Slide 1: 2022 Preliminary Results
BAE Systems 2022 Preliminary Results 1 2022 Preliminary Results 23 February 2023 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
Slide 2: Agenda
BAE Systems 2022 Preliminary Results 2 Agenda • Chairman Review Sir Roger Carr - Chairman • 2022 Review Charles Woodburn - CEO • 2022 Financials Brad Greve - CFO • Business Outlook Charles Woodburn - CEO • Q&A © 2023 BAE Systems. All Rights Reserved. BAE SYSTEMS is a registered trademark.
Slide 3: Sir Roger Carr, Chairman
Sir Roger Carr Chairman Copyright© 2021 BAE Systems. All Rights Reserved. BAE SYSTEMS is a registered trademark.
Slide 4: Chairman's Overview
BAE Systems 2022 Preliminary Results 4 Chairman’s Overview Step up in performance improvement and shareholder returns driven by fundamental changes: Customer at the forefront Transfer of knowledge and skills in the business Management de-layering and strengthening the talent bench Investment in next
Slide 5: 2022 - Year in review
BAE Systems 2022 Preliminary Results 5 2022 - Year in review Charles Woodburn - CEO © 2023 BAE Systems. All Rights Reserved. BAE SYSTEMS is a registered trademark.
Slide 6: 2022 – Our year in review
BAE Systems 2022 Preliminary Results 6 2022 – Our year in review Delivered mission critical requirements Record order intake - backlog £59bn – well set for good long term growth Delivered good top Increased Increased Strong operational Investment in line and earnings shareholder performance business
Slide 7: Investment in the business over last 3 years
BAE Systems 2022 Preliminary Results 7 Investment in the business over last 3 years Investment in technology Investment in facilities Investment in our people c.3,000 apprentices Self-funded Capex hired & R&D £1.4bn c.£300m in £0.8bn education & skills © 2023 BAE Systems. All Rights Reserved. BAE SY
Slide 8: ESG Agenda evolving and progressing
BAE Systems 2022 Preliminary Results 8 ESG Agenda evolving and progressing ‘We serve, supply and protect those who serve and protect us, in a corporate culture that is performance driven and values led’ • Environmental stewardship Addressing climate risks • Net Zero Scope 1 &2 • Biodiversity & natur
Slide 9: What we look to achieve in the years 2021-23
BAE Systems 2022 Preliminary Results 9 “What we look to achieve in the 3 years 2021-23” Another 12 months of strong business performance 2 year performance Strong consistent programme performance Top line Sales growth growth Organisational efficiency and 10% simplification Margin expansion Por
Slide 10: Brad Greve, CFO
BAE Systems 2022 Preliminary Results 10 Brad Greve CFO © 2023 BAE Systems. All Rights Reserved. BAE SYSTEMS is a registered trademark.
Slide 11: 2022 financial highlights
BAE Systems 2022 Preliminary Results 11 2022 financial highlights Increased Sales Earnings Good Cash Capital Demand Growth Growth Generation Allocation Orders Sales Underlying EBIT Free Cash Flow Dividend £37bn £23bn £2,479m £1,950m up 7.6% Order Backlog Underlying EPS £0.8bn buyback £59bn 55.5p com
Slide 12: 2022 summary financials
BAE Systems 2022 Preliminary Results 12 2022 summary financials Constant Average $ rate: 2022 $1.24, 2021 $1.38 2022 2021 Currency Reported Order Intake £37,093m £21,458m Sales £23,256m £21,310m +4.4% +9% Underlying EBIT (1) £2,479m £2,205m +5.5% +12% Return on Sales 10.7% 10.3% +20bps +40bps Underl
Slide 13: Order intake
BAE Systems 2022 Preliminary Results 13 Order intake Record order intake - £37bn ES P&S Air Maritime C&I £5.4bn £5.7bn £14.0bn £9.7bn £2.4bn Electronic combat £1.3bn Combat vehicles £3.6bn Saudi support £7.8bn UK ship build £3.7bn I&S £1.5bn C4ISR £1.1bn Ship repair £1.0bn MBDA £2.9bn Dreadnought £3
Slide 14: Sales
BAE Systems 2022 Preliminary Results 14 Sales Group By reporting segment* £7.7bn £23.3bn £5.1bn £3.7bn £4.6bn +4% £2.2bn (constant currency) ES P&S Air Maritime C&I Variance: Constant Currency +4% +2% (1)% +3% +10% +7% Variance: Reported +9% +13% +9% +3% +10% +15% * excludes HQ & eliminations © 2023
Slide 15: Underlying EBIT/Return on Sales
BAE Systems 2022 Preliminary Results 15 Underlying EBIT/Return on Sales Group By reporting segment* Return on Sales 10.7% 16.6% 8.8% 11.0% 7.7% 10.5% £838m £849m £2,479m £356m £326m +5% £232m (constant currency) ES P&S Air Maritime C&I Variance: Constant Currency +5% (1)% +16% +7% +1% +21% Variance:
Slide 16: Operating business cash flow
BAE Systems 2022 Preliminary Results 16 Operating business cash flow Group By reporting segment Cash conversion(1) 103% 78% 161% 134% 66% 66% £1,140m £2,552m £650m £525m +£230m £235m £154m (variance to 2021(2)) £(152)m ES P&S Air Maritime C&I HQ Variance to 2021 +£230m £(124)m +£238m +£592m £(139)m
Slide 17: Net debt (£m)
