Leonardo S.p.A.

Raffaella Luglini - IR Mauro Moretti - CEO Gianpiero Cutillo - CFO

Massimo Vecchio - Mediobanca Nick Cunningham - Agency Partners Tristan Sanson - Exane Martino De Ambroggi - Equita David Perry - JP Morgan Zafar Khan - SocGen Charles Armitage - UBS Francesca Belli - Citi

Good morning ladies and gentlemen and welcome to the presentation of Finmeccanica full year 2014 results. I am Raffaella Luglini Head of IR and SRI.

For the presentation today I am pleased to introduce you to our CEO and General Manager, Mauro Moretti. He will take you through an overview of the results and recent strategic progresses we've made.

Then our CFO Gianpiero Cutillo will take you through the full results in more details and update you on the guidance reflecting the new shape of the Group. We will then welcome your questions.

I will now hand you over to Mr. Moretti.

Thank you, Raffaella. Ladies and gentlemen, we are very pleased to address you again today.

It’s only seven weeks since we presented here in London our new investor plan 2015-2019. So I’ll keep my remarks brief.

There are some key points for you to takeaway today. First, we are delivering on what we said we will do.

Second, change has already been happening. You can see it in the 2014 results and especially the second half, EBITDA above €1 billion, EBIT €700 million, and positive net result before extraordinary transactions.

You can see in the new industrial plan that we launched in January and you can see it with the great sale of transportation business, meaning that going forward we will -- now we are focused on Aerospace, Defense & Security player. And lastly we are very focused on achieving our target for 2015 and beyond.

We achieved a lot last year as we started to turnaround the company. We delivered above expectations, and we closed out the year with good momentum finishing well above our original guidance.

You know that twice we updated -- upgraded the guidance. With respect to the strong commercial performance holding take about €15.5 billion and the book-to-bill about 1.

Revenues closed to €14.7 billion, and profitability at 7.4% improved by a 100 basis points year-on-year. We've delivered strong performance in helicopters, Defense, Electronics and Security and Aeronautics.

To give you some example of operational progress across the growth, in helicopters we achieved European and U.S. certification of our last son of the family AW189 particularly dedicated to oil and gas services.

We already delivered the first 10 of that helicopter -- those helicopters, of 189s. We expect the certification for the second important new helicopter, the AW169, and we are progressing well with the AW609 particularly in recent months we've really agreed with the most important companies of helicopter service for the commercial use in the future.

In Selex, Airborne and Space 180 contract for the upgrading of the Eurofighter radar, the [ES] radar. Our Land and Naval maintained good profitability on higher volumes and security on that improved profitability, fully recovering from the air traffic control issue.

In an in a rare fix, higher structures increased production rates of B707, B787 and ATR. While we draw volume increases in military platform for Eurofighter, JSF and our trainer the M-346.

And then we have seen good evidence of stabilization on defense, electronics and security with order no longer declining in the United States and the loss of earnings in DRS on the air cargo contract, fully made up at the group level as I committed to when I first addressed you at the first half results. We have also delivered a step changing corporate center cost radically transforming the culture and delivering 25 million saving in six months.

And lastly, we are improving the quality of our earnings. You know that this is a priority for me and I am pleased that we are back in the black delivering a positive net result before extraordinary transaction in 2014 of €70 million.

It’s the first time we've done that since 2010. And we will have a lower level of restructuring and below the line cost going forward but we have much more to do.

That was 2014 and we’re already looking ahead. In January, we presented our new five years industrial plan.

I said here that we will strengthen our business with a meaningful step up on profitability and margins. By far reaching change to our operational processes, engineering, supply chain and the manufacturing too.

By 2017, we are going to reduce working capital by 15% and we’re going to rationalize CapEx and capitalized R&D by 20%, and we will deliver meaningful step up in cash generation with guidance for 2015 of positive between 200 million and 300 million free operated cash flow without considering the reconciled operations. Reducing that and creating a stronger capital base.

When I presented the industrial plan, I said that we will develop this business by doing much more with less resources, increasing our focus by not getting smaller. Using a sharper focus to achieve more and growth in our core, we fewer products and with fewer segments in fewer businesses.

