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2003 Interim Results 11 September 2003. Mike Turner Chief Executive Mike Turner Chief Executive.

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Presentation on theme: "2003 Interim Results 11 September 2003. Mike Turner Chief Executive Mike Turner Chief Executive."— Presentation transcript:

1 2003 Interim Results 11 September 2003

2 Mike Turner Chief Executive Mike Turner Chief Executive

3 Business Performance Strong North America performance Strong North America performance CS&S delivering growth strategy CS&S delivering growth strategy Airbus performing well Airbus performing well UK MoD programmes being addressed UK MoD programmes being addressed Strong North America performance Strong North America performance CS&S delivering growth strategy CS&S delivering growth strategy Airbus performing well Airbus performing well UK MoD programmes being addressed UK MoD programmes being addressed Military Platforms Commercial Platforms Electronics & Software Support Solutions 30% 29% 21% 20%

4 Highlights - UK Iraq Iraq –Equipment performance endorsement CS&S CS&S –Continued good progress with DLO –Expanding in new markets Programmes Programmes –Nimrod and Astute on track –Thales agreement on the Carrier –Type 45 progressing well –Sting Ray mod 1 contract award –Typhoon Type Acceptance achieved –JSF development progressing to plan –Hawk agreements for UK and India Iraq Iraq –Equipment performance endorsement CS&S CS&S –Continued good progress with DLO –Expanding in new markets Programmes Programmes –Nimrod and Astute on track –Thales agreement on the Carrier –Type 45 progressing well –Sting Ray mod 1 contract award –Typhoon Type Acceptance achieved –JSF development progressing to plan –Hawk agreements for UK and India

5 Network Enabled Capability NITEworks NITEworks –Optimise UKs Network Enabled Capabilities –UK MoD / Industry partnership –BAE SYSTEMS lead –Key to integration of future systems UK Missile Defence Centre UK Missile Defence Centre –Forum for missile defence collaboration –Interface with US Missile Defence Agency –UK MoD / Industry partnership –BAE SYSTEMS lead NITEworks NITEworks –Optimise UKs Network Enabled Capabilities –UK MoD / Industry partnership –BAE SYSTEMS lead –Key to integration of future systems UK Missile Defence Centre UK Missile Defence Centre –Forum for missile defence collaboration –Interface with US Missile Defence Agency –UK MoD / Industry partnership –BAE SYSTEMS lead

6 Highlights - US AJCN AJCN –Adaptive Joint C4ISR Node (AJCN) –DARPA a –DARPA advanced technology demonstration programme WIN -T –Warfighter Information Network - Tactical GPCS / APCS GPCS / APCS –Selected for key C4ISR position on FCS C-17 C-17 –Avionics upgrade Acquisitions Acquisitions –MEVATEC and APTI AJCN AJCN –Adaptive Joint C4ISR Node (AJCN) –DARPA a –DARPA advanced technology demonstration programme WIN -T –Warfighter Information Network - Tactical GPCS / APCS GPCS / APCS –Selected for key C4ISR position on FCS C-17 C-17 –Avionics upgrade Acquisitions Acquisitions –MEVATEC and APTI

7 Highlights - Europe Airbus Airbus –Good order intake –Stable delivery outlook A400M A400M –180 aircraft contract signed EuroSystems EuroSystems –Memorandum of Understanding signed STN Atlas STN Atlas –Restructuring agreed Airbus Airbus –Good order intake –Stable delivery outlook A400M A400M –180 aircraft contract signed EuroSystems EuroSystems –Memorandum of Understanding signed STN Atlas STN Atlas –Restructuring agreed

8 Programme Management Programme management Programme management –External benchmarking –Management team changes –New programme management assessment centre –Incentives revised Programme management Programme management –External benchmarking –Management team changes –New programme management assessment centre –Incentives revised

9 Group Strategy Framework To be the premier transatlantic defence company and a lead supplier of prime systems solutions Integrated Business Plans Grow leading sub systems position in North America Consolidate Defence Electronics position in Europe Build an integrated support, solutions and services business in UK and international markets Develop a sustainable UK programme prime position in Air, Sea and Land Become the UKs system of systems architect Manage non- strategic business for optimal value Achieve transaction(s) to secure a prime systems solutions position in the US Optimise the value of our business portfolio through being a leader in our chosen markets

