Slide 1: 2022 Half Year Results
BAE Systems 2022 Half Year Results 1 2022 Half Year Results 28 July 2022 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 2022 Half Year Results 2 Agenda • 2022 Half Year Review Charles Woodburn - CEO • 2022 Half Year Financials Brad Greve - CFO • Business Outlook Charles Woodburn - CEO • Q&A © 2022 BAE Systems. All Rights Reserved. BAE SYSTEMS is a registered trademark.
Slide 3: 2022 – Half year review
BAE Systems 2022 Half Year Results 3 2022 – Half year review Charles Woodburn - CEO © 2022 BAE Systems. All Rights Reserved. BAE SYSTEMS is a registered trademark.
Slide 4: 2022 – Half year in review
BAE Systems 2022 Half Year Results 4 2022 – Half year in review Stepped up to meet mission critical requirements Record defence order backlog Increased shareholder Operational performance Positioned for sustained returns momentum sustained growth dividend and buyback Orders Sales Underlying EBIT Fre
Slide 5: Another 6 months of strong business performance
BAE Systems 2022 Half Year Results 5 “What we look to achieve in the 3 years 2021-23” Another 6 months of strong business performance Strong consistent programme performance Top line growth Organisational efficiency and simplification Margin expansion Portfolio shaping for value creation Stron
Slide 6: 2022 – Half year highlights
BAE Systems 2022 Half Year Results 6 2022 – Half year highlights Strong consistent programme performance Pension Air • UK pension triennial review completed – no company deficit • F-35 production work at full rate contributions • First Qatari Typhoons set for delivery in second half • IAS 19 Account
Slide 7: Investment in the business
BAE Systems 2022 Half Year Results 7 Investment in the business Investment in our people Investment in facilities Investment in technology © 2022 BAE Systems. All Rights Reserved. BAE SYSTEMS is a registered trademark.
Slide 8: ESG Agenda evolving and progressing
BAE Systems 2022 Half Year 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 & nature
Slide 9: Brad Greve CFO
BAE Systems 2022 Half Year Results 9 Brad Greve CFO © 2022 BAE Systems. All Rights Reserved. BAE SYSTEMS is a registered trademark.
Slide 10: 2022 half year financial highlights
BAE Systems 2022 Half Year Results 10 2022 half year financial highlights Increased Sales Earnings Good Cash Capital Demand Growth Growth Generation Allocation Orders Sales Underlying EBIT Free Cash Flow Dividend £18bn £10.6bn £1,112m £123m up 5% Up to £1.5bn, 3 year Order Backlog Underlying EPS sha
Slide 11: 2022 half year summary financials
BAE Systems 2022 Half Year Results 11 2022 half year summary financials Half Year Half Year Constant Average $ rate: June 2022 $1.30, June 2021 $1.39 2022 2021 Currency Reported Order Intake £17,985m £10,582m Sales £10,581m £10,035m +3% +5% Underlying EBIT (1) £1,112m £1,028m +4% +8% Margin 10.5% 10
Slide 12: Pensions
BAE Systems 2022 Half Year Results 12 Pensions Funding position IAS 19 position £0.9bn surplus(1) at 2022 half year compared to £2.1bn deficit at 2021 year end Triennial review completed Driven by increase in UK discount rate Fully funded on a Technical Provisions basis IAS 19 surplus/(defic
Slide 13: Order intake
BAE Systems 2022 Half Year Results 13 Order intake £18.0bn – ahead of expectations ES P&S Air Maritime C&I $3.0bn $2.0bn £8.9bn £4.1bn $1.6bn Electronic combat $0.8bn Combat vehicles $1.0bn Saudi support £4.9bn Dreadnought £2.5bn I&S $1.0bn C4ISR $0.6bn Ship repair $0.4bn MBDA £1.8bn UK ship build £
Slide 14: Sales
BAE Systems 2022 Half Year Results 14 Sales Group By reporting segment* £3.5bn £10.6bn £2.3bn £2.2bn £1.6bn +3% £1.1bn (constant currency) ES P&S Air Maritime C&I Variance: Constant Currency +3% - (3)% +4% +6% +6% Variance: Reported +5% +6% +3% +3% +6% +11% * excludes HQ & eliminations © 2022 BAE Sy
Slide 15: Underlying EBIT/margin
BAE Systems 2022 Half Year Results 15 Underlying EBIT/margin Group By reporting segment Margin 10.5% 15.8% 8.9% 10.4% 8.4% 11.7% £362m £1,112m £359m £182m £146m +4% £123m (constant currency) £(60)m ES P&S Air Maritime C&I HQ Variance: Constant Currency +4% 1% +28% (1)% (1)% +22% (7)% Variance: Repor
Slide 16: Operating business cash flow
BAE Systems 2022 Half Year Results 16 Operating business cash flow Group By reporting segment £380m £410m £93m £69m £(284)m (variance to Half Year 2021*) £(22)m £(59)m £(51)m ES P&S Air Maritime C&I HQ Variance to half year 2021 £(284)m £(161)m £(50)m +£221m £(5)m £(37)m £(252)m * Half year 2021 inc
