 235, net of charges related to the make-whole transaction
on the bond issues in USD for €mil. 70.
Financial income and expenses deriving from the application of the fair value method are broken-down
as follows:

Exchange rate swap
Interest rate swaps
Ineffective portion of hedging swap

Income

1
25
26

2022
Expenses

(7)
(7)

Net

1
18
19

Income19
19

2023
Expenses

(14)
(14)

Net

5
5

32. INCOME TAXES
Income taxes can be broken down as follows:
2022

IRES (corporate income tax)
IRAP (reg. tax on production)
Other income taxes (foreign)
Tax related to previous periods
Accruals (reversals) of provisions for tax disputes
Deferred tax - net

249

(18)
(34)
(117)
14
7
97
(51)

2023

(11)
(27)
(152)
2
(6)
65
(129)

Consolidated Financial Statements at 31 December 2023
The table below shows the analysis of the tax rate compared to the rate of 24%:
2022

Profit (loss) before income taxes
Theoretical tax rate (Ires) %Theoretical taxes
Changes increasing (decreasing):
effect of companies valued at equity
IRAP effect of Italian companies
taxation effect of foreign companies
effect of use/accrual of tax losses
foreign tax effect of Italian companies
effect of taxation of intra-group dividends
other movements
Total changes increasing (decreasing)
Effective taxes

983
24%
(236)

2023

38
(20)
76
86
(5)
(3)
13
185
(51)

824
24%
(198)
28
(26)
17
80
(4)
(8)
(18)
69
(129)

Deferred taxes and related receivables and payables at 31 December 2023 were the result of the following
temporary differences. In this regard, we point out that part of the deferred tax assets relates to tax losses
valued on the basis of the taxable income envisaged in the companies’ plans, in particular an amount of €mil.
65 is related to the tax consolidation mechanism (about €mil. 63 of unrecognized losses).
2022

Deferred tax assets on tax losses
Property, plant and equipment and intangible assets
Financial assets and liabilities
Severance and retirement benefits
Provision for risks and impairment
Effect of change in tax rate
Other
Deferred taxes recognised through profit or loss

Deferred tax assets on tax losses
Property, plant and equipment and intangible
assetsSeverance and retirement benefits
Financial assets and liabilities
Provision for risks and impairment
Other
Offsetting
Deferred taxes recognised through balance
sheet
Cash-flow hedge derivatives
On actuarial gains and losses
Deferred taxes recognised through equity

31 December 2022
Balance sheet
AssetsLiabilities
141
-

Net

141

(6)
(10)
1
4
55
(1)
54
97

2023

(3)
(2)
(6)
(1)
(3)
80
65

31 December 2023
Balance sheet
AssetsLiabilities
113

Net

113

79

129

(50)

76

143

(67)

17
3
623
212
(14)

27
40
(14)

(10)
3
623
172
-

6
1
643
312
(14)

29

43
(14)

(23)
1
643
269
-

1,061

182

879

1,137

201

936

39
33
72
1,133

19
45
64
246

20
(12)
8
887

29
47
76
1,213

26
41
67
268

3
6
9
945

250

Consolidated Financial Statements at 31 December 2023
33. ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS
Liabilities related to assets held for sale referred to liabilities accruing from the charges that are due to arise
from the probable sale of the investment in the associate Industria Italiana Autobus, expected by the end of2024.
The values of the comparative period, vice versa, were mainly represented by the ATM business unit of Selex
ES Llc, sold in May 2023.
Below is the breakdown of reclassified assets and liabilities:
31 December 2022

31 December 2023

Non-current assets
Current assets
Assets held for sale

16
21
37

-

Non-current liabilities
Current liabilities
Liabilities associated with assets held for sale

4
8
12

40
40

There was no impact on the income statement deriving from discontinued operations during 2023 and 2022.

34. EARNING PER SHARE
Earnings (Losses) per share (hereinafter “earnings per share” or “EPS”) are calculated as follows:••for basic EPS, by dividing net profit attributable to holders of ordinary shares by the average numberof ordinary shares for the period less treasury shares;
for diluted EPS, by dividing net profit by the average number of ordinary shares and the average
number of ordinary shares potentially deriving from the exercise of all the option rights for stockoption plans less treasury shares.

Average shares outstanding during the reporting period (in thousands)
Earnings for the period (excluding non-controlling interests) (€ millions)
Earnings from continuing operations (excluding non-controlling interests) (€ millions)
Earnings from discontinued operations (excluding non-controlling interests) (€ millions)
Basic and Diluted EPS (€)
Basic and Diluted EPS from continuing operations (€)
Basic and Diluted EPS from discontinued operations (€)

2022
575,307
927
927
-

2023
575,307
658
658
-

1.611
1.611
n.a

1.144
1.144
n.a

Basic EPS, as that relating to the comparative period, was equal to diluted earnings per share, since there are
no dilutive elements.

251Consolidated Financial Statements at 31 December 2023
35. CASH FLOWS FROM OPERATING AND INVESTING ACTIVITIESNet result
Amortisation, depreciation and financial assets value adjustments
Share of profits/(losses) of equity-accounted investees
Income taxes
Cost of Severance pay provision and other defined-benefit plans
Net financial expenses /(income)Net allocations to the provisions for risks and inventory write-downs
Other non-monetary items

2022

932
627
(142)
51
76
(12)
350
1
1,883

2023

695
645
(148)
129
40
255
317
47
1,980

Costs for severance pay provision and other defined-benefit plans include the portion of costs relating todefined-benefit pension plans that is recognised as a personnel expense (the portion of costs relating tointerest is carried among net financial expense).
The changes in working capital, net of the effects of the acquisition and sale of consolidated companies andforeign currency translation differences, are as follows:2022

Inventories
Contract assets and liabilities
Trade receivables and payables

207
144
(590)
(239)

2023

(387)
585
(247)
(49)

The changes in other operating assets and liabilities, net of the effects of the acquisition and sale ofconsolidated companies and foreign currency translation differences, are as follows:2022

Payment of pension plans
Changes in provisions for risks and other operating items

(79)
(186)
(265)

2023

(88)
(284)
(372)

Changes in other investing or disinvesting activities include dividends received and the effects of acquisitions
and sales of equity investments and are broken down as follows:
2022

Strategic transactions
Dividends received
Change of other investing or disinvesting activities

(172)
133
(6)
(45)

2023

352
186
(31)
507

The net receipts of €mil. 352 of transactions on equity investments that for their nature or significance qualify
as “strategic investments” mainly relate for €mil. 327 to the sale of DRS shares occurred in November 2023
and to the sale of the air navigation radio aids business unit (ATM) to Indra Air Traffic, Inc., AC.

252

Consolidated Financial Statements at 31 December 2023
36. RELATED PARTY TRANSACTIONS
Related party transactions are carried out at arm’s length, as is settlement of the interest-bearing receivables
and payables when not governed by specific contractual conditions. The relevant financial statements
amounts are shown below. The statement of cash flows presents the impact of related party transactions on
cash flows.
RECEIVABLES at 31
December 2022

Non-current
loans andreceivables

Other noncurrent
receivables

Current loans
and receivables

Associates
NH Industries SAS
Eurofighter Jagdflugzeug
GmbH
Iveco - Oto Melara Scarl
Hensoldt AG
Macchi Hurel Dubois SAS
AgustaWestland Aviation
Services LLC
Other with unit amountlower than €mil. 10
Joint Venture
Thales Alenia Space SAS
MBDA SASGIE ATROrizzonte - Sistemi Navali
SpA
Other with unit amountlower than €mil. 10

8Other companies andconsortiums
Other with unit amountlower than €mil. 10
Companies subject to thecontrol or considerable
influence of the MEF
Ministero dell'Economia
e delle Finanze
Cassa Depositi e Prestiti
SpA
Other with unit amountlower than €mil. 10
Total% against total for theperiodTrade
receivables

Other current
receivables

Total

186

186

99

99

51
15
15

51
15
15

12

12

11

32

43

40

10
33
29

50
33
29

21

21

12

2

11

13

85

85

71

71

5

2

38

1

44
792

13

-

56

720

3

100.0%

n.a.

53.3%

21.6%

1.8%

253

25

3

Consolidated Financial Statements at 31 December 2023
RECEIVABLES at 31
December 2023

Non-current
loans andreceivables

Other noncurrent
receivables

Current loans
and receivables

Associates
NH Industries SAS
Eurofighter Jagdflugzeug
GmbH
AgustaWestland Aviation
Services LLC
Iveco - Oto Melara Scarl
Hensoldt AG
Other with unit amountlower than €mil. 10
Joint Venture
Thales Alenia Space SAS
Orizzonte - Sistemi Navali
SpA
GIE ATR
MBDA SAS
Telespazio S.p.A.
Polo Strategico Nazionale
SpA
Other with unit amountlower than €mil. 1017Companies subject to thecontrol or considerable
influence of the MEF
Ministero dell'Economia
e delle Finanze
Cassa Depositi e Prestiti
SpA
Poste Italiane SpA
Other with unit amountlower than €mil. 10
Total% against total for theperiodOther current
receivables

Total

339

339

68

68

21

21

18
12

18
12

4

27

31

175

22

197

34

34

33
21
11

33
21
34

2

Other companies andconsortiums
Other with unit amountlower than €mil. 10

Tradereceivables

2

4

10

10

14

14

13

15
-

101

101

47

47

12

12

23

1

24
1,031

17

-

183

826

5

100.0%

n.a.

89.3%

22.4%

2.6%

254

Consolidated Financial Statements at 31 December 2023

PAYABLES at 31 December 2022

NonOther non- Current
current
current loans andTradeloans andborrowing borrowing payables
borrowingsss

Associates
NH Industries SAS
Eurofighter Jagdflugzeug GmbH
Gulf System Logistic Services Company WLL
Elettronica SpA
Hensoldt AG
Leonardo Helicopteres Algerie
Other with unit amount lower than €mil. 10

85

20
2

Joint Venture
MBDA SAS
Telespazio SpA
GIE ATR
Other with unit amount lower than €mil. 10713
41

Other companies and consortiums
Other with unit amount lower than €mil. 10
Companies subject to the control or considerable
influence of the MEF
Cassa Depositi e Prestiti SpA
Enel SpAOther with unit amount lower than €mil. 10
Total% against total for the period

Othercurrent
payables

91
60
28
24
11
7

4

38
2
19
15

2
39

100

-

1
862

1
12
5
317

2.8%

n.a.

79.7%

10.4%

255

91
145
28
24
11
20
13

751
45
58
15

43

8
100

4

4

100

Guarante
es

Total

1
1
47
3.5%

102
12
7
1,326

165

316

Consolidated Financial Statements at 31 December 2023
PAYABLES at 31 December
2023

Non-current
loans andborrowings

Other noncurrent
borrowings

Current loans
andborrowings

Associates
NH Industries SAS
Eurofighter Jagdflugzeug
GmbH
Gulf System Logistic Services
Company WLL
Hensoldt AG
Elettronica SpA
Leonardo Helicopteres
Algerie
Other with unit amountlower than €mil. 10

75

Guarantees

144

144

136

211

38

38

17
13

17
13
20

1

17

3

21

47

1,070
26

14
3
3

2
35

1,084
31
38

8
93

20

1

21

Other companies andconsortiums
Other with unit amountlower than €mil. 10% against total for theperiodTotal

20

Joint Venture
MBDA SAS
Telespazio SpA
GIE ATR
Other with unit amountlower than €mil. 10

Companies subject to thecontrol or considerable
influence of the MEF
Cassa Depositi e Prestiti SpA
Enel SpAOther with unit amountlower than €mil. 10
Total

Other
current
payablesTradepayables

3

3

100

1
26

1

102
26

161

2

2
100

-

1,192

437

42

3.5%

n.a.

58.3%

13.4%

3.1%

1,771

309

Trade receivables are commented on later, along with revenue from related parties.
Current loans and borrowings from related parties included in particular the amount of €mil. 1,070 (€mil. 713
at 31 December 2022) due to the joint venture MBDA and payables of €mil. 75 (€mil. 85 at 31 December2022), to Eurofighter, 21% owned. As regards the latter, under a cash pooling agreement its surplus cash andcash equivalents are distributed among the partners. The item also includes payables for subscribed capital
unpaid to be paid to Leonardo Helicopteres Algerie for €mil. 20.
The financial exposure to Cassa Depositi e Prestiti (€mil. 100) related to the loan taken out in 2020 in supportof investments in R&D and innovation set out in the Industrial Plan.

256

Consolidated Financial Statements at 31 December 2023
Income statementtransactions at 31
December 2022
Associates
Eurofighter Jagdflugzeug
GmbH
NH Industries SAS
Iveco-Oto Melara Scarl
Macchi Hurel Dubois SAS
Hensoldt AG
Gulf System Logistic
Services Company WLL
AgustaWestland Aviation
Services LLC
Euromids SAS
Elettronica SpA
Other with unit amountlower than €mil. 10
Joint Venture
Orizzonte - Sistemi Navali
SpA
GIE ATR
MBDA SAS
Thales Alenia Space SAS
Rotorsim Srl
Other with unit amountlower than €mil. 10
Other companies andconsortiums
Panavia Aircraft GmbHCons. G.e.i.e. Eurotorp
Consorzio Protezioni
Balistiche Italia
Other with unit amountlower than €mil. 10
Companies subject to thecontrol or considerable
influence of the MEF
Cassa Depositi e Prestiti
SpA
Ministero dell'Economia
e delle Finanze
ENAV SpA
Poste Italiane SpA
SOGEI - Società generale
di informatica SPA
ENEL SpAOther with unit amountlower than €mil. 10
Total% against total for theperiodOther operating
incomeRevenue

Other operating
Financial income
costs

Costs

694

495

388
116
41
35

423
2

Financialexpenses

172
99

22

2

18
2

3
72

27

15

147

1

117
98
63
2

2

12
87
2
18

9

2

5

38
10

1

7

1

1

16
2

2

221

2

42
21
20

1

14
11

63

13

1

1

2,187

4

1,478

-

1

9

14.9%

0.5%

11.2%

n.a.

0.3%

2.4%

257

Consolidated Financial Statements at 31 December 2023
Income statementtransactions at 31
December 2023
Associates
Eurofighter Jagdflugzeug
GmbH
NH Industries SAS
Iveco-Oto Melara Scarl
Hensoldt AG
AgustaWestland Aviation
Services LLC
Macchi Hurel Dubois SAS
Elettronica SpA
Gulf System Logistic
Services Company WLL
G.E.M. Elettronica Srl
Other with unit amountlower than €mil. 10
Joint Venture
Orizzonte - Sistemi Navali
SpA
GIE ATR
MBDA SAS
Thales Alenia Space SAS
Polo Strategico Nazionale
SpA
Rotorsim Srl
Other with unit amountlower than €mil. 10
Other companies andconsortiums
Panavia Aircraft GmbH
Consorzio Protezioni
Balistiche Italia
Cons. G.e.i.e. Eurotorp
Other with unit amountlower than €mil. 10
Companies subject to thecontrol or considerable
influence of the MEF
Cassa Depositi e Prestiti
SpA
Poste Italiane SpA
Ministero dell'Economia
e delle Finanze
ENAV SpASOGEI - Società generale
di informatica SPA
ENEL SpAOther with unit amountlower than €mil. 10
Total% against total for theperiodOther operating
incomeRevenue

Other operating
Financial income
costs

Costs

940

306

317
113
31

470
2
142

29

3

28
1

64

Financialexpenses

2

14
18
29

9

134

2

143
91
45

8
49
2

1

4

39

16
1

2

19

7

1

12

1

29
21
11
1

5

129

2

5

37
25
19

1

18
8

118

14

1

2,237

3

1,247

-

6

46

14.6%

0.5%

9.1%

n.a.

3.6%

10.9%

258

Consolidated Financial Statements at 31 December 2023
Trade receivables and revenues, in addition to those from joint ventures, are mainly related to:
•

•
•
•
•
•
•

Eurofighter Jagdflugzeug GmbH in the scope of the EFA Kuwait aeronautical programme, increasing
Revenues due to the start of the activities on new orders (Quadriga, Halcon) and to higher volumesof logistic support activities, and GCAP programme, launched in 2023;
NH Industries in the scope of the NH90 helicopter programme;
Iveco - Oto Melara for production and post-sales assistance on defence and security ground vehicles;
Macchi Hurel Dubois for the sale of nacelles, decreasing due to lower volumes developed in the year;
Panavia Aircraft GmbH in the scope of the Tornado programme;
Ministry of the Economy and Finance mainly for the Italian Tax Police;
CDP due to supplies to the subsidiary Fincantieri.

Costs related to those to Joint Ventures, as well as to companies:•••

Eurofighter Jagdflugzeug GmbH within the scope of the abovesaid programme, decreasing due tolower logistic support activities compared to the comparative period and to the reduction indeliveries of the major items for aircraft assembly for the Kuwait customer;
Gulf System Logistic Services Company W.L.L. decreasing for the gradual transfer of activities to thesubsidiary Leonardo For Aviation Services;
Elettronica Spa for the support to the fleet of EFA vehicles and within the scope of the GCAP
programme.

37. FINANCIAL RISK MANAGEMENT
The Leonardo Group is exposed to financial risks associated with its operations, specifically related to thesetypes of risks:•interest-rate risks, related to the Group’s financial exposure;•exchange-rate risks, related to operations in currencies other than the reporting currency;•

liquidity risks, relating to the availability of financial resources and access to the credit market;•

credit risks, resulting from normal commercial transactions or financing activities.

Leonardo carefully and specifically follows each of these financial risks, with the objective of promptly
minimizing them, even using hedging derivatives.
The sections below provide an analysis, conducted through sensitivity analysis, of the potential impact on
the final results deriving from assumed fluctuations in reference parameters. As required by IFRS 7, theseanalyses are based on simplified scenarios applied to the final results of the reference periods and, by theirown nature, they cannot be considered as indicators of the actual effects of future changes in reference
parameters with different financial statements and market conditions, and cannot reflect the inter-relations
and the complexity of reference markets.

Interest rate risk
The Leonardo Group is exposed to interest rate risk on borrowings. The management of interest rate risk is
consistent with the long-standing practice of reducing the risk of fluctuations in interest rates while seeking
to minimize related borrowing costs.
259

Consolidated Financial Statements at 31 December 2023
In this regard, it should be noted that borrowings at 31 December 2023, equal to €mil. 4,929, included thevalue of lease liabilities equal to €mil. 610 and payables to related parties.
The amount of fixed-rate borrowings from banking and lending institutions (excluding lease liabilities andloans and borrowings with Group’s companies), also through the use of hedging instruments, amounts toabout 70%, and, consequently, the floating-rate percentage is around 30%. At the date of these financial
statements, the cost of debt came to about 3.3% p.a., with a residual average life of about 2.3 years.
At 31 December 2023, the transactions were the following:•

options for €mil. 200 (CAP at 4.20% and Knock out at 5.60% in relation to the 6-month Euribor
interest rate), originally purchased in order to partially cover the bond issue due in 2025.

•

floating/fixed interest rate swap for €mil. 300 relating to the EIB loan in the same amount, whichguarantees a fixed rate of 1.82% on the loan.

The detail of the main outstanding interest-rate swaps is as follows:
Notional
2021
Options
IRS fixed/floating/fixed
Total notional

200
300
500

2022

Options
IRS floating/fixed
Total notional

200
300
500

Fair value
01.01.2022

200 Bond 2025
300
BEI
500

Notional
2022

Underlying(maturity)2023

Underlying(maturity)

(1)
(13)
(14)

Fair value
01.01.2023

200 Bond 2025
300
BEI
500

(1)
30
29

Changes
Fair value
Expens
CFH
31.12.2022
Incomees
Reserve
(1)
43
30
43
29
Changes
Fair value
Expens
CFH
31.12.2023
Incomees
Reserve
(1)
43
73
43
72

The table below shows the effects of the sensitivity analysis deriving from the 50-basis-point shift in theinterest-rate at the reporting date:
Effect of shift of interest rate curve

31 December 2022
Decrease of 50
Increase of 50 bps
bps

31 December 2023
Decrease of 50
Increase of 50 bps
bps

(3)
1

1
1

Net result
Equity (*)

3
(1)

(1)
(1)

(*) Defined as sum of earnings and cash-flow hedge reserve

Exchange rate risk
Transaction risk
Due to its commercial operations, the Group’s companies are exposed to the risk of fluctuations in thecurrencies related to those cases in which orders, revenue and costs are expressed in currencies other than
the functional one used in the financial statements (specifically, US dollars and, to a lesser extent, the poundsterling).
260

Consolidated Financial Statements at 31 December 2023
Exchange rate risk management is governed by the directive in force within the Group. The purpose of thedirective is to standardize management criteria based on industrial-not-speculative strategies so as to containrisks within specific limits by carefully and constantly assessing all foreign currency transaction positions. The
methodology adopted calls for the systematic hedging of commercial cash flows resulting from theassumption of contractual commitments that are certain or highly probable as either buyer or seller, thereby
ensuring current exchange rates at the date of acquisition of multi-year contracts and neutralizing the effects
of exchange-rate fluctuations. As a result, contracts for purchases or sales denominated in a currency
different from the functional currency are hedged using forward contracts of amounts, maturities, and key
parameters that are similar to the underlying position. The Group defines the existence of an economic
relationship between the hedging instrument and the hedged item on the basis of the currency, amounts
and respective cash flows and assesses whether the derivative designated in each hedging relationship will
be and has been effective in offsetting changes in the cash flows of the hedged item. In the event that, due
to their nature or following events that entail their ineffectiveness, derivative instruments held in theportfolio should be found to no longer be a hedge, the fair value of the instrument is recognised throughprofit and loss according to accounting principles. In the event the designation of the instrument as a hedge
should continue to be supported, the cash-flow hedge accounting method of recognition is adopted (Note
4.3).
Leonardo carries out these transactions with banks in its own interest and of Group companies.
At 31 December 2023 the Leonardo Group had outstanding foreign exchange transactions totaling €mil.
8,287 (notional amount). Overall, the average EUR/USD dollar exchange rate for hedging purposes is 1.081
on sales and about 1.154 on purchases.
Notional
Sales
Swap and forward
transactions

5,361

Purchases
2,696

Total
8,057

Notional
Sales
Swap and forward
transactions

5,023

Purchases
3,264

Total
8,287

Changes
Fair value
Discontinued
CFH
01.01.2022
Income Expenses
operation
Reserve
(39)

26

(7)

(81)

Changes
Fair value
Discontinued
CFH
01.01.2023
Income Expenses
operation
Reserve
(101)

261

19

(14)

111

Fair value
31.12.2022(101)

Fair value
31.12.2023
15

Consolidated Financial Statements at 31 December 2023
The table below shows the expected due dates of receipts and payments related to derivative instruments
broken down by main currencies:
31 December 2022
Notional
Notional
Receipts
Payments
USD
GBP
USD
GBP

31 December 2023
Notional
Notional
Receipts
Payments
USD
GBP
USD
GBP

Cash-flow and fair-value hedges
Within 1 year
2 to 3 years
4 to 9 years

1,581
2,240
252

8
-

656
513
75

1,108
56
15

1,583
1,796
533

8
-

931
467
27

926
73
17

Total

4,073

8

1,244

1,179

3,912

8

1,425

1,016

211

4

211

4

225

2

225

2

4,284

12

1,455

1,183

4,137

10

1,650

1,018

Hedging transactions which cannot be classified as
hedging transactions
Total transactions

The table below shows the effects of the sensitivity analysis carried out on the change in the exchange ratesof the euro against the US dollar (USD) and the pound sterling (GBP) and, assuming a +/-5% change in the
euro/US dollar exchange rate and the euro/pound sterling exchange rate compared with the reference rates
at 31 December 2023 and at 31 December 2022.

Net result
Equity (*)

31 December 2022
Effect of change in the
Effect of change in the€/GBP rate€/USD rate
Increase Decrease of Increase of Decrease of 50
of 50 bps
50 bps
50 bps
bps
(3)
4
3
(4)
(9)
10
88
(98)

31 December 2023
Effect of change in the
Effect of change in the€/GBP rate€/USD rate
Increase of Decrease of Increase of Decrease of 50
50 bps
50 bps
50 bps
bps
(4)
5
8
(8)
(7)
8
82
(83)

(*) Defined as sum of earnings and cash flow hedge reserve

Translation risk
The Group is exposed to “translation risk”, i.e. the risk that assets, liabilities and results in consolidated
companies whose reporting currency is not the euro (mainly USD and GBP) can have different values in euros
depending on the performance of exchange rates, which affect the equity reserve named “Translation
reserve” (Note 20) and results of operations. It should be noted that Leonardo does not hedge translation
risk relating to its own equity investments, the most important of which are in the USA and in the UK.
Leonardo UK Ltd., which is Leonardo’s main equity holding in the UK had a positive net financial position
which is transferred to Leonardo through cash pooling arrangements. Leonardo systematically hedges thisexposure through exchange-rate derivatives recognised as fair value hedges. As a result, even though theGroup has no economic exposure, it is subject to balance-sheet volatility directly impacting the amount ofGroup net debt, which is affected by the realigning payables/receivables in foreign currency.
The effects on the equity of the Group, broken down by the main currencies, are reported in Note 20.
Liquidity risk
The Group is exposed to the risk of not being able to finance the prospective requirements deriving from its
usual business and investment operations, as well as those connected with the volatility of the relevantmarkets and with operations linked to commercial contracts for which there is the risk of renegotiation orcancellation. Furthermore, there is the risk of not being able to repay or refinance debts at the expiry dates.
262

Consolidated Financial Statements at 31 December 2023
In order to face these risks, the Leonardo Group had at its disposal, for financing its operations, at 31
December 2023:•

the cash and cash equivalents of €mil.2,407 generated at 31 December 2023 related to Leonardo Spa(€mil. 1,791) and to Group companies that, for different reasons, do not fall within the scope of the
cash pooling system (€mil. 573), in addition to temporarily available cash amounts of the companies
falling, directly or indirectly, within the scope of the cash pooling, as well as to deposits made fordifferent reasons;•an ESG-linked Revolving Credit Facility (RCF), available to Leonardo pa, amounting to €bil. 2.4,
comprising a 5-year tranche of €bil. 1.8 expiring in September 2026 and a 3-year tranche of €mil. 600
expiring in September 2024. Both the RCF tranches had been entirely unused at 31 December 2023;•

a Sustainability-Linked loan of €mil. 260 with the European Investment Bank (EIB) (entirely unused
at 31 December 2023);•

uncommitted bank credit lines totaling €mil. 810 (entirely unused at 31 December 2023);•

an EMTN (Euro Medium Term Notes) Programme, out of which all the bonds of Leonardo Spa were
issued, which are currently in place on the Euromarket and which was still available at 31 December
2023 for a total nominal amount of €mil. 2,400 compared to a total amount of €mil. 4,000 under the
programme;•a Framework Programme for the issuance of Multi-Currency Commercial Paper on the European
market, for a maximum amount of €bil. 1, which was entirely unused at 31 December 2023;•

a RCF available to Leonardo DRS amounting to USDmil. 275 (€mil. 249), which was also entirely
unused at 31 December 2023;•

short-term credit lines subject to revocation, available to the subsidiary Leonardo US Corporationand guaranteed by Leonardo Spa, for an amount of USDmil. 210 (€mil. 190), used at 31 December
2023 for USDmil. 40 (€mil. 36);•

unconfirmed lines of credit for guarantees for a total amount of €mil. 10,877, of which an amount of€mil. 3,051 was available at 31 December 2023.

Credit risk
The Group is exposed to credit risk, which is defined as the probability of an insolvency with respect to acredit position with commercial and financial counterparties.
Regarding commercial transactions, the most significant programmes are made with public sector
contractors or contractors belonging to public institutions, mainly in the Euro area, in the UK, the US and the
Middle East. The risks associated with the counterparty, for contracts with countries for which there are nousual commercial relations, are analyzed and valued at the time of the offer in order to mitigate insolvency
risks, if any. While solvency is guaranteed with public-entity customers, it can entail an extension of thecollection times than for other business sectors, creating outstanding credit positions and the subsequentneed, in some cases, for transactions to convert the receivables into cash. When requested to do so, theGroup hedges against potential defaults of its customers by entering into insurance policies with leading
Export Credit Agencies (ECAs) internationally and with major Italian agencies.
The types of contracts entered into by the Group often provide for sizeable retention money possibly
withheld by customers, as well as back-to-back clauses in case of sub-supplies. All this may inherently extend
the times for collection of outstanding receivables.
263

Consolidated Financial Statements at 31 December 2023
Furthermore, the Group operates in markets which are or have been recently affected by geopolitical or
financial tensions. In particular, with reference to the situation at 31 December 2023, we note the following
relations with countries exposed to credit risk according to the international institutions (SACE):€mil.

Nigeria

AssetsLiabilities
Net exposure

29
(52)
(23)

TurkeyPakistan

160
(104)
56

86
(31)
55

Kenya

Other
countries

Angola
4
(21)
(17)

31
(28)
3

38
(35)
3

Total
348
(271)
77

As at 31 December 2023, the countries identified by SACE as countries at risk also included Russia and Ukraine
to which the Group has no balance sheet exposures.
Finally, the receivables related to certain existing contracts, might not be paid, renegotiated or written off.
The table below summarizes trade receivables, with most of the balance claimed, as indicated, from publicsector contractors or contractors belonging to public institutions:(€ billions)
Portion due- of which: for more than 12 months
Portion not yet due
Total trade receivables

31 December 2022
1.0
0.3
2.3
3.3

31 December 2023
1.4
0.4
2.3
3.7

A part of the portion due is offset by a liability, in relation to payable items or provisions for risks on any net
excesses.
Loans and receivables, amounting to €mil. 222 (€mil. 118 at 31 December 2022) included €mil. 17 (€mil. 13
at 31 December 2022) classified as “non-current” and consequently excluded from the net financial position.
Loans and receivables are broken down in the table below:
Loans and receivables from related parties
Other loans and receivables
Non-current loans and receivables

31 December 2022
13
13

31 December 2023
17
17

Loans and receivables from related parties
Other loans and receivables
Current loans and receivables

56
49
105

183
22
205

Total loans and receivables

118

222

Both the main trade and financial receivables are impaired based on their probability of default or individuallyin case of particular situations. Vice versa, for receivables that are not impaired individually, impairment
provisions are accrued, using time series, statistical data and probability of default on an aggregate basis also
supported by qualitative analyses.
During the year, receivables were assigned without recourse for a total volume of €mil. 305 (€mil. 404 in2022). The amount of the assignments is lower than the previous year's figure as a result of the further
264

Consolidated Financial Statements at 31 December 2023
streamlining of working capital management processes, which enabled, despite the continuation of someemergency situations, to further improve the dynamics underlying the realization of collection flows.

Classification of financial assets and liabilities
The table below shows the fair value hierarchy for the financial assets and liabilities of the Group measured
at fair value. The fair value of derivatives (classified under other current assets and liabilities) and of current
securities is determined on the basis of measurement techniques which consider directly observable market
inputs (the so-called “Level 2”). The fair value of the earn-out linked to the acquisition of Kopter wasdetermined on the basis of measurement techniques which do not consider directly observable market
inputs (the so-called “Level 3”), by discounting back the estimate of the variable amounts payable on thebasis of the commercial performance of the programme.

Level 2Other non-current
assetsOther current assets
Other non-current
liabilities
Other current liabilities

31 December 2022
Level 3

Total

Level 231 December 2023
Level 3

Total

-

-

-

-

-

-

224

-

224

207

-

207

-

17

17

17

17

296

-

296

-

175

175

The total fair value of pension plan assets amounted to €mil. 2,371 (€mil. 2,280 at 31 December 2022),
classified under non-current assets and deducted from employee benefits.

38. REMUNERATION TO KEY MANAGEMENT PERSONNEL
Remuneration paid to persons who have strategic power and responsibility of Leonardo S.p.a. amounted to€mil. 15 (€mil. 12 at 31 December 2022).
Remuneration paid to Directors, excluding managers with strategic responsibility, amounted to €mil. 2 (€mil.
2 in 2022). This figure includes fees and other compensation, pensions and other benefits, including the
portion borne by the Company.

39. INFORMATION ON THE IMPACT OF CLIMATE CHANGE
Leonardo defined a decarbonization strategy aimed at reducing direct and indirect climate altering emissions,in line with the path embarked on joining the Science Based Target initiative (SBTi), in relation to which in2023 the Group promoted the submission of targets, following up its commitment undertaken in 2022. The
decarbonization strategy aims not only to reduce emissions related to industrial processes (operations) but
also those generated by suppliers and customers through the use of Leonardo's products and services (Scope
3 emissions). In this regard, during 2023, Leonardo conducted a careful examination of scope 3 emissions
produced by the Group to identify, in line with the SBTi methodology, the areas requiring major commitment
towards which it will promote its decarbonization actions, including its supply chain and products andservices.
In order to reduce the emissions from its operations, Leonardo further intensified in 2023 some initiatives
already launched in previous years, among which are the energy self-production programme, the Full
Potential LED lighting programme and the replacement of the SF6 gases with gases with lower climate
265Consolidated Financial Statements at 31 December 2023
altering emissions. Furthermore, Leonardo is active in reducing scope 3 emissions related to the use of its
sold products and services, promoting innovative solutions and the use of alternative materials and latestgeneration fuels in place of fossil fuels. For instance, Leonardo through the realization of simulators allows
pilots to perform virtual training and cutting on real flight hours and subsequent emissions. Leonardo is also
investing to develop products exploiting alternative fuels to fossil fuels such as synthetic fuels and theSustainable Aviation Fuel (SAF). Moreover, Leonardo embarked on a supplier engagement path aimed atcreating an aware community committed to achieving increasingly ambitious sustainability goals. Among theinitiatives promoted, Leonardo launched specific training, awareness and support programmes to plansustainability reporting in order to align the decarbonization process of its suppliers with the SBTi.
The above initiatives are integrated into the Group's business plan. For further details, please refer to theReport on Operations (in particular the “Decarbonization path" paragraph of the “Planet” chapter).
As previously point out, the Group's business plans have been prepared considering, in addition to further
investments linked to the search for innovative solutions in the field of sustainable business, also theprospective aspects and impacts linked to climate change.
Based on the above the Group does not expect any significant financial impact.

40. SHARE-BASED PAYMENTS
In order to implement an incentive and retention system for the Group’s employees and associates, startingfrom 2015 Leonardo adopted incentive plans which provide for the assignment of Leonardo shares, subject
to assessing the attainment of pre-set business targets. These shares will be awarded to the beneficiaries atthe end of the vesting period, provided that they have met the condition of being still employed with thecompany. The cost recognised in the income statement for the share incentive plans of the Parent
Company amounted in 2023 to €mil. 11 (€mil. 5 in 2022).
With specific regard to the abovementioned current Long-Term Incentive Plans, the fair value used tomeasure the portion linked to the performance indicators (Group Net Debt, ROS and starting from the threeyear cycle 2021-2023 the Sustainability indicators) was equal to €11.04 (value of Leonardo shares at the grant
date of 31 July 2019) with reference to the three-year cycle 2019-2021, € 5.41 (value of Leonardo shares at
the grant date of 31 July 2020) with reference to the three-year cycle 2020-2022, € 6.788 (value of Leonardo
shares at the grant date of 31 July 2021) with reference to the three-year cycle 2021-2023 and € 9.15 (valueof Leonardo shares at the grant date of 31 July 2022) with reference to the three-year cycle 2022-2024 and€ 13.66 (value of Leonardo shares at the grant date of 1 October 2023) with reference to the three-year cycle
2023-2025.
Vice versa, the award of the remaining of the shares depends upon market conditions which affect thedetermination of the fair value (“adjusted fair value”). The adjusted fair value, calculated using the “Monte
Carlo” method in order to simulate the possible performance of the stock and of the other companies within
the basket, was equal to €6.72 with reference to the three-year cycle 2019-2021, €1.73 with reference to thethree-year cycle 2020-2022, €3.7 with reference to the three-year cycle 2021-2023, €6.4 with reference tothe three-year cycle 2022-2024 and €12.1 with reference to the three-year cycle 2023-2025.
The input data used to calculate the adjusted fair value were:• the stock price at the grant date;•

the average share price in the three months preceding the performance period;•

the risk-free interest rate based on the zero-coupon yield curve in 36 months;266

Consolidated Financial Statements at 31 December 2023•

the expected volatility of the price of Leonardo shares and of the shares of the other companies
within the basket based on time series in the 36 months prior to the grant date;•correlation coefficients between Leonardo and the other companies within the basket on the basisof logarithms of the daily performance of the stocks in the 36 months prior to the grant date;•dividend distribution forecasts on a historical basis.

During 2023, like in 2022, no shares were awarded under the long-term incentive plan.
Share incentive plans also exist with reference to the US subsidiary Leonardo DRS, the cost of which
recognised in the income statement amounted to USDmil. 17 in 2023 (€mil.16).

For the Board of Directors
The Chairman(Stefano Pontecorvo)

267

Consolidated Financial Statements at 31 December 2023

Attachments
Attachment: Disclosure ex-lege 124/2017
In accordance with the provisions of Article 1, paragraphs 125-126, of Law 124 of 4 August 2017, information
on grants received from public administrations and granted by the Group is provided below.
Grants received
Worth noting are the provisions of Law no. 124/2017 imposing disclosure obligations on those entities
carrying out the activity referred to in article 2195 of the Italian Civil Code in relation to sums which are notof a general nature and do not consist of fees, remuneration or compensation received from public
administrations or similar entities.
Excluded from such scope are any grant consisting of a consideration for the Group's services and any grantderiving from bilateral financial relationships, which are peculiar to the Group's business, as well as any
general measure that falls within the broader general structure of the reference system defined by the State(among others, Law 237/1993, Law 297/1999, Development Contracts and Regional Operational Programme,
Law 808/1985, Regional Laws and National Operational Programmes), the effects of which are described in
the notes to the Consolidated Financial Statements, based on the accounting standards adopted in the
preparation of said accounts that can be used by all sector businesses, as well as grants received forcontinuing professional development from interprofessional funds.
The Group has not received grants falling within the framework of those referred to in article 1, para. 125, of
Law 124/2017.
It should also be noted that the transparency of State aid for which there is a publication obligation isprotected by their publication in the National Register of State Aids referred to in Article no. 52 of Law 234
of 24 December 2012.
Grants disbursed
As a publicly traded company, Leonardo S.p.A. is not subject to the obligations under Article 1, para. 126, in
accordance with Article 2-bis, para. 2, letter b) of Legislative Decree 33/2013.
There are no grants disbursed by Leonardo S.p.A. and its Italian subsidiaries in the form of donations or
disbursements that do not consist of a consideration for services received, not even in the form of a returnin terms of image.

268

Consolidated Financial Statements at 31 December 2023

Attachment: scope of consolidation

269

Consolidated Financial Statements at 31 December 2023
List of companies consolidated on a line-by-line basis (amounts in currency)
N.

Company nameRegistered office13083683 NOVA SCOTIA LIMITED

2

AGUSTAWESTLAND INDIA PRIVATE LTD (INLIQ.)

New Delhi (India)

3

AGUSTAWESTLAND INTERNATIONAL LTD

Yeovil, Somerset (UK)

4
5
6
7
8
9
10
11

Yeovil, Somerset (UK)
Wilmington, Delaware (USA)Roma
Polcenigo (Pordenone)
Roma
Roma
Wilmington, Delaware (USA)
Wilmington, Delaware (USA)13
14

AGUSTAWESTLAND LTD
AGUSTAWESTLAND PHILADELPHIA CO
AGUSTAWESTLAND SPA
ALEA SRLALENIA AERMACCHI SPAANSALDOBREDA SPADAYLIGHT DEFENCE LLCDAYLIGHT SOLUTIONS INCDISPOSITIVI PROTEZIONE INDIVIDUALE
D.P.I. SRLDRS ADVANCED ISR LLC
DRS DEFENSE SOLUTIONS LLC

15

DRS ENVIRONMENTAL SYSTEMS INC

Wilmington, Delaware (USA)

16
17
18
19
20
21

DRS HOMELAND SECURITY SOLUTIONS INC
DRS INTERNATIONAL INC
DRS NAVAL POWER SYSTEMS INC
DRS NETWORK & IMAGING SYSTEMS LLCDRS SIGNAL SOLUTIONS INC
DRS SURVEILLANCE SUPPORT SYSTEMS INC

Wilmington, Delaware (USA)
Wilmington, Delaware (USA)
Wilmington, Delaware (USA)
Wilmington, Delaware (USA)
Wilmington, Delaware (USA)
Wilmington, Delaware (USA)22

DRS SUSTAINMENT SYSTEMS INC

Wilmington, Delaware (USA)

23
24
25
26
27
28
29
30

DRS SYSTEMS MANAGEMENT LLC
DRS SYSTEMS INC
DRS RADA TECHNOLOGIES LTD
DRS TECHNOLOGIES CANADA INC
DRS TECHNOLOGIES CANADA LTD
DRS TECHNOLOGIES SAUDI ARABIA LLC
DRS TECHNOLOGIES UK LIMITEDDRS TRAINING & CONTROL SYSTEMS LLC

Wilmington, Delaware (USA)
Wilmington, Delaware (USA)
Netanya (Israele)
Wilmington, Delaware (USA)
Kanata, Ontario (Canada)
Riyadh (Arabia Saudita)
Yeovil, Somerset (UK)
Tallahassee, Florida (USA)31

DRS UNMANNED TECHNOLOGIES INC

Wilmington, Delaware (USA)32

ENGINEERED COIL COMPANY

Jefferson City, Missouri (USA)33
34

ENGINEERED SUPPORT SYSTEMS INC
ESSI RESOURCES LLC

35

KOPTER GERMANY GMBH

36
37

KOPTER GROUP AG
LARIMART SPA

Jefferson City, Missouri (USA)Frankfort, Kentucky (USA)HÖHENKIRCHEN-Siegertsbrunn(Germania)
Mollis, Glarona Nord (Svizzera)
Roma

38

LAUREL TECHNOLOGIES PARTNERSHIP

Wilmington, Delaware (USA)39

LEONARDO AUSTRALIA PTY LTD

Essendon, Victoria (Australia)

40

LEONARDO BELGIUM SA

12

Halifax, Nova Scotia (Canada)

Roma
Wilmington, Delaware (USA)
Wilmington, Delaware (USA)Grace Hollogne (Belgio)

42

LEONARDO CAE ADVANCED JET TRAININGSRLLEONARDO (CHINA) CO. LTD

43

LEONARDO DO BRASIL LTDA

44
45
46

LEONARDO DRS INCLEONARDO ELECTRONICS US INCLEONARDO FOR AVIATION SERVICES (SPC)

47

LEONARDO GERMANY GMBH

48

LEONARDO GLOBAL SOLUTIONS SPA

Roma

49

LEONARDO HELICOPTERS USA INC

Wilmington, Delaware (USA)

50
51
52
53
54
55
56

LEONARDO HISPANIA SAU (IN LIQ.)LEONARDO INTERNATIONAL SPALEONARDO LOGISTICS SPALEONARDO LOGISTICS POLAND SP Z O.O
LEONARDO MALAYSIA SDN BHDLEONARDO PARTECIPAZIONI SPALEONARDO PORTUGAL SALEONARDO ROMANIA AEROSPACE,
DEFENCE & SECURITY SA

Loriguilla, Valencia (Spagna)
Roma
Roma
Swidnik (Polonia)
Kuala Lumpur (Malesia)
Roma
Porto Salvo Oeiras (Portogallo)

41

57

Villasor (Cagliari)
Beijing (Cina)
Itapevi (Brasile)
Wilmington, Delaware (USA)
Wilmington, Delaware (USA)Kuwait City (Kuwait)
Neuss (Germania)

Ploiesti (Romania)

58

LEONARDO SAUDI LTD

Riyadh (Arabia Saudita)

59
60

LEONARDO SOUTH AFRICA (PTY) LTD
LEONARDO TECHNOLOGIES & SERVICES LTDLEONARDO TURKEI HAVACILIK SAVUNMAVE GUVENLIK SISTEMLERI AS
LEONARDO UK LTD

Pretoria (Sud Africa)
Nairobi (Kenya)

61
62

Ankara (Turchia)
Londra (UK)Partecipating company
ENGINEERED SUPPORT SYSTEMSINC
AGUSTAWESTLAND SPA
AGUSTAWESTLAND LTD
AGUSTAWESTLAND SPA
AGUSTAWESTLAND LTD
LEONARDO UK LTD
LEONARDO US CORPORATIONLEONARDO PARTECIPAZIONI SPALEONARDO SPALEONARDO PARTECIPAZIONI SPALEONARDO PARTECIPAZIONI SPADAYLIGHT SOLUTIONS INCLEONARDO DRS INC

Currency

Share capital% Group ownership
DirectIndirect% Groupshareholding

CAD

-

100

72.30

INR

11,519,450

100

100

GBP

511,000

100

100

GBP
USD
EUR
EUR
EUR
EUR
USD
USD

1,520,304
20,000,000
120,000
120,000
120,000
10,000,000
1

100
100
100
100
100
100
100

100
100
100
69.97
100
100
72.30
72.30

LARIMART SPA

EUR

309,600

77.92

46.75

DRS DEFENSE SOLUTIONS LLC
LEONARDO DRS INC
ENGINEERED SUPPORT SYSTEMSINCLEONARDO DRS INCLEONARDO DRS INCLEONARDO DRS INCLEONARDO DRS INC
DRS DEFENSE SOLUTIONS LLC
LEONARDO DRS INC
ENGINEERED SUPPORT SYSTEMSINCLEONARDO DRS INCLEONARDO DRS INCLEONARDO DRS INCLEONARDO DRS INC
DRS TECHNOLOGIES CANADA INC
LEONARDO DRS INCLEONARDO UK LTD
DRS DEFENSE SOLUTIONS LLC
DRS TRAINING & CONTROLSYSTEMS LLC
ENGINEERED SUPPORT SYSTEMSINCLEONARDO DRS INC
DRS SUSTAINMENT SYSTEMS INC

USD
USD

-

100
100

72.30
72.30

USD

2

100

72.30

USD
USD
USD
USD
USD
USD

1
1
1
10
1

100
100
100
100
100
100

72.30
72.30
72.30
72.30
72.30
72.30

USD

1,000

100

72.30

USD
USD
ILS
USD
CAD
SAR
GBP
USD

1
1
1,491,527
1100
2,000,000
1
510

100
100
100
100
100
49
100
100

72.30
72.30
72.30
72.30
72.30
39.64
100
72.30

USD

1

100

72.30

USD

1,000

100

72.30

USD
USD

1
-

100
100

72.30
72.30

KOPTER GROUP AG

EUR

25,000100

100

LEONARDO SPALEONARDO SPADRS SYSTEMS MANAGEMENT LLC
DRS SIGNAL SOLUTIONS INCLEONARDO INTERNATIONAL SPALEONARDO INTERNATIONAL SPASELEX ES INTERNATIONAL LTD

CHF
EUR

32,000,000
2,500,000

69.97

100
60

100
60

USD

-

100

72.30

AUD

8,366,301

100

100

EUR

500,000

100

100

LEONARDO SPA

EUR

49,040,000

LEONARDO INTERNATIONAL SPALEONARDO INTERNATIONAL SPASELEX ES INTERNATIONAL LTD
LEONARDO US HOLDING LLC
LEONARDO UK LTD
LEONARDO SPALEONARDO INTERNATIONAL SPASELEX ES INTERNATIONAL LTD
LEONARDO SPA
AGUSTAWESTLAND PHILADELPHIACOLEONARDO INTERNATIONAL SPALEONARDO SPALEONARDO SPALEONARDO LOGISTICS SPALEONARDO INTERNATIONAL SPALEONARDO SPALEONARDO INTERNATIONAL SPALEONARDO INTERNATIONAL SPASELEX ES INTERNATIONAL LTD
LEONARDO UK LTD
SELEX ES (PROJECTS) LTD
LEONARDO INTERNATIONAL SPALEONARDO INTERNATIONAL SPALEONARDO INTERNATIONAL SPASELEX ES INTERNATIONAL LTD
LEONARDO SPA

USD

800,000

100

100

270

50

50

BRL

48,241,788

100

100

USD
USD
KWD

262,454,115
32,750,000
300,000

72.30
100

72.30
100
100

EUR

2,500,000

100

100

EUR

51,000,000

100

100

100

USD

-

100

100

EUR
EUR
EUR
PLN
MYR
EUR
EUR

5,189,019
1,000,000
100,000
5,000
2,500,000
1,000,000
100,000

100

100

100
100
100
100
100
100
100

RON

10,847,960

100

100

SAR

500,000

100

100

ZAR
KES

1,500
109,600,000

100
100

100
100

100

100

TRY

79,557,009

GBP

314,500,100

100
100
100
100
100

100

100

Consolidated Financial Statements at 31 December 2023
63
64

LEONARDO US AIRCRAFT LLC
LEONARDO US CORPORATION

Wilmington, Delaware (USA)
Wilmington, Delaware (USA)65

LEONARDO US HOLDING LLC

Wilmington, Delaware (USA)

66
67
68
69

LEONARDO US SUBHOLDING LLC
OTO MELARA NORTH AMERICA LLC
PARTECH SYSTEMS PTY LTD
PIVOTAL POWER INC

Wilmington, Delaware (USA)
Wilmington, Delaware (USA)
Yerriyong (Australia)
Halifax, Nova Scotia (Canada)

70

PRECISION AVIATION PROPERTY PTY LTD

77
78
79
80
81
82
83
84
85

PRECISION AVIATION TRAINING ACADEMYPTY LTD
RADA INNOVATIONS LLC
RADA SENSORS INC
RADA TECHNOLOGIES LLC
RADA USA LLCREGIONALNY PARK PRZEMYSLOWYSWIDNIK SP Z O.O
SELEX ELSAG LTD
SELEX ES AUSTRALIA PTY LTD
SELEX ES LLC
SELEX ES INTERNATIONAL LTD
SELEX ES MALAYSIA SDN BHD
SELEX ES SPA (IN LIQ.)
T - S HOLDING CORPORATION
TECH-SYM LLC
TTI TACTICAL TECHNOLOGIES INC

86

UTM SYSTEMS & SERVICES SRL

87

VEGA DEUTSCHLAND GMBHWYTWORNIA SPRZETU KOMUNIKACYJNEGO``PZL-SWIDNIK``SPOLKA AKCYJNA

71
72
73
74
75
76

88

Delaware (USA)
Delaware (USA)
Delaware (USA)
Delaware (USA)

LEONARDO US SUBHOLDING LLC
LEONARDO US HOLDING LLC
LEONARDO SPALEONARDO INTERNATIONAL SPALEONARDO US CORPORATIONLEONARDO DRS INCLEONARDO AUSTRALIA PTY LTD
3083683 NOVA SCOTIA LIMITEDLEONARDO SOUTH AFRICA (PTY)LTD
LEONARDO SOUTH AFRICA (PTY)LTD
RADA SENSORS INC
DRS RADA TECHNOLOGIES LTD
RADA SENSORS INC
RADA SENSORS INC

Swidnik (Polonia)

PZL-SWIDNIK SA

PLN

7,072,000

74

74

GBP
AUD
USD
GBP
MYR
EUR
USD
USD
CAD

25,800,100
500,000
100
100
500,000
120,000
280,000
10
2,500,001

100
100
100
100
100
100
100
100
100

100
100
100
100.00100.00
100
72
72
100

EUR

6,620,000

Colonia (Germania)

LEONARDO UK LTD
LEONARDO INTERNATIONAL SPALEONARDO US SUBHOLDINGS LLC
LEONARDO INTERNATIONAL SPALEONARDO INTERNATIONAL SPALEONARDO PARTECIPAZIONI SPA
TECH-SYM LLC
LEONARDO DRS INCLEONARDO UK LTD
LEONARDO SPATELESPAZIO SPALEONARDO INTERNATIONAL SPA

EUR

25,700Swidnik (Polonia)

LEONARDO SPA

PLN

137,401,350

Pretoria (Sud Africa)
Pretoria (Sud Africa)

Basildon, Essex (UK)
Melbourne (Australia)
Wilmington, Delaware (USA)
Basildon, Essex (UK)
Kuala Lumpur (Malesia)
Roma
Austin, Texas (USA)
Carson City, Nevada (USA)
Ottawa, Ontario (Canada)
Roma

271

USD
USD

100
10
53

100
100

100
100.00

USD

10

47

100

USD
USD
AUD
CAD

100
330
-

100
100
100
100

72
100
72.30

ZAR

100

100

100.00

ZAR

1,000

100

100.00

USD
USD
USD
USD

1
100
1
1

100
100.00
100
100

72.30
72.30
72
72

66.67

100

33.33

89

100

100
100

Consolidated Financial Statements at 31 December 2023
List of companies consolidated using the equity method (amounts incurrency)
N.

