Slide 1: 2017 Half Year Results
© BAE Systems 2017 2017 Half Year Results 2 August 2017 © Crown © Aircraft copyright Carrier Alliance 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 S
Slide 2: Sir Roger Carr, Chairman
© BAE Systems 2017 Sir Roger Carr Chairman 2
Slide 3: Charles Woodburn, Chief Executive
© BAE Systems 2017 Charles Woodburn Chief Executive 3
Slide 4: Strategic Overview
© BAE Systems 2017 Strategic Overview • Right strategy to: • Sustain and grow business • Win international business • Leverage capabilities and technology • Address challenges • Secure opportunities Capital allocation unchanged – underpins strategy 4
Slide 5: Business Overview
© BAE Systems 2017 Business Overview • Strong well run business • Robust order backlog • Key competitive advantages • Long term programme positions • Broad geographic footprint • Diversified market position • Track record of successful partnerships • World leading technologies 5
Slide 6: Focus Areas
© BAE Systems 2017 Focus Areas • Market environment competitive and fast moving • Position of strength today and focus on: • Operational excellence • Competitiveness • Technological innovation 6
Slide 7: 2017 – Half Year Overview
© BAE Systems 2017 2017 – Half Year Overview 2017 2016 Half Year Half Year • Performance in line with expectation Sales £9,565m £8,714m • Strong demand for capabilities Underlying EBITA £945m £849m • Large order backlog Underlying EPS 19.8p 17.4p • Geographic and business mix Dividend per share 8.8p
Slide 8: Key Markets - US
© BAE Systems 2017 Key Markets - US • Return to growth in defence budgets • Portfolio well positioned • Electronic Systems - strong franchises • F-35 ramp-up • Land business - positioned for growth • M109 upgrade and AMPV • Bradley franchise • Ship repair - dry dock capacity in San Diego operational
Slide 9: Key Markets - UK
© BAE Systems 2017 Key Markets - UK Military Air • Typhoon − Exports − Typhoon capability development and support • F-35 − Production rate increasing Maritime • Astute and Dreadnought class in production • Type 26 - production contract signed • QEC Carriers - first of class sea trials commenced 9
Slide 10: Key Markets - International
© BAE Systems 2017 Key Markets - International KSA • Typhoon and Hawk delivered into service • Support activities performing well Australia • Long-term support and upgrade business • Bid activity on Land 400 and SEA 5000 MBDA • Order backlog underpins good future growth India • M777 - first deliveri
Slide 11: Cyber
© BAE Systems 2017 Cyber Intelligence and Security • Competitive market • High level of bid activity Applied Intelligence • Double digit sales growth • Market review undertaken • Focused investment in Commercial Cyber 11
Slide 12: Peter Lynas, Group Finance Director
© BAE Systems 2017 Peter Lynas Group Finance Director 12
Slide 13: 2017 Half Year Financial Summary
© BAE Systems 2017 2017 Half Year Financial Summary 2017 2016 Half Year Half Year Sales £9,565m £8,714m Underlying EBITA (1) £945m £849m Underlying Finance Costs (2) £(129)m £(120)m Underlying Earnings per share (3) 19.8p 17.4p Operating Business Cash Flow £277m £(20)m Net Debt £(1,741)m £(2,036)m O
Slide 14: Balance Sheet
© BAE Systems 2017 Balance Sheet (£m) 30 Jun 31 Dec 2017 2016 Drivers Intangible fixed assets 10,974 11,264 exchange translation Tangible fixed assets (1) 1,984 1,999 Investments 283 305 Working capital (3,091) (3,564) advances & provision utilisation Pension deficit (5,860) (6,054) asset performanc
Slide 15: Pension Deficit (IAS 19)
© BAE Systems 2017 Pension Deficit (IAS 19) (£bn) 30 Jun 31 Dec 2017 2016 Assets 26.3 25.9 Liabilities (32.7) (32.5) Pension deficit (6.4) (6.6) Group share of deficit (5.9) (6.1) UK - Bond yields 2.6% 2.7% Inflation rate 3.1% 3.2% US - Bond yields 3.9% 4.2% 15
Slide 16: Net Cash / (Debt)
© BAE Systems 2017 Net Cash / (Debt) (£m) 2017 Electronic Systems 118 Half Year Cyber & Intelligence 46 Opening Net Debt (1,542) Platforms & Services (US) 38 Operating business cash flow 277 Platforms & Services (UK) 107 Interest & Tax (207) Platforms & Services (Int’l) 102 HQ (134) Equity dividends
