BAE Systems plc (LSE:BA.):
Half-yearly Report 2022
Results in brief
Financial performance measures as defined
by the Group1
Financial performance measures derived
from IFRS2
Six months ended 30 June
2022
Six months ended 30 June 2021
Year ended 31 December 2021
Six months ended 30 June
2022
Six months ended 30 June 2021
Year ended 31 December 2021
Sales
£10,581m
£10,035m
£21,310m
Revenue
£9,739m
£9,339m
£19,521m
Underlying EBIT
£1,112m
£1,028m
£2,205m
Operating profit
£1,028m
£1,303m
£2,389m
Underlying earnings per share
Basic earnings per share
19.6p
31.3p
55.2p
excluding one-off tax benefit (2021
only)3
24.5p
21.9p
47.8p
including one-off tax benefit (2021
only)3
24.5p
24.8p
50.7p
Net cash flow from operating
activities
£493m
£623m
£2,447m
Free cash flow
£123m
£461m
£1,864m
Net debt (excluding lease liabilities)
£(3,135)m
£(2,745)m
£(2,160)m
Order book
£42.5bn
£35.5bn
£35.5bn
Order intake
£17,985m
£10,582m
£21,458m
Dividend per share
10.4p4
9.9p4
25.1p
Order backlog
£52.7bn
£44.6bn
£44.0bn
Group’s share of the net post-employment
benefits surplus/(deficit)
£0.9bn
£(2.4)bn
£(2.1)bn
Charles Woodburn, Chief Executive, said: “Trading in the first
half has been in line with expectations delivering strong order
intake and good operational performance.
“Our diverse portfolio, together with our focus on programme
execution, cash generation and efficiencies are helping us navigate
the current macroeconomic challenges and position us well for
sustained top line and margin growth in the coming years. We see
further opportunities to enhance the medium- and long‑term outlook
as our customers commit to increased defence spending to address
the elevated threat environment.
“The positive outcome of the UK pension triennial review, along
with our performance and confidence in the outlook enable us to
maintain our guidance, continue to invest in our business and
progress our ESG agenda whilst increasing returns to our
shareholders.
“Good operational performance, execution on our strategy and
confidence in the outlook enables us today to announce a 5%
increase in the interim dividend as well as initiating a new,
three-year share buyback programme for up to £1.5bn.”
Guidance for 2022
The Group’s full year 2022 guidance across all metrics is
unchanged from that provided at the Preliminary announcement on 24
February 2022, which was provided on the basis of an exchange rate
of $1.38:£1 for the year.
+2% to +4% (2021: £21,310m)
+4% to +6% (2021: £2,205m)
+4% to +6% (2021: 47.8p)
- 2022 Free Cash Flow (FCF)
>£1bn
>£4bn
Should the current dollar rate persist, this will be a tailwind
to earnings with sensitivity to EPS being around 1 pence for every
5 cent movement.
The guidance is based on the measures used to monitor the
underlying financial performance of the Group. Reconciliations from
these measures to the financial performance measures derived from
International Financial Reporting Standards for the six months
ended 30 June 2022 are provided in the Group financial review on
pages 12 to 18.
Financial highlights
Financial performance measures as defined by the Group1
- Sales increased by 2.8% on a constant currency basis5 to
£10.6bn.
- Underlying EBIT of £1,112m increased by 4.4% on a constant
currency basis5.
- Underlying earnings per share increased by 11.9% to 24.5p3,
excluding the impact in 2021 of the one-off tax benefit. The
Group’s underlying effective tax rate for the first half of the
year was 19%.
- Free cash inflow of £123m (2021 £461m inflow, including £250m
receipt in respect of the Filton and Broughton site
disposals).
- Net debt (excluding lease liabilities) at £3,135m (£2,160m at
31 December 2021).
- Order backlog of £52.7bn (£44.0bn at 31 December 2021).
Financial performance measures derived from IFRS2
- Revenue increased by 4.3% to £9.7bn.
- Operating profit decreased by 21.1% to £1,028m.