Company nameShare capital% Group ownership
DirectIndirect% Groupshareholding

MYR

10,000,000

30

30

LEONARDO SPA

AED

58,010,000

Issy Les Moulineaux (Francia)

TELESPAZIO FRANCE SAS

EUR

11,000,000

Rotterdam (Olanda)
Roma
Ottawa, Ontario (Canada)

LEONARDO SPALEONARDO SPALEONARDO CANADA CO

EUR
EUR
CAD

36,296,316
90,964,213
100

50
30

LEONARDO SPA

USD

200,000,000

30

LEONARDO CANADA COLEONARDO SPAUTM SYSTEMS & SERVICES SRLTELESPAZIO BELGIUM SRLTELESPAZIO FRANCE SAS
E - GEOS SPATELESPAZIO SPATELESPAZIO UK LTD
E2E ENGINEERING LIMITEDE2E ENGINEERING LIMITEDLEONARDO SPALEONARDO SPA

CAD
USD
EUR

10,00083,333

EUR

Monaco (Germania)
Parigi (Francia)
Monaco (Germania)
Kuwait City (Kuwait)

Registered office

Partecipating company

Shah Alam (Malesia)

SELEX ES INTERNATIONAL LTD

Abu Dhabi (Emirati Arabi Uniti)

8
9
10

ADVANCED AIR TRAFFIC SYSTEMS SDN
BHD
AGUSTAWESTLAND AVIATION SERVICES
LLC
AIRBUS TELESPAZIO CAPACITY OPERATORSASAMSH BV
AVIO SPABLCAT INC
CNBM LEONARDO (SHANGHAI)
AEROSTRUCTURES CO. LTD
C-27J AVIATION SERVICES INCCONSORZIO ATR GIE
D-FLIGHT SPA

11

EARTHLAB LUXEMBOURG SA

Mamer (Lussemburgo)

12
13
14
15
16
17

E - GEOS SPA
E2E ENGINEERING LIMITEDE2E SATCOM LIMITEDE2E SERVICES LIMITEDELETTRONICA SPAEUROFIGHTER JAGDFLUGZEUG GMBHEUROFIGHTER SIMULATION SYSTEMSGMBH (IN LIQ.)
EUROMIDS SAS
GAF AG
GULF SYSTEMS LOGISTICS SERVICESCOMPANY WLL

MateraLuton (UK)
Luton (UK)
Luton (UK)Roma
Hallbergmoos (Germania)

1
2
3
4
5
6
7

18
19
20
21
22

G.E.M. ELETTRONICA SRL

23
24

HELIVERT JOINT STOCK COMPANYHENSOLDT AG
IAMCO - INTERNATIONAL AEROSPACEMANAGEMENT COMPANY SCRL

25

Shanghai (Cina)
Ottawa, Ontario (Canada)
Tolosa (Francia)
Roma

San Benedetto del Tronto (Ascoli
Piceno)Mosca (Russia)
Taufkirchen (Germania)
Venezia26

ICARUS SCPA (IN LIQ.)

Torino27
28
29

INDUSTRIA ITALIANA AUTOBUS SPAINMOVE ITALIA SRLIVECO - OTO MELARA SC A RL
JIANGXI CHANGHE AGUSTA HELICOPTER
CO LTDLEONARDO AEROSPACE DEFENSE &SECURITY INDIA PRIVATE LTDLEONARDO CANADA COLEONARDO ELECTRONICS PENSIONSCHEME (TRUSTEE) LTD
LEONARDO FOR TRADING OF MACHINERYEQUIPMENT AND DEVICES WLL
LEONARDO FUTUREPLANNER (TRUSTEE)
LIMITED

Roma
Napoli
Roma

30
31
32
33
34
35
36
37
38
39
40
41
42
43

LEONARDO HELICOPTERES ALGERIE SPALEONARDO HELICOPTERS PENSIONSCHEME (TRUSTEE) LTD
LEONARDO MW LtdLEONARDO LIMITEDLEONARDO POLAND SP Z O.O
LEONARDO SINGAPORE PTE. LTD
LEONARDO TECHNOLOGY PAKISTAN(SMC-PRIVATE) LIMITEDLEONARDO & CODEMAR SA

Currency

30

30
49

32.83

50

50
29.63
50
30

30
40

30
50
35.60

4,875,000

100

64.72

EUR
GBP
GBP
GBP
EUR
EUR

5,000,000
489
900
300
9,000,000
2,556,459

80
100
100
100
31
21

53.60
67
67
67
31.33
21

LEONARDO SPA

EUR

260,000

24

24

LEONARDO SPA
E - GEOS SPA

EUR
EUR

40,500
256,000

25

ALENIA AERMACCHI SPA

KWD

75,000

50

100

25
53.60

40

40

LEONARDO SPA

EUR4,500,000

30

30

LEONARDO SPALEONARDO SPA

RUB
EUR

325,010,000
115,500,000

50
22.80

50
22.80

LEONARDO SPA

EUR

208,000

25

25

LEONARDO GLOBAL SOLUTIONSSPALEONARDO SPAANSALDOBREDA SPALEONARDO SPA

EUR3,192,724

EUR
EUR
EUR

24,115,593
14,44140,00029

LEONARDO SPA

CNY

6,000,000

LEONARDO INTERNATIONAL SPASELEX ES INTERNATIONAL LTD
LEONARDO INTERNATIONAL SPA

INR

30,000,000

100

100

CAD

298,421

100

100

Yeovil, Somerset (UK)

LEONARDO UK LTD

GBP

100

100

100

Kuwait City (Kuwait)

LEONARDO INTERNATIONAL SPA

KWD

303,000

93

93

Yeovil, Somerset (UK)

LEONARDO UK LTD

GBP

1

100

100

LEONARDO SPALEONARDO INTERNATIONAL SPA

EUR

55,000,000

1049

Yeovil, Somerset (UK)

LEONARDO UK LTD

GBP

1

100

100

Basildon, Essex (UK)
Yeovil, Somerset (UK)
Varsavia (Polonia)
Singapore (Singapore)

LEONARDO UK LTD
LEONARDO UK LTD
LEONARDO INTERNATIONAL SPALEONARDO INTERNATIONAL SPA

GBP
GBP
PLN
USD

1
1
850,000
150,000

100
100
100
100

100
100
100
100

Islamabad (Pakistan)

LEONARDO INTERNATIONAL SPA

PKR

30,000,000

100

100

Maricà (Brasile)

LEONARDO INTERNATIONAL SPALEONARDO SPA
AGUSTAWESTLAND SPA

BRL

4,010,000

51

51

EUR

8,000,000

25

25

50

EUR
EUR
EUR
EUR
EUR
RON
EUR

100,000
53,824,021
306,000
20,000,000
3,000,000
468,500
9,800,000

50

USD

12.607.452

50

50

GBP
EUR

100
500,000

100
50

100
34

ARS

9,950,000

100

66.96

Jingdezhen (Cina)
New Delhi (India)
Halifax, Nova Scotia (Canada)

Bir Mourad Rais (DZ) (Algerie)

44

LIBYAN ITALIAN ADVANCED TECHNOLOGY
CO

45
46
47
48
49
50
51

MACCHI HUREL DUBOIS SAS
MBDA SAS
NHINDUSTRIES SAS
ORIZZONTE - SISTEMI NAVALI SPAPOLO STRATEGICO NAZIONALE SPARARTEL SA
ROTORSIM SRL

Versailles (Francia)
Parigi (Francia)
Aix en Provence (Francia)
GenovaRoma
Bucarest (Romania)
Sesto Calende (Varese)

52

ROTORSIM USA LLC

Wilmington, Delaware (USA)53
54

SELEX ES (PROJECTS) LTD
SPACEOPAL GMBH

Basildon, Essex (UK)
Monaco (Germania)

55

TELESPAZIO ARGENTINA SA

Buenos Aires (Argentina)

Tripoli (Libia)

LEONARDO SPAAMSH BVLEONARDO SPALEONARDO SPALEONARDO SPATELESPAZIO SPALEONARDO SPA
AGUSTAWESTLAND PHILADELPHIACOLEONARDO UK LTD
TELESPAZIO SPATELESPAZIO SPATELESPAZIO BRASIL SA

272

53

53

100
50

29
100
50

40

40

39

50
32
49
25
61
50

50
25
32
49
25
41
50

Consolidated Financial Statements at 31 December 2023
56

TELESPAZIO BELGIUM SRL

Transinne (Belgio)

57
58
59

TELESPAZIO BRASIL SATELESPAZIO FRANCE SASTELESPAZIO FRENCH GUIANA SARL60

TELESPAZIO GERMANY GMBH

61

TELESPAZIO IBERICA SL

62

TELESPAZIO LATIN AMERICA LTDA

Rio de Janeiro (Brasile)

63
64
65
66
67
68

TELESPAZIO SPATELESPAZIO UK LTD
TELESPAZIO UK SL
THALES ALENIA SPACE SASTORPEDO SOUTH AFRICA (PTY) LTD
VITROCISET JADWALEAN LTD

RomaLuton (UK)
Madrid (Spagna)
Cannes (Francia)
Gauteng (Sud Africa)
Riyadh (Arabia Saudita)

Rio de Janeiro (Brasile)
Tolosa (Francia)
Kourou (Guyana Francese)
Darmstadt (Germania)
Madrid (Spagna)

TELESPAZIO SPATELESPAZIO FRENCH GUIANA SARLTELESPAZIO LATIN AMERICA LTDATELESPAZIO SPATELESPAZIO SPATELESPAZIO SPATELESPAZIO FRANCE SASTELESPAZIO SPATELESPAZIO SPATELESPAZIO UK LTD
LEONARDO SPATELESPAZIO SPATELESPAZIO UK LTD
LEONARDO SPALEONARDO SPALEONARDO SPA

EUR

1,282,750

100

67

BRL
EUR
EUR

58,724,000
33,670,000
7,625

99
100
100

66
67
67

EUR

44,150

100

67

EUR

2,230,262

100

67

BRL

56,444,390

100

67

EUR
GBP
EUR
EUR
ZAR
SAR

50,000,000
14,400,048
3,100
918,037,500
2,000,000

67
100
100
33
49
45

67
67
67
33
49
45

List of subsidiaries and associates valued at cost ( amounts in currency)
N.

Company nameRegistered office

1

ADVANCED MALE AIRCRAFT LLC

Al Ain, Muwaiji (Emirati Arabi
Uniti)

2

ELSACOM - UKRAINE JOINT STOCKCOMPANY

Kiev (Ucraina)

Partecipating company

Currency

Share capital

LEONARDO SPA

AED

200,000

LEONARDO PARTECIPAZIONI SPA

UAH

7,945,000

273% Group ownership
DirectIndirect49% Groupshareholding
49

49

49

Consolidated Financial Statements at 31 December 2023
Below are the main changes in the scope of consolidation at 31 December 2023 in comparison with 31
December 2022:
Company

Event

Month

Companies which entered the scope of consolidation:
Leonardo Us Subholding Llc

newly establishedMarch 2023

Cnbm Leonardo (Shanghai) Aerostructures Co. Ltd (*)

newly established

April 2023

E2E Engineering Ltd (*)

acquiredNovember 2023

E2E Satcom Ltd (*)

acquiredNovember 2023

E2E Services Ltd (*)

acquiredNovember 2023

Companies which left the scope of consolidation:
No change to reportCompanies involved in merger transactions:
No change to reportCompanies which changed their corporate name:
Old name

New name

Month

Leonardo US Aircraft Inc

Leonardo US Aircraft Llc

March 2023

Selex Es Inc

Selex Es Llc

March 2023(*): companies valued at equity274Consolidated Financial Statements at 31 December 2023

STATEMENT ON THE CONSOLIDATED FINANCIAL STATEMENTS PURSUANT TO ART. 154BIS, PARAGRAPH 5 OF LEGISLATIVE DECREE 58/98 AS AMENDED AND SUPPLEMENTED
1. The undersigned Roberto Cingolani as the Chief Executive Officer and General Manager and Alessandra
Genco as the Officer in charge of Financial Reporting for Leonardo Spa, certify, in accordance with Article
154-bis, paragraphs 3 and 4 of Legislative Decree 58 of 24 February 1998:••

the appropriateness of the financial statements with regard to the nature of the business andthe effective application of administrative and accounting procedures in preparing the consolidated
financial statements at 31 December 2023.

2. In this respect it is noted that no significant matters arose.
3. It is also certified that:
3.1 The consolidated financial statements:•••

were prepared in accordance with International Financial Reporting Standards endorsed by theEuropean Community pursuant to EU Regulation 1606/2002 of the European Parliament and of
the Council of 19 July 2002;
correspond to the entries in the books and accounting records;
were prepared in accordance with Article 154-ter of the aforesaid Legislative Decree 58/1998
and subsequent amendments and integrations and they provide a true and fair view of thefinancial position and results of operations of the issuer and of the entities included within thescope of consolidation.

3.2 The Report on Operations includes a reliable analysis of the performance and the operating result,as well as the position of the issuer and of the entities included within the scope of consolidation,
together with a description of the main risks and uncertainties they are exposed to.
This statement also is made pursuant to and for the purposes of Article 154-bis, paragraph 2, of Legislative
Decree 58 of 24 February 1998.
Rome, 12 March 2024

Chief Executive Officer and General Manager

Officer in charge of financial reporting(Roberto Cingolani)(Alessandra Genco)275

Consolidated Financial Statements at 31 December 2023

INDEPENDENT AUDITOR’S REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS AS
AT 31 DECEMBER 2023

276

Leonardo S.p.A.
Consolidated financial statements as at December 31, 2023
Independent auditor’s report pursuant to article 14 ofLegislative Decree n. 39, dated 27 January 2010, and article
10 of EU Regulation n. 537/2014

EY S.p.A.
Via Lombardia, 3100187 Roma

Tel: +39 06 324751
Fax: +39 06 324755504
ey.comIndependent auditor’s report pursuant to article 14 of Legislative
Decree n. 39, dated January 27, 2010 and article 10 of EU Regulation
n. 537/2014(Translation from the original Italian text)

To the Shareholders of
Leonardo S.p.A.

Report on the Audit of the Consolidated Financial Statements
OpinionWe have audited the consolidated financial statements of Leonardo Group (the Group), which
comprise the statement of financial position as at December 31, 2023, the separate income
statement, the statement of comprehensive income, the statement of cash flows and the statement ofchanges in equity for the year then ended, and notes to the consolidated financial statements,
including material accounting policy information.
In our opinion, the consolidated financial statements give a true and fair view of the financial positionof the Group as at December 31, 2023, and of its financial performance and its cash flows for theyear then ended in accordance with International Financial Reporting Standards as adopted by theEuropean Union and with the regulations issued for implementing art. 9 of Legislative Decree n.
38/2005.

Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISA Italia). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the
Audit of the Consolidated Financial Statements section of our report. We are independent of Leonardo
S.p.A. in accordance with the regulations and standards on ethics and independence applicable toaudits of financial statements under Italian Laws. We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the consolidated financial statements of the current period. These matters wereaddressed in the context of our audit of the consolidated financial statements as a whole, and informing our opinion thereon, and we do not provide a separate opinion on these matters.

We identified the following key audit matters:
EY S.p.A.
Sede Legale: Via Meravigli, 12 – 20123 Milano
Sede Secondaria: Via Lombardia, 31 – 00187 Roma
Capitale Sociale Euro 2.600.000,00 i.v.
Iscritta alla S.O. del Registro delle Imprese presso la CCIAA di Milano Monza Brianza Lodi
Codice fiscale e numero di iscrizione 00434000584 - numero R.E.A. di Milano 606158 - P.IVA 00891231003
Iscritta al Registro Revisori Legali al n. 70945 Pubblicato sulla G.U. Suppl. 13 - IV Serie Speciale del 17/2/1998
A member firm of Ernst & Young Global Limited

Key Audit Matter
Recognition of revenues and losses from longterm contracts with customers

Audit response

Revenues from long-term contracts withcustomers are recognized “over-time” using an
input method for measuring progress towards
complete satisfaction of performanceobligations based on the percentage ofcompletion obtained from the ratio of incurredcosts on the total expected costs for thecontract over the life of the project (cost to cost
method).
The estimation of the total expected project
costs is, by its nature, complex andcharacterized by significant uncertainties as it
may be impacted by many factors, including theability to fulfill the obligations assumed towards
customers, which may also result in penalties
and additional expenses for significant amounts.

Our audit procedures in response to the key
audit matter included, among others:• the understanding of the criteria applied
for the recognition of revenues fromlong-term contracts with customers;• the assessment of the process and key
controls over the recognition ofrevenues from long-term contracts withcustomers;• for a sample of contracts we performed:(i) testing of relevant contractual terms
and conditions in order to verify
whether those were adequately
considered in management
estimates;(ii) testing of the reasonableness of key
assumptions underlying theestimation of the life-of-project
costs based on inquiries, analysis of
any communications with customers
and comparative analysis;(iii) comparative analysis between
actual figures and estimates madein previous periods in order toassess the accuracy ofmanagement’s forecasting;(iv) testing of incurred costs and their
allocation to proper on-going
contracts.

Therefore, the estimate involves a high degreeof judgment by Directors that may significantly
affect the contract revenues recognition andany loss at completion in cases of negative
margin expectation. Accordingly, we identified
this area as a key audit matter.
The disclosures related to the criteria applied forthe recognition and measurement of revenues
and margins on long-term contracts withcustomers are included in notes “3.9 Revenues
and contract assets/liabilities with customers“
and “4.4 Estimate of revenues and final costs oflong- term contracts”.

Lastly, we have reviewed the disclosuresprovided in the notes to the financial statements
regarding this key audit matter.

Test of the recoverability of goodwill
Goodwill as at December 31, 2023 amounts toEuro 3.899 million.
Directors tested for impairment the Cash
Generating Units (CGUs) to which goodwill has
been allocated in order to identify any
impairment loss in respect of their recoverable
amount.
The recoverable amount of each CGU isdetermined using the value in use method and it
is based on complex assumptions that inherently2

Our audit procedures in response to the key
audit matter included, among others:• the assessment of the procedure appliedin the performance of the impairment
test as approved by the Directors;• testing of the criteria applied for
identifying the CGUs and allocating
relevant assets and liabilities to them;• the analysis of the expected cash flows
of each CGU and testing of theirconsistency with the expected cash
flows resulting from the Business Plan

involve a degree of judgment by Directors, withreference to the expected cash flows over theperiod considered in the Business Plan 20242028, to the estimate of the terminal value andthe determination of the long-term growth anddiscount rates.
Because of the judgement involved and thecomplexity of the assumptions underlying theestimation of the recoverable amount of
goodwill, we identified this area as a key audit
matter.
Disclosures on the assumptions and theestimations adopted when performing theimpairment test are included in the notes to theconsolidated financial statements “4.6
Impairment of assets“ and “9. Intangible
Assets”.

•••

2024-2028;
the assessment of the reasonablenessof the estimates made by Directors, also
by comparing actual figures andestimates made in previous periods;
the assessment of the long-term growthand discount rates;
the assessment of the sensitivity
analysis performed by Directors on key
assumptions underlying the impairment
test.

In performing our procedures we involved ourexperts in valuation techniques.
Lastly, we have reviewed the disclosuresprovided in the notes to the financial statements
regarding this key audit matter.

Recognition and subsequent measurement of
non-recurring costs and development costs
Non-recurring costs and developments costs
capitalized as intangible assets as at December
31, 2023 amount to an aggregate of Euro2.924 million.
The initial recognition of these assets and thesubsequent assessment of their recoverability
are based on complex assumptions that
inherently involve a degree of judgment by
Directors as influenced by many factors
including the time horizon of the productbusiness plans and management’s ability toforecast the commercial success of theunderlying technologies.
Because of the judgement involved and thecomplexity of the underlying assumptions, we
identified this area as a key audit matter.
Disclosures on the assumptions and theestimations adopted in the recognition andsubsequent measurement of non-recurring costs
and development costs are included in the notes
to the consolidated financial statements “4.1
Research and development costs “, “4.2 Nonrecurring costs” and “9. Intangible assets”.

Our audit procedures in response to the key
audit matter included, among others:• understanding of the processes appliedin recognizing for non-recurring costs
and development costs and the process
related to the assessment of theirrecoverability;• for a sample of development programs
we performed:(i) substantive procedures aimed atverifying internal and external costs
recognized during the period;(ii) assessment of the reasonablenessof key assumptions underlying the
product business plans;(iii) testing of the discount rates;(iv) assessment of the sensitivity
analysis performed by Directors on
the key assumptions underlying theimpairment test.
In performing our procedures we involved ourexperts in valuation techniques.
Lastly, we have reviewed the disclosuresprovided in the notes to the financial statements
regarding this key audit matter.

Responsibilities of Directors and Those Charged with Governance for the3Consolidated Financial Statements
The Directors are responsible for the preparation of the consolidated financial statements that give atrue and fair view in accordance with International Financial Reporting Standards as adopted by theEuropean Union and with the regulations issued for implementing art. 9 of Legislative Decree n.
38/2005, and, within the terms provided by the law, for such internal control as they determine isnecessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
The Directors are responsible for assessing the Group’s ability to continue as a going concern and,
when preparing the consolidated financial statements, for the appropriateness of the going concern
assumption, and for appropriate disclosure thereof. The Directors prepare the consolidated financial
statements on a going concern basis unless they either intend to liquidate the Parent Company
Leonardo S.p.A. or to cease operations or have no realistic alternative but to do so.
The statutory audit committee (Collegio Sindacale) is responsible, within the terms provided by thelaw, for overseeing the Group’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and toissue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with International Standards on Auditing(ISA Italia) will always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if, individually or in aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these consolidated
financial statements.
As part of an audit in accordance with International Standards on Auditing (ISA Italia), we haveexercised professional judgment and maintained professional skepticism throughout the audit. In
addition:• we have identified and assessed the risks of material misstatement of the consolidated
financial statements, whether due to fraud or error, designed and performed audit procedures
responsive to those risks, and obtained audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatement resulting
from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control;• we have obtained an understanding of internal control relevant to the audit in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Group’s internal control;• we have evaluated the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by the Directors;• we have concluded on the appropriateness of Directors’ use of the going concern basis ofaccounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Group’s ability tocontinue as a going concern. If we conclude that a material uncertainty exists, we are required
to draw attention in our auditor’s report to the related disclosures in the financial statements
or, if such disclosures are inadequate, to consider this matter in forming our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause the Group to cease to continue as a going
concern;• we have evaluated the overall presentation, structure and content of the consolidated
financial statements, including the disclosures, and whether the consolidated financial

4•statements represent the underlying transactions and events in a manner that achieves fairpresentation;
we have obtained sufficient appropriate audit evidence regarding the financial information of
the entities or business activities within the Group to express an opinion on the consolidated
financial statements. We are responsible for the direction, supervision and performance of thegroup audit. We remain solely responsible for our audit opinion.

We have communicated with those charged with governance, identified at an appropriate level as
required by ISA Italia, regarding, among other matters, the planned scope and timing of the audit andsignificant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
We have provided those charged with governance with a statement that we have complied with the
ethical and independence requirements applicable in Italy, and we have communicated them all
matters that may reasonably be thought to bear on our independence, and where applicable, theactions taken to eliminate relevant risks or the safeguard measures applied.
From the matters communicated with those charged with governance, we have determined thosematters that were of most significance in the audit of the financial statements of the current period
and are therefore the key audit matters. We have described these matters in our auditor’s report.

Additional information pursuant to article 10 of EU Regulation n. 537/14
The Shareholders of Leonardo S.p.A., in the general meeting held on May 20, 2020, engaged us toperform the audits of the financial statements and consolidated financial statements for each of theyears ending December 31, 2021 to December 31, 2029.
We declare that we have not provided prohibited non-audit services, referred to article 5, par. 1, of EU
Regulation n. 537/2014, and that we have remained independent of the Group in conducting theaudit.
We confirm that the opinion on the consolidated financial statements included in this report isconsistent with the content of the additional report to the audit committee (Collegio Sindacale) in
their capacity as audit committee, prepared pursuant to article 11 of the EU Regulation n. 537/2014.

Report on compliance with other legal and regulatory requirements
Opinion on the compliance with Delegated Regulation (EU) 2019/815
The Directors of Leonardo S.p.A. are responsible for applying the provisions of the European
Commission Delegated Regulation (EU) 2019/815 for the regulatory technical standards on thespecification of a single electronic reporting format (ESEF – European Single Electronic Format) (the“Delegated Regulation”) to the consolidated financial statements, to be included in the annual
financial report.
We have performed the procedures under the audit standard SA Italia n. 700B, in order to express an
opinion on the compliance of the consolidated financial statements as at December 31, 2023 with theprovisions of the Delegated Regulation.
In our opinion, the consolidated financial statements as at December 31, 2023 have been prepared in
the XHTML format and have been marked-up, in all material aspects, in compliance with theprovisions of the Delegated Regulation.
Due to certain technical limitations, some information included in the explanatory notes to theconsolidated financial statements, when extracted from the XHTML format to an XBRL instance, may

5not be reproduced in an identical manner with respect to the corresponding information presented in
the consolidated financial statements in XHTML format.

Opinion pursuant to article 14, paragraph 2, subparagraph e), of Legislative
Decree n. 39 dated January 27, 2010 and of article 123-bis, paragraph 4, ofLegislative Decree n. 58, dated February 24, 1998
The Directors of Leonardo S.p.A. are responsible for the preparation of the Report on Operations andof the Report on Corporate Governance and Ownership Structure of Leonardo Group as at December
31, 2023, including their consistency with the related consolidated financial statements and theircompliance with the applicable laws and regulations.
We have performed the procedures required under audit standard SA Italia n. 720B, in order toexpress an opinion on the consistency of the Report on Operations and of specific information
included in the Report on Corporate Governance and Ownership Structure as provided for by article
123-bis, paragraph 4, of Legislative Decree n. 58, dated February 24, 1998, with the consolidated
financial statements of Leonardo Group as at December 31, 2023 and on their compliance with theapplicable laws and regulations, and in order to assess whether they contain material misstatements.
In our opinion, the Report on Operations and the above mentioned specific information included in
the Report on Corporate Governance and Ownership Structure are consistent with the consolidated
financial statements of Leonardo Group as at December 31, 2023 and comply with the applicablelaws and regulations.
With reference to the statement required by art. 14, paragraph 2, subparagraph e), of Legislative
Decree n. 39, dated January 27, 2010, based on our knowledge and understanding of the entity andits environment obtained through our audit, we have no matters to report.

Statement pursuant to article 4 of Consob Regulation implementing Legislative
Decree n. 254, dated December 30, 2016
The Directors of Leonardo S.p.A. are responsible for the preparation of the non-financial information
pursuant to Legislative Decree n. 254, dated December 30, 2016. We have verified that non-financial
information has been approved by Directors.
Pursuant to article 3, paragraph 10, of Legislative Decree n. 254, dated December 30, 2016, suchnon-financial information is subject to a separate compliance report signed by us.
Rome, March 15, 2024
EY S.p.A.
Signed by: Riccardo Rossi, Auditor

The accompanying consolidated financial statements of Leonardo S.p.A. constitute a non-official
version which is not compliant with the provisions of the Commission Delegated Regulation (EU)2019/815. This independent auditor’s report has been translated into the English language solely
for the convenience of international readers. Accordingly, only the original text in Italian language isauthoritative.

6

Separate Financial Statements at 31 December 2023

SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2023
LEONARDO – SOCIETÀ PER AZIONI

277

Separate Financial Statements at 31 December 2023

ACCOUNTING STATEMENTS TO THE SEPARATE FINANCIAL STATEMENTS
AT 31 DECEMBER 2023
Separate income statement
Note

Euro
Revenues
Other operating income
Purchase and personnel expenses
Amortisation, depreciation and financial assets
value adjustments
Other operating expenses
Income before tax and financial expenses

27
28
29

Financial income
Financial expense
Operating profit/(loss) before income taxes anddiscontinued operations
Income taxes
Net profit/(loss) for the periodof which withrelated parties

2022

9,555,715,284
2,625,062,843
629,495,658
9,945,325(8,673,749,184) (2,161,796,489)

of which withrelated parties

2023

9,936,503,303
2,873,826,784
468,915,672
20,690,488(9,066,297,275) (2,113,519,201)

30(503,160,662)

28(654,064,156)354,236,941(326,004)(462,388,282)
411,229,681(775,330)

31
31

1,732,704,805(317,613,086)

14,679,518(30,831,973)

882,100,617(425,423,631)

18,694,018(104,246,254)

32(465,503,737)

1,769,328,659

867,906,667(68,821,029)
1,700,507,630(84,209,553)
783,697,114

Statement of comprehensive income
Euro

2022

2023
1,700,507,630

Profit /(Loss) for the period

783,697,114

Other comprehensive income (expense):
Comprehensive income/expense which will not be
subsequently reclassified within the profit (loss) forthe period:- Measurement of defined-benefit plans:- revaluation- exchange rate gains (losses)

10,268,375-- Tax effectComprehensive income/expense which will or might
be subsequently reclassified within the profit (loss)
for the period:- Changes in cash flow hedges:- change generated in the period- transferred to the profit (loss) for the period

10,268,375(7,872,236)-

277,491
10,545,866(18,853,501)
19,244,672- Tax effectTotal other comprehensive income (expense), netof tax:Total comprehensive income

278

391,171(7,872,236)(148,050)(8,020,286)

80,009,170(11,457,341)

68,551,829(94,077)
297,094(16,452,626)
52,099,203

10,842,960

44,078,917

1,711,350,590

827,776,031

Separate Financial Statements at 31 December 2023
Statement of financial positionEuroof which withrelated parties

Note 31 December 2022

Intangible assets
Property, plant and equipment
Right of use
Equity investments
Receivables
Deferred tax assets
Other non current assets
Non-current assets

8
9
10
11
12
32
12

3,187,528,399
915,516,734
668,023,008
9,638,110,253
133,500,660
840,744,083
33,103,474
15,416,526,611

Inventories
Assets from contracts
Trade receivables
Income tax receivables
Loans and receivables
Other assets
Cash and cash equivalents
Current assets

13
14
15
16
15
17
18

3,948,856,252
2,381,318,738
3,121,395,939
33,961,452
325,756,876
488,146,468
1,039,514,625
11,338,950,350

88,614,703

1,132,810,977
277,272,797
26,694,064

31 December 2023
3,222,872,590
979,915,861
590,293,507
9,425,821,958
174,907,570
865,019,279
30,886,092
15,289,716,857
4,187,309,822
2,365,098,888
3,627,571,900
60,437,956
520,504,815
513,267,614
1,791,014,433
13,065,205,428

Total assets

26,755,476,961

28,354,922,285

Share capital
Other reserves
Total equity

2,499,097,262
5,159,614,499
7,658,711,761

2,499,097,262
5,913,929,998
8,413,027,260

20

Loans and borrowings (non current)
Employee benefits
Provisions for risks and charges
Deferred tax liabilities
Other non-current liabilities
Non-current liabilities

21
23
22
32
24

3,424,966,639
245,735,166
677,981,169
86,987,756
732,936,896
5,168,607,626

Liabilities from contracts
Trade payables
Loans and borrowings (current)
Income tax payables
Provisions for short-term risks and charges
Other current liabilities
Current liabilities

14
25
21
16
22
24

6,751,375,914
2,475,331,081
2,438,741,383
64,428,416
785,954,264
1,412,326,516
13,928,157,574

Liabilities associated with assets held for sale

19-

40,085,000

19,096,765,200
26,755,476,961

19,941,895,025
28,354,922,285

Total liabilities
Total liabilities and equity

279

631,087,301

157,210,134

667,020,089
2,336,537,165

80,861,400

2,684,925,516
232,261,636
706,206,212
96,412,778
763,229,276
4,483,035,418
7,210,824,070
2,802,038,994
3,287,847,106
2,726,492
803,645,627
1,311,692,318
15,418,774,607

of which withrelated parties

130,364,282

1,437,953,019
506,932,306
25,193,752

534,730,772

152,072,430

825,845,849
2,576,109,866

128,138,734

Separate Financial Statements at 31 December 2023
Statement of cash flows
Euro
Gross cash flows from operating activities
Change trade receivables/payables,
assets/liabilities from contracts andinventories
Change in other operating assets and liabilities
and provisions for risks and charges
Interest received (paid)
Income taxes received (paid)
Cash flows generated (used) from operating
activities
Investments in property, plant and equipment
and intangible assets
Sales of property, plant and equipment andintangible assets
Dividends received
Other investing activities
Cash flows generated (used) from investing
activities
Bond buy repayments
Net change in other loans and borrowings
Dividends paid
Cash flows generated (used) from financing
activitiesof which withrelated parties

2022

33

1,133,854,603

33(49,632,623)(62,241,850)(45,426,972)(129,975,282)

33(101,108,090)

18,972,987(277,754,070)(29,656,646)(150,960,654)(11,591,598)(16,152,690)(158,672,353)(96,332,813)(85,553,072)

33

2023
1,134,639,078

820,561,638

556,452,870(471,073,654)(453,374,788)

3,284,322

2,409,461

269,032,291(613,456,065)

729,968,800
154,328,595(812,213,106)

433,332,068(555,508,000)(209,555,935)(79,680,998)

92,257,120(153,282,803)(81,405,039)(844,744,933)(234,687,842)(836,396,401)

755,097,096

513,334(3,597,288)

Cash and cash equivalents at 1 January

1,875,397,692

1,039,514,625

Cash and cash equivalents at 31 December

1,039,514,625

1,791,014,433

Net increase (decrease) in cash and cash
equivalents
Exchange rate differencesof which withrelated parties

Note

280

(54,719,579)(98,778,171)

Separate Financial Statements at 31 December 2023
Statement of changes in equity

Share capitalEuro
1 January 2022

Revaluation
Cash flow
reserve of
Merger surplus Total equity
hedge reserve defined-benefit
plans

Retainedearnings

2,499,097,262 2,946,117,219(58,682,771)(70,415,738)

720,062,704 6,036,178,676

Profit (loss) for the period
Other comprehensive income (expense)
Total comprehensive income (expense)- 1,700,507,630- 1,700,507,630

297,094
297,094

10,545,866
10,545,866- 1,700,507,630
10,842,960- 1,711,350,590

Dividends resolved
Repurchase of treasury shares less sold shares
Total transactions with owners of the parent,
recognised directly in equity-(80,543,019)
-

-

-

-

(80,543,019)--(80,543,019)

-

-

-

(80,543,019)

Effect from Mergers/Demergers
Stock option/grant plans - performance's value
Other changes-

5,232,072
753,129--(14,259,687)-(14,259,687)
5,232,072
753,129

31 December 2022

2,499,097,262 4,572,067,031(58,385,677)(59,869,872)

705,803,017 7,658,711,761

1 January 2023

2,499,097,262 4,572,067,031(58,385,677)(59,869,872)

705,803,017 7,658,711,761

Profit (loss) for the period
Other comprehensive income (expense)
Total comprehensive income (expense)-

783,697,114

52,099,203
52,099,203(8,020,286)(8,020,286)-

783,697,114
44,078,917
827,776,031

Dividends resolved
Total transactions with owners of the parent,
recognised directly in equity-(80,543,019)

-

-

-

(80,543,019)-(80,543,019)

-

-

-

(80,543,019)

Stock option/grant plans - performance's value
Other changes-

9,818,487(2,736,000)

-

-

-

9,818,487(2,736,000)

2,499,097,262 5,282,303,613(6,286,474)(67,890,158)

31 December 2023

783,697,114-

281

705,803,017 8,413,027,260

Separate Financial Statements at 31 December 2023

NOTES TO THE SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2023
1. GENERAL INFORMATION
Leonardo SpA is a company limited by shares based in Rome (Italy), at Piazza Monte Grappa 4, and is listedon the Italian Stock Exchange (FTSE MIB).
The Company is a major Italian high technology organization operating in the Helicopters, Defence Electronics& Security, Aircraft and Aerostructures business sectors.

2. FORM, CONTENT AND APPLICABLE ACCOUNTING STANDARDS
In application of EU Regulation 1606/2002 of 19 July 2002, the financial statements at 31 December 2023
were prepared in accordance with the international accounting standards (IFRS) endorsed by the European
Commission, supplemented by the relevant interpretations (Standing Interpretations Committee - SIC andInternational Financial Reporting Interpretations Committee - IFRIC) issued by the International AccountingStandards Board (IASB) and in force at the year-end.
The general principle used in preparing these separate financial statements is the historical cost method,
except for those items that, in accordance with IFRS, are obligatory recognised at fair value, as indicated in
the valuation criteria of each item.
The separate financial statements are composed of the separate income statement, the statement ofcomprehensive income, the statement of financial position, the statement of cash flows, the statement ofchanges in equity and the related notes to the financial statements.
In consideration of the significant values, the figures in these notes are shown in millions of euros unlessotherwise indicated. Among the options permitted by IAS 1, the Company has chosen to present its balance
sheet by separating current and non-current items and its income statement by the nature of the costs.
Instead, the statement of cash flows was prepared using the indirect method.
The International Financial Reporting Standards (IFRS) used for preparing these separate financial
statements, drawn up under the going-concern assumption, are the same that were used in the preparationof the separate financial statements at 31 December 2022 except for what indicated below (Note 4).
Preparation of the separate financial statements required management to make certain valuations andestimates. The main areas affected by estimates or assumptions of particular importance or that havesignificant effects on the balances shown are described in Note 4 to the Consolidated Financial Statements,
to which reference is made.
The Board of Directors of 12 March 2024 resolved to submit to shareholders the draft financial
statements at 31 December 2023.
The separate financial statements were prepared in accordance with IFRS and are subject to a statutory
audit by EY S.p.A.

3. ACCOUNTING POLICIESThe accounting policies and criteria are the same adopted, where applicable, for the annual consolidated
financial statements, to which reference is made, except for the recognition and measurement of equity
investment in subsidiaries, jointly controlled companies and associates recognised at their purchase orincorporation cost. In case of any impairment losses their recoverability is verified through the comparison
282

Separate Financial Statements at 31 December 2023
between their carrying amount and the higher of their value in use that is determined by discounting
prospective cash flows of the equity investment, where applicable, and the assumed sales value (fair value)
which is determined on the basis of recent transactions or market multiples. The portion of losses (if any)
exceeding the carrying amount is recognised through profit or loss in a specific provision under liabilities tothe extent that the Company states the existence of legal or implicit obligations to cover such losses, which
are in any case within the limits of the book equity. If the impaired investee shows a subsequent
improvement in performance which leads to believe that the reasons for the impairment cease to exist, theequity investments are revalued to the extent of the impairment losses recognised in previous periods under“adjustments to equity investments”. In order to define the reversals of the value of an equity investment,
the Company monitors, on an annual basis, any equity investment whose value has been previously written
down and analyses whether the conditions are fulfilled for its reversal. Specifically, the analysis covers
business plans, profitability levels, and future cash flows approved by corporate bodies and the results ofsensitivity analyses are evaluated against the basic assumptions used to determine the recoverable value.
The results of the write-back performed in 2023 are reported in Note 5. Dividends from subsidiaries andassociates are recognised in the income statement in the year in which they are resolved.
Finally, with reference to transactions between entities under joint control, which are not governed by IFRS,
either from the point of view of the purchaser/assignee or from that of the seller/assignor, Leonardo
recognizes such transactions recognising directly in equity any gain on the transfer or sale of its subsidiaries.
In the event the Group has evidence of an impairment loss of the investment, in excess of the amountaccounted for under the equity method, the Group will proceed with calculating the impairment to berecorded in the income statement which is determined as the difference between the recoverable amountand the carrying amount of the investment. The fair value of equity investments, in the event this method
applies, is calculated based on the bid price of the last trading day of the month for which the IFRS report
was prepared, or based on financial valuation techniques for not listed instruments.
Investments available for sale, like those acquired with the sole purpose of being disposed within thesubsequent twelve months, are classified separately within “assets held for sale”.

4. EFFECTS OF CHANGES IN ACCOUNTING POLICIES ADOPTED
No significant changes occurred in the period with reference to the application of the accounting policies
adopted by the Company.

5. SIGNIFICANT EVENTS AND TRANSACTIONS DURING THE YEAR
With reference to the request for termination for default due to alleged delays and non-compliant products
formalised during 2022 by the governmental Norwegian Defence Materiel Agency (NDMA) under thecontract for the supply of 14 NH90 helicopters entered into with NH Industries (NHI, a company whose
shareholders are Leonardo, Airbus Helicopters and Fokker Aerostructure), the parties commenced amediation process in April 2023 which should be completed in the next months. The NHI position, confirmed
by Leonardo, is unchanged compared to what was reported in the Financial Statements as of 31 December
2022, considering this request to be legally unfounded and reasonably disputable in the appropriate forum
due to a lack of factual and legal basis and misinterpretation of the contract and Norwegian law, as well as
due to a breach of confidentiality obligations. As noted above, in April 2023, the customer and NHI initiateda mediation procedure in an attempt to reach a mutually satisfactory agreement. In the period from October
2023 to February 2024, the parties exchanged significant claims and counterclaims and took steps to filedeeds and documents required under the mediation procedure; the hearing before the mediators is283

Separate Financial Statements at 31 December 2023
scheduled for the second half of March 2024. At this stage of the mediation neither NHI nor Leonardo
considers that it should change its position.
With reference to the industrial transactions, it should be noted that work continued in 2023 on
concentrating the assets held by Leonardo in the USA in a single legal entity started in 2022. During theperiod, the following transactions were completed, through direct and indirect subsidiaries:• Leonardo International contributed its stake in Selex ES, LLC to Leonardo US Holding. The same stake
was subsequently transferred from Leonardo US Holding to Leonardo US Corporation, and from thelatter to Leonardo US Subholding;• Leonardo US Corporation established Leonardo US Subholding, wholly owned;• Leonardo US Corporation contributed its stake in Leonardo US Aircraft to Leonardo US Subholding.
With reference to the financial transactions, during the 2023 financial year Leonardo completed the following
capital market transactions:•

In November Leonardo SpA finalized, through the subholding Leonardo US Holding, LLC, (“LUSH”),
the sale on the US market of a parcel of shares in Leonardo DRS (“DRS”). The proceeds from suchtransaction (approx. USDmil. 352 equal to €mil. 327) allowed Leonardo US Holding to repay a capital
portion of about €mil. 171 to Leonardo SpA. The proceeds from this transaction allow Leonardo toincrease its financial flexibility for investments and acquisitions, and to maintain at the same time asolid financial structure and a significant industrial and commercial footprint in the US defense
business. For more details on the transaction, reference is made to the section “Group results andfinancial position” in the consolidated financial statements;•

in May 2023 the EMTN (Euro Medium Term Note) programme was renewed for further 12 months,
which regulates possible bond issues on the European market for a maximum nominal value of €bil.
4. At the date of this report, the Programme could be still used for €mil. 2,400.

