Slide 1: BAE Systems 2013 Preliminary Results
BAE Systems 2013 Preliminary Results 20 February 2014 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: Sir Roger Carr
Sir Roger Carr 2 © BAE Systems 2014
Slide 3: Ian King
BAE SYSTEMS INSPIRED WORK lan King © BAE Systems 2014
Slide 4: 2013 Overview
2013 Overview Solid performance in tough environment Kingdom of Saudi Arabia ‒ Continued growth in order Backlog ‒ Typhoon deliveries resumed ‒ Price escalation Reduced US defence spend UK naval ships agreement Continued cost reduction ‒ Protecting margins ‒ Enhancing competitivity Conti
Slide 5: Key markets - US
Key markets - US 2013 Group Sales by Destination 2013 trading environment US (Commercial) RoW Continued budget uncertainty 4% 63% Sequester pointed to 10% budget reduction from 2012 level ‒ 15% reduction to O&M and investment accounts US (Defence & Security) 33% 2014 budget DoD Budget Authority
Slide 6: Protecting the Land industrial base
Protecting the Land industrial base M2 Bradley • Refocus on to core missions • Cost reduction – Exit wheeled automotive assembly - Sealy closure M88A2 – Consolidate satellite manufacturing to hubs • Restructuring of existing contracts • Pursue additional opportunities ‒ Bradley and M88 business won
Slide 7: Key markets - UK
Key markets - UK Trading environment Budget pressures, but stable Good long-term programme visibility Large order backlog Strong programme performance Military air First Typhoon Tranche 3 aircraft flown Taranis UAV flight trials underway Salam Typhoon deliveries recommenced to plan Mar
Slide 8: International - business development
International - business development Further good order intake KSA – Multi-year Typhoon support – Tornado upgrade and weapons procurement Typhoon exports – Opportunities in Gulf state Military aircraft upgrade and support − F-15 in KSA − F-16 RoK − Australian Hawk follow-on support Armoured
Slide 9: Cyber & Intelligence
Cyber & Intelligence Intelligence & Security Continued weakness from slow contracting pace Some anticipated operations driven reductions Substantial bids in prospect Applied Intelligence Performing well - 60% growth in Order Book Good growth in commercial cyber security Continued organic
Slide 10: Strategy
Strategy Consistent strategy for 2014 Well balanced portfolio Organic investment in:- ‒ Cyber & Security ‒ Commercial aerospace electronics Continued R&D investment ‒ US defence electronics ‒ Military Air including unmanned Prioritised capital allocation ‒ Pension funding ‒ Organic investment
Slide 11: Peter Lynas
Peter Lynas 11 © BAE Systems 2014
Slide 12: 2013 Full Year Financial Summary
2013 Full Year Financial Summary Yr-on-Yr (1) Sales £18,180m + 2% (2) Underlying EBITA £1,925m + 3% Underlying Finance Costs (3) £(179)m (4) Underlying Earnings per Share 42.0p + 9% Operating Business Cash Flow £147m Net Debt £(699)m Order Backlog £42.7bn Dividend per Share 20.1p + 3% (1) Comparativ
Slide 13: Balance Sheet
Balance Sheet (£m) 31 Dec 13 31 Dec 12 Movement drivers: Intangible fixed assets 9,735 10,928 - impairments & amortisation Tangible fixed assets 2,071 2,407 - held-for-sale & depreciation Investments 286 270 Working capital (4,988) (6,557) - advances & provision utilisation Pension deficit (3,509) (
Slide 14: Pension Deficit (IAS 19)
Pension Deficit (IAS 19) (£bn) 31 Dec 13 30 Jun 13 31 Dec 12 Assets 21.5 20.5 19.6 Liabilities (26.0) (26.0) (25.3) Pension Deficit (4.5) (5.5) (5.7) Group share of deficit, pre-tax (3.5) (4.3) (4.6) UK - real discount rate 1.1% 1.3% 1.6% bond yields 4.5% 4.6% 4.5% inflation rate 3.4% 3.3% 2.9% US -
Slide 15: Net Cash / (Debt)
Net Cash / (Debt) (£m) Electronic Systems 235 Opening Net Cash 387 Cyber & Intelligence 118 Platforms & Services (US) 192 Operating business cash flow 147 Platforms & Services (UK) 59 Interest & Tax (304) Platforms & Services (Int'l) (189) HQ (268) Equity dividends paid (638) 147 Share buyback (212)
Slide 16: Electronic Systems
Electronic Systems 2013 2012 2013 Performance: Sales $3,858m $3,974m • Sales down 3% Underlying EBITA $541m $565m Commercial growth Margin 14.0% 14.2% US defence budgets Cash flow $368m $406m • Margin performance per guidance Strong programme execution Order backlog $6.1bn $5.8bn Continued c
Slide 17: Cyber & Intelligence
Cyber & Intelligence 2013 2012 2013 Performance: Sales $1,945m $2,222m • Sales down 12% Underlying EBITA $180m $196m US down 18% Margin 9.3% 8.8% Applied Intelligence growth at 9% Cash flow $185m $179m • Margin performance slightly ahead of guidance Order backlog $1.2bn $1.6bn Continued organi
Slide 18: Platforms & Services (US)
Platforms & Services (US) 2013 2012 Sales $6,564m $7,193m Underlying EBITA $414m $625m Margin 6.3% 8.7% Cash flow $300m $498m Order backlog $12.3bn $13.7bn 2013 Sales Support Platforms (23%) Solutions Land & Military & Technical Armaments Services (77%) 18 © BAE Systems 2014
