Slide 1: BAE Systems 2012 Preliminary Results
BAE Systems 2012 Preliminary Results 21 February 2013 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 an
Slide 2: Ian King, Chief Executive
Ian King Chief Executive 1 © BAE Systems 2013
Slide 3: Overview - 2012
Overview - 2012 Sales Trading environment 25 £bn 20 Robust performance in difficult environment 15 10 5 Business performance 0 2008 2009 2010 2011 2012 Good programme execution Large platform programme maturity Disciplined cost control Order Intake Winning new International business 25 £bn
Slide 4: US defence
US defence Current trading environment Reducing operations-driven activity Continuing Resolution invoked Continued good growth in commercial aerospace electronics Market outlook Possibility of enduring ‘CR’ environment Sequestration deferred from 2 Jan 13 to 1 Mar 13 Expect some pockets
Slide 5: US market - opportunities
US market - opportunities New business development Land & Armaments – Bradley funded through to 2014 – Paladin PIM low rate production proposal – GCV and JLTV participation continues Support Solutions ‒ Radford operations contributing from mid 2012 ‒ US Navy T-34, T-44 and T-6 turboprop aircraft
Slide 6: UK defence
UK defence Trading environment Budget pressures, but stable Good long term programme visibility Large order book in military air, naval ships and submarines Good programme execution Cost reduction continues Military air Continued European Typhoon T2 deliveries Salam aircraft in–build f
Slide 7: International Markets
International Markets • Norway Order Intake – £0.5bn CV90 contract signed 25 £bn Non UK/US 20 • India 15 – M777 opportunity progressing UK/US – Continued Hawk order intake 10 5 • Oman – £2.5bn Typhoon and Hawk 0 contracts 2008 2009 2010 2011 2012 • KSA – High level of planning and contracting activi
Slide 8: Kingdom of Saudi Arabia
Kingdom of Saudi Arabia Saudi-British Defence Co-operation Programme - SBDCP – Five year follow-on contract Orders agreed 2012 year end – Upgraded training environment (incl. Hawk, PC21) £1.6bn contract award in May 12 Tornado Sustainment Programme - TSP – Upgrade embodiment Aircraft deliveries
Slide 9: International - business development
International - business development • KSA – DEWS contracts for RSAF F-15 upgrades – Pursuing Bradley opportunities • Oman, Indonesia and Iraq – F-16 support and test equipment • RoK – Down-selected for F-16 upgrade programme • UAE and Malaysia – Typhoon opportunities • Sweden – RG32 patrol vehicle
Slide 10: Group Strategic Framework - 2013
Group Strategic Framework - 2013 A well defined strategy Our vision is to be the premier global defence, aerospace and security company Our mission is to deliver sustainable growth in shareholder value through our commitment to Total Performance • Financial performance Customer Focus Programme Execu
Slide 11: Capital Allocation and M&A
Capital Allocation and M&A Capital • Good 2012 cash flow benefitting from increased International order intake allocation – Address pension obligations – Sustain organic investment – Dividends Dividends and share repurchases – Accelerated returns totalled over £2.8bn 2010 - 2012 – M&A • Disposals M&
Slide 12: Summary
Summary Underlying earnings per share • Robust performance in a difficult environment 40 pence 35 • US environment 30 – Continued sequestration risk – Budget reductions anticipated 25 20 2008 2009 2010 2011* 2012 • UK environment – Market pressures but stable – Good programme execution Dividend per
Slide 13: Peter Lynas, Group Finance Director
Peter Lynas Group Finance Director
Slide 14: 2012 Financial Summary
