Slide 1: 2014 Half Year Results
© BAE Systems 2014 2014 Half Year Results 31 July 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 A
Slide 2: Ian King
© BAE Systems 2014 BAE SYSTEMS INSPIRED WORK lan King
Slide 3: 2014 Overview
© BAE Systems 2014 2014 Overview Group performing well overall 2014 Half Year ‒ Good programme execution ‒ Large order backlog Sales £7,611m ‒ FX translation headwind Underlying EBITA £802m International markets vibrant Underlying EPS 17.7p ‒ Continued high level of activity in KSA ‒ Significant
Slide 4: Key Markets - US
© BAE Systems 2014 Key Markets - US Trading environment Improving budget clarity ‒ Bipartisan budget signed in January Procurement activity improving in many sectors ‒ Electronics, Support and Land programmes Continued low visibility in short cycle services activities ‒ eg Intelligence & Secur
Slide 5: Key Markets - UK
© BAE Systems 2014 Key Markets - UK Trading environment Good long-term programme visibility Large order backlog Budget pressures, but stable Military air First Typhoon Tranche 3 aircraft flown 4 Salam Typhoon deliveries in period F-35 production ramp commencing Successful Taranis UAS p
Slide 6: Key Markets - Kingdom of Saudi Arabia
© BAE Systems 2014 Key Markets - Kingdom of Saudi Arabia Multi-year training and support contracts ‒ Tornado to remain in-service into next decade Continuing Typhoon deliveries – Support for 38 Typhoon aircraft now in service Reorganisation of industrial companies 6
Slide 7: Other International Markets
© BAE Systems 2014 Other International Markets Australia Increasing defence budget Significant naval opportunities Korean F-16 upgrade Initial contract funding received MBDA Indian Jaguar ASRAAM award High level of new business proposals Typhoon exports Further opportunities in Gulf stat
Slide 8: Cyber & Intelligence
© BAE Systems 2014 Cyber & Intelligence Intelligence & Security Slow contracting pace continues Substantial bids prospects Strong margin performance Applied Intelligence Continuing good performance against strategy Good growth in commercial cyber security ‒ Building on last year’s 60% orde
Slide 9: Business investment and capital allocation
© BAE Systems 2014 Business investment and capital allocation Business investment Company funded R&D and investment focus:- ‒ Defence electronics ‒ Commercial aerospace electronics ‒ Unmanned technologies / combat air ‒ Commercial cyber security Company and customer funded R&D ‒ Circa 6% of sale
Slide 10: Peter Lynas
© BAE Systems 2014 Peter Lynas 10
Slide 11: 2014 Half Year Financial Summary
© BAE Systems 2014 2014 Half Year Financial Summary 2014 2013 Half Year Half Year Sales £7,611m £8,487m Underlying EBITA (1) £802m £867m Underlying Finance Costs (2) £(89)m £(95)m Underlying Earnings per Share (3) 17.7p 17.9p Operating Business Cash Flow £287m £(815)m (4) Net Debt £(1,182)m £(699)m
Slide 12: Balance Sheet
© BAE Systems 2014 Balance Sheet (£m) 30 Jun 14 31 Dec 13 Movement drivers: Intangible fixed assets 9,527 9,735 - foreign exchange, amortisation Tangible fixed assets 1,729 2,071 - KSA residential compound disposal Investments 251 286 - foreign exchange Working capital (4,190) (4,988) - utilisation
Slide 13: Pension Deficit (IAS 19)
© BAE Systems 2014 Pension Deficit (IAS 19) (£bn) 30 Jun 14 31 Dec 13 30 Jun 13* Assets 22.1 21.5 20.7 Liabilities (26.9) (26.0) (26.0) Pension Deficit (4.8) (4.5) (5.3) Group share of deficit, pre-tax (3.7) (3.5) (4.1) UK - real discount rate 0.9% 1.1% 1.3% bond yields 4.2% 4.5% 4.6% inflation rate
Slide 14: Net Cash / (Debt)
© BAE Systems 2014 Net Cash / (Debt) (£m) Opening Net Debt (699) Electronic Systems 86 Cyber & Intelligence 24 Operating business cash flow 287 Platforms & Services (US) 109 Interest & Tax (141) Platforms & Services (UK) (201) Platforms & Services (Int'l) 541 Equity dividends paid (383) HQ (272) Sha
Slide 15: Electronic Systems
© BAE Systems 2014 Electronic Systems 2014 2013 Half Year Half Year Sales $1,849m $1,843m • Sales in line with year’s guidance Underlying EBITA $238m $241m Margin 12.9% 13.1% Cash flow $144m $113m • Improved cash conversion expected in full year Order backlog $6.2bn $6.1bn * • Order backlog sustaine
Slide 16: Cyber & Intelligence
© BAE Systems 2014 Cyber & Intelligence 2014 2013 Half Year Half Year • Overall sales reduction at 13% Sales $883m $1,014m US down 22% on budget pressures Underlying EBITA $78m $82m Applied Intelligence growth at 7% Margin 8.9% 8.1% • Margin improvement in line with guidance Cash flow $40m $86m
Slide 17: Platforms & Services (US)
