BAE SYSTEMS PLC Trading Update (5591S)
07 November 2019 - 6:01PM
UK Regulatory
TIDMBA.
RNS Number : 5591S
BAE SYSTEMS PLC
07 November 2019
7 November 2019
BAE Systems - Trading update
Guidance
The Group's guidance for 2019 remains unchanged from the 2019
interim results. Overall, we expect the Group's underlying earnings
per share (excluding the one-off tax benefit) to grow by mid-single
digit percent compared to the full year underlying earnings per
share in 2018 of 42.9p.
The Group continues to target in excess of GBP3bn of free cash
flow over the three-year period 2019-2021, and expects 2019 net
debt to be broadly unchanged from the net debt at 31 December
2018.
Whilst the Group is subject to geopolitical uncertainties
including the forthcoming general election in the UK, the above
guidance is provided on current expected operational performance
and remains based on an assumption of average sterling exchange
rate of US$1.30.
UK and US market update
In the UK, the spending round announced in September
re-emphasised the UK's commitment to strong defence and security
with a 2.6% real terms increase in the MoD budgets from 2019-20 to
2020-21. In the US following the two-year budget agreement that was
signed in July, Congress passed a Continuing Resolution for funding
through 21 November. The Group's US-based portfolio is well aligned
to customer priorities and growth areas and the business has
continued to grow its backlog.
Major programme update
The production ramp up of the F-35 programme is progressing well
towards c.140 aft fuselage sets in 2019 and full rate production
levels targeted in 2020.
The Qatar Typhoon and Hawk contract is meeting its contractual
milestones with Typhoon now aligned to the accelerated schedule.
Typhoon support in the UK and Oman continues to deliver expected
operational levels.
In Saudi Arabia, following the updates in September from the
German government regarding export licences, we continue to work
closely with industry partners and the UK government to fulfil our
contractual support arrangements in the Kingdom on key European
Collaborative programmes.
In our UK Maritime business, activity on the Dreadnought
programme is ramping up, with the associated major programme of
building works continuing to progress. On the Offshore Patrol
Vessels programme, the third ship has been conditionally accepted.
Schedule on ships four and five is being maintained with the
programme due to complete in 2020. The Queen Elizabeth Class
aircraft carrier programme is nearing completion with HMS Prince of
Wales commencing sea trials in September as planned.
Manufacturing work on the Type 26 programme in the UK continues
to increase following cut steel on the second ship in August. The
first formal design review with the customer on the Hunter Class
programme in Australia was approved in September. Mobilisation
activities on the Canadian Surface Combatant programme are taking
shape.
Whilst progress is being made in US Combat Vehicles, this
remains a clear area of focus as we ramp production across a number
of programmes. On the Paladin M109A7 we are meeting our revised
delivery plan. The first four Amphibious Combat Vehicles have been
delivered to meet customer testing requirements. The Armored
Multi-Purpose Vehicle programme is ramping with first deliveries
still expected in the first half of 2020. Further contract awards
were received in September for the M88A3 modernisation and the
Bradley A4 programmes, strengthening the order backlog for the
Combat Vehicles franchise.
US Ship Repair was awarded a total of $171m for the repair and
maintenance of the USS Decatur and USS Stethem in September. This
represents the first tandem docking in our San Diego dry dock
facility as we work with the US Navy to improve utilisation
levels.
The Electronic Systems business continues to perform strongly.
It has received an initial $184m award for APKWS under the recently
announced five year, $2.7bn, Indefinite Delivery Indefinite
Quantity production contract. Additionally the business was awarded
the $450m digital upgrade contract for the ALR-56C Radar Warning
Receiver to be incorporated onto the F-15 platform.
Pension
The low bond yield environment continues to impact the Pension
accounting position. It has a lesser impact on the funding position
of our schemes which is driven by an asset led discount rate
approach. Asset returns are exceeding our investment return
assumptions and the latest actuarial tables have increased
mortality assumptions which lowers liabilities. The Group will
commence the triennial funding valuations of its UK schemes in
April 2020.
As explained in previous years the low discount rate environment
does impact the accounting pension service cost in the UK
businesses and whilst this will provide a headwind into 2020, the
impact of the higher costs is expected to be absorbed within the
existing margin ranges.
Board
On 1 February next year, Sir Roger Carr will have served as
Chairman of the Board for six years. It has been agreed that he
will serve a final term of just over three years from that date,
and in keeping with current corporate governance best practice will
retire following the conclusion of the Company's Annual General
Meeting in May 2023.
Having served as a non-executive Director for nine years,
Harriet Green retires from the Board with effect from today.
As previously announced, Peter Lynas Group Finance Director will
retire from the Company on 31 March 2020 and the Company has
appointed Brad Greve as Group Finance Director Designate to succeed
Peter Lynas and join the BAE Systems plc Board on 1 April 2020.
Brad joined at the start of September and became a member of the
Executive Committee and is working with Peter to ensure a smooth
handover of responsibilities.
Interim Dividend
The Interim dividend of 9.4 pence per share will be paid on 2
December 2019.
Full year results
BAE Systems will announce its financial results for the year
ending 31 December 2019 on 20 February 2020.
Cautionary statement
All statements other than statements of historical fact included
in this statement are forward-looking statements. Such
forward-looking statements, which reflect management's assumptions
made on the basis of information available to it at this time,
involve known and unknown risks, uncertainties and other important
factors which could cause the actual results, performance or
achievements of BAE Systems or the markets and economies in which
BAE Systems operates to be materially different from future
results, performance or achievements expressed or implied by such
forward-looking statements. BAE Systems plc and its directors
accept no liability to third parties in respect of this statement,
save as would arise under English law. Accordingly, any liability
to a person who has demonstrated reliance on any untrue or
misleading statement or omission shall be determined in accordance
with section 90A of the Financial Services and Markets Act
2000.
Issued by:
BAE Systems plc
London
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END
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