Slide 1: 2014 Preliminary Results
© BAE Systems 2015 2014 Preliminary Results 19 February 2015 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 object
Slide 2: Sir Roger Carr
© BAE Systems 2015 Sir Roger Carr 2
Slide 3: Ian King
© BAE Systems 2015 BAE SYSTEMS INSPIRED WORK lan King
Slide 4: 2014 Overview
© BAE Systems 2015 2014 Overview 2014 Full Year Continued solid performance in 2014 Sales £16,637m Underlying EBITA £1,702m US and UK markets ‒ Environment stabilising Underlying EPS 38.0p ‒ Visibility starting to improve in US Dividend per share 20.5p Order backlog £40.5bn International marke
Slide 5: Key Markets - US
© BAE Systems 2015 Key Markets - US Trading environment Procurement environment improving ‒ Electronics, Support and Land programmes Land franchise positions being renewed Intelligence & Security, services challenging Continued growth in commercial electronics ‒ Organic growth from incumbent
Slide 6: Key Markets - UK
© BAE Systems 2015 Key Markets - UK Trading environment Budget constraints, but stable ahead of SDSR Good programme execution Continued focus on affordability and efficiency Military air Acceleration of Typhoon capability expansion F-35 production ramp commencing Good progress on unmanne
Slide 7: Key Markets - Kingdom of Saudi Arabia
© BAE Systems 2015 Key Markets - Kingdom of Saudi Arabia Continuing Typhoon deliveries – 11 aircraft delivered in 2014 – 45 aircraft cumulative deliveries* Strategic development of industrial holdings ‒ Good support to KSA national objectives Continued high level of activity *as at 31 Dec 2014
Slide 8: Other International Markets
© BAE Systems 2015 Other International Markets Australia Increasing defence budget Strong performance on Naval Programmes Naval workload challenge post LHD MBDA Indian Jaguar ASRAAM award Good level of new business proposals Typhoon and Hawk exports Omani contract progressing to plan H
Slide 9: Applied Intelligence - building for growth in cyber security
© BAE Systems 2015 Applied Intelligence - building for growth in cyber security Secure-government capabilities …. …. addressing commercial markets Cloud Cyber security Security solutions Applied Intelligence Detica • Large US customer base • Established sales infrastructure • Strong engineering and
Slide 10: Peter Lynas
© BAE Systems 2015 Peter Lynas 10
Slide 11: 2014 Financial Summary
© BAE Systems 2015 2014 Financial Summary 2014 2013 Sales £16,637m £18,180m Underlying EBITA (1) £1,702m £1,925m Underlying Finance Costs (2) £(204)m £(179)m Underlying Earnings per Share (3) 38.0p 42.0p Operating Business Cash Flow £1,191m £147m Net Debt £(1,032)m £(699)m Order Backlog £40.5bn £42.
Slide 12: Balance Sheet
© BAE Systems 2015 Balance Sheet (£m) 31 Dec 14 31 Dec 13 Movement drivers: Intangible fixed assets 9,983 9,735 - acquisitions & impairment Tangible fixed assets 1,718 2,071 - KSA residential compound disposal Investments 236 286 Working capital (4,466) (4,988) - utilisation of customer advances, pr
Slide 13: Pension Deficit (IAS 19)
© BAE Systems 2015 Pension Deficit (IAS 19) (£bn) 31 Dec 14 30 Jun 14 31 Dec 13 Assets 23.8 22.1 21.5 Liabilities (30.6) (26.9) (26.0) Pension Deficit (6.8) (4.8) (4.5) Group share of deficit, pre-tax (5.4) (3.7) (3.5) UK – real discount rate 0.4% 0.9% 1.1% Bond yields 3.6% 4.2% 4.5% Inflation rate
Slide 14: UK Pensions: Assets/Liabilities – Funded Basis