- Basic earnings per share decreased to 19.6p (2021 31.3p).
- Net cash inflow from operating activities of £493m (2021 £623m
inflow).
- Order book of £42.5bn (£35.5bn at 31 December 2021).
Dividend
The directors have declared an interim dividend of 10.4p per
share in respect of the half year ended 30 June 2022. This dividend
will be payable on 30 November 2022. The directors have also
approved a new share buyback programme of up to £1.5bn over the
next three years, which will commence immediately.
Post-employment benefits
The Group’s share of the accounting net post-employment benefits
obligations has improved by £3.0bn moving from a deficit as of 31
December 2021 of £2.1bn to a surplus of £0.9bn, which is presented
after deducting withholding tax which would be levied prior to the
future refunding of any surplus.
1.
We monitor the underlying financial
performance of the Group using alternative performance
measures.
These measures are not defined in
International Financial Reporting Standards (IFRS) and, therefore,
are
considered to be non-GAAP (Generally
Accepted Accounting Principles) measures. Accordingly, the
relevant
IFRS measures are also presented where
appropriate. For alternative performance measure definitions
see
glossary on page 9.
2.
International Financial Reporting
Standards.
3.
A one-off tax benefit of £94m was
recognised in 2021, in respect of agreements reached regarding
the
exposure arising from the April 2019
European Commission decision regarding the UK’s Controlled
Foreign
Company regime. Growth rate disclosed
excludes the impact of the 2021 one-off tax benefit.
4.
Interim dividends declared (see note
7).
5.
Current period compared with prior period
translated at current period exchange rates.
Operational and strategic key points
Ukraine
- Closely engaged with our global customers to provide on-going
support wherever requested.
- Delivering on programme specific mission critical requirements
of our customers.
COVID-19
- Kept an agile and flexible business response to the
ever-evolving situation.
- Focus remained on employee safety and well-being whilst
maintaining delivery on our customer commitments.
Group Portfolio actions
- UK Triennial pension review completed.
- Acquisition of Bohemia Interactive Simulations (BISim)
completed in March.
- Agreement signed in July for the sale of BAE Systems’ financial
crime detection business from Cyber & Intelligence, with
completion expected in the next few months.
- Reflecting the changes in operational reporting lines effective
from the beginning of the year, the BAE Systems Australia business
has moved from being reported in the Air segment to the Maritime
segment. Additionally, the Group has established a new Digital
Intelligence business, bringing together the non-US digital and
data capabilities to further strengthen how we deliver these
services and capabilities to our customers. Digital Intelligence is
reported within the Cyber & Intelligence segment.
Electronic Systems
- Cumulatively, over 1,100 electronic warfare systems have been
delivered on the F-35 programme.
- Deliveries continue of next-generation EW Eagle Passive Active
Warning Survivability System to support upgrade of US Air Force
F-15 platform and testing on F-15E and F-15EX test aircraft.
- Awarded $176m (£145m) for Airborne High Frequency Radio
Modernization programme.
- Selected to design, test and supply energy management
components for GE Aviation’s megawatt class hybrid electric
propulsion system supporting NASA’s Electrified Powertrain Flight
Demonstration project.
Platforms & Services
- M109A7 programme is consistently delivering at full rate
production levels and received a $299m (£246m) contract.
- Deliveries of all five variants of Armored Multi-Purpose
Vehicles to the US Army continue.
- Amphibious Combat Vehicle deliveries to US Marine Corps
continue, with design and development under way for new mission
variants.
- Bradley vehicle upgrade work continues on contracts for 459
vehicles.
- BAE Systems Hägglunds is ramping to perform on multiple
contracts for CV90 and BvS10.
- CV90 wins Slovakia’s competitive evaluation for its Infantry
Fighting Vehicle programme.
- US Ship Repair profitability was significantly impacted by the
COVID-19 pandemic, but continues to recover.
Air
- Production on F-35 is at full rate levels. 74 rear fuselage
assemblies have been completed in the period.
