Bae Systems Plc · LSE:BA.
Bae Systems — FY2005 Earnings Presentation
38 slides from Bae Systems's earnings presentation, Mar 6, 2006
Slide 1: BAE SYSTEMS Presentation
BAE SYSTEMS Presentation 6 March 2006 1
Slide 2: 2005 – A Landmark Year
2005 – A Landmark Year • Financial plan delivered 2005 Geographic • US position strengthened sales by origin UK • European portfolio restructured 42% • UK business outlook enhanced US 26% • New export business opportunities RoW 32% 2
Slide 3: Financial Performance
Financial Performance 2005 Sales 21% 23% • Good project execution 12% 8%* 18% 18% • Improved terms of trade 2005 EBITA 15% 27% • Acquisitions successfully integrated 9% 3% * • All sectors delivering 11% 35% Electronics, Intelligence & Support Land & Armaments Programmes Customer Solutions & Support
Slide 4: Delivering the US strategy
Delivering the US strategy • Successful acquisition record – 13 US businesses integrated since 2000 US Sales growth 9000 8000 UDI • Good organic growth $ 7000 6000 – 7% in 2005 5000 4000 3000 • United Defense 2000 1000 0 – Delivering global land strategy 2000 2001 2002 2003 2004 2005 BAE Systems is
Slide 5: US market environment
US market environment US Defence budget outlook • Quadrennial Defense Review Budget Supplementals – Defence investment priorities reaffirmed 600 – No big surprises 500 400 300 200 • 2007 budget allocation 100 0 – Good growth maintained 2006 2007 2008 2009 2010 2011 – Land sector benefit from supplem
Slide 6: European business Portfolio
European business Portfolio • EuroSystems – UK sensor systems and EW activities sold – AMS restructured – Integrated System Technologies formed • Saab – Gripen marketing re-aligned – Shareholding reduced • Atlas – Sale agreed • MBDA – Performing well • Airbus – Performing well – Strong order intake
Slide 7: UK MoD business
UK MoD business • UK Programmes – Typhoon - performing well – Nimrod - production pricing underway – Hawk - UK Mk 128 production pricing underway – JSF - first airframe assemblies delivered – Type 45 - HMS Daring launched on schedule – LSD(A) - Mounts Bay handover in December – Astute - bonus target
Slide 8: UK MoD business
UK MoD business • UK Support – DLO partnered support successes continue – Tornado ATTAC way forward agreed – Harrier support contracts awarded – Progressing AFV land support agreement 8
Slide 9: UK Defence Industrial Strategy
UK Defence Industrial Strategy • Defence Industrial Strategy published in December following extensive consultation with industry • Recognises need for partnership between industry and MoD • Identifies key UK technologies required to deliver capability • Recognises need for UK control of key offshor
Slide 10: George Rose
George Rose 10
Slide 11: Financial Highlights
Financial Highlights • Sales - Continuing £15,411m • EBITA* - Continuing Underlying £1,226m • - Discontinued £(24)m • Underlying earnings per share ** 22.5p • Net cash flow from operating activities £2,099m • Net debt £1,277m • Order book £59.8bn • Dividend per share 10.3p * Earnings before amortisa
Slide 12: Income Statement - Continuing Operations
Income Statement - Continuing Operations 2005 2004 2005 2004 Underlying Underlying Reported Reported Sales 15,411 13,222 15,411 13,222 EBITA * 1,182 1,016 1,182 1,016 Profit in acquired inventories 44 6 Underlying EBITA 1,226 1,022 Finance Costs (215) (176) (215) (176) add back : Pension Interest 1
Slide 13: Balance Sheet
Balance Sheet 31/12/05 01/01/05 31/12/04 Intangible fixed assets 8,217 6,115 6,115 Tangible fixed assets 1,922 1,901 1,901 Investments 1,730 2,305 1,535 Working capital (4,829) (3,907) (3,884) Retirement benefit obligation (4,101) (3,210) (3,210) Tax assets & liabilities 1,012 882 876 Financial asse
Slide 14: Pension funding
Pension funding Company • One-off cash contribution • Letter of Credit 60% • Increased annual contributions ££2.4bn 2.4bn Main Main Scheme Scheme Funding Funding Deficit Deficit Employees • Reduced early retirement benefit 40% • Average final salary over 3 years • Longevity increases for future serv
Slide 15: Operating Business Cash Flow
Operating Business Cash Flow 2005 Cash flow from operating activities 2,099 Capital expenditure (net) & financial investment (250) Dividends from equity accounted investments 88 Operating business cash flow 1,937 Electronics, Intelligence & Support 323 Land & Armaments 168 Programmes 285 Customer So
Slide 16: Movement in Net Debt
Movement in Net Debt 2005 Net Debt 31.12.04 (668) IAS 32 & 39 opening balance adjustments (283) Opening Net Debt (951) Operating business cash flow 1,937 Interest, preference dividend and taxation (179) Equity dividends paid (315) Acquisitions and disposals (including acquired cash/loans) (1,836) Pr
Slide 17: Sales by Business Group
Sales by Business Group Commercial Electronics, Aerospace Intelligence & 21% Support 23% Integrated Land & Systems & Armaments Partnerships 8%* 12% Customer Programmes Solutions & 18% Support 18% * Includes United Defense from 24 June 05 17
Slide 18: Electronics, Intelligence & Support