While strengthening our commercial footprint and reach delivering to more customer in more markets but doing it more efficiently through standardization, modularity and the values, and we are confident that we can execute, why, because change is already happening and since we announced our new industrial plan in January, we took another important step with the disposal of the transportation business. You remember that before there was a disposal in July over the buses sector and this is the last part the rail sector both signaling and rolling stocks.

The sale of the transportation business to Hitachi was a key milestone for Finmeccanica enabling us to focus on our core business with less than 1% of growth of revenues now in noncore activities. It will also make a significant contribution to reducing our net debt by around €600 million in 2015.

And the transaction with Hitachi also represented the best possible outcome for the two transportation businesses to company and all these recorders and all their employees. In 2015, my priorities are very clear, the absolute first priorities is the execution of the industrial plan turnaround.

In order to do this effectively we are changing the way in which we manage the business. As we have said since last year, we’re transforming into one single operating company based on a divisional structure to ensure it is fit to the purpose.

And this represent a strong discontinuity compare to the past, it is a radical mission change, not a symbol label change from a financial holding company overseeing a number of diverse if not homogeneous same independent businesses to one single industrial company focused on only on the Airspace and Defense and selecting within its business, product, line of business and so on. So we have not got a much more operationally focused management aimed at providing clear direction to our divisions.

We are shortening the chain of command and this will facilitate much more effective decision making. To support this substantial transformation, we have undertaken a different view of all the industrial processes engineering, supply chain, manufacturing, and the full assessment of all products and line of business across the sectors starting to exit from noncore business as we intent to move out of areas that are not core for us over where we don’t have the full industrial control within the core business.

I am fully committed and personally involved in driving this material changes. Second priority, we must now deliver as focused Space Defense and Security player.

In January I told you that in 2015 we will be refining our go-to-market plans in each market establishing our priority markets first and then establishing the right customer focus model to deliver there. As for the rest of the portfolio, the ink is not yet dry on the transportation sale agreement with Hitachi but already people want to know what is the next.

In this regard I would repeat what I told you in January in London, all of our remaining assets are important in the potential strategic development of the sector in Europe. They are important pieces on the chess board.

There are no sacred cows at Finmeccanica anymore. Every part of our portfolio must contribute otherwise if more value can be achieved by an asset being outside of the group I will not hesitate.

But our plan to reduce the debt is based on transformation in the delivery of cash over the next year, not on the new business disposal. And at the moment we are well founded and we don’t have any pressure about liquidity issues.

So I won’t be pressured into selling anything and we will update you only when we have something to show. Let me finish with the one single example -- simple example of how we are making the industrial turnaround our priorities -- all our priorities, how we are talking -- taking a very different approach and how we will ensure as we are move fast and with commitment to change.

We are for example committed to increase engineering productivity by 10% to 2015. We've more to come to be delivered by a range of action focused on R&D execution and by creating a more effective organization based on the division giving to the line of business the opportunity to control the engineering application.

A change -- computer change in the Finmeccanica philosophy and all the philosophy of the controlled campaigns. So this is a serious turnaround plan to restore international competitiveness and create value for the shareholders.

Thank you, and I’ll hand it over to Gianpiero for detail in the financial aspect. Thank you very much.

Thank you Mauro, and good morning everyone. As you have heard that we've delivered results above expectations and we've closed out the year with a good momentum, but we've got lot more to do.

And our number one priority as Mauro said -- just said is delivering to the turnaround plan. I want to start to with some thoughts on our overall performance in 2014, then I want to show you the progress of our operating businesses and how they’ve driven this performance and then I want to confirm our 2015 guidance and now reflecting a transportation sale.

So starting with the overall group performance, a few key points. First, there is been outstanding commercial performance with the new order over 15 billion.

Good performance across the core group and supported too by transportation. Second, revenue has increased to over 14 billion mainly driven by Selex, Aeronautics and Helicopter.

Thirdly, the real good news is a EBITDA at 1080 and it’s up 23% and we returned on sales of more than 7%, helped by very strong Q4 and improving operating performance, plus we are starting to see the benefits of more cost cutting initiatives. This is like Selex you may have remember performance and deliver step-up in profitability, and it will continue.

Aerospace and Defense overall was in line with expectation, and as you know we made progress towards the last year improving the results in transportation. All this is starting to feed into better performance after the bottom-line.

A reduction in below the line items resulted in a significant improvement in EBIT. So we achieved a positive net result before extraordinary transaction with a turnaround of more than €700 million versus last year.