2012 Financial Summary Yr-on-Yr Sales (1) £17,834m - 7% Underlying EBITA (1,2) £1,895m - 6% Underlying Finance Costs (1,3) £(204)m Underlying Earnings per Share (1,4) 38.9p - 2% Operating Business Cash Flow £2,692m Net Cash £387m Order Backlog £42.4bn + 8% Dividend per Share 19.5p + 4% (1) Continuin
Slide 15: Balance Sheet
Balance Sheet (£m) 31 Dec 12 31 Dec 11 Movements: Intangible fixed assets 10,928 11,465 FX, amortisation and disposals Tangible fixed assets 2,407 2,626 FX, pension funding Investments 270 788 £424m MBDA one-off dividend Working capital (6,557) (5,677) advances and provision utilisation Pension defi
Slide 16: Pension Deficit (IAS 19)
Pension Deficit (IAS 19) (£bn) 31 Dec 12 30 Jun 12 31 Dec 11 Assets * 19.6 18.6 18.1 Liabilities (25.3) (24.5) (23.3) Pension Deficit (5.7) (5.9) (5.2) Group share of deficit, pre-tax (4.6) (4.7) (4.2) UK - real discount rate 1.6% 1.7% 1.9% bond yields 4.5% 4.4% 4.8% inflation rate 2.9% 2.7% 2.9% US
Slide 17: Net Cash / (Debt)
Net Cash / (Debt) (£m) Opening Net Debt (1,439) Operating business cash flow 2,692 Electronic Systems 256 Cyber & Intelligence 113 Interest & Tax (262) Platforms & Services (US) 314 Equity dividends paid (620) Platforms & Services (UK) 1,719 Platforms & Services (Int'l) 506 Acquisitions & disposals
Slide 18: Net Cash / (Debt)
Net Cash / (Debt) (£bn) Gross Gross Debt Cash Net 31 December 2011 (3.2) 1.8 (1.4) Cash Flow - 1.8 1.8 Commercial Paper redemption 0.5 (0.5) - Term Debt issuance (0.4) 0.4 - Foreign exchange translation 0.1 (0.1) - 31 December 2012 (3.0) 3.4 0.4 Pre-financing of 2014 debt (0.4) 17 © BAE Systems 2013
Slide 19: Capital Allocation
Capital Allocation Conservative balance sheet management Pension funding obligations Organic investment Maintain Manage investment working Sustainable dividends grade capital rating volatility Return capital to shareholders M&A activity Three year share repurchase programme up to £1bn* * full implem
Slide 20: Electronic Systems
Electronic Systems 2012 2011 2012 Performance: Sales $3,974m $4,243m • Sales impacted by: Completion of Thermal Weapon Underlying EBITA $565m $619m Sights deliveries Margin 14.2% 14.6% Commercial aerospace growth Cash flow $406m $430m Continuing Resolution Order backlog $5.8bn $5.6bn • Strong
Slide 21: Cyber & Intelligence
Cyber & Intelligence 2012 2011 2012 Performance: Sales $2,222m $2,244m • US sales / backlog constrained on award decisions Underlying EBITA $196m $218m • Detica sales constrained on Middle Margin 8.8% 9.7% East contract Cash flow $179m $197m • Margins reflect investment in Detica Order backlog $1.6b
Slide 22: Platforms & Services (US)
Platforms & Services (US) 2012 2011 Sales $7,193m $8,511m Underlying EBITA $625m $767m Margin 8.7% 9.0% Cash flow $498m $658m Order backlog $13.7bn $13.6bn 2012 Sales Support Platforms (25%) Solutions Land & Military & Technical Armaments Services (75%) 21 © BAE Systems 2013
Slide 23: Platforms & Services (US) – Land & Armaments
Platforms & Services (US) – Land & Armaments 2012 2011 2012 Performance: Sales $4,160m $5,403m • Like-for-like sales down 20% Underlying EBITA $359m $534m Volume reductions on FMTV, Bradley, Caiman & MRAP Margin 8.6% 9.9% • EBITA includes Newcastle closure & Cash flow $260m $430m legal costs Order
Slide 24: Platforms & Services (US) – Support Solutions
Platforms & Services (US) – Support Solutions 2012 2011 2012 Performance: Sales $3,033m $3,108m • Sales down 2% Increase in new business Underlying EBITA $266m $233m (Radford munitions plant) Margin 8.8% 7.5% Lower operational tempo driven Cash flow $238m $228m volumes Order backlog $5.4bn $5.2b
Slide 25: Platforms & Services (UK)
