Slide 1: 2016 Preliminary Results
© BAE Systems 2017 2016 Preliminary Results 23 February 2017 © Crown copyright 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
Slide 2: Sir Roger Carr, Chairman
© BAE Systems 2017 Sir Roger Carr Chairman 2
Slide 3: Ian King, Chief Executive
© BAE Systems 2017 Ian King Chief Executive 3
Slide 4: 2016 - Overview
© BAE Systems 2017 2016 - Overview Good performance in 2016: 2016 2015 • Sales and order backlog growth Sales £19,020m £17,904m • Core franchises strengthened Underlying EBITA £1,905m £1,683m • Strong programme execution Underlying EPS 40.3p 40.2p • Investment in technology and talent Dividend per s
Slide 5: Key Markets - US
© BAE Systems 2017 Key Markets - US • Return to growth in defence budgets • Portfolio well positioned • Electronic Systems - performing well • Land business - positioned for return to growth • Ship repair - performing well • Commercial Ships – final 2 deliveries in 2017 5
Slide 6: Key Markets - UK
© BAE Systems 2017 Key Markets - UK Military Air • Typhoon − Kuwait - £1bn order intake − Typhoon capability development and support • F-35 − Production rate increasing − MROU hubs awarded • Hawk − KSA deliveries commenced − Renewed UK support contracts Maritime • Astute and Dreadnought class in pro
Slide 7: Key Markets - International
© BAE Systems 2017 Key Markets - International KSA • 5-year services contract renewal • Typhoon and Hawk delivered into service Australia • Business stable after 2015 actions • Long-term support and upgrade business base MBDA • Strong order backlog underpins good future growth India • M777 secured •
Slide 8: Cyber
© BAE Systems 2017 Cyber Intelligence and Security • Solid performance in a competitive market • New multi-year service contracts secured Applied Intelligence • Order Intake and Sales growth • Investment in product development and marketing • Commercial demand increasing 8
Slide 9: Peter Lynas, Group Finance Director
© BAE Systems 2017 Peter Lynas Group Finance Director 9
Slide 10: 2016 Financial Summary
© BAE Systems 2017 2016 Financial Summary 2016 2015 Sales £19,020m £17,904m Underlying EBITA (1) £1,905m £1,683m Underlying Finance Costs (2) £(257)m £(194)m Underlying Earnings per share (3) 40.3p 40.2p Operating Business Cash Flow £1,004m £681m Net Debt £(1,542)m £(1,422)m Order backlog £42.0bn £3
Slide 11: Balance Sheet
© BAE Systems 2017 Balance Sheet (£m) 31 Dec 31 Dec 2016 2015 Drivers Intangible fixed assets 11,264 10,117 exchange translation Tangible fixed assets (1) 1,999 1,772 exchange translation Investments 305 256 exchange translation Working capital (3,564) (3,850) advance & provision utilisation Pension
Slide 12: Pension Deficit (IAS 19)
© BAE Systems 2017 Pension Deficit (IAS 19) (£bn) 31 Dec 30 Jun 31 Dec 2016 2016 2015 (1) Assets 25.9 23.8 22.0 Liabilities (32.5) (30.4) (26.9) Pension deficit (6.6) (6.6) (4.9) Group share of deficit (6.1) (6.1) (4.5) UK - Bond yields 2.7% 3.1% 3.9% Inflation rate 3.2% 2.9% 3.2% US - Bond yields 4
Slide 13: Net Cash / (Debt)
© BAE Systems 2017 Net Cash / (Debt) (£m) Electronic Systems 469 2016 Opening Net Debt (1,422) Cyber & Intelligence 83 Platforms & Services (US) 58 Operating business cash flow 1,004 Platforms & Services (UK) 199 Interest & Tax (387) Platforms & Services (Int’l) 435 Equity dividends paid (670) HQ (2
Slide 14: Electronic Systems
© BAE Systems 2017 Electronic Systems 2016 2015 (1) Sales $4,445m $4,464m • Sales stable Commercial up 11% on HybriDrive volumes Underlying EBITA $670m $668m Defence down 4% for timing of EW production Margin 15.1% 15.0% • Margin performance on strong programme Cash flow $635m $566m execution •
Slide 15: Cyber & Intelligence
© BAE Systems 2017 Cyber & Intelligence 2016 2015 (1) Sales $2,408m $2,390m • Sales up 4%, like-for-like US business up 2% Underlying EBITA $121m $158m Applied Intelligence up 11% (2) Margin 5.1% 6.6% • Margin performance Cash flow $112m $70m US business at 8.6% Applied Intelligence loss $25
Slide 16: Platforms & Services (US)