Slide 17: Net debt (£m)
BAE Systems 2022 Half Year Results 17 Net debt(1) (£m) Free cash flow £123m (2,160) 410 (2,883) (3,135) (287) (161) (610) (75) (252) Net debt Operating Interest Shareholder Minority Net debt FX-related Net debt & tax M&A 1 January cash flow returns(2) dividends pre-FX & non-cash 30 June (1) Net debt
Slide 18: 2022 Group guidance
BAE Systems 2022 Half Year Results 18 2022 Group guidance(1) Guidance is provided based on $1.38:£1 Sales Underlying EBIT Underlying EPS +2% to +4% +4% to +6% +4% to +6% (2021 £21,310m) (2021 £2,205m) (2021 47.8p(2)) 2022 Free cash flow (FCF) 3 year FCF (2022 – 2024) Other Underlying >£1bn >£4bn Sen
Slide 19: Margin & long term cash expansion – delivering on the 3 Ps
BAE Systems 2022 Half Year Results 19 Margin & long term cash expansion – delivering on the 3 Ps Programme performance Margin Business mix expansion Performance – enhanced Efficiency improvements / cost savings Portfolio – building for value creation Margin progression Cash Working capital managemen
Slide 20: Capital Allocation
BAE Systems 2022 Half Year Results 20 Capital Allocation Investment in our people Capex to drive growth Investment in the business R&D increasing Free cash flow – in excess of £4bn 2022-2024 Dividend M&A Buyback Pipeline of technology Up to £1.5bn, three Covered c.2x by focussed bolt-on year program
Slide 21: Business Outlook
BAE Systems 2022 Half Year Results 21 Business Outlook © 2022 BAE Systems. All Rights Reserved. BAE SYSTEMS is a registered trademark.
Slide 22: The Group today and competitive advantage
BAE Systems 2022 Half Year Results 22 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 23: Inflation and Supply Chain
BAE Systems 2022 Half Year Results 23 Inflation and Supply Chain Not immune to inflation or supply chain pressures - monitoring and managing the major risks Inflation Mitigations Supply Chain Environment • Long term supplier agreements • Critical skill labour constraints – will remain in near term •
Slide 24: Geographically Diverse Portfolio
BAE Systems 2022 Half Year Results 24 Geographically Diverse Portfolio Defence Budget outlook • US budget expected to grow • Modernisation budget growing at a higher rate Growing Meeting customer requirements • US portfolio well aligned to enduring customer priority areas • Products and capabilities
Slide 25: European Defence Market
BAE Systems 2022 Half Year Results 25 European Defence Market European Defence Budget outlook Meeting NATO spending commitments + Sweden & Finland adds $75bn+ pa • Intention to raise defence spending to at least 2% GDP by 2024 Germany growing • Commitment to 100bn in 2022 budget Well placed to benef
Slide 26: Multi year programme visibility
BAE Systems 2022 Half Year Results 26 Multi year programme visibility • £53bn order backlog – record defence levels - incumbent positions on key long term programmes • H1 orders ahead of expectations – H2 expected to be strong also – further underpinning positive outlook Major Programme/Franchise 20
Slide 27: Opportunity Pipeline
BAE Systems 2022 Half Year Results 27 Opportunity Pipeline • All sectors positioned for growth from backlog and franchise positions • Opportunities to enhance that position in the near and medium term – expanded list from February ES Air Maritime C&I • US FMS direct and content on • Typhoon sales •
Slide 28: Platforms & Services – Opportunity pipeline
BAE Systems 2022 Half Year Results 28 Platforms & Services – Opportunity pipeline • P&S well positioned for growth • Expanded opportunity list from February especially from combat vehicles and mobile artillery Opportunity Comment OMFV US Optionally Manned Fighting Vehicle Work on-going on initial co
Slide 29: 2022 – Half year key messages
BAE Systems 2022 Half Year Results 29 2022 – Half year key messages 1) Strong operational performance in a challenging environment drove good sales and earnings performance 2) Underpins annual guidance – full year results set to benefit further from fx tailwind 3) Strong H1 order intake – record def
Slide 30: Supplementary Information
BAE Systems 2022 Half Year Results 30 Supplementary Information © 2022 BAE Systems. All Rights Reserved. BAE SYSTEMS is a registered trademark.