With reference to the industrial relations, in May 2023 Leonardo made supplements to the agreement signed
in December 2022 (early retirement plan under art. 4 of Law 92/2012, Fornero Act) up to a maximum of 490
employees and executives working in the Corporate and Staff functions of Leonardo SpA, Leonardo Global
Solutions and Leonardo Logistics, who will meet any requirement for retirement by 30 November 2028, withplanned exits during the two-year period from 2023 to 2024. The expansion of the scope of this measure
resulted in the recognition in the period of additional charges of €mil. 20.
31 July 2023 saw the signature of the agreement with the Trade Unions for the regulation of the Performance
Bonus and Target Bonus 2023, as well as the distinct component of pay (in Italian, EDR 2021 – Elemento
Distinto della Retribuzione) for the portion related to 2023.
On 20 December 2023, the Company signed the agreement for renewal of Leonardo’s supplementary
contract. Such agreement sets for the three-year period 2024-2026 not just better economic conditions for
employees, but additional measures reinforcing corporate welfare and experimental solutions toreformulate working hours, finetuning the path to harmonization started in 2016 with the creation of the
One Company.
With reference to the comparative period, it should be remembered that the year 2022 saw the start of theRussian offensive, still underway, against Ukraine. In consideration of the profound changes in the world’s
geo-political and economic equilibriums that have come out, Leonardo had written down its financial
exposures to the two countries involved in the conflict for a total amount of €mil. 33, including tax effects.

284

Separate Financial Statements at 31 December 2023
As set out above, the governmental Norwegian Defence Materiel Agency (NDMA) formalised the aforementioned request for termination for default in relation to the contract for the supply of 14 NH90
helicopters entered into in 2001 with NH Industries (NHI) due to alleged delays and non-compliant products.

6. SIGNIFICANT POST-BALANCE SHEET EVENTS
In January 2024 the Group amended the arrangements behind the Space Alliance with the shareholder Thales
in relation to the Telespazio component. The nature of the amendments to the shareholders’ agreementschanged the qualification of the Telespazio group from a joint venture to a subsidiary.
With regard to the arbitration proceedings involving, on the one hand, Leonardo S.p.a. and PSC S.p.A.
(hereinafter collectively referred to as unincorporated joint venture, “LP”) and, on the other, Galfar Misnad
Engineering & Contracting W.L.L., Salini-Impregilo S.p.A. (now Webuild) and Cimolai S.p.A. (hereinaftercollectively referred to as unincorporated joint venture, “GSIC”), on 7 March 2024, the Court of Arbitration
issued the petition for correction of the award filed by LP, ordering GSIC to pay an additional amount ofapproximately €mil. 11 to LP with respect to an initial net amount of approximately €mil. 146.5 under theaward issued on 6 October 2023; for more details, reference should be made to the Note 22 to these separate
financial statements.

7. SEGMENT INFORMATION
In accordance with the compliance model followed, management has adopted operating segments that
correspond to the business sectors in which the Company operates: Helicopters, Defence Electronics &Security, Aircraft and Aerostructures.
For a more detailed analysis of the main programmes, outlooks and operating indicators for each segment,
reference should be made to the Report on Operations.

285

Separate Financial Statements at 31 December 2023
8. INTANGIBLE ASSETS
Intangible assets
Goodwill
1 January 2022
Cost
Amortisation, depreciation
and write-offs
Carrying amount

Development
costs

Nonrecurring
costs

Concessions,licenses andtrademarks

AcquiredOtherthroughintangible
business
assetscombinations

Total

917

1,022

2,364

728

96

412

5,539

(210)

(625)

(704)

(494)

(56)

(310)

(2,399)

707

397

1,660

234

40

102

3,140

Investments (net of grants)
Sales
Depreciation
Impairment losses
Other changes
31 December 2022

1
708

44
(1)
(30)
(1)
(3)
406

98
(63)
(21)
5
1,679

9
(24)
18
237

(2)
38

53
(25)
(1)
(9)
120

204
(1)
(144)
(23)
12
3,188

broken down as follows:
Cost
Depreciation
Impairment losses
Carrying amount

918
(210)
708

1,107
(616)
(85)
406

2,466
(575)
(212)
1,679

758
(521)
237

97
(59)
38

462
(318)
(24)
120

5,808
(2,089)
(531)
3,188

Investments (net of grants)
Sales
Depreciation
Impairment losses
Other changes
31 December 2023

708

56
(1)
(20)
(5)
(7)
429

86
(53)
(26)
5
1,691

7
(30)
26
240

(2)
36

51
(29)
(23)
119

200
(1)
(134)
(31)
1
3,223

broken down as follows:
Cost
Depreciation
Impairment losses
Carrying amount

918
(210)
708

1,153
(636)
(88)
429

2,556
(628)
(237)
1,691

788
(548)
240

97
(61)
36

487
(344)
(24)
119

5,999
(2,217)
(559)
3,223

31 December 2022
Gross value
Grants

4,678
3,000

31 December 2023
Gross value
Grants

4,689
2,998

The item increased by €mil. 35 as a result of new investments net of related grants and amortisation charges
for the period.
Investments for the period are mainly related to Helicopters (€mil. 105) and Defence Electronics & Security(€mil. 52).
At 31 December 2023, commitments were in place for the purchase of intangible assets for €mil. 20 (€mil.
18 at 31 December 2022).

286

Separate Financial Statements at 31 December 2023
As set out in Note 4.1 of the consolidated financial statements, to which reference should be made,
impairment tests on development costs and non-recurring costs are carried out – if conditions obtain- using
the discounted cash flow method. The cash flows used are those of the product business plans, discounted
on the basis of a WACC rate determined by applying the Capital Asset Pricing Model.

Goodwill
Goodwill is allocated to the Cash Generating Units (CGUs) or groups of CGUs concerned, which are
determined with reference to the Group’s organizational, management and control structure coinciding, as
is known, with the Group’s four business segments.
The breakdown of goodwill recognised by business sector at 31 December 2023 is as follows:
31 December 2022
459
189
60
708

Helicopters
Electronics for the Defence and Security
Aircraft

31 December 2023
459
189
60
708

Goodwill is tested for impairment in order to determine any possible loss in value, making reference to the
CGU as a whole, including, in accordance with the organizational and operational model, the equity
investments falling within the scope of consolidation, which are then included and tested in the same year
as the impairment. Therefore, only the equity investments that are not tested together with goodwill are
subject to an impairment test separately, if required.
The test is done by individual CGU by comparing the carrying amount with the greater of the value in use of
the CGU and amount recoverable by sale (fair value). In practice, the Company has established an operational
hierarchy between calculating the fair value net of costs to sell and value in use, where the value in use isestimated first, and then only after, if it is lower than the carrying value, is the fair value net of costs to sell
determined. In particular, the value in use is measured by the unlevered discounting of the cash flows
resulting from the Group’s five-year business plans prepared by the CGU’s management and incorporated
into the plan approved by Leonardo’s Board of Directors, projected beyond the explicit time horizon coveredby the plan according to the perpetuity growth method (terminal value), using growth rates (“g-rate”) no
greater than those forecast for the markets in which the given CGU operates. The cash flows used were those
provided for in the plans adjusted to exclude the effects of any future business restructurings, not yet
approved, or future investments for improving future performance. Specifically, these cash flows are thosegenerated before financial expense and taxes – determined on a notional basis - and include investments incapital assets and monetary changes in working capital, while excluding cash flows from financial
management, extraordinary events or the payment of dividends. The basic macro-economic assumptions
were made on the basis of external information sources, where available, while the profitability and growthestimates used in the plans were calculated by management based on past experience and expected
prospective developments in the markets in which the Company operates.
These cash flows are discounted on a weighted-average cost of capital (WACC) basis calculated using theCapital Asset Pricing Model method. The following factors were taken into account in calculating WACCs,
which were also determined using the data referable to the main competitors operating in each sector:•

the risk-free rate was determined using the 10-year gross yield of government bonds of thegeographic market of the CGU;•

the market premium determined using the computations of external providers;•

the sector beta;•

the cost of debt;
287

Separate Financial Statements at 31 December 2023•

the debt/equity ratio.

On the contrary, the growth rates used to project the CGU’s cash flows beyond the explicit term of the plan
were estimated by making reference to the growth assumptions of the individual sectors in which said CGUs
operate. These assumptions are based on the internal processing of external sources, making reference to aperiod of time that is usually ten years. The g-rates used for the purposes of the impairment test were equal
to 2%, consistently with the actions taken in previous financial years, even in the presence of higher expected
growth rates in some sectors.
Below are mostly important assumptions for the purposes of estimating the cash flows used in determining
the value in use:
•

WACC;

•

g-rate;

•

ROS;

•

trend in Defence budgets.

In estimating these assumptions, the management made reference, in the case of external variables, tointernal information processed on the basis of external surveys, as well as on its knowledge of the markets
and of the specific contractual situations.
The following WACCs and (nominal) growth rates were used at 31 December 2023 and 2022:

Helicopters
Electronics for the Defence and Security
Aircraft

31 December 2022
Wacc
g-rate
8.6%
2.0%
7.5%
2.0%
8.1%
2.0%

31 December 2023
Wacc
g-rate
9.3%
2.0%
8.2%
2.0%
9.2%
2.0%

Testing revealed no signs of impairment but showed, on the contrary, significant positive margins(Headroom). Sensitivity analysis was conducted on the results of the tests, making reference to theassumptions for which it is reasonable to believe that a change in the same may significantly modify the
results of the test. The wide positive margins recorded in all sectors are such that they may not be significantly
modified by any changes in the assumptions described above. In any case, the results for all CGUs arereported below for information purposes. The table below shows, for the 2023 and 2022 financial years, theheadroom relating to the base scenario, compared with the results of the following sensitivity analyses: (i)increase by 50 basis points in the interest rate used to discount cash flows across all the CGUs, otherconditions being equal; (ii) reduction by 50 basis points in the growth rate used in calculating the terminal
value, other conditions being equal; (iii) reduction by half point in the operating profitability applied to theterminal value, other conditions being equal.
31 December 2022

Margin (base case)

Helicopters
Electronics for the Defence and Security
Aircraft

1,321
8,479
5,730

288

Margin post sensitivity
Wacc
g-rateROS TV
967
1,041
1,135
7,481
7,668
8,188
5,389
5,455
5,587

Separate Financial Statements at 31 December 2023
31 December 2023

Margin (base case)

Helicopters
Electronics for the Defence and Security
Aircraft

1,158
9,004
5,817

Margin post sensitivity
Wacc
g-rateROS TV
833
908
976
8,077
8,267
8,703
5,510
5,581
5,682

Development costs and non-recurring charges
Investments of the item “Development costs” chiefly related to Defence Electronics & Security and to
Helicopters for €mil. 29 and €mil. 22, respectively. The investments of “Non-recurring costs” refer to the
Helicopters sector for €mil. 62 and to the Defence Electronics & Security sector for €mil. 16.
As regards programmes that benefit from the provisions of Law 808/85 and that are classified as functional
to national security, the portion of capitalised non-recurring costs, pending the fulfilment of the legal
requirements for the classification under receivables, is separately classified among “other non-current
assets” (Note 12). Receivables for grants assessed by the grantor in relation to capitalised costs (shown here
net of the related grants) are illustrated in Note 28.
The impairment for the year mainly refers to write-downs linked to programmes in the Aircraft businesssegment. Impairment tests of non-recurring costs and development costs are performed on the mostsignificant programmes in terms of capitalisation or risk or when impairment indicators emerge. They arecarried out – if conditions obtain- using the discounted cash flow method. The cash flows used are those of
the product business plans, discounted on the basis of a WACC rate determined by applying the Capital Asset
Pricing Model. As stated in the section on accounting principles, product business plans include theinvestments related to climate change issues.
At 31 December 2023, total research and development costs, including also the “development costs” and“non-recurring costs” just mentioned, amount to €mil. 1,362 (€mil. 1,192 at 31 December 2022), of which€mil. 177 expensed (€mil. 164 at 31 December 2022).

Concessions Licenses and Trademarks
The item “Concessions, licenses and trademarks” especially includes the value of licenses acquired inprevious years in the Helicopters sector.

Other intangible assets“Other assets” mainly include software, intangible assets in progress and advances.

289

Separate Financial Statements at 31 December 2023
9. PROPERTY, PLANT AND EQUIPMENT

1 January 2022
Cost
Amortisation, depreciation and writeoffs
Carrying amount
Investments
Sales
Depreciation
Impairment losses
Other changes
31 December 2022
broken down as follows:
Cost
Amortisation, depreciation and writeoffs
Carrying amount
Investments
Sales
Depreciation
Impairment losses
Other changes
31 December 2023
broken down as follows:
Cost
Amortisation, depreciation and writeoffs
Carrying amount

Property, plant and equipment
Plant and
Other tangible
Equipmentmachinery
assetsLand andbuildings

Total

27

1,272

1,909

890

4,098

(22)

(1,026)(1,697)(561)(3,306)

5

246

212

329

792

(1)
2
6

13
(55)
33
237

45
(45)
28
240

202
(4)
(30)
(64)
433

260
(4)
(131)
(1)
916

28

1,316

1,995

1,024

4,363

(22)

(1,079)(1,755)(591)(3,447)

6

237

240

433

916

(2)
49
53

10
(1)
(56)
(3)
74
261

51
(52)
(10)
31
260

196
(15)
(31)
(1)
(176)
406

257
(16)
(141)
(14)
(22)
980

78

1,392

2,072

1,010

4,552

(25)

(1,131)(1,812)(604)(3,572)

53

261

260

406

980

The item showed an increase of €mil. 64 due to the new investments, net of the depreciation charges for theperiod, and as a result of investments in tangible assets under construction.
Investments in 2023 are mainly related to Aircraft for €mil. 54, Aerostructures for €mil. 66, DefenceElectronics & Security for €mil. 91 and Helicopters for €mil. 35.
The item “Other property, plant and equipment” includes also the amount of property, plant and equipment
under completion (€mil. 263 at 31 December 2023 and €mil. 272 at 31 December 2022).
Commitments for the acquisition of tangible assets were in place for €mil. 146 at 31 December 2023 (€mil.
162 at 31 December 2022).

290

Separate Financial Statements at 31 December 2023
10. RIGHT OF USE

1 January 2022
Cost
Amortisation, depreciation and write-offs
Carrying amount

Right of use of land andbuildings

Right of use
Right of use of othertangible assets

Total

782
(303)
479

64
(34)
30

846
(337)
509

New Contract submission
Closing and contract modifications
Depreciation
Other changes
31 December 2022

52
212
(109)
14
648

2
1
(14)
1
20

54
213
(123)
15
668

broken down as follows:
Cost
Amortisation, depreciation and write-offs
Carrying amount

892
(244)
648

61
(41)
20

953
(285)
668

New Contract submission
Closing and contract modifications
Depreciation
31 December 2023

12
21
(110)
571

6
4
(11)
19

18
25
(121)
590

broken down as follows:
Cost
Amortisation, depreciation and write-offs
Carrying amount

922
(351)
571

47
(28)
19

969
(379)
590

During 2023 this item decreased by €mil. 78 mainly due to amortisation for the period net of the signatureof new contracts and contractual changes.
The leases with a term of less than 12 months and those concerning assets of modest value were recognisedamong “costs for purchases” (Note 29)
At 31 December 2023 acquisition commitments were in place for short-term leases for €mil. 3 (€mil. 3 at 31
December 2022).

11. EQUITY INVESTMENTS

1 January
Acquisitions/subscriptions
Repayment of capital
Effect from Mergers/Demergers
Write-back/Write-down
Disposals
Other changes
31 December

31 December 2022
EquityRisk provisions
investments
7,684
(14)
2,446
10
(43)
1,322
(1)
(1,462)
(309)
9,638
(5)

Total
7,670
2,456
(43)
1,321
(1,462)
(309)
9,633

31 December 2023
EquityRisk provisions
investments
9,638
(5)
64
1
(171)
(32)
(73)
9,426
(4)

Total
9,633
65
(171)
(32)
(73)
9,422

Appendices no. 1 and 2 to these Notes provide, respectively, the changes that occurred in the year anddetailed information on equity investments showing the total of assets and liabilities, as required by IFRS 12.
291

Separate Financial Statements at 31 December 2023
The carrying amount of equity investments, if conditions obtain, is tested for impairment in order todetermine any possible loss in value. As mentioned, the carrying amount of individual equity investments ismainly tested by making reference to the relevant divisions; for any information on the procedures for the
performance of tests and any related information, reference should then be made to Note 4.6 of theConsolidated Financial Statements.
Among the changes that occurred during the period were the following transactions:•

Incorporation of the company CNBM Leonardo (Shanghai) Aereostructures Co., LTD., specializing in
the manufacturing of compound material parts and components in the civil aerospace sector. The
equity interest held by Leonardo is 30% for an amount of €mil. 28;•

A contribution to capital in favour of the company Polo Strategico Nazionale SpA for €mil. 11;•

The sales for the period, equal to €mil.73, related to the 100% sale to Leonardo companies of thefollowing equity investments:•−

AnsaldoBreda SpA, for €mil. 17, sold to the direct subsidiary Leonardo Partecipazioni SpA;−

Selex Es International Ltd sold to the direct subsidiary Leonardo International SpA for €mil. 56,
with the recognition at the same time of a reversal of €mil. 2 of previous impairments;

A repayment of capital, equal to €mil. 171, of Leonardo US Holding LLC (see Note 5);

Payments were also made to cover losses and on account of capital for a total amount of €mil. 24 in favourof the investee Industria Italiana Autobus SpA and subsequently written down in consequence of the losses
recorded in the period. It should be noted that the equity investment was classified among assets andliabilities held for sale after a negotiation was started for the related sale to third parties (Note 19).
The recoverability of the carrying amount of equity investments is verified, where the prerequisites are met,
including through impairment tests, from which no critical issues have emerged.
Finally, below is reported a comparison of the carrying amounts and the average market price of the listed
shares of Avio SpA and Hensoldt AG in December 2023:
Listedcompany

N° of shares
held

Avio SpA
Hensoldt AG

7,809,307
26,355,000

Stock price
Unit €

7.97
24.14

Book value

Total €mil.
62.2
636.1

Unit €
10.84
23.45

Unit Difference
Total
in €
Difference in
Total €mil.
€mil.
84.7
(2.9)
(22.5)
618.0
0.7
18.1

The difference related to the investee Avio SpA is not considered indicative of a permanent loss in value.
A breakdown of the changes in equity investments in 2023 is provided below:292

Separate Financial Statements at 31 December 2023
Company

Event

Month

CANARY BIT AB
VOLTA STRUCTURAL ENERGY S.R.L.
CNBM LEONARDO (SHANGAI) AEREOSTRUCTURES CO.,LTD.
CONSORZIO ELIS PER LA FORM PROFESS.SUP.SCRLCONSORZIO ERION PROFESSIONALCONSORZIO HYPERBUILDERS
FLYINGBASKET S.R.L
LEONARDO LOGISTICS SPAANSALDOBREDA S.P.A.
CONSORZIO ERION WEESELEX ES INTERNATIONAL LTD
LOGISTICA DIGITALE S.R.L.

acquisitionacquisitionacquisitionacquisitionacquisitionacquisitionacquisitionacquisition
disposaldisposaldisposaldisposalFebruary 2023
February 2023
April 2023
May 2023
July 2023
July 2023
May 2023
August 2023
May 2023
July 2023
August 2023
December 2023

Old name

New nameMonth

CONSORZIO LEONARDO SKILLS AND TRAININGLEONARDO TECHNICAL TRAINING

January 2023

Companies which changed their corporate name:

12. RECEIVABLES AND OTHER NON-CURRENT ASSETS
31 December 2022

Deferred grants under Law no. 808/85
Related parties receivables (Note 34)
Other non-current receivables
Non-current receivables

6
88
39
133

Prepayments - non-current portion
Non-recurring costs pending under Law no. 808/1985
Non-current assets

4
29
33

31 December 2023

6
130
39
175
2
29
31

Non-current receivables showed an increase of €mil. 42, mainly attributable to related parties, the details of
which are reported in Note 34.
Non-current assets decreased by €mil. 2 in relation to the part of accrued income.
The changes during the year and the composition of assets by maturity, currency and geographical area areshown in Appendices nos. 3, 4, 5 and 6 to these Notes.

13. INVENTORIES
31 December 2022
1,634
984
42
224
1,065
3,949

Raw materials, supplies and consumables
Work in progress and semi-finished goods
Finished goods and merchandise
Assets from contracts point in time
Advances to suppliers

Inventories showed an increase in the period equal to €mil. 238.
293

31 December 2023
1,810
1,152
47
233
945
4,187

Separate Financial Statements at 31 December 2023
Provisions for write-down are entered against the inventories to cover any obsolescence, slow-moving items
or if the entry value is higher than the net realizable value, for a total amount of €mil. 591 (€mil. 591 al 31
December 2022).
“Point-in-time contract assets” include production progress recorded on contracts that do not meet therequirements for the recognition of revenues on an over time basis.

14. CONTRACT ASSETS AND LIABILITIESContract assets (gross)
Liabilities from contracts
Contract assets (net)

31 December 2022
5,360
(2,979)2,381

31 December 2023
4,404
(2,039)2,365

Contract liabilities (gross)
Assets from contracts
Contract liabilities (net)

6,958
(207)
6,751

7,419
(208)
7,211

Contract assets, equal to €mil. 2,365 (€mil. 2,381 in 2022), included the net amount of work executed thatexceeded the advances received from customers. Similarly, contract liabilities, equal to €mil. 7,211 (€mil.
6,751 in 2022), included the opposite case.
This offsetting is performed only with regard to contract assets and liabilities and not to point-in-time
contract assets classified among inventories. If the progress payments and advances from customers havenot been collected at the reporting date, the corresponding amount is recognised as a receivable from
customers.
In 2023, the portion of revenues deriving from those exposures classified at the start of the period within
contract liabilities amounted to €bil. 2.5.

15. TRADE AND FINANCIAL RECEIVABLES

Receivables
Allowance for doubtful accounts
Related parties current receivables (Note 34)

31 December 2022
Trade
Financial
2,395
68
(407)
(19)
1,133
277
3,121
326

31 December 2023
Trade
Financial
2,602
33
(412)
(19)
1,438
507
3,628
521

The “Provision for bad debts” mainly includes the effects of the application of IFRS 9.
The composition of assets by currency and geographical area is shown in Appendices nos. 5 and 6 to these
Notes. The ageing of receivables together with an analysis of how the Company manages credit risk isreported under Note 35.

16. RECEIVABLES AND PAYABLES FOR INCOME TAXESAt 31 December 2023, income tax receivables and payables amounted to €mil. 60 (€mil.34 at 31 December2022) and €mil. 3 (€mil. 64 at 31 December 2022), respectively.
The direct taxes for the period are entered net of advances paid in the year.
294Separate Financial Statements at 31 December 2023
The changes during the year and the composition of assets and liabilities by currency and geographical area
are shown in Appendices nos. 5, 6, 8 and 9 to these Notes.

17. OTHER CURRENT ASSETS
31 December 2022
211
63
59
35
33
2
27
58
488

Derivatives
Prepaid expenses - current portion
Receivables for grants
Receivables from employees and social security
Indirect tax receivables
Deferred receivables under Law no. 808/85
Other related parties receivables (Note 34)
Other assets

31 December 2023
189
80
61
35
49
25
74
513

The item showed an increase on 2022 of €mil. 25 due to the increase in deferred expenses of €mil. 17 and inreceivables for indirect taxes for €mil. 16.
The breakdown of current assets from related parties is commented on in Note 34 .
The changes during the year and the composition of assets by currency and geographical area are shown inAppendices nos. 5 and 6 to these Notes.
The reduction in derivative assets of €mil. 22 is due to the decrease in volumes as well as to the fluctuationin the Euro/ US dollar exchange rate.
The table below shows the trend in the fair value of the derivative portfolio.

Interest rate swaps
Trading
Fair value hedge
Cash flow hedge

31 December 2022
AssetsLiabilities

Currency forward/swap/option
Trading
Fair value hedge
Cash flow hedge

Fair value at
Net

Assets31 December 2023
Liabilities

Net

30

(1)
-

(1)
30

18

(1)
-

(1)
18

21
160

(21)
(245)

(85)

3
168

(3)
(152)

16

The cash flow hedge is the forward instrument hedging trade items denominated in foreign currency.

18. CASH AND CASH EQUIVALENTS
At 31 December 2023, the balance of “Cash and cash equivalents”, equal to €mil. 1,791 (€mil. 1,040 at 31
December 2022), was mainly the result of the net cash flows realized by the Company’s divisions during theyear. Cash and cash equivalents at 31 December 2023 included €mil. 0.6 of term deposits (€mil. 5 at 31
December 2022).

295

Separate Financial Statements at 31 December 2023
19. ASSETS AND LIABILITIES HELD FOR SALE
At 31 December 2023, the item included the liabilities accruing for an amount of €mil. 40 for the expectedcharges deriving from the sale of the investment in Industria Italiana Autobus SpA that is due to occur in
2024.

20. EQUITY
31 December 2022
2,499
327
392
(60)
(58)
45
706
2,107
1,701
7,659

CapitalLegal reserve
Extraordinary reserve
Reserve for actuarial gains/(losses) in equity
Cash flow hedge reserve
Stock grant reserve
Merger/demerger surplus reserve
Retained earnings and other reserves
Net profit/(loss) for the period
Equity31 December 2023
2,499
412
392
(68)
(6)
54
706
3,640
784
8,413

The composition of the share capital is as follows and is unchanged compared to the prior period:
Number ofordinary shares
Outstanding shares
Treasury shares
31 December 2023

Par value578,150,395(2,843,120)
575,307,275

2,544
2,544

Costs incurred(net of tax
effect)
(19)
(26)
(26)
(19)

Treasuryshares value

Total
2,525
(26)
2,499

The share capital, fully subscribed and paid-up, is divided into 578,150,395 ordinary shares with a par valueof € 4.40 each, including no. 2,843,120 treasury shares.
At 31 December 2023 the Ministry of Economy and Finance owned around 30.204% of the share capital.
The reserve includes changes in fair value of derivatives used by the Company to hedge its exposure to
currency net of the effect of deferred taxes until the moment in which the “underlying position” isrecognised. When this condition is met, the reserve is recognised in the income statement to offset theeconomic effects of the hedged transaction. In accordance with the provisions of IFRS 9 governing hedge
accounting, the reserve also includes the fair value change in the forward component of forward contracts(premium points), taken to the income statement when the hedged item affects profit or loss.
The revaluation reserve includes the effects of the valuation of actuarial gains and losses with reference toseverance pay.
The breakdown of the equity items according to their origin, possible use and distributable portion, is shownin the following table:

296

Separate Financial Statements at 31 December 2023

Nature/descriptiom

Share capital (*)
Profit reserve:
Legal reserve
Extraordinary reserve
Reserve for actuarial gains/(losses) inequityCash flow hedge reserve
Stock grant reserve
Reserve for merger and demerger
surplusRetained earnings and other reserve
Total
Net profit/(loss) for the period

AmountPossible use

Available portion

2,499

412
392

B
A,B,C
B

(68)
(6)
54

392

318
136

A,B,C
A,B,C

706
3,495
4,593

141
595

A,B,C

745

B
B

706
3,640
7,629
784

Constraint ex art. 2426 paragraph 1
no. 5 Civil CodeTotal equity

Reserve subject todeferred taxation under
Article 110 of Legislative
Decree 104/2020(2,120)

8,413

3,218

(*) less treasury shares for € mil. 26 and costs for capital increase for € mil. 19(**) The tied-up amount of €mil. 141 as per tax requirement (Article 110 of Legislative Decree 104/2020) is allocated to the reserve for "Capitalgains from transactions under common control"Keys:
A: for capital increase
B: for loss coverage
C: for distribution to shareholders

21. LOANS AND BORROWINGS
31 December 2022
Non current
Current
Total
Bonds
1,592
36
1,628
Bank loans and borrowings
1,081
22
1,103
Lease liabilities
62
19
81
Lease liabilities from related parties (Note 34)
473
107
580
Other related parties loans and borrowings
158
2,229
2,387
(Note 34)
Other financial debts
59
26
85
3,425
2,439
5,864

31 December 2023
Non current
Current
Total
996
635
1,631
1,043
41
1,084
78
19
97
381
117
498
154

2,459

2,613

33
2,685

17
3,288

50
5,973

The item increased by €mil. 109 mainly as a result of the change in other related parties loans and borrowings,
the breakdown of which is shown in Note 34.
The main clauses that regulate the Company’s loans and borrowings are provided in the section on “Financial
Transactions” of the Report on Operations.
Below is the breakdown of loans and borrowings:

297

Separate Financial Statements at 31 December 2023
1 January
2022
Bonds
Bank loans and borrowings
Lease liabilities
Lease liabilities from related parties(Note 34)
Other related parties loans andborrowings (Note 34)
Other financial debts

2,208
1,648
100

Repayments/PayOther net increase
Exchange 31 December
ment of(decrease)differences2022
coupons
(556)
(24)
1,628
(546)
(1)
2
1,103
(19)
81

437

-

-

143

-

580

2,147
87
6,627

-

(152)
(1,254)

419
(2)
516

(27)
(25)

2,387
85
5,864

1 January
2023
Bonds
Bank loans and borrowings
Lease liabilities
Lease liabilities from related parties(Note 34)
Other related parties loans andborrowings (Note 34)
Other financial debts

NewborrowingsNewborrowings

1,628
1,103
81

Repayments/PayOther net increase
Exchange 31 December
ment of(decrease)differences2023
coupons
3
1,631
(19)
(1)
1
1,084
16
97

580

-

-

(82)

-

498

2,387

-

-

233

(7)

2,613

85
5,864

-

(19)

(35)
134

(6)

50
5,973

Below is the reconciliation of the financial liabilities with the cash flows from financing activities in 2023:
31 December 2022
6,627

31 December 2023
5,864

Changes included in cash flows from financing activities- Bond issue (Repayments)- Term loan and BEI Subscription- Net change in other borrowings
Non-monetary movements:- Non-monetary items of lease liabilities- Exchange rate effects- Accrued interest

(762)
(556)
(546)
340
(1)
49
(25)
(25)

69
(19)
88
40
44
(7)
3

Balance at 31 December

5,864

5,973

Balance at 1 January

Bonds
Below are the bonded loans in place and listed on the Luxembourg Stock Exchange:

298Separate Financial Statements at 31 December 2023
Year of issue

Maturity

Currency

2005
2017
2020

2025
2024
2026

€
€
€

Outstanding nominal
amuont (mil.)(*)
500
600
500

Annual coupon

Type of offer

4.88%
1.50%
2.38%

European institutional
European institutional
European institutional(*)Residual nominal amounts in case of issues subject to the buy-back transactions

The Company’s issues are governed by rules with standard legal clauses for these types of corporatetransactions on institutional markets that do not require any undertaking with regard to compliance withspecific financial parameters (financial covenants), but they do require negative pledge and cross-default
clauses. Based on negative pledge clauses, the Company is expressly prohibited from pledging collateral
security or other obligations to secure its debt in the form of bonds or listed financial instruments or financial
instruments that qualify for listing, unless these guarantees are extended to all bondholders. Exceptions tothis prohibition are securitization and, as from July 2006, the establishment of assets for the use indicated in
Article 2447-bis et seq. of the Italian Civil Code. On the contrary, the cross-default clauses give thebondholders the right to request early redemption of the bonds in their possession in the event of default by
the Company that results in a failure to make payment beyond pre-set limits.

Bank loans and borrowings
Bank loans and borrowings amounted to €mil. 1,084 and decreased by €mil. 19.
The item includes loan agreements entered into with the European Investment Bank (EIB) amounting to:−€mil. 200 subscribed in December 2020 and used in January 2021, maturity date 2033;−€mil. 300 subscribed in 2018, maturity date 2031.

Both loans have been raised to finance investment projects provided for in the Group’s Industrial Plan.
The item also includes the ESG-linked Term Loan facility raised and used in December 2021 equal to €mil.
600, with a duration of 5 years and maturity date at the beginning of 2027.

Related parties loans and borrowings
Related parties loans and borrowings included lease liabilities equal to €mil. 498 (€mil. 580 at 31 December2022) and other financial debts for €mil. 2,613 (€mil. 2,387 at 31 December 2022). The item comprised,among others, the loan agreement of €mil. 100 entered into in 2020 with Cassa Depositi e Prestiti (CDP)
aimed at co-financing some investment projects provided for in the Industrial Plan.
For a more detailed breakdown of related parties loans and borrowings, reference is made to Note 34 .

Other financial debts
The item includes the residual balance of subsidised loans, related to programmes and projects of thecompanies and business units merged.
Exposure to changes in interest rates of the financial liabilities is as follows:299

Separate Financial Statements at 31 December 2023

Bonds

Other related Lease liabilities
Bank loans and parties loans and from related
Other financial
Lease liabilities
borrowings borrowings (Note parties (Note
debts
34)
34)

Total

Other related Lease liabilities
Bank loans and parties loans and from related
Other financial
Lease liabilities
borrowings borrowings (Note parties (Note
debts
34)
34)

Total

31 December
floating fixed floating fixed floating
fixed floating fixed floating fixed floating fixed floating fixed2022
Within 1 year
36
22
2,286
1
107
19
26
- 2,334 163
2 to 5 years- 1,592
749
62
100
362
36
59
908 2,052
Beyond 5
131
139
111
26
131 276years
Total- 1,628
902
201
2,386
1
580
81
85
- 3,373 2,491

Bonds

31 December
floating fixed floating fixed floating
fixed floating fixed floating fixed floating fixed floating fixed2023
Within 1 year
635
40
1
2,459
117
19
17
- 2,516 772
2 to 5 years
996
748
88
154
333
47
33
935 1,464
Beyond 5
years
94
113
48
31
94 192
Total- 1,631
882
202
2,613
498
97
50
- 3,545 2,428********
Below is the financial information prepared in accordance with the scheme required under CONSOB
communication DEM/6064293 of 28 July 2006 and updated in accordance with the ESMA guidelines 32-3821138 of 4 March 2021 as implemented in the CONSOB warning notice no. 5/21 of 29 April 2021.
31 December 2022
(1,040)(1,040)31 December 2023
(1,791)(1,791)

E - Current financial debt (*)
F - Current portion of non-current financial debt

2,077
36

2,133
635

G - Current financial debt

2,113

2,768

H - Net current financial debt (funds)

1,073

977

I - Non-current financial debt (*)
J - Debt instruments (**)
K - Trade payables and other non-current liabilities
L - Non-current financial debt

3,425
19
170
3,614

2,685
6
212
2,903

M - Total financial debt

4,687

3,880

A - Cash
C - Other current financial assets
D - Liquidity(*) Includes leasing payables for € mil. 595, of which € mil. 136 current (€ mil. 661 at 31 December 2021, of which € mil. 126 current)(**) Includes the fair value of foreign exchange derivatives hedging debt items

Based on current interpretations, the item “Trade payables and other non-current payables” of the abovesaid
scheme includes the value of payables for grants received from MEMIT for the development of programmes
300Separate Financial Statements at 31 December 2023
not related to national security eligible for benefits under Law 808/1985, even though such value is not, by
its very nature, a financial caption.
The reconciliation between Net Financial Debt and Group Net Debt, used as KPI, is as follows:Note
Net financial debt com. CONSOB no. DEM/6064293
Non-current payables to MEMiT (Law 808/1985)
Non current financial receivables from Group's consolidated entities
Net debt (KPI)

301

24

31 December 2022
4,687
(170)
(75)
4,442

31 December 2023
3,880
(212)
(113)
3,555

Separate Financial Statements at 31 December 2023
22. PROVISIONS FOR RISKS AND CHARGES AND CONTINGENT LIABILITIES

1 January 2022
Current
Non current

Effect from
Mergers/Demergers
Allocations
Uses
Reversals
Other changes
31 December 2022
Broken down as follows:
Current
Non current

Allocations
Uses
Reversals
Other changes
31 December 2023
Broken down as follows:
Current
Non current

Guarantees
given

Restructuring

Product
Contracts
Other
guarantees (final losses) provisions

Penalties

Total

35
35

48
62
110

8
6
14

138
84
222

242
242

379
346
725

850
498
1,348

-

-

-

-

-

-

-

2
(1)
(14)
(1)
21

97
(32)
(7)
168

1
(4)
11

81
(14)
(48)
241

67
(126)
76
259

303
(14)
(174)
(76)
764

551
(61)
(366)
(8)
1,464

21
21

39
129
168

7
4
11

161
80
241

259
259

299
465
764

786
678
1,464

(1)
1
21

38
(33)
(4)
2
171

3
(1)
1
14

59
(17)
(36)
(1)
246

58
(115)
22
224

228
(19)
(43)
(96)
834

386
(70)
(199)
(71)
1,510

21
21

64
107
171

9
5
14

182
64
246

224
224

304
530
834

804
706
1,510

The amount of the provisions for risks showed an increase of €mil.46 compared to the previous year.
“Other provisions for risks and charges” mainly include:•

the provision for tax disputes of €mil. 67 (€mil. 61 at 31 December 2022), of which new accruals toprovisions for €mil. 10;•

the provision for litigation with employees and former employees of €mil. 14 (€mil. 18 at 31
December 2022) of which new accruals to provisions for €mil. 2;•

the provision for critical issues on contracts equal to €mil. 404 (€mil. 380 at 31 December 2022), of
which new accruals to provisions for €mil. 62.

The provision for “restructuring” showed an increase of €mil. 3 and includes the effects of the early
retirement schemes under Article 4 of Law 92/2012 (Fornero Act), provided for in the agreement signed with
the national trade unions in 2023.
With regard to risks, below is a summary of the criminal proceedings that are currently underway against
Leonardo SpA, and certain former directors and executives, concerning acts committed during theperformance of their duties at the Company. With specific reference to the events that occurred in 2023 andin early 2024:•

On 22 May 2019 the Supreme Court rejected the appeals submitted against the judgment wherebyon 8 January 2018 the Milan Court of Appeal had acquitted the former Chairman and Chief Executive302

Separate Financial Statements at 31 December 2023
Officer of Leonardo and the former Chief Executive Officer of AgustaWestland SpA of the charges forthe crimes under Articles 110, 112, paragraph 1, 318, 321 and 322-bis, paragraph 2(2) of the Italian
Criminal Code and Article 2 of Legislative Decree 74/2000, within the proceedings brought in relation
to the supply of twelve AW 101 VIP/VVIP helicopters to the Indian Government.
In respect of these companies, it is recalled that on 25 July 2014, pursuant to Article 58 of Legislative
Decree 231/2001, the Public Prosecutor dismissed the proceedings against Leonardo, holding
groundless, following the conclusion of investigations, the Company’s involvement from both afactual and legal point of view. The Prosecutor also acknowledged that since 2003 the Company has
adopted, actually implemented and regularly updated an Organisational, Management and Control
Model that is conceptually suitable to prevent offences like the one in question and is also focusedon compliance processes as to guarantee adequate standards of fairness and ethical conduct. In
addition, on 28 August 2014 the Judge for Preliminary Investigations (GIP, Giudice delle Indagini
Preliminari) of the Court of Busto Arsizio – in granting the motions put forth by the companies –imposed administrative penalties pursuant to Article 63 of Legislative Decree 231/2001 and Article
444 and ff. of the Italian Code of Criminal Procedure, amounting to €80,000 for AgustaWestland SpAand €300,000 for AgustaWestland Ltd, and ordered the confiscation of the equivalent of €mil. 7.5. In
this regard, on 20 April 2021 the Court of Appeal of Brescia, following the requests by
AgustaWestland SpA and AgustaWestland Ltd for the review of the abovementioned rulings, revoked
the rulings challenged and acquitted the abovesaid companies. Since times for a possible appeal to
the Supreme Court expired, the ruling became definitive.
As regards the investigations started by the Indian Judicial Authority (CBI) in February 2013 for thesame facts referred to above, on 2 February 2018 a notice was served on AgustaWestland
International Ltd., whereby the latter was invited to appear at the hearing to be held on 30 May 2018
before the Rouse Avenue Court in New Delhi within the criminal proceedings brought therein against
the aforesaid company and other entities and persons, including Leonardo SpA.
On 13 April 2018 the Milan Public Prosecutor’s Office served the abovementioned notice of invitation
to appear at the hearing on 30 May 2018 on Leonardo SpA. The Company submitted an applicationfor enforcement review before the Judge for Preliminary Investigations (GIP) of the Court of Milan,
which was rejected on 22 May 2018, as well as an appeal before the Lazio Regional Administrative
Court. The Company also took the same legal actions with respect to the service of the notice ofinvitation to appear in court at the hearing on 10 September 2018. By a judgment dated 3 July 2019,
the Lazio Regional Administrative Court rejected the appeals submitted by Leonardo Spa; theCompany then filed an appeal against the abovementioned measures. By a judgment dated 7 May
2020 the Council of State granted the appeals submitted by Leonardo.
Leonardo SpA has brought the same lawsuits before the administrative Court and before the Judgefor Preliminary Investigations of the Court of Milan, including with reference to the services of noticeof invitation to appear at the hearings set on 18 September 2019 and 18 December 2019. The Lazio
Regional Administrative Court, by judgment dated 24 September 2021, rejected the appeals
submitted by Leonardo. The Company filed an appeal with the Council of State, which, by judgment
handed down at a plenary meeting on 6 December 2022, granted the appeal filed by Leonardo,
annulling the orders issued by the Ministry of Justice.
With regard to objecting to the execution of a judicial measure, the Judge of Preliminary
Investigations of the Court of Milan granted the claims submitted by Leonardo by an order filed on
22 March 2022 while revoking the decrees whereby the notifications had been ordered by the Milan
Public Prosecutor's Office.
303

Separate Financial Statements at 31 December 2023
On the contrary AgustaWestland International Ltd appeared at the hearings set within theproceedings brought by the Central Bureau of Investigation (CBI) and the proceedings are continuing.
On 28 August 2019 the Public Prosecutor’s Office of Milan served on Leonardo SpA a notice ofinvitation to appear at the hearing of 18 September 2019 within further proceedings brought by the
Indian Judicial Authority (Directorate of Enforcement) in relation to the supply of 12 AW 101 VIP/VVIP
helicopters to the Indian Government. The Company submitted an application for enforcement
review before the Judge for Preliminary Investigations of the Court of Milan, as well as an appeal with
the Lazio Regional Administrative Court, even in relation to this notice. The Lazio Regional
Administrative Court, by the same judgment of 24 September 2021, rejected the appeal submitted
by Leonardo which filed an appeal with the Council of State. The latter granted the appeal submitted
by Leonardo by a judgment handed down at a Plenary Meeting on 6 December 2022. With regard to
objecting to the execution of a judicial measure, the Judge of Preliminary Investigations of the Courtof Milan revoked, in the same order of 22 March 2022, the decree whereby the notification had beenordered by the Milan Public Prosecutor's Office.
Finally, it should be noted that on 11 February 2020 a notice was served on AgustaWestland
International Ltd whereby it was invited to appear in court within the proceedings brought by the
Directorate of Enforcement.
The proceedings initiated by the Indian Authorities (CBI and Directorate of Enforcement) arecurrently pending in the preliminary stage before the Rouse Avenue Court New Delhi.
•

On 6 June 2023 a search and seizure warrant was executed against the former Chief Executive Officer
of Leonardo SpA, who terminated his office on 9 May 2023. The warrant was issued as part of theproceedings, conducted by the Public Prosecutor’s Office with the Court of Naples, where the former
Chief Executive Officer is under investigation for the crime under articles 110, 61 bis, 322 bis para. I
and II, no. 2 of the Italian Criminal Code in relation to the supply of the Company’s products to
Colombia;•

On 20 September 2023 Leonardo SpA, during the preliminary hearing, entered an appearance in thecivil action within the criminal proceedings pending before the Court of Gorizia, in which are involved,
inter alia, certain former directors of the then Ansaldo Componenti SpA, the then Ansaldo SpA andthe then Ansaldo Industria SpA, in office in the period between 1979 and 1991, charged with having
committed the crimes under Articles 589 paragraphs 1, 2 and 4, 40 and 41 of the Italian Criminal
Code for violation of the rules governing the prevention of occupational diseases, and in particular
Article 2087 of the Italian Civil Code, Presidential Decree 547/55 and Presidential Decree 303/56. The
proceedings are at a trial stage still pending before the Court of Gorizia.

Based upon the information gathered and the results of the analysis carried out so far, the Directors of
Leonardo did not allocate any specific provisions in relation to these cases. Any negative developments which cannot be foreseen, nor determined to date - arising from any internal investigations or judicial
investigations being conducted, will be subject to consistent assessment for the purposes of provisions (ifany).
********
With regard to the provisions for civil, tax and administrative disputes, it is underlined that the Company’s
operations regard industries and markets where many disputes, both as petitioner and plaintiff, are settled
only after a considerable period of time, especially in cases where the customer is a government entity.
Pursuant to the IFRSs, provisions have only been set aside for risks that are deemed probable and for which
the amount can be determined. No specific provisions have been set aside for certain disputes in which the304Separate Financial Statements at 31 December 2023
Company is defendant as these disputes are reasonably expected to be settled, based on current knowledge,
satisfactorily and without significantly impacting the Company. Of particular note are the following disputes:•

the proceedings brought by Firema under extraordinary management before the Court of Naples
against the directors; and statutory and independent auditors of Firema Trasporti (General Register32257/13) in order to have them declared responsible for the financial collapse caused to thecompany, who then summoned Leonardo and AnsaldoBreda requesting for direct compensation infavour of the plaintiff for the damages that should be ascertained (presumptively at €mil. 262, equal
to Firema’s statement of liabilities).
As to the action brought by GMR against Leonardo and AnsaldoBreda due to abuse of economic
dependence before the Court of Naples (General Register 16312/15), at the hearing held on 1
October 2020 the President of the Division first pointed out some issues connecting the twoproceedings and then referred the present case before the judge of the proceedings under General
Register 32257/13 in order for the proceedings to be possibly joined.
In both proceedings Leonardo and AnsaldoBreda appeared before the court requesting that, on the
merits, the claims submitted against them be dismissed as clearly groundless as of fact and as ofright.
It should be noted that, within these proceedings, the plaintiff states that Firema Trasporti wasallegedly subject, during the period in which Leonardo held an investment in it (from 1993 to 2005),
to management and coordination activities that were carried out to its detriment and in the soleinterest of the Leonardo Group and that, even after the sale of the aforesaid investment, Firema
Trasporti was allegedly de facto subjected to an abuse of economic dependence from theabovementioned Leonardo Group in performing the various agreements existing with AnsaldoBreda.
Following the reservation taken at the hearing on 19 October 2023, the Court (i) ordered the joinderof the aforementioned proceedings, and (ii) admitted a technical ascertainment/accounting audit inorder for the expert to analyze the corporate events concerning the company subsequently
subjected to Extraordinary Management and verify whether statutory auditors and directors acted
in a proper manner. The Court-appointed expert took an oath at the hearing held on 7 December
2023 and technical experts were appointed by the parties.
By an order dated 18 December 2023, the Court, having read the briefs pursuant to Article 101,
paragraph 2, of the Italian Code of Civil Procedure and the written discussion notes filed by theparties, noted that, in an application filed on 6 December 2023, the defence counsels to Giorgio Fiore
had "submitted objections concerning the expiry of the proceedings due to the fact that Firema
under extraordinary management had joined the criminal proceedings Rg. (General Register) no.
21567/10/2021 as an aggrieved party to recover damages on the assumption that the latter,although it declared (in order to avoid effects on the ongoing civil action) that it had appeared withregard only to item D), had also specifically dealt with item C) during the pre-trial investigation", and,
therefore, set the hearing on 24 January 2024 for the relevant discussion. At this hearing, the Court
asked the attorneys to inform the Court of whether there would be the possibility of pursuing asettlement agreement in relation to any individual situations and positions and, for this purpose, set
the hearing on 14 March 2024 for possibly submitting a settlement proposal.
As a result, the technical ascertainment was suspended.