Slide 17: Electronic Systems
© BAE Systems 2017 Electronic Systems Half Year: 2017 2016 Sales $2,173m $2,067m • Sales up 5% 2nd half weighting (F-35, APKWS, THAAD) Underlying EBITA $323m $300m • Margin performance in line with guidance Margin 14.9% 14.5% • Cash conversion reflects inventory build and Cash flow $149m $150m tim
Slide 18: Cyber & Intelligence
© BAE Systems 2017 Cyber & Intelligence Half Year: 2017 2016 Sales $1,162m $1,194m • Sales stable at constant currency US business down 6% Underlying EBITA $44m $25m Applied Intelligence up 21% (1) Margin 3.8% 2.2% • Margin performance Cash flow $58m $47m US business at 9.4% Applied Intellig
Slide 19: Platforms & Services (US)
© BAE Systems 2017 Platforms & Services (US) Half Year: 2017 2016 Sales $1,804m $1,844m • Sales stable, like-for-like 2nd half weighting (AAV Japan & Brazil, PIM) Underlying EBITA $137m $123m • Margin performance improved Margin 7.6% 6.7% $6m HY17 charge re Commercial Ships Cash flow $48m $(47)m
Slide 20: Platforms & Services (UK)
© BAE Systems 2017 Platforms & Services (UK) Half Year: 2017 2016 Sales £3,913m £3,664m • Sales up 7% Saudi Typhoon deliveries completed Underlying EBITA £416m £414m First two Omani Typhoons delivered Margin 10.6% 11.3% F-35 ramp up Cash flow £107m £(154)m • Margin in line with guidance HY16
Slide 21: Platforms & Services (International)
© BAE Systems 2017 Platforms & Services (International) Half Year: 2017 2016 Sales £1,771m £1,739m • Sales stable 2nd half weighting (MBDA, Saudi support) Underlying EBITA £176m £158m • Margin in line with guidance Margin 9.9% 9.1% • Operating cash flow reflects utilisation of 2016 Cash flow £102m
Slide 22: 2017 Guidance - Trading
© BAE Systems 2017 2017 Guidance - Trading 2016 Actual 2017 Guidance (1,2) 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 23: Cash Guidance
© BAE Systems 2017 Cash Guidance (£bn) 2017 2017 Half Year Guidance Operating items: Net capital expenditure, disposals & depreciation (0.1) (0.2) Working capital - provision utilisation (0.1) (0.1) - advances movement (net) (0.3) nil - (0.3) - other working capital movements - (0.1) Pension deficit
Slide 24: 2017 – Summary
© BAE Systems 2017 2017 – Summary 2017 2016 Half Year Half Year Solid performance in first half 2017: Sales £9,565m £8,714m Underlying EBITA £945m £849m • Group-level guidance confirmed Underlying EPS 19.8p 17.4p • Clear strategy and capital allocation Dividend per share 8.8p 8.6p Order backlog £42.
Slide 25: Supplementary Information
© BAE Systems 2017 Supplementary Information 25
Slide 26: 2017 Half Year Financial Performance
© BAE Systems 2017 2017 Half Year Financial Performance (£m / £bn backlog) Underlying Cash Order Sales EBITA Margin Flow Backlog Electronic Systems 1,726 257 14.9% 118 5.1 Cyber & Intelligence 923 35 3.8% 46 2.2 Platforms & Services (US) 1,433 109 7.6% 38 4.7 Platforms & Services (UK) 3,913 416 10.6
Slide 27: EPS Bridge
© BAE Systems 2017 EPS Bridge pence 20 0.8 1.0 1.3 0.7 15 10 19.8 17.4 5 0 HY16 F/X HY16 HY16 Trading HY17 Commercial Astute volumes & Shipbuild trade-ups mix 27
Slide 28: Like-for-Like Sales & Underlying EBITA
© BAE Systems 2017 Like-for-Like Sales & Underlying EBITA Half Year: Sales Underlying EBITA 2017 2016 Yr-on-Yr 2017 2016 Yr-on-Yr As Reported 9,565 8,714 10% 945 849 11% Foreign exchange: USD 412 43 EUR 30 2 Other 57 6 Adjusted for foreign exchange 9,565 9,213 4% 945 900 5% Transactions: Acquisition
Slide 29: Reconciliation of Half Year Earnings
© BAE Systems 2017 Reconciliation of Half Year Earnings (£m / pence EPS) 2017 2016 2017 2016 Underlying Underlying Reported Reported Underlying EBITA 945 849 945 849 Non-recurring items (4) - EBITA 941 849 Amortisation/Impairment (41) (43) Underlying Finance Costs (129) (120) (129) (120) Pensions/Fa
Slide 30: Working Capital Movements - reconciliation to Cash Flow
© BAE Systems 2017 Working Capital Movements - reconciliation to Cash Flow (£m) Movement analysed between: 30 Jun 31 Dec Cash 2017 2016 Mvmt F/X M&A Other Flow Inventories 773 744 (29) 29 16 - (74) Receivables – current 3,653 3,305 Receivables – non-current 334 351 Total Receivables 3,987 3,656 (331