And importantly the free operating cash flow has gotten better on the back of a stronger cash management in Q4, it was still negative of the €137 million adversely impacted by the hit from the famous Indian helicopter contract. But stripping that out, the few operating -- the free operating cash flow has being positive above the 100 million, better than the original guidance.

So two important points to me from this are, first we did better than expected that, in 2014 with visible benefit from our action on cost and this gives us confidence on the targets we have shown in the industrial plan. Let’s focus on the group orders.

Now let me show how the operating businesses have driven this performance starting I’d say as with orders. Here you can see the really strong commercial performance that has being above the guidance with as we said above 15 billion.

The book-to-bill above one for the second year in the row. Aerospace and Defense overall showed a good commercial performances mainly in Helicopter and Selex.

You can see on the slide Helicopter, at a good order of 4.6 billion as a result of contract with UK MoD to upgrade their Merlin fleet and especially a greater contribution from the product support. Selex too has done well with order up 4% at 3.6 billion.

Importantly, you should note that DRS order has stabilized around €1.5 billion. For the first time in the recent years, orders were at the similar level of last year so we believe that the decline trend has stopped.

Aeronautics is also doing well if you consider that it was against a very strong 2013 which so major order on the BX7 and Eurofighter program. Transportation too did very well.

So about revenue at 14.7 billion, we also delivered at the top end of the guidance. Helicopter did well, continued to grow at 4.4 billion of revenues with sales of AW189, the CH47 program for the Italian Army and again product support revenue.

Important also Selex revenue was up on 2013 and at 3.6 and it was in line with expectation. We saw the increased activity on Airborne and the Space and also in naval in the land and naval system.

Both these areas benefit from an important new contract which we won at the end of the 2013 and in 2014. DRS was lower as expected -- as planned but we are encouraged as we say by the level of order intakes, so we do not expect a further decline going forward.

These after adjusting for some of this business being exited. Aeronautics benefited from the growth in production rate of the B787 program.

Let’s go to the EBITDA, on EBITDA we beat our latest guidance achieving as we say an EBITDA of €1080 million and as we said there has been 23% higher and all our sector performed very well and to achieve even a very good loss at the 7.4 percentage and we did this despite the problem in the air cargo contact in DRS which impacted the EBITDA by more than $100 million. The slide here is showing a breach between ‘13 and ‘14.

Helicopter has really an impressive profitability, contributing 50% of the group EBITDA and a return on sale which is above 12%, and the comparison with last year looks even better if you strip out the 50 million one-off benefits in 2013 from the U.S. presidential contract.

You can also see the progress in the defense electronics where the recovering profitability in Selex almost offsetting the DRS shortfall. Aeronautics improved almost to 20% year-on-year thanks to the benefit of the efficiency action in our manufacturing.

Defense system has maintained its profitability. All these give us confidence in achieving our target of raising EBITDA by 20% over the next two years.

And stepping-up our return on sales by more than 150 basis points, as we said in general. Going forward transportation would no longer be part of the group as you know, but nonetheless we were satisfied to see a positive contribution from transportation this year after some year of losses.

Turning to cash, we've seen an improvement compared both to 2013 and to guidance. I want to show you the key dynamics driving the free operating cash flow.

Looking at the slide what you see here is a very good contribution from the operations. Then there is dividend from our JVs, in 2014 we received the payment of an extraordinary dividend, so the total item had been over and above the regular dividend flow.

Then you can see a lower net investment of 620, but which benefits from around 300 million of government grants, I will cover later we see -- how we see this going forward in 2015. You can see that despite the improvement in profitability and transportation as expected this sector remains a major drag on in free operating cash flow.

Then finally the effect of the Indian contract, the famous one, as a result of all of this the net effect was a negative free operating cash flow for the group of minus 137 million. And as you can see without the Indian contract, the hit, we would have been positive of around 120 million.

You heard from our update, we are back in the black with a positive net result before extraordinary transactions. In this chart, we would like to show the reasons.

2014 EBITDA starts up 23% driven by higher revenue and improved efficiency. But the key point here is the lower below the line charges.

The non-recurring expenses fall from 423 to 92, restructuring charges fell almost a 50% and this is all in line with what we promised one year ago. So this leads to an EBIT up from a negative 14 to a positive €692 million, and then we have the financial expenses up 440 million, taxes are slightly higher and all this gives a net results before capital gain or extraordinary transaction, positive of €70 million, that’s one more time is over €700 million compared to the negative 649 million of last year.