10 George Rose Group Finance Director George Rose Group Finance Director

11 Financial Highlights Profit before interest* £465m Profit before interest* £465m Fully diluted earnings per share* 7.2p Fully diluted earnings per share* 7.2p Dividend per share 3.7p Dividend per share 3.7p Operating cash flow £273m Operating cash flow £273m Net debt £1,254m Net debt £1,254m Order book £46.4bn Order book £46.4bn Profit before interest* £465m Profit before interest* £465m Fully diluted earnings per share* 7.2p Fully diluted earnings per share* 7.2p Dividend per share 3.7p Dividend per share 3.7p Operating cash flow £273m Operating cash flow £273m Net debt £1,254m Net debt £1,254m Order book £46.4bn Order book £46.4bn * before goodwill amortisation, impairment and exceptional items

12 Profit and Loss Account Sales (including share of JV sales) Profit before interest * Interest Profit before tax* Exceptional items Sales (including share of JV sales) Profit before interest * Interest Profit before tax* Exceptional items £ millions 5,703461(102)359(39) First half * before goodwill amortisation, impairment and exceptional items 5,682465(132)333(3)

13 Balance Sheet £ millions 5,703461(102)359(39) Fixed assets Working capital Net cash / (debt) Provisions Net assets Minority interest Shareholders funds Fixed assets Working capital Net cash / (debt) Provisions Net assets Minority interest Shareholders funds 9,652 9,652(1,671)(1,298)(987)5,696 (20) (20)5,676 31/12/02 30/6/03 9,480 9,480(1,606)(1,254)(1,018)5,602 (20) (20)5,582

14 FRS 17 - Pensions £ millions Deficit in pension schemes at 1 January 2003 Actual return on assets in excess of expected return Increase in liabilities Other movements Deficit in pension schemes at 30 June 2003 Related deferred tax asset Net pension liability Deficit in pension schemes at 1 January 2003 Actual return on assets in excess of expected return Increase in liabilities Other movements Deficit in pension schemes at 30 June 2003 Related deferred tax asset Net pension liability (3,125)188(683)(12)(3,632)1,122(2,510)(3,125)188(683)(12)(3,632)1,122(2,510)

15 Operating Cash Flow £ millions (3,125)188(683)(12)(3,632)1,122(2,510)(3,125)188(683)(12)(3,632)1,122(2,510) Profit before interest* Less J/Vs Less J/Vs Less exceptional items Less exceptional items Add depreciation Add depreciation Profit on disposal of fixed assets Profit on disposal of fixed assets Mvt in liability provisions Mvt in liability provisions Mvt in stocks Mvt in stocks Mvt in debtors Mvt in debtors Mvt in creditors Mvt in creditors Mvt in customer stage payments Mvt in customer stage payments Operating cash flow (FRS 1) Profit before interest* Less J/Vs Less J/Vs Less exceptional items Less exceptional items Add depreciation Add depreciation Profit on disposal of fixed assets Profit on disposal of fixed assets Mvt in liability provisions Mvt in liability provisions Mvt in stocks Mvt in stocks Mvt in debtors Mvt in debtors Mvt in creditors Mvt in creditors Mvt in customer stage payments Mvt in customer stage payments Operating cash flow (FRS 1) 465(103)(3)106(17)(62)(101)300(534) (103)(3)106(17)(62)(101)300(534) First half 2003 * before goodwill amortisation, impairment and exceptional items £ millions

16 Sector Cash Flow Operating cash flow (FRS 1) Capital Expenditure (net) & Financial Investment J/V Dividend Sector cash flow Programmes Customer Solutions & Support International Partnerships Avionics North America Commercial Aerospace HQ and other businesses Sector cash flow 273(63)7217 (35) (35)30241(51)143(154)(29)217 First half 2003 £ millions

17 Free Cash Flow £ millions Operating cash flow Capital Expenditure (net) & Financial Investment Dividend received from J/Vs Interest and Preference Dividend Taxation Free cash flow Operating cash flow Capital Expenditure (net) & Financial Investment Dividend received from J/Vs Interest and Preference Dividend Taxation Free cash flow 273(63)7(66) (63)7(66)70221 First half 2003

18 Movement in Net Debt Opening Net Debt Free cash flow Dividends paid Acquisitions and Disposals Exchange property Foreign currency translation Proceeds of equity issues Movement in cash on customers account Closing Net Debt Opening Net Debt Free cash flow Dividends paid Acquisitions and Disposals Exchange property Foreign currency translation Proceeds of equity issues Movement in cash on customers account Closing Net Debt (1,298)221(168)(62)2519-9(1,254)(1,298)221(168)(62)2519-9(1,254) £ millions First half 2003

