Slide 1: 2020 Preliminary Results
2020 Preliminary Results 25 February 2021 baesystems.com 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
Slide 2: Agenda
BAE Systems 2020 Preliminary Results 2 Agenda • Introduction and Company Purpose Sir Roger Carr – Chairman • 2020 Performance and sustainability Charles Woodburn – CEO • 2020 Financials and 2021 Guidance Brad Greve – CFO • Business Evolution and Equity Case Charles Woodburn and Brad Greve • Q&A Copy
Slide 3: Sir Roger Carr, Chairman
BAE Systems 2020 Preliminary Results 3 Sir Roger Carr Chairman Copyright© 2021 BAE Systems. All Rights Reserved. BAE SYSTEMS is a registered trademark.
Slide 4: Chairman's introduction and Company purpose
BAE Systems 2020 Preliminary Results 4 Chairman’s introduction and Company purpose At BAE Systems we serve, supply and protect those who serve and protect us, in a corporate culture that is performance driven and values led. We have an important role in society because we: • support employees’ right
Slide 5: Charles Woodburn, Chief Executive
BAE Systems 2020 Preliminary Results 5 Charles Woodburn Chief Executive Copyright© 2021 BAE Systems. All Rights Reserved. BAE SYSTEMS is a registered trademark.
Slide 6: 2020 – Our year in review
BAE Systems 2020 Preliminary Results 6 2020 – Our year in review Focus has been on safety and programme delivery Agile response to COVID-19 US acquisitions and Strong and Positioned UK pension action resilient business for sustained completed performance growth Orders Sales Underlying EBITA Free cas
Slide 7: Evolving a sustainable business
BAE Systems 2020 Preliminary Results 7 Evolving a sustainable business Well-positioned portfolio Long-term programme visibility Environment Social • Goal to reduce environmental impact • Our People and values – developing talent of our operations Sustainability • Positive social & economic impacts •
Slide 8: Brad Greve, CFO
BAE Systems 2020 Preliminary Results 8 Brad Greve CFO Copyright© 2021 BAE Systems. All Rights Reserved. BAE SYSTEMS is a registered trademark.
Slide 9: 2020 Financial highlights
BAE Systems 2020 Preliminary Results 9 2020 Financial highlights Strong Balanced Robust Sales Earnings Cash Capital Demand Growth Growth Generation Allocation Scheduled UK lump Orders 2020 Sales £1.4bn of FCF(1) Underlying EPS sum pension £20.9bn £20.9bn improved cash 46.8p payments up 13% up 3.7% c
Slide 10: 2020 Summary financials
BAE Systems 2020 Preliminary Results 10 2020 Summary financials Average $ rate: 2020 $1.28, 2019 $1.28 Financial summary 2020 2019 % change Sales £20,862m £20,109m +3.7% Underlying EBITA (1) £2,132m £2,117m +0.7% Underlying Earnings per Share (1,2,3) 46.8p 45.8p +2.2% Operating Business Cash Flow (4
Slide 11: 2020 Order intake
BAE Systems 2020 Preliminary Results 11 2020 Order intake £20.9bn $13.1bn ES £6.5bn $6.1bn P&S (US) I&S £3.8bn $5.3bn $1.8bn Electronic Combat $1.5bn F-35 £1.3bn Submarines £1.0bn C4ISR $1.5bn Typhoon Germany £1.3bn UK Munitions £1.5bn Precision Strike $1.2bn Typhoon Radar £0.6bn RBSL Boxer £0.4bn S
Slide 12: 2020 Sales