To me this represents a step towards a higher quality of earnings. And as we say, improving the net results and achieving a lower volatility of earnings are key objective in our plan.

Now I want to update you very briefly on the operating performance of the business. Starting with helicopters, as you have seen helicopter performed very well in 2014, this again shows the strength of our product portfolio, the order intake demonstrates the appeal of the new product 189, 169 as you have heard.

Revenue grew above the market growth rate, and you can see the strong double-digit profitability. The activities on the new product are progressing well, and we remained confident in the near-term prospects to maintain a very attractive profitability.

Defense in Selex, as you know Selex is in the middle of an important restructuring. The key point is that that we are doing what we said we would and we've seen the benefit clearly coming through.

I’ve mentioned the increase on margin profitability, you can see they step-up from 2% to 5.2% but what’s important here is that, that we’re confident of growing further. DRS has been affected by two main items.

First, the drop in volume with we had planned for and Secondly, the famous problem on the air cargo contract. But it’s an isolated one and we have dealt with it and you can see that the total difference picture on Q4 performance, so going forward we expect to have our recovery profitability starting from 2015 and the real good news as we said is that we saw the decline in order stabilizing in 2014 and we expected to start rising again this year.

Aeronautics, here we saw a satisfactory performance, growth in revenue and EBITDA and importantly we’re continuing to grow in our return on sales and it looks better also if don’t consider striping out the 300 million of pass-through revenues. The key drivers here where the good product performance mainly in 787, ATR as well as the military platform their M346 and the Eurofighter and management action driving profitability really focusing on industrial processes and production efficiencies.

Because of this looking forward in 2015, we except to continue progress and maintain profitability with some additional benefits. Space, and in line with last year let’s say no surprises.

And going forward we expect to grow revenue and improved the business performance. We see the growth here in manufacturing and launch operations services.

In Defense System, EBITDA was down compare to last year due to MBDA and underwater system. We expect a partial recovery in 2015, and to do better than last year with the major deliveries on the missile system and rising production.

Transportation, as you can see, we summarized the result here and giving that it’s not part of our future, I won’t go into additional detail. Now I want to confirm the guidance for 2015, there are no significant changes to most of the assumptions that we shared with you in January with the obvious exception of the reduction in net debt by 600 million resulting from the transportation bill.

The recap as we say in January, we’re assuming a modest top line growth, but achieving a meaningful step up in profitability of 10% in 2015 much lower volatility in earnings and lower restructuring charges. And now I think it’s important for you to understand the key drivers and major components of our free operating cash flow and why it’s improving.

You can see these on the next slide. First of all, you can see on the starting point the cash from operations that it goes from 725 million to almost 900 million in 2015 then you can see the contribution from JV, I mean dividends, we are expecting only a normal level of dividends in 2015 as we won’t be getting the extraordinary dividend that we got in 2014.

Then we have our investment spending which is an important driver in our cash flow. Here we are budgeting for a higher net spend in 2015 but only because we expect a lower level of government grant which is in the range of 150 million, which is the normal level.

Then in 2015, we still see some negative drag from the transportation business reduced to a 50 million and then stopping. All of these will result in an increase on free operating cash flow which is in 2015 we expect to be in the range €200 million, €300 million.

To summarize the guidance, we are now an Aerospace & Defense company, so the new group guidance is affecting the all Aerospace and Defense we share with in January with the exception as we said of the group net debt. Our number one priority; we already said this is to deliver in our industrial plan and we have a very clear medium term targets significant increase in EBITDA plus 20% from ’14 to 16’ and more than 150 basis point rise in return on sales.

SG&A reduction over 10% over 2013, 2015, 20% reduction in capital expenditure in capitalized R&D. Reduction on the operating working capital and positive and growing free operating cash flow that reduced debt to below 3 billion by the end of 2017, and stronger capital structure with better ratios.

So in summary, joining all that together hopefully, we've shown you that as Maura earlier said, we've already started to deliver on what we said we would. Clearly there is a lot still to do but change has already started.

And you can see some of that coming through in the results that we've shown. And we are really focused on achieving the target we have laid-out and we’re confident that we can do it.