19 Programmes First half 2003£976m£18m1.8%£11.7bn£(35)m SalesPBITMargin Order book Cash flow First half 2002£955m£3m0.3%£11.7bn£(222)m

20 Customer Solutions & Support First half 2003£1,018m£210m20.6%£2.1bn£302m SalesPBITMargin Order book Cash flow First half 2002£1,065m£220m20.7%£2.2bn£85m

21 International Partnerships First half 2003£650m£8m1.2%£6.1bn£41m SalesPBITMargin Order book Cash flow First half 2002£658m£2m0.3%£5.9bn£39m MBDA (37.5%) Saab (35%) AMS (50%) Atlas Elektronik (100%)

22 Avionics First half 2003£488m£4m0.8%£2.5bn£(51)m SalesPBITMargin Order book Cash flow First half 2002£459m£4m0.9%£2.7bn£5m

23 North America First half 2003£1,365m£122m8.9%£2.5bn£143m SalesPBITMargin Order book Cash flow First half 2002£1,327m£115m8.7%£2.4bn£84m

24 North America First half 2003$2,202m$197m8.9%$4.1bn$230m SalesPBITMargin Order book Cash flow First half 2002$1,917m$166m8.7%$3.7bn$121m

25 Commercial Aerospace First half 2003£1,341m£88m6.6%£22.9bn£(154)m SalesPBITMargin Order book Cash flow First half 2002£1,389m£122m8.8%£19.3bn£(138)m

26 Financial Summary Profit before interest * £465m Margin 8.2% Net debt £1,254m Operating cash flow £273m Fully diluted earnings per share* 7.2p Dividend per share 3.7p Order book £46.4bn Profit before interest * £465m Margin 8.2% Net debt £1,254m Operating cash flow £273m Fully diluted earnings per share* 7.2p Dividend per share 3.7p Order book £46.4bn * before goodwill amortisation, impairment and exceptional items

27 Mark Ronald President BAE SYSTEMS North America Mark Ronald President BAE SYSTEMS North America

28 Current Trends / Consequences of 9/11, Afghanistan and Iraq Asymmetric warfare, global War on terrorism Convergence between national and tactical Intelligence Persistent ISR and combat operations Time critical strike/ precision engagement Horizontal integration across stove-pipes Shift toward outsourcing non-combative roles Migration toward common real-time enterprise systems Asymmetric warfare, global War on terrorism Convergence between national and tactical Intelligence Persistent ISR and combat operations Time critical strike/ precision engagement Horizontal integration across stove-pipes Shift toward outsourcing non-combative roles Migration toward common real-time enterprise systems

29 Growing Leadership Positions in the US Continued strong performance… award fees greater than 95% Winning key programs –Future Combat Systems Communications Integrator –Classified Intelligence Programs –DARPA Advanced Concept Technology Demos –Homeland Security Digital Mapping Systems Managing for Profitable Growth –Facilities consolidation & modernization –Engineering & Production process improvements –IT Infrastructure rationalization –eBusiness implementation Continued strong performance… award fees greater than 95% Winning key programs –Future Combat Systems Communications Integrator –Classified Intelligence Programs –DARPA Advanced Concept Technology Demos –Homeland Security Digital Mapping Systems Managing for Profitable Growth –Facilities consolidation & modernization –Engineering & Production process improvements –IT Infrastructure rationalization –eBusiness implementation

30 Optimizing Value of US Portfolio Acquisitions expand capabilities in strategic areas: Analytical Solutions (MEVATEC) – $129 M Sales –Engineering and technical services company, with contracts in missile defense, joint interoperability, aviation and outsourcing. Strengths include modeling and simulation and proprietary software tools. –Over 500 employees in 14 locations, headquartered in Huntsville, Alabama. –20% annual growth over last three years. Advanced Technologies (APTI) – $25 M Sales –Research & Development engine with key discriminators in Network Centric Warfare (NCW) and Information Warfare (IW) technologies. –Over 100 employees in 4 locations, headquartered in Washington, DC. Acquisitions expand capabilities in strategic areas: Analytical Solutions (MEVATEC) – $129 M Sales –Engineering and technical services company, with contracts in missile defense, joint interoperability, aviation and outsourcing. Strengths include modeling and simulation and proprietary software tools. –Over 500 employees in 14 locations, headquartered in Huntsville, Alabama. –20% annual growth over last three years. Advanced Technologies (APTI) – $25 M Sales –Research & Development engine with key discriminators in Network Centric Warfare (NCW) and Information Warfare (IW) technologies. –Over 100 employees in 4 locations, headquartered in Washington, DC.

