Slide 1: BAE Systems 2008 Preliminary Results
BAE Systems 2008 Preliminary Results 19 February 2009 1
Slide 2: Organisation
Organisation Ian King Chief Executive Functions Finance Operations Walt Havenstein Legal BAE Systems Inc. Strategy Mike Heffron Linda Hudson Nigel Whitehead Guy Griffiths Business Electronics, Land & Programmes & International Development Intelligence Armaments Support & Support HR Communications 2
Slide 3: Overview - 2008
Overview - 2008 20,000 15,000 • Continued good performance Sales 10,000 5,000 – Delivering against objectives – Establishing consistent track record £m 0 2004 2005 2006 2007 2008 • Well-positioned 2,000 – Large forward order book 1,500 Underlying – Well-balanced spread of programmes EBITA 1,000 – Re
Slide 4: George Rose
BAE SYSTEMS George Rose
Slide 5: Acquisition contributions, disposal gains, exchange translation
• Acquisition contributions – MTC Technologies completed 9 June 2008 – Tenix Defence completed 27 June 2008 – Detica completed 25 September 2008 – Armor Holdings full year contribution • Disposal gains – Gains totalling £238m in 2008 excluded from underlying EBITA – Surveillance and Attack – Flagshi
Slide 6: Financial Highlights
Financial Highlights • Sales - continuing £18,543m • Underlying EBITA * £1,897m • Underlying earnings per share ** 37.1p • Cash inflow from operating activities £2,009m • Net cash £39m • Order book £46.5bn • Dividend per share 14.5p * earnings before amortisation/impairment of intangible assets, fin
Slide 7: Income Statement
Income Statement - Continuing Operations 2008 2007 2008 2007 Underlying Underlying Reported Reported Sales 18,543 15,710 18,543 15,710 Underlying EBITA * 1,897 1,449 1,897 1,449 Profit on disposed businesses 238 40 Uplift on acquired inventory - (12) EBITA 2,135 1,477 Finance Income 697 93 697 93 de
Slide 8: Balance Sheet
Balance Sheet 31/12/08 31/12/07 Intangible fixed assets 12,306 9,559 Tangible fixed assets 2,558 1,887 Investments 1,040 787 Working capital (5,785) (5,481) Retirement benefit obligations (3,365) (1,629) Tax assets & liabilities 256 63 Financial assets & liabilities 240 52 Assets held for resale - 6
Slide 9: Retirement Benefit Obligations
Retirement Benefit Obligations 2008 Deficit in defined benefit pension plans at 31.12.07 (1,999) Asset returns (3,724) Discount rates 1,634 Mortality assumptions (201) Contributions over service cost 321 Exchange translation (240) Other movements 54 Deficit in defined benefit pension plans at 31.12.
Slide 10: Operating Business Cash Flow
Operating Business Cash Flow 2008 Cash inflow from operating activities 2,009 Capital expenditure (net) (503) Dividends from equity accounted investments 89 Operating business cash flow 1,595 Electronics, Intelligence & Support 380 Land & Armaments 467 Programmes & Support 651 International 163 HQ &
Slide 11: Movement in Net Cash
Movement in Net Cash 2008 Net Cash 31.12.07 700 Operating business cash flow 1,595 Interest and taxation (359) Equity dividends paid (478) Acquisitions & disposals (1,038) Net purchase of equity shares (27) Foreign exchange (374) Other movements 20 Net Cash 31.12.08 39 £ millions 11
Slide 12: Operating Groups
Operating Groups 2008 2008 Sales by sector * Underlying EBITA by sector * 24% 34% 25% 28% Electronics, Land & Electronics, Land & Intelligence Armaments Intelligence Armaments & Support & Support 24% 22% 25% 18% Programmes International Programmes International & Support & Support Strong performance
Slide 13: Electronics, Intelligence & Support
Electronics, Intelligence & Support SALES 10.0 $bn 2008 2007 5.0 Sales $8,260m $7,838m 0.0 Underlying EBITA $937m $875m 2006 2007 2008 Margin 11.3% 11.2% Information Electronic Solutions Solutions Order book $7.5bn $6.9bn Platform Cash flow $704m $604m Solutions Support Solutions 13
Slide 14: Land & Armaments
Land & Armaments SALES 12.0 $bn MRAP 2008 2007 6.0 Sales $11,869m $7,082m 0.0 Underlying EBITA $1,049m $649m 2006 2007 2008 Margin 8.8% 9.2% Global US Combat Tactical Systems Systems Order book $16.7bn $14.5bn Cash flow $865m $20m Global Combat Systems Security & Survivability 14
Slide 15: Programmes & Support
Programmes & Support SALES 6.0 £bn 2008 2007 3.0 Sales £4,638m £5,327m 0.0 Underlying EBITA £491m £456m 2006 2007 2008 Margin 10.6% 8.6% Air Order book £19.8bn £20.9bn Cash flow £651m £807m Naval Systems & Security 15
Slide 16: International