•

the proceedings brought by Mr. Pio Deiana (to have a deed of settlement entered into with former
Ansaldo Industria declared null and void) before the Rome Court of Appeal, which had beensuspended following Mr. Deiana’s death and then resumed by his sister. During the proceedings, theexistence of another heir of the deceased person was ascertained; accordingly, at the last hearing305

Separate Financial Statements at 31 December 2023
held on 26 October 2022, the Court declared the latter's contumacy and set the final hearing on 18
December 2024.
********
Moreover, given their complexity, their cutting-edge technological content and the nature of the customers,
the Company’s long-term contracts are sometimes affected by disputes with customers in relation to thecompliance of works with customer specifications and product performances. The Company adjusts theestimated contract costs for foreseeable issues, also taking into account the possible developments in therelevant disputes. With regard to contracts in progress affected by uncertainties and issues under discussion
with customers, there are:•by a request for arbitration filed on 25 October 2019, Leonardo S.p.a. and PSC S.p.A. (collectively
referred to as “LP” unincorporated joint venture,) initiated arbitration proceedings against Galfar
Misnad Engineering & Contracting W.L.L., Salini-Impregilo S.p.A. (now Webuild) and Cimolai S.p.A.
(collectively referred to “GSIC” unincorporated joint venture) to seek an order imposing them to pay,among others, the outstanding amounts and all the additional costs relating to the subcontract
entered into between the parties on 22 September 2016, whereby GSIC appointed LP to provide
supplies and carry out certain manufacturing operations. These electrical, mechanical and plumbing
plant engineering works are included in the general contract, awarded to GSIC, for the design andconstruction of the Al Bayt Stadium in Al Khor City (Qatar). The regular progress of the subcontracted
works was strongly affected by a number of delays not attributable to LP, as well as by numerous
additions and variations to the works that had been initially agreed and the shortcomings of thetechnical documentation prepared by GSIC. On the other hand, the latter submitted allegations tothe contrary, while also charging LP with having caused damages to its organisation. In this context,
on a preliminary basis LP asked the court to order GSIC to pay the remaining amounts provided by
the subcontract, as well as any and all additional costs incurred, for a total of approximately QAR mil.
1,500 (about €mil. 388 at 17 February 2023). On the other hand, GSIC contested each and every
charge and asked the court, as a counterclaim, to order LP to compensate for any damage the latter
had allegedly caused, for a total of QAR mil. 721 (approximately €mil. 186 at 17 February 2023).
On 6 October 2023 the Court of Arbitration issued the award ordering GSIC to pay LP a net amountof approximately €mil. 146.5; on 7 March 2024 this amount was modified by the granting of thepetition for correction of the award filed by LP for an additional amount of approximately €mil. 11..

•

with reference to the request for termination for default due to alleged delays and non-compliant
products formalised during 2022 by the governmental Norwegian Defence Materiel Agency (NDMA)
under the contract for the supply of 14 NH90 helicopters entered into with NH Industries (NHI, whose
shareholders are Leonardo, Airbus Helicopters and Fokker Aerostructure), the parties started a
mediation process in April 2023, which should be completed in the next months. The NHI position,
confirmed by Leonardo, is unchanged compared to what was reported in the financial statements asof 31 December 2022, considering this request to be legally ungrounded and reasonably disputablein the appropriate forum due to a lack of factual and legal basis and misinterpretation of the contract
and Norwegian law, as well as due to a breach of confidentiality obligations. As noted above, in April
2023, the customer and NHI initiated a mediation procedure in an attempt to reach a mutuallysatisfactory agreement. In the period from October 2023 to February 2024, the parties exchanged
significant claims and counterclaims and took steps to file deeds and documents required under the
mediation procedure; the hearing before the mediators is scheduled for the second half of March
306

Separate Financial Statements at 31 December 2023
2024. At this stage of the mediation neither NHI nor Leonardo considers that it should change its
position.

23. EMPLOYEE BENEFIT OBLIGATIONS
31 December 2022
208
38
246

Severance pay provision
Defined contribution plans

31 December 2023
191
41
232

The severance pay provision showed a reduction essentially due to early retirements under art. 4 of Law
92/2012 (Fornero Act).
The amount of the costs related to employee benefit obligations, which was recognised during the year underfinancial expense, is equal to €mil. 7 (€mil.2 at 31 December 2022).
Below are the changes in the severance pay:
Opening balance
Net interest expense
Remeasurement
Actuarial losses (gains) through equity - financial assumptions
Actuarial losses (gains) through equity resulting from adjustments based on theexperience
Benefits paid
Other changes
Closing balance

31 December 2022
239
2
(10)
(25)
15

31 December 2023
208
7
7
3
4

(27)
4
208

(31)
191

It should be noted that the portion of cost for the year relating to amounts transferred to pension funds or
to a treasury fund managed by INPS is recognised according to the rules for defined-contribution plans,
without any actuarial assessment.
The main actuarial assumptions used in the valuation of defined-benefit plans and of the portion of theseverance pay that has maintained the nature of defined-benefit plan are as follows:
31 December 2022
3.7%
2.2%

Discount rate (annual)
Inflation rate

31 December 2023
3.3%
2.0%

The sensitivity analysis for each significant actuarial assumption, which shows the effects on bonds inabsolute value, is as follows:

Discount rate (annual)
Inflation rate

31 December 2022
-0.25%+0.25%
2(2)

The average duration of the severance pay is four years.

307

(2)
2

31 December 2023
-0.25%+0.25%
2
(1)

(2)
1

Separate Financial Statements at 31 December 2023
24. OTHER NON-CURRENT AND CURRENT LIABILITIESEmployee obligations (*)
Deferred income
Amounts due to social security institutions
Payables to MEMiT (Law no. 808/85)
Payables to MEMiT for monopoly costs (Law no.
808/85)
Indirect tax liabilities
Derivatives
Other payables to related parties (Note 34)
Other liabilities

31 December 2022
Non current
Current
41
367
122
124
195
170
-

31 December 2023
Non current
Current
39
386
132
133
192
212
1

185

45

209

21

157
58
733

88
267
81
246
1,413

152
19
763

83
156
128
212
1,312

(*) Non-current item includes other employee benefits related to seniority bonuses

The item decreased by €mil. 71 compared to 2022 in particular due to the decrease in derivative liabilitiesfor €mil. 111, determined by the reduction in volumes as well as by the fluctuation in the Euro/US Dollar
exchange rate.
“Deferred income” includes subsequent years rentals already collected in past years in relation to theagreements for the sale of “Ansaldo” trademark, royalties and grants collected.
The payables to the Ministry of Enterprises and Made in Italy (MEMiT) under Law 808/1985 relate tomonopoly costs accrued on national security and similar projects, as well as payables for grants received from
MEMiT for the development of programmes not related to national security and similar projects eligible forbenefits under Law 808/1985.
The breakdown of other payables to related parties includes payables deriving from the Group tax
consolidation mechanism recorded by the Company for €mil. 83. The breakdown is shown in Note 34 .
“Other liabilities” refer in particular to contractual agreement and penalties for €mil. 91 and to commissions
and royalties for €mil. 35.
The changes recorded during the year and the composition of liabilities by maturity, currency andgeographical area are shown in Appendices nos. 7, 8 and 9 to these Notes.

25. TRADE PAYABLES
31 December 2022
1,808
667
2,475

Suppliers
Trade payables to related parties (Note 34)

26. GUARANTEES AND OTHER COMMITMENTS
At 31 December 2023 the Company had in place the following guarantees:308

31 December 2023
1,976
826
2,802

Separate Financial Statements at 31 December 2023
31 December 2022
3,782
8,101
1,732
13,615

Guarantees in favour of related parties (Note 34)
Guarantees in favour of third parties
Guarantees given to third parties
Unsecured guarantees given

31 December 2023
4,211
8,467
1,827
14,505Specifically, the main guarantees issued consist of:•bank and insurance sureties in favour of third-party companies for an amount of €mil. 8,467 (€mil.
8,101 at 31 December 2022);•

bank and insurance counter-guarantees issued in the interest of related parties for €mil. 1,797 (€mil.
1,200 at 31 December 2022);•

direct commitments issued by the Company in favour of tax authorities, customers and co-suppliers(Parent Company Guarantee) for €mil. 1,825 (€mil. 1,730 at 31 December 2022), in favour of relatedparties for €mil. 2,414 (€mil. 2,582 at 31 December 2022) and in favour of other companies for €mil.
2 (€mil. 2 at 31 December 2022).

In addition to the above commitments, the Company issued non-binding letters of patronage on behalf ofsubsidiaries and certain associates in support for their commercial activities.

27. REVENUES
Revenue from contracts with customers
Change in contract assets
Revenue and change in contract assets from related parties (Note 34)
Total revenues

2022

6,640
291
2,625
9,556

2023

8,075
(1,012)
2,874
9,937

The performance in terms of revenues by business sector at Group level is commented on in the Report on
Operations.
Below is the breakdown of revenue by timing of reporting:
2022

Revenues recognized at point in time
Revenues recognized over time
Total

1,429
8,127
9,556

2023

1,639
8,298
9,937

Revenues were realized in the following geographical areas:
2022

Italy
United Kingdom
Rest of Europe
United states of America
Rest of the world

309

2,060
389
2,619
1,159
3,329
9,556

2023

2,649
297
3,239
1,194
2,558
9,937

Separate Financial Statements at 31 December 2023
28. OTHER OPERATING INCOME (EXPENSES)

Grants for research and development costs (*)
Other operating grants
Gains/losses on sales of intangible asset, property, plantand equipment
Reversals/accruals to provisions for risks
Exchange rate difference on operating items
Insurance reimbursements
Indirect taxes
Other operating income (expenses)
Other operating income (expenses) from related parties(Note 34)

Income26
42022
Expenses

-

Net

26
4

Income35
142023
Expenses

-

Net

35
14

2

-

2

-

-

-

360
155
3
69

(439)
(163)
(9)
(43)

(79)
(8)
3
(9)
26

185
133
40
41

(280)
(123)
(9)
(50)

(95)
10
40
(9)
(9)

10

-

10

21

(1)

20

629

(654)

(25)

469

(463)

6

(*) To which must be added "Deferred non-current and current receivables for measures under Law 808/1985” (Note 12 and Note 17
respectively) equal to €mil. 17 (€mil. 5 at 31 December 2022). In 2023 there were no assessments for "Non-recurring costs formeasures pending under Law 808/85” (Note 12) (€mil. 15 at 31 December 2022).

Other income, net of operating expenses, at 31 December 2023, increased by €mil. 31 compared to theprevious year. The main changes involved the use of and accruals to provisions for risks. In particular:•

the product warranty provision for an accrual of €mil. 59 and reversals of €mil. 36;•

the provision for onerous contracts (final losses) for an accrual of €mil. 58 and reversals of €mil. 115;•

the provision for critical issues on contracts for an accrual of €mil. 62 and reversals of €mil. 9.

310

Separate Financial Statements at 31 December 2023
29. PURCHASE AND PERSONNEL EXPENSES
2022

2023

Purchase of materials from third parties
Change in inventories of raw materials
Costs for purchases from related parties (Note 34)
Purchases

2,365
(77)
1,340
3,628

2,826
(176)
1,181
3,831

Services rendered by third parties
Costs of leases
Royalties
Services rendered by related parties (Note 34)
Services

2,110
59
24
822
3,015

2,290
55
12
932
3,289

Wages and salaries
Social security contributions
Costs related to defined-contribution plans
Employee disputes
Restructuring costs - net
Other personnel expenses net of cost recovery
Personnel expenses

1,574
457
116
(4)
108
18
2,269

1,665
483
116
(3)
48
5
2,314

Change in finished goods, work in progress and semi-finished products

(62)

(181)

Internal work capitalised

(176)

(187)

Total purchases and personnel expenses

8,674

9,066

The item increased by €mil. 392 essentially for the acquisition of materials and services related to the increase
in revenues.
Personnel expenses showed an increase by €mil. 45 related to the average workforce at 31 December 2023,
equal to 30,353 units, which showed an increase of 561 units compared to 2022.
The figure related to the average workforce is affected by the presence of part-time employees andpersonnel that took extended leave.
The figure of total workforce at 31 December 2023, equal to 31,255 units, showed an increase of 798 units
compared to 2022.
Below is the breakdown of workforce by category:

Senior managers (*)
Middle managers
Clerical employees
Manual labourers (**)
Total

Average Workforce
31 December
31 December
2022
2023
834
848
3,493
3,526
17,907
18,792
7,558
7,187
29,79230,353

Change
14
33
885
(371)
561

(*) Includes pilots(**) Includes senior manual labours

311

Total Workforce
31 December
31 December
2022
2023
875
829
3,642
3,469
18,573
19,7797,367
7,178
30,45731,255

Change
(46)
(173)
1,206
(189)
798

Separate Financial Statements at 31 December 2023
30. AMORTISATION, DEPRECIATION AND FINANCIAL ASSETS VALUE ADJUSTMENTS
2022

Amortisation of intangible assets
Development costs
Non-recurring costs
Acquired through business combinations
Concessions, licenses and trademarks
Other intangible assets

30
63
2
24
25

Depreciation of property, plant and equipment and investment properties
Depreciation of right of use
Impairment of other assets
Financial assets value adjustments
Contract assets and liabilities
Operating receivables
Other financial assets

(3)
16
69

144

131
123
23
82

2023

134

20
53
2
30
29

141
121
45
25

4
(1)
22

503

466

Amortisation, depreciation and financial assets value adjustments showed a decrease of €mil. 37 compared
to 2022. Financial assets value adjustments refer to evaluations periodically carried out in order to assess therecoverability of the financial assets recognised in the separate financial statements, in compliance with theprovisions of IFRS 9 on impairment.

31. FINANCIAL INCOME AND EXPENSEInterest to/from banks
Interest on lease liabilities
Interest and other charges on bonds
Commissions
Dividends
Premiums (paid) received on IRS
Premiums (paid) received on forwards
Value adjustments on equity investments
Fair value gains (losses) through profit or loss
Exchange rate differences
Financial income (expense) - related parties (Note 34)
Other financial income and expense

2022
Expenses
2
(19)
(2)
(50)
(10)
269
(4)
35
(56)
1,330
(44)
25
(5)
38
(44)
15
(31)
19
(52)
1,733
(317)

Income

Net

(17)
(2)
(50)
(10)
269
(4)
(21)
1,286
20
(6)
(16)
(33)
1,416

2023
Income Expenses
27
(39)
(3)
(49)
(10)
730
6
39
(45)
2
(91)
19
(12)
29
(33)
19
(104)
11
(39)
882
(425)

Net

(12)
(3)
(49)
(10)
730
6
(6)
(89)
7
(4)
(85)
(28)
457

Income net of financial expense amounted to €mil. 457 (€mil. 1,416 at 31 December 2022) and decreased by€mil. 959, compared to 2022. The change is mainly attributable to the value adjustment of the equity
investments that included in 2022, the write-back for €mil. 1,290 of Leonardo US Holding LLC. Moreover, thisitem comprises total charges, for €mil. 57, linked to the negotiations underway for the sale of the equity
investment in Industria Italiana Autobus SpA, in addition to the write-down of the same investment for €mil.
24 performed as a result of the recapitalizations which became necessary given the losses for the period
recognised by the investee.
Dividends, equal to €mil. 730, increased by €mil. 461 compared to 31 December 2022. The increase isattributable to the dividend paid in 2023 by Leonardo UK for €mil. 464, not assigned in 2022.
The breakdown of income and expense from/to related parties is shown in Note 34.
312Separate Financial Statements at 31 December 2023
Fair value results through profit or loss are as follows:

Ineffective portion of hedging swap
Gains (charges) on FVTPL

2022
Income Expenses
24
(5)
1
-

Net

19
1

2023
Income Expenses
19
(12)
-

Net

7
-

32. INCOME TAXES
Income taxes can be broken down as follows:
2022

IRES (corporate income tax)
IRAP (reg. tax on production)
Tax related to previous periods
Provisions for tax disputes
Deferred tax - net
Other taxes
Total income taxes

(52)
(32)
(13)
(12)
41
(1)
(69)

2023

(83)
(23)
1
(6)
31
(4)
(84)

Below is an analysis of the composition of the theoretical and effective tax rates for 2023 and 2022:
2022

Profit (loss) before income taxes

1,769

2023

868

Tax rate

3.9%

9.7%

Theoretical tax
Permanent differences
Dividends
Reversal (Impairment) of equity investments
IRAP tax
Net deferred tax assets
Registration of deferred tax assets on tax losses
Tax provision
Other taxes
Total tax through profit or loss

(425)
(1)
61
317
(32)
13
5
(12)
5
(69)

(208)
(2)
163
(22)
(23)
1
19
(6)
(6)

Theoretical tax
Permanent differences
Timing differences
Unrecognised tax consolidation benefit
Dividends
Revaluations of equity investments
Reversal (Impairment) of equity investments
IRAP tax
Net deferred tax assets
Registration of deferred tax assets on tax losses
Tax provision
Other taxes
Total tax

24.0%
(0.1%)
n.a.
n.a.
3.4%
n.a.
17.9%
(1.8%)
0.7%
0.3%(0.7%)
0.3%(3.9%)

24.0%(0.2%)
n.a.
n.a.
18.8%
n.a.
(2.5%)(2.6%)
0.1%
0.3%(0.7%)(0.7%)(9.7%)The effective tax rate went from (3.9%) in 2022 to (9.7%) in 2023.
313

(84)

Separate Financial Statements at 31 December 2023
It should be noted that a portion of deferred tax assets related to tax losses. In this regard, during the year
they were written off with a reversal through profit or loss for €mil. 5 and new deferred tax assets of €mil.
19 were recognised against tax losses on the basis of the prospective recoverability vis-à-vis the taxable
profits envisaged by the business plans, in the context of the national tax consolidation scheme. At the endof the year, there were no losses which had not been measured for the Company.
Deferred taxes and related receivables and payables at 31 December 2023 were the result of the following
differences:
2022

Deferred tax assets on tax losses
Property, plant and equipment and intangible assets
Provision for risks and impairment
Other
Deferred taxes recognised through profit or loss

Deferred tax assets on tax losses
Property, plant and equipment andintangible assets
Provision for risks and impairment
Other
Deferred taxes recognised through balance
sheet
Cash-flow hedge derivatives
On actuarial gains and losses
Deferred taxes recognised through equity

31 December 2022
Financial statement
AssetsLiabilities
5
-

Net

(59)
(7)
58
49
41

2023

31 December 2023
Financial statement
AssetsLiabilities
19
-

5

14
(4)
13
8
31

Net

19

22

(26)

(4)

22

(30)

(8)

588
177

(38)

588
139

601
184

(37)

601
147

792

(64)

728

826

(67)

759

38
11
49
841

(19)
(4)
(23)
(87)

19
7
26
754

28
11
39
865

(25)
(4)
(29)
(96)

3
7
10
769

33. CASH FLOWS FROM OPERATING AND INVESTING ACTIVITIESNet result
Amortisation, depreciation and financial assets value adjustments
Income taxes
Net allocations to the provisions for risks and inventory write-downs
Net financial expense /(income)
Other non-monetary items

2022

1,701
503
69
278
(1,416)
(1)
1,134

2023

784
466
84
227
(457)
31
1,135

The changes in working capital are as follows:2022

Inventories
Contract assets and liabilities
Trade receivables and payables

314

232
206
(488)
(50)

2023

(227)
377
(196)
(46)

Separate Financial Statements at 31 December 2023
The changes in other operating assets and liabilities are as follows:2022

Payment of pension plans
Changes in provisions for risks and other operating items

(27)
(74)
(101)

2023

(31)
(247)
(278)

Changes in other investing activities include dividends received and the effects of acquisitions and sales of
equity investments. Below is a breakdown:
2022

Strategic transactions
Transactions on equity investments
Changes in other investment and divestment activities

(616)
(138)
141
(613)

2023

177
(23)
154

34. FINANCIAL TRANSACTIONS WITH RELATED PARTIES
Related party transactions are carried out at arm’s length, as is settlement of the interest-bearing receivables
and payables when not governed by specific contractual conditions. The relevant financial statements
amounts are shown below. The statement of cash flows presents the impact of related party transactions on
cash flows:315Separate Financial Statements at 31 December 2023
Receivables at 31 December 2022

Subsidiaries
Agustawestland Philadelphia Corporation
W.S.K. PZL-Swidnik S.A.
Selex ES SpA (In Liquid.)
Kopter Group AG
Leonardo UK Ltd
Leonardo Global Solutions SpA
Leonardo CAE Advanced Jet Training Srl
Leonardo DRS INC
Leonardo Belgium SA
Leonardo Australia PTY Ltd
Leonardo Malaysia SDN BHD
Leonardo Logistics SpA
Leonardo do Brasil LTDA
Other with unit amount lower than €mil. 10
Associates
Nhindustries (S.A.S)
Eurofighter Jagdflugzeug Gmbh
Industria Italiana Autobus SpA
Iveco - Oto Melara S.c.a.r.l.
Agustawestland Aviation Services LLC
Macchi Hurel Dubois SAS
Other with unit amount lower than €mil. 10
Joint Venture
Avions De Transport Regional - ATR GIE
Gruppo MBDA S.A.S
Gruppo Thales Alenia Space S.A.S
Orizzonte - Sistemi Navali SpA
Gruppo Telespazio SpA
Polo Strategico Nazionale SpA
Other with unit amount lower than €mil. 10
Other companies and consortiums
Other with unit amount lower than €mil. 10
Companies subject to the control or considerable
influence of the MEF
CDP Cassa Depositi e Prestiti SPA
Ministero dell'Economia e delle Finanze
Other with unit amount lower than €mil. 10
Total% against total for the period

Non-current
loans andreceivables

Current loans
andreceivables

199
75

1
1

23

8

316

1
15

7

186
97

128
15
16
202
184
86
31
2
11
13
25
27
10
20
186
97
8
50
12
15
25

50
12
15
25

8
11

1

2

9

2

13

277
85.0%

71
85
29
1,133
36.3%

3

5
88
66.2%

127
15
1
3
184
3
31
1
11
13
25
4
10
20

Total

29
28
49
21
11
8
12

40
8

Other current
and noncurrent
receivables

Tradereceivables

29
28
9
21

1
27
5.1%

71
85
35
1,525

Separate Financial Statements at 31 December 2023
Receivables at 31 December 2023

Subsidiaries
Agustawestland Philadelphia Corporation
Kopter Group AG
Leonardo Australia PTY Ltd
Leonardo Belgium S.A.
Leonardo CAE Advanced Jet Training Srl
Leonardo do Brasil LTDA
Leonardo DRS INC
Leonardo Global Solutions SpA
Leonardo Logistics SpA
Leonardo Malaysia SDN BHD
Leonardo South Africa (PTY) Ltd
Leonardo UK Ltd
W.S.K. PZL-Swidnik S.A.
Other with unit amount lower than €mil. 10
Associates
Advanced Air Traffic System SDH BHD
Agustawestland Aviation Services LLC
Eurofighter Jagdflugzeug Gmbh
Euromids S.A.S.
Industria Italiana Autobus SpA
Iveco - Oto Melara S.c.a.r.l.
Nhindustries (S.A.S)
Other with unit amount lower than €mil. 10
Joint Venture
Avions De Transport Regional - ATR GIE
Gruppo MBDA S.A.S
Gruppo Telespazio SpA
Gruppo Thales Alenia Space S.A.S
Orizzonte - Sistemi Navali SpA
Polo Strategico Nazionale SpA
Other companies and consortiums
Other with unit amount lower than €mil. 10
Companies subject to the control or considerable
influence of the MEF
CDP Cassa Depositi e Prestiti SPA
Ministero dell'Economia e delle Finanze
Poste Italiane SpA
Other with unit amount lower than €mil. 10
Total% against total for the period

Non-current
loans andreceivables

Current loans
andreceivables

297

1

113

30

17

130
74.3%

Other current
and noncurrent
receivables

Tradereceivables

198
9
22
22
28
11
1
3
5
39
11
196
86
16

1

3

9

4

Total

199
306
22
22
31
11
2
125
35
39
11
196
86
20

4
21
65
8
1
18
339
13

4
21
65
8
1
18
339
13

2
175

33
17
10
22
34
17

33
17

2

9

507
97.3%

47
101
12
20
1,438
39.6%

4
1

197
35
17

2

13

1
25
4.9%

47
101
12
21
2,100

As regards the most important loans and receivables we note that:•

Non-current loans and receivables equal to €mil. 130 (€mil. 88 at 31 December 2022) were up by€mil. 42 and included the assets related to lease transactions in compliance with IFRS16;•

Current loans and receivables equal to €mil. 507 (€mil. 277 at 31 December 2022) increased by €mil.
230, as a result of financing activities conducted by Leonardo in favour of the Group companies, withthe abovementioned centralisation of treasury resources;•

Other receivables equal to €mil. € 25 (€mil. 27 at 31 December 2022) included amounts deriving fromthe Group tax consolidation mechanism, recognised by Leonardo, the party having a legal
relationship with the Tax Authority;•

Trade receivables equal to €mil. 1,438 (€mil. 1,133 at 31 December 2022) include receivables related
to services rendered in the interest and in favour of the Group’s companies.
317

Separate Financial Statements at 31 December 2023
Payables at 31 December 2022

Subsidiaries
Agustawestland Philadelphia Corporation
Leonardo UK Ltd
Ansaldobreda SpA
Larimart SpA
Leonardo Logistics SpA
Leonardo Global Solutions SpA
Leonardo US Aircraft Inc
W.S.K. PZL-Swidnik S.A.
Selex ES International Ltd
Leonardo Malaysia SDN BHD
Leonardo Saudi Limited
Leonardo US Holding LLC
Gruppo Leonardo DRS INC
Leonardo International SpA
Leonardo Partecipazioni SpA
Leonardo CAE Advanced Jet Training Srl
Other with unit amount lower than €mil. 10
Associates
Eurofighter Jagdflugzeug Gmbh
Gruppo Elettronica SpA
Gulf System Logistic Services Company WLL
Nhindustries (S.A.S)
Industria Italiana Autobus SpA
Leonardo Hélicoptères Algérie SpA
Other with unit amount lower than €mil. 10
Joint Venture
Avions De Transport Regional - ATR GIE
Gruppo MBDA S.A.S
Gruppo Telespazio SpA
Polo Strategico Nazionale SpA
Other with unit amount lower than €mil. 10
Other companies and consortiums
Other with unit amount lower than €mil. 10
Companies subject to the control or considerable
influence of the MEF
Cassa Depositi e Prestiti Spa
Enel Spa
Altre di importo unitario inferiore a €mil. 10
Total% against total for the period

Other current
Current andand nonnon-current
Other current
current loans Trade payables lease loans
payablesandandborrowings
borrowings
58
1,002
41
8

3

9

4

145
24
27
91
16
13

19
38
2

39

12
52
38
14
33

13
48

157
23

580

1
1

13

36
58

1
4

21
44

85

60
24
27
91

16

713
41

2

2,387
50.6%

318

58
751
45

585
1,647
214
1
1
4
356

13
245
208
102
90

43

8
100

11

11

100

Guarantees

269
1,083
64
20
53
787
14
46
48
13
37
62
21
47

54
81

168

Total

10

2

12

1
12
1
667
26.9%

1

102
12
1
3,872

580
9.9%

238
11.8%

165

3,782
27.8%

Separate Financial Statements at 31 December 2023
Payables at 31 December 2023

Subsidiaries
Ansaldobreda SpA
Agustawestland SpA
Agustawestland Philadelphia Corporation
Gruppo Leonardo DRS INC
Larimart SpA
Leonardo Australia PTY Ltd
Leonardo CAE Advanced Jet Training Srl
Leonardo for Aviation Services (SPC)
Leonardo Global Solutions SpA
Leonardo International SpA
Leonardo Logistics SpA
Leonardo Malaysia SDN BHD
Leonardo Partecipazioni SpA
Leonardo Saudi Limited
Leonardo UK Ltd
Leonardo US Aircraft, Inc
Leonardo US Corporation
W.S.K. PZL-Swidnik S.A.
Other with unit amount lower than €mil. 10
Associates
Eurofighter Jagdflugzeug GmbH
Gruppo Elettronica SpA
Gruppo HENSOLDT AG
Gulf System Logistic Services Company WLL
Industria Italiana Autobus SpA
Leonardo Hélicoptères Algérie SpA
Nhindustries (S.A.S)
Other with unit amount lower than €mil. 10
Joint Venture
Avions De Transport Regional - ATR GIE
Gruppo MBDA S.A.S
Gruppo Telespazio SpA
Other with unit amount lower than €mil. 10
Other companies and consortiums
Other with unit amount lower than €mil. 10
Companies subject to the control or considerable
influence of the MEF
Cassa Depositi e Prestiti SPA
Enel SpA
Total% against total for the period

Other current
Current andand nonnon-current
Other current
current loans Trade payables lease loans
payablesandandborrowings
borrowings

54

71
7
16
12
24
12
38

175
211

50
24
152
1

498

56
14

33
760

74
14

90
1

33
33

75

136
13
9
37

16

1
7

144
16

1,070
26

3
14
2
12

2

9

100

1
26
826
29.5%

2,613
43.7%

4

3
35
2

Total

Guarantees

50
24
277
7
17
12
24
12
715
211
57
14
40
834
14
123
34
211
13
9
37
16
144
19
38
1,084
30
12

206
669
52

2
99
1
17
13
1,648
211
984

47

8
93

11

1
498
8.3%

280
13.5%

102
26
4,217

161
4,211
29.0%

As regards the most important loans and receivables we note that:•

Loans and borrowings equal to €mil. 2,613 (€mil. 2,387 at 31 December 2022) include current
financial debt relationships arising from net cash inflows achieved by the Group companies during
the year, which were contributed to Leonardo as a result of the Group’s cash pooling system; among
these, the item includes a payable of €mil. 1,070 (€mil. 713 at 31 December 2022) to the joint
ventures of the MBDA group and the loan of €mil. 100 taken out with Cassa Depositi e Prestiti (CDP)
which is aimed at co-financing some investment projects envisaged in the Industrial Plan;•

Loans and borrowings for leases include a fixed amount of €mil. 498 (€mil. 580 at 31 December 2022)
linked to lease transactions in accordance with IFRS16

319

Separate Financial Statements at 31 December 2023•

Other payables equal to €mil. 280 (€mil. € 238 at 31 December 2022), increased by €mil. 42, andinclude for €mil. 83 the values deriving from the Group tax consolidation mechanism recognised by
the Company.

The changes during the year and the composition of assets and liabilities by maturity, currency andgeographical area are shown in Appendices nos. 3, 4, 5, 6, 7, 8 and 9 to these Notes.
Below are all income statement transactions with the Leonardo’s related parties for the years 2023 and 2022:
Income statement transactions at 31 December 2022

Subsidiaries
Agustawestland Philadelphia Co
Leonardo Logistics SpA
Leonardo Global Solutions SpA
Leonardo CAE Advanced Jet Training Srl
Leonardo for Aviation Services (SPC)
Leonardo UK Ltd
Larimart SpA
Leonardo Belgium SA
Leonardo Australia (PTY) Ltd
Leonardo Malaysia SDN BHD
Leonardo Electronics US Inc.
Kopter Group AG
W.S.K. PZL-Swidnik S.A.
Other with unit amount lower than €mil. 10
Associates
Eurofighter Jagdflugzeug GmbH
Gruppo Elettronica SpA
Euromids S.A.S.
Gulf System Logistic Services Company WLL
Gruppo HENSOLDT AG
Nhindustries (S.A.S)
Iveco-Oto Melara Scarl
Macchi Hurel Dubois SAS
Agustawestland Aviation Services LLC
Other with unit amount lower than €mil. 10
Joint Venture
Avions De Transport Regional - ATR GIE
Orizzonte - Sistemi Navali S.p.A.
Gruppo MBDA S.A.S
Gruppo Thales Alenia Space Sas
Rotorsim Srl
Polo Strategico Nazionale SpA
Other with unit amount lower than €mil. 10
Other companies and consortiums
Cons. G.e.i.e. Eurotorp
Panavia Aircraft GMBH
Other with unit amount lower than €mil. 10
Companies subject to the control or considerable
influence of the MEF
Enel SpACDP Cassa Depositi e Prestiti SPA
Ministero dell'Economia e delle Finanze
Enav SpA
Poste Italiane SpA
Sogei SpAOther with unit amount lower than €mil. 10
Total% against total for the period

Other
operatingrevenues

Revenue

Purchase andServiceexpenses

144

35
178

2

24
35
56
4
11
27

3

694
2
18

Other
operatingexpenses

90
131
134
21
23
152
19
8
13
19
10
6
174
42

FinancialincomeFinancialexpenses

13

1

9

6
4

1

495
72
3
96
23
423
2

15
388
116
41
22
24

2
9

117
147
65
63
2

2

12
1
86
2
18

7

2

4

10
38
2

7

1
1

11
221
42
21
20
14
11
2,625
27.5%

4

4

1

15
0.9%

31
9.8%

63
2
1

10
1.6%

320

1
2,162
24.9%

0.0%

Separate Financial Statements at 31 December 2023
Income statement transactions at 31 December 2023

Subsidiaries
Agustawestland Philadelphia Corporation
Gruppo Leonardo DRS INC
Larimart SpA
Leonardo Australia PTY Ltd
Leonardo Belgium S.A.
Leonardo CAE Advanced Jet Training Srl
Leonardo do Brasil LTDA
Leonardo Electronics US Inc.
Leonardo for Aviation Services (SPC)
Leonardo Global Solutions SpA
Leonardo Logistics SpA
Leonardo Malaysia SDN BHD
Leonardo Saudi Limited
Leonardo UK Ltd
Kopter Group AG
W.S.K. PZL-Swidnik S.A.
Other with unit amount lower than €mil. 10
Associates
Agustawestland Aviation Services LLC
Eurofighter Jagdflugzeug GmbHEuromids S.A.S.
G.E.M. Elettronica Srl
Gruppo Elettronica SpA
Gruppo HENSOLDT AG
Gulf System Logistic Services Company WLL
Iveco-Oto Melara Scarl
Macchi Hurel Dubois SAS
Nhindustries (S.A.S)
Other with unit amount lower than €mil. 10
Joint Venture
Avions De Transport Regional - ATR GIE
Gruppo MBDA S.A.S
Gruppo Thales Alenia Space S.A.S
Orizzonte - Sistemi Navali S.p.A.
Polo Strategico Nazionale SpA
Rotorsim Srl
Other with unit amount lower than €mil. 10
Other companies and consortiums
Cons. G.e.i.e. Eurotorp
Panavia Aircraft GMBH
Other with unit amount lower than €mil. 10
Companies subject to the control or considerable
influence of the MEF
Cassa Depositi e Prestiti SPA
Enav SpA
Enel SpA
Ministero dell'Economia e delle Finanze
Poste Italiane SpA
Sogei SpAOther with unit amount lower than €mil. 10
Total% against total for the period

Other
operatingrevenues

Revenue

Purchase andServiceexpenses

176

31
35
11
10

11

1
68
166
10
181
20

3
3

29
940
9

Other
operatingexpensesFinancialincome

86
12
24
17
11
42
3
15
33
136
156
30
17
164
4
211
31

Financialexpenses
1

1

1
7
1

3
306
3
18
64
28
14

1
18
113
28
317
16

2
1

19
5

11
29
6

1

3

4

1
2,113
23.3%

39

1

1

2

2
1
118

21
4.5%

1
1

1

8
49
2
2

128
19
8
25
37
18
13
2,874
28.9%

32

2

470
5

143
57
44
134
16
1
5

24

5

1
0.2%

19
2.2%

104
24.5%

“Financial income (expense)” relates to interest on loans and receivables and loans and borrowings andcommissions which mainly arise from the centralisation of the management of Group treasury resources
within Leonardo. In carrying out its treasury management functions, the Company acts as the main
counterparty, always at arm’s length, for the financial assets and liabilities of the subsidiaries within the scopeof such centralisation.
321

Separate Financial Statements at 31 December 2023
35. FINANCIAL RISK MANAGEMENT
Leonardo SpA is exposed to financial risks associated with its operations, specifically related to these typesof risks:•

interest-rate risks, related to the Company’s financial exposure;•exchange-rate risks, related to operations in currencies other than the reporting currency;•

liquidity risks, relating to the availability of financial resources and access to the credit market;•

credit risks, resulting from normal commercial transactions or financing activities.

The Company carefully and specifically follows each of these financial risks, with the objective of promptly
minimizing them, even using hedging derivatives.
The sections below provide an analysis, conducted through sensitivity analysis, of the potential impact on
the final results deriving from assumed fluctuations in reference parameters. As required by IFRS 7, theseanalyses are based on simplified scenarios applied to the final results of the reference periods and, by theirown nature, they cannot be considered as indicators of the actual effects of future changes in reference
parameters with different financial statements and market conditions, and cannot reflect the inter-relations
and the complexity of reference markets.
Below is the main information related to the abovementioned risks. However, for further details reference
is made to the section on “Financial risk management” of the consolidated financial statements.

Interest rate risk
Leonardo is exposed to interest rate risk on borrowings. The management of interest rate risk is consistent
with the long-standing practice of reducing the risk of fluctuations in trends in interest rates while seeking tominimize related borrowing costs.
In this regard, it should be noted that loans and borrowings at 31 December 2023 equal to 5,973 included
lease liabilities of €mil. 595 and other payables to related parties. The amount of fixed-rate loans andborrowings from banks and financing institutions (excluding lease liabilities and loans andreceivables/borrowings from related parties) – including by using hedging instruments – was equal to about
42% and the amount at floating rate was equal to about 58%.
At 31 December 2023, the transactions were the following:•

options for €mil. 200 (CAP at 4.20% and Knock out at 5.60% in relation to the 6-month Euribor
interest rate), originally purchased in order to partially cover the bond issue due 2025;•

floating/fixed interest rate swap for €mil. 300 relating to the EIB loan in the same amount, whichguarantees a fixed rate of 1.82% on the loan.

The detail of the main interest-rate swaps at 31 December 2023 is as follows:
Notional

Options
IRS fixed/floating
Total notional

2021

2022

200
300
500

200
300
500

Underlying(maturity)
Bond 2025
BEI 2031

322

Fair value
01.01.2022
(1)
(13)
(14)

Changes
Fair value
Expens
CFH
31.12.2022
Incomee
Reserve
(1)
43
30
43
29

Separate Financial Statements at 31 December 2023
Notional

Options
IRS fixed/floating
Total notional

2022

2023

200
300
500

200
300
500

Underlying(maturity)

Fair value
01.01.2023
(1)
30
29

Bond 2025
BEI 2031

Changes
Fair value
Expens
CFH
31.12.2023
Incomee
Reserve
(1)
(12)
18
(12)
17

The table below shows the effects of the sensitivity analysis for 2023 and 2022 on interest rates at thereporting dates deriving from the 50-basis-point shift in the interest rate curve (bps):
Effect of shift of interest rate curve

Net result
Equity (*)

31 December 2022
31 December 2023
Increase of 50 Decrease of 50 Increase of 50 Decrease of 50
bps
bps
bps
bps
(8)
8
(6)
6
(4)
4
(6)
6

(*): Defined as sum of earnings and cash-flow hedge reserve

Exchange rate risk
Due to its commercial operations, the Company is exposed to the risk of fluctuations in the currencies related
to those cases in which orders, revenue and costs are expressed in currencies other than the functional one
used in the financial statements (specifically, US dollars and, to a lesser extent, the pound sterling).
Exchange-rate risk management for the Group is governed by the Directive issued by Leonardo SpA, thepurpose of which is to standardize management criteria based on industrial-not-speculative strategies so as
to contain risks within specific limits by carefully and constantly assessing all foreign currency transaction
positions. The methodology adopted calls for the systematic hedging of commercial cash flows resulting fromthe assumption of contractual commitments that are certain or highly probable as either buyer or seller,
thereby ensuring current exchange rates at the date of acquisition of multi-year contracts and neutralizing
the effects of exchange-rate fluctuations. As a result, contracts for purchases or sales denominated in acurrency different from the functional currency are hedged using forward contracts of amounts, maturities,
and key parameters that are similar to the underlying position. The Company defines the existence of an
economic relationship between the hedging instrument and the hedged item on the basis of the currency,
amounts and respective cash flows and assesses whether the derivative designated in each hedging
relationship will be and has been effective in offsetting changes in the cash flows of the hedged item. In theevent that, due to their nature or following events that entail their ineffectiveness, derivative instruments
held in the portfolio should be found to no longer be a hedge, the fair value of the instrument is recognised
through profit and loss according to accounting principles. In the event the designation of the instrument as
a hedge should continue to be supported, the cash-flow hedge accounting method of recognition is adopted(see Note 4.3 of the Consolidated Financial Statements).
Leonardo carries out these transactions with banks in its own interest and of Group companies.
The Company hedges the risks related to short-term financial payables and receivables denominated incurrencies other than the euro and had entered into foreign exchange transactions at 31 December 2023,
totaling €mil. 6,619 (notional amount), as detailed in the following table:

323

Separate Financial Statements at 31 December 2023

Swap and forward
transactions

Notional 2022
Purchases

Sales
4,038

Total

2,285

Notional 2023
Purchases

Sales
6,323

4,009

Total

2,610

6,619

As a result of the financial centralization, the cash flows of the Group’s foreign companies were recharged to
Leonardo through intercompany transactions mainly denominated in GBP and USD. This risk is hedged using
mirror transactions of payables/receivables to/from third parties in the currency of intercompany items or
through specific exchange-rate derivatives, classified as fair-value hedges. The table below shows the
expected due dates of receipts and payments related to derivative instruments broken down by maincurrencies:

Cash-flow and fair-value hedges
Within 1 year
2 to 3 years
4 to 9 years
Total

31 December 2022
Notional
Notional
Receipts
Payments
USD
GBP
USD
GBP
1,636
62
612 1,357
1,355
219
31
456
1
17
3,447
62
832 1,405

31 December 2023
Notional
Notional
Receipts
Payments
USD
GBP
USD
GBP
1,608
40
998 1,157
1,282
214
27
174
6
5
3,064
40
1,218 1,189

Total transactions

3,447

3,064

62

832

1,405

40

1,218

1,189

The table below shows the effects of the sensitivity analysis carried out on the change in the exchange ratesof the euro against the US dollar (USD) and the pound sterling (GBP) and, assuming a +/-5% change in the
euro/pound sterling exchange rate and in the euro/US dollar exchange rate compared with the reference
rates at 31 December 2023 and 31 December 2022.
31 December 2022
Effect of change in the
Effect of change in the€/GBP rate€/USD rate
Increase Decrease of Increase of Decrease of 50
of 50 bps
50 bps
50 bps
bps
3
(1)
7
(8)
(3)
5
99
(109)

Net result
Equity (*)

31 December 2023
Effect of change in the
Effect of change in the€/GBP rate€/USD rate
Increase of Decrease of Increase of Decrease of 50
50 bps
50 bps
50 bps
bps
2
(1)
13
(12)
(3)
5
91
(99)

(*): Defined as sum of earnings and cash-flow hedge reserve

Liquidity risk
Leonardo is exposed to liquidity risk, i.e. the risk of not being able to finance the prospective requirements
arising from usual business and investment operations, as well as those connected with the volatility of therelevant markets in relation to commercial contracts at risk of renegotiation or cancellation. Moreover, thereis the risk of not being able to repay or finance debts at the expiry dates.
In order to face the series of above-mentioned risks, Leonardo has adopted a series of instruments aimed at
optimizing the management of financial resources by resorting to bank and bond transactions.
In order to finance its operations, the Company had at its disposal at 31 December 2023:−

the cash and cash equivalents of €mil. 1,791 generated at 31 December 2023 by amounts
temporarily remaining at the disposal of the companies falling under, directly or indirectly, thescope of the centralization of treasury resources, as well as by deposits made for various reasons;324

Separate Financial Statements at 31 December 2023−

an ESG-linked Revolving Credit Facility (RCF), available to Leonardo SpA, amounting to €bil. 2.4,
comprising a 5-year tranche of €bil. 1.8 expiring in September 2026 and a 3-year tranche of €mil.
600 expiring in September 2024. Both the RCF tranches had been entirely unused at 31 December
2023;

−

a sustainability-linked loan for an amount of €mil. 260 with the European Investment Bank (EIB)
entirely unused at 31 December 2023);−

uncommitted bank credit lines totaling €mil. 810, entirely unused at 31 December 2023);−

the EMTN (Euro Medium Term Note) Programme, out of which all the bonds of Leonardo SpA
currently in place on the Euromarket were issued, was still available at 31 December 2023 for a
total nominal amount of €mil. 2,400, compared to a total amount of €mil. 4,000 under the
programme;−a Framework Programme for the issuance of Multi-Currency Commercial Papers on the European
market, for a maximum amount of €bil. 1, which had been entirely unused at 31 December 2023;−

unconfirmed lines of credit for guarantees for a total amount of €mil. 10,479, of which an amountof €mil. 3,019 was available at 31 December 2023.