BAE Systems 2020 Preliminary Results 12 2020 Sales Group By reporting segment* (£bn) 7.9 £20.9bn +£0.8bn 4.6 3.5 3.3 1.8 Defence sales +7% ES P&S (US) Air Maritime C&I growth +3.7% +2.7% +5.0% +6.1% +4.5% +4.6% * Excludes HQ (£0.2bn) and eliminations (£(0.4)bn) Copyright© 2021 BAE Systems. All Right
Slide 13: 2020 Underlying EBITA
BAE Systems 2020 Preliminary Results 13 2020 Underlying EBITA Group By reporting segment (£m) 941 £2,132m 684 +£15m +0.7% 195 306 136 (130) ES P&S (US) Air Maritime C&I HQ return on sales 10.2% 15.0% 5.6% 11.9% 9.4% 7.5% Copyright© 2021 BAE Systems. All Rights Reserved. BAE SYSTEMS is a registered t
Slide 14: 2020 Underlying EPS bridge (pence)
BAE Systems 2020 Preliminary Results 14 2020 Underlying EPS bridge (pence) 2.3 1.2 1.1 (3.6) 45.8 45.8 44.5 44.5 45.6 46.8 Net operational COVID impact 2019* M&A Tax rate 2020 improvement – Commercial * Excluding one-off tax benefit of 5.0p (£161m) Copyright© 2021 BAE Systems. All Rights Reserved. B
Slide 15: 2020 Operating business cash flow
BAE Systems 2020 Preliminary Results 15 2020 Operating business cash flow Group* By reporting segment (£m) 718 580 £1,826m 382 243 +£519m 221 +40% (318) ES P&S (US) Air Maritime C&I HQ* Variance 86% Conversion to 2019 £(92)m +£141m +£310m +£93m +£153m £(86)m * Excluding the £1bn one-off UK pension c
Slide 16: 2020 Free cash flow bridge to July guidance
BAE Systems 2020 Preliminary Results 16 2020 Free cash flow* (£bn) Bridge to July guidance 0.1 0.4 1.2 0.1 0.9 0.8 1.4 0.8 Guidance Additional Accelerated Other net working 2020 (2020 interims) profits receipts capital improvement * Excluding the £1bn one-off UK pension contribution Copyright© 2021
Slide 17: 2020 Net debt (£m)
BAE Systems 2020 Preliminary Results 17 2020 Net debt (£m) Free cash flow 1,367 1,826 (459) (1,000) (743) (1,674) (765) 97 (2,718) £1bn one-off Opening Operating Interest Dividends Closing UK pension M&A Other net debt cash flow & tax contribution paid net debt Copyright© 2021 BAE Systems. All Right
Slide 18: 2021 Group guidance
BAE Systems 2020 Preliminary Results 18 2021 Group guidance (1) Guidance is provided based on a $1.35:£1 Sales Underlying EBITA Underlying EPS +3% to +5% +6% to +8% +3% to +5% (2020 £20,862m) (2020 £2,132m) (2020 46.8p) Other 2021 Free cash flow (FCF) 3 year FCF (2021 – 2023) Underlying Sensitivity
Slide 19: 3 year Free cash flow guidance
BAE Systems 2020 Preliminary Results 19 3 year Free cash flow guidance (1) 2019 2020* 2021 2022 2023 2019 – 2021 £850m £1,367m >£1bn In excess of £3bn £3.2bn on track 2020 – 2022 £1,367m >£1bn £3.5 – 3.8bn on track 2021 – 2023 >£1bn In excess of £4bn On track to meet rolling 3 year targets 202
Slide 20: 3 year Free cash flow
BAE Systems 2020 Preliminary Results 20 3 year Free cash flow* FCF (£bn) Cash flow drivers outlook Increasing profits £3.5 >£4 Pension reducing >£3 - £3.8 £2.8 CAPEX 18–20 19–21 20–22 21–23 Advance utilisation Conversion increases to >80% * Excluding the £1bn one-off UK pension contribution Copyrigh
Slide 21: Positioning for the Future
BAE Systems 2020 Preliminary Results 21 Positioning for the Future Charles Woodburn, Chief Executive Copyright© 2021 BAE Systems. All Rights Reserved. BAE SYSTEMS is a registered trademark.
