Slide 1: BAE Systems 2013 Half Year Results
BAE Systems 2013 Half Year Results 1 August 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 and the
Slide 2: Ian King
BAE SYSTEMS INSPIRED WORK lan King 2 © BAE Systems 2013
Slide 3: Introduction
Introduction • Salam – Good progress with continued price escalation discussions – Supports expectations for 2013 performance – Significant trading bias to second half anticipated • Backlog – Further good international order intake – Group order backlog sustained 3 © BAE Systems 2013
Slide 4: US defence
US defence 2013 trading environment Good programme execution Continued uncertainty Continuing Resolution – In operation at start of 2013, O&M flexibility introduced – Possibility of further CR from October Group Sales Ship repair WARN announcements mitigated by Destination 2013 First Half US
Slide 5: UK defence
UK defence Trading environment Good programme execution Budget pressures, but stable Good long term programme visibility Large order book Cost reduction continues Maritime Carrier progressing well Post Carrier shipyard work load under review Excellent long term submarines visibility
Slide 6: International - business development
International - business development Good programme execution KSA – Typhoon deliveries recommenced – £0.6bn Guided weapons contract signed – Multi-year Typhoon support agreement – Price escalation discussions continue Oman – £2.5bn Typhoon and Hawk contract Typhoon opportunities – KSA B2 – M
Slide 7: Cyber & Intelligence
Cyber & Intelligence Commercial cyber Continued organic investment Good growth in commercial cyber Strong position in Financial services sector Cyber security for CNI and corporate networks Intelligence & Security Resilient mission-specific services Well positioned for new business in hi
Slide 8: Peter Lynas
Peter Lynas 8 © BAE Systems 2013
Slide 9: 2013 Half Year Financial Summary
2013 Half Year Financial Summary Yr-on-Yr Sales (1) £8,448m + 1% Underlying EBITA (1,2) £865m - 6% Underlying Finance Costs (1,3) £(95)m Underlying Earnings per Share (1,4) 17.8p - 4% Operating Business Cash Flow £(815)m Net Debt £(1,192)m Order Backlog (1,5) £43.1bn + 2% Dividend per Share 8.0p + 3
Slide 10: Balance Sheet
Balance Sheet (£m) 30 Jun 13 31 Dec 12 Movement drivers: Intangible fixed assets 11,218 10,928 Exchange translation & amortisation Tangible fixed assets 2,414 2,407 Investments 299 270 Advances & provision utilisation, Working capital (5,037) (6,557) T&T settlement Pension deficit (4,287) (4,560) As
Slide 11: Pension Deficit (IAS 19)
Pension Deficit (IAS 19) (£bn) 30 Jun 13 31 Dec 12 30 Jun 12 Assets 20.5 19.6 18.6 * Liabilities (26.0) (25.3) (24.5) Pension Deficit (5.5) (5.7) (5.9) Group share of deficit, pre-tax (4.3) (4.6) (4.7) UK - real discount rate 1.3% 1.6% 1.7% bond yields 4.6% 4.5% 4.4% inflation rate 3.3% 2.9% 2.7% US
Slide 12: Net Cash / (Debt)
Net Cash / (Debt) (£m) Opening Net Cash 387 Operating business cash flow (815) Electronic Systems 73 Cyber & Intelligence 56 Interest & Tax (175) Platforms & Services (US) (89) Equity dividends paid (380) Platforms & Services (UK) (415) Platforms & Services (Int'l) (221) Share buyback (90) HQ (223)
Slide 13: Net Cash / (Debt)
Net Cash / (Debt) (£bn) Gross Gross Debt Cash Net 31 December 2012 (3.0) 3.4 0.4 Cash Flow - (1.5) (1.5) Foreign exchange translation (0.1) - (0.1) 30 June 2013 (3.1) 1.9 (1.2) Pre-financing of 2014 debt (0.4) 13 © BAE Systems 2013
Slide 14: Electronic Systems
Electronic Systems First Half First Half 2013 First Half Performance: 2013 2012 • Sales down 1%: Sales $1,843m $1,862m US defence budgets Underlying EBITA $241m $259m Commercial business growth Margin 13.1% 13.9% • Margin performance per guidance Cash flow $113m $166m • Cash conversion of 47% Or
Slide 15: Cyber & Intelligence
Cyber & Intelligence First Half First Half 2013 First Half Performance: 2013 2012 • US sales down 14% on lower IT Sales $1,014m $1,126m Services and C-IED Underlying EBITA $82m $85m • Detica sales growth at 9% Margin 8.1% 7.6% • Margins reflect investment in Detica, per guidance Cash flow $86m $33m
Slide 16: Platforms & Services (US)
Platforms & Services (US) First Half First Half 2013 2012 Sales $3,217m $3,554m Underlying EBITA $281m $298m Margin 8.7% 8.4% Cash flow $(137)m - Order backlog $11.8bn $13.7bn * 2013 Sales Support Platforms (26%) Solutions Land & Military & Technical Armaments Services (74%) * as at 31 December 2012
Slide 17: Platforms & Services (US) – Land & Armaments
Platforms & Services (US) – Land & Armaments First Half First Half 2013 First Half Performance: 2013 2012 • Like-for-like sales down 9% Sales $1,660m $2,048m Completion of MRAP vehicle Underlying EBITA $157m $175m upgrades Margin 9.5% 8.5% • Margin benefits from ongoing cost reduction actions Cash