Credit risk
The Company is exposed to credit risk, which is defined as the probability of an insolvency with respect to acredit position with commercial and financial counterparties.
Regarding commercial transactions, the most significant programmes are made with public sector
contractors or contractors belonging to public institutions, mainly in the Euro area, in the UK, the US and the
Middle East. The risks associated with the counterparty, for contracts with countries for which there are nousual commercial relations, are analyzed and valued at the time of the offer in order to mitigate insolvency
risks, if any. While solvency is guaranteed with public-entity customers, collection times are longer (in somecountries they are significantly longer) than for other business sectors, creating significant outstanding credit
positions and the subsequent need for transactions to convert the receivables into cash. On the other hand,
the Company hedges, when deemed appropriate, against potential defaults in the payment of its receivables
by entering into insurance policies with leading Export Credit Agencies (ECAs) internationally and with major
Italian agencies.
The types of contracts entered into by the Group provide for the possibility of sizeable retention money
withheld by customers, as well as back-to-back clauses in case of sub-supplies. Such cases may inherently
extend the times for collection of outstanding receivables.
Furthermore, the Company operates in markets which are or have been recently affected by geopolitical or
financial tensions. In particular, with reference to the situation at 31 December 2023, we note the following
relations with countries exposed to credit risk according to the international institutions (SACE):(€ millions)

AssetsLiabilities
Net exposure

Libya

1
(8)
(7)

Nigeria

28
(52)
(24)

Turkey

141
(103)
38

Turkmenistan

11
(1)
10

Kenya

1
(21)
(20)

Pakistan

85
(30)
55

Other

45
(41)
4

Total

312
(256)
56

As at 31 December 2023, the countries identified by SACE as countries at risk also included Russia and Ukraine
to which, however, the Company has no residual balance sheet exposures at risk.
The receivables related to these agreements might not be paid, renegotiated or written off.
The table below summarizes trade receivables at 31 December 2023 and 2022 (values in €bil.).
325

Separate Financial Statements at 31 December 2023
31 December 2022
0.5
0.2
2.5
3.0

Portion due- of which: for more than 12 months
Portion not yet due
Total trade receivables

31 December 2023
1.5
0.5
2.1
3.6

A part of the portion due is offset by a liability, in relation to payable items or provisions for risks on any net
excesses.
Loans and receivables, equal to €mil. 651 (€mil. 414 at 31 December 2022) include €mil. 17 (€mil. 12 at 31
December 2022) classified as “non-current” and subsequently excluded from the net financial position. The
table below shows the breakdown of loans and receivables:
Loans and receivables from related parties
Other loans and receivables
Non-current loans and receivables

31 December 2022
88
88

31 December 2023
130
130Loans and receivables from related parties
Other loans and receivables
Current loans and receivables

277
49
326

507
14
521

Total loans and receivables

414

651

Both the main trade and financial receivables are impaired based on their probability of default or individuallyin case of particular situations. Vice versa, for receivables that are not impaired individually, impairment
provisions are accrued, using historical series, statistical data and probability of default on an aggregate basis
also supported by qualitative analyses.
During the year, receivables were assigned without recourse for a total volume of €mil. 25 (€mil. 50 in 2022).
The amount of the assignments is significantly lower than the previous year's figure, due to the effects ofmaking the processes to manage working capital more efficient, which has allowed a further improvementin the dynamics underlying the realization of collection flows, despite the continuation of emergency
situations of various kinds.

Classification of financial assets and liabilities
The table below shows the fair value hierarchy for the financial assets and liabilities of Leonardo SpA
measured at fair value. The fair value of derivatives (classified under other current assets and liabilities) andof current securities is determined on the basis of measurement techniques which consider directly
observable market inputs (the so-called “Level 2”). The fair value of the earn-out linked to the acquisition of
Kopter was determined on the basis of measurement techniques which do not consider directly observable
market inputs (the so-called “Level 3”), by discounting back the estimate of the variable amounts payable on
the basis of the commercial performance of the programme.

326

Separate Financial Statements at 31 December 2023

Level 2Other non current
assetsOther assets
Other non-current
liabilities
Other current liabilities

31 December 2022
Level 3

Total

Level 231 December 2023
Level 3

Total

-

-

-

-

-

-

267

-

267

156

-

156

-

16

16

-

16

16

211

-

211

189

-

189

36. REMUNERATION TO KEY MANAGEMENT PERSONNEL
Remuneration paid to persons who have strategic power and responsibility of Leonardo SpA amounted to€mil. 15 (€mil. 12 at 31 December 2022).
Remuneration paid to Directors, excluding managers with strategic responsibility, amounted to about €mil.
2 (€mil. 2 in 2022). This figure includes fees and other compensation, pensions and other benefits, including
the portion borne by the Company.

37. SHARE-BASED PAYMENTS
In order to implement an incentive and retention system for the Group’s employees and associates, startingfrom 2015 Leonardo adopted incentive plans which provide for the assignment of Leonardo shares, subject
to assessing the attainment of pre-set business targets. These shares will be awarded to the beneficiaries atthe end of the vesting period, provided that they have met the condition of being still employed with thecompany. The cost recognised in the income statement for the share incentive plans amounted in 2023 to€mil. 11 (€mil. 5 in 2022).
With specific regard to the Long-Term Incentive Plan, the fair value used to measure the portion linked tothe performance indicators (Group Net Debt, ROS and starting from the three-year cycle 2021-2023
Sustainability Indicators) was equal to € 11.04 (the value of Leonardo shares at the grant date of 31 July 2019)with reference to the three-year cycle 2019-2021, to € 5.41 (the value of Leonardo shares at the grant dateof 31 July 2020) with reference to the three-year cycle 2020-2022 and to € 6.788 (the value of Leonardo
shares at the grant date of 31 July 2021) with reference to the three-year cycle 2021-2023 and € 9.15 (thevalue of Leonardo shares at the grant date of 31 July 2022) with reference to the three-year cycle 2022-2024
and € 13.66 (the value of Leonardo shares at the grant date of 1 October 2023) with reference to the threeyear cycle 2023-2025.
Vice versa, the award of the remaining amount of the shares depends upon market conditions which affectthe determination of the fair value (“adjusted fair value”). The adjusted fair value, calculated using the“Monte Carlo” method in order to simulate the possible performance of the stock and of the other companies
within the basket, was equal to € 6.72 with reference to the three-year cycle 2019-2021, € 1.73 with reference
to the three-year cycle 2020-2022, € 3.7 with reference to the three-year cycle 2021-2023 and € 6.4 withreference to the three-year cycle 2022-2024 and €12.1 with reference to the three-year cycle 2023-2025.
The input data used to calculate the adjusted fair value were:•

the stock price at the grant date;•

the average share price in the three months preceding the performance period;•

the risk-free interest rate based on the zero-coupon yield curve in 36 months;
327

Separate Financial Statements at 31 December 2023•

the expected volatility of the price of Leonardo shares and of the shares of the other companies
within the basket based on time series in the 36 months prior to the grant date;•correlation coefficients between Leonardo and the other companies within the basket on the basisof logarithms of the daily performance of the stocks in the 36 months prior to the grant date;•dividend distribution forecasts on a historical basis.

In 2023, as in 2022, no shares were granted under the long-term incentive plan.

328

Separate Financial Statements at 31 December 2023

PROPOSAL TO THE SHAREHOLDERS’ MEETING
Dear Shareholders,
The 2023 financial statements, which we submit for your approval, close with a net profit of Euro783,697,113.66 :In light of the foregoing, we submit the following proposed resolution for your approval:“The Ordinary Shareholders’ Meeting of LEONARDO - Società per azioni:−

considering the Report of the Board of Directors;−

considering the Report of the Board of Statutory Auditors;−

having examined the financial statements at 31 December 2023;−

having acknowledged the report of EY S.p.A.
resolves−

to approve the Directors’ Report on operations and the financial statements at 31 December
2023;

−

to approve the proposal posed by the Board of Directors of allocating the profit of €783,697,113.66 for the 2023 financial year as follows:-

as to € 39,184,855.68, equal to 5% of the profit, to legal reserve;-

as to € 0.28, on account of dividend, by paying it, including any withholding prescribedby law, as from 26 June 2024, with "detachment date" of coupon no. 14 falling on 24
June 2024 and "record date" (i.e. date on which the dividend is payable, pursuant to
Art.83-terdecies of Legislative Decree no. 58 of 24 February 1998 and Art. 2.6.6,
paragraph 2, of the Regulations for the Markets organized and managed by Borsa
Italiana S.p.A.) falling on 25 June 2024; the above provisions refer to eachordinary share that will be outstanding at the detachment date of the coupon,
excluding treasury shares in portfolio at that date, without prejudice to the regime ofthose that will be actually awarded, under the current incentive plans, during thecurrent financial year.

-with regard to the remaining amount, to retained earnings.”

For the Board of Directors
The Chairman(Stefano Pontecorvo)

329

Separate Financial Statements at 31 December 2023

ATTACHMENT: DISCLOSURE EX-LEGE 124/2017
In accordance with the provisions of Article 1, paragraphs 125-126, of Law 124 of 4 August 2017, information
is provided below on grants received from public administrations and granted to Leonardo SpA.
Grants received
Worth noting are the provisions of Law no. 124/2017 imposing disclosure obligations on those entities
carrying out the activity referred to in article 2195 of the Italian Civil Code in relation to sums which are notof a general nature and do not consist of fees, remuneration or compensation received from public
administrations or similar entities.
Excluded from such scope are any grant consisting of a consideration for Company's services and any grantderiving from bilateral financial relationships, which are peculiar to the Company's business, as well as any
general measure that falls within the broader general structure of the reference system defined by the State(among others, Law 237/1993, Law 297/1999, Development Contracts and Regional Operational Programme,
Law 808/1985, Regional Laws and National Operational Programmes), the effects of which are described in
the notes to the Separate Financial Statements, based on the accounting standards adopted in the
preparation of said accounts that can be used by all sector businesses, as well as grants received forcontinuing professional development from interprofessional funds.
The Company has not received grants falling within the framework of those referred to in article 1, para. 125,
of Law 124/2017.
It should also be noted that the transparency of State aid for which there is a publication obligation isprotected by their publication in the National Register of State Aids referred to in Article no. 52 of Law 234
of 24 December 2012.
Grants disbursed
As a publicly traded company, Leonardo SpA, is not subject to the obligations under article 1, para. 126
pursuant to art. 2-bis, para. 2, letter b) of Legislative Decree 33/2013.
There are no grants disbursed by Leonardo SpA in the form of donations or disbursements that do not consistof a consideration for services received, not even in the form of a return in terms of image.

330

Separate Financial Statements at 31 December 2023

APPENDICES
Appendix no.1 (€ mil) - EQUITY INVESTMENTS
31 December 2022
Equity investments in%
subsidiaries
Carrying amount
68
100
100
60

ALEA SRLANSALDOBREDA SPAKOPTER GROUP AG
LARIMART SPALEONARDO FOR
100 AVIATION SERVICES(SPC)LEONARDO GLOBAL
100
SOLUTIONS SPALEONARDO
100
INTERNATIONAL SPALEONARDO
100
PARTECIPAZIONI SPA
100 LEONARDO UK LTD
LEONARDO US
53
HOLDING, LLC
SELEX ES100
INTERNATIONAL LTD
67
TELESPAZIO SPA(*)
UTM SYSTEMS &67
SERVICES SRL
W.S.K. PZL-SWIDNIK
100
S.A.
TOTAL EQUITY INVESTMENTS IN
SUBSIDIARIES
of which
Cost
Write-back/Writedown

1/3
31 December 2023

Movements of the year
Acquis./Subscriptions/payments of capital

Disposal

Reversals/Impairment

Otherchanges

3
17
258
14

-

(17)
-

-

-

3
258
14

1

-

-

-

-

1

850

-

-

-

-

850

1,612

-

-

-

-

1,612

Carrying amount

29

-

-

-

-

29

2,805

-

-

-

-

2,805

1,699

(171)

-

-

-

1,528

54

-

(56)

2

-

-

190

-

-

-

-

190

4

-

-

-

-

4

143

-

-

-

-

143

7,679

(171)

(73)

2

-

7,437

8,269

(171)

(640)

-

-

7,458

(590)

-

567

2

-

(21)

(*): joint control

331Separate Financial Statements at 31 December 2023
Appendix no.1 (€ mil) - EQUITY INVESTMENTS
31 December 2022
Equity investments in%
Acquis./Subscriptions/associates
Carrying amountpayments of capital
30
50
30
50

30
31
21
24
30
23
32

AGUSTAWESTLAND
AVIATION SERVICES
LLC
AMSH B.V.

(*)

AVIO SPAAVIONS DE
TRANSPORT REG. ATR GIE
CNBM LEONARDO(SHANGAI)AEROSTRUCTURES
CO,. LTDELETTRONICA SPAEUROFIGHTER
JAGDFLUGZEUG
GMBH
EUROFIGHTERSIMULATIONSYSTEMS GMBH
G.E.M. ELETTRONICASRL
HENSOLDT AG

NHINDUSTRIES SAS
INDUSTRIA ITALIANA(**)
29
AUTOBUS SPAJIANGXI CHANGHE
40 AGUSTA
HELICOPTERS CO. LTD
LEONARDO CAE
50 ADVANCED JET
TRAINING SRLLEONARDO
39 HELICOPTERESALGERIE SPA
ORIZZONTE - SISTEMI49
NAVALI SPAPOLO STRATEGICO(*)
25
NAZIONALE SPA
50 ROTORSIM SRL
THALES ALENIA(*)
33
SPACE S.A.S
Other with unit amount lower
than €mil. 1
TOTAL EQUITY INVESTMENTS
IN ASSOCIATES
of which
Cost
Write-back/Writedown

2/3
31 December 2023

Movements of the year
Disposal

Reversals/Impairment

Otherchanges

Carrying amount

4

-

-

-

-

4

481
85

-

-

-

-

481
85

232

-

-

-

-

232

-

28

7

-

-

-

-

7

9

-

-

-

-

9

2

-

-

-

-

2

5

-

-

-

-

5

618
1

-

-

-

-

618
1

-

24

-

(24)

-

-

2

-

-

-

-

2

25

-

-

-

-

25

22

-

-

-

-

22

16

-

-

-

-

16

3

11

-

-

-

14

28

-

-

-

-

28

401

-

-

-

-

401

1

-

-

-

-

1

1,942

63

-

(24)

-

1,981

2,568

63

-

-

-

2,631

(626)

-

-

(24)

-

(650)

28

(*): joint control(**): investment classified at 31 December 2023 within assets/liabilities held for sale332

Separate Financial Statements at 31 December 2023
Appendix no.1 (€ mil) - EQUITY INVESTMENTS

3/3

31 December 2022%

Other companies

31 December
2023

Movements of the year

Carrying amount

Acquis./Subscriptions/payments of capital

Disposal

Reversals/Impairment

Otherchanges

2

-

-

-

-

2

3

-

-

-

-

3

10

-

-

(10)

-

-

-

1

-

-

-

1

2

-

-

-

-

2

17

1

-

(10)

-

8

18

1

-

-

-

19

(1)

-

-

(10)

-

(11)

9,638

(107)

(73)

(32)

-

9,426

10,855

(107)

(640)

-

-

10,108(1,217)

-

567

(32)

-

(682)

ISTITUTOTRECCANI SPAPANAVIA
15
AIRCRAFT GMBH
SKYDWELLER
17
AERO INC.
VOLTA
5STRUCTURAL
ENERGY SRLOther with unit amountlower than €mil. 1
3

TOTAL EQUITY INVESTMENTS
IN OTHER COMPANIESof which
Cost
Write-back/Writedown

TOTAL EQUITY INVESTMENTS

Carrying amountof which
Cost
Write-back/Writedown

Appendix no.2 (€mil.) - LIST OF EQUITY INVESTMENTS

1/4

Equity investments in subsidiaries
Name

Office

Total
ReportingShare capital Net Equity
Currency
Assetsdate(total)(€mil.)(€mil.)

Total
Liabilities(€mil.)

EquityProfitattributable Carrying
Ownership(loss)
to theamount%(€mil.)
Company(€mil.)(€mil.)

ALEA SRL

Polcenigo (Italy)

31/12/2023

EUR

129,383

5

5

-

-

67.65

3

3

KOPTER GROUP AG

Wetzikon(Switzerland)

31/12/2023

CHF

32,000,000

209

1,086

877

34

100

209

258

LARIMART SPA

Rome (Italy)

31/12/2023

EUR

2,500,000

37

58

21

9

60

22

14

LEONARDO FORAVIATION SERVICES(SPC)

Kuwait31/12/2022

KWD

300,000

-

18

18

-

100

-

1

LEONARDO GLOBAL
SOLUTIONS SPA

Rome (Italy)

31/12/2023

EUR

51,000,000

901

1,240

339

22

100

901

850

LEONARDO
INTERNATIONAL SPA

Rome (Italy)

31/12/2023

EUR

1,000,000

1,890

1,978

88

6

100

1,890

1,612

LEONARDO LOGISTICS
SPA

Rome (Italy)

31/1272023

EUR

1,000,000

3

108

105

-

100

3

-

LEONARDO
PARTECIPAZIONI SPA

Rome (Italy)

31/12/2023

EUR

100,000

22

134

112

(7)

100

22

29

LEONARDO UK LTD

Basildon (UK)

31/12/2023

GBP

314,500,100

2,402

4,612

2,210

192

100

2,402

2,805

LEONARDO US
HOLDING, LLC

Wilmington(USA)

31/12/2023

USD

10

2,969

2,971

2

47

53.11

1,577

1,528

TELESPAZIO SPA(*) Rome (Italy)

31/12/2023

EUR

50,000,000

275

654

379

41

67

184

190

UTM SYSTEMS &SERVICES SRL

Rome (Italy)

31/12/2023

EUR

6,620,000

7

9

2

-

66.67

5

4

W.S.K. PZL-SWIDNIK
S.A.

Świdnik (Poland)

31/12/2023

PLN

307,642,000

207

541

334

(18)

100

207

143

TOTAL EQUITY INVESTMENTS IN SUBSIDIARIES(*): joint control

333

7,437

Separate Financial Statements at 31 December 2023
Appendix no.2 (€mil.) - LIST OF EQUITY INVESTMENTS

2/4

Equity investments in associates
Total
ReportingShare capital Net Equity
Currency
Assetsdate(total)(€mil.)(€mil.)

Total
Liabilities(€mil.)

EquityProfitattributable Carrying
Ownership(loss)
to theamount%(€mil.)
Company(€mil.)(€mil.)

Name

OfficeADVANCED MALE
AIRCRAFT LLC

Al Ain (United
Arab Emirates)

n.d.

AED

200,000

-

-

-

-

49

-

-

AGUSTAWESTLAND
AVIATION SERVICES LLC

Abu Dhabi City
(United ArabEmirates)

31/12/2023

AED

58,010,000

27

39

12

3

30

8

4

Rotterdam(Netherlands)

31/12/2022

EUR

36,296,316

1,455

1,455

-

193

50

728

481

AVIO SPARome (Italy)

31/12/2022

EUR

90,964,212

281

1,318

1,037

(2)

29.63

83

85

CNBM (SHANGHAI)
AVIATIONTECHNOLOGY CO. LTD.

Shanghai (China)

n.d.

CNY

200,000,000

-

-

-

-

30

-

28

AVIONS DE TRANSPORTREGIONAL - GIE ATR

Blagnac Cedex(France)

31/12/2022

USD

n.d.

31

1,013

982

31

50

15

232

ELETTRONICA SPA

Rome (Italy)

31/12/2023

EUR

9,000,000

132

-

-

15

31.33

41

7

EUROFIGHTER
JAGDFLUGZEUG GMBH

Hallbergmoos(Germany)

31/12/2022

EUR

639,114

31

1,482

1,451

8

21

7

9

EUROFIGHTERSIMULATION SYSTEMSGMBHHallbergmoos(Germany)

31/12/2022

EUR

260,000

3

4

1

-

24

1

2

EUROMIDS S.A.S

Paris (France)

31/12/2022

EUR

40,500

4

42

38

-

25

1

1

G.E.M. ELETTRONICA
SRL

Ascoli Piceno(Italy)31/12/2022

EUR

4,500,000

16

45

29

3

30

5

5

HELIVERT JOINT STOCKCOMPANY

Moscow (Russia)

31/12/2023

RUB

325,010,000

(14)

27

41

(4)

50

(7)

-

HENSOLDT AG

Taufkirchen(Germany)

31/12/2022

EUR

105,000,000

1,778

2,934

1,156

38

22.80

405

618

IAMCO-INT.
AEROSPACE MANAG.
COMPANY SCRL

Venice (Italy)

31/12/2022

EUR

208,000

2

9

7

1

25

1

-

IVECO - OTO MELARA
S.C. A. RL

Rome (Italy)

31/12/2022

EUR

40,000

-

327

327

-

50

-

-

JIANGXI CHANGHEAGUSTA HELICOPTERS
CO. LTD

Jingdezhen(China)31/12/2023

CNY

48,403,000

7

12

5

6

40

3

2

LEONARDO CAEADVANCED JET
TRAINING SRL

Decimomannu(Italy)31/12/2022

EUR

29,040,000

40

186

146

(7)

50

20

25

LEONARDO
HELICOPTERES ALGERIESPAAin Arnat(Algeria)

31/12/2022

DZD

7,420,165

50

50

-

-

39

20

22

LIBYAN ITALIANADVANCEDTECHNOLOGYCOMPANY

Tripoli (Lybia)

31/12/2011

LYD

8,000,000

1

5

4

(1)

25

-

-

MACCHI HUREL DUBOIS
S.A.S

Versailles(France)

31/12/2022

EUR

100,000

1

33

32

-

50

1

-

NHINDUSTRIES (S.A.S)

Aix-en-Provence(France)

31/12/2023

EUR

306,000

11

9

9

2

32

4

1

ORIZZONTE - SISTEMINAVALI SPA

Genoa (Italy)

31/12/2022

EUR

20,000,000

36

2,324

2,288

-

49

18

16

(*) Rome (Italy)

31/03/2023

EUR

3,000,000

35

153

118

13

25

9

14

31/12/2023

EUR

9,800,000

77

86

9

6

50

39

28

31/12/2022

EUR

918,037,500

1,268

1,571

303

142

33

418

401

AMSH B.V.

POLO STRATEGICONAZIONALE SPAROTORSIM SRL(*)

Sesto Calende(Italy)THALES ALENIA SPACE(*) Cannes (France)
S.A.S

TOTAL EQUITY INVESTMENTS IN ASSOCIATES(*): joint control

334

1,981

Separate Financial Statements at 31 December 2023
Appendix no.2 (€mil.) - LIST OF EQUITY INVESTMENTS

3/4

Consortiums
Name

Office

Total
ReportingShare capital Net Equity
Currency
Assetsdate(total)(€mil.)(€mil.)

Total
Liabilities(€mil.)

EquityProfitattributable Carrying
Ownership(loss)
to theamount%(€mil.)
Company(€mil.)(€mil.)

CONS. ELIS PER LA
FORMAZIONEPROFESSIOALE
SUPERIORE SCRL

Rome (Italy)

31/12/2022

EUR

51,000

-

10

10

-

0.10

-

-

CONAI - CONSORZIONAZIONALEIMBALLAGGIRome (Italy)

31/12/2022

EUR

15,073,170

26

83

57

1

0.02

-

-

CONSORZIO BI-REX

Bologna (Italy)

31/12/2022

EUR

235,000

-

7

7

-

0.45

-

-

CONSORZIO CREO CENTRO RICERCHEELETTRONICHE

L'Aquila (Italy)

31/12/2023

EUR

774,685

-

2

2

-

99

-

1

CONS. ERIONPROFESSIONAL

Milan (Italy)

31/12/2023

EUR

3,787,621

1

1

-

1

0.02

-

-

CONSORZIO IANUA

Genoa (Italy)

31/12/2022

EUR

49,716

-

-

-

-

16.67

-

-

CONS. IMPRENDITORIGIUGLIANO - ASI

Giugliano (Italy)

31/12/2022

EUR

50,000

-

1

1

-

15.15

-

-

CONSORZIO KIDS

Rome (Italy)

31/12/2023

EUR

100,000

-

-

-

-

90

-

-

CONS. PER L'ENERGIAVARESE - ENERGI.VA

Varese (Italy)

31/12/2022

EUR

80,242

-

-

-

-

0.67

-

-

CONS. LEONARDOSKILLS AND TRAINING

Naples (Italy)

31/12/2022

EUR

211,123

1

3

2

-

64.81

1

-

CONSORZIOHYPERBUILDERS

Rome (Italy)

n.d

EUR

-

-

-

-

3.78

-

-

CONS. SISTEMASOLDATO SICURO

Rome (Italy)

31/12/2023

EUR

40,000

-

-

-

-

65

-

-

CONSORZIO TESSERA

Venice (Italy)

31/12/2022

EUR

40,000

-

-

-

-

90

-

-

E-NET SERVIZI DIPRESIDIO E ASSISTENZATECNICA (E-SPAT)

Rome (Italy)

31/12/2022

EUR

10,000

-

3

3

-

92

-

-

G.E.I.E EUROTORP

Vallauris (France)

31/12/2016

EUR

n.d.

-

-

-

-

50

-

-

TICOM - CONS. PER LETECNOL.
DELL'INFORMAZ.E
COMUNICAZ.

Campi Bisenzio(Italy)31/12/2022

EUR

10,000

-

-

-

-

100

-

-

n.d.

TOTAL EQUITY INVESTMENTS IN CONSORTIUMS

335

1

Separate Financial Statements at 31 December 2023
Appendix no.2 (€mil.) - LIST OF EQUITY INVESTMENTS

4/4

Other companies
Name

Office

Total
ReportingShare capital Net Equity
Currency
Assetsdate(total)(€mil.)(€mil.)

Total
Liabilities(€mil.)

EquityProfitattributable Carrying
Ownership(loss)
to theamount%(€mil.)
Company(€mil.)(€mil.)

A4ESSOR S.A.S

Gennevilliers(France)

31/12/2022

EUR

123,100

1

58

57

-

18.77

-

-

AGGREG. PUBL-PRIV.
SULLA LOGISTICA
MARE-TERRA SCARL

Naples (Italy)

31/12/2022

EUR

81,000

-

1

-

-

7.69

-

-

CANARY BIT AB

Sollentuna(Sweden)31/12/2022

SEK

29,412

0

0

-

-

15

-

1

C.I.R.A. (CENTROITALIANO DI RICERCHEAEROSPAZIALI) - SCPA

Capua (Italy)

31/12/2022

EUR

985,224

108

154

47

2

12

13

-

CENTRO PER GLI STUDIDI TECNICA NAVALECETENA SPA

Genoa (Italy)

31/12/2022

EUR

1,000,000

10

38

28

1

2.60

-

-

COMPAGNIA AEREAITALIANA SPA

Rome (Italy)

31/12/2022

EUR

3,526,846

10

34

25

-

0.01

-

-

COMPETENCE
INDUSTRY
MANUFACTURING 4.0
S.C. A R.L.

Turin (Italy)

31/12/2022

EUR

3,460,000

4

16

12

-

4.31

-

-

DISTRETTOAEREOSPAZIALE DELLASARDEGNA S.C.A R.L.

Cagliari (Italy)

31/12/2022

EUR

97,112

-

-

-

-

5.55

-

-

DISTRETTO LIGURE
DELLE TECNOLOGIEMARINE S.C.A R.L.

La Spezia (Italy)

31/12/2022

EUR

1,140,000

1

9

8

-

9.80

-

-

DISTRETTOTECNOLOGICOAEROSPAZIALE DELLA
CAMPANIA S.C.A R.L.

Capua (Italy)

31/12/2022

EUR

827,500

1

7

6

-

3.69

-

-

DISTRETTOTECNOLOGICOAEROSPAZIALE S.C.A
R.L.

Brindisi (Italy)

31/12/2022

EUR

150,000

2

13

11

-

18.74

-

-

EUROPEAN
ORGANISATION FOR
SECURITY S.C.R.L.

Bruxelles(Belgium)

31/12/2022

EUR

72,000

-

2

2

-

2.38

-

-

EUROPEAN SATELLITE
NAVIGATION
INDUSTRIES GMBH (IN
LIQ.)

Ottobrunn(Germany)

12/11/2020

EUR

264,000

-

3

3

-

18.94

-

-

FLYINGBASKET SRL

Bolzano (Italy)

31/12/2022

EUR

14,426

2

3

1

(1)

8.53

-

I.M.A.S.T. S.C. A R.L.

Naples (Italy)

31/12/2022

EUR

689,000

2

5

3

-

7.27

-

-

ISTITUTO DELLA
ENCICL. ITALIANATRECCANI SPA

Rome (Italy)

31/12/2022

EUR

62,124,105

89

101

12

-

2.72

2

2

PANAVIA AIRCRAFT
GMBH

Hallbergmoos(Germany)

31/12/2022

EUR

10,225,838

41

180

139

-

15

6

3

S.E.C.B.A.T. SARLSaint - Cloud(France)

31/12/2022

EUR

32,000

1

15

14

-

13.55

-

-

SIIT SCPA

Genoa (Italy)

31/12/2022

EUR

600,000

1

2

1

-

12.10

-

-

SKYDWELLER AERO INC

Delaware (USA)31/12/2022

USD

474,004

37

59

22

2

16.54

6

-

SUPERJET
INTERNATIONAL SPA

Tessera (Italy)

n.d.

EUR

32,984,147

-

-

-

-

10

-

-

TEC DATABENC S.C.A
R.L.

Naples (Italy)

31/12/2022

EUR

30,000

-

-

-

-

3.33

-

-

VITROCISET
JADWALEAN LTD

Riyadh (Saudi
Aradia)n.d.

RIAL
SAUDITA

2,000,000

-

-

-

-

45

-

-

VOLTA STRUCTURAL
ENERGY SRLMilan (Italy)

31/12/2022

EUR

15,309

-

-

-

-

19.05

-

1

336

TOTAL EQUITY INVESTMENTS IN OTHER COMPANIES7TOTAL EQUITY INVESTMENTS

9,426

Separate Financial Statements at 31 December 2023

Appendix no.3 (€ mil.)- NON-CURRENT RECEIVABLES
31 December 2022
Movements of the year
Residual
Carrying
Reimbourse
nominal Impairment
Disbursement Reclass.
amountments
amountReceivables
45
45- Receivables from
88
88
48
(5)
(1)
subsidiaries
Total receivables
133
133
48
(5)
(1)

Appendix no. 4 (€ mil.) - ASSETS BROKEN DOWN BY MATURITY
31 December 2022
Amounts duefrom 2nd to 5th
beyond 5th year
subsequent year
Receivables
423
Non-current loans and receivables
62
26
from relates parties
Other non current assets
33
Total receivables and non-current
137
29
assetsAppendix no.5 (€ mil.) - FOREIGN CURRENCY ASSETS
In foreign
currency
Receivables
Non-current loans and receivablesfrom relates parties
Other non current assets
Total receivables and other noncurrent assets
Deferred tax assets
Total non-current assets
Loans and receivables
Loans and receivables form relatedparties
Trade receivables
Trade receivables from relatedparties
Other assets
Other receivables from relatedparties
Income tax receivables
Cash and cash equivalents
Total current assets

130

-

130

175

-

175

31 December 2023
Amounts due

Totalfrom 2nd to 5th
beyond 5th year
subsequent year
45
42
3

Total
45

88

50

80

130

33

31

-

31

166

123

83

206

31 December 2022
in Euro31 December 2023
Residual
Carrying
nominal Impairment
amountamount45
45

In foreign
currency

Total

31 December 2023
in Euro

Total

-

45

45

-

45

45

5

83

88

-

130

130

-

33

33

-

31

31

5

161

166

-

206

206

5

841
1,002

841
1,007

-

865
1,071

865
1,071

-

49

49

-

14

14

200

77

277

298

209

507

200
413

126
1,575

326
1,988

298
688

223
1,502

521
2,190

268

865

1,133

383

1,055

1,438

681
30

2,440
431

3,121
461

1,071
23

2,557
465

3,628
488

1

26

27

1

24

25

31
7
113
1,032

457
27
927
3,977

488
34
1,040
5,009

24
8
106
1,507

489
52
1,685
5,006

513
60
1,791
6,513

337

Separate Financial Statements at 31 December 2023
Appendix no.6 (€ mil.) - ASSETS BY GEOGRAPHICAL AREA
31 December 2022
Italy
Rest ofNorth
Rest of
Total
Europe America the world
Receivables
1629
45
Non-current loans and receivables
83
0
5
88
from relates parties
Other non current assets
33
33
Total receivables and other non132
29
5
166
current assets
Deferred tax assets
841
841
Total non-current assets
973
29
5
1,007
Loans and receivables
13
36
49
Loans and receivables form related
38
238
1
277
parties
51
274
1
326
Trade receivables
456
422
160
950
1,988
Trade receivables from related
355
601
130
47
1,133
parties
811
1,023
290
997
3,121
Other assets
425
6
30
461
Other receivables from related
3
23
1
27
parties
428
29
1
30
488
Income tax receivables
27
734
Cash and cash equivalents
1,013
1
26
1,040
Total current assets
2,330
1,327
292
1,060
5,009

Appendix no.7 (€ mil.) - LIABILITIES BROKEN DOWN BY MATURITY
31 December 2022
Amounts duefrom 2nd to 5th
beyond 5th year
subsequent year
Other non-current liabilities
297
436
Loans and borrowings (non current)
2,486
308
Non-current loans and borrowings to473
158
related parties
Total non-current liabilities
3,256
902

338

Italy

31 December 2023
Rest ofNorth
Rest of
Total
Europe America the world
16
29
45

130

-

-

-

130

31

-

-

-

31

177

29

-

-

206

865
1,042
3

29
2

-

9

865
1,071
14

35

471

1

-

507

38
414

473
440

1
173

9
1,163

521
2,190

327

750

200

161

1,438

741
397

1,190
49

373
2

1,324
40

3,628
488

1

-

25

3
1
378

40
5
24
1,402

513
60
1,791
6,513

24
421
53
1,764
3,017

49
1
3
1,716

31 December 2023
Amounts due

Totalfrom 2nd to 5th
beyond 5th year
subsequent year
733
303
460
2,794
1,896
254

Total
763
2,150

631

415

120

535

4,158

2,614

834

3,448

Separate Financial Statements at 31 December 2023
Appendix no.8 (€ mil.) - FOREIGN CURRENCY LIABILITIESIn foreign
currency
Loans and borrowings (non current)
Non-current loans and borrowings torelated parties
Deferred tax assets
Other non-current liabilities
Other non-current liabilities torelated parties
Total non-current liabilities
Loans and Borrowings
Related-parties loans and borrowings
Trade payables
Trade payables to related parties
Other liabilities
Other payables to related parties
Income tax payables
Total current liabilities

31 December 2022
in EuroIn foreign
currency

Total

31 December 2023
in Euro

Total

2

2,792

2,794

-

2,150

2,150

58

573

631

54

481

535

60
20

3,365
87
556

3,425
87
576

54
20

2,631
96
516

2,685
96
536

157

-

157

152

75

227

237

4,008

4,245

226

3,318

3,544

3
1,158
1,161
266
172
438
24
24
1,623

100
1,178
1,278
1,542
495
2,037
1,308
81
1,389
64
4,768

103
2,336
2,439
1,808
667
2,475
1,332
81
1,413
64
6,391

1
1,122
1,123
204
256
460
13
35
48
3
1,634

711
1,454
2,165
1,772
570
2,342
1,171
93
1,264
5,771

712
2,576
3,288
1,976
826
2,802
1,184
128
1,312
3
7,405

339

Separate Financial Statements at 31 December 2023
Appendix no. 9 (€ mil) - LIABILITIES BY GEOGRAPHICAL AREA
31 December 2022
Italy
Rest ofNorth
Rest ofEurope America the world
Loans and borrowings (non current)
Non-current loans and borrowings torelated parties
Deferred tax assets
Other non-current liabilities
Other non-current liabilities torelated parties
Total non-current liabilities
Loans and Borrowings
Related-parties loans and borrowings
Trade payables
Trade payables to related parties
Other liabilities
Other payables to related parties
Income tax payables
Total current liabilities

Total

31 December 2023
Rest ofNorth
Rest ofEurope America the world

Italy

Total

2,310

483

-

1

2,794

1,089

1,061

-

-

2,150

573

-

58

-

631

481

-

54

-

535

2,883
87
556

483
-

58
20

1
-

3,425
87
576

1,570
96
516

1,061
-

54
20

-

2,685
96
536

-

-

157

-

157

75

-

152

-

227

3,526

483

235

1

4,245

2,257

1,061

226

-

3,544

78
460
538
1,291
218
1,509
1,275
81
1,356
63
3,466

22
1,860
1,882
192
305
497
14
14
2,393

136
71
207
207

3
16
19
189
73
262
43
43
1
325

103
2,336
2,439
1,808
667
2,475
1,332
81
1,413
64
6,391

671
564
1,235
1,398
213
1,611
1,123
93
1,216
4,062

41
1,996
2,037
340
401
741
6
35
41
1
2,820

122
100
222
23
23
245

16
16
116
112
228
32
32
2
278

712
2,576
3,288
1,976
826
2,802
1,184
128
1,312
3
7,405

For the Board of Directors
The Chairman(Stefano Pontecorvo)

340

Separate Financial Statements at 31 December 2023

STATEMENT ON THE SEPARATE FINANCIAL STATEMENTS PURSUANT TOART. 154-BIS, PARAGRAPH 5 OF LEGISLATIVE DECREE 58/98 AS
AMENDED
1. The undersigned Roberto Cingolani as the Chief Executive Officer and General Manager andAlessandra Genco as the Officer in charge of Financial Reporting for Leonardo SpA, certify, in
accordance with Article 154-bis, paragraphs 3 and 4 of Legislative Decree 58 of 24 February 1998:•

the appropriateness of the financial statements with regard to the nature of the business and•the effective application of administrative and accounting procedures in preparing the separate
financial statements at 31 December 2023.

2. In this respect it is noted that no significant matters arose.
3. It is also certified that:
3.1 The separate financial statements:•

were prepared in accordance with International Financial Reporting Standards endorsed by theEuropean Community pursuant to EU Regulation 1606/2002 of the European Parliament and of theCouncil of 19 July 2002;•

correspond to the entries in the books and accounting records;•

were prepared in compliance with Article 154-ter of the mentioned Legislative Decree no. 58/98 as
amended and supplemented, and provide a true and fair view of the financial position and results ofoperations of the issuer.

3.2 The Report on Operations includes a reliable analysis of the performance and the operating result, as
well as the position of the issuer, together with a description of the main risks and uncertainties it is
exposed to.
This statement is also made pursuant to and for the purposes of Article 154-bis, paragraph 2, of Legislative
Decree 58 of 24 February 1998.
Rome, 12 March 2024

Chief Executive Officer andOfficer in charge of financial reporting

General Manager(Alessandra Genco)(Roberto Cingolani)341

Separate Financial Statements at 31 December 2023

Independent Auditor’s report on the separate financial statements as at
31 December 2023

342

Leonardo S.p.A.
Financial statements as at December 31, 2023
Independent auditor’s report pursuant to article 14 ofLegislative Decree n. 39, dated 27 January 2010, and article
10 of EU Regulation n. 537/2014

EY S.p.A.
Via Lombardia, 3100187 Roma

Tel: +39 06 324751
Fax: +39 06 324755504
ey.comIndependent auditor’s report pursuant to article 14 of Legislative
Decree n. 39, dated January 27, 2010 and article 10 of EU Regulation
n. 537/2014(Translation from the original Italian text)

To the Shareholders of
Leonardo S.p.A.

Report on the Audit of the Financial Statements
OpinionWe have audited the financial statements of Leonardo S.p.A. (the Company), which comprise thestatement of financial position as at December 31, 2023, the separate income statement, thestatement of comprehensive income, the statement of cash flows and the statement of changes inequity for the year then ended, and notes to the financial statements, including material accounting
policy information.
In our opinion, the financial statements give a true and fair view of the financial position of theCompany as at December 31, 2023, and of its financial performance and its cash flows for the year
then ended in accordance with International Financial Reporting Standards as adopted by theEuropean Union and with the regulations issued for implementing art. 9 of Legislative Decree n.
38/2005.

Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISA Italia). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the
Audit of the Financial Statements section of our report. We are independent of the Company inaccordance with the regulations and standards on ethics and independence applicable to audits offinancial statements under Italian Laws. We believe that the audit evidence we have obtained issufficient and appropriate to provide a basis for our opinion.

Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial statements of the current period. These matters were addressed in thecontext of our audit of the financial statements as a whole, and in forming our opinion thereon, andwe do not provide a separate opinion on these matters.

EY S.p.A.
Sede Legale: Via Meravigli, 12 – 20123 Milano
Sede Secondaria: Via Lombardia, 31 – 00187 Roma
Capitale Sociale Euro 2.600.000,00 i.v.
Iscritta alla S.O. del Registro delle Imprese presso la CCIAA di Milano Monza Brianza Lodi
Codice fiscale e numero di iscrizione 00434000584 - numero R.E.A. di Milano 606158 - P.IVA 00891231003
Iscritta al Registro Revisori Legali al n. 70945 Pubblicato sulla G.U. Suppl. 13 - IV Serie Speciale del 17/2/1998
A member firm of Ernst & Young Global Limited

We identified the following key audit matters:
Key Audit Matter
Recognition of revenues and losses from longterm contracts with customers

Audit response

Revenues from long-term contracts withcustomers are recognized “over-time” using an
input method for measuring progress towards
complete satisfaction of performanceobligations based on the percentage ofcompletion obtained from the ratio of incurredcosts on the total expected costs for thecontract over the life of the project (cost to cost
method).
The estimation of the total expected project
costs is, by its nature, complex andcharacterized by significant uncertainties as it
may be impacted by many factors, including theability to fulfill the obligations assumed towards
customers, which may also result in penalties
and additional expenses for significant amounts.

Our audit procedures in response to the key
audit matter included, among others:• the understanding of the criteria applied
for the recognition of revenues fromlong-term contracts with customers;• the assessment of the process and key
controls over the recognition ofrevenues from long-term contracts withcustomers;• for a sample of contracts we performed:(i) testing of relevant contractual terms
and conditions in order to verify
whether those were adequately
considered in management
estimates;(ii) testing of the reasonableness of key
assumptions underlying theestimation of the life-of-project
costs based on inquiries, analysis of
any communications with customers
and comparative analysis;(iii) comparative analysis between
actual figures and estimates madein previous periods in order toassess the accuracy ofmanagement’s forecasting;(iv) testing of incurred costs and their
allocation to proper on-going
contracts.

Therefore, the estimate involves a high degreeof judgment by Directors that may significantly
affect the contract revenues recognition andany loss at completion in cases of negative
margin expectation. Accordingly, we identified
this area as a key audit matter.
The disclosures related to the criteria applied forthe recognition and measurement of revenues
and margins on long-term contracts withcustomers are included in notes “3. Accounting
policies”, “14. Contract assets and liabilities”,“22. Provisions for risk and charges andcontingent liabilities” and “27. Revenues”.

Lastly, we have reviewed the disclosuresprovided in the notes to the financial statements
regarding this key audit matter.

Test of the recoverability of goodwill andequity investments
Goodwill as at December 31,2023 amounts toEuro 708 million; Equity investments amount toEuro 9.426 million.
Directors tested for impairment the Cash
Generating Units (CGUs) to which goodwill andequity investments have been allocated in order

Our audit procedures in response to the key
audit matter included, among others:• the assessment of the procedure appliedin the performance of the impairment
test as approved by the Directors;• testing of the criteria applied for
identifying the CGUs and allocatingto identify any impairment loss in respect of
their recoverable amount.
The recoverable amount of each CGU isdetermined using the value in use method and it
is based on complex assumptions that inherently
involve a degree of judgment by Directors, withreference to the expected cash flows over theperiod considered in the Business Plan 20242028, to the estimate of the terminal value andthe determination of the long-term growth anddiscount rates.
Because of the judgement involved and thecomplexity of the assumptions underlying theestimation of the recoverable amount of
goodwill and equity investments, we identified
this area as a key audit matter.
Disclosures on the assumptions and theestimations adopted when performing theimpairment test are included in the notes “3.
Accounting policies“, “8. Intangible Assets” and“11. Equity investments”.

•
•

•

•
•

relevant assets and liabilities to them;
the assessment of the presence of any
impairment indicator on therecoverability of equity investments;
the analysis of the expected cash flows
of each CGU and testing of theirconsistency with the expected cash
flows resulting from the Business Plan
2024-2028;
the assessment of the reasonablenessof the estimates made by Directors, also
by comparing actual figures andestimates made in previous periods;
the assessment of the long-term growthand discount rates;
the assessment of the sensitivity
analysis performed by Directors on key
assumptions underlying the impairment
test.

In performing our procedures we involved ourexperts in valuation techniques.
Lastly, we have reviewed the disclosuresprovided in the notes to the financial statements
regarding this key audit matter.

Recognition and subsequent measurement of
non-recurring costs and development costs
Non-recurring costs and developments costs
capitalized as intangible assets as at December
31, 2023 amount to an aggregate of Euro
2.120 million.
The initial recognition of these assets and thesubsequent assessment of their recoverability
are based on complex assumptions that
inherently involve a degree of judgment by
Directors as influenced by many factors
including the time horizon of the productbusiness plans and management’s ability toforecast the commercial success of theunderlying technologies.
Because of the judgement involved and thecomplexity of the underlying assumptions, we
identified this area as a key audit matter.
Disclosures on the assumptions and theestimations adopted in the recognition and2

Our audit procedures in response to the key
audit matter included, among others:• understanding of the processes appliedin recognizing for non-recurring costs
and development costs and the process
related to the assessment of theirrecoverability;• for a sample of development programs
we performed:(i) substantive procedures aimed atverifying internal and external costs
recognized during the period;(ii) assessment of the reasonablenessof key assumptions underlying the
product business plans;(iii) testing of the discount rates;(iv) assessment of the sensitivity
analysis performed by Directors on
the key assumptions underlying theimpairment test.

subsequent measurement of non-recurring costs
and development costs are included in the notes“3. Accounting policies“ and “8. Intangible
Assets”.

In performing our procedures we involved ourexperts in valuation techniques.
Lastly, we have reviewed the disclosuresprovided in the notes to the financial statements
regarding this key audit matter.

Responsibilities of Directors and Those Charged with Governance for the Financial
Statements
The Directors are responsible for the preparation of the financial statements that give a true and fairview in accordance with International Financial Reporting Standards as adopted by the European
Union and with the regulations issued for implementing art. 9 of Legislative Decree n. 38/2005, and,within the terms provided by the law, for such internal control as they determine is necessary toenable the preparation of financial statements that are free from material misstatement, whether due
to fraud or error.
The Directors are responsible for assessing the Company’s ability to continue as a going concern and,
when preparing the financial statements, for the appropriateness of the going concern assumption,and for appropriate disclosure thereof. The Directors prepare the financial statements on a going
concern basis unless they either intend to liquidate the Company or to cease operations or have norealistic alternative but to do so.
The statutory audit committee (Collegio Sindacale) is responsible, within the terms provided by thelaw, for overseeing the Company’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s reportthat includes our opinion. Reasonable assurance is a high level of assurance, but is not a guaranteethat an audit conducted in accordance with International Standards on Auditing (ISA Italia) will always
detect a material misstatement when it exists. Misstatements can arise from fraud or error and areconsidered material if, individually or in aggregate, they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with International Standards on Auditing (ISA Italia), we haveexercised professional judgment and maintained professional skepticism throughout the audit. In
addition:• we have identified and assessed the risks of material misstatement of the financial
statements, whether due to fraud or error, designed and performed audit procedures
responsive to those risks, and obtained audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatement resulting
from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control;• we have obtained an understanding of internal control relevant to the audit in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control;• we have evaluated the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by the Directors;

3

•

•

we have concluded on the appropriateness of Directors’ use of the going concern basis ofaccounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Company’s ability tocontinue as a going concern. If we conclude that a material uncertainty exists, we are required
to draw attention in our auditor’s report to the related disclosures in the financial statements
or, if such disclosures are inadequate, to consider this matter in forming our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause the Company to cease to continue as a going
concern;
we have evaluated the overall presentation, structure and content of the financial statements,
including the disclosures, and whether the financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.