© BAE Systems 2015 UK Pensions : Assets/Liabilities – Funded Basis £bn 25.0 21.3 Deficit * 20.0 £2.7bn 19.2 Deficit * 18.6 £4.0bn 15.0 15.2 10.0 5.0 0 Previous 2014 Valuations Valuations Liabilities Assets 14 * before allocation to equity accounted investments and other participating employers
Slide 15: Net Cash / (Debt)
© BAE Systems 2015 Net Cash / (Debt) Opening Net Debt (699) Electronic Systems 246 Operating business cash flow 1,191 Cyber & Intelligence 71 Platforms & Services (US) 201 Interest & Tax (237) Platforms & Services (UK) 173 Equity dividends paid (642) Platforms & Services (Int’l) 881 HQ (381) Share b
Slide 16: Electronic Systems
© BAE Systems 2015 Electronic Systems 2014 2013 • Sales up 3%, ahead of guidance Sales $3,978m $3,858m Commercial up 7% Underlying EBITA $614m $541m Defence up 2% Margin 15.4% 14.0% • Margin performance ahead of guidance strong programme execution Cash flow $405m $368m 50 bps contract pricin
Slide 17: Cyber & Intelligence
© BAE Systems 2015 Cyber & Intelligence 2014 2013 • Overall sales reduction at 8% Sales $1,788m $1,945m US down 17% on budget pressures Underlying EBITA $202m $180m Applied Intelligence growth at 10% Margin 11.3% 9.3% • Margin improvement ahead of guidance Applied Intelligence margin enhanced
Slide 18: Platforms & Services (US)
© BAE Systems 2015 Platforms & Services (US) 2014 2013 (1) Sales $5,380m $6,120m Underlying EBITA $242m $358m Margin 4.5% 5.9% Cash flow $331m $299m Order Backlog $9.0bn $10.1bn 2014 Sales Support Platforms Solutions 21% Land & Military & Technical Armaments Services and Support 79% 18 (1) 2013 pres
Slide 19: Platforms & Services (US) – Land & Armaments
© BAE Systems 2015 Platforms & Services (US) – Land & Armaments 2014 2013 (1) Sales $2,319m $3,019m • Sales to $2.3bn, as per guidance Bradley reset activity Underlying EBITA $238m $266m MMPV, M777 completion Margin 10.3% 8.8% • Margins improvement Cash flow $289m $258m good programme executio
Slide 20: Platforms & Services (US) – Support Solutions
© BAE Systems 2015 Platforms & Services (US) – Support Solutions 2014 2013 Sales $3,061m $3,101m • Sales 1% lower, as per guidance Underlying EBITA $4m $92m • Margin performance impacted Margin 0.1% 3.0% $122m commercial shipbuild charges Radford stabilised Cash flow $42m $41m • Order backlog lo
Slide 21: Platforms & Services (UK)
© BAE Systems 2015 Platforms & Services (UK) 2014 2013 (1) • Sales lower Sales £6,623m £7,174m 2013 Salam price escalation Underlying EBITA £772m £915m lower inter-Group trading Margin 11.7% 12.8% • Margin performance in line with guidance Cash flow £173m £60m • Cash performance reflects slowe
Slide 22: Platforms & Services (International)
© BAE Systems 2015 Platforms & Services (International) 2014 2013 • Sales, like-for-like, below guidance support delivery timing Sales £3,572m £4,063m LHD ramping down Underlying EBITA £366m £429m 2013 higher KSA equipment deliveries Margin 10.2% 10.6% • Margin performance in line with guidanc
Slide 23: 2015 Guidance - Trading
© BAE Systems 2015 2015 Guidance - Trading 2014 Actual (1) 2015 Guidance (2) Sales Margin Sales Margin Electronic Systems 2,415 15.4% stable 12% - 14% Cyber & Intelligence 1,658 9.2% c.5% 8% - 10% Platforms & Services (US) 2,689 4.4% c.(10)% 6% - 8% Platforms & Services (UK) 6,623 11.7% c.5% 10% - 1
Slide 24: 2015 Guidance - Cash Utilisation
© BAE Systems 2015 2015 Guidance - Cash Utilisation 2015 (£bn) 2014 Guidance Operating items: • Net capital expenditure, disposals & depr’n 0.5 (0.1) • Working capital - provision utilisation (0.2) (0.2) - advances movement (net) (0.6) nil – (0.5) - other working capital movements 0.2 (0.2) • Pensio
