Slide 1: 2018 Interim Results
© BAE Systems 2018 2018 Interim Results 1 August 2018 All statements other than statements of historical fact included in this document, including, without limitation, those regarding the financial condition, results, operations and businesses of BAE Systems and its strategy, plans and objectives an
Slide 2: Charles Woodburn, Chief Executive
© BAE Systems 2018 Charles Woodburn Chief Executive 2
Slide 3: 2018 – Half Year Overview
© BAE Systems 2018 2018 – Half Year Overview 2018 2017 Half Year Half Year • Significant business wins Sales £8,818m £9,467m • SEA 5000 Australian Frigates Underlying EBITA £874m £967m • Amphibious Combat Vehicle Underlying EPS 19.8p 20.2p • Major programme positions strengthened Dividend per share
Slide 4: Market Outlook
© BAE Systems 2018 Market Outlook • UK • Combat Air Strategy • Modernising Defence Programme • Defence and Security remains high priority • Long-term contract positions • US • Budget outlook positive • Portfolio well aligned to customer priorities • International Markets • Good prospects in many of
Slide 5: Strategic Priorities – Update
© BAE Systems 2018 Strategic Priorities – Update • Operational Excellence • Maritime management strengthened • Ramp to rate actions in the US • AI performance improvement • Competitiveness • New organisation structure embedded • Procurement category managers • Technological Innovation • Collaboratio
Slide 6: Key franchises and programmes - US
© BAE Systems 2018 Key franchises and programmes - US Sales outlook • Electronic Systems • Broad portfolio – well placed • F-35 and F-15 upgrades ramp up • Classified work increasing • APKWS – high demand • US Platforms and Services US Combat Vehicles • Production set to double in plan • M109, AMP
Slide 7: Key franchises and programmes - Air
© BAE Systems 2018 Key franchises and programmes - Air Sales outlook • Typhoon Production • Qatar stabilises outlook post 2018 • Further orders secured would drive growth • UK Combat Air Strategy • Typhoon Support • Global fleet still increasing, ongoing upgrades • Qatar support package, Oman in pla
Slide 8: Key franchises and programmes – Maritime and Cyber
© BAE Systems 2018 Key franchises and programmes – Maritime and Cyber Sales outlook • Maritime • Long-term contracted programmes • Astute and Dreadnought production • Type 26 • Support services and combat systems • Canada opportunity • Cyber & Intelligence US Intelligence & Security • High tempo o
Slide 9: Overview
© BAE Systems 2018 Overview • Significant business wins • Major programmes outlook strengthened • Transition earnings year • Strategic priorities being driven hard • Strategy and capital allocation – clear, consistent and disciplined Firm basis for growth and sustainable cashflow 9
Slide 10: Peter Lynas, Group Finance Director
© BAE Systems 2018 Peter Lynas Group Finance Director 10
Slide 11: 2018 Half Year Financial Summary
© BAE Systems 2018 2018 Half Year Financial Summary 2018 2017 Half Year Half Year Sales (1) £8,818m £9,467m Underlying EBITA (1,2) £874m £967m Underlying Finance Costs (3) £(101)m £(129)m Underlying Earnings per Share (1,4) 19.8p 20.2p Operating Business Cash Flow £(436)m £277m Net Debt (5) £(1,921)
Slide 12: Balance Sheet
© BAE Systems 2018 Balance Sheet (£m) 30 June 31 Dec 2018 2017 (1) Drivers Intangible fixed assets 10,523 10,378 FX Tangible fixed assets (2) 1,918 1,977 Williamstown & Mobile shipyards Investments 388 330 profits and share of lower pension deficit Working capital (2,442) (3,595) reversal of ‘17 ben
Slide 13: Net Cash / (Debt)
© BAE Systems 2018 Net Cash / (Debt) (£m) 2018 Electronic Systems 117 Half Year Cyber & Intelligence 63 Opening Net Debt (752) Platforms & Services (US) (46) Operating business cash flow (436) Air (167) Interest & Tax (227) Maritime (196) HQ (207) Equity dividends paid (415) Operating business cash
Slide 14: Electronic Systems
© BAE Systems 2018 Electronic Systems Half Year: 2018 2017 (1) Sales $2,503m $2,291m • Sales growth at 9% F-35 & APKWS production volumes Underlying EBITA $358m $342m Classified activity Margin 14.3% 14.9% • Margin performance in line with guidance Cash flow $161m $149m • Cash conversion to impr
Slide 15: Cyber & Intelligence
© BAE Systems 2018 Cyber & Intelligence Half Year: 2018 2017 (1) Sales $1,122m $1,156m • Sales down 6% on a constant currency basis Intelligence & Security down on desktop IT Underlying EBITA $66m $47m services contract Margin 5.9% 4.1% Applied Intelligence down 10%; business re- focussed Cash f
Slide 16: Platforms & Services (US)