We have communicated with those charged with governance, identified at an appropriate level as
required by ISA Italia, regarding, among other matters, the planned scope and timing of the audit andsignificant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
We have provided those charged with governance with a statement that we have complied with the
ethical and independence requirements applicable in Italy, and we have communicated them all
matters that may reasonably be thought to bear on our independence, and where applicable, theactions taken to eliminate relevant risks or the safeguard measures applied.
From the matters communicated with those charged with governance, we have determined thosematters that were of most significance in the audit of the financial statements of the current period
and are therefore the key audit matters. We have described these matters in our auditor’s report.

Additional information pursuant to article 10 of EU Regulation n. 537/14
The Shareholders of Leonardo S.p.A., in the general meeting held on May 20, 2020, engaged us toperform the audits of the financial statements and consolidated financial statements for each of theyears ending December 31, 2021 to December 31, 2029.
We declare that we have not provided prohibited non-audit services, referred to article 5, par. 1, of EU
Regulation n. 537/2014, and that we have remained independent of the Company in conducting theaudit.
We confirm that the opinion on the financial statements included in this report is consistent with thecontent of the additional report to the audit committee (Collegio Sindacale) in their capacity as audit
committee, prepared pursuant to article 11 of the EU Regulation n. 537/2014.

Report on compliance with other legal and regulatory requirements
Opinion on the compliance with Delegated Regulation (EU) 2019/815
The Directors of Leonardo S.p.A. are responsible for applying the provisions of the European
Commission Delegated Regulation (EU) 2019/815 for the regulatory technical standards on thespecification of a single electronic reporting format (ESEF – European Single Electronic Format) (the“Delegated Regulation”) to the financial statements, to be included in the annual financial report.

4

We have performed the procedures under the audit standard SA Italia n. 700B, in order to express an
opinion on the compliance of the financial statements as at December 31, 2023 with the provisions of
the Delegated Regulation.
In our opinion, the financial statements as at December 31, 2023 have been prepared in the XHTML
format in compliance with the provisions of the Delegated Regulation.

Opinion pursuant to article 14, paragraph 2, subparagraph e), of Legislative
Decree n. 39 dated January 27, 2010 and of article 123-bis, paragraph 4, ofLegislative Decree n. 58, dated February 24, 1998
The Directors of Leonardo S.p.A. are responsible for the preparation of the Report on Operations andof the Report on Corporate Governance and Ownership Structure of Leonardo S.p.A. as at December
31, 2023, including their consistency with the related financial statements and their compliance withthe applicable laws and regulations.
We have performed the procedures required under audit standard SA Italia n. 720B, in order toexpress an opinion on the consistency of the Report on Operations and of specific information
included in the Report on Corporate Governance and Ownership Structure as provided for by article
123-bis, paragraph 4, of Legislative Decree n. 58, dated February 24, 1998, with the financial
statements of Leonardo S.p.A. as at December 31, 2023 and on their compliance with the applicablelaws and regulations, and in order to assess whether they contain material misstatements.
In our opinion, the Report on Operations and the above mentioned specific information included in
the Report on Corporate Governance and Ownership Structure are consistent with the financial
statements of Leonardo S.p.A. as at December 31, 2023 and comply with the applicable laws andregulations.
With reference to the statement required by art. 14, paragraph 2, subparagraph e), of Legislative
Decree n. 39, dated January 27, 2010, based on our knowledge and understanding of the entity andits environment obtained through our audit, we have no matters to report.
Rome, March 15, 2024
EY S.p.A.
Signed by: Riccardo Rossi, Auditor
The accompanying financial statements of Leonardo S.p.A. constitute a non-official version which is
not compliant with the provisions of the Commission Delegated Regulation (EU) 2019/815. This
independent auditor’s report has been translated into the English language solely for the convenienceof international readers. Accordingly, only the original text in Italian language is authoritative.

5

Separate Financial Statements at 31 December 2023

Report of the Board of statutory Auditors to the Shareholders’ Meeting

343

REPORT OF THE BOARD OF STATUTORY AUDITORSTO THE SHAREHOLDERS’ MEETING OF LEONARDO S.P.A.
CALLED TO APPROVE THE 2023 FINANCIAL STATEMENTS(PURSUANT TO ART. 153 OF LEGISLATIVE DECREE NO. 58/1998)
To the Shareholders' Meeting of the company Leonardo S.p.a.
Dear Shareholders,the Board of Statutory Auditors of the company Leonardo S.p.a. (hereinafter also “theCompany”) hereby submits its report pursuant to Article 153 of Legislative Decree No. 58/1998(T.U.F. - Testo Unico della Finanza, Consolidated Law on Financial Intermediation) to reporton the activity performed.
The Board of Statutory Auditors serving at present was appointed by the Shareholders’Meeting on 19 May 2021 and will terminate its mandate with the Shareholders' Meeting toapprove the Financial Statements as at 31 December 2023.
The Board of Statutory Auditors consists of the following members: Mr Luca Rossi,
Chairman, Ms Anna Rita de Mauro, Ms Sara Fornasiero, Mr Leonardo Quagliata and Mr Amedeo
Sacrestano, Regular Auditors.
The Shareholders’ Meeting held on 20 May 2020 appointed the independent auditing firm
EY S.p.A. (hereinafter also the “Auditing Firm”), to carry out the statutory audit of accounts
starting from 2021 and for the period from 2021 to 2029.
On 9 May 2023, the Shareholders’ Meeting, after setting the number of Board members at
twelve, proceeded with the appointment of the new Board of Directors of the Company for thethree-year period 2023 – 2025 and of the Chairman. Again on 9 May on 9 May 2023 the Boardof Directors appointed the Chief Executive Officer and General Manager assigning powers to
him and to the Chairman. On 23 May 2023, the internal Board committees were set up inaccordance with the Corporate Governance Code for listed companies, and the Lead
Independent Director was appointed. On 28 July 2023, the Surveillance Body was appointed
pursuant to Legislative Decree 231/2001.
Furthermore, on 9 May 2023, the Board of Directors approved the creation, effective from
1 June 2023, of the new General Business & Operations Department.
During the year ended on 31 December 2023 the Board of Statutory Auditors, also in its
capacity as Internal Control and Auditing Committee, carried out the checks and othersupervisory activities in compliance with the relevant laws and regulations in force, as well as
the Corporate Governance Code, the Rules of Conduct of the Board of Statutory Auditors of1

listed companies issued by the National Council of Chartered Accountants and Accounting
Experts and the Communications issued by CONSOB regarding corporate checks and theactivities of the Board of Statutory Auditors.
With effect from 1 June 2022, Leonardo S.p.a. is subject to the audit of the Court of Auditors
pursuant to Art. 12 of Law No. 259 of 21 March 1958. We point out that, by virtue of theprovisions of Art. 12 of Law No. 259/1958, the Delegated Judge for the audit of the financialtransactions attends the meetings of the Board of Directors and of the Board of Statutory
Auditors of Leonardo S.p.a.
This report has been prepared in accordance with the instructions provided by CONSOB
with Communication DEM/1025564 of 6 April 2001 as amended and supplemented.
***

The Board of Statutory Auditors has adopted its own Rules of Procedure which govern therole, organization and the methods of functioning of the body, in line with the mainorganizational aspects of Leonardo’s corporate governance model, in the light of the principles
and rules laid down by the Corporate Governance Code and by the Rules of conduct of theboards of statutory auditors of listed companies.
During the year the Board of Statutory Auditors – in the meeting held on 26 February 2024
– provided for the self-assessment of the independence of its members, whose outcome
confirmed the existence of the independence requirements for all its members. It is hereby
acknowledged that no Statutory Auditor has had any interests, on his/her own behalf or on
behalf of third parties, in any transaction of the Company during the financial year and thatthe members of the Board of Statutory Auditors have complied with the cumulation of offices
required by Art. 144-terdecies of the Issuers’ Regulation.
As required by the Corporate Governance Code, the Board of Statutory Auditors, within thescope of the tasks assigned to it by law, verified the correct application of the assessment
criteria and procedures adopted by the Board of Directors to assess the independence of its
members, on the occasion of the renewal of the Board of Directors as well as upon the annual
verification about the existence of the independence requirements, as per the press releasesof 9 May 2023 and 29 February 2024.
As in previous years, the Board carried out a self-assessment process relating to the 2023
financial year, thus making use of the support of the external consultant (Eric Salmon &Partners S.r.l.) for the fourth year running. This self-assessment process was aimed atgathering the opinions of the members of the Board of Statutory Auditors regarding both thework and the composition of the Board itself, in line with the provisions of the Rules of Conductof the Board of Statutory Auditors of listed companies issued by the National Council ofChartered Accountants and Accounting Experts. The results, the assessments carried out and2the conclusive instructions of the Board of Statutory Auditors were discussed collectively andsubsequently collected in the document called "Analysis of the results and comments of the
Statutory Auditors", on the basis of which an executive summary was prepared, sent to theBoard of Directors and whose content was incorporated in the Report on Corporate Governanceand Shareholder Structure. On completion of this self-evaluation, the Board of Statutory
Auditors drafted, supported by the aforesaid external advisor, a document containing its
Guidelines to the Shareholders for the renewal of the monitoring body.
***

The Board of Statutory Auditors regularly met during the year, minuting the control
activities carried out. As part of the activities and tasks assigned to the Board of Statutory
Auditors while implementing the relevant regulations, the Board of Statutory Auditors:a)held twenty-two meetings in 2023 and seven meetings from the beginning of 2024 to

the date of this report and carried out audits and gathered information from the heads of thedifferent corporate functions, periodically meeting the top positions for an exchange of
information on the performance of the corporate transactions, thus acquiring the knowledge
necessary to monitor, pursuant to Art. 149 of T.U.F., the compliance with the law and thememorandum of association, the compliance with the principles of correct management andthe adequacy of the organizational structure, the internal control system, the administrativeaccounting system, also pursuant to Art. 2086 of the Italian Civil Code and of Legislative
Decree No. 14 of 12 January 2019 (Business Crisis and Insolvency Code), as well as theimplementation of the corporate governance rules from the codes of conduct and the adequacyof the instructions given to the subsidiaries, without any remark; relations with the Company's
personnel were inspired by mutual collaboration in compliance with the subjective roles andareas of competence and each body or function of the Company has fulfilled the reporting
obligations provided for by the applicable regulation;b)attended the Shareholders’ Meeting held on 9 May 2023 in its ordinary session, towhich the Shareholders were able to intervene exclusively through the designatedrepresentative, pursuant to Art. 106 of Law Decree No. 18/2020, subsequently converted into
Law No. 27/2020, whose efficacy was extended until 31 July 2023 by Law Decree No. 198 of
29 December 2022, converted with amendments by Law No. 14 of 24 February 2023;c)

attended the thirteen meetings held by the Board of Directors during 2023 and thethree meetings held from the beginning of 2024 to the date of this report, during which it was
informed of the work done and of the financial transactions which are materially important interms of the Company’s assets and financial position carried out by the Company and its
subsidiaries, thus obtaining adequate and timely information on their performance;3d)attended the eleven meetings of the Control and Risks Committee, the eight meetingsof the Remuneration Committee, the nine meetings of the Nomination and GovernanceCommittee, the eight meetings of the Sustainability and Innovation Committee held in 2023
and the four meetings of the Control and Risks Committee, the three meetings of theRemuneration Committee, the three meetings of the Nomination and Governance Committee,
the five meetings of the Sustainability and Innovation Committee held from the beginning of2024 to the date of this report, thus acknowledging that the above-mentioned Committees
have worked in compliance with the provisions of the Corporate Governance Code and theirown Rules of Procedure.
An effective flow of information is in place between the Board of Statutory Auditors, theBoard of Directors, the internal Committees and the Company’s offices.
The collaboration and discussions with the Control and Risks Committee, also through theorganization of joint meetings on topics of common interest, have been fruitful and effective
and have, among other things, allowed to complete the analysis process of the Board of
Statutory Auditors on risk control and management, thus acquiring further information withrespect to that obtained through the constant contacts and meetings with the Chief Audit
Executive (“CAE”) and the Chief Risk Officer of the Company, as well as with the other persons
involved in any capacity in the internal control and risk management system including theGroup General Counsel and, following organizational changes, the Heads of the Compliance
O.U. and Legal Affairs O.U..
The Board of Statutory Auditors, in particular, acknowledges that during the meetings of
the Control and Risks Committee, checks were carried out, as established by the Corporate
Governance Code and the Committee's Rules of Procedure, regularly presented to the Boardof Statutory Auditors also as Internal Control and Auditing Committee, in particular monitoring
the adequacy and effectiveness of the Internal Control and Risks Management System, withrespect to the Company’s characteristics and the risk factor accepted by the Company and of
the Work Plan prepared by the CAE and referred to the audits of Leonardo planned for 2023
and carried out by the Group Internal Audit O.U. (“GIA”) in the relevant period (April 2023 –March 2024) after submission of the Plan to the Control and Risks Committee and then to theBoard of Directors. Furthermore, the Board of Statutory Auditors acknowledged that theControl and Risks Committee expressed its favourable opinion on 8 March 2024 on the annual
assessment of the adequacy of the Internal Control and Risks Management System on thebasis of the relevant results provided by the CAE in relation to what is provided for in the
Guidelines regarding the assessment process of the Internal Control and Risks Management
System adopted by the Board of Directors in February 2022.
Furthermore, the Board of Statutory Auditors acknowledged that the Board of Directors, on
11 March 2024, assessed, also in light of Art. 2086 of the Italian Civil Code, the adequacy of4the organizational, administrative and accounting structure of the Company and strategic
subsidiaries, also for the purpose of timely detection of the company's crisis and loss ofbusiness continuity, after having obtained the opinion of the Control and Risks Committee withspecific reference to the Internal Control and Risks Management System;e)

as part of the periodic meetings with the CAE, it acknowledged the results of the control

activities carried out in 2023 and concluded in the first months of 2024, in line with the audit
plan and the special audits carried out from time to time, following reports received from theCompany or requested by management. From the recurring audit activities, the opportunity
sometimes emerged to implement improvement actions on the processes examined that, after
being shared with the corporate management, were reflected in Action Plans whose
implementation was monitored by the GIA O.U. on a quarterly basis and whose results weretransmitted to the Top management. As for Special Audit activities required to the GIA O.U.
by management or the Whistleblowing Committee, the Board acknowledged that the resultsof some audits, in a few cases, led to the Leonardo management taking management initiatives
in order also to strengthen the Internal Control and Risk Management System with particularreference to corporate procedures. The Board also acknowledged the results of the "Quality
Assurance and Improvement Plan" (QAIP) of the GIA O.U. prepared in order to monitor andimprove the effectiveness, efficiency and quality of its activities; the results revealed, for all
the audits sampled, a General Compliance with international standards and best practices thatis the "highest compliance degree" required by the Institute of Internal Auditors. Furthermore,
the Board was informed that the GIA O.U. intends to develop, also for 2024, internal audit
activities on the quality of its work, through a new Quality Assurance & Improvement Plan.
The results of the 2023 Plan and the activities envisaged by the new 2024 QAIP were analyzed
by the Control and Risks Committee in the meeting of 24 January 2024 and explained to theBoard of Directors on 25 January 2024;
f)

received information about the activities carried out by the GIA O.U. in order toevaluate the operations of the Internal Control over Financial Reporting (hereinafter ICFR)
system at Leonardo S.p.a. and the companies falling under the scope of Law 262/2005. In
addition to the Test 262 activities for 2023, the Board was informed by the GIA O.U. about the
specific monitoring (the so-called “Detection Audit”), as an anti-fraud component of the ICFR
Model. Following the performance of these activities, the GIA O.U. informed the Board of
Statutory Auditors that no critical issues emerged such as to affect the reliability of the Internal
Control System with regard to Accounting and Financial Information;g)

received information about the Control Model on the Leonardo Non-Financial Reporting,designed also to allow the issue a “reasonable assurance” opinion by the independent auditing
firm in relation to a set of selected of indicators within the consolidated non-financial
statement;5h)periodically met with the Officer in charge of financial reporting;i)periodically met the Surveillance Body pursuant to Legislative Decree No. 231/2001;

j)received regular reports prepared by the Whistleblowing Committee based on the“Whistleblowing Management Guidelines” related to evidence taken from the activities carriedout every six months by the GIA O.U. or by other competent functions, assigned by the
Whistleblowing Committee. As part of this, we note that the statutory auditors are informedby the Surveillance Body at the same time as the members of the Whistleblowing Committee
about the reports received by the Company and of the relevant decisions;k)also participated, in the person of the Chairman, in the meetings of the Coordinating

and Consultative Body for the prevention of corruption, chaired by the Chairman of the Boardof Directors as coordinator and composed of the Chairman of the Control and Risks Committee,
the Chairman of the Surveillance Body and the Chairman of the Board of Statutory Auditors;
it was also informed of the activity carried out by the same Body within the framework of thereports that it periodically provides to the Board;l)

was informed of the activities carried out by the Anti-corruption organizational unit,

acknowledging the annual audit, by the Certification Body, of the ISO 37001:2016 (“Antibribery Management System”) certification;m)

was periodically updated regarding the main disputes of the Company and the Group,

thus monitoring their progress during the financial year;n)during 2023 and from the beginning of 2024 to the date of this report, received fromthe independent auditing firm information on the audit strategy, the areas of attention, thechecks performed and the related outcomes, as well as the essential issues encountered incarrying out the activity pursuant to the provisions of Art. 19 of Legislative Decree No. 39/2010
and Art. 11 of Regulation (EU) No. 537/2014;o)verified the full compliance with of the obligations regarding regulated, privileged or

required information by the Supervisory Authorities;p)received every six months from the Company, through the Legal, Corporate Affairs,

Compliance, Criminal Law and Anti-corruption organizational unit (and following theorganizational changes through the Legal Affairs O.U.), information on Transactions withRelated Parties initiated or concluded during the period, including those exempt transactions
under CONSOB Regulation No. 17221/2010 as amended and supplemented and the Leonardo
S.p.A. procedure, as well as the information on the distribution of the powers to represent theCompany;q)

verified the adequacy of the instructions given to the subsidiaries in order to ensure

prompt compliance with reporting obligations pursuant to Art. 114, paragraph 2, of T.U.F.;r)received adequate information, with reference to the provisions of Articles 15 et seq.

of the Market Regulation, relating to the subsidiaries established and regulated by the laws of6

non-EU countries, by the CAE on 8 March 2024, brought to the attention also of the Control
and Risks Committee, showing, for the companies that are significant according to the criteria
set by the Issuers’ Regulation, a control environment substantially adequate to therequirements referred to in the above-mentioned Art. 15. Therefore, the preparation of a
specific adjustment plan is not required;s)verified that the Report on Corporate Governance and Shareholder Structure contains

all the information required by Art. 123-bis of T.U.F. as well as other information provided incompliance with the regulation governing issuers listed on regulated markets;t)

was informed of changes in the organizational structure, thus supervising theexistence, updating and effective dissemination of the corporate directives and procedures andthe general adequacy of the organizational structure, including in light of the overall corporate
reorganization announced by the Company by the press release of 15 June 2023;u)supervised the adequacy of the internal control system and the administrative andaccounting system and the reliability of the latter as a means of accurately reporting business
operations;v)

met with the Boards of Statutory Auditors of the main subsidiaries in order to acquire

information in particular regarding the operation of the company business, the reliability of theinternal control system and the company organization, the relevant dispute - as required byArt. 151 of T.U.F. - and compliance with internal procedures issued by the Parent Company.
In particular, the checks were aimed at acquiring information and assessments regarding themanagement and control systems of the subsidiaries: on these profiles the Boards of Statutory
Auditors of the Group companies did not represent critical issues worthy of mention. All the
Boards of Statutory Auditors involved also expressed a positive opinion regarding the adequacyof the organizational, administrative and accounting system of the respective companies; nobreach of procedures qualifying as material or significant emerged, nor any gaps or
inadequacies in the internal control systems; for foreign companies controlled directly by
Leonardo S.p.a. the supervisory activity of the Board developed with the collaboration of theGroup Internal Audit organizational unit. Specifically, in relation to the 2022 Aggregate Audit
Plan and the 2023 Aggregate Audit Plan, the Board was periodically informed, together with
the Control and Risks Committee, about the results of the audits carried out at the said
Leonardo Group foreign companies and about the related results expressed in the audit
reports;w)

actively participated in all the meetings organized by the Company as part of the“Induction” program proposed to the Corporate Bodies, in compliance with the Corporate
Governance Code, in order to increase the skills and knowledge of the business sectors inwhich the Company operates and to investigate news introduced by legislation and regulationthat have a direct impact on the supervisory role of the Board of Statutory Auditors;

7

x)

received, on a quarterly basis, an update by the Chief Executive Officer regarding theexercise of the delegated powers granted by the Board of Directors and the implementation of
the Board's resolutions.
The Board of Statutory Auditors, also in compliance with the recommendations of the
CONSOB Resolution DEM/1025564 of 6 April 2001, reports that it has not found any criticalissues regarding the main transactions of greater financial and economic importance, carriedout during the reporting period, including through subsidiaries, which are shown in the draft
financial statements to which reference should be made.
With reference to significant transactions having an impact on the overall operating modelof the Company, the Board of Statutory Auditors monitored a set of organizational changes
that the Company has put in place during the year in light also of the aforesaid corporate
reorganization.
The Board of Statutory Auditors did not detect any atypical and/or unusual transactions
that, due to their significance or relevance, the nature of the counterparties, the object of thetransaction, the methods for determining the transfer price and the timing of the event, could
give rise to doubts regarding the correctness/completeness of the information in the financial
statements, conflict of interests, safeguarding of corporate assets, protection of minority
shareholders.
***

Furthermore, the Board, in the course of the activities carried out:a)find no omissions or reprehensible facts;b)

acknowledged that, on 23 May 2023, a report was lodged pursuant to article 2408 of
the Italian Civil Code by shareholder Fondazione Finanza Etica (holder of no. 3 shares),represented by the Director of the Foundation, Simone Siliani, who complained a “lackof control” on the part of the Company about Prof. Cingolani being allegedly
incompatible to take on the position of CEO of Leonardo pursuant to Law no. 215 of
2004, as well as the alleged lack of reasons behind the reply given by the Company toa specific question posed by the shareholder before the general meeting.
The Board of Statutory Auditors, which met on 17 July 2023, after a broad andthorough analysis – considering the lack of legitimacy of the Company to pass any
decision on the matter, which is the exclusive responsibility of the Competition
Authority, as well as taking account of the exhaustive reply provided to the shareholder
by the Company – assessed the report submitted by the shareholder as being
groundless.
Moreover, it should be noted that, following a report sent by Fondazione Finanza Etica
in May 2023, the Competition Authority considered that there were no impediments

8for Prof. Cingolani to take on the position of chief executive officer of the Company andruled out that Leonardo mainly operates in sectors connected with the position hepreviously held with the Government, pursuant to and for the purposes of Article 2 (4),second sentence, of Law no. 215/2004;c)

acknowledged that no complaints were received;d)acknowledged that no appeals were notified to the Company related to reports to a
court pursuant to Art. 2409, first paragraph, of the Italian Civil Code, nor was the Bord
required to make reports pursuant to Art. 2409, paragraph 7, of the Italian Civil Code;e)

was not required to take action due to omissions by the Board of Directors pursuant toArt. 2406 of the Italian Civil Code;f)made no reports to the Board of Directors pursuant to and for the purposes of Art. 25octies of Legislative Decree No. 14/2019;g)

expressed its opinion in all the cases provided for by the law and by the Corporate
Governance Code and, in particular, with regard to the correct application of the criteria
for assessing the independence of directors;h)verified the methods of actual implementation of the corporate governance rules;i)also supervised the corporate documents and information to the market, in particular:-

noted that the Report on Operations to the financial statements for the financial
year 2023 contains adequate information on transactions with related parties andhas verified, pursuant to Art. 4, sixth paragraph, of the Regulation approved by
CONSOB with resolution 17221 of 12 March 2010 as amended, the compliance of
the “Procedure for Related Parties Transactions”, implemented by the Company,
with the principles listed in the same Regulation, as well as full compliance withthis procedure for individual transactions with related parties entered into during
the financial year;-

ascertained that the 2023 Integrated Annual Report had been drafted on the single
electronic reporting format provided for by the European Commission DelegatedRegulation No. 2019/815 of 17 December 2018;-supervised communications to the market, thus monitoring the adequacy of therelated procedures;l)acknowledges that, in compliance with the recommendations of the joint Banca
d’Italia-CONSOB-ISVAP document No. 4 of 3 March 2010, the Impairment Test
procedure governed by IAS 36 received the favorable opinion of the Control and Risks
Committee on 28 February 2024 and was approved by the Board of Directors on 29
February 2024; in this regard, the Board monitored the substantive and formal
legitimacy of the impairment process;9m)verified that the Company has fulfilled the obligations provided for by Legislative
Decree No. 254/2016 and that, in particular, has prepared the Integrated Annual
Report as a single document that includes the consolidated non-financial statement inaccordance with the provisions of Articles 3 and 4 of the same decree; it also verified
that the above-mentioned statement was accompanied by the report of the
Independent Auditing firm EY S.p.A. pursuant to Art. 3, paragraph 10, of Legislative
Decree No. 254/2016 that certified that the Directors had prepared the non-financial
statement, as part of the Report on Operations of the Integrated Annual Report; byvirtue of a specific assignment, the Auditing Firm also issued on 15 March 2024 areport, without qualifications, in the form of "Negative Assurance", on the complianceof the information relating to the non-financial statement, in all material aspects, witharticles 3 and 4 of Legislative Decree 254/2016 and with the GRI standards, as well asa report, without qualifications, in the form of “reasonable assurance” on a set of
selected indicators within the consolidated non-financial statement.

* * *The responsibility for expressing an opinion on the financial statements pursuant to Article
14 of Legislative Decree No. 39 of 27 January 2010 lies with the auditing firm EY S.p.A.,
entrusted with the statutory audit of the accounts.
Since the Board of Statutory Auditors is not entrusted with the analytical control on the
merits of the content of the financial statements, the Board supervised the Directors'
compliance with the procedural rules relating to the preparation, approval and publication of
the draft financial statements, assessing their overall compliance with the law with regard totheir formation and structure, and supervised the process of preparing and presenting thefinancial statement disclosures to the Shareholders' Meeting.
The Auditing Firm released the reports pursuant to Art. 14 of Legislative Decree No. 39 of
27 January 2010 and of articles 10 and 11 of Regulation (EU) No. 537/2014; theaforementioned reports show that there are no qualifications or emphasis of matters, norstatements issued pursuant to subparas. e) and f) of Art. 14, second paragraph of Legislative
Decree No. 39/2010.
More specifically, the Board examined the Independent Auditors' Reports on the
consolidated financial statements of the Leonardo Group and on the separate financial
statements of the Company for the year ended 31 December 2023 issued, pursuant to Art. 14of Legislative Decree No. 39/2010 and Art. 10 of the Reg. (EU) No. 537/2014, on 15 March2024 and with which the auditor certified that:-the consolidated financial statements of the Group and the separate financial
statements of the Company provide a true and fair view of the financial position as at10

31 December 2023, the result of operations and the cash flows for the financial year
then ended in compliance with the International Financial Reporting Standards adopted
by the European Union as well as the provisions issued in implementation of Art. 9 ofLegislative Decree No. 38/2005 and are prepared in compliance with the European
Commission Delegated Regulation (EU) 2019/815 of 17 December 2018;-

the Report on Operations and some specific information contained in the Report on
Corporate Governance and Shareholder Structure indicated in Art. 123-bis, paragraph
4, of Legislative Decree No. 58/1998 are consistent with the financial statements of
the Company and with the consolidated financial statements of the Group and draftedin compliance with the law;-

the opinion on the separate financial statements and consolidated financial statements
expressed in the aforementioned Reports is in line with what is shown in the Additional
Report prepared pursuant to Art. 11 of Regulation (EU) No. 537/2014.

The Board also examined the contents of the Additional Report pursuant to Art. 11 ofRegulation (EU) No. 537/2014, which is sent to the Board of Directors, whose examinationshows no aspects that need to be highlighted in this report.
The Board, pursuant to Art. 19 of Legislative Decree No. 39/2010 and Art. 150, paragraph
3 of T.U.F., periodically met the Auditing Firm for a constant exchange of information usefulto perform their respective tasks. During the meetings and from the exchange of information,
no facts or situations emerged worthy of mention in this Report.
The Board monitored the observance of the Company's procedure and policy for theassignment of tasks to the Group Auditing Firm, which envisages specific information andauthorization flows and procedures for the assignment of such appointments aimed at allowing
the Board of Statutory Auditors to carry out its supervision activities properly. From the set of
information flows put in place in compliance with the provisions of the procedure and the policy
for the assignment of appointments to the Group Auditing Firm, which the Board considers
adequate, no critical issues or anomalies emerged that could affect the opinions on theseparate financial statements and the consolidated financial statements of the Company.
Pursuant to Art. 149-duodecies of the Issuers Regulation, a summary table is attached to
the notes to the financial statements and shows the fees paid to the Auditing Firm and to theentities belonging to its network for auditing, assurance and other services provided to
Leonardo S.p.a. and its subsidiaries, in relation to which the Board:-

verified that no assignments were granted that were not permitted under Art.5,
paragraph 1, of Regulation (EU) No. 537/2014;-

carried out a monitoring process in order to verify that the Auditing Firm, in relation tothe "non-audit services” provided to Leonardo S.p.a. and its subsidiaries complied withthe limits set by Art. 4, paragraph 2, of Regulation (EU) No. 537/2014;11-

declares that the fees for the aforementioned assignments for the financial year
amount to a total of € 1,418 thousand and related (i) for € 174 thousand to the limited
assurance engagement (negative assurance) on the consolidated non-financial
statement (ii) for € 473 thousand to the reasonable assurance engagement on aselection of performance indicators (KPIs) included in the consolidated non-financial
statement (iii) for € 399 thousand to the examination of the schedule on R&D expenses(iv) for € 231 thousand to the issue of the comfort letter concerning the sale of DRS
shares and (v) for € 141 thousand to other assurance services.

Taking into account the declarations of independence issued by EY S.p.A., as well as thetasks assigned to it and to the companies belonging to its network by Leonardo S.p.a. and by
its subsidiaries, the Board believes that there are no critical aspects to report on the continued
fulfilment of the independence requirement by the Auditing Firm.
During the supervisory activity performed by the Board of Statutory Auditors in accordancewith the methods described above, on the basis of the information and data acquired, no facts
emerged from which to infer that the law and the memorandum of association were notcomplied with or that justified any reports to the Supervisory Authority or the mention in thisreport.
***With regard to the result for the financial year ended 31 December 2023, which recorded a
net profit of € 783,697,113.66, the Board of Directors set out in detail the formation of theresult and the events that generated it in the Report on Operations and in the Explanatory
Notes.
On the basis of the supervisory activities carried out up to today, taking into account theabove and within its sphere of competence, the Board of Statutory Auditors, pursuant to Article
153, paragraph 2, of the T.U.F. finds no grounds for objecting to the proposal to approve thefinancial statements for the year ended 31 December 2023, nor the proposal for the allocationof the relevant FY result as requested by the Board of Directors.

15 March 2024

ON BEHALF OF THE BOARD OF STATUTORY AUDITORSThe Chairman
Luca Rossi

12Separate Financial Statements at 31 December 2023

INFORMATION PURSUANT TO ARTICLE 149 DUODECIES OF THE ISSUER REGULATION
The following statement reports the fees for the year 2023 for auditing and assurance services and for tax
and other services provided by the same auditing firm and entities belonging to the auditing firm’s network.
Entity providing
the services

To

Fees for the 2023 year(€ thousands)

Auditing services

EY SpAEY SpAEY Network

Parent Company
Subsidiaries
Subsidiaries

2,704
913
8,106

Assurance services

EY SpAEY SpAEY Network

Parent Company
Subsidiaries
Subsidiaries

1,079
40
239

Other services

EY SpAEY Network
EY Network

Parent Company
Parent Company
Subsidiaries

60
-

Total

13,141344

Annex to the Report on operations – Note to the NFS 2023
V

ANNEX TO THE REPORT ON OPERATIONS – NOTE
TO THE NFS

345

Annex to the Report on operations – Note to the NFS 2023

Methodology note of the NFS
The Consolidated Non-Financial Statement (NFS) in accordance with Legislative Decree 254/2016 forms an
integral part of the 2023 Integrated Annual Report and is prepared annually in accordance with the most upto-date version of the GRI Sustainability Reporting Standards of the Global Reporting Initiative (GRI). The
Integrated Report has been prepared taking into consideration the Integrated Reporting Framework, thestandards of the Sustainability Accounting Standards Board (SASB) for the Aerospace & Defense sector, as
published by the International Sustainability Standards Board (ISSB) in December 2023 106, the Sustainable
Development Goals (SDGs), the Ten Principles of the United Nations Global Compact, the recommendationsof the Task Force on Climate-related Financial Disclosure (TCFD) and the "core" metrics contained in the
White Paper on "Measuring Stakeholder Capitalism - Towards Common Metrics and Consistent Reporting of
Sustainable Value Creation" by the World Economic Forum (WEF) 107.
The NFS covers the 2023 fiscal year (1 January 2023 – 31 December 2023), includes all fully consolidated
companies (see "Reporting Scope" section for more information) and was approved by the Leonardo
S.p.A. Board of Directors at its meeting on 12 March 2024. The Sustainability and Innovation Committee andControl and Risks Committee reviewed the overall approach of the NFS, as well as the completeness andtransparency of the disclosure, issuing a prior opinion for approval by the Board of Directors.
In compliance with Legislative Decree 254/2016, the Consolidated Non-Financial Statement 2023, with the
exception of the disclosures related to the indicators summarised in the paragraph "Table of Contents SASB"
and "Table of Contents TCFD (Task Force on Climate-related Financial Disclosure)”, was subject to limited
review, in accordance with the provisions of the "International Standard on Assurance Engagements ISAE
3000 (Revised) - Assurance Engagements Other than Audits or Reviews of Historical Financial Information"(hereinafter "ISAE 3000 Revised"), issued by the International Auditing and Assurance Standards Board(IAASB), by EY S.p.A..
In addition, with reference to FY2023 and for the third consecutive year, a selection of indicators (below
shown) has been subjected to comprehensive examination (reasonable assurance) in accordance with theprovisions of the "International Standard on Assurance Engagements ISAE 3000 (Revised) - Assurance
Engagements. Other than Audits or Reviews of Historical Financial Information" (hereinafter "ISAE 3000
Revised"), issued by the International Auditing and Assurance Standards Board (IAASB), by EY S.p.A.. The
indicators subjected to full examination are listed below:•

GRI 302-1: Energy consumption within the organization;•

GRI 302-3: Energy intensity - (calculated on consolidated revenues);•

GRI 305-1: Direct (Scope 1) GHG emissions;•

GRI 305-2: Energy indirect (Scope 2) GHG emissions);•

GRI 305-4: GHG emissions intensity - (calculated on consolidated revenues);

106 The Integrated Reporting Framework and the standards issued by the Sustainability Accounting Standards Board (SASB) weremerged within the IFRS Foundation with the work completed, in August 2022, on the consolidation of the Value Reporting Foundation(VRF), which, in turn, had been created in June 2021 through the merger of the International Integrated Reporting Council (IIRC) andthe Sustainability Accounting Standards Board (SASB). The International Sustainability Standards Board (ISSB), created within the IFRSFoundation to develop sustainability-related disclosure standards, promotes the use of both of them. In December 2023, ISSB
published an updated version of the SASB standards in order to improve their applicability at an international level, regardless of thereference jurisdiction while at the same time not alterating their structure or purpose.
107 For more details, please see the section on the Correlation Table of the Non-Financial Statement.

346

Annex to the Report on operations – Note to the NFS 2023•

GRI 303-3: Water withdrawal;•

GRI 306-3: Waste generated;•

GRI 405-1: Diversity of governance bodies and employees;•

GRI 401-1: New employee hires and employee turnover (including details of women hired with STEM
degrees);•

GRI 404-1: Average hours of training per year per employee;•

GRI 403-9: Work-related injuries.

The audit was carried out according to the procedures set out in the “Independent Auditors’ Report on the
NFS as of 31 December 2023”, included in this document. For additional information about the scope of theaudit work and the procedures performed by the independent auditors, reference should be made to the
Independent Auditors’ Report included in the document. The information summarised in the GRI Content
Index is included in the scope of the limited assurance engagement.
Quantitative indicators reported in the pages referred to in the Content Index that are not related to any GRI
Standards general or topic-specific disclosure, are not subject to the limited assurance performed by EY
S.p.A..
The document is published on the Company’s website at www.leonardo.com.

347

Annex to the Report on operations – Note to the NFS 2023

Sustainability governance
The Board of Directors, assisted by the Sustainability and Innovation Committee and the Control and Risks
Committee, sets out the key guidelines on sustainability and monitors the pursuit of sustainability objectives.
The Sustainability and Innovation Committee, which is composed of five non-executive members, mostly
independent, in collaboration with the Control and Risks Committee, establishes whether the Sustainability
Plan objectives have been pursued, examines the general approach of the NFS, promotes interaction withstakeholders (stakeholder engagement), monitors Leonardo's positioning in the Sustainability/ESG Indicesand collaborates to setting out and assessing technological capabilities and in creating academic and research
networks.
Furthermore, all the Board Committees provide their support to the Board - each one within the sphere of
its respective competence - in considering the topics that are material for Leonardo for the purposes ofgenerating long-term value.
As from 2023, the Sustainability Organisational Unit (O.U.), headed by the Chief Sustainability Officer, reports
directly to the Chief Executive Officer and General Manager, in order to integrate sustainability as a key leverof the Group. The O.U., through the Climate and Environmental Strategy and Projects, ESG Ratings &Benchmarking, Stakeholder Engagement, Sustainability Projects & Reporting and Social Impact OUs, is
responsible for guidance, management, monitoring and strategic dialogue on sustainability issues,particularly focusing on environmental, climate, social issues. Sustainability, in coordination with the Top
Management, supports the preparation of the Sustainability Plan, in accordance with the Group's Business
Plan, by developing and monitoring the relevant KPIs for sustainability performance planning.
The unit is also responsible for managing relations with ESG rating companies and activities related toadmission to the main sustainability stock indices.
Reporting and the preparation of the integrated report are managed, under the responsibility of the Chief
Financial Officer (CFO), by the ESG & Integrated Reporting O.U., within Administration & Financial Statement,with the aim of providing a full and integrated view of the Group. In addition, relations with financial
stakeholders on ESG issues are managed by the Investor Relations & Credit Rating Agencies O.U., again under
the responsibility of the CFO, in coordination with Sustainability O.U..
The Sustainability Managers and Coordinators – from the various divisions, Corporate functions and Group
companies - are the internal connection point and are involved in the materiality analysis and in the processof setting out, implementing and monitoring the Sustainability Plan, ensuring consistency between strategic
objectives, Sustainability Plan and non-financial indicators.
In order to strengthen the sustainability governance system, Leonardo has included the achievement ofobjectives linked to specific ESG indicators 108 in its remuneration policy.

Materiality analysis
The materiality analysis allows the identification and evaluation of the relevant impacts generated by theGroup along the entire value chain. The result of this analysis is a list of material topics that supports andsteers the identification of key targets, the definition of the Sustainability Plan and the preparation of theIntegrated Annual Report. As required by the operating sustainability model, Leonardo proceeds with
updating, on an annual basis, the materiality analysis for an appropriate integration of the stakeholder
108 For more details, please see the Corporate Governance Report 2024 and the Remuneration Report 2023.

348

Annex to the Report on operations – Note to the NFS 2023
perspective into company processes. Based on regulatory developments and market trends, the impact
materiality process was structured into 3 stages in 2023: analysis and understanding the relevant context,
identifying impacts, and assessing their significance.
Analysis and understanding of the context
The identification of potentially relevant impacts for Leonardo is derived from an analysis of the reference
context, the Group's key characteristics and priorities, and specialist sources, including the OECD Due
Diligence Guidelines. The analysis covered both regulatory developments, with attention to European
regulations and standards which will become applicable in the future, and market trends, including priorities
expressed by the financial community and relevant issues (reported in the most recent reporting documents)from a sample of 22 peers and competitors. Finally, the mapping was compared and added to by the findingsof the Group's Enterprise Risk Management, covering the ESG risk and opportunity areas identified by
Leonardo to 2023.
Identification of impacts
The above analysis led to the identification of a list of more than 60 impacts, classified as negative or positive
and actual or potential, placed along Leonardo's value chain. The preliminary mapping was reviewed withrepresentatives from all functions, business areas and companies in the Group to ensure a comprehensive
and representative view of business dynamics, which led to the identification of the 30 most significant
impacts for Leonardo.
Impact assessment
After having been identified, impacts were subjected to the assessment of selected categories of internal andexternal stakeholders for a total of 527 people involved compared to 348 in 2022, with an overall response
rate of 49%. Specifically, the following were involved:>>>

33 company representatives from all business areas, who hold positions as sustainability
managers/coordinators, who were asked to assess the significance and likelihood of impacts;
39 members of the Group's Top Management and Board of Directors, representative of Leonardo's
strategic vision;
455 stakeholders and industry experts attributable to 13 categories, including suppliers, employees,
customers, and representatives of the academia and research world.

The latter 2 groups were questioned, via special survey, about the significance of the impacts, rated on ascale of 1 (not significant) to 5 (extremely significant).
The results of the above assessments were then integrated with a data-driven analysis, which, through data
intelligence, big data analytics and semantic analysis tools, considered large databases of peers' documents,
regulations and press articles relating to the significance of the impacts that had been mapped.
The integration of the analyses described above made it possible to assign an order of priority to the impacts,
defined on the basis of their respective significance and, in case of equal value of the latter, the probabilityof occurrence. A materiality threshold was applied to the impacts ordered in this manner, resulting in theidentification of 26 material impacts, which were subsequently aggregated into issues pertaining to the same
scope of action. The process then led to the definition of 15 material topics, listed in order of priority below.

349

Annex to the Report on operations – Note to the NFS 2023

SURVEY PARTICIPATION – EXTERNAL STAKEHOLDERS AND EMPLOYEESEXTERNAL STAKEHOLDERS BY COUNTRY
Italy

UK

USA

Other Countries

Data refer to 205 external andemployees respondents

EXTERNAL STAKEHOLDERS BY CATEGORY
7%

12%

3%

1%

9%

5%

24%

3%
29%

74%
14%

3%
3%
2%
1%

Past years
ITALY

UK

USA

OTHER

2022

79%

9%

3%

9%

2021

72%

10%

7%

11%

5%
4%
1%

Business Partners

Industry Associations

Central institutions

NGOs, networks andThink Tanks

Local institutions

Suppliers

Clients

International
Organizations

Trade Unions

Media

Universities/
Research Centres

Employees

NEW

Financial Community

Other

Prioritized list of material topic
1.
2.
3.
4.
5.
6.
7.
8.
9.

Citizen security
Climate change, adaptation/mitigation
Cybersecurity and data protection
R&D, innovation and advanced technology
Protection of human rights
Diversity, equity and inclusion
Solutions’ quality, security and performance
Health and safety
Business integrity, compliance and anti-corruption

10. Skill development, talent attraction and employee
wellbeing
11. Digital transformation
12. Environmental impact of the use of materials andcircularity
13. Relations with territories and communities
14. Sustainable supply chain
15. Natural resources and biodiversity management

A preliminary exercise of double materiality was also completed during the 2023 materiality process. The
principle requires that material topics be defined by integrating the materiality of impact or inside-out(impact of Leonardo and its value chain on the planet, people and the economy) with the outside-in
perspective, i.e., considering any risks and opportunities associated with a given issue and the impact these
could have on the creation of the company's value. In line with regulatory requirements and best market
practices, the process was conducted in close alignment with the latest findings of the Group's Enterprise
Risk Management, including assessments, even from a financial perspective, of risks and opportunities in thearea of sustainability. The evidence that emerged will direct the integration of future regulatory
requirements, especially at the European level, with the Corporate Sustainability Reporting Directive, within
the scope of Leonardo's processes.

350

Annex to the Report on operations – Note to the NFS 2023

Reporting scope
The 2023 environmental reporting scope 109 covered 111 sites around the world. The scope has been basedon the materiality of the environmental impact from operating sites, the number of employees of Leonardo
SpA’s and its subsidiaries consolidated on a line-by-line basis. In order to ensure consistency with theconsolidation criteria of the Consolidated Financial Statements, the Group’s environmental data do notinclude those of the joint ventures.
The personnel reporting scope corresponds to 100% of companies consolidated on a line-by-line basis in the2023 Consolidated Financial Statements. Any possible limitations are set out from time to time in thisdocument.
Sites covered by the environmental reporting scope
2021

2022

2023

Italy

55

54

55

United Kingdom

7

7

7

United States

32

32

30

Poland1

1

1Rest of the World

12

11

18

Total sites

106

105

111

Country

Sites included in the environmental reporting scope

Italy

Abbadia San Salvatore, Brescia, Campi Bisenzio – Florence, Carsoli, Catania, Chieti, Cisterna di Latina, Genoa
Fiumara, Genoa Puccini, Giugliano, L'Aquila - Zona Industriale Di Pile, La Spezia – Valdilocchi, Livorno, Montevarchi,
Naples– Fusaro, Nerviano, Palermo, Pisa - Via di Marmiceto 6/C, Pomezia, Pozzuoli, Rome - Via Laurentina, Rome Via Tiburtina 1020 (ELE ITA), Rome - Via Tiburtina km. 12400 (ELE ITA), Ronchi dei Legionari, S. Maurizio Canavese,
Taranto, Villaputzu, Rome - Via Torrevecchia, Anagni, Benevento, Brindisi, Cascina C. Di Samarate, Frosinone, Pisa
- Via S. Cannizzaro, 7, Sesto Calende, Tessera - Via Triestina 214 (ELI), Vergiate, Cameri - Loc. Aereoporto, Caselle
Nord, Caselle Sud, Tessera - Via Triestina 214 (VEL), Turin - C.so Francia, Venegono Campo Volo, Venegono
Superiore, Decimomannu, Foggia, Grottaglie, Nola, Pomigliano, Rome - Piazza Monte Grappa, Rome - Via
Faustiniana, Rome - Via Montello, Aprilia - Via Vallelata 2/A, Rome - Via Pastrengo, Rome - Via Sardegna

UnitedKingdom

Basildon Sigma House, Bristol Building 430, Edinburgh, Lincoln, Luton, Southampton, Yeovil

UnitedStates

Arlington, Austin, Burnsville, Cypress, Dallas 1057 Sherman Street, Dallas 1300 Sherman Street, Dallas Expressway,
Danbury, Dayton, Fitchburg, Fort Walton Beach (Anchor St.), Germantown DRS, Germantown Rada, Greensboro,
High Ridge, Huntsville, Johnstown Airport, Largo, Madison, Melbourne Babcock St., Menomonee Falls, Milwaukee,
Overland Park, San Diego, Sidman, St. Louis, West Plains, Broussard, Milton, Philadelphia

109 Environmental data, as reported through the Group's web-based system (and in particular those relating to energy consumption),were obtained through: direct measurements (e.g., meters and consumption measurement systems); calculations (e.g., bills;
purchase orders/invoices); estimates based on the number of employees and/or activities carried out. In particular, with regard toemissions into the atmosphere, where sites have monitoring systems (e.g., industrial sites), these are calculated from laboratory
analyses carried out during the year. If these analyses are not carried out (e.g., at office sites and/or in cases where the production
processes conducted are not characterised by emissions into the atmosphere), the Group's reporting system automatically calculates
the NOX and SO2 emissions produced, based on the annual consumption of methane and diesel fuel for the production of energy/heatand emission coefficients available in literature.

