Slide 1: Half Year Results 31 July 2019
Half Year Results 31 July 2019 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 and the markets and econo
Slide 2: Charles Woodburn, Chief Executive
Charles Woodburn Chief Executive Copyright© 2019 BAE Systems. All Rights Reserved. BAE SYSTEMS is a registered trademark. 2
Slide 3: 2019 – Half Year Overview
2019 – Half Year Overview 2019 2018 Half Year Half Year • Half year performance underpins full year Sales £9,416m £8,818m Underlying EBITA £999m £874m • Focus on operational performance Underlying EPS • US outlook enhanced by further backlog growth - excl. one-off tax benefit 21.9p 19.8p • Portfolio
Slide 4: Major Programme Status – Half Year 2019
Major Programme Status – Half Year 2019 • F-35 - Ramp to 140 sets in 2019 progressing well • Qatar Typhoon and Hawk production – Programme mobilised; Typhoon deliveries to be accelerated • UK Typhoon support – 3 years in, performing well • KSA support – Managing licence position • Astute – Boat 4 du
Slide 5: Driving Strategic Priorities
Driving Strategic Priorities • UK future combat air programme • Next phase commenced • MOU with Sweden • Applied Intelligence – action taken on commercial division • Acquisition of Riptide Autonomous Solutions • Land JV completed • Saudi partner companies • AACC sale completed • AEC proposed disposa
Slide 6: Summary
Summary Focus on driving strong and consistent programme performance • Strategy and capital allocation clear and consistent • Portfolio actions being taken • Balance sheet strong • Diverse portfolio - long term programme positions • Strong customer relationships and in country partnerships • Multi y
Slide 7: Peter Lynas, Group Finance Director
Peter Lynas Group Finance Director Copyright© 2019 BAE Systems. All Rights Reserved. BAE SYSTEMS is a registered trademark. 7
Slide 8: 2019 Half Year Financial Summary
2019 Half Year Financial Summary 2019 2018 Half Year Half Year Sales £9,416m £8,818m Underlying EBITA (1,2) £999m £874m Underlying Finance Costs (1,3) £(130)m £(101)m Underlying Earnings per Share (1,4) - excluding one-off tax benefit (5) 21.9p 19.8p - including one-off tax benefit (5) 26.9p 19.8p O
Slide 9: Balance Sheet
Balance Sheet (£m) 30 Jun 31 Dec 2019 2018 Drivers Intangible fixed assets 10,648 10,658 Tangible fixed assets (1) 3,314 2,017 Adoption of IFRS 16 (no 31/12/18 restatement) Investments 346 442 Dividends received, AEC to held-for-sale Working capital (2,173) (3,288) Timing, advances, 2nd half cash co
Slide 10: Net Cash / (Debt)
Net Cash / (Debt) Electronic Systems 137 (£m) 2019 Cyber & Intelligence 23 Half Year Platforms & Services (US) 5 Opening Net Debt (904) Air (163) Operating business cash flow (309) Maritime (92) Interest & Tax (265) HQ (219) Operating business cash flow (309) Dividends paid, incl. minorities (449) O
Slide 11: Electronic Systems
Electronic Systems Half Year: 2019 2018 Sales $2,772m $2,503m • Sales growth at 11% F-35 ramp up Underlying EBITA $409m $358m APKWS ramp up Margin 14.8% 14.3% Increasing classified activity Cash flow $177m $161m Commercial sales up 14% Order backlog $7.6bn $6.9bn(1) • Margin performance in l
Slide 12: Cyber & Intelligence
Cyber & Intelligence Half Year: 2019 2018 Sales $1,103m $1,122m • Sales broadly unchanged Intelligence & Security down 2% Underlying EBITA $32m $66m Applied Intelligence up 6% Margin 2.9% 5.9% • Margin performance Cash flow $30m $87m Intelligence & Security at 9% £25m restructuring charge at
Slide 13: Platforms & Services (US)
Platforms & Services (US) Half Year: 2019 2018 Sales $1,970m $1,902m • Sales up 4% 2nd half bias re Combat Vehicles Underlying EBITA $175m $77m • Margin improved to 8.9% Margin 8.9% 4.1% 2018 programme charges @ 350bps Cash flow $7m $(64)m Lower margin US Combat Vehicles sales in 2nd half Orde
Slide 14: Air
Air Half Year: 2019 2018 Sales £3,366m £3,305m • Sales 2nd half weighted Qatar Typhoon/Hawk Underlying EBITA £438m £459m MBDA Margin 13.0% 13.9% • Margin performance above guidance Cash flow £(163)m £(167)m 2nd half weighting of lower margin Qatar sales Higher 2nd half spend on Tempest Order
Slide 15: Maritime
