BAE Systems 2009 Preliminary Results 18 February 2010 1 Overview - - PowerPoint PPT Presentation

BAE Systems 2009 Preliminary Results 18 February 2010 1

Overview - 2009 +21% 25,000 20,000 15,000 • Sales Continued good performance 10,000 5,000 – Good programme execution £m 0 – Strong cash generation 2004 2005 2006 2007 2008 2009 • Well positioned +17% 2,500 – Large forward order book 2,000 – Broad portfolio of programmes Underlying 1,500 – EBITA Multiple long term contracts 1,000 – Wide base of geographic markets 500 – Key national capability provider 0 £m 2004 2005 2006 2007 2008 2009 Good basis for delivering sustainable growth in shareholder value 2

Business characteristics Platforms and Readiness & Products Sustainment 40% 40% Electronics & IT & Cyber Equipment 7% 13% Analysis of 2009 sales by activity 3

Business characteristics Platforms & Products – Surface ships and submarines – Guided weapons and radar Readiness & – Aircraft and vehicles Sustainment 40% 40% Electronics & IT & Cyber Equipment 7% 13% Analysis of 2009 sales by activity 4

Business characteristics Readiness & Sustainment – Mission preparation Platforms and – Capability provision Products – Through-life support 40% 40% Electronics & IT & Cyber Equipment 7% 13% Analysis of 2009 sales by activity 5

Business characteristics Platforms and Readiness & Products Sustainment 40% 40% 13% IT & Cyber Electronics & Equipment 7% – Electronic systems – Equipment Analysis of 2009 sales by activity 6

Business characteristics Platforms and Readiness & Products Sustainment 40% 40% 7% Electronics & IT & Cyber Equipment – Border & transport security 13% – Cyber security – IT products & services Analysis of 2009 sales by activity 7

George Rose 8

Financial Highlights • Sales £22,415m • £2,220m Underlying EBITA * • 40.7p Underlying earnings per share ** • Cash inflow from operating activities £2,232m • Net cash £403m • Order book £46.9bn • 16.0p Dividend per share * earnings before amortisation and impairment of intangible assets, finance costs and taxation expense (EBITA) excluding non-recurring items ** earnings excluding amortisation and impairment of intangible assets, non-cash finance movements and non-recurring items 9

Income Statement 2009 2009 2008 2008 Underlying Reported Reported Underlying 22,415 18,543 22,415 18,543 Sales 2,220 1,897 2,220 1,897 Underlying EBITA 68 238 Profit on disposed businesses 261 Pension accounting gain Regulatory penalties (278) 2,135 EBITA 2,271 (707) (707) 697 Finance (Expense)/Income 697 deduct: Pension Interest / Mark-to-Market 512 (799) Underlying Finance Costs (195) (102) (247) (286) Amortisation (973) Impairment (177) (640) (467) Tax (567) (350) (22) (23) Minority Interests 1,768 1,436 1,305 (45) Profit / (Loss) after Tax £ millions 10

Balance Sheet 31/12/09 31/12/08 11,253 Intangible fixed assets 12,306 2,663 2,558 Tangible fixed assets Investments 852 1,040 (6,839) Working capital (5,825) (4,410) (3,325) Pension deficit Tax assets & liabilities 850 256 (45) 240 Financial assets & liabilities 403 39 Net cash Net assets 4,727 7,289 £ millions 11

Operating Business Cash Flow 2009 2,232 Cash inflow from operating activities (489) Capital expenditure (net) 77 Dividends from equity accounted investments (225) Contribution to Trust (re pensions) 1,595 Operating business cash flow Electronics, Intelligence & Support 380 Land & Armaments 480 Programmes & Support 285 International 816 HQ & Other Businesses (366) Operating business cash flow 1,595 £ millions 12

Movement in Net Cash 2009 Net Cash 31 December 2008 39 1,595 Operating business cash flow Interest and taxation (536) (534) Equity dividends paid Acquisitions and disposals (254) (20) Net purchase of equity shares Foreign exchange and other movements 113 403 Net Cash 31 December 2009 £ millions 13

Pension Deficit - (IAS 19) 31 Dec 08 30 Jun 09 31 Dec 09 £bn 13.1 12.6 Pension assets 15.0 (17.3) (18.5) (20.6) Pension liabilities (4.2) (5.9) Pension deficit, net (5.6) (3.3) (4.5) (4.4) Group share of deficit, pre-tax * Group share of deficit, post-tax (2.2) (3.1) (3.0) Real Discount Rates 3.4% 2.8% 2.2% UK 3.5% 3.5% 2.9% US * 30 June 2009 and 31 December 2009 include assets contributed into Trust 14

