Bae Systems Plc · LSE:BA.
Bae Systems — H1 2021 Earnings Presentation
38 slides from Bae Systems's earnings presentation, Jul 29, 2021
Slide 1: 2021 Half Year Results
BAE Systems 2021 Half Year Results 1 2021 Half Year Results 29 July 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
Slide 2: Agenda
BAE Systems 2021 Half Year Results 2 Agenda • 2021 Half Year Review Charles Woodburn - CEO • 2021 Half Year Financials Brad Greve - CFO • Summary Charles Woodburn - CEO • Q&A © 2021 BAE Systems. All Rights Reserved. BAE SYSTEMS is a registered trademark.
Slide 3: Charles Woodburn, Chief Executive
BAE Systems 2021 Half Year Results 3 Charles Woodburn Chief Executive © 2021 BAE Systems. All Rights Reserved. BAE SYSTEMS is a registered trademark.
Slide 4: 2021 – Half year in review
BAE Systems 2021 Half Year Results 4 2021 – Half year in review Focus has been on safety and programme delivery Comprehensive response to COVID-19 Increased shareholder Strong underlying business Positioned for sustained returns performance growth dividend and buyback Orders Sales Underlying EBIT Fr
Slide 5: What we look to achieve in the next 3 years
BAE Systems 2021 Half Year Results 5 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 Strong cash conversion shareholder Portfolio shaping for value creation
Slide 6: 2021 Half year highlights
BAE Systems 2021 Half Year Results 6 2021 Half year highlights Strong underlying business growth - 2021 guidance confirmed Operational Performance Technology Investment • Air – Growth delivered • Linking and transitioning solutions into priority areas: - Multi domain • F-35; Typhoon production and s
Slide 7: Demand outlook
BAE Systems 2021 Half Year Results 7 Demand outlook • US Business growth in coming years from recent high Book to Bill • 2022 proposed budget supports US business programmes • Opportunity to outperform from NDS portfolio alignment • Budget spending on high-end technology benefits ES • 4 year spendin
Slide 8: Sustainability central to our business
BAE Systems 2021 Half Year Results 8 Sustainability central to our business Well-positioned portfolio Long-term programme visibility Environment Social • Goal to reduce environmental impact of • Our People and values – developing talent our operations Sustainability • Positive social & economic impa
Slide 9: Brad Greve, CFO
BAE Systems 2021 Half Year Results 9 Brad Greve CFO © 2021 BAE Systems. All Rights Reserved. BAE SYSTEMS is a registered trademark.
Slide 10: 2021 Half year financial highlights
BAE Systems 2021 Half Year Results 10 2021 Half year financial highlights Sales Improved Increased Earnings Capital Growth Cash Demand Growth Allocation Generation Orders Sales Underlying EBIT Free Cash Flow Dividend £10.6bn £10.0bn £1,028m £0.5bn 9.9p Order Backlog Underlying EPS * Share buyback £4
Slide 11: 2021 Half year summary financials
BAE Systems 2021 Half Year Results 11 2021 Half year summary financials Half Year Half Year Reported Constant 2021 2020 change currency Average $ rate: June 2021 $1.39, June 2020 $1.26 Order Intake £10,582m £9,339m Sales £10,035m £9,871m +2% +6% Underlying EBIT (1) £1,028m £849m +21% +27% Margin 10.