Electronics, Intelligence & Support 2005 2004 Sales £3,697m £3,063m EBITA £324m £256m Margin 8.8.% 8.4% Order book £3.5bn £3.1bn Cash flow £323m £190m 18
Slide 19: Electronics, Intelligence & Support
Electronics, Intelligence & Support 2005 2004 Sales $6,726m $5,613m EBITA $590m $469m Margin 8.8% 8.4% Order book $6.0bn $6.0bn Cash flow $588m $348m 19
Slide 20: Land & Armaments
Land & Armaments 2005 2004 Sales £1,270m £482m EBITA £42m £(8)m Underlying EBITA £86m £(2)m Underlying Margin 6.8% (0.4)% Order book £4.4bn £2.2bn Cash flow £168m £60m 20
Slide 21: Land & Armaments
Land & Armaments 2005 2004 Sales $2,311m $883m EBITA $76m $(15)m Underlying EBITA $156m $(4)m Underlying Margin 6.8% (0.4)% Order book $7.6bn $4.2bn Cash flow $306m $110m 21
Slide 22: Programmes
Programmes 2005 2004 Sales £2,819m £2,219m EBITA £133m £10m Margin 4.7% 0.5% Order book £12.3bn £13.0bn Cash flow £285m £442m 22
Slide 23: Customer Solutions & Support
Customer Solutions & Support 2005 2004 Sales £2,923m £2,856m EBITA £419m £497m Margin 14.3% 17.4% Order book £5.0bn £4.6bn Cash flow £850m £1,102m 23
Slide 24: Integrated Systems & Partnerships
Integrated Systems & Partnerships MBDA 37.5% 2005 2004 Sales £1,834m £2,022m EBITA £109m £95m Integrated System Technologies Margin 5.9% 4.7% Order book £5.9bn £7.0bn Cash flow £17m £59m Saab 20.5% Atlas Elektronik 24
Slide 25: Commercial Aerospace
Commercial Aerospace 2005 2004 Sales £3,232m £2,924m EBITA £179m £201m Margin 5.5% 6.9% Order book £29.5bn £20.9bn Cash flow £327m £226m 25
Slide 26: Financial Highlights
Financial Highlights • Sales - Continuing £15,411m • EBITA* - Continuing Underlying £1,226m • - Discontinued £(24)m • Margin 8.0% • Underlying earnings per share ** 22.5p • Net cash flow from operating activities £2,099m • Net debt £1,277m • Order book £59.8bn • Dividend per share 10.3p * Earnings b
Slide 27: Summary
BAE SYSTEMS
Slide 28: Top ten objectives - 2005
Top ten objectives - 2005 1. Deliver operational performance plan Achieved 2. Enhance focus on internal processes Centre for Performance Excellence 3. Continue to grow US position UDI acquisition 4. Progress US / UK technology sharing Progressing slowly 5. Progress business in Kingdom of Saudi Arabi
Slide 29: Top ten objectives - 2006
Top ten objectives - 2006 1. Deliver 2006 financial targets 2. Ensure application of mandated business processes 3. Increase focus on schedule and cost commitments 4. Continue to grow US business 5. Implementation of UK Defence Industrial Strategy 6. Focus on key export opportunities 7. Progress bus
Slide 30: Summary
Summary • Good financial performance • US position strengthened • European portfolio restructured • UK business outlook enhanced • Well balanced base of performing businesses Set to deliver steady and reliable growth 30
Slide 31: Handouts
BAE SYSTEMS Handouts
Slide 32: Underlying Earnings per Share
Underlying Earnings per Share Continuing Operations 2005 2004 EBITA 1,182 1,016 - Add back fair value on acquired inventories 44 6 1,226 1,022 Interest (215) (176) - exclude pension financing credit 1 (24) - exclude market value movements on instruments 4 - - preference dividends restatement - (21)
Slide 33: Basic & Diluted EPS - Continuing Operations
Basic & Diluted EPS - Continuing Operations 2005 2004 Profit for the period 581 456 Preference dividends - (21) Profit for the period after preference dividends 581 435 Weighted average number of shares used in calculating EPS 3,183 3,058 Basic Earnings per Share (IAS 33) 18.3p 14.2p Profit for the
Slide 34: Finance Costs
Finance Costs 2005 2004 Financial Income:- Interest Income 123 57 Net present value adjustments 23 10 Expected return on pension scheme assets 632 542 Net gain on remeasurement of financial instruments at fair value (A) 159 - Other fair value movements (B) 59 - Foreign exchange gains (C) 228 - Finan
Slide 35: Retirement Benefit Obligations
Retirement Benefit Obligations Deficit in defined benefit pension plans at 1 Jan 2005 (4,339) Transfers arising on acquisitions (89) Actual return on assets above expected return 1,138 Increase in liabilities due to changes in assumptions (2,100) Other movements 84 Deficit in defined benefit pension
Slide 36: Operating Cash Flow
Operating Cash Flow 2005 EBITA* 1,182 Discontinued Operations (24) Less share of equity accounted investments (373) Add depreciation 402 Gain on disposal of fixed assets (41) Loss on disposal of business 20 Impairment of other investments 2 Cost of equity-settled employee share schemes 16 Movements
Slide 37: Working Capital Movements
Working Capital Movements Reconciliation to Cash Flow 31/12/05 1/1/05 Mvt Acq/Dis * F/X Other ** Cash Flow Inventories (A) 485 498 13 (4) 43 2 54 Receivables - current 1,877 2,126 Receivables - non current 912 500 Total receivables (B) 2,789 2,626 (163) 120 114 (75) (4) Payables - current (7,006) (6
Slide 38: Performance by Business Group
Performance by Business Group Sales EBITA * Electronics, Intelligence & Support 3,697 324 Land & Armaments 1,270 42 Programmes 2,819 133 Customer Solutions & Support 2,923 419 Integrated Systems & Partnerships 1,834 109 Commercial Aerospace 3,232 179 HQ and other businesses 69 (24) Intra-group (433)