International SALES 4.0 £bn 2008 2007 2.0 Sales £3,333m £3,359m 0.0 Underlying EBITA £435m £435m 2006 2007 2008 Margin 13.1% 13.0% CS&S International Australia Order book £11.0bn £7.9bn Cash flow £163m £678m MBDA, Saab, Air Astana 16
Slide 17: HQ & Other Businesses
HQ & Other Businesses 2008 2007 • Regional Aircraft Sales £235m £243m • Shared Services – Research Centres Underlying EBITA £(101)m £(203)m – Property Management Cash flow £(66)m £181m • Head Office 17
Slide 18: Pension Schemes – Funding Valuations
Pension Schemes – Funding Valuations Main 2000 US Scheme Plan ROPS SIPS Plans Valuation Date 5 Apr ‘08 5 Apr ‘07 31 Dec ‘07 31 Mar ‘07 31 Dec ’08 £bn £bn £bn £bn $bn Liabilities 9.80 3.31 1.04 1.05 3.7 Assets 7.41 3.02 0.94 1.09 3.3 (Deficit) / Surplus (2.39) (0.29) (0.10) 0.04 (0.4) Funding Level 7
Slide 19: Pensions summary
Pensions summary UK scheme funding • Triennial valuations for UK schemes • Major restructuring undertaken in 2006 • Previously agreed 20 year recovery plan for Main Scheme to continue – additional £200m in 2009 US scheme funding • Annual valuations for US schemes – additional $250m in 2009 19
Slide 20: Financial Highlights
Financial Highlights • Sales - continuing £18,543m • Underlying EBITA * £1,897m • Underlying earnings per share ** 37.1p • Cash inflow from operating activities £2,009m • Net cash £39m • Order book £46.5bn • Dividend per share 14.5p * earnings before amortisation/impairment of intangible assets, fin
Slide 21: Ian King
BAE SYSTEMS lan King 21
Slide 22: Top Ten Objectives - 2008
Top Ten Objectives - 2008 1. Meet 2008 financial targets and set challenging/realistic longer term plans 2. Develop partnering approach to meet customers’ capability requirements 3. Ensure continued quality application of our mandated business processes 4. Further enhance programme execution - sched
Slide 23: Organisation, Performance, Markets, Strategy, Business development
• Organisation • Performance • Markets • Strategy • Business development 23
Slide 24: Broadening the base of Home Markets - Drivers and Requirements
Broadening the base of Home Markets - Drivers and Requirements Foreign investment and Developing Home Market management involvement in defence industry acceptable Country has economic strength and growth Leveraging Capabilities Country has increasing security requirements and defence needs Defence i
Slide 25: Programme portfolio
Programme portfolio FCS Bradley F-35 Typhoon Increasing FMTV Type 45 CVF activity CV90 M777 Astute Nimrod Tornado Decreasing activity Caiman RG33 F-22 Hawk Broad based portfolio of programme involvement 25
Slide 26: Group Strategic Framework - 2009
Group Strategic Framework - 2009 Group Strategy To deliver sustainable growth in shareholder value by being the premier global defence, security and aerospace company Group Strategic Objectives •Continue to embed a high performance culture including delivery of our Corporate Responsibility agenda •F
Slide 27: Group Strategic Framework - 2009
Group Strategic Framework - 2009 Group Strategy To deliver sustainable growth in shareholder value by being the Security premier global defence, security and aerospace company Security Group Strategic Objectives •Continue to embed a high performance culture including delivery of our Corporate Respon
Slide 28: Group Strategic Framework - 2009
Group Strategic Framework - 2009 Group Strategy To deliver sustainable growth in shareholder value by being the premier global defence, security and aerospace company Group Strategic Objectives High including delivery ofCorporate Responsibility HighaPerformance •Continue to embed Performance Culture
Slide 29: Group Strategic Framework - 2009
Group Strategic Framework - 2009 Group Strategy To deliver sustainable growth in shareholder value by being the premier global defence, security and aerospace company Group Strategic Objectives •Continue to embed a high performance culture including delivery of our Corporate Responsibility agenda •F
Slide 30: Land sector development
Land sector development Strategy evolution Land sector growth 2004 - Alvis 12000 Armor Holdings Through-life capability provision in UK AFV fleet Sales 10000 US$m 8000 United Defense 2005 - United Defense 6000 US tracked combat vehicles reset and upgrade Alvis 4000 2007 - Armor Holdings 2000 Demand
Slide 31: Security business