And with that we can handover to the Q&A. Thank you.

Yes, good morning everybody. I am Massimo Vecchio from Mediobanca.

One question on the currency exposure. I see that your guidance is done at a $1.27, can you detail how the dollar impacts your numbers.

And second question is really more a clarification, your 2014 debt is 4 billion, after the disposal of transport it’s 3.4, which is your 2015 guidance. The free cash flow to €300 million how does it reconcile with your debt guidance?

Is this probably due to the restructuring cost that do not equates. And last question is on the plan to transform the legal entities into divisions.

Can you give an update on this process? Thanks.

I will start to answer to the first two questions. First about our rate of change that we use, that’s correct is 1.27 on dollars.

I think it’s based on our exercise, we have each 10 basis points so let’s say, I’ll give you this reference, we’ve around €15 million of change. Having used a 1.27 it’s kind of a prudent approach that we’ve this is more or less on dollars.

We also have some exposure in pounds which is bit higher. We have each 10 basis points here we've around €25 million to €30 million of impact.

I’m talking to the operating profit there, as a point of reference. If you want to talk about revenue, we've $1 each 10 basis points we may have €150 million, €200 million revenue impact.

And it will be bit greater in pounds each 10 basis points you’ll have 350 to 400 revenue change. This is of course there is accordingly with our budget figures in 2015.

That’s more or less there, so you can have an idea of how is the impact. I think that was about the first question.

The second was related?

The free operating cash flow guidance with a net debt of 3.4.

We say that we have as you can see -- the net debt after the end of 2014 which is below 4 billion slightly. First of all the 600 million of debt we published as the impact of the deal includes also part of the benefit of the consolidating the negative free operational cash flow of the transportation.

So it’s partially included over just 200 or 300. That’s the reason, otherwise there is something -- and also we've some non-operating item on the debt that will affect but largely it’s this.

[Information] on legal entities towards the divisions. We already defined the model.

We are running some sensitivities concerning the different situations of the different companies. For example, more homogeneous [indiscernible] absolutely different Selex, so we have to better define what these strategic business unit giving them, end-to-end all the resources powers and responsibility avoiding discrepancy in the -- but substantially confirm the roadmap that I presented in January, some weeks ago.

Morning, Nick Cunningham from Agency Partners, couple of questions, first on helicopter. You’ve been gaining market share particularly in oil and gas markets, so I want to ask how much of an issue do you think that is?

How can you mitigate as in and so on and then a couple of more technical and forecasting to our questions, you’re going to reduce the below the line cost to restructuring and so on, but does that imply that there will some in this year, what sort of level should we think about? And then I’m afraid a very technical one, but the other line, the eliminations and other in revenue and the core personnel in EBITDA, how do we think about the pro forma now that transportation is gone; because I don’t really have an idea as forecasted that I have to admit?

At the moment we don’t have particularly negative assets on the helicopters in the oil and gas sectors maybe because we have launched the new 189 that performed very well, best-in-class at the moment, no one have the same performances or distances and the other performance is that -- are [emitted] in the gas and oil business. So at the moment we did perform very well.

You know that in Orlando we did some new agreements not only for the 189 but also for our strong 139 at the moments in the best in the level. And so we are expecting the new AWU609 for the same task giving the sort of revolution in the sector for the opportunity of the distances particularly we have shown works that at the moment is very-very important consider that the [indiscernible] volume toward cost of the oil and reducing -- giving the support reduce cost to extract oil is mainly at the moment with best question that all the oil and gas company are facing.

Okay about that I think if my understanding is correct about the corporate cost, they were always included on Aerospace and Defense, they fully included -- we never allocated any dollar to the transportation. It has been always included there and I think the question was the restructuring, the restructuring we expect to have kind of two-third of what we had this year more or less; decreasing, but we still have something to do.

Thank you, it’s Tristan Sanson from Exane, first and I have a few follow ups first on the helicopters question of Nick. So thanks for feedback on the Heli exposure, can you tell us more specifically on the AW139 as we see an effort of other helicopter to modernize as per the trend and to specifically attract the AW139, how do you see overall market share evolving going forward you will gain on the one AW189 maybe little bit on the AW139; so does that mean overall stable market or some pressure or some increase?