Slide 22: Positioning for the future
BAE Systems 2020 Preliminary Results 22 Positioning for the future Evolution Business Fundamentals Planned Evolution in last 3 years today in coming years • What we have achieved • Structure • Strategic priorities • Competitive advantage • Portfolio shaping for value creation • Sustainability agenda
Slide 23: Evolution 2018–20
BAE Systems 2020 Preliminary Results 23 Evolution 2018–20 What we have achieved in the last 3 years Programme Execution Improvement Portfolio Progression Sales CAGR • Over $2.2bn of high technology acquisitions 4.1% • Legacy contracts completed • Sell down of Saudi Portfolio Company holdings for val
Slide 24: The Group today and competitive advantage
BAE Systems 2020 Preliminary Results 24 The Group today and competitive advantage Multi-year programmes – Diverse geographic footprint – visibility on value generators deep customer relationships Key competitive Leading defence franchises advantages Differentiated technology Operating model drives s
Slide 25: Multi year programme visibility
BAE Systems 2020 Preliminary Results 25 Multi year programme visibility £45.2bn Order backlog; incumbent positions on key long term programmes; opportunities predominantly on aircraft sales and support, electronic systems and land vehicles: 2020 Sales Major Programme/Franchise Sales outlook Comment
Slide 26: Market outlook
BAE Systems 2020 Preliminary Results 26 Market outlook • US Business growth in coming years from recent high Book to Bill • Stable defence budget outlook • Opportunity to outperform from NDS portfolio alignment • Expected spend focus on high-end technology to benefit ES • 4 year spending increases a
Slide 27: Diverse geographic footprint
BAE Systems 2020 Preliminary Results 27 Diverse geographic footprint % Group sales by destination 2015 2016 2017 2018 2019 2020 US 50 45% 45 40 35 2020 30 Sales by UK destination 25 19% 20 Saudi Arabia 15 13% 10 International 5 Australia 20% 0 3% US UK KSA Aus. RoW Copyright© 2021 BAE Systems. All R
Slide 28: Leading defence franchises
BAE Systems 2020 Preliminary Results 28 Leading defence franchises Multi-Domain Capabilities Electronic Warfare Well positioned to offer differentiated A leader in full-spectrum electronic solutions in autonomous, networking warfare technology and solutions– and data exploitation – augments and cust
Slide 29: Differentiated technology
BAE Systems 2020 Preliminary Results 29 Differentiated technology Focus areas: Development of technologies: • Advanced electronics • Underpins strategy • Electronic warfare • Drives product and • Space and hypersonics service development • Autonomy • Gives our customers the advantage they seek • Cyb
Slide 30: Value creating operating model
BAE Systems 2020 Preliminary Results 30 Value creating operating model Our operating model and domain incumbency is a strength and creates barriers to entry Efficient R&D model – CAPEX self and customer customer, self and Advance Payments funded – franchise specific collaboration funded Strong opera
Slide 31: Evolution looking forward
BAE Systems 2020 Preliminary Results 31 Evolution looking forward What we look to achieve in the next 3 years Strong consistent programme performance Top line growth Technology investment Margin expansion Efficiency and simplification in working Attractive Improved shareholder cash conversion return
Slide 32: Margin Expansion
BAE Systems 2020 Preliminary Results 32 Margin Expansion Programme Execution Cost Savings/ Margin +ve Business Mix - ES Competitiveness Expansion Technology Investment Operating Leverage Copyright© 2021 BAE Systems. All Rights Reserved. BAE SYSTEMS is a registered trademark.
Slide 33: Cash conversion improvement – key drivers
BAE Systems 2020 Preliminary Results 33 Cash conversion improvement – key drivers Working Capital Mgt Working Capital/advances Net Capex reducing Higher and neutralising over time sustained Cash Margin progression Conversion Pension deficit inputs contributions down [DELETED] Free cash flow in exces
Slide 34: Capital allocation
BAE Systems 2020 Preliminary Results 34 Capital allocation Pension(1) – UK lump sum deficit funding completed Investment in business – included in earnings and cash outlook Free Cash flow Dividend(2) M&A Buyback Maintain investment grade credit rating and balance sheet flexibility 1) Per current fun
Slide 35: Summary
BAE Systems 2020 Preliminary Results 35 Summary • Order backlog – drives top line growth and cash flow • Visibility of long-term value drivers • Leading defence franchises Strong Fundamentals • Wide geographic footprint • Deep customer relationships • Strong operating model • Programme execution Cle
Slide 36: Q&A
BAE Systems 2020 Preliminary Results 36 Q&A Copyright© 2021 BAE Systems. All Rights Reserved. BAE SYSTEMS is a registered trademark.
Slide 37: Supplementary Information
BAE Systems 2020 Preliminary Results 37 Supplementary Information Copyright© 2021 BAE Systems. All Rights Reserved. BAE SYSTEMS is a registered trademark.