351

Annex to the Report on operations – Note to the NFS 2023

Australia

Essendon Sites, Fishermans Bend, Rockingham

Belgium

Grâce Hollogne

BrazilItapevi

CanadaBedford, Ottawa

Germany

Neuss, Backnang

IsraelBet Shean, Netanya

Malaysia

SubangPolandSwidnik

Romania

Ploiesti

Spain

LoriguillaSouth Africa

Pretoria

Switzerland

Mollis, Wetzikon

TurkeyAnkara352

Annex to the Report on operations – Note to the NFS 2023

INDICATORS – DETAILSGRI INDICATORSENVIRONMENTAL INDICATORS

Energy consumption within the organisation (GRI 302-1)
Non-renewable energy consumed
Natural gas
Diesel oil for energy and/or heat generation
Fuel oil
Other (LPG, fuels used for product tests)
Energy purchased for electricity and district heating
Electrical energy from conventional sources
Electrical energy from renewable sources
District heating
Self-generated energy
Energy sold
Total

Unit
TJ
TJ
TJ
TJ
TJ
TJ
TJ
TJ
TJ
TJ
TJ
TJ

2021
2,982
2,699
2
281
2,493
460
1,805
228
138
5,614

2022
2,836
2,575
5
257
2,473
469
1,790
214
126
5,435

GRI 3021/3
2023
2,806
2,434
2
370
2,504
347
1,967
191
0.47
5,311

Energy intensity (GRI 302-3)
Energy consumption/Revenues

Unit
MJ/€

2021
0.40

2022
0.37

2023
0.35

2022
2,142
1,976
166
2,849
2,299
550
338
338
5,329

GRI 3021/3
2023
2,038
2,029
8
2,485
1,661
824
406
406
4,929

EnergyWater and water discharge
Water withdrawal by source and category (GRI 303-3)
Water supply systemsof which freshwaterof which other water
Wells
of which freshwaterof which other water
Other sourcesof which freshwaterof which other water
Total

Unit
megaliters
megaliters
megaliters
megaliters
megaliters
megaliters
megaliters
megaliters
megaliters
megaliters

353

2021
2,349
2,126
223
3,175
3,053
122
364
354
10
5,888

Annex to the Report on operations – Note to the NFS 2023
Water withdrawal from water-stressed areas by source and category (GRI
303-3)
Water supply systemsof which freshwaterof which other water
Wells
of which freshwaterof which other water
Other sourcesof which freshwaterof which other water
Total

Unit

2021

2022

2023

megaliters
megaliters
megaliters
megaliters
megaliters
megaliters
megaliters
megaliters
megaliters
megaliters

519
510
8
146
35
111
14
5
9
679

425
423
2
124
59
65
8
8
556

407
404
2
142
131
11
45
45
594

Water discharge by type of destination (GRI 303-4)
Sewers
Surface water
SeawaterOther use
Total

Unit
megaliters
megaliters
megaliters
megaliters
megaliters

2021
3,993
257
14
15
4,279

2022
3,112
860
24
12
4,007

2023
2,929
257
17
13
3,215

Unit

2021

2022

2023

megaliters
megaliters
megaliters
megaliters
megaliters

3,989
462
291
21
4,279

3,528
383
480
62
4,007

2,300
269
914
134
3,215

2022
20,472
13,631
6,841
9,528
1,707
7,821
30,001

GRI 306-3
2023
24,628
14,106
10,522
8,437
2,236
6,201
33,065

Water discharge to water-stressed areas by type of destination andcategory (GRI 303-4)
Freshwaterof which in areas with water stress
Other waterof which in areas with water stress
Total

Waste
Waste produced by type and disposal
Non-hazardous
Recovered
Disposed
Hazardous
Recovered
Disposed
Total waste produced (hazardous and non-hazardous)

Unit
t
t
t
t
t
t
t

NOTE:
- Environmental data may be subject to estimates, should final data not be available.

354

2021
21,642
13,333
8,309
8,242
1,988
6,254
29,884

Annex to the Report on operations – Note to the NFS 2023
Emissions
CO2e emissions (GRI 305-1/2/3)
Direct emissions (Scope 1)
Indirect emissions (Scope 2 market-based)*
Indirect emissions (Scope 2 location-based)*
Other indirect emissions (Scope 3)(1)
cat. 1(2)cat. 2
cat. 3
cat. 4cat. 5cat. 6
cat. 7
cat. 8cat. 9cat. 10
cat. 11(2)cat. 12
cat. 13cat. 14
cat. 15
Total Scopes 1, 2 market-based, 3
Total Scopes 1, 2 location-based, 3

Unit
t
t
t
t
t
t
t
t
t
t
t
t
t
t
t
t
t
t
t
t
t

2021
262,984
62,029215,907220,472
na
na
na
na
na
na
na
na

CO2e emission intensity (GRI 305-4)
Total emissions (Scope 1 + Scope 2 market-based)/Revenues
Total emissions (Scope 1 + Scope 2 location-based)/Revenues
Other emissions (GRI 305-7)
NOx
SO2
VOC
VIC
Heavy metal
Particulate

GRI 305-1/2/3/4/7
2022
2023
213,107
195,682
63,92455,088213,040
227,905
243,4255,800,193
na
2,263,633
na
149,149
na
34,594na
17,027na
26,371na
27,200na
54,713na
12,170

(3)

(3)

(4)

(4)

(3)
(4)

na

na

3,215,336

(5)

(5)

(5)

(6)

(6)

(6)

(7)

(7)

(7)

(8)

(8)

(8)

545,485
699,363

520,457
669,573

6,050,963
6,223,780

Unit
g/€
g/€

2021
22.99
33.88

2022
18.83
28.96

2023
16.40
27.70

Unit
t
t
t
t
t
t

2021
162
1
99
3
0,5
13

2022
143
2
166
3
0.4
19

2023
146
2
178
3
0.9
16

* Starting from 2023, emissions from district heating are included. These emissions are equal to 15,281 t (Scope 2 market-based) and
9,544 t (Scope 2 location-based) in 2023.
(1) Over the course of 2023, and as part of its science-based target setting effort, Leonardo overhauled its calculation methodology
for Scope 3 CO2 emissions. This overhaul allowed to get: a full visibility into Scope 3 Category 11 (use of sold product) emissions,which previously were not accounted for, that all products and services purchased by Leonardo contribute to the calculationof Scope 3 Category 1 (purchased goods) emissions and emission factors are aligned with IAEG's, a more complete inventoryof all the other categories of emissions within Scope 3. As a result of this activity, the CO2 emissions for Leonardo in 2023 havechanged significantly since the last report.
(2) Leonardo’s business is cyclical so a +/- 15% YoY variability between 2020 and 2030 is forecast on Cat. 1 and 11 emissions. This YoY
variability reduces to +/-6% in the 2027-2030 timeframe due to several high-impact programs coming to an end and businessstabilizing on lower emissions / higher volumes platforms.
(3) Not Applicable: Leonardo manages and pays the delivery of products and services directly to the customer. Therefore, according
to GHG protocol, emissions related to transportation and distribution of sold products are tracked and reported under the
upstream transportation and distribution category because Leonardo purchases the service. Thus, downstream transportationand distribution emissions are not applicable.
(4) Negligible - around 0.05% of total Scope 3 emissions.
(5) Negligible - around 0.01% of total Scope 3 emissions.
(6) Leonardo's business is based on selling products, not on leasing them. Therefore, this category is not applicable.
(7) Leonardo does not have any franchises. This category is not applicable for Leonardo's business structure or activities.
(8) Negligible - around 0.5% of total Scope 3 emissions.

355

Annex to the Report on operations – Note to the NFS 2023
EMPLOYEE INDICATORS
Information on employees and other workers
Employees by employment contract, employment type and gender
Total employees
Men
Women
Permanent employment contracts
Men
Women
Fixed-term contracts
Men
Women
Full-time contracts (permanent)
Men
Women
Part-time contracts (permanent)
Men
Women
Full-time contracts (temporary)
Men
Women
Part-time contracts (temporary)
Men
Women

Unit
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.

2021
50,41341,073
9,340
49,66940,495
9,174
744
578
166
48,58740,280
8,307
1,082
215
867
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.

2022
51,392
41,6399,753
50,57041,022
9,548
822
617
205
49,49840,778
8,720
1,072
244
828
788
597
191
34
20
14

GRI 2-7, 2-8
2023
53,566
43,07010,49652,132
41,948
10,184
1,434
1,122
312
51,04041,692
9,348
1,092
256
836
1,383
1,089
294
51
33
18

Employees by professional category and gender
Managers
Men
Women
Middle managers
Men
Women
White collars
Men
Women
Blue collars
Men
Women
PilotsMen
Women
Employees by Country and gender
Italy
Men
Women
United States
Men
Women
United Kingdom
Men
Women
Poland
Men

Unit
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
Unit
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.

2021
1,174
1,018
156
6,243
5,063
1,180
29,41322,648
6,765
13,53812,299
1,239
45
45
2021
31,661
26,402
5,259
7,274
5,413
1,861
7,375
6,015
1,360
2,548
2,073

2022
1,227
1,051
176
6,512
5,244
1,268
30,302
23,228
7,074
13,304
12,069
1,235
47
47
2022
32,327
26,847
5,480
7,143
5,307
1,836
7,540
6,057
1,483
2,578
2,076

2023
1,169
993
176
6,579
5,244
1,335
32,336
24,647
7,689
13,431
12,135
1,296
51
51
2023
33,30627,459
5,847
7,329
5,413
1,916
8,106
6,462
1,644
2,913
2,317

356

Annex to the Report on operations – Note to the NFS 2023
Women
Other countries
Men
Women
Employees by employment contract and Country
Permanent employment contracts
Italy
United States
United Kingdom
PolandOther countries
Temporary employment contracts
Italy
United States
United Kingdom
PolandOther countries
Workers other than employees
Supervised workers

N.
N.
N.
N.
Unit
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
Unit
N.

475
1,555
1,170
385
2021
49,66931,464
7,228
7,011
2,502
1,464
744
197
46
364
46
91
2021
1,790

502
1,804
1,352
452
2022
50,57032,193
7,082
7,164
2,458
1,673
822
134
61
376
120
131
2022
1,919

NOTE:
- With regards to the total Leonardo’s workforce: 52,423 full-time employees and 1,143 part-time employees.

357

596
1,912
1,419
493
2023
52,13232,966
7,274
7,683
2,493
1,716
1,434
340
55
423
420
196
2023
2,325

Annex to the Report on operations – Note to the NFS 2023
Employment
New employee hires and employee turnover (GRI 401-1)
Total hires and gender breakdown
Percentage of hires on total employees
Men
Women
Number and percentage of hires by age group< 30 years
30-50 years> 50 years
Number and percentage of hires by Country
Italy
United States
United Kingdom
PolandOther countries
Number of hires with STEM degree
Men
Women
Total employees leaving and gender breakdown
Percentage of employees leaving on total employees
Men
Women
Number and percentage of employees leaving by age group< 30 years
30-50 years> 50 years
Number and percentage of employees leaving by Country
Italy
United States
United Kingdom
PolandOther countries
Return to work and retention rates after parental leave (GRI 401-3)
Employees entitled to parental leave
Men

358

Unit
N.
%
N.
%
N.
%

2021
3,753
7
2,862
76
891
24

2022
4,984
10
3,781
76
1,203
24

GRI 401-1/3
2023
6,118
11
4,618
75
1,500
25

N.
%
N.
%
N.
%

1,585
42
1,616
43
552
15

2,189
44
2,208
44
587
12

2,979
49
2,522
41
617
10

N.
%
N.
%
N.
%
N.
%
N.
%
N.
N.
N.
N.
%
N.
%
N.
%

1,456
39
1,298
35
689
18
64
2
246
7
1,527
1231
296
3,303
7
2,599
79
704
21

2,121
43
1,158
23
1,278
26
144
3
283
6
2,217
1,728
489
4,176
8
3,323
80
853
20

2,626
43
1,313
21
1,315
21
472
8
392
6
2,644
2,051
593
4,039
8
3,229
80
810
20

N.
%
N.
%
N.
%

601
18
1081
33
1,621
49

814
19
1,429
34
1,933
46

798
20
1,237
31
2,004
50

N.
%
N.
%
N.
%
N.
%
N.
%
Unit
N.
N.

911
28
1311
40
732
22
102
3
247
7
2021
50,41341,073

1,409
34
1,428
34
911
22
114
3
314
8
2022
51,392
41,639

1,645
41
1,141
28
773
19
176
4
304
8
2023
53,566
43,070Annex to the Report on operations – Note to the NFS 2023
Employment
Women
Rate of return to work by gender
Men
Women
Retention rate by gender
Men
Women
Employees who took parental leave during the reporting period, by gender
Men
Women
Employees who returned to work at the end of the parental leave during thereporting period, by gender
Men
Women
Employees who returned to work at the end of the parental leave andcontinued to work 12 months after their return, by gender
Men
Women

359

N.
%
%
%
%
%
%
N.
N.
N.

9,340
95
97
92
95
96
93
1,504
1,039
465

9,753
94
95
89
93
95
88
1,757
1,235
522

GRI 401-1/3
10,496
98
100
94
97
98
95
1,726
1,288
438

N.
N.
N.

1,542
1,079
463

1,518
1,141
377

1,506
1,179
327

N.
N.
N.

1,579
1,027
552

1,240
948
292

1,194
924
270

Annex to the Report on operations – Note to the NFS 2023
Occupational health and safety
Injuries of employees
Number of injuries
Injury Rate (IR) by gender and Country
Men
Women
Italy
Men
Women
United States
Men
Women
United Kingdom
Men
Women
PolandMen
Women
Number of injuries with high consequences
Injury Rate with high consequences

Unit
N.
i
i
i
i
i
i
i
i
i
i
i
i
i
i
i
N.
i

2021
246
2.91
3.13
1.93
3.53
3.72
2.55
2.73
3.28
1.13
1.15
1.13
1.24
1.63
1.70
1.30
-

2022
200
2.35
2.57
1.40
2.98
3.21
1.80
2.06
2.17
1.74
0.31
0.39
0.00
1.60
1.67
1.26
1
0

GRI 403-9
2023
179
2.03
2.15
1.51
2.65
2.79
1.90
1.20
1.28
0.97
0.52
0.65
0.00
1.26
1.04
2.15
2
0

Injuries of workers not employees
Number of injuries
Total Injury Rate
Number of injuries with high consequences
Injury Rate with high consequences

Unit
N.
i
N.
i

2021
11
3.30
-

2022
10
4.35
-

2023
8
2.57
-

Work-related fatalities
Work-related fatalities
Fatality Rate of employees
Number of fatalities of workers not employees
Number of fatalities of workers not employees

Unit
N.
i
N.
i

2021
-

2022
-

2023
-

NOTES:- The injury is defined in this way if it has been communicated to the agencies/authorities/regulators and if it has caused the inability
to work to one or more days.
- The Injury Rate (IR) is calculated using the following formula: (Total injuries/Total worked hours)*1,000,000. Workers not-employees
refer to the category of supervised workers.
Training
Average hours of training per employee
Training hours
Training hours by gender
Men
Women
Training hours by employee category
Managers
Middle managers
White collars
Blue collars

360

Unit
ore

2021
31.8

2022
20.6

GRI 404-1
2023
24.1

ore
ore

32.6
28.3

20.7
20.3

24.8
21.3

ore
ore
ore
ore

29.0
28.8
27.4
43.0

16.1
20.4
20.5
21.5

15.1
21.1
22.4
30.7

Annex to the Report on operations – Note to the NFS 2023
Diversity and equal opportunities
Diversity of governance bodies and employees
Composition of governance bodies
Men
Women
< 30 years
30-50 years> 50 years
Breakdown of employees by category and gender
MenManagers
Middle managers
White collars
Blue collars
Pilots
Women
Managers
Middle managers
White collars
Blue collars
PilotsBreakdown of employees by category and age group< 30 years
Managers
Middle managers
White collars
Blue collars
Pilots30-50 years
Managers
Middle managers
White collars
Blue collars
Pilots> 50 years
Managers
Middle managers
White collars
Blue collars
Pilots

361

Unit

2021

2022

GRI 405-1
2023

%
%
%
%
%

58
42
25
75

58
42
25
75

58
42
33
67

%
%
%
%
%

87
81
77
91
100

86
81
77
91
100

85
80
76
90
100

%
%
%
%
%

13
19
23
9
-

14
19
23
9
-

15
20
24
10
-

%
%
%
%
%

11
14
-

13
13
-

1
16
13
2

%
%
%
%
%

34
42
54
53
33

36
43
53
57
32

32
43
52
58
25

%
%
%
%
%

66
58
35
31
67

64
56
34
30
68

68
56
32
29
73

Annex to the Report on operations – Note to the NFS 2023
Equal remuneration for women and men
Ratio of basic salary of women to men by employee category
Italy
Managers
Middle managers
White collars
Blue collars
United States
Managers
Middle managers
White collars
Blue collars
United Kingdom
Managers
Middle managers
White collars
Blue collars
PolandManagers
Middle managers
White collars
Blue collars
Ratio of remuneration of women to men by employee category
Italy
Managers
Middle managers
White collars
Blue collars
United States
Managers
Middle managers
White collars
Blue collars
United Kingdom
Managers
Middle managers
White collars
Blue collars
PolandManagers
Middle managers
White collars
Blue collars

362

Unit

2021

2022

GRI 405-2
2023

%
%
%
%

96
96
97
97

91
97
97
97

88
96
98
101

%
%
%
%

92
89
75
86

95
88
74
82

89
86
75
82

%
%
%
%

100
94
82
76

107
96
86
79

98
97
89
82

%
%
%
%

70
98
88
91

69
98
88
90

85
89
89
90

Unit

2021

2022

2023

%
%
%
%

94
92
92
92

84
91
91
88

84
92
91
90

%
%
%
%

94
88
73
84

94
88
71
82

85
86
74
80

%
%
%
%

96
94
83
68

98
96
85
66

99
98
89
82

%
%
%
%

69
99
79
88

60
98
80
85

73
89
85
88

Annex to the Report on operations – Note to the NFS 2023
ECONOMIC INDICATORS
Direct economic value generated and distributed€ mlllions
Direct economic value generated
Economic value distributed
Operating costs
Value distributed to employees
Value distributed to providers of capital
Value distributed to Public Administration
Value distributed to shareholders
Value distributed to community
Economic value retained

2021
15,364
13,810
9,523
3,762
335
185
5
1,554

2022
16,365
14,179
9,568
4,010
410
107
81
3
2,186

GRI 201-1
2023
16,634
14,706
9,870
4,258
405
147
83
26
1,928

Notes:- Starting from 2022, in order to ensure a further adherence with GRI Standard 201-1, a different representation compared to previous reports isprovided- Generated economic value includes: value of the production, income from equity investments and other financial incomes. Value distributed toshareholders refers to dividends paid during the reporting year.

GRI 207-1 Approach to tax
GRI 207-2 Tax governance, control and risk management
GRI 207-3 Stakeholder engagement and management of concerns related to tax
With the aim of tax risk-aware management 110, Leonardo aims to minimize tax risk by determining the properlevel of due taxation, in the application of national and supranational regulations in force in any local area inwhich it operates. For this purpose, Leonardo SpA's tax strategy, adopted since 2017, is inspired by principles
of interpretative prudence and compliance with tax regulations, envisaging conduct characterised by theutmost honesty and fairness towards the Tax Authorities and third parties.
With this in mind, the Chief Executive Officer and the Officer in charge of financial reporting participate intax-related decisions, in terms of both strategy and operations. They are responsible for managing the tax
risk, the performance of the tax department, and the personnel dedicated to tax risk management while the
BoD designs the related strategy. Specifically, tax governance provides for the continuing involvement of thecompetent tax departments in the decision-making processes pertaining to all business operations. As early
as from 2016, Leonardo S.p.a. joined, on a voluntary basis, the Cooperative Compliance scheme in Italy(Legislative Decree no. 128/2015), which provides for the implementation of a system for the detection,measurement, management and control of tax risk in all processes with any possible impact on tax
computation and tax compliance (Tax Control Framework - TCF). The TCF takes the form of a clear assignmentof roles and responsibilities, mapping of any tax risk associated with business processes, as well as theirmeasurement and control through effective monitoring procedures. In addition, TCF requires continuous
training and updating on tax issues, from an interdisciplinary and cross-functional perspective, involving thecompany personnel, and is subject to ongoing adaptation and updating to corporate and external changes(e.g., tax legislation). In addition, Leonardo promotes the training of all personnel involved in tax-relevantbusiness processes, including through specific training plans. Tax risk control and management tools havealso been adopted, outside of the scope of cooperative compliance agreements with local tax authorities, by
the main foreign subsidiaries Leonardo S.p.a. (Leonardo UK, DRS and PZL).

110 It is to be understood as the risk of operating in breach of tax regulations or contrary to the principles or purposes of the tax

system.

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Annex to the Report on operations – Note to the NFS 2023
The approach to taxation adopted by Leonardo is aimed at protecting the interests of all stakeholders,
including Governments and the local communities in which it operates 111. Leonardo's personnel andmanagement, at all levels, are expected to conduct business and corporate activities by imbuing their
behaviour with the "general principles" of compliance with laws, transparency, integrity and fairmanagement, good faith, trust, and cooperation with stakeholders, as required and promoted in the Group
Code of Ethics, the Group Charter of Values, and the Anti-Corruption Code 112.
GRI 207-4 Country-by-Country Reporting
The table below is consistent with the information provided to the Revenue Agency (Revenue Agency
Director’s Order file 275956 of 28 November 2017) within the framework of the “Country-by-Country
Reporting” (CBCR). This information has been prepared by taking account of the OECD guidelines relating tothis requirement. Therefore, although the figures shown are derived from the same database, they do notfollow the rules of representation and preparation of the data included in the Group’s consolidated financial
statements. In particular, the main changes refer to the following requirements of the OECD guidelines, asreported in the abovementioned Order:>>>

perimeter of companies: inclusion of all companies;
allocation by Country: allocation of items relating to permanent establishments in the Countries inwhich they operate, instead of the registered offices of the companies to which they belong, used toprepare consolidated financial statements;
definitions: levels of aggregation of specific data that are not immediately comparable with thevalues reported in the consolidated financial statements.

Tax - Country-by-Country Reporting (Year 2021)
Tax jurisdiction
Revenues from third parties
Revenues from related parties
Total revenues
Profit/(Loss) before income taxes*
Income taxes paid (based on cash accounting)
Income taxes accrued in the year
Workforce
Property, plant and equipment other than cash
and cash equivalents

Notes

USA

1
2
3
4
5

3,165
188
3,353
163
4
12
7,253
339

6
7

GRI 207-4
Other
UK Poland Italy
countires
2,203
53
9,550
378
206
176
847
99
2,409
229 10,397
477
263
30
166
12
(17)
(4)
(28)
(8)
43
6
24
12
7,338 2,548 31,521 1,753
193
36
1,660
68

111 In this regard, it should be noted that Leonardo SpA operates in full compliance with the rules governing transfer pricing, inadherence to the OECD Guidelines, as well as with those on DAC6 (mandatory automatic exchange of information on cross-borderarrangements) and on transactions that can potentially give rise to the hybrid tax mismatch referred to in Legislative Decree no.
142/2018 ("ATAD Decree").
112 In this regard, it should be also considered that the company incentive system of Leonardo's function dealing with tax matters
does not include specific targets related to tax rate reduction.

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Annex to the Report on operations – Note to the NFS 2023
Tax - Country-by-Country Reporting (Year 2022)
Tax jurisdiction
Revenues from third parties
Revenues from related parties
Total revenues
Profit/(Loss) before income taxes
Income taxes paid (based on cash accounting)
Income taxes accrued in the year
Workforce
Property, plant and equipment other than cash
and cash equivalents

Notes

USA

1
2
3
4
5

3,316
947
4,264
1,027
6
60
7,141
344

6
7

GRI 207-4
Other
UK Poland Italy
countires
2,342
46
10,047
368
194
233
2,240
132
2,536
279 12,287
500
253
31
1,628
(2)
(38)
(2)
(15)
(2)
37
8
49
16
7,482 2,578 31,842 2,349
202
46
1,828
81

NOTES:
1. Revenues from third parties: include all revenues (as defined below), net of those from companies subject to CBCR.
2. Revenues from related parties: include all revenues (as defined below) from companies subject to CBCR.
3. Revenues: include all revenues and financial income, net of dividends.
4. Profit/(Loss) before income taxes: includes the result before tax and the result from discontinued operations.
5. Income taxes paid: positive value indicates receipts, while negative value indicates payments. This includes payments for current
tax and for tax disputes.
6. Workforce: number of employees entered in the register on the last day of the period (31 December).
7. Property, plant and equipment other than cash and cash equivalents: include tangible assets and investment property.

365Annex to the Report on operations – Note to the NFS 2023

OTHER INDICATORS
1. Trade union relations
Industrial Relations (% on total employees)
Employees covered by collective bargaining
Employees who are members of trade unions

Unit
%
%

2023
77
31

In Italy, 100% of employees are covered by collective bargaining agreements. In 2023, the hours of strike on
the total hours worked was 0.05%.
2. Employee training
Average hours of training per employee
Total average training hours
Mandatory training
Non mandatory training
Average hours of training per employee by age group< 30 years
30-50 years> 50 years
N. employees who received training
N. employees who received training in the reporting period

Unit
n.
n.
n.
Unit
n.
n.
n.
Unit
n.

2023
24.1
14.8
9.3
2023
37.3
26.1
16.3
2023
51,605

Unit
i
i
i

2023
0.07
34.54
4.83

3. Employee health and safety
Health and safety indicators
Occupational Disease Rate (ODR)
Lost Days Rate (LDR)
Absenteeism Rate (AR)Details on indicator calculation: ODR is calculated using the following formula: (Total cases of occupational
diseases/Total worked hours)*200,000. LDR is calculated using the following formula: (Total days of lostwork/Total worked hours)*200,000. AR is calculated using the following formula: (Total days ofabsence/Total working days)*100.

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Annex to the Report on operations – Note to the NFS 2023
4. Employee performance appraisal
Performance appraisal
Total employees assessed
Employees with performance appraisal
Employees assessed on the total workforce - by gender
Men
Women
Employees assessed on the total workforce - by category
Managers
Middle managers
White collars
Blue collars
Employees assessed on the total employees assessed - by gender
Men
Women
Employees assessed on the total employees assessed - by category
Managers
Middle managers
White collars
Blue collars

Unit
N.
%.
Unit
%
%
Unit
%
%
%
%
Unit
%
%
Unit
%
%
%
%

2023
29,059
54
2023
52
62
2023
93
91
60
18
2023
78
22
2023
4
21
67
8

Unit
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.

2023
1,860
1,269
591
1,860
9
7
2
266
191
75
739
489
250
844
580
264
2
2
1,860
540
71
488
62
19
9
624
94

5. Diversity – Ethnic minorities
Ethnic minority US employees
Employees from minorities by gender
Men
Women
Ethnic minority employees by category
Managers
Men
Women
Middle managers
Men
Women
White collars
Men
Women
Blue collars
Men
Women
PilotsMen
Women
Ethnic minority employees by type
Asianof which managers and middle managers
Black or African Americanof which managers and middle managers
American Indian (Alaska Native)of which managers and middle managers
Hispanic or Latinoof which managers and middle managers

367Annex to the Report on operations – Note to the NFS 2023
Native Hawaiianof which managers and middle managers
Other Pacific Islanderof which managers and middle managers
Mixed / Multiple ethnicof which managers and middle managers
Otherof which managers and middle managers

N.
N.
N.
N.
N.
N.
N.
N.

13
2
176
37
-

Ethnic minority UK employees
Employees from minorities by gender
Men
Women
Ethnic minority employees by category
Managers
Men
Women
Middle managers
Men
Women
White collars
Men
Women
Blue collars
Men
Women
PilotsMen
Women
Ethnic minority employees by type
Asian / Asian Britishof which managers and middle managers
Black African / Black British / Carribeanof which managers and middle managers
Mixed / Multiple ethnic (White and Black Caribbean, White and Black African, White and Asian, Anyother Mixed or multiple ethnic background)of which managers and middle managers
Otherof which managers and middle managers

Unit
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.
N.

2023
248
181
67
144
2
2
25
20
5
113
84
29
4
3
1
248
144
17
51
2

N.
N.
N.
N.

30
5
23
4

Unit
N.

2023
1,705

N.
N.
N.
N.

10
167
1,068
458

6. Diversity - disability
Employees with disability
Total employees with disability
Employees belonging to minorities groups by professional category
Managers
Middle managers
White collars
Blue collars

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Annex to the Report on operations – Note to the NFS 2023
7. Gender diversity
First
SecondThird
Last
quartile quartile quartile quartile
81%
77%
78%
86%
19%
23%
22%
14%
94%
100%
101%
95%

Gender pay gap
Men
Women
2023 remuneration ratio

Total
80%
20%
98%

First quartile: employees with higher remuneration
Second quartile: employees with medium-high remuneration
Third quartile: employees with low-medium remuneration
Fourth quartile: employees with lower remuneration

Remuneration ratio is calculated on 96.5% of employees using the following formula: women average
remuneration/men average remuneration. The total median value of the remuneration ratio is 104%. 10%of employees with the highest remuneration is composed of 17% women and 83% men.
Top management composition
Men
Women

Unit
%
%

2023
84
16

For the “top management” category, the percentage is calculated by considering first-level (reporting directly
to the Chief Executive Officer) and second level management positions.
The executive team (CEO included) consists of 21 men (84%) and 4 women (16%).
8. Certifications
Health and safety management systems
Employees at ISO 45001-certified sites on total employees
Environmental management systems
Employees at ISO14001-certified sites on total employees
Quality management systems
Employees at ISO 9001-certified sites on total employees
Employees at AS/EN 9100-certified sites on total employees

Unit
%

2023
81

%

82

%
%

89
83

ISO 45001-certified sites are 65, ISO 14001-certified sites are 70, ISO 50001-certified sites are 7, ISO 9001certified sites are 93, AS/EN 9100-certified sites are 75. As part of the activities carried out by external
auditors with the above-mentioned certifications (conducted on an annual basis for the purposes of newcertification / maintenance / renewal of certification), systematic assessments are performed that also cover
the risk management process, its tools and methodologies.

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Annex to the Report on operations – Note to the NFS 2023
9. Data protection
In terms of personal data protection, in line with the applicable privacy regulations 113, Leonardo adopts
adequate technical and organisational measures to respect fundamental rights and freedoms and mitigate
the risks associated with any possible violation. For this purpose, it has implemented processes, procedures
and technologies to ensure the broadest protection of the data of employees, collaborators, guests,
customers, suppliers and any natural person whose personal data are processed by Leonardo. The
organisational structures and technologies used allow for the accurate and prompt detection of security
threats and breaches. Processes, procedures and technologies are subject to periodical audits to ensure fullcompliance with the highest standards of protection. Leonardo has designated a Group Data Protection
Officer who oversees, monitors, and provides specialist advice to Leonardo when acting as both a data
controller and a data processor, acts as a contact person for the supervisory authority and for data subjects
in relation to any and all matters concerning the processing of their personal data and the exercise of theirrights, with regard to the protection of personal data. By means of training, numerous reporting channels
and support tools, in the event of situations or episodes that put people's data at risk, all employees andcollaborators are trained and enabled to immediately give notices to the competent departments in order toadopt remedial and risk mitigation measures in accordance with law, according to the methods and schedules
set out in the procedures for handling data breaches and managing security incidents in general. If requests
are submitted to exercise rights regarding the protection of personal data, Leonardo has set up specificorganisational processes and information flows that make it possible to provide information regarding dataprocessing in a transparent and easily accessible form and to follow up such requests promptly andeffectively. Furthermore, Leonardo only uses suppliers that present sufficient guarantees to meet therequirements of the applicable privacy legislation and implements risk assessment and mitigation processes
in any case of transfer of personal data outside the European Economic Area, in full compliance with current
legislation.
10. Supply chain management
Leonardo manages the sustainability of its supply chain by integrating environmental, social and governanceparameters in any and all phases of collaboration with suppliers: from the application to become a supplier,to the pre-qualification and qualification phases to enter the register, from the selection criteria to thecontract Terms and Conditions, up to the verification audits and development plans of suppliers.
Potential suppliers of Leonardo must first pass a pre-qualification phase to establish whether they meet
economic-financial, ethical-legal, social and environmental requirements. This is the preliminary assessmentof the risk associated with establishing an industrial relationship with a potential supplier and consists ofaudits carried out both through an exchange of documents with the supplier and through infoproviders,which, through specialist databases and media analysis, enable a reputational audit of the counterparty to
be carried out. If potential risks emerge from these analyses, Leonardo proceeds to further verifications withthe supplier, in order to have evidence and updates about the company's position in relation to the reported
facts and about any self-cleaning actions put in place. The rate of dependence of turnover on the Leonardo
Group is also measured during pre-qualification. Failure to meet even one of these requirements prevents
the company from accessing Leonardo's Register of Suppliers.
This is followed by the qualification phase, during which the technical and operational capabilities linked to
specific supplies are assessed, as are the minimum requirements demanded by Leonardo regarding
113 The protection of personal data is a fundamental right of the individual under the Charter of Fundamental Rights of the European
Union (Article 8). In Europe, the protection of natural persons with regard to the processing of personal data is regulated, in particular,
by Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016.

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Annex to the Report on operations – Note to the NFS 2023
environmental management, health and safety protection, cyber security and intellectual property
protection, which are also regulated by specific contractual clauses at any time 114. As from 2022, the process
was extended to all divisions with massive application to all suppliers subject to qualification. Moreover,
Leonardo examines any possible certification uploaded to the Purchasing Portal by potential suppliers.
According to the product sector, an additional qualification, the Product Qualification, may be necessary toascertain compliance with technical/technological requirements and the production process applied in the
manufacture of the purchased component that will form part of a product configuration. Successful
completion of the qualification phase is necessary for the award of a tender and the assignment of a purchaseorder, and therefore to become actual suppliers of Leonardo. Furthermore, for some product areas, supplierselection takes also account of the availability of specific additional ESG requirements, for example ISO
14001, ISO 45001 and other quality and cyber security certifications.
The ongoing satisfaction of the requirements is monitored through periodic control activities throughout theterm of the contractual relationship, both through recurring audits (every two years for pre-qualification
requirements and every three years for qualification requirements) and through audit plans, going as far as
temporary or definitive exclusion from the Register in cases of serious or repeated failures. As for supplieraudits on HSE issues, every year Leonardo sets out an audit plan and selects the suppliers that will have to
be audited in the subsequent year, giving priority to those operating within Leonardo sites whose activities
carried out and/or products supplied may have an impact on compliance with environmental or occupational
health and safety regulations. Suppliers may also be selected to be audited for whom risk factors haveemerged in relation to environmental, and occupational health and safety issues, either through reports or
during the requalification phase, or even suppliers selected on a random basis. The audit consists of checks
carried out by Leonardo personnel or by a third-party entity and is also an opportunity to inform the supplierof any possible opportunity for improvement. In any case of non-conformity, Leonardo always asks the
supplier to take a corrective action, reported by the supplier in an Action Plan, complete with the related
date of implementation, which is verified by Leonardo in the subsequent audit.
Supplier relations are managed through a dedicated Portal (Procurement Portal) to ensure transparency andtraceability of information, and the storage of all supporting documentation.
Progress on sustainability objectives

Unit

Implementation of development programmes of the supply chain and medium/long- no. ofterm partnerships, focusing on SMEs, to improve business sustainability
suppliers
Raising wareness/training on SDGs and support tools for reporting to more than 80% no. ofof key suppliers (over 500 suppliers)
suppliers
100% of LEAP partners with targets and plans set out on green energy, reduction of%CO2, emissions, waste recycling, water consumption

2022

2023

Target
year

165

206

2023

336

648

2023

40

100

2023

11. Ozone-depleting substances
Emissions of ozone-depleting substances
SF6 emissions
HFC emissions
Total SF6 and HFC emissions
Quantity of ozone-depleting substances emitted in atmosphereUnitt CO2et CO2et CO2et CFC-11e

2023
20,8208,357
29,1770.00065

114 By including clauses in their contracts, suppliers are required to ensure that their subcontractors also comply with the samerequirements.

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Annex to the Report on operations – Note to the NFS 2023

Content Indexes

GRI Content Index
The GRI table is reported below, which is in line with requirement 7 of GRI 1: Foundation 2021 included in
the GRI Universal Standards 2021. References reported refer to the 2023 Report on Operations or to theother documents where expressly stated: the 2024 Corporate Governance Report (FY 2023), the Code of
Ethics and the Anti-Corruption Code.
Statement of use

Leonardo has reported in accordance with the GRI Standards for the period
1 January 2023 – 31 December 2023.

GRI 1 used

GRI 1: Foundation 2021

ApplicableStandard(s)GRI

GRI STANDARDS/OTHER SOURCE

SectorGRI Sector Standard not avaialble yet

DISCLOSURE

LOCATION

2-1
Organizational
details

Leonardo
SpA
Leonardo S.p.A.’s registered office is in Piazza
Monte Grappa, 4 - Rome (Italy)

General disclosures
GRI 2: General
Disclosures–version2021

Group profile

2-2 Entities included intheorganization’ssustainability
reportingConsolidation principles and area

2-3 Reporting period,
frequency and contact
point

FY 2023

Methodology note of the NFS

Annual Financial Report
ir@leonardocompany.com
The report is published on 12 March 2024

2-4 Restatements of
information

Any restatements or adjustments of
information are indicated in the documentfrom time to time

372

OMISSION

Annex to the Report on operations – Note to the NFS 2023
2-5
assurance.

External

2-6 Activities, value
chain
and
other
business relationships

Methodology note of the NFS
Independent Auditors’ Report
ProfileBusiness sectors
Business modelGroup results and financial position
Sector results and outlook
Supply chain value

2-7 Employees

Table GRI 2-7
Employment protection, people wellbeing andengagement
Profile2-8 Workers who are
not employees

Table GRI 2-8

2-9
Governancestructureandcomposition

Corporate governance

2-10

Corporate governanceNominationandselectionofthehighest governancebody

CORPORATE GOVERNANCE REPORT 2023 –Diversity criteria and policies

2-11 Chair of thehighest governancebody

CORPORATE GOVERNANCE REPORT 2023 –Par. Corporate governance information andPar. 4.9. Directors’ interests and transactions
with related parties

2-12 Role of thehighest governancebody in overseeing themanagementof
impacts

Corporate GovernanceCorporate governance – Corporate governancemodel

Sustainability targets and plan
Sustainability governance373

Annex to the Report on operations – Note to the NFS 2023
Leonardo’s integrated model for the
responsible conduct of business is based on aset of conduct rules and ethical principles
which underly a Group culture driving therelationship with stakeholders and a synergic
dialogue with institutions and civil society. The
Board of Directors, supported by its internal
committees, is responsible for setting thestrategic guidelines needed to pursue suchobjectives. Top management is responsible for
implementing and complying the ethicalprinciples, as well as for promoting both acontinuous improvement of the model for the
responsible conduct and a strong culture of
integrity aimed at value creation in the longterm. Moreover, the Board of Directors
assigned to the President the oversight on theimplementation of the corporate governanceregarding the integrity of company behaviors
and the anti-corruption.
CORPORATE GOVERNANCE REPORT 2023 –Board of Directors and Committees
2-13 Delegation of
responsibility
formanaging impacts

Corporate governance

2-14 Role of thehighest governancebody in sustainability
reportingCorporate governance

2-15 Conflicts
interests

Code of Ethics Par. 6 Conflict of interestsofSustainability targets and plan
Sustainability governance

Sustainability governance

Organisational, Management and Control
Model under Legislative Decree 231 of 8 June
2001 (pages 14; 24; 29)
CORPORATE GOVERNANCE REPORT 2023 Par.
4.3 Composition - Curricula of the Directors,
Par 4.9
Directors’ interests and Transactions withRelated Parties

2-16 Communicationof critical concerns

Responsible business conduct374

Annex to the Report on operations – Note to the NFS 2023
2-17Collective
knowledge of thehighest governancebody

Corporate Governance Report 2023 --> par.
Board Induction

2-18 Evaluation of theperformance of thehighest governancebody

Corporate Governance Report 2023 --> par.
Self-evaluation and succession of Directors

2-19 Remuneration
policies

Corporate Governance Report 2023 -> par. 8.2

During 2023, Leonardo's Board of Directors
was updated on the development of theStrategic Plan, and, on that occasion, on issues
related to business development andstrategies in information security and cybersecurity, as well as current activities andprospects in this area.

The ESG indicators stated in the 2023
remuneration policy (MBO and LTIP sections)are reported below:
MBO
>

>

Inclusion in the Dow Jones
Sustainability Index: Inclusion in the2023 index.
Rate of injury: 2.03 in 2023.

LTIP
>

>

2-20
Process
determine
remuneration

toIntensity of CO2 emissions Scope 1 +Scope 2 (Location Based) / Revenues:
28.96 in 2022, 27.70 in 2023.
% of women hired with STEM degree
out of total new hires with STEM
degree: 21.6% in the three-year
period 2023-2021.

In accordance with applicable regulations,
Leonardo’s Shareholders' Meeting is called
upon to resolve on the remuneration policy
Corporate Governance Report 2023 -> par.
Remuneration Committee
Remuneration Report 2023
Remuneration Policy 2023

2-21 Annual totalcompensation ratio

-->

par.

Corporate Governance – Remuneration policy
The CEO’s total pay is unchanged and thepercentage increase in the median total pay of
employees is 8%.

375Annex to the Report on operations – Note to the NFS 2023
For the calculation, remuneration received by
employees during the year was used, according
to the cash principle accounting method.

2-22 Statement onsustainable
development strategy

Strategy and outlook

2-23
commitments

Responsible business conduct

PolicySustainability targets and plan

Decarbonisation path
Charter of Values available on the website.
Code of Ethics -> par. 11 "External relations "Policy on human rights

2-24
Embeddingpolicy commitment

Corporate Governance – Remuneration policy

2-25 Processes toremediate negative
impacts

Business model

People – Respect for human rights

Methodology note of the NFS – Materiality
analysis
Strategy and outlook – Materiality analysis
Corporate Governance – Responsible businessconduct

2-26 Mechanisms forseeking advice andraising concerns

In accordance with Legislative Decree No.
24/2023 on whistleblowing, Leonardo has:
>

>

>

>

provided clear information on thechannel,procedures
andprerequisites for filing internalreports, as well as on the channel,
procedures and prerequisites for filingexternal reports;
identified the Internal Reporting
Channel in the Whistleblowing
Platform already online since 2020and compliant with the new
regulatory requirements;
released the updated version of the
Whistleblowing
Management
Guidelines (in both Italian and English)
to both Italian and foreign Group
companies;
published
theWhistleblowing
Management Guidelines together
with the FAQ and the Privacy Policy(both in Italian and in English), as wellas in the dedicated "Whistleblowing"376

Annex to the Report on operations – Note to the NFS 2023
section on the corporate intranet andon the leonardo.com website.
Furthermore, Leonardo DRS implements an
Ethics Helpline available 24/7 managed by athird-party company 115.
Responsible business conduct
In addition to what is reported in theparagraph "Responsible business conduct"
Governance chapter on Whistleblowing, itshould be noted that among the audits on thecomplaints concluded in 2023, 3 led to thedetection of the presence of elements ofsubstantiation, sometimes even partial, withreference to situations of potential "Conflictsof Interest". For 1 report in particular, theappropriate management actions were takenby the corporate structures of Leonardo S.p.A..
In addition, the following activities werecarried out following two reports also valid for"Anti-corruption" purposes:
Special Audit carried out by the Internal Audit
function concerning the management of the
supply relationship with two suppliers of
Leonardo S.p.A. and whose Audit Report wasalso forwarded to the function responsible foranti-corruption of Leonardo S.p.A., for theassessments of competence.
Qualified report in which several cases werereported that may constitute violations of theCode of Ethics committed by employees and a
supplier of Leonardo S.p.A.. For some of them,
the Judicial Authority was involved for the
relevant assessments.

115

The helpline website is https://secure.ethicspoint.com/domain/media/en/gui/80079/index.html.

377

Annex to the Report on operations – Note to the NFS 2023
2-27 Compliance withlaws and regulations

With regards to environmental issues, during2023 the number of violations ofenvironmental laws reported by the control
bodies amounted to 3 (2 in 2022, 6 in 2021, 11
in 2020, 6 in 2019 and 9 in 2018), one of which
resulted in fines imposed during the year (64k€
in the site of Frosinone).
During 2023, 2 environmental incidents
occurred, of which: 1 of about 50 litres caused
by a spillage of liquid waste (derived fromgalvanic processes) in the site of Swidnik and 1
spill of hydraulic fluid (from cooling processes)of about 151 litres in the site of West Plains.
Within the context of remediation processes,
there was no damage caused to theenvironment for which Leonardo has been
definitively found to be liable, and no fines
were imposed on Leonardo for environmental
offences.
In addition, 6 violations of health and safety
regulations were reported by the control
bodies, which resulted in 2 fines amounting to€ 7,156.
For a summary of criminal proceedings,
reference should be made to Note 22 in thechapter on Notes to the Consolidated Financial
Statements at 31 December 2023.

2-28 Membership ofassociations

World:
>
>
>
>
>

AIAC
(Aerospace
Industries
Association of Canada)
CIS International - The Center forInternet Security
Gama(General
Aviation
Manufacturers Association)
Heli Offshore
TCCA(Tetraand
CriticalCommunications Association)

Europe:>>>>>ASD (AeroSpace and Defence
Industries Association of Europe)
ECSO (European Cyber Security
Organization)
EOS (European Organization for
Security)ETSI (European Telecommunication
Standards Institute)
EUROCAE (European Organisation for
Civil Aviation Equipment)378

Annex to the Report on operations – Note to the NFS 2023>

Gaia X

Italy:
>

>

>
>
>

>

AIAD (Italian Industry Federation for
Aerospace, Defence and Security) –associated with CONFINDUSTRIAANITEC-ASSINFORM (Association ofInformation&
Communication
Technology companies) - associatedwith CONFINDUSTRIAAir Tech Italy
Global Compact Network Italia (GCNI)Foundation
UNAVIA(Association
forStandardisation,
Training
andQualification in the Aerospace,
Defence & Security sectors)
Italian National Unification Body (UNI)

UK:
>

>

>

>
>

>

>

ADS (Aerospace Defence Security &Space) – the major trade associationin the AD&S sector in the United
KingdomtechUK (Information Technology
Telecommunications and Electronics
Association)
make UK (formerly Federation ofengineering employers) – represents
the manufacturing sector in the
United Kingdom
5% Club - employer movement
offering training opportunities
Team Defence Information – Nonprofit collaborative organisation tomodernise and transform Defence
support in the United Kingdom
Social Value Portal UK (nationalorganisation that to support thegeneration of a Social Value
framework and provides tools toquantify social value reporting inorder to help us deliver Social Valuethat improves well-being and reduce
inequality
andenvironmental
degradation)
Royal United Services Institute (RUSI)- think tank engaged in cutting edge
defence and security research379

Annex to the Report on operations – Note to the NFS 2023>

Engineering UK – works in partnershipwith the engineering community toinspire tomorrow’s engineers andincrease the talent pipeline into
engineering and helps its members
influence UK skills policy through its
research and annual report.