And second question can you remind us what’s the mix between civil and defense and OE aftermarket in helicopter is right now in 2014? And maybe a quick follow up on the currency question we had earlier also, I didn’t understand actually to which extent you’re hedged on your net to dollar exposure in 2015, so when you say -- you gave the sensitivity which is useful, but so far concerns change dollar to euro rate, but to which -- at which speed is it going to materialize, going forward?

Thanks.

The helicopter is quite difficult to know because of the market at the moment, because all the intermediation of the service companies in this sector, but we don’t have particular difficulties. And you know we have reached some important agreement, particularly based on the new 189.

What we can expect in the future, I don’t know, on one know exactly the trend of the price of the oil, at the moment $45 per barrel. The Companies involved in oil and gas systems are running sort of turnaround.

The [indiscernible] between the shale oil and shale gas towards the other. The most important question at the moment is to create the condition to decrease the extraction cost.

And you know that most very important difference that if you have considered the different regions worldwide. The helicopters can give to the company some new opportunities.

And people in the offshore, where it’s quite difficult today with the [slips] that is valuable with some performances that new field of oil required. About civil and military, at the moment in our point of view we consider the civil been most important activity at the moment.

So we are also -- we've also decided to increase the services in this part of the business, because usually in the civil field the operators don’t have all the organization in training in maintenance and so on if we can guarantee we have the best level. We are investing in this and we’re expecting an increase in services revenues and profit for the next years or so.

The last is about the kind of hedging.

Yes. The rate of a change impact that I was saying it before is totally related to translation it’s not in trading, trading for us is not really an issue.

On my sensitivity I had between 1 million to 2 million the impact of trading. So basically zero, because we are fully hedged on the training.

This is of course translation -- conversion as you want, rate impact and as we said before.

Good morning, Martino De Ambroggi, Equita. The first question is on the minimum guidance.

I remember in January presentation, DRS was expected to return to the normalized profitability that means something in the region of a 100 million improvement year-over-year, maybe more taken into account the dollar translation effect. So that means that basically all the rest of the business is flattish or slightly growing which is okay, taken into account the heavy cost cutting measures, maybe it is not great.

So just to have your flavor of my calculation.

I think I didn’t answer correct last time, because you did a same question. But anyhow, I will try to be a bit more clear.

Yes it’s correct, is no one under the mill, because the DRS has a two impact. One is the volume, which is good impact.

The other one is $100 that change in euro is way below. And it is correct, we expect to restore completely but there is not a fully delta that we expect.

And also you’ll get to take in consideration that we've also some remaining cost of debt that we've to include in such a big reorganization that we are doing. So we believe that year-on-year 10% on operating profit is with all the change that we are doing, that’s quite good.

Even if one of the components that you say it’s a DRS but you have to keep in mind that DRS as a portion of the shortfall is volume. And we are not expected to increase dramatic volume in 2015.

But we expect to be more or less not to decline again to be flat but no to rise.

We would like to change the trend, this is our goal for the 2015 DRS.

The second question is still on DRS, I didn’t ask it last time. And in some of your recent public statements you mentioned we need to wait for the second results in order to understand what to do.

Last time mentioned we want to find a partner either industrial or financial one, what does it mean waiting for the second quarter results?

We would like to expect to wait the result of the second quarter. We are expecting good results, change in the curve -- change of the trend over the rest of the last years.

And immediately after we can analyze better the situation. And I confirm that we've two opportunities, if we would like to enforce on our position on the market -- U.S.

market, maybe an industrial partner could be the best solution. Otherwise we've to change our dream maybe, and looking for a financial partner for other sources.

This is that we consider the moment the problem of the disposal postponed, and only if -- so in September we can absolutely have all the elements all the details decided by that.

If I may one question on the restructuring cost, last time -- last year you gave an indication of 1 billion of cash out for the restructuring recorded in past, did you see any uptick on that?

It’s not fully in 2014.

No, no just going forward, I want to just to know an update on this figure, the cumulated cash out flow the next few years and what was the impact in 2014 and what is project included in guidance for 15? Thank you.

Yes, okay let’s do a bit of the ground -- we started to give you the indication because of the huge restructuring provision that we book in 2011, right, and that was really important to see cash and non-cash item. Now if you were to separate restructuring what is -- I will give you numbers for 2014 because if I remember well we used to say €470 is above 510 is what recorded.