BAE Systems 2022 Preliminary Results 17 Net debt(1) (£m) Free cash flow £1,950m (602) (38) 2,552 (2,160) (1,590) (2,023) (185) Net Debt Operating Interest Shareholder Net Debt M&A Other 2021 Cash Flow & tax returns(2) 2022 (1) Net debt excludes lease liabilities (2) Dividends £802m & share repurchas
Slide 18: 2023 Group guidance
BAE Systems 2022 Preliminary Results 18 2023 Group guidance(1) Guidance based on $1.24:£1 Underlying Underlying 2023 Free Sales EBIT EPS Cash Flow +3% to +5% +4% to +6% +5% to +7% >£1.2bn (2022 £23,256m) (2022 £2,479m) (2022 55.5p) (2022 £1,950m) Underlying finance costs Effective tax rate Non-contr
Slide 19: 3 year free cash flow guidance
BAE Systems 2022 Preliminary Results 19 3 year free cash flow guidance(1) 2019 2020(2) 2021 2022 2023 2024 2025 2019 – 21: In excess of £3bn £4.1bn 2020 – 22: In excess of £4bn £5.2bn 2021 – 23 : In excess of £5bn £1,864m £1,950m >£1.2bn (prev. in excess of £4.5bn) 2022 – 24: In excess of £4.5bn £1,
Slide 20: Clear margin expansion pathway
BAE Systems 2022 Preliminary Results 20 Clear margin expansion pathway Driven by continued programme execution and robust business model 90bps of Margin Expansion in the last 2 years Pathway to Further Margin Expansion Clear Matching business models with commensurate risk Higher margin commercial
Slide 21: Capital Allocation
BAE Systems 2022 Preliminary Results 21 Capital Allocation Investment in our people Capex to drive growth Investment in the business R&D increasing Free cash flow 2023-2025 : £4bn - £5bn Dividend M&A Buyback Pipeline of technology Up to £1.5bn, three Covered c.2x by focussed bolt-on year programme u
Slide 22: Business Outlook
BAE Systems 2022 Preliminary Results 22 Business Outlook © 2023 BAE Systems. All Rights Reserved. BAE SYSTEMS is a registered trademark.
Slide 23: Financially we continue to be focused on three priorities…
BAE Systems 2022 Preliminary Results 23 Financially we continue to be focused on three priorities… Disciplined Capital Organic Growth Expanding Margins Allocation • Order intake and backlog • Programme performance • Higher and sustained cash conversion • Organic investment • Portfolio diversity • Bu
Slide 24: Key drivers behind long term growth outlook
BAE Systems 2022 Preliminary Results 24 Key drivers behind long term growth outlook Leading defence Diverse geographic Leading & disruptive Order backlog franchises footprint technologies Visibility on long term value generators Long standing customer relationships & collaborations Opportunity pipel
Slide 25: Multi year programme visibility underpinned by a £59bn backlog
BAE Systems 2022 Preliminary Results 25 Multi year programme visibility underpinned by a £59bn backlog 2022 Sector Backlog Sector sales outlook Major Programme/Franchise 2022 Sales Sales outlook(1) Electronic Combat Solutions $1.8bn ES $9.7bn ES Defence other $3.6bn ES Commercial $0.8bn Combat Missi
Slide 26: Multi-decade Programmes With Long-Term Embedded Value
BAE Systems 2022 Preliminary Results 26 Multi-decade Programmes With Long-Term Embedded Value - illustrative Concept and Low rate Full rate Ongoing sustainment, design production production support and upgrades Backlog Represents Just a Portion of Embedded Value Hawk Tempest F15 EW Bradley M777 Addi
Slide 27: Geographic diversity - a strength now and into the future
BAE Systems 2022 Preliminary Results 27 Geographic diversity - a strength now and into the future UK – 20% sales • Submarine build • Ship build & support • Typhoon build & support • F-35 (aft fuselage) & support • GCAP/Tempest • Digital Intelligence Japan • UK Munitions Europe – 13% sales • Defence
Slide 28: World Class Multi-domain Capabilities
BAE Systems 2022 Preliminary Results 28 World Class Multi-domain Capabilities - Enabling an Integrated and Networked Battlespace Air Land Sea Value for Customers Value for BAE Systems • Integrated offering Multi-Domain Capabilities • Diversification of revenue • Single point of contact • Opportunity
Slide 29: Portfolio uniquely placed to address current and future threat environment
BAE Systems 2022 Preliminary Results 29 Portfolio uniquely placed to address current and future threat environment Precision munitions AUKUS – pillar 1 and 2 Combat vehicles Global Combat Air Programme US FMS - Combat vehicles USA Munitions restocking Asia – artillery/precision weapons Positive spen
Slide 30: Summary - Our Investment Proposition
BAE Systems 2022 Preliminary Results 30 Summary - Our Investment Proposition £ Strong Investing in Foundation Leading Global Scope to Consistent programme the business for sustained technology opportunity expand Capital performance growth solutions pipeline margins Allocation Progressive and Cash ES
Slide 31: Supplementary Information
BAE Systems 2022 Preliminary Results 31 Supplementary Information © 2023 BAE Systems. All Rights Reserved. BAE SYSTEMS is a registered trademark.