- The Qatar Typhoon and Hawk programme is progressing well. The
first Typhoon deliveries will commence in the second half of
2022.
- Work continues on the Typhoon programme and the production
programme has been extended further following the award in June of
20 further aircraft for Spain.
- The future electronically scanned European Common Radar
Solution continues in line with the Typhoon plan.
- The sector continues to work closely with industry partners and
the UK government to continue to fulfil contractual support
arrangements in Saudi Arabia.
- The Future Combat Air System (FCAS) programme continues as
anticipated with the initial Concept & Assessment Phase
contract underway across national and international partners.
- Saudi British Defence Co-operation Programme five-year renewal
support funding agreed.
Maritime
- £2.5bn of further contract funding awarded as part of Delivery
Phase 3 for the Dreadnought programme.
- New Submarine Build Capability contract maintains BAE Systems'
role as the lead for the design and build of nuclear submarines
within the UK submarine enterprise.
- The Submersible Ship Nuclear Replacement (SSNR) programme has
moved into its Functional Design phase.
- Ongoing support to the Royal Navy’s Portsmouth-based flotilla
and the operation of HM Naval Base Portsmouth under the UK Ministry
of Defence’s Future Maritime Support Programme, including support
to the UK’s two aircraft carriers.
- The Hunter Class Frigate programme in Australia continues to
make strong progress through the prototyping phase.
- HMAS Toowoomba, the fifth ANZAC Class frigate to move through
the ANZAC Mid Life Capability Assurance Programme (AMCAP) was
returned to the Australian Navy following successful completion of
the dry production phase of AMCAP.
- Mobilisation of the Challenger 3 and Mechanised Infantry
Vehicle contracts secured by the RBSL joint venture is advancing
well.
- Transition to the Next Generation Munitions Supply Solution
(NGMS) contract is ongoing.
Cyber & Intelligence
Intelligence & Security
- Strong operational performance and integration of Bohemia
Interactive Simulations progressing well.
- Awarded an 18-year contract to continue supporting the
sustainment of U.S intercontinental ballistic missiles
(ICBMs).
- Won a $699m (£575m), five-year contract for operations,
maintenance, and management services for the US Army’s Defense
Supercomputing Resource Center.
Digital Intelligence
- Ongoing integration and transformation of the newly-formed
business.
- Increasing underlying profitability supported by strong
programme execution, productivity and cost base optimisation.
- Continued integration and growth of the acquired In-Space
Missions business, a UK-based satellite and satellite systems
company, to accelerate our space capabilities.
HQ
- Repayment of £400m bond in June from existing resources.
For further information please contact:
Investors
Media Relations
Email:investors@baesystems.com
Email:kristina.anderson@baesystems.com
Analyst and investor presentation
A presentation, for analysts and investors, of the Group’s first
half results for 2022 will be available via WebEx at 11.00am BST
today (28 July 2022).
Details can be found on investors.baesystems.com, together with
presentation slides and a pdf copy of this report. A recording of
the WebEx will be available for replay later in the day.
About BAE Systems
At BAE Systems, we provide some of the world’s most advanced,
technology-led defence, aerospace and security solutions. We employ
a skilled workforce of 91,400 people1 in over 40 countries. We help
our customers to stay a step ahead when protecting people and
national security, critical infrastructure and vital information.
We also work closely with local partners to support economic
development through the transfer of knowledge, skills and
technology.
- Including share of equity accounted investments.
For more information about this news release, please visit:
baesystems.com/results
For associated materials, please visit:
https://baesys.resourcespace.com/?c=12989&k=c9bf8bfa10
Ref: 105/2022
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version on businesswire.com: https://www.businesswire.com/news/home/20220728005786/en/
Kristina Anderson, BAE Systems M: +44 (0) 7540 628673
E: kristina.anderson@baesystems.com
Beth Neilson, BAE Systems M: +44 (0) 7787 669236
E: beth.neilson@baesystems.com
Issued by: BAE Systems plc Media hotline: +44 (0) 7801 717739
www.baesystems.com @BAESystemsplc
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