UK Discount Rates and Inflation 8.0% 7.5% 7.0% 6.5% Nominal AA Corporate Bond Yield 6.0% 5.5% 5.0% 4.5% 4.0% Nominal Inflation Rate 3.5% 3.0% 2.9% (10 yr avg ) 2.5% 2.0% Real Discount Rate 1.5% 1.0% 31 Dec 1999 31 Dec 2000 31 Dec 2001 31 Dec 2002 31 Dec 2003 31 Dec 2004 31 Dec 2005 31 Dec 2006 31 Dec 2007 31 Dec 2008 31 Dec 2009 15

Operating Groups Sales * 19% 25% Sales by activity Electronics, International Intelligence & Support 40% 40% Readiness & Platforms & Sustainment Products 27% 29% Programmes Land & & Support Armaments Underlying EBITA * 25% 19% Electronics, International Intelligence 13% 7% & Support IT & Electronics & Equipment Cyber 27% 29% Programmes Land & & Support Armaments * excluding HQ & Other Businesses 16

Electronics, Intelligence & Support SALES Electronic Support 2009 2008 Solutions Solutions Sales $8,826m $8,260m Underlying EBITA * $900m $937m Information Platform Solutions Solutions Margin 10.2% 11.3% IT & Readiness & Order book $7.3bn $7.5bn Cyber Sustainment Cash flow $595m $704m Electronics & Equipment * excludes US pension accounting gain of $315m 17

Land & Armaments SALES Global Combat Global Tactical 2009 2008 Systems Systems Sales $10,550m $11,869m Security & $946m Underlying EBITA * $1,049m Survivability US Combat Systems 9.0% Margin 8.8% Readiness & Order book $12.6bn $16.7bn Sustainment Cash flow $752m $865m Platforms & Products Electronics & Equipment * excludes US pension accounting gain of $93m 18

Programmes & Support SALES Naval 2009 2008 £6,298m £4,638m Systems & Sales Security Air Underlying EBITA £670m £491m 10.6% 10.6% Margin Readiness & £19.8bn Order book £24.3bn Sustainment Cash flow £285m £651m Platforms & Electronics & Products Equipment IT & Cyber 19

International SALES MBDA, Saab, CS&S 2009 2008 Air Astana International £4,253m £3,333m Sales Underlying EBITA £442m £435m Australia 10.4% 13.1% Margin £11.0bn Platforms & Order book £11.6bn Readiness & Products Sustainment Cash flow £816m £163m Electronics & Equipment 20

HQ & Other Businesses 2009 2008 • Regional Aircraft £254m £235m Sales • Shared Services – Research Centres Underlying EBITA * £(71)m £(101)m – Property Management £(366)m £(66)m Cash flow • Head Office * excludes regulatory penalties of £278m 21

Financial Summary • Sales £22,415m • £2,220m Underlying EBITA * • 40.7p Underlying earnings per share ** • Cash inflow from operating activities £2,232m • Net cash £403m • Order book £46.9bn • 16.0p Dividend per share * earnings before amortisation and impairment of intangible assets, finance costs and taxation expense (EBITA) excluding non-recurring items ** earnings excluding amortisation and impairment of intangible assets, non-cash finance movements and non-recurring items 22

Ian King 23

Agenda • Markets – US – UK • Strategy update – Framework – Actions 24

US defence • Overall FY10 defence budget better than anticipated – addressing higher manpower related costs – continued high cost of overseas operations • Core investment account spend DoD funding – internal planning assumes flat / reducing $ bn Supplemental 708 800 693 / Operations – FY11 slightly up 667 662 601 700 535 600 479 Other 468 437 core 500 345 • Increased procurement emphasis on:- 316 400 Investment – programme performance 300 accounts – programme relevance 200 100 0 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 QDR and FY11 budget support planning assumptions 25

UK defence market Challenging environment • Significant budget constraints continue – Public expenditure constraints – Meeting cost of overseas operations • Progressive approach to align procurement to budget – Programme stretch - eg Carriers – Salam Typhoon diversions a significant alleviation • Reductions in legacy fleets announced – Anticipate Tornado and Harrier reductions – Nimrod MR2 Out of Service date accelerated Post election Strategic Defence Review planned 26