For the future I think is all included in our free operating cash flow and I don’t think it’s really meaningful to keep this separated, it’s going lower that there was because we book some last year, not this year in 2013 some additional provision we paid this year that’s the reason specially in Selex why we had an increase of this cash out but -- now we’re spending this increase on cash out restructuring, we did a quite satisfactory performance work.

David Perry from JP Morgan and I’ve got four questions but these are all financials, can you just tell us you gave us your assumed dollar/euro rate, what’s your assumed euro/sterling rate please?

It’s in the presentation, it’s zero.

Zero that is what we understand. And then you’ve commented on the impact of the currency on earnings, what about on debt, can you just remind us how much dollar debt you have and $0.01 would do you debt?

I can’t say it now.

We [hear all] the question, David, and then we answer them, thanks.

Can you just help us as what is first time now we’re forecasting on IFRS 11, just to help us think about the finance charge and the tax charge, please, for our models and then just lastly any guidance on capitalized R&D for this year? Please.

Okay, yes, just a recap for because those were lower. The second is about dollar impact on net debt.

The third question is about what we expect in terms of net financial interest taxes. And the last is about our forecast for capitalize -- net capitalize R&D expenses.

Okay about the rate impact of the net debt this year in the figures that you have seen -- we have an unfavorable impact on around 80 million it’s not really prescribe because there is really one fixed impact -- that the impact that we have on bonds in dollar. This is something fix, for the other it depends on the cash positive position you have at the end of the year.

You should also keep into account that according to the accounting IFRS principle we have to use at the yearend exchange rate for the balance sheet items. For the next year it would be very different I mean now we see that is going close to parity.

We use 1.27 we may have 50 million, 100 million maybe impact -- it well, really depends after the end of the year of the positive cash position that we have either in pound or in dollar that we have in our subsidiary, that’s for budget. And the second is?

Net financial interest and taxes for [indiscernible]?

Okay net financial interest, it would be very close to -- you see that we are decreasing these year-over-year. We expect to do this in our current budget because we have more or less the same figures that we did in [2000] it won’t far from that and is the same for the tax.

And net capitalized R&D?

Net capitalized R&D, I think it’s also in the presentation what has been in 2014. For 2015, we expect also here consistent with the reduction of R&D and what we see decreasing of debt, it should be close to 200.

Zafar Khan from SocGen, just on the tax, what is the actual underlying tax rate that we can expect going forward given the disposal, given IFRS 2011. And what was the underlying tax rate for 2014, I know the number was -- the rate, the actual underlying tax rate?

I will give you an answer which is not strictly connected with the theoretical rate because there is not really meaningful. The reason of that because as all the capital gain that we’ll have from these operations is tax free, is not effectively impacted by the tax, is in tax exemption.

And also we've a bunch of losses carry over that we have. So the level in absolute terms that I give you that we will have the same level of tax of this year is the most reasonable guidance to that I can give you at this stage.

And on the debt guidance, you have given for 2017, you are suggesting below 3 billion. So, simple arithmetic tells me that's about 300 million free cash flow, free operating cash flow, 2016 and 2017, doesn’t seem like a very good conversion rate given all the efforts you are putting and you reducing investments, R&D hopefully will come down a bit as well.

The 300 million, on 1.2, 1.3 billion of EBIT doesn’t seem like very exciting number for me. Can you -- Is that very conservative on your part, or is that the reality?

Well, prudent. So you can also hope better.

I’ve been hoping for a long time.

But you know that we are changing rapidly.

And on the Selex --.

And if I can add something more. With the disposal of the [indiscernible], we anticipate what we presented in the -- January for a couple of years.

And maybe we have some space to redefine some new opportunities, considering that -- if you consider the increase of the equity and the decrease of the debt our ratio is quite good in a couple of years. This changed a lot.

And all we can do more is absolutely.

On the Selex side, very good improvement in margin from the low base obviously. And in the good old days, you used to do round about a 10% margin that business before you acquired the BAE business.

When can we hope to be back out that double-digit margin?

We are very satisfied with the progress that we're making in Selex. You know that they came from a very deep problem.

Mauro mentioned that the air traffic control problem, but that was not the only one that, that we had. But we had a very good progress this year.

We really are confident that next year that we’ll continue to grow both on revenue and profitability. So we really -- but as we said at the beginning that we can achieve a very good level of return on sales that they could be close to 9% in the couple of years.