31 Well Positioned for Growth in Homeland Security Chemical, Biological, and Toxic Agent detection Geographic mapping for emergency response Thermal Imaging systems First responders communications vehicle Unified command suite Upgraded communications for US Coast Guard Physical security systems Chemical, Biological, and Toxic Agent detection Geographic mapping for emergency response Thermal Imaging systems First responders communications vehicle Unified command suite Upgraded communications for US Coast Guard Physical security systems

32 Mike Turner Summary Summary

33 Summary Contract risk addressed UK defence industrial strategy NITEworks Support for allied operations in Iraq Strategy implementation –Systems –Support solutions –US growth Contract risk addressed UK defence industrial strategy NITEworks Support for allied operations in Iraq Strategy implementation –Systems –Support solutions –US growth

34 Handouts

35 Profit and loss account Profit before tax * Goodwill amortisation Exceptional items Profit before tax Tax - excluding exceptionals Tax - exceptional items Minority interests Profit / (loss) for the year Diluted earnings per share* Profit before tax * Goodwill amortisation Exceptional items Profit before tax Tax - excluding exceptionals Tax - exceptional items Minority interests Profit / (loss) for the year Diluted earnings per share* £ millions 359 (279) (39) 41 (115) 11 - (63) 7.7p First half 2003 First half (274) (3) 56 (103) 1 (1) (47) 7.2p * before goodwill amortisation, impairment and exceptional items

36 Exceptional items Defence sector rationalisation MES integration costs Commercial aerospace Total exceptional items Defence sector rationalisation MES integration costs Commercial aerospace Total exceptional items (2) (1) - (3) (8) (1) (30) (39) First half 2003 First half 2002 £ millions

37 Profit incl. goodwill amortisation and exceptional items Preference dividends Earnings including goodwill amortisation and exceptional items Add back - Goodwill amortisation - Exceptional items - Tax on exceptional items Earnings excl. goodwill amortisation and exceptional items Weighted average ordinary shares in issue (millions) Basic earnings per share : Including goodwill amortisation and exceptional items Excluding goodwill amortisation and exceptional items (63) (10) (73) (11) 234 3,048 (2.4)p 7.7p Basic EPS calculation 2002 First Half (47) (10) (57) (1) 219 3,056 (1.9)p 7.2p 2003 First Half

38 Profit incl. goodwill amortisation and exceptional items Preference dividends Earnings including goodwill amortisation and exceptional items Add back - Goodwill amortisation - Exceptional items - Tax on exceptional items Earnings excl. goodwill amortisation and exceptional items Weighted average ordinary shares in issue (millions) Weighted average incl. options and preference shares(millions) Basic earnings per share : Including goodwill amortisation and exceptional items Excluding goodwill amortisation and exceptional items (63) (10) (73) (11) 234 3,048 n/a (2.4)p 7.7p Diluted EPS calculation 2002 First Half (47) (10) (57) (1) 219 3,056 n/a (1.9)p 7.2p 2003 First Half

39 Performance by Sector - First Half 2003 Programmes Customer Solutions & Support International Partnerships Avionics North America Commercial Aerospace HQ and other businesses Intra Group Total , ,3651, (303) (303)5, Sales PBIT * £ millions * before goodwill amortisation, impairment and exceptional items

40 Working Capital & Provision Movements Stocks (A) Debtors < 1 Year Debtors > 1 Year Total debtors (B) Creditors < 1 Year Creditors > 1 Year Total creditors ** (C) Customer stage payments (CSPs) Total creditors excl CSPs Working cap per balance sheet *** Cash on customers account Working capital per cash flow Liability provisions Stocks (A) Debtors < 1 Year Debtors > 1 Year Total debtors (B) Creditors < 1 Year Creditors > 1 Year Total creditors ** (C) Customer stage payments (CSPs) Total creditors excl CSPs Working cap per balance sheet *** Cash on customers account Working capital per cash flow Liability provisions £ millions Acq/DisFlow FRS 1 Cash Flow (5409)(444)(5853)1950(3903)(1618)12(1606)(1018) 31/12/0230/6/ (5489)(449)(5938)1727(4211)(1692)21(1671)(987)(158)169223(308)(74)9(65) (151)(28)19(58)(71) * Other * * includes adjustments for non FRS 1 movements on tax, interest and dividends ** includes cash on customers account *** equals A+B+C (5)(8)(1)(17)6 F/X (101)300222(534)(62)


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