Slide 38: Electronic Systems
BAE Systems 2020 Preliminary Results 38 Electronic Systems Full year 2020 2019 Sales $5,848m $5,668m Underlying EBITA $878m $877m Margin 15.0% 15.5% Cash flow $744m $858m Order intake $6,060m $6,414m Order backlog $8.8bn $7.9bn • Sales – Up 3.2% – Defence business grew c.12% - acquisitions 4% 2020 S
Slide 39: Platforms & Services (US)
BAE Systems 2020 Preliminary Results 39 Platforms & Services (US) Full year 2020 2019 Sales $4,496m $4,261m Underlying EBITA $250m $341m Margin 5.6% 8.0% Cash flow $491m $309m Order intake $5,309m $5,133m Order backlog $8.3bn $7.7bn • Sales growth at 5.5% – US combat vehicles - monthly vehicle produ
Slide 40: Air
BAE Systems 2020 Preliminary Results 40 Air Full year 2020 2019 Sales £7,910m £7,457m Underlying EBITA £941m £887m Margin 11.9% 11.9% Cash flow £718m £408m Order intake £6,494m £4,594m Order backlog £22.5bn £23.9bn • Sales up 6.1% – F-35 build and Typhoon support higher activity 2020 Sales % – Qatar
Slide 41: Maritime
BAE Systems 2020 Preliminary Results 41 Maritime Full year 2020 2019 Sales £3,257m £3,116m Underlying EBITA £306m £268m Margin 9.4% 8.6% Cash flow £243m £150m Order intake £3,772m £2,875m Order backlog £9.1bn £8.6bn • Sales growth at 4.5% – Continued ramp on Dreadnought, now over £1bn p.a 2020 Sales
Slide 42: Cyber & Intelligence
BAE Systems 2020 Preliminary Results 42 Cyber & Intelligence Full year 2020 2019 Sales $2,326m $2,211m Underlying EBITA $175m $116m Margin 7.5% 5.3% Cash flow $283m $86m Order intake $2,550m $2,357m Order backlog $2.3bn $2.3bn • Sales up 5.2% – I&S growth of 7% - all divisions contributed growth 202
Slide 43: Major programme status
BAE Systems 2020 Preliminary Results 43 Major programme status • F-35 – Year on year sales increase in 2020 despite COVID- • Australia Hunter class – Design and production 19; ramp to full rate by 2021 readiness phase underway • Qatar Typhoon and Hawk – Typhoon and Hawk build • M109 – Transitioned t
Slide 44: 2020 summary salients by sector
BAE Systems 2020 Preliminary Results 44 2020 summary salients by sector Underlying Operating Order Order (£m / £bn backlog) Sales EBITA Margin Cash Flow1 Intake Backlog Electronic Systems 4,557 684 15.0% 580 4,722 6.5 Platforms & Services (US) 3,503 195 5.6% 382 4,137 6.1 Air 7,910 941 11.9% 718 6,4
Slide 45: 2021 Guidance – Reporting Segments
BAE Systems 2020 Preliminary Results 45 2021 Guidance – Reporting Segments - guidance below assumes a $1.35:£1 exchange rate 2020 Actual 2021 Guidance (1) Underlying Sales (£m) Underlying EBITA margin (%) Sales EBITA margin Electronic Systems * 4,557 15.0 up 4% to 6% 15% to 16% Platforms & Services
Slide 46: 2020 Balance sheet
BAE Systems 2020 Preliminary Results 46 2020 Balance sheet 31 Dec 2020 31 Dec 2019 Summarised balance sheet £m £m Intangible fixed assets 11,745 10,371 Tangible fixed assets1 3,158 3,188 Investments 409 441 Working capital1 (3,012) (2,854) Pension deficit (4,485) (4,455) Lease liabilities (1,203) (1
Slide 47: Net Cash / (Debt)
BAE Systems 2020 Preliminary Results 47 Net Cash / (Debt) excl. £1bn one-off £1bn one-off UK £m UK pension contribution pension contribution 2020 Opening Net Debt (743) Operating business cash flow 1,826 (1,000) 826 Interest & Tax (459) - (459) Free Cash Flow 1,367 (1,000) 367 Dividends paid, incl.
Slide 48: IAS 19 Pensions
BAE Systems 2020 Preliminary Results 48 IAS 19 Pensions 31 Dec 30 Jun 31 Dec (£bn) 2020 2020 2019 Assets 29.8 29.3 27.7 Liabilities (34.6) (35.7) (32.5) Pension deficit (4.8) (6.4) (4.8) Group share of deficit (4.5) (6.0) (4.5) UK - Bond yields 1.4% 1.5% 2.1% Inflation rate 2.7% 2.7% 2.8% US - Bond
Slide 49: Reconciliation of Earnings
BAE Systems 2020 Preliminary Results 49 Reconciliation of Earnings (£m / pence EPS) Underlying (1) Reported 2020 2019 2020 2019 Underlying EBITA 2,132 2,117 2,132 2,117 Non-recurring items 19 (27) EBITA 2,151 2,090 Amortisation/Impairment (141) (115) Underlying Finance Costs (255) (257) (255) (257)