Slide 31: Electronic Systems
BAE Systems 2022 Half Year Results 31 Electronic Systems Half year 2022 2021 Sales $2,954m $2,974m Underlying EBIT $467m $465m Margin 15.8% 15.6% Cash flow $121m $353m Order intake $3,042m $3,102m Order backlog (1) $9.3bn $9.7bn • Sales volumes impacted by supply chain constraints & tight labour mar
Slide 32: Platforms & Services
BAE Systems 2022 Half Year Results 32 Platforms & Services Half year 2022 2021 Sales $2,125m $2,214m Underlying EBIT $189m $152m Margin 8.9% 6.8% Cash flow $(76)m $(12)m Order intake $1,964m $2,562m Order backlog (1) $7.2bn $7.6bn • Sales down 3% on a constant currency basis − Lower ship repair volu
Slide 33: Air
BAE Systems 2022 Half Year Results 33 Air Half year 2022 2021 Sales £3,497m £3,394m Underlying EBIT £362m £360m Margin 10.4% 10.6% Cash flow £380m £159m Order intake £8,883m £2,270m Order backlog (1) £23.3bn £17.8bn • Sales up 4% on a constant currency basis − F-35 running at full rate production −
Slide 34: Maritime
BAE Systems 2022 Half Year Results 34 Maritime Half year 2022 2021 Sales £2,155m £2,028m Underlying EBIT £182m £184m Margin 8.4% 9.1% Cash flow £(22)m £(17)m Order intake £4,108m £3,082m Order backlog (1) £14.2bn £12.1bn • Sales growth at 6% − Increased volumes on Dreadnought & Type 26 programmes •
Slide 35: Cyber & Intelligence
BAE Systems 2022 Half Year Results 35 Cyber & Intelligence Half year 2022 2021 Sales $1,362m $1,311m Underlying EBIT $160m $135m Margin 11.7% 10.3% Cash flow $89m $147m Order intake $1,628m $1,612m Order backlog (1) $2.7bn $2.6bn • Sales up 6% on a constant currency basis(2) − I&S growth of 6% 2022
Slide 36: 2022 half year summary by reporting segment
BAE Systems 2022 Half Year Results 36 2022 half year summary by reporting segment Underlying Operating Order Order Sales EBIT Margin Cash Flow Intake Backlog £m £m % £m £m £bn Electronic Systems 2,276 359 15.8% 93 2,344 7.7 Platforms & Services 1,638 146 8.9% (59) 1,513 5.9 Air 3,497 362 10.4% 380 8
Slide 37: 2022 half year summarised balance sheet (£m)
BAE Systems 2022 Half Year Results 37 2022 half year summarised balance sheet (£m) 30 June 31 December 2022 2021 Intangible fixed assets 12,616 11,716 Tangible fixed assets(1) 3,725 3,204 Investments 730 630 Working capital(1) (2,088) (2,934) Pension surplus/(deficit) 940 (2,124) Lease liabilities (
Slide 38: Half year reconciliation of earnings
BAE Systems 2022 Half Year Results 38 Half year reconciliation of earnings (£m / pence EPS) Half Year - Underlying Half Year - Reported 2021 2021 (excl. one-off (incl. one-off 2022 tax benefit) tax benefit) 2022 2021 Underlying EBIT 1,112 1,028 1,028 1,112 1,028 Other intangible amortisation/impairm
Slide 39: 2022 half year underlying EPS bridge (pence)
BAE Systems 2022 Half Year Results 39 2022 half year underlying EPS bridge (pence) 1.6 0.4 0.8 (0.2) 24.5 21.9 30 June Share Tax Operational 30 June FX 2021 Buyback rate performance 2022 © 2022 BAE Systems. All Rights Reserved. BAE SYSTEMS is a registered trademark.
Slide 40: 2022 Guidance: FX
BAE Systems 2022 Half Year Results 40 2022 Guidance: FX The table below provides an illustrative impact on guidance of a 5 cent & 10 cent decrease in the USD exchange rate 2022 Illustrative retranslation of guidance 2021 Guidance(2) for USD rate: Actual @ $1.38 @ $1.33 @ $1.28 Sales 21,310 +2% to +4
Slide 41: 2021 Full year re-presentation
BAE Systems 2022 Half Year Results 41 2021 Full year re-presentation The table below provides a re-presentation of the Group’s segmental sales and underlying EBIT to reflect the transition of BAE Systems Australia from the Air segment to the Maritime segment, as well as the creation of the new Digit