Platforms & Services (UK) 2012 2011 2012 Performance: Sales £5,646m £6,258m • Sales down 10% Salam Typhoon timing Underlying EBITA £689m £658m South Africa deliveries completed Margin 12.2% 10.5% Salam price escalation delays Cash flow £1,719m £69m • Margin benefit from strong Order backlog £2
Slide 26: Platforms & Services (International)
Platforms & Services (International) 2012 2011 2012 Performance: Sales £4,071m £3,794m • Like-for-like sales up 9% Underlying EBITA £417m £449m Saudi Tornado upgrade Typhoon support Margin 10.2% 11.8% Salam price escalation delays Cash flow £506m £80m • Cash performance reflects Order backlog
Slide 27: 2013 Guidance - Trading
2013 Guidance - Trading 2012 Actual 2013 Guidance * Sales Margin Sales Margin Electronic Systems 2,507 14.2% stable 12% - 14% Cyber & Intelligence 1,402 8.8% stable to c.(5)% 8% - 9% Platforms & Services (US) 4,539 8.7% c.(3)% to c.(7)% 7.5% - 8.5% Platforms & Services (UK) 5,646 12.2% c.25% 10% - 1
Slide 28: 2013 Guidance – Cash Utilisation
2013 Guidance – Cash Utilisation £bn Operating items: • Capital expenditure / depreciation nil • Working capital - 2012 accelerated receipts (0.2) - provision utilisation (0.4) - advances movement (net) (1.0) – (1.75) • Pension deficit funding (0.4) Non-operating items: • Interest & tax (0.4) • Divi
Slide 29: Summary
Summary 2012 Sales by activity • Robust performance in a difficult environment Military & Platforms Technical 36% Services • US environment 42% – Budget reductions anticipated 50% Services Electronic • UK environment Systems 14% Cyber & – Good programme execution Intelligence 8% • Strong Internation
Slide 30: Handouts
BAE SYSTEMS Handouts
Slide 31: 2012 Financial Summary
2012 Financial Summary (£m) Underlying Cash Sales EBITA Margin flow Electronic Systems 2,507 356 14.2% 256 Cyber & Intelligence 1,402 124 8.8% 113 Platforms & Services (US) 4,539 394 8.7% 314 Platforms & Services (UK) 5,646 689 12.2% 1,719 Platforms & Services (International) 4,071 417 10.2% 506 HQ
Slide 32: Reconciliation of Earnings
Reconciliation of Earnings (£m) 2012 2011 2012 2011 Underlying Underlying Reported Reported Underlying EBITA 1,895 2,025 1,895 2,025 Gain / (loss) on disposal of businesses 103 (29) Regulatory penalties - (49) EBITA 1,895 2,025 1,998 1,947 Amortisation / Impairment (312) (348) Underlying finance cos
Slide 33: Like-for-Like Sales & Underlying EBITA - Group
Like-for-Like Sales & Underlying EBITA - Group (£m) Sales Underlying EBITA 2012 2011 Yr-on-Yr 2012 2011 Yr-on-Yr Continuing Businesses 17,834 19,154 (7)% 1,895 2,025 (6)% Foreign Exchange: USD 90 8 Other (83) (10) Adjusted for Foreign Exchange 17,834 19,161 (7)% 1,895 2,023 (6)% Transactions: Acquis
Slide 34: Like-for-Like Sales & Underlying EBITA by sector
Like-for-Like Sales & Underlying EBITA by sector ($m) Sales Underlying EBITA 2012 2011 Growth 2012 2011 Growth Electronic Systems - reported 3,974 4,243 (6)% 565 619 (9)% Foreign Exchange (5) (1) Acquisitions (67) (43) (2) (3) Electronic Systems - adjusted 3,907 4,195 (7)% 563 615 (8)% Cyber & Intel
Slide 35: Like-for-Like Sales & Underlying EBITA by sector
Like-for-Like Sales & Underlying EBITA by sector (£m) Sales Underlying EBITA 2012 2011 Growth 2012 2011 Growth Platforms & Services (UK) - reported 5,646 6,258 (10)% 689 658 5% Foreign Exchange - - Acquisitions - - - - Platforms & Services (UK) - adjusted 5,646 6,258 (10)% 689 658 5% Platforms & Ser
Slide 36: Working Capital Movements – Reconciliation to Cash Flow
Working Capital Movements – Reconciliation to Cash Flow (£m) 31 December Cash (2) 2012 2011 Mvmt F/x M&A Other Flow Inventories 655 716 61 23 33 (1) 6 Receivables - current 2,873 3,369 496 Receivables - non-current 254 314 60 Total receivables 3,127 3,683 556 92 28 (11) 447 Payables - current (8,067