Slide 32: Electronic Systems
BAE Systems 2022 Preliminary Results 32 Electronic Systems Business Description Financial Performance Electronic Systems comprises the US- and UK-based electronics activities, 2022 2021 including electronic warfare systems, navigation systems, electro-optical Sales $6,248m $6,178m sensors, military
Slide 33: Platforms & Services
BAE Systems 2022 Preliminary Results 33 Platforms & Services Business Description Financial Performance Platforms & Services, with operations in the US, UK and Sweden, manufactures 2022 2021 and upgrades combat vehicles, weapons and munitions, and delivers services Sales $4,557m $4,670m and sustainm
Slide 34: Air
BAE Systems 2022 Preliminary Results 34 Air Business Description Financial Performance Air comprises the Group’s UK-based air activities for European and 2022 2021 International Markets, US Programmes, and development of Future Combat Air Sales £7,698m £7,449m Systems, alongside its businesses in th
Slide 35: Maritime
BAE Systems 2022 Preliminary Results 35 Maritime Business Description Financial Performance Maritime comprises the Group’s UK-based maritime and land activities, as well 2022 2021 as the Group’s Australian business. Sales £4,598m £4,169m Underlying EBIT £356m £351m Margin 7.7% 8.4% Cash flow £235m £
Slide 36: Cyber & Intelligence
BAE Systems 2022 Preliminary Results 36 Cyber & Intelligence Business Description Financial Performance Cyber & Intelligence comprises the US-based Intelligence & Security business 2022 2021 and UK-headquartered Digital Intelligence business, and covers the Group’s Sales $2,724m $2,645m cyber securi
Slide 37: 2022 summary by reporting segment
BAE Systems 2022 Preliminary Results 37 2022 summary by reporting segment Underlying Return Operating Order Order Sales EBIT on Sales Cash Flow Intake Backlog £m £m % £m £m £bn Electronic Systems 5,057 838 16.6% 650 5,444 8.1 Platforms & Services 3,688 326 8.8% 525 5,719 8.1 Air 7,698 849 11.0% 1,14
Slide 38: 2023 guidance by reporting segment
BAE Systems 2022 Preliminary Results 38 2023 guidance by reporting segment - guidance below assumes a £1:US$1.24 exchange rate 2022 Actual 2023 guidance(1) Return Expected Expected Sales on Sales Sales Return on Sales Electronic Systems 5,057 16.6% Up 4% to 6% 16% to 17% Platforms & Services 3,688 8
Slide 39: Summarised balance sheet (£m)
BAE Systems 2022 Preliminary Results 39 Summarised balance sheet (£m) 31 December 31 December 2022 2021 Intangible fixed assets 12,644 11,716 Tangible fixed assets 4,723 4,010 Investments 886 630 Working capital (4,119) (3,740) Pension surplus/(deficit) 646 (2,124) Lease liabilities (1,582) (1,252)
Slide 40: 2022 reconciliation of earnings
BAE Systems 2022 Preliminary Results 40 2022 reconciliation of earnings (£m / pence EPS) Underlying Reported 2021 2021 (excl. one-off (incl. one-off 2022 tax benefit) tax benefit) 2022 2021 Underlying EBIT 2,479 2,205 2,205 2,479 2,205 Other intangible amortisation/impairment (111) (101) Adjusting i
Slide 41: 2022 underlying EPS bridge (pence)
BAE Systems 2022 Preliminary Results 41 2022 underlying EPS bridge (pence) 4.3 1.3 2.9 (0.8) 55.5 47.8 Share Tax Operational 2021 FX 2022 Buyback rate performance © 2023 BAE Systems. All Rights Reserved. BAE SYSTEMS is a registered trademark.
Slide 42: Key Franchises and Programmes - illustrative
BAE Systems 2022 Preliminary Results 42 Key Franchises and Programmes - illustrative Key programmes - Order Backlog, Pipeline/incumbent position, Opportunity F-35 build and support Typhoon Production Air Typhoon Support** KSA Support** Electronic Combat (inc F-35) Electronic Systems (ES) ES Defence
Slide 43: Long term outlook: ES, P&S and C&I
BAE Systems 2022 Preliminary Results 43 5 Year outlook Primary Sector (2022 Sales) Key growth drivers markets Major Opportunities Electronic Combat – F35, F15, classified US FMS direct and content on other prime platforms GPS/Precision strike Hybrid technologies on military platforms Commercial and
Slide 44: Long term outlook: Air and Maritime
BAE Systems 2022 Preliminary Results 44 5 Year outlook Primary Sector (2022 Sales) Key growth drivers markets Major Opportunities F-35 build and support Typhoon sales and support (increased flying hours) Typhoon support and upgrade MBDA exports and restocking MBDA F-35 Sustainment Air Tempest/Global