© BAE Systems 2014 Platforms & Services (US) 2014 2013 (1) Half Year Half Year Sales $2,774m $3,024m Underlying EBITA $175m $266m Margin 6.3% 8.8% Cash flow $182m $35m Order backlog $9.2bn $10.1bn * 2014 Sales Support Platforms Solutions 25% Land & Military & Technical Armaments Services 75% (1) 201
Slide 18: Platforms & Services (US) – Land & Armaments
© BAE Systems 2014 Platforms & Services (US) – Land & Armaments 2014 2013 (1) Half Year Half Year Sales $1,259m $1,467m • Sales 14% lower, as expected Bradley reset activity Underlying EBITA $137m $142m MMPV, M777 completion Margin 10.9% 9.7% • Margins improved Cash flow $149m $2m • Profit to ca
Slide 19: Platforms & Services (US) – Support Solutions
© BAE Systems 2014 Platforms & Services (US) – Support Solutions 2014 2013 Half Year Half Year Sales $1,515m $1,557m • Sales 3% lower per guidance Naval ship repair strength Underlying EBITA $38m $124m • Margin performance impacted Margin 2.5% 8.0% $20m commercial ship build charge Cash flow $33
Slide 20: Platforms & Services (UK)
© BAE Systems 2014 Platforms & Services (UK) 2014 2013 (1) Half Year Half Year Sales £2,844m £3,356m • Sales have 2nd half bias Typhoon deliveries (H1 12 : H2 30) Underlying EBITA £393m £396m • Margin performance strong Margin 13.8% 11.8% programme execution / accelerated risk Cash flow £(201)m
Slide 21: Platforms & Services (International)
© BAE Systems 2014 Platforms & Services (International) 2014 2013 Half Year Half Year Sales £1,576m £1,654m • Sales, like-for-like, unchanged Underlying EBITA £157m £165m • Margin performance consistent Margin 10.0% 10.0% Cash flow £541m £(221)m • Cash includes compound transactions Order backlog £1
Slide 22: 2014 Guidance - Trading
© BAE Systems 2014 2014 Guidance - Trading (£m) 2013 Actual 2014 Guidance (1) Sales Margin Sales Margin Electronic Systems 2,466 14.0% stable 12% - 14% Cyber & Intelligence 1,243 9.3% c.(5)% 8% - 10% (2) Platforms & Services (US) 3,912 5.9% c.(10)% to c.(15)% 6% - 8% (2) Platforms & Services (UK) 7,
Slide 23: 2014 Guidance - Cash Utilisation
© BAE Systems 2014 2014 Guidance - Cash Utilisation 2014 (£bn) 2014 Full Year Half Year Guidance Operating items: • Net capital expenditure, disposals & depr'n 0.4 0.4 • Working capital - provision utilisation (0.2) (0.3) - advances movement (net) (0.3) (0.9) - (1.25) - other working capital movemen
Slide 24: 2014 Summary
© BAE Systems 2014 2014 Summary Group performing well overall ‒ Good programme execution 2014 Half Year ‒ Large order backlog ‒ FX translation headwind Sales £7,611m International markets vibrant Underlying EBITA £802m ‒ Continued high level of activity in KSA ‒ Significant new bid activity Unde
Slide 25: Supplementary Information
© BAE Systems 2014 Supplementary Information 25
Slide 26: 2014 Half Year Financial Summary
© BAE Systems 2014 2014 Half Year Financial Summary Underlying Cash Sales EBITA Margin flow Electronic Systems 1,108 143 12.9% 86 Cyber & Intelligence 529 47 8.9% 24 Platforms & Services (US) 1,662 105 6.3% 109 Platforms & Services (UK) 2,844 393 13.8% (201) Platforms & Services (International) 1,57
Slide 27: Underlying EPS Bridge
© BAE Systems 2014 Underlying EPS Bridge pence 20.0 19.0 1.0 0.8 18.0 0.3 0.3 17.0 0.8 1.2 16.0 15.0 14.0 17.9 17.7 13.0 12.0 11.0 10.0 2013 F/X Share Tax Rate Land Support All 2014 Half Year Buyback volumes Solutions other Half Year margins 27
Slide 28: Presentation of UK Munitions – 2013
© BAE Systems 2014 Presentation of UK Munitions – 2013 2013 Half Year 2013 Full Year As Munitions As As Munitions As Reported transfer Presented Reported transfer Presented Platforms & Services (US) Sales $3,217m $(193)m $3,024m $6,564m $(444)m $6,120m Underlying EBITA $281m $(15)m $266m $414m $(56)
Slide 29: Reconciliation of Earnings
© BAE Systems 2014 Reconciliation of Earnings 2014 2013 2014 2013 Half Year Half Year Half Year Half Year Underlying Underlying * Reported Reported * Underlying EBITA 802 867 802 867 Gain on disposal of businesses - 4 EBITA 802 871 Amortisation / Impairment (88) (100) Underlying finance costs (89) (
Slide 30: Like-for-Like Sales & Underlying EBITA - Group
© BAE Systems 2014 Like-for-Like Sales & Underlying EBITA - Group (£m) Sales Underlying EBITA Half Year Half Year 2014 2013 * Yr-on-Yr 2014 2013 * Yr-on-Yr Continuing Businesses 7,611 8,487 (10)% 802 867 (7)% Foreign Exchange: USD (246) (26) AUD (65) (4) Other (57) (3) Adjusted for Foreign Exchange
Slide 31: Working Capital Movements – Reconciliation to Cash Flow
© BAE Systems 2014 Working Capital Movements – Reconciliation to Cash Flow (£m) Cash 30 Jun 14 31 Dec 13 Mvmt F/x Reclass Other Flow Inventories 690 680 (10) 18 - - (28) Receivables - current 3,054 3,038 Receivables - non-current 517 477 Total receivables 3,571 3,515 (56) 66 - 3 (125) Payables - cur