United States:>>>

NDIA (National Defense Industry
Association)
SIA (Satellite Industry Association)
AIA (Aerospace Industry Association)

Poland:>>>>>Association of Polish Aviation Industry
Aviation Valley - Association of
Aerospace Industry Entrepreneurs
Group
Association of Employers of Defenseand Aerospace Industries
Association of Lublin Cluster ofAdvanced Aviation Technologies
Italian Chamber of Commerce andIndustry in Poland.

In 2023, membership fees for tradeassociations, industry and business support
organisations, technical interest bodies andthink tanks totalled approximately €mil. 5.7(approximately
€mil.
5.3
in
2022,
approximately €mil. 5.8 in 2021, approximately€mil. 5.2 in 2020, approximately €mil. 5 in 2019
and approximately €mil. 5 in 2018). In
particular, the most significant contributions in
2023 concerned Confindustria (associatedlocal bodies) for €mil. 2.5, AIAD (ItalianIndustry Federation for Aerospace, Defence
and Security) for €mil. 1.15 and Gama (General
Aviation Manufacturers Association) for
211K€.
2-29 Approachstakeholder
engagement

to

2-30
Collective
bargaining
agreements

Stakeholder engagement
Responsible business conduct
Stakeholder engagement
Employment protection, people wellbeing andengagement
Skill management and enhancement

380

Annex to the Report on operations – Note to the NFS 2023
Table – Other indicators
Where there is no collective bargaining
agreement, the general principles laid down inparagraph 3 of Leonardo’s Code of Ethics(Human Resources, Employment Policy andPrivacy Protection) and paragraph 5 ofLeonardo’s Charter of Values (Rights andSustainability) still apply to employees.
Material Topics

GRI 3: Material
Topics 2021

3-1
Processtodetermine material
topics

Methodology note of the NFS – Materiality
analysis

3-2 List of material
topics

Methodology note of the NFS – Materiality
analysis

Strategy and outlook – Materiality analysis

Strategy and outlook – Materiality analysis
Diversity, equity and inclusion
GRI 3: Material
topics 2021

3-3 Management ofmaterial topics

Positive impacts generated by Leonardo's
activities to promote a culture of Diversity,
Equity and Inclusion inside and outside thecompany, including through mentorship,coaching
andtraining
programs
incollaboration with the education system.
Negative impacts arising from potential casesof discrimination and harassment against
Leonardo employees or external to the Group.
Diversity, equity and inclusion
Respect for human rights

GRI 201: Economic
Performance–2016

201-3 Defined benefit
plan obligations andotherretirement
plans

Group companies use various pension
schemes, as described in Note 3.16 in thechapter on Notes to the Consolidated Financial
Statements at 31 December 2023.

GRI
402:
Labor/Management
Relations 2016

402-1
Minimum
noticeperiods
regarding operationalchanges

In Italy and abroad, Leonardo applies themechanisms allowed by the regulations andthe agreements with the trade unions. In Italy,
this issue is regulated by the National
Collective Bargaining Agreement (CCNL), as
well as by any relevant union agreements.

405-2 Ratio of basic
salaryandremunerationof
women to men

Table GRI 405-2

GRI 405: Diversity
and
equal
opportunity 2016

Other indicators – Gender diversity

Protection of human rights
GRI 3: Material
Topics 2021

3-3 Management ofmaterial topics

Negative impacts arising from potential humanrights violations along the value chain(including workers' rights, such as violations of381

Annex to the Report on operations – Note to the NFS 2023
freedom of association and expression,modern slavery, health and safety,
discrimination, fair pay) and violations of rights
of individuals and communities related to theuse of Leonardo solutions (e.g. related to noncompliance in the control of sales anddistribution operations).
GRI 406: Nondiscrimination
2016406-1 Incidents of
discrimination
andcorrective
actionstaken

It should be noted that the audits on reports
completed in 2023 did not reveal any
discriminatory or harassing behaviour and,
therefore, no disciplinary action was taken.

3-3 Management ofmaterial topics

Potential injuries or illnesses of Leonardo
employees and workers outside the Group.

Health and safety
GRI 3: Material
Topics 2021

Health and safety

GRI
403:
Occupational
Health and Safety2018403-1 Occupational
health and safety
management system

Health and safety

403-2
Hazardidentification,risk
assessment,
andincident investigation

Health and safety403-3 Occupational
health services

Health and safety

403-4
Workerparticipation,
consultation,andcommunicationonoccupational healthand safety

Health and safety403-5 Worker trainingonoccupational
health and safety

Health and safety403-6 Promotion ofworker health

Health and safety403-7 Prevention andmitigationofoccupational healthand safety impacts
directly linked bybusiness relationships

Health and safety

403-9 Work-related
injuries

Health and safety

Decarbonisation path

Table GRI 403-9

Skill development, talent attraction and wellbeing of employees
GRI 3: Material
Topics 2021

3-3 Management ofmaterial topics

Contribution to improving the quality of life,
human capital and skills of employees and382

Annex to the Report on operations – Note to the NFS 2023
developing STEM culture and skills for young
people and women both within and outside
the Group.
Potential employee dissatisfaction resulting
from insufficient internal growth andinvolvement policies.
Skill management and enhancement
GRI
401:
Employment 2016

401-1 New employee
hires and employee
turnover

Employment protection, people wellbeing andengagement
Skill management and enhancement
In 2023, voluntary resignations accounted for
4.4% of total employees.

401-3 Parental leave

Table
GRI
401-3
In Italy, the rules governing permits and leaves
to protect maternity and paternity are laid
down in Legislative Decree 151/2001 and theremaining relevant legislation.
For metalmechanical companies, the issue isalso regulated by the current CCNL. Specificmore favourable provisions on the subject for
Leonardo employees are also contained in thecurrent Supplementary Company Agreement.

GRI 404: Training
and Education 2016404-1 Average hoursof training per year
per employee

Other indicators – Employee training

404-2 Programs for
upgrading employee
skills and transition
assistance programs

Skill management and enhancement

Table GRI 404-1

Sustainable supply chain
GRI 3: Material
Topics 2021

3-3 Management ofmaterial topics

Growth, development and support forsustainable supply chain transition throughdedicated programmes implemented by
Leonardo.
Respect for human rights
Sustainable supply chain
Other indicators – Supply chain management

GRI
204:
Procurement
Practices 2016

204-1 Proportion of
spending on local
suppliers

Supply chain value

GRI 308: Supplier
Environmental
Assessment 2016308-1 New suppliers
that were screenedusing environmental
criteria

Sustainable supply chain management383

Annex to the Report on operations – Note to the NFS 2023
GRI 407: Freedomof Association andCollective
Bargaining 2016407-1 Operations andsuppliers in which theright to freedom of
association
andcollective bargaining
may be at risk

Supply chain value

GRI 414: SupplierSocial Assessment
2016414-1 New suppliers
that were screenedusing social criteria

Sustainable supply chain management

Other indicators – Supply chain management

Other indicators – Supply chain management

Business integrity, compliance and anti-corruption
GRI 3: Material
Topics 2021

3-3 Management ofmaterial topics

Negative impacts resulting from potential
wrongdoing and misconduct by the Group, its
employees, business-related third parties andsuppliers along the value chain.
Responsible business conduct

205-2 Communicationand training aboutanti-corruption
policies
andprocedures

Leonardo's anti-corruption policies arecommunicated to all members of governing
bodies, employees and business partners, in all
geographies in which the Group operates.
In addition, anti-corruption training for newhires continued in 2023, with 84% of users
taking the course.
With the new internal regulation on Business
Compliance of 2023 Leonardo confirmed thetraining requirement (with successful
completion of the learning test) to distributors
and resellers as well; eligibility for signing
contracts is now conditional on passing theend-of-course test.

GRI 205: Anticorruption 2016

Responsible business conduct
Anti-Corruption Code pages 3-4
205-3
Confirmed
incidentsofcorruption and actions
taken

Provisions for risks and contingent liabilities

GRI 206: Anticompetitive
behavior 2016

206-1 Legal actions foranti-competitive
behavior, anti-trust,andmonopolypractices

No legal actions were commenced in 2023
related to unfair competition, anti-trust andmonopoly practices.

GRI 207: Tax 2019

207-1 Approach to tax

Paragraph GRI 207-1

207-2 Tax governance,
control,andriskmanagement

Paragraph GRI 207-2

In 2023 there were no convictions within
criminal proceedings against Group’s legal
entities, nor dismissals due to confirmed casesof corruption.

384

Annex to the Report on operations – Note to the NFS 2023

GRI 405: Diversity
and
equal
opportunity 2016

207-3
Stakeholder
engagement
andmanagementofconcerns related totax

Paragraph GRI 207-3

207-4Country-bycountry reporting

Table GRI 207-4

405-1 Diversity of
governancebodiesand employees

Employment protection, people wellbeing andengagement
Corporate Governance
Table GRI 405-1

GRI 415:
Policy 2016

Public415-1
Political
contributions

Code of Ethics page 14
As provided for in Leonardo’s Code of Ethics,
the Company does not contribute company
funds to political and trade union parties,
movements, committees and organizations, orto their representatives and/or candidates;
therefore, Leonardo did not pay any politicalcontribution in 2022. The prohibition in the
Code of Ethics on political contributions applies
to all Group companies worldwide, including
the United States. For more details, please see
the Code of Ethics and Business conduct of
Leonardo DRS.
In the United States, where voluntary
contributions to Political Action Committees(PACs) by employees are allowed, theoperation of the PAC is supervised andmonitored for legal compliance to ensure they
are not used as vehicles for corruption.

Environmental impact of the use of materials and circularity
GRI 3: Material
Topics 2021

3-3 Management ofmaterial topics

Development of circular economy models andlonger life cycles through product and process
innovations by Leonardo.
Consumption of materials and fossil fuels andproduction of waste from activities along
Leonardo's
value
chain.
Naturalresources
management

andbiodiversity

Circular economy
GRI 301: Materials
2016

301-1 Materials usedby weight or volume

In 2023, Leonardo purchased about 25.5 of raw
materials (14.7 ktons in 2022), among which:about 8.9 ktons of iron, ferroalloys and steel(7.5 ktons in 2022), about 6.8 ktons ofaluminium, magnesium and other metals (5.4
ktons in 2022), 0.8 ktons of paper andcardboard (0.9 ktons in 2022), 0.8 ktons ofother raw materials (0.9 ktons in 2022) and 7.1

385

Annex to the Report on operations – Note to the NFS 2023
kton of semi-finished products (not available in2022).
2021 data have been collected on a partial
perimeter and are not comparable with thedata for 2023 and 2022.
306-1
Waste
generation
andsignificant
wasterelated impacts

GRI 306:
2020

In order to reduce the impact related to waste
production, Leonardo has implemented and isdeveloping circular economy programmes andactivated collaborations with third-party
partners.

Waste

GRI 306: Effluentsand Waste 2016

Leonardo undertakes to adopt measures forthe reduction and prevention of pollution andwaste, thus minimising the production of
hazardous and non-hazardous waste andpromoting recycling.

Naturalresourcesandmanagement Circular economy

biodiversity306-2 Management ofsignificant
wasterelated impacts

Naturalresources
management

biodiversity

306-3
generated

Table GRI 306-3

Waste

306(2016)-3
Significant spills

andIn 2023 following events were reported:>>

1 spill f about 50 litres of liquid waste(derived from galvanic processes) in
the site of Swidnik;
1 spill of hydraulic fluid (from coolingprocesses) of about 151 litres in thesite of West Plains.

Climate change, adaptation/mitigation
GRI 3: Material
Topics 2021

3-3 Management ofmaterial topics

Contribution to the mitigation of climatechange through the development ofsustainable aviation technologies andsustainable mobility services and products(including SAF-compatible aircraft andhelicopters, optimised air traffic management
systems and virtualisation systems) andthrough sensors and satellite observation
technologies enabling analysis and monitoringof climate phenomena.
Contribution to emergency management,
includingenvironmental
andclimateemergencies, through special aircraft andhelicopter configurations and satellite andglobal monitoring technologies.
Contribution to the worsening of climatechange and air pollution through emissions
attributable to Leonardo in operations, along386

Annex to the Report on operations – Note to the NFS 2023
the supply chain, in the use of its solutions or
related to its investments.
Naturalresources
management

andbiodiversity

andbiodiversity

Decarbonisation path

GRI 302:
2016

Energy302-1
Energyconsumption within
the organization

Naturalresources
management
Decarbonisation path
Table GRI 302-1

302-3 Energy intensity

ESG performance indicators
Table GRI 302-3

305-1 Direct (Scope 1)
GHG emissions

Naturalresources
management

andbiodiversity

Decarbonisation path
Table GRI 305-1
Source of the emission factor:
>
>
>
>
>

GRI 305: Emissions
2016

305-2 Energy indirect(Scope2)
GHG
emissions

UNFCCC - National Inventory
Submissions 2023
Tabella dei parametri standard
nazionali (MASE) 2022
AIMS Energy Article 2018
IPCC AR6 - Sixth assessment report
Australian National Greenhouseaccounts factors (February 2023)

Naturalresources
management

andbiodiversity

Decarbonisation path
Table GRI 305-2
Source of the emission factor:
>

>
>

>

Location based US, Source: EPA UnitedStatesEnvironmental
Protection Agency - eGRID2021;
Location based Europe and World,
Source: TERNA - ENERDATA 2020;
Market based Rest of the world,
Source: Terna –ENERDATA 2020;
Ministero Brasile, Australian National
Greenhouseaccounts
factors(February 2023);
Market based United States andCanada, Source: 2023 Green-e Energy
Residual Mix Emissions Rates;

387

Annex to the Report on operations – Note to the NFS 2023>>>

305-3 Other indirect(Scope3)
GHG
emissionsMarket base Europe, Source: AIB Association of Issuing Bodies European Residual Mixes 2022;
Market Based District Heating,Source: site’s providers;
Location Based District Heating,Source: UK Government GHG
Conversion Factors for Company
Reporting (DEFRA 2023).

Naturalresources
management

andbiodiversity

Decarbonisation path
Table GRI 305-3
Source of the emission factor:
>
>
>

>
>
>
>
>
>
>
305-4 GHG emissions
intensity

GHG Protocol – Emission factor fromcross sector tools;
UNFCCC - National Inventory
Submissions 2023;
UK Government GHG Conversion
Factors for Company Reporting(DEFRA 2023, 2021);
Australian National Greenhouseaccounts factors (February 2023);
GHG Aviation Tool;
SBT Aviation Guideline;
Terna Enerdata 2019;
IRENA 2019;
IPCC 2006 Guidelines for National
Greenhouse Gas Inventories;
IAEG emissions available here.

ESG performance indicators
Decarbonisation path
Table GRI 305-4

305-5 Reduction of
GHG emissions

Naturalresources
management

andbiodiversity

Decarbonisation path
Tables GRI 305-1,2,3,4
Solutions’ quality, security and performance
GRI 3: Material
Topics 2021

3-3 Management ofmaterial topics

Negative impacts on end-users and customers
resultingfrompotential
inadequate
performance or malfunctioning of Leonardo's
solutions.
Quality and safety
Cyber security and data protection388

Annex to the Report on operations – Note to the NFS 2023
Responsible business conduct
Other indicators - Par. Data protection
GRI 416: Customer
Health and Safety2016416-1 Assessment of
the health and safety
impacts of productand service categories

Quality and safety

R&D, innovation and advanced technologies
GRI 3: Material
Topics 2021

3-3 Management ofmaterial topics

Strengthening research, development andinnovation through Leonardo's investments
and collaborations with academia, start-ups
and other research organisations.
Innovation

GRI 201: Economic
Performance 2016

201-1 Direct economic
value generated anddistributed

Table of economic value generated, distributed
and retained
The following list includes the parent company
and the main subsidiaries in the 4 domestic
markets (fully consolidated) and their main
countries of operations at 31 December 2023
(these companies are incorporated in the main
country of operation). These companies havebeen selected based on materiality in terms ofrevenues, number of employees, fixed assets,
and tax contribution.
>
>
>
>
>
>

Leonardo SpA - Italy
Leonardo UK – United Kingdom
Leonardo DRS INC – United States ofAmerica
PZL-Świdnik SA – Poland
AgustaWestland Philadelphia Co United States of America
Leonardo Global Solutions SpA – Italy

The aforesaid subsidiaries account for a total
of:
>
>
>
GRI 203:
Indirect Economic
Impacts 2016

203-1 Infrastructure
investments
andservices supported

97% of revenues generated
90% of fixed assets
94% of employees

Supply chain value
Value for communities and territories
Table of generated, distributed and retained
economic value

Cyber security and data protection
GRI 3: Material
Topics 2021

3-3 Management ofmaterial topics

Contribution of Leonardo, through its
solutions, to the digital security of the country,
the protection of strategic information and thecontinuity of essential services.

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Annex to the Report on operations – Note to the NFS 2023
Potential loss of data/violation of the privacy of
stakeholders whose information the Groupmanages.
Cyber security and data protection
Responsible business conduct
Other indicators - Par. Data privacy
GRI 418: Customer
Privacy 2016418-1 Substantiatedcomplaints
concerning breachesof customer privacy
andlossesofcustomer data

Cyber security and data protection
Responsible business conduct
Other indicators - Par. Data protection

Relations with local areas and communities
GRI 3: Material
Topics 2021

3-3 Management ofmaterial topics

Positive impacts on local communities
resulting from job creation and economic value
generated, directly or indirectly, by activities
along Leonardo's value chain, including withregard to vulnerable stakeholder groups or
geographic areas.
Customer intimacy, quality and safety
Value for communities and territories

GRI 416:
Customer
Healthand Safety 2016416-1 Assessment of
the health and safety
impacts of productand service categories

Quality and safety

Natural resources and biodiversity management
GRI 3: Material
Topics 2021

3-3 Management ofmaterial topics

Contribution to the protection andpreservation of ecosystems, natural resources
and people through good site management
practices and sensors and satellite observation
technologies that enable the analysis andmonitoring of resources, biomass and naturalelements.
Worsening of water resource quality andquantity due to water withdrawals,
consumption and pollution along the Leonardo
value chain.
Naturalresources
management

andbiodiversity

andbiodiversity

Circular economy
GRI 303: Water andeffluents 2018

303-1
Interactions
with water as a sharedresource

Naturalresources
management390Annex to the Report on operations – Note to the NFS 2023

GRI
304:
Biodiversity 2016

GRI 305: Emissions
2016

303-2 Management ofwater
dischargerelated impacts

Naturalresources
management

andbiodiversity

303-3
withdrawal

Naturalresourcesandmanagement Table GRI 303-3

biodiversity

304-1
Operationalsites owned, leased,managedin,oradjacent to, protectedareas and areas ofhigh biodiversity value
outsideprotected
areas

Naturalresources
management

andbiodiversity

305-7 Nitrogen oxides(NOx), sulphur oxides(SOx), and othersignificant
air
emissions

Tables GRI 305-7
andbiodiversity

3-3 Management ofmaterial topics

Facilitating the digital transition for Leonardo
employees, its customers, suppliers (includingSMEs) and PAs with which the Group works.

Water

Naturalresources
management

Digital Transformation
GRI 3: Material
Topics 2021

Skill management and enhancement
Innovation
Naturalresources
management

andbiodiversity

Supply chain value
Customer support, quality and safety
Value for communities and territories
Citizens’ security
GRI 3: Material
Topics 2021

3-3 Management ofmaterial topics

Increased security for people, infrastructure
and territories thanks to the civil and defense
market solutions offered by Leonardo.
Customer support, quality and safety
Innovation

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Annex to the Report on operations – Note to the NFS 2023

SASB Content Index
DISCLOSURE
RT-AE-000.A

Production/trend
segment

SECTION/NOTES
byreportable

ProfileSector results and outlook

RT-AE-000.B

Number of employees

PeopleRT-AE130a.1(1) Total energy consumed

Natural resources and biodiversity management(2) percentage grid electricity

Decarbonisation path(3) percentage renewable
RT-AE150a.1

Amount of hazardous waste generated,
percentage recycled

Natural resources and biodiversity management

RT-AE150a.2

Number and aggregate quantity ofreportable spills, quantity recovered

GRI 306-3: Significant spills

RT-AE230a.1(1) Number of data breaches

Responsible business conduct

RT-AE230a.2

Description of approach to identifying
and addressing data security risks in (1)company operations and (2) products

Cyber security and data protection

RT-AE250a.1

Number of recalls issued, total units
recalled

Any measure issued to the in-service fleet, should there bea safety impact, is covered by the Authority with an
Emergency Airworthiness Directive (see indicator RT-AE250a.3).

RT-AE250a.2

Number of counterfeit parts detected,
percentage avoided

NA

RT-AE250a.3

Number of Airworthiness Directives
received, resulting in Emergency
Airworthiness Directive, total units
affected

In the applicable businesses, Leonardo has Airworthiness
Review processes in place to investigate any events withpotential impact on the safety of its products and takes
appropriate precautionary and/or corrective actions. In
2023, Leonardo agreed with the relevant aviation authority
two Emergency Airworthiness Directives. Following theinvestigation and in compliance with the current
regulations, Leonardo issued the relevant applicable Alert
Service Bulletins (ASBs), providing instructions to manage
the risk that had been reported. More information isavailable on the website of the European Union Aviation
Safety Agency.

RT-AE250a.4

Amount of fines and legal andregulatory transactions associated withproduct safety

No fine/settlement agreement associated with Emergency
Airworthiness directives referred to in indicator RT-AE250a.3.

RT-AE410a.1

Revenue from alternative
related productsSome of the helicopters produced by Leonardo canoperate with fuels having up to 50% of SAFs without
operational limitations or performance degradation are
the following: AW139, AW169, AW189, AW149, A109S,(2) percentage involving confidential
informationenergy-Other indicators– par. Data Privacy
Sustainable supply chain management392

Annex to the Report on operations – Note to the NFS 2023
AW109SP, AW119MkII, A109A/AII, A109C, A109K2, A109E,
A119.
RT-AE410a.2

Description of strategic approach to
reducefuel consumption
andgreenhouse gas (GHG) emissions of
products

Decarbonisation path

RT-AE440a.1

Description of risk management
associated with the use of criticalmaterials

Risk management

RT-AE510a.1

Total amount of monetary losses
resulting from legal proceedings
associated with incidents ofcorruption, bribery and/or illicit
international trade.

In 2023, there were not convictions or compensation
ordered to the Group’s legal entities as part of criminal
proceedings for corruption.

RT-AE510a.2

Revenues from countries classified inband “E” and “F” of Transparency
International’s Government Defence
Anti-Corruption Index

15% of revenues in 2023 from countries classified inbands E and F of the Government Defence AntiCorruption Index of Transparency International, of which
60% for EFA Kuwait and NH90 Qatar contracts underwhich Leonardo is the prime contractor.

RT-AE510a.3

Description of processes to manage
ethical risks in conducting businessthroughout the value chain

Responsible business conduct
Risk management
Supply chain value393

Annex to the Report on operations – Note to the NFS 2023

TCFD (Task Force on Climate-related Financial Disclosures)
Content Index
TCFD RECOMMENDATIONS
Pillar

TCFD Recommended Disclosures

Section/Notesa) Describe the board’s oversight of climate
related risks and opportunities.
GOVERNANCEb) Describe management’s role in assessing
and managing climate related risks andopportunities.

Sustainability governancea) Describe the climate related risks andopportunities the company has identified overthe short, medium, and long term.
b) Describe the impact of climate-related risks
and opportunities on the company’sbusinesses, strategy, and financial planning.

STRATEGY

Decarbonisation pathc) Describe the resilience of the company’s
strategy, taking into consideration different
climate-related scenarios, including a 2°C or
lower scenarioa) Describe the company’s processes for
identifying andassessing climate related risks.
RISK
MANAGEMENTb) Describe the company’s processes for
managing climate related risks.
c) Describe how processes for identifying,assessing, and managing climate related risks
are integrated into the company’s overall risk
management.
a) Disclose the metrics used by the company
to assess climate-related risks andopportunities in line with its strategy and risk
management process.

METRICSTARGETSb) Disclose Scope 1, Scope 2, and, if
AND appropriate, Scope 3 greenhouse gas (GHG)
emissions, and the related risks.

c) Describe the targets used by the company
to manage climate-related risks andopportunities and performanceagainst targets.

394

Risk management
Decarbonisation path

GRI indicators
Naturalresources
management
Decarbonisation pathandbiodiversity

Annex to the Report on operations – Note to the NFS 2023

Information on EU Taxonomy for sustainable activities

Regulatory framework
In 2019, the European Union unveiled the European Green Deal plan with the goal of achieving climate
neutrality by 2050. In order to attain this goal, the European Union aims to promote investments in assets
and activities needed to ensure an equitable ecological transition.
In 2020, in this perspective, Regulation (EU) 2020/852 (Taxonomy Regulation) brought in a classification
system or taxonomy, which identifies the list of economic activities that can be considered to beenvironmentally sustainable. The Taxonomy Regulation sets out the criteria for establishing whether anactivity can be considered environmentally sustainable based on its substantial contribution to six objectives:a) climate change mitigation; b) climate change adaptation; c) the sustainable use and protection of waterand marine resources; d) the transition to a circular economy; e) pollution prevention and control; f) the
protection and restoration of biodiversity and ecosystems.
Companies are required to provide information about the share of sales (revenues), capital expenditures(Capex) and operating expenses (Opex) that are derived from environmentally sustainable activities, i.e., thatare "eligible" and "aligned" to the Taxonomy. Specifically, an economic activity is "eligible" if it is explicitly
included in the European regulations and "aligned" if it simultaneously meets the following 3 criteria:>>>

it contributes substantially to one or more of the 6 environmental objectives listed above by meetingthe technical screening criteria that set conditions and performance requirements ("Significant
Contribution");it does not cause any significant harm to any of the other environmental objectives ("Do Not
Significant Harm -DNSH criteria");
it is carried out in accordance with specific social safeguards ("minimum safeguards").

In 2021, the regulatory framework was supplemented by some Delegated Acts, including:>>the “Climate Delegated Act” - Delegated Regulation (EU) 2021/2139 of 4 June 2021 -, which definedthe "Technical Screening Criteria," i.e., "significant contribution" and "Do Not Significant Harm DNSH" criteria, of an initial set of activities for the two climate change mitigation and adaptation
goals;
the “Disclosures Delegated Act” - and the Delegated Regulation (EU) 2021/2178 of 6 July 2021, which
regulates the mandatory disclosure regime for companies.

In 2022, the Platform on Sustainable Finance 116 published the “Final Report on Minimum Safeguards”, which
identifies the minimum social safeguards (“minimum safeguards”).
In 2023, the European Commission adopted:>>

the “COMMISSION DELEGATED REGULATION (EU) 2023/2485", which integrates the “Climate
Delegated Act” - Delegated Regulation (EU) 2021/2139 of 4 June 2021 with additional economic
activities that contribute to the climate change mitigation and adaptation goals, defining the relevant“Technical Screening Criteria”;
the “Environmental Delegated Act” - COMMISSION DELEGATED REGULATION (EU) 2023/2486, whichsets out the “Technical Screening Criteria” of the economic activities of the remaining 4 objectives
set out in Taxonomy (sustainable use and protection of water and marine resources; transition to a

116 This is a platform established by the European Commission for the purposes of providing advice on taxonomy.

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Annex to the Report on operations – Note to the NFS 2023
circular economy; pollution prevention and control; protection and restoration of biodiversity andecosystems).
The “Environmental Delegated Act” 117 requires companies to provide information about the eligibility ofadditional economic activities as early as the 2023 financial statements, while alignment will be mandatoryfrom those prepared for 2024.
With the integration of the Climate Delegated Act published in 2023, the primary reference NACE code for
the Aerospace, Defence & Security sector 118 has been included among the activities that contribute to climatechange mitigation. Moreover, the same legislation stresses the relevance of certain aircraft for carrying out
disaster risk management activities with a view to adapting to climate change and recognises the potential
need to set out specific "Technical Screening Criteria" in the future with respect to their production 119. In
agreeing with this need, Leonardo hopes for the prompt inclusion of the production of such aircraft, both
fixed-wing and rotary-wing, among the activities that are relevant to the climate change adaptation goal.

Leonardo reporting
Leonardo publishes the required information for the year 2023 regarding the percentages of revenues, CapEx
and OpEx relating to:>>

eligibility/non-eligibility and alignment/non-alignment for economic activities related to the climatechange mitigation and adaptation objectives and set out in the “Climate Delegated Act”;
eligibility/non-eligibility for economic activities provided by the supplement to the Climate Delegated
Act 120 and for economic activities related to the remaining four objectives included in the“Environmental Delegated Act”.

In view of the above, it can be expected that future alignment %s could deviate, even significantly, from what
is published in this report.
The guidelines provided in Annex I attached to the “Disclosures Delegated Act” have been considered for thedefinition of the denominators of revenues, CapEx and OpEx.
Any information necessary for the calculation of the KPIs envisaged by the Taxonomy is mainly extracted
from the IT accounting systems of Leonardo and of its divisions/legal entities and corresponds, therefore, tothe information used for the preparation of the Group's income and cash flow statements. In this way, thedue level of granularity of the analyses is ensured, on the one hand, and, on the other hand, the risk of double
counting is eliminated, both when the same economic activity contributes to more than one objective and in
the case of intercompany revenues. OpEx considered are largely related to expensed R&D activities,
according to a principle of materiality and in accordance with regulatory requirements.
In addition to establishing the significant contribution to the goal, in assessing alignment with the Taxonomy,
Leonardo's management also verified that:>

economic activities do not significantly undermine the achievement of the other environmental
objectives through the assessment of compliance with “Do Not Significant Harm (DNSH)” criteria;

117 In particular, please see Art. 5 “Amendments to Delegated Regulation (EU) 2021/2178”.
118 NACE code C30.3 "Manufacture of air and spacecraft and related machinery”.

119 The regulations in force to date only provide for the “Technical Screening Criteria” for the performance of disaster risk

management activities in the strict sense (and not also for the production of aircraft required to carry out such activities).
120 I.e., the “Commission Delegated Regulation amending the Taxonomy Climate Delegated Act”.

396

Annex to the Report on operations – Note to the NFS 2023>

compliance with "minimum safeguards" as defined in Article 18 of Regulation (EU) 2020/852 isensured, in accordance with the OECD Guidelines for multinational enterprises and the United
Nations Guiding Principles on Business and Human Rights.

Below are details of the analyses carried out by Leonardo with regard to the 3 macro-criteria provided for in
Regulation (EU) 2020/852: analysis of the substantial contribution to one or more of the 6 environmental
objectives ("significant contribution"), analysis of the "Do Not Significant Harm - DNSH" criteria, and analysis
of compliance with social safeguards ("minimum safeguards").
ANALYSIS OF “SIGNIFICANT CONTRIBUTION”“Core” business
The activities that are part of Leonardo’s business are found to be eligible for the objectives of climate change
mitigation and adaptation and transition to a circular economy; specifically:
Climate change mitigation
Production of fixed-wing and rotary-wing aircraft related to the Helicopters, Aircraft and Aerostructures
sectors, including the production of electronics components for avionics in the Defense Electronics& Security sector (code 3.21 Manufacturing of aircraft).
Climate change adaptation>

Computer programming and consultancy carried out by the Defense Electronics & Security sector(code 8.2 Computer programming, consultancy and related activities).

Transition to a circular economy
>
>
>
>
>

Manufacture of electrical and electronic equipment related to the Defense Electronics & Electronic
Security, Helicopters, Aircraft sectors (code 1.2 Manufacture of electrical and electronic equipment).
Repair, refurbishment and remanufacturing related to the Defense Electronics & Security,
Helicopters, Aircraft sectors (code 5.1 Repair, refurbishment and remanufacturing).
Sales of spares parts within the scope of Customer Support & Training activities of all Leonardo
sectors (code 5.2 Sale of spare parts).
Sales of second-hand goods in the Helicopters sector (code 5.4 Sales of second-hand goods).
“Product-as-a-service” and other circular use- and result-oriented service models related tosimulators of Helicopters, Aircraft and Defense Electronics & Security (code 5.5 Product-as-a-service
and other circular use- and result-oriented service models).

For those activities that are planned in the acts adopted during 2023, only the level of eligibility/non-eligibility
is reported 121.
Ancillary activities
At the same time, additional activities carried out by Leonardo that refer to non-primary processes ancillary
to the production process were identified as eligible and in some cases aligned with the goal of climatechange mitigation, namely:

121 Reference is made to all the activities reported above, except for those relating to computer programming and consultancy

services rendered by the Cyber & Security Solutions division, for which alignment/non-alignment is also reported in the tables below.

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Annex to the Report on operations – Note to the NFS 2023
>
>
>
>
>

6.5 Transport by motorbikes, passenger cars and light commercial vehicles;
7.3 Installation, maintenance and repair of energy efficiency equipment;
7.4 Installation, maintenance and repair of charging stations for electric vehicles in buildings (andparking spaces attached to buildings);
7.5 Installation, maintenance and repair of instruments and devices for measuring, regulation andcontrolling energy performance of buildings;
8.1 Data processing, hosting and related activities.

These activities have already been reported in Leonardo's 2022 Integrated Annual Report since they areprovided for in the Climate Delegated Act of 2021.
ANALYSIS OF “DNSH” CRITERIA
Leonardo's management has positively assessed compliance with the “Do Not Significant Harm (DNSH)”
criteria envisaged for economic activities that contribute substantially to the climate change mitigation goals
listed above 122.
Climate change adaptation (codes 6.5, 7.3, 7.4, 7.5, 8.1)
This criterion requires a robust climate risk and vulnerability assessment. Leonardo invests in thedevelopment of initiatives, products, and services that facilitate climate change adaptation of both its own
manufacturing operations and of the society in general. With regards to its assets, Leonardo has:>>>defined action plans by identifying all sites located in geographical areas exposed to potentialconditions of water stress, risks of hurricanes, storms and flooding, changing weather patterns, andother climate-related physical hazards;
conducted a Water Site Risk Analysis (WSRA) to develop a water risk response strategy for relevant
industrial sites;
included in the criteria for inclusion of suppliers on vendor lists the evaluation of their continuity
plans, including with regard to impacts related to climate change risks.

For more information, please see Leonardo's "DECARBONIZATION PATH TCFD (Task Force on Climate-related
Financial Disclosures) Report 2022" 123.
Sustainable use and protection of water and marine resources (Code 8.1)
82% of employees are at sites with ISO 14001-certified environmental management systems, which also
include issues concerning the responsible use of water. In addition, Leonardo has taken various actions at its
manufacturing plants, aimed at reducing water withdrawals and analysing water risk. 124.

122 For the activity related to computer programming, consultancy which contributes to the objective of "climate change adaptation"(8.2 Computer programming, consultancy and related activities), no DNSH criteria are envisaged.
123 The report is available at the following link.
124 For more details on water management, please see the paragraph on “Natural resources management and biodiversity” in the on
chapter on Planet.

398Annex to the Report on operations – Note to the NFS 2023
Transition to a circular economy (Code 6.5)
Vehicles within the Leonardo fleet meet the requirements prescribed in terms of reusability/recyclability/
recoverability and for the management of their end of life.
Transition to a circular economy (Code 8.1)
Leonardo uses instruments that meet the regulatory requirements referred to by the Taxonomy and has
implemented waste management plan, which also includes end of life.
Pollution prevention and control (Code 6.5)
Leonardo’s fleet meets the requirements prescribed by the Taxonomy on European standards on pollutant
emissions, tires and engine noise.
Pollution prevention and control (Code 7.3)
Leonardo’s equipment meets the regulatory requirements prescribed by regulations in terms of components,
materials and asbestos.
ANALYSIS OF “MINIMUM SAFEGUARDS”
Leonardo has positively assessed compliance with the safeguards prescribed by the Taxonomy, which referto the following areas: human rights, including workers’ rights, corruption, fair competition and taxation.
Human rights
Leonardo has set out specific principles and rules of conducts aimed at spreading a culture of respect foruniversally recognised human rights in line with the United Nations’ Universal Declaration of Human Rights,
the International Labor Organisation (ILO) Conventions, the Organisation for Economic Co-operation andDevelopment (OECD) guidelines and the Charter of Fundamental Rights of the European Union. As also
reported in the disclosure required by the Sustainable Finance Disclosure Regulation, referring to Principal
Adverse Impacts (PAIs) 125, in order to strengthen the surveillance system, the Group promotes the protectionof human rights along the value chain, supporting its dissemination among its stakeholders, including though
the action under the Sustainability Plan and by participating in multilateral initiatives to create synergies
between associations, businesses and institutions 126.
Corruption and fair competition
Leonardo acts with integrity and transparency in compliance with regulations and with zero tolerance for any
type of corruption to ensure the most proper management of the business and to establish relationships oftrust and collaboration with employees, customers, suppliers and all other counterparties, which are asked
to accept and apply the principles and values stated in the Charter of Values, the Code of Ethics and othercodes of conduct. In conducting its business, Leonardo confirms its commitment to respecting and promoting
the Ten Principles of the United Nations Global Compact related to human rights, labour, environment and
125 For more details, please see this file.

126 For more details, please see the paragraph on “Respect for human rights” in the chapter on “People”.

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Annex to the Report on operations – Note to the NFS 2023
anti-corruption. Leonardo's model for the responsible conduct of business, inspired by national andinternational best practices, is based on company codes of conduct and a system of clear rules, periodically
updated, which guide compliant and responsible behaviour 127.
TaxationWith the aim of tax risk-aware management, Leonardo aims to minimise tax risk by determining the properlevel of due taxation, in the application of national and supranational regulations in force in any local area inwhich it operates. For this purpose, Leonardo SpA's tax strategy, adopted since 2017, is inspired by principles
of interpretative prudence and compliance with tax regulations, envisaging conduct characterised by theutmost honesty and fairness towards the Tax Authorities and third parties 128.

127 For more details, please see the paragraph on “Responsible business conduct” in the chapter on “Governance”.

128 For more details, please see the paragraph on “Economic indicators” of ANNEX TO THE REPORT ON OPERATIONS – NOTE TO THE

NFS.

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Annex to the Report on operations – Note to the NFS 2023

Financial year 2023

ProportionofTurnover,year 2023

Pollution

Circular Economy

Biodiversity

Climate Change mititgation

Climate Change adaptation

Water

Pollution

Circular Economy

Biodiversity

Miminum Safeguards

€ Mln

%

Y; N;
N/EL

Y; N; Y; N; Y; N;
N/EL N/EL N/EL

Y; N;
N/EL

Y; N;
N/EL

Y/N

Y/N

Y/N

Y/N

Y/N

Y/N

Y/N

%

Water

Text

Turnover

Climate Change adaptation

Code

Proportionof
Taxonomyaligned Category(A.1.)
enabling
or eligible activity(A.2.)
turnover,year 2022

Climate Change mititgation

Economic Activities

DNSH criteria ('Does Not Significantly
Harm')

Substantial contribution criteria

2023

E

Categorytransitional
activityT

A TAXONOMY-ELIGIBLE ACTIVITIES
A.1 Environmentally sustainable activities (Taxonomy-aligned)
Turnover of environmentally sustainable activities(Taxonomy-aligned) (A.1)

0

0%

0%

0%

0%

0%

0%

0%

n/a

n/a

n/a

n/a

n/a

n/a

Y

0%

Of which Enabling
Of which Transitional

0
0

0%
0%

%
%

%

%

%

%

%

n/a
n/a

n/a
n/a

n/a
n/a

n/a
n/a

n/a
n/a

n/a
n/a

Y
Y

0%
0%

A

T

A.2 Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities)

Computer programming, consultancy
and related activities

CCA 8.2

EL;
N/EL

EL;
EL;
EL;
N/EL N/EL N/EL

EL;
N/EL

EL;
N/EL

386

3%

N/EL

EL

N/EL N/EL

N/EL

N/EL

n/a

Turnover of Taxonomy-eligible but notenvironmentally sustainable activities (notTaxonomy-aligned activities) (A.2)

386

3%

0%

100%

0%

0%

0%

0%

n/a

A. Turnover of Taxonomy
eligible activities (A1+A2)

386

3%

0%

100%

0%

0%

0%

0%

n/a

14.90597%

15.291100%

B. TAXONOMY-NON-ELIGIBLE ACTIVITIES
Turnover of Taxonomy-non-eligible activities
TOTAL

(*)

(*) Consistently with what reported above, the eligibility related to economic activities envisaged by the Delegated Regulations (EU) 2023/2485 "Climate Delegated Act" and 2023/2486 "Environmental Delegated Act" is provided in thetable below.

401Annex to the Report on operations – Note to the NFS 2023

Financial year 2023

Biodiversity

Miminum Safeguards

%

Y; N;
N/EL

Y; N;
N/EL

Y; N;
N/EL

Y; N;
N/EL

Y; N;
N/EL

Y; N;
Y/N Y/N Y/N Y/N Y/N Y/N
N/EL

Y/N

%

E

Circular Economy€ Mln

Pollution

Biodiversity

Proportionof Taxonomy
aligned (A.1.)
or eligible(A.2.)CapEx,
year 2022

Water

Circular Economy

Climate Change adaptation

Pollution

Climate Change mititgation

Proportionof Capex
year 2023

Water

Text

CapEx

Climate Change adaptation

Code

Climate Change mititgation

Economic Activities

DNSH criteria ('Does Not
Significantly Harm')

Substantial contribution criteria

2023

Category Category
enabling transitional
activity activity

T

A TAXONOMY-ELIGIBLE ACTIVITIES
A.1 Environmentally sustainable activities (Taxonomy-aligned)
Installation, maintenance and repair of energy
efficiency equipment

CCM 7.3

18,3

2%

Y

N/EL

N/EL

N/EL

N/EL

N/EL

n/a

Y

n/a

n/a n/aY

1%

E

Installation, maintenance and repair of charging
stations for electric vehicles in buildings (andparking spaces attached to buildings)

CCM 7.4

0,7

0,08%

Y

N/EL

N/EL

N/EL

N/EL

N/EL

n/a

Y

n/a n/a n/a n/a

Y

0,01%

E

N/EL

N/EL

N/EL

n/a

Y

n/a n/a n/a n/a

Y

0,02%

E

Installation, maintenance and repair of
instruments and devices for measuring,CCM 7.5
0,2
0,02%
Y
N/EL
N/EL
regulation and controlling energy performance ofbuildings
CapEx of environmentally sustainable activities (Taxonomy19,2
2%
100%
0%
0%
aligned) A.1
2%
100%
0%
0%
Of which Enabling 19,200%0%
Of which Transitional
A.2 Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities)
EL;
EL;
EL;
N/EL
N/EL
N/EL
Computer programming, consultancy and related
CCA 8.2
9,15
1%
N/EL
EL
N/EL
activities
CapEx of Taxonomy-eligible but not environmentally
sustainable activities (not Taxonomy-aligned activities)(A.2)
A. CapEx of Taxonomy eligible activities (A1+A2)

9,15

Y

0%

0%

0%

n/a

Y

n/a

Y

n/a n/a

Y

1%

0%

0%

0%

n/a
n/a

Y
Y

n/a
n/a

Y
Y

n/a n/an/a n/a

Y
Y

1%
0%

EL;
N/EL

EL;
N/EL

EL;
N/EL

N/EL

N/EL

N/EL

n/a

1%

0%

100%

0%

0%

0%

0%

n/a

28,4

%

68%

32%

0%

0%

0%

0%

n/a

923
951

97%
100%

E

T

B. TAXONOMY-NON-ELIGIBLE ACTIVITIESCapEx of Taxonomy-non-eligible activities(*)
TOTAL

402

(*) Consistently with what reported above, the eligibility related to economic activities envisaged by the Delegated Regulations (EU) 2023/2485 "Climate Delegated Act" and 2023/2486 "Environmental Delegated Act" is provided in the tablebelow.

Annex to the Report on operations – Note to the NFS 2023

Financial year 2023

Climate Change mititgation

Climate Change adaptation

Water

Pollution

Circular Economy

Biodiversity

Climate Change mititgation

Climate Change adaptation

Water

Pollution

Circular Economy

Biodiversity

Miminum Safeguards

%

Y; N;
N/EL

Y; N;
N/EL

Y; N;
N/EL

Y; N;
N/EL

Y; N;
N/EL

Y; N;
N/EL

Y/N

Y/N

Y/N

Y/N

Y/N

Y/N

Y/N

%

E

6,6

1%

Y

N/EL

N/EL

N/EL

N/EL

N/EL

n/a

Y

n/a

Y

Y

n/a

Y

1,1%

E

6,6

1%

100%

0%

0%

0%

0%

0%

n/a

Y

Y

Y

Y

n/a

Y

1,7%

Of which Enabling

6,6

1%

100%

0%

0%

0%

0%

0%

n/a

Y

Y

n/a

Y

n/a

Y

1,1%

Of which Transitional

0

0%

0%

n/a

Y

Y

n/a

Y

n/a

Y

0,6%

Code

Text
A TAXONOMY-ELIGIBLE ACTIVITIES
A.1 Environmentally sustainable activities (Taxonomy-aligned)
Transport by motorbikes, passenger cars and light commercial
vehiclesCCM 6.5

OpEx of environmentally sustainable activities (Taxonomy-aligned) A.1

Proportion
OpEx of OpEx year2023

A.2 Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities)
EL;
N/EL
Computer programming, consultancy and related activities
OpEx of Taxonomy-eligible but not environmentally
sustainable activities (not Taxonomy-aligned activities) (A.2)
A. OpEx of Taxonomy eligible activities (A1+A2)
B. TAXONOMY-NON-ELIGIBLE ACTIVITIES(*)

Proportionof
TaxonomyalignedCategory Category(A.1.)
enabling transitionalor eligible activity activity(A.2.)
OpEx,
year 2022€ Mln

Economic Activities

OpEx of Taxonomy-non-eligible activities
Total

DNSH criteria ('Does Not Significantly
Harm')

Substantial contribution criteria

Year

CCA 8.2

EL;
N/EL

EL;
N/EL

EL;
N/EL

EL;
N/EL

EL;
N/EL

13,4

3%

N/EL

EL

N/EL

N/EL

N/EL

N/EL

n/a

13,4

3%

0%

100%

0%

0%

0%

0%

1,6%

20,0

4%

33%

67%

0%

0%

0%

0%

3,3%

456
476

96%
100%

(*) Consistently with what reported above, the eligibility related to economic activities envisaged by the Delegated Regulations (EU) 2023/2485 "Climate Delegated Act" and 2023/2486 "Environmental Delegated Act" is provided in the table below.

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TAnnex to the Report on operations – Note to the NFS 2023

Economic activities envisaged by the COMMISSION
DELEGATED REGULATION (EU) 2023/2485 and by the
COMMISSION DELEGATED REGULATION (EU) 2023/2486
Turnover
Capex
Opex

Eligible (€mil.)
11,687478
270

Eligible (%)

Non-eligible (%)

86%
51%
59%

14%
49%
41%

404

Annex to the Report on operations – Note to the NFS 2023

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