Security business • Evolving and growing security market • Opportunities to leverage large scale system integration capabilities • Focus on information and intelligence sector UK • UK addressable market set to double to over £3.0bn by 2011 • Detica acquisition – leading counter-threat consultancy –
Slide 32: Readiness & Sustainment
Readiness & Sustainment • Well established as trusted partner supporting UK armed forces – Delivering enhanced availability / capability at lower cost – Business model driven by customer affordability constraints – Further opportunities across Air, Land & Sea domains • Extensive experience in KSA –
Slide 33: Unmanned Air Systems
Unmanned Air Systems • Group experience in:- – Air systems – UAS – Underwater systems – UUS – Ground vehicles – UGS – Encrypted datalink technology • Addressing global demand for UAS to provide range of capabilities;- – Persistent intelligence, surveillance and reconnaissance – Provide route map to
Slide 34: Developing a Global business
Developing a Global business Readiness & Unmanned Land Sustainment Security Air Systems Air, Naval and land Organic development, HERTI Alvis acquired Systems through-life Mantis 2004 Detica acquired 2008 capability provision Taranis United Defense Ship repair acquired 2005 DigitalNet Datalinks, acqu
Slide 35: Summary - 2008
Summary - 2008 23.3% 40 28.1% • Continued good performance Underlying 30 27.0% – good programme execution 36.0% EPS 20 pence 10 0 • Further progress against strategy 2004 2005 2006 2007 2008 – broad base of business – multi-Home Market positions 13.3% 13.3% 15 9.7% • Good visibility 8.4% DPS – large
Slide 36: Handouts
BAE SYSTEMS Handouts 36
Slide 37: Electronics, Intelligence & Support
Electronics, Intelligence & Support SALES 5.0 £bn 2008 2007 2.5 Sales £4,459m £3,916m 0.0 Underlying EBITA £506m £437m 2006 2007 2008 Information Margin 11.3% 11.2% Electronic Solutions Solutions Order book £5.2bn £3.5bn Platform Solutions Cash flow £380m £302m Support Solutions 37
Slide 38: Land & Armaments
Land & Armaments SALES 8.0 £bn 2008 2007 MRAP 4.0 Sales £6,407m £3,538m 0.0 Underlying EBITA £566m £324m 2006 2007 2008 Global Margin 8.8% 9.2% US Combat Tactical Systems Systems Order book £11.5bn £7.3bn Cash flow £467m £10m Global Combat Systems Security & Survivability 38
Slide 39: Underlying Earnings per Share
Underlying Earnings per Share Continuing Operations 2008 2007 Underlying EBITA 1,897 1,449 Interest 697 93 - exclude pension financing credit (53) (92) - exclude market value movements on derivatives (746) (39) (102) (38) Tax (640) (373) - impact of pension financing credit 14 24 - impact of market
Slide 40: Operating Cash Flow
Operating Cash Flow 2008 Underlying EBITA 1,897 Less share of equity accounted investments (132) Add depreciation & impairment 331 Gain on disposal of fixed assets & investments (38) Cost of equity-settled employee share schemes 51 Movements in retirement benefit obligations (272) Movements in provi
Slide 41: Working Capital Movements
Working Capital Movements Reconciliation to Cash Flow 31/12/08 31/12/07 Mvt Acq/Dis F/X Other Cash Flow Inventories (A) 926 701 (225) (9) 283 (3) 46 Receivables - current 3,831 2,933 Receivables - non-current 162 322 Total receivables (B) 3,993 3,255 (738) 159 686 (112) (5) Payables - current (9,165
Slide 42: Like-for-Like Sales & Underlying EBITA - Group
Like-for-Like Sales & Underlying EBITA - Group Underlying Sales EBITA 2008 2007 2008 2007 Growth Growth Continuing Businesses 18,543 15,710 +18% 1,897 1,449 +31% Foreign Exchange: USD 415 43 Other 221 18 Adjusted for foreign exchange 18,543 16,346 +13% 1,897 1,510 +26% Transactions: Armor Holdings (
Slide 43: Like-for-Like Sales & Underlying EBITA by segment
Like-for-Like Sales & Underlying EBITA by segment Underlying Sales EBITA 2008 2007 2008 2007 Electronics, Intelligence & Support Reported (USD) 8,260 7,838 +5% 937 875 +7% Foreign Exchange (40) (7) Transactions: Surveillance & Attack, MTC (198) (176) - (29) Adjusted (USD) 8,062 7,622 +6% 937 839 +12
Slide 44: Like-for-Like Sales & Underlying EBITA by segment
Like-for-Like Sales & Underlying EBITA by segment Underlying Sales EBITA 2008 2007 2008 2007 Programmes & Support Reported 4,638 5,327 (13)% 491 456 +8% Transactions: Detica (55) (9) Adjusted 4,583 5,327 (14)% 482 456 +6% International Reported 3,333 3,359 (1)% 435 435 0% Foreign Exchange 184 16 Tra