Slide 18: Platforms & Services (US) – Support Solutions
Platforms & Services (US) – Support Solutions First Half First Half 2013 First Half Performance: 2013 2012 • Sales up 3% Sales $1,557m $1,506m Radford munitions facility Underlying EBITA $124m $123m Navy training aircraft maintenance Margin 8.0% 8.2% • Margin performance per guidance Cash flow $
Slide 19: Platforms & Services (UK)
Platforms & Services (UK) First Half First Half 2013 First Half Performance: 2013 2012 • Like-for-like sales up 18% Sales £3,192m £2,651m Four Salam aircraft delivered Underlying EBITA £384m £420m Hawk India deliveries Margin 12.0% 15.8% • Margin performance per guidance Cash flow £(415)m £243m
Slide 20: Platforms & Services (International)
Platforms & Services (International) First Half First Half 2013 First Half Performance: 2013 2012 • Sales up 5% Sales £1,654m £1,573m Typhoon support Underlying EBITA £165m £161m • Margin performance per guidance Margin 10.0% 10.2% • Cash performance reflects utilisation of advances Cash flow £(22
Slide 21: 2013 Guidance - Trading
2013 Guidance - Trading 2012 Actual ** 2013 Guidance * Sales Margin Sales Margin Electronic Systems 2,507 14.2% stable to c.(5)% 12% - 14% Cyber & Intelligence 1,402 8.8% c.(5)% 8% - 9% Platforms & Services (US) 4,539 8.7% c.(5)% to c.(10)% 7.5% - 8.5% Platforms & Services (UK) 5,646 12.2% c.+25% 10
Slide 22: 2013 Guidance - Trading
2013 Guidance - Trading In aggregate: • including the benefit from share repurchase programme, downside arising from reductions to US defence budgets • and, assuming a satisfactory conclusion to Salam pricing negotiations this year Double-digit growth in underlying earnings per share is anticipa
Slide 23: 2013 Guidance – Cash Utilisation
2013 Guidance – Cash Utilisation 2013 Half Year 2013 Guidance £bn £bn Operating items: • Capital expenditure / depreciation nil nil • Working capital - 2012 accelerated receipts (0.1) (0.2) - provision utilisation (0.2) (0.4) - advances movement (net) (0.7) (1.0) – (1.75) - other working capital mov
Slide 24: Summary - Investor proposition
Summary - Investor proposition Business environment Balanced portfolio • US market • 50/50 Services and Products – Sequestration pressures – Strong platform positions – Reduced spend anticipated – High customer relevance support provision – Commercial growth opportunities • UK market – Stable – Good
Slide 25: Handouts
Handouts 25 © BAE Systems 2013
Slide 26: 2013 First Half Financial Summary
2013 First Half Financial Summary (£m) Underlying Cash Sales EBITA Margin flow Electronic Systems 1,194 156 13.1% 73 Cyber & Intelligence 657 53 8.1% 56 Platforms & Services (US) 2,085 182 8.7% (89) Platforms & Services (UK) 3,192 384 12.0% (415) Platforms & Services (International) 1,654 165 10.0%
Slide 27: Reconciliation of Earnings
Reconciliation of Earnings (£m) First Half First Half First Half First Half 2013 2012 2013 2012 Underlying Underlying * Reported Reported * Underlying EBITA 865 922 865 922 Gain on disposal of businesses 4 18 EBITA 865 922 869 940 Amortisation / Impairment (100) (164) Underlying finance costs (95) (
Slide 28: Like-for-Like Sales & Underlying EBITA - Group
Like-for-Like Sales & Underlying EBITA - Group (£m) Sales Underlying EBITA First Half First Half 2013 2012 Yr-on-Yr 2013 2012 Yr-on-Yr Continuing Businesses 8,448 8,334 1% 865 922 (6)% Foreign Exchange: USD 73 8 Other 5 (4) Adjusted for Foreign Exchange 8,448 8,412 0% 865 926 (7)% Transactions: Acqu
Slide 29: Like-for-Like Sales & Underlying EBITA by sector
Like-for-Like Sales & Underlying EBITA by sector ($m) Sales Underlying EBITA First Half First Half 2013 2012 Growth 2013 2012 Growth Electronic Systems - reported 1,843 1,862 (1)% 241 259 (7)% Foreign Exchange (3) - Electronic Systems - adjusted 1,843 1,859 (1)% 241 259 (7)% Cyber & Intelligence - r
Slide 30: Like-for-Like Sales & Underlying EBITA by sector
Like-for-Like Sales & Underlying EBITA by sector (£m) Sales Underlying EBITA First Half First Half 2013 2012 Growth 2013 2012 Growth Platforms & Services (UK) - reported 3,192 2,651 20% 384 420 (9)% Combat Vehicles UK transfer 50 (5) Platforms & Services (UK) - adjusted 3,192 2,701 18% 384 415 (7)%
Slide 31: Working Capital Movements – Reconciliation to Cash Flow
Working Capital Movements – Reconciliation to Cash Flow (£m) Cash 30/6/13 31/12/12 Mvmt F/x M&A Other Flow Inventories 738 655 (83) (27) 2 1 (59) Receivables - current 3,392 2,873 Receivables - non-current 299 254 Total receivables 3,691 3,127 (564) (107) 1 (15) (443) Payables - current (7,334) (8,0