Slide 12: Order intake
BAE Systems 2021 Half Year Results 12 Order intake £10.6bn – orders ahead of expectations US Air Maritime ES P&S (US) I&S $3.1bn $2.6bn $0.9bn £2.7bn £2.8bn Electronic Combat $0.7bn FCAS £0.3bn Submarines £1.4bn C4ISR $0.6bn F-35 £0.2bn UK ship support £0.5bn Precision Strike $0.6bn Typhoon Support
Slide 13: Sales
BAE Systems 2021 Half Year Results 13 Sales Group By reporting segment* (£bn) 3.8 £10.0bn 2.1 1.6 1.7 +6% 0.9 (constant currency) ES P&S (US) Air Maritime C&I Growth: Constant Currency +6% +6% +1% +6% +10% +1% Growth: Reported +2% (3)% (7)% +6% +10% (6)% * excludes HQ & eliminations © 2021 BAE Syste
Slide 14: Underlying EBIT/margin
BAE Systems 2021 Half Year Results 14 Underlying EBIT/margin Group By reporting segment (£m) Margin 10.2% 15.6% 6.8% 10.6% 9.0% 9.8% £1,028m 407 +27% 335 (constant currency) 109 149 84 (56) ES P&S (US) Air Maritime C&I HQ Growth: Constant Currency +27% +29% (1)% +22% +37% +56% +8%* Growth: Reported
Slide 15: Operating business cash flow
BAE Systems 2021 Half Year Results 15 Operating business cash flow Group By reporting segment (£m) 254 202 165 £694m 94 +£574m (variance to Half Year 2020) (9) (12) ES P&S (US) Air Maritime C&I HQ Variance to 30 June 2020 +£574m +£190m £(152)m +£148m +£55m £(13)m £346m 2020 Half year comparison excl
Slide 16: Net debt (£m)
BAE Systems 2021 Half Year Results 16 Net debt (£m) Free Cash Flow (2,718) £461m (2,745) (233) 214 694 (461) (241) Net debt(1) Operating Interest Equity (2) Net debt(1) & tax M&A Other 1 January cash flow Dividends 30 June (1) Net Debt excludes lease liabilities (2) Other includes £172m dividends pa
Slide 17: 2021 Group guidance (EBIT basis)
BAE Systems 2021 Half Year Results 17 2021 Group guidance (EBIT basis) (1,2) Guidance is provided based on a $1.35:£1 Sales Underlying EBIT Underlying EPS +3% to +5% +6% to +8% +3% to +5% (2020 £20,862m) (2020 £2,037m) (2020 44.3p) 2021 Free cash flow (FCF) 3 year FCF (2021 – 2023) Other Underlying
Slide 18: 3 year free cash flow guidance
BAE Systems 2021 Half Year Results 18 3 year free cash flow guidance(1) 2019 2020(2) 2021 2022 2023 2019 – 2021 £850m £1,367m >£1bn In excess of £3bn >£3.2bn 2020 – 2022 £1,367m >£1bn £3.5 – 3.8bn 2021 – 2023 >£1bn In excess of £4bn On track to meet rolling 3 year targets Guidance held against
Slide 19: Capital Allocation
BAE Systems 2021 Half Year Results 19 Capital Allocation Pension(1) – UK lump sum deficit funding completed Investment in business – included in earnings and cash outlook Free Cash flow Dividend M&A Buyback Maintain investment grade credit rating and balance sheet flexibility 1) Per current funding
Slide 20: Summary
BAE Systems 2021 Half Year Results 20 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 Clear
Slide 21: Q&A
BAE Systems 2021 Half Year Results 21 Q&A © 2021 BAE Systems. All Rights Reserved. BAE SYSTEMS is a registered trademark.
Slide 22: Supplementary Information
BAE Systems 2021 Half Year Results 22 Supplementary Information © 2021 BAE Systems. All Rights Reserved. BAE SYSTEMS is a registered trademark.
Slide 23: Cash conversion improvement – key drivers
BAE Systems 2021 Half Year Results 23 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 excess
Slide 24: Margin Expansion
BAE Systems 2021 Half Year Results 24 Margin Expansion Programme Execution Cost Savings/ Margin +ve Business Mix - ES Competitiveness Expansion Technology Investment Operating Leverage © 2021 BAE Systems. All Rights Reserved. BAE SYSTEMS is a registered trademark.