Slide 25: Ian King
© BAE Systems 2015 BAE SYSTEMS INSPIRED WORK lan King 25
Slide 26: Group Strategic Framework - 2015
© BAE Systems 2015 Group Strategic Framework - 2015 Our vision is to be the premier international defence, aerospace and security company Our mission is to safeguard and enhance our customers’ vital interests and deliver sustainable growth in shareholder value Our Strategy - Maintain and grow our de
Slide 27: Delivering the strategy
© BAE Systems 2015 Delivering the strategy Continuously improve • 2009-14: Headcount reduced 30%, sales 20% efficiency and • Margin maintained competitiveness Continue to drive value • Good programme execution from our defence • Cost reduction and efficiency improvements Platform and Services • UK s
Slide 28: Summary
© BAE Systems 2015 Summary 2014 Full Year Large base of high technology Sales £16,637m programmes and capabilities Underlying EBITA £1,702m Stabilised US/UK defence budgets Underlying EPS 38.0p Dividend per share 20.5p Broad international customer base Order backlog £40.5bn Well balanced bus
Slide 29: Supplementary Information
© BAE Systems 2015 Supplementary Information 29
Slide 30: Underlying EPS Bridge
© BAE Systems 2015 Underlying EPS Bridge 50p 45p 1.6 0.9 0.6 40p 1.2 2.5 4.4 0.9 35p 1.9 30p 42.0 25p 38.0 20p 15p 10p 2013 F/X Share Tax Finance Salam price Land Commercial Other 2014 buyback rate costs escalation volumes shipbuild operational charges performance 30
Slide 31: 2014 Financial Summary – As Reported
© BAE Systems 2015 2014 Financial Summary – As Reported (£m / £bn backlog) Underlying Cash Order Sales EBITA Margin Flow Backlog Electronic Systems 2,415 373 15.4% 246 3.9 Cyber & Intelligence 1,085 123 11.3% 71 0.9 Platforms & Services (US) 3,266 147 4.5% 201 5.8 Platforms & Services (UK) 6,623 772
Slide 32: Segment Changes – 2014 Full Year
© BAE Systems 2015 Segment Changes – 2014 Full Year (£m) Sales Underlying EBITA Old IE&WS New Old IE&WS New Structure Transfer Structure Structure Transfer Structure Electronic Systems 2,415 - 2,415 373 - 373 Cyber & Intelligence 1,085 573 1,658 123 30 153 Platforms & Services (US) 3,266 (577) 2,689
Slide 33: 2014 Financial Summary – Restated
© BAE Systems 2015 2014 Financial Summary – Restated (£m / £bn backlog) Underlying Cash Order Sales EBITA Margin Flow Backlog Electronic Systems 2,415 373 15.4% 246 3.9 Cyber & Intelligence * 1,658 153 9.2% 125 2.0 Platforms & Services (US) * 2,689 117 4.4% 147 4.7 Platforms & Services (UK) 6,623 77
Slide 34: Like-for-Like Sales & Underlying EBITA - Group
© BAE Systems 2015 Like-for-Like Sales & Underlying EBITA - Group (£m) Sales Underlying EBITA 2014 2013 Yr-on-Yr 2014 2013 Yr-on-Yr Continuing Businesses 16,637 18,180 (8)% 1,702 1,925 (12)% Foreign exchange: USD (324) (31) AUD (97) (6) Other (146) (12) Adjusted for foreign exchange 16,637 17,613 (6
Slide 35: Reconciliation of Earnings
© BAE Systems 2015 Reconciliation of Earnings 2014 2013 2014 2013 Underlying Underlying Reported Reported Underlying EBITA 1,702 1,925 1,702 1,925 Non-recurring items - 6 EBITA 1,702 1,931 Amortisation/Impairment (354) (1,076) Underlying Finance Costs (204) (179) (204) (179) Pensions/Fair Value/FX m
Slide 36: Working Capital Movements
© BAE Systems 2015 Working Capital Movements – Reconciliation to Cash Flow (£m) 31 December Cash 2014 2013 Mvmt F/X M&A Reclass Other Flow Inventories 690 680 (10) (24) 17 - (2) (1) Receivables – current 2,850 3,038 Receivables – non-current 347 321 Total Receivables 3,197 3,359 162 (62) 6 - 21 197