Maritime Half Year: 2019 2018 Sales £1,525m £1,447m • Sales up 5% 1st half bias on Carrier & Naval Base Support Underlying EBITA £133m £93m • Margin performance in line with full year guidance Margin 8.7% 6.4% • Cash flow Cash flow £(92)m £(196)m Naval Ships, utilisation of provisions & timing O
Slide 16: 2019 Guidance - Trading
2019 Guidance - Trading 2018 Actual 2019 Guidance (1,2) Sales (£m) Margin (%) Sales Margin Electronic Systems 3,965 15.3 mid-single digit 14% - 16% Cyber & Intelligence 1,678 6.6 stable c.7% mid to high Platforms & Services (US) 3,005 7.0 8% - 9% single digit Air 6,712 12.8 +c.10% 11% - 13% Maritime
Slide 17: Cash Guidance - 2019
Cash Guidance - 2019 (£bn) 2019 2019 Half Year Guidance(1) Operating items: Net capital expenditure above depreciation (0.1) (0.2) Working capital movements (1.0) (0.4) - (0.1) Pension deficit funding (0.2) (0.2) Non-operating items: Interest & Tax (0.3) (0.5) Dividends (0.4) (0.8) Net Debt guidance
Slide 18: Financial Summary
Financial Summary • Half Year Net Debt better than expectation - Qatar • Full Year Net Debt guidance slightly improved Qatar & Paladin – timing mix Excludes potential disposals • 3 year Free Cash Flow target reconfirmed • 2019 Earnings guidance reconfirmed • Interim Dividend up 4.4% on performan
Slide 19: Supplementary Information
Supplementary Information Copyright© 2019 BAE Systems. All Rights Reserved. BAE SYSTEMS is a registered trademark. 19
Slide 20: EPS Bridge (pence)
EPS Bridge (pence) 30 25 2.1 0.6 5.0 0.4 20 0.7 0.3 15 26.9 (incl 21.9 one-off 10 19.8 tax benefit) 5 0 2018 F/X 2018 1st half AI Minority Other 2019 Half Year performance restructuring Interest trading Half Year issues Copyright© 2019 BAE Systems. All Rights Reserved. BAE SYSTEMS is a registered tr
Slide 21: 2019 Half Year Financial Performance
2019 Half Year Financial Performance (£m / £bn backlog) Underlying Cash Order Sales EBITA Margin Flow Backlog Electronic Systems 2,142 316 14.8% 137 6.0 Cyber & Intelligence 853 25 2.9% 23 1.9 Platforms & Services (US) 1,522 135 8.9% 5 5.6 Air 3,366 438 13.0% (163) 25.9 Maritime 1,525 133 8.7% (92)
Slide 22: Like-for-Like Sales & Underlying EBITA
Like-for-Like Sales & Underlying EBITA Half Year: Sales Underlying EBITA 2019 2018 Yr-on-Yr 2019 2018 Yr-on-Yr As Reported 9,416 8,818 +7% 999 874 +14% IFRS 16 (estimated) (25) Foreign exchange: USD 229 22 EUR (4) - Other (13) (1) Adjusted for IFRS 16 & f/x 9,416 9,030 +4% 974 895 +9% Copyright© 201
Slide 23: Reconciliation of Half Year Earnings
Reconciliation of Half Year Earnings 2019 Underlying (£m / pence EPS) excl. one-off incl. one-off 2018 2019 2018 tax benefit tax benefit Underlying Reported Reported Underlying EBITA 999 999 874 999 874 Non-recurring items (28) (33) EBITA 971 841 Amortisation (49) (33) Underlying Finance Costs (130)
Slide 24: Pensions
Pensions (£bn) 30 June 31 Dec 2019 2018 Assets 27.6 25.7 Liabilities (32.2) (29.9) Pension deficit (4.6) (4.2) Group share of deficit (4.3) (3.9) UK - Bond yields 2.4% 3.0% Inflation rate 3.1% 3.1% US - Bond yields 3.5% 4.2% Investment returns to date, funding the deficit recovery plans, on track Co
Slide 25: Working Capital Movements - reconciliation to Cash Flow
Working Capital Movements - reconciliation to Cash Flow (£m) Movement analysed between: 30 Jun 31 Dec IFRS Cash 2019 2018 Mvmt F/X 16 M&A Other Flow Inventories 847 774 (73) - - - (3) (70) Receivables - non-current 352 352 Receivables - current 6,061 5,177 Total Receivables (1) 6,413 5,529 (884) (3)
Slide 26: Impact of adoption of IFRS 16 Leases
Impact of adoption of IFRS 16 Leases (£m) 31 Dec 1 Jan 2018 IFRS 16 2019 Intangible fixed assets 10,658 10,658 Estimated P&L impact in 2019 Tangible fixed assets 2,017 1,298 3,315 £m Investments 442 (11) 431 Electronic Systems 4 Working capital (3,288) 33 (3,255) Cyber & Intelligence 3 Pension defic
Slide 27: Capital Allocation
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 acquisitions allows ; must deliver > WACC Balance shee
Slide 28: Key Franchises and Programmes – Illustrative timeline
Key Franchises and Programmes – Illustrative timeline • £47.4bn Order Backlog; incumbent positions on key long term programmes; opportunities predominately on aircraft sales and support and land vehicles Key programmes - Order Backlog, Pipeline/incumbent position, Opportunity F-35 build and support