© BAE Systems 2018 Platforms & Services (US) Half Year: 2018 2017 (1) Sales $1,902m $1,895m • Sales broadly unchanged; 2nd half bias Combat vehicles ramp up Underlying EBITA $77m $144m M777 India Margin 4.1% 7.6% • Margin performance impacted by charges on Cash flow $(64)m $48m Radford facilit
Slide 17: Air
© BAE Systems 2018 Air Half Year: 2018 2017 (1) Sales £3,305m £3,720m • Sales down 11% Typhoon production completed on European, Underlying EBITA £459m £478m KSA and Oman Margin 13.9% 12.8% • Margin performance impacted by IFRS 15; sustainable margin remains as per guidance Cash flow £(167)m £4m •
Slide 18: Maritime
© BAE Systems 2018 Maritime Half Year: 2018 2017 (1) Sales £1,447m £1,488m • Sales little changed from ‘17 Underlying EBITA £93m £110m • EBITA impacted by OPV charge £15m Margin 6.4% 7.4% Conservative trading on Carrier Cash flow £(196)m £255m • Cash flow Order backlog £9.5bn £8.5bn(2) c.£100m
Slide 19: 2018 Guidance - Trading
© BAE Systems 2018 2018 Guidance - Trading 2017 Actual (1) 2018 Guidance (2,3) Sales (£m) Margin (%) Sales Margin Electronic Systems 3,598 15.0 high single digit 14% - 16% Cyber & Intelligence 1,818 3.2 marginally higher c.5% Platforms & Services (US) 2,951 8.0 10% - 15% 9% - 10% Air 7,210 13.4 c.(5
Slide 20: Cash Guidance
© BAE Systems 2018 Cash Guidance (£bn) 2018 2018 Half Year Guidance Operating items: Net capital expenditure, disposals & depreciation - (0.2) Working capital - provision utilisation (0.1) (0.1) - advances movement (net) (0.5) nil – (0.3) - other working capital movements (0.4) (0.1) Pension deficit
Slide 21: Charles Woodburn, Chief Executive
© BAE Systems 2018 Charles Woodburn Chief Executive 21
Slide 22: 2018 – Half Year Summary
© BAE Systems 2018 2018 – Half Year Summary 2018 2017 Half Year Half Year • Group guidance maintained Sales £8,818m £9,467m • Issues being addressed on certain long- Underlying EBITA £874m £967m standing programmes Underlying EPS 19.8p 20.2p • Business wins strengthen the outlook Dividend per share
Slide 23: Supplementary Information
© BAE Systems 2018 Supplementary Information 23
Slide 24: EPS Bridge (pence)
© BAE Systems 2018 EPS Bridge (pence) 25 1.7 0.5 1.2 20 0.5 0.8 2.1 1.4 15 10 20.2 19.8 5 0 2017 F/X Finance Tax 1st half Air volumes AI Other 2018 Half Year Costs performance (Typhoon reduced trading Half Year issues production) loss 24
Slide 25: Pension Deficit (IAS 19)
© BAE Systems 2018 Pension Deficit (IAS 19) (£bn) 30 Jun 31 Dec 2018 2017 Assets 26.6 27.0 Major movements to 30 June 2018 Liabilities (29.8) (31.2) - Asset returns (0.1) Pension deficit (3.2) (4.2) - Discount unwind (0.4) Group share of deficit (3.0) (3.9) - Discount rates 1.1 - Mortality 0.2 UK -
Slide 26: 2018 Half Year Financial Performance
© BAE Systems 2018 2018 Half Year Financial Performance (£m / £bn backlog) Underlying Cash Order Sales EBITA Margin Flow Backlog Electronic Systems 1,819 260 14.3% 117 5.3 Cyber & Intelligence 815 48 5.9% 63 2.0 Platforms & Services (US) 1,382 56 4.1% (46) 4.6 Air 3,305 459 13.9% (167) 18.9 Maritime
Slide 27: Like-for-Like Sales & Underlying EBITA
© BAE Systems 2018 Like-for-Like Sales & Underlying EBITA Half Year: Sales Underlying EBITA 2018 2017 Yr-on-Yr 2018 2017 Yr-on-Yr As Reported 8,818 9,467 (7)% 874 967 (10)% Foreign exchange: USD (320) (34) EUR 9 1 Other (24) (4) Adjusted for foreign exchange 8,818 9,132 (3)% 874 930 (6)% 27
Slide 28: Reconciliation of Half Year Earnings
© BAE Systems 2018 Reconciliation of Half Year Earnings (£m / pence EPS) 2018 2017 2018 2017 Underlying Underlying(1) Reported Reported(1) Underlying EBITA 874 967 874 967 Non-recurring items (33) (4) EBITA 841 963 Amortisation/Impairment (33) (41) Underlying Finance Costs (101) (129) (101) (129) Pe
Slide 29: Working Capital Movements - reconciliation to Cash Flow
© BAE Systems 2018 Working Capital Movements - reconciliation to Cash Flow (£m) Movement analysed between: 30 Jun 31 Dec Cash 2018 2017 Mvmt F/X M&A Other Flow Inventories 799 733 (66) (7) - (3) (56) Receivables – current 4,726 4,244 Receivables – non-current 434 387 Total Receivables 5,160 4,631 (5
Slide 30: Segment Changes – Sales – 2017 Half Year
© BAE Systems 2018 Segment Changes – Sales – 2017 Half Year (£m) Old New Structure Reorg. (1) IFRS 15 Structure Electronic Systems 1,726 - 94 1,820 Electronic Systems Cyber & Intelligence 923 - (6) 917 Cyber & Intelligence Platforms & Services (US) 1,433 - 72 1,505 Platforms & Services (US) Platform
Slide 31: Segment Changes – Underlying EBITA – 2017 Half Year
© BAE Systems 2018 Segment Changes – Underlying EBITA – 2017 Half Year (£m) Old New Structure Reorg. (1) IFRS 15 Structure Electronic Systems 257 - 15 272 Electronic Systems Cyber & Intelligence 35 - 3 38 Cyber & Intelligence Platforms & Services (US) 109 - 5 114 Platforms & Services (US) Platforms