Slide 25: Leading defence franchises
BAE Systems 2021 Half Year Results 25 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 custom
Slide 26: Differentiated technology
BAE Systems 2021 Half Year Results 26 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 • Cyber
Slide 27: Value creating operating model
BAE Systems 2021 Half Year Results 27 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 28: The Group today and competitive advantage
BAE Systems 2021 Half Year Results 28 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 str
Slide 29: Multi year programme visibility
BAE Systems 2021 Half Year Results 29 Multi year programme visibility • £44.6bn 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 30: Electronic Systems
BAE Systems 2021 Half Year Results 30 Electronic Systems Half year 2021 2020 Sales $2,974m $2,777m Underlying EBIT $465m $361m Margin 15.6% 13.0% Cash flow $353m $81m Order intake $3,102m $3,554m Order backlog (1) $9.2bn $8.8bn • Sales up 6% on a constant currency basis − Strong contributions from t
Slide 31: Platforms & Services (US)
BAE Systems 2021 Half Year Results 31 Platforms & Services (US) Half year 2021 2020 Sales $2,214m $2,165m Underlying EBIT $152m $149m Margin 6.8% 6.9% Cash flow $(12)m $180m Order intake $2,562m $2,608m Order backlog (1) $8.4bn $8.3bn • Sales growth 0.6% on a constant currency basis − Combat Vehicle
Slide 32: Air
BAE Systems 2021 Half Year Results 32 Air Half year 2021 2020 Sales £3,827m £3,610m Underlying EBIT £407m £340m Margin 10.6% 9.4% Cash flow £165m £17m Order intake £2,720m £2,482m Order backlog (1) £20.6bn £22.5bn • Sales up 6% on a constant currency basis − Driven by F-35, Typhoon support & upgrade
Slide 33: Maritime
BAE Systems 2021 Half Year Results 33 Maritime Half year 2021 2020 Sales £1,656m £1,505m Underlying EBIT £149m £109m Margin 9.0% 7.2% Cash flow £(12)m £(67)m Order intake £2,771m £1,035m Order backlog (1) £10.2bn £9.1bn • Sales growth at 10% − Dreadnought and Type 26 activity continues to climb 2021
Slide 34: Cyber & Intelligence
BAE Systems 2021 Half Year Results 34 Cyber & Intelligence Half year 2021 2020 Sales $1,195m $1,151m Underlying EBIT $116m $74m Margin 9.8% 6.5% Cash flow $131m $135m Order intake $1,376m $1,269m Order backlog (1) $2.3bn $2.3bn • Sales up 1% on a constant currency basis − I&S growth of 1% 2021 Sales
Slide 35: 2021 Half year summary salients by reporting segment
BAE Systems 2021 Half Year Results 35 2021 Half year summary salients by reporting segment Underlying Operating Order Order (£m / £bn backlog) Sales EBIT Margin Cash Flow Intake Backlog Electronic Systems 2,142 335 15.6% 254 2,234 6.6 Platforms & Services (US) 1,595 109 6.8% (9) 1,845 6.1 Air 3,827
Slide 36: 2021 Half year balance sheet
BAE Systems 2021 Half Year Results 36 2021 Half year balance sheet 30 June 31 Dec Pension deficit 30 Jun 31 Dec 30 Jun 2021 2020 (£bn) 2021 2020 2020 Summary balance sheet £m £m Assets 30.1 29.8 29.3 Intangible fixed assets 11,625 11,745 Liabilities (32.6) (34.6) (35.7) Tangible fixed assets1 3,011
Slide 37: 2021 Half year reconciliation of earnings
BAE Systems 2021 Half Year Results 37 2021 Half year reconciliation of earnings (£m / pence EPS) Half Year - Underlying Half Year – Reported 2021 2021 (excl. one-off (incl. one-off tax benefit) tax benefit) 2020 2021 2020 Underlying EBIT 1,028 1,028 849 1,028 849 Non-recurring items 346 (21) Other i
Slide 38: 2021 Half year underlying EPS bridge (pence)
BAE Systems 2021 Half Year Results 38 2021 Half year underlying EPS bridge (pence) 2.9 4.3 0.1 0.8 0.8 24.8 (incl one- off tax 21.9 benefit) 17.5 30 June Covid 30 June FX Tax rate All other 2020 – commercial 2021 © 2021 BAE Systems. All Rights Reserved. BAE SYSTEMS is a registered trademark.