© BAE Systems 2017 Platforms & Services (US) 2016 2015 Sales $3,893m $4,246m • Sales down 8%, marginally better than guidance US ship repair activity Underlying EBITA $286m $271m • Commercial Shipbuild charges, net of provision Margin 7.3% 6.4% releases, impact margin by 130bps Cash flow $79m $152
Slide 17: Platforms & Services (UK)
© BAE Systems 2017 Platforms & Services (UK) 2016 2015 Sales £7,806m £7,405m • Sales up 5% and ahead of guidance F-35 & Hawk deliveries Underlying EBITA £810m £721m Submarine programmes ahead of plan Margin 10.4% 9.7% inter-Co activity higher; eliminated at Group Cash flow £199m £220m • Margin
Slide 18: Platforms & Services (International)
© BAE Systems 2017 Platforms & Services (International) 2016 2015 Sales £3,943m £3,742m • Sales per guidance, up 5% increased support in Saudi Arabia Underlying EBITA £400m £335m weapons volumes at MBDA Margin 10.1% 9.0% • Margin back to 10% Cash flow £435m £164m 2015 included Australian charg
Slide 19: 2017 Guidance - Trading
© BAE Systems 2017 2017 Guidance - Trading 2016 Actual 2017 Guidance (1) Sales (£m) Margin (%) Sales Margin Electronic Systems 3,282 15.1 c.5% 13% - 15% Cyber & Intelligence 1,778 5.1 low single digit 6% - 8% Platforms & Services (US) 2,874 7.3 stable 8% - 9% Platforms & Services (UK) 7,806 10.4 c.(
Slide 20: Cash Guidance
© BAE Systems 2017 Cash Guidance (£bn) 2017 2016 Guidance Operating items: Net capital expenditure, disposals & depreciation (0.2) (0.2) Working capital - provision utilisation (0.1) (0.1) - advances movement (net) (0.4) nil - (0.3) - other working capital movements 0.3 (0.1) Pension deficit funding
Slide 21: Ian King, Chief Executive
© BAE Systems 2017 Ian King Chief Executive 21
Slide 22: 2016 - Summary
© BAE Systems 2017 2016 - Summary Good performance in 2016: 2016 2015 • Sales and order backlog growth Sales £19,020m £17,904m • Core franchises strengthened Underlying EBITA £1,905m £1,683m • Strong programme execution Underlying EPS 40.3p 40.2p • Investment in technology and talent Dividend per sh
Slide 23: Supplementary Information
© BAE Systems 2017 Supplementary Information 23
Slide 24: 2016 Financial Performance
© BAE Systems 2017 2016 Financial Performance (£m / £bn backlog) Underlying Cash Order Sales EBITA Margin Flow Backlog Electronic Systems 3,282 494 15.1% 469 5.2 Cyber & Intelligence 1,778 90 5.1% 83 2.4 Platforms & Services (US) 2,874 211 7.3% 58 4.6 Platforms & Services (UK) 7,806 810 10.4% 199 17
Slide 25: EPS Bridge
© BAE Systems 2017 EPS Bridge 45 pence 40 2.3 4.3 1.9 1.1 1.3 35 40.2 40.3 * 37.8 30 25 2015 2015 F/X Finance 2015 Trading 2016 tax releases costs Australian mix ratex / impairment * 2015 underlying EPS restated for tax provision releases & FX to $1.35 25
Slide 26: Capital Allocation
© BAE Systems 2017 Capital Allocation Pension funding legal obligation capital expenditure, R&D, Organic investment business development sustainable cover of around Dividends two times earnings Return of capital M&A when appropriate & balance sheet value enhancing bolt-on acquisitions allows ; must
Slide 27: Like-for-Like Sales & Underlying EBITA
© BAE Systems 2017 Like-for-Like Sales & Underlying EBITA Sales Underlying EBITA 2016 2015 Yr-on-Yr 2016 2015 Yr-on-Yr As Reported 19,020 17,904 6% 1,905 1,683 13% Foreign exchange: USD 784 84 EUR 99 11 Other 107 1 Adjusted for foreign exchange 19,020 18,894 1% 1,905 1,779 7% Transactions: Acquisiti
Slide 28: Reconciliation of Earnings
© BAE Systems 2017 Reconciliation of Earnings (£m / pence EPS) 2016 2015 2016 2015 Underlying Underlying Reported Reported Underlying EBITA 1,905 1,683 1,905 1,683 Non-recurring items (12) 26 EBITA 1,893 1,709 Amortisation/Impairment (87) (186) Underlying Finance Costs (257) (194) (257) (194) Pensio
Slide 29: Working Capital Movements - reconciliation to Cash Flow
© BAE Systems 2017 Working Capital Movements - reconciliation to Cash Flow (£m) Movement analysed between: Cash 2016 2015 Mvmt F/X M&A Other Flow Inventories 744 726 (18) (102) (11) - 95 Receivables – current 3,305 2,940 Receivables – non-current 351 275 Total Receivables 3,656 3,215 (441) (328) (9)