Slide 19: Platforms & Services (US) – Land & Armaments
Platforms & Services (US) – Land & Armaments 2013 2012 2013 Performance: Sales $3,463m $4,160m • Sales down 17%; like-for-like 10% Underlying EBITA $322m $359m UK vehicles & support transferred out Margin 9.3% 8.6% Completion of Caiman and MRAP upgrade contracts; lower Bradley Cash flow $259m $2
Slide 20: Platforms & Services (US) – Support Solutions
Platforms & Services (US) – Support Solutions 2013 2012 2013 Performance: Sales $3,101m $3,033m • Sales up 2% Underlying EBITA $92m $266m Radford munitions, ship repair Margin 3.0% 8.8% • Margin performance impacted by charges taken Cash flow $41m $238m Radford munitions facility Order backlog $
Slide 21: Platforms & Services (UK)
Platforms & Services (UK) 2013 2012 * 2013 Performance: Sales £6,890m £5,717m • Sales up 21%; like-for-like 19% Underlying EBITA £879m £695m UK vehicles & support transferred in Margin 12.8% 12.2% 10 Salam aircraft plus escalation Cash flow £59m £1,717m • Margin performance ahead of guidance S
Slide 22: Platforms & Services (International)
Platforms & Services (International) 2013 2012 2013 Performance: Sales £4,063m £4,071m • Sales unchanged Underlying EBITA £429m £417m Increased KSA Typhoon support Margin 10.6% 10.2% LHD production ramping down Cash flow £(189)m £506m • Margin performance at lower level of guidance Order backlog
Slide 23: 2012 - 2014 US Sectors: Defence Sales only
2012 - 2014 US Sectors: Defence Sales only 2012 2013 2014 $10bn Actual Actual Guidance Intelligence & Security (18)% “marginally lower” Land & Armaments (17)% “20% - 25% lower” Support Solutions (3)% “a little lower” Electronic (5)% “(3)% - (5)%” Systems 23 © BAE Systems 2014
Slide 24: 2014 Guidance - Trading
2014 Guidance - Trading 2013 Actual 2014 Guidance 1 Sales Margin Sales Margin Electronic Systems 2,466 14.0% stable 12% - 14% Cyber & Intelligence 1,243 9.3% stable 8% - 10% Platforms & Services (US) 4,196 6.3% c.(10)% to c.(15)% 2 6% - 8% Platforms & Services (UK) 6,890 12.8% c.(5)% 2 10% - 12% Pla
Slide 25: 2014 Guidance – Cash Utilisation
2014 Guidance – Cash Utilisation 2013 2014 Guidance £bn £bn Operating items: • Net capital expenditure, disposals & depr’n 0.1 0.2 • Working capital - 2012 accelerated receipts (0.2) - - provision utilisation (0.3) (0.2) - advances movement (net) (0.7) (0.75) – (1.25) - other working capital movemen
Slide 26: Summary - Investor proposition
Summary - Investor proposition Summary business environment Key tenets of investment case • US market • Strategic intent – Some budget clarity emerging – Sustainable growth in shareholder returns – Reduced spend anticipated – Derive value from large order backlog • UK market • Balanced business port
Slide 27: Handouts
Handouts 27 © BAE Systems 2014
Slide 28: 2013 Financial Summary
2013 Financial Summary (£m) Underlying Cash Sales EBITA Margin flow Electronic Systems 2,466 346 14.0% 235 Cyber & Intelligence 1,243 115 9.3% 118 Platforms & Services (US) 4,196 265 6.3% 192 Platforms & Services (UK) 6,890 879 12.8% 59 Platforms & Services (International) 4,063 429 10.6% (189) HQ 3
Slide 29: Reconciliation of Earnings
Reconciliation of Earnings (£m) 2013 2012 2013 2012 Underlying Underlying * Reported Reported * Underlying EBITA 1,925 1,862 1,925 1,862 Gain on disposal of businesses 6 103 EBITA 1,931 1,965 Amortisation / Impairment (1,076) (312) Underlying finance costs (179) (204) (179) (204) Pension / Fair Valu
Slide 30: Like-for-Like Sales & Underlying EBITA - Group
Like-for-Like Sales & Underlying EBITA - Group (£m) Sales Underlying EBITA 2013 2012 Yr-on-Yr 2013 2012 Yr-on-Yr Continuing Businesses 18,180 17,905 2% 1,925 1,862 3% Foreign Exchange: USD 88 10 Other (39) (4) Adjusted for Foreign Exchange 18,180 17,954 1% 1,925 1,868 3% Transactions: Acquisitions &
Slide 31: Like-for-Like Sales & Underlying EBITA by sector
Like-for-Like Sales & Underlying EBITA by sector ($m) Sales Underlying EBITA 2013 2012 Growth 2013 2012 Growth Electronic Systems - reported 3,858 3,974 (3)% 541 565 (4)% Foreign Exchange (5) - Electronic Systems - adjusted 3,858 3,969 (3)% 541 565 (4)% Cyber & Intelligence - reported 1,945 2,222 (1
Slide 32: Like-for-Like Sales & Underlying EBITA by sector
Like-for-Like Sales & Underlying EBITA by sector (£m) Sales Underlying EBITA 2013 2012 Growth 2013 2012 Growth Platforms & Services (UK) - reported 6,890 5,717 21% 879 695 26% Combat Vehicles UK transfer 70 (6) Platforms & Services (UK) - adjusted 6,890 5,787 19% 879 689 28% Platforms & Services (In
Slide 33: Working Capital Movements – Reconciliation to Cash Flow
Working Capital Movements – Reconciliation to Cash Flow (£m) Cash 1 31/12/13 31/12/12 Mvmt F/x M&A Other Flow Inventories 680 655 (25) 20 (8) (2) (35) Receivables - current 3,038 2,873 Receivables - non-current 477 254 Total receivables 3,515 3,127 (388) 47 (8) (152) (275) Payables - current (7,074)