For ’15 or in the coming years?

No, no in the couple of years.

So the trajectory is linear to 9%.

Exactly.

Okay, thank you very much.

If you consider the two main sector of Selex maybe you have some better results in the 2015. [indiscernible] I guess some and [indiscernible] and landing level.

With the new governments we will be guiding better the businesses. Giving of every businesses the opportunity to better show the potential, in case -- and their results.

And so decided better on the other, as I mentioned before substantially for the so called civil part of Selex.

Good morning, Charles Armitage, UBS. You mentioned exiting some of not doing everything in all your divisions, and presumably some of that will not be through disposals, it will just be not bidding.

So if you think that you currently go around about 12.5 billion of sales, some of that will go down because you are not doing some of the stuff you are doing. You expect to grow in your core areas.

Potentially, how should we see those two moving parts, say over the next five years? Do we have, is it 10 billion in five years’ time, or is it 15 billion in five years’ time?

How do you see those moving?

The answer is in our industrial plan, prudent, but solid. At the moment you know there is a very important -- two important; but questions budget reduction on the military side in euro particularly and the other is consolidation.

So to be prudent at this moment is absolutely a need, avoiding dreams, avoiding forced acceleration as we did some years ago in some [further] operation. So I think that we can maintain gradually objective to increase in the five year of plan more or less 20% of the revenues consolidating the most important business in the core.

As I mentioned before we have almost finished to define the core business, but we have something to personalize and we have to balance the differences of revenues on this line of businesses and the opportunities that we can catch with the core business and particularly focusing on the main sector helicopters, electronics particularly. This what we can say at the moment.

Okay, a follow-up question from Tristan.

Few follow ups quick, first I didn’t really understand why your pension deficit is going down, why the interest rates are going down; its technical but maybe you can explain me you got there? Second quick question on the 787, can you tell us what is your position in the learning curve compared to the target costs -- the unit cost at maturity?

Are your two-thirds ways through, are you close to target that you have in mind for the unit cost on the 787? And final one on ATR and the future on that activity, I have the impression that ATR was more less core business but if you were defining core business as activity where you have full control where ATR doesn’t really fit because you can’t launch all the program as you want to do, so what do you want to do with this activity going forward?

About the pension there I’ll tell you, you’re looking at where annual report that we published basically our pension deficit is mainly based on the UK companies, and mainly on Selex ES. In that case we have benefited by two things, one is the sterling and the other is basically a better performance from the asset plan.

That has been partial but only partially offset by a worsening in the U.S. pension plan for DRS which is in any case lowing size.

And as I said the benefit is not being completely offset by the U.S. plan that’s basically the explanation.

The 787 learning curve.

787, we have seen that that we have also to intervene strongly in the operational 787 and again fully committed to that, also we’ll change.

ATR?

ATR is we’re in joint venture. There is a partner.

We have to discuss with the partner. We cannot decide about that.

At the moment with the oil at $45 per barrel, it’s quite different than we started 6 months ago -- 7 months ago; so we have to take care of our analysis because at the moment it’s quite difficult to decide. We have always some region particularly dedicated to this kind of aircraft if I consider for example for the Southeast Asia, Indonesia, Malaysia and some other part.

But we have to reconsider this and we have to reconsider also that we don’t have only the program of the control. But we have to invest still lot in every situation, also if we maintain the partnership with the joint venture with Airbus, we may need to invest in a new platform because not to change the mission of the aircraft because we have to avoid functional -- we have to innovate a lot on the platform.

It’s quite old, the ATR. So, double question, double program that we've to study better, avoiding mistake.

I really think we've done for a last question now. Thank you.

Francesca Belli, Citi. Could you please give us an idea of total debt and total leverage forecast?

Do you mean the gross that?

Gross, yeah.

The gross debt is in the range of 5 billion. And the other question is?

Is the leverage.

What do you mean leverage? The cost of our -- I can come back to you with this with the actual figures about all the guidance, all the guidance that we gave is on the slide.

My question was just because you gave guidance on a net basis, so I wanted to have an idea on the gross basis.

You are right, but that is the set of numbers that we released so far. And we don’t give guidance on EBITDA at the moment, at least.

You get the number from the financial statement -- for the actual figures.

I just wanted to have an idea of leverage going forward.

Thank you very much, see you next time. The next quarter.