REG - BAE SYSTEMS PLC - Trading Statement

BAE SystemsAnnouncement

05/05/2022 07:00

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RNS Number : 3757K  BAE SYSTEMS PLC  05 May 2022

 

 
 
                           5 May 2022

BAE Systems plc - Annual General Meeting and Market Update

BAE Systems plc will hold its Annual General Meeting today at 11.00 a.m. in
Farnborough, Hampshire, UK.  At the meeting, Chairman, Sir Roger Carr, and
Chief Executive, Charles Woodburn, will comment on the performance of the
Group in 2021, as detailed in the results announcement published on 24
February 2022.

The results of voting at the Annual General Meeting will be announced later
today.

Additionally, BAE Systems plc provides the following update on trading year to
date.

 

Charles Woodburn, BAE Systems Chief Executive, said:

"Trading in the first quarter has been in line with expectations with strong
order intake and good operational performance being maintained.

 

"Looking forward, our diverse portfolio, together with our focus on programme
execution, cash generation and efficiencies, are helping us to navigate the
challenging operating environment in the near term, while positioning us well
for sustained top line and margin growth in the coming years, alongside
accelerating our ESG agenda. Additionally, we see opportunities to further
enhance the medium- term outlook as our customers address the elevated threat
environment."

 

Guidance

The Group's full year 2022 guidance across all metrics is unchanged from that
provided at the Preliminary announcement on 24 February 2022.

·    Sales
+2-4% (2021: £21,310m)

·    Underlying EBIT                 +4-6% (2021: £2,205m)

·    Underlying EPS                   +4-6% (2021:
47.8p)

·    2022 Free Cash Flow (FCF)  >£1bn

·    Cumulative FCF 2022-2024   >£4bn

·    Guidance is provided on the basis of an exchange rate of $1.38:£1
for the year

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.

Operational update

Overall programme execution has been good across all sectors in the year to
date. There remain ongoing pressures on our supply chains, delivery lead times
and people resourcing across our operations. Consistent with our guidance we
continue to mitigate the major financial impacts. In many cases, we benefit
from long-term programme positions and incumbencies with more stable forward
visibility for long-lead items allowing us to continue to actively manage
supplier lead times against demand requirements.

Order flow

We continue to expect a strong year of order intake and order flow to date has
been positive especially on our long-term programmes.

Orders received are predominantly long cycle in nature which will support our
growth expectations into the coming years.

Additionally, there is a pipeline of opportunities across all sectors to
enhance the growth outlook, as we look to support our key customers and allies
in addressing the heightened threat environment.

Notable new and strategically important awards received this year include:

 Sector                   Contract
 Electronic Systems       F-35 Lightning II EW systems
 Electronic Systems       M-Code Global Positioning System modules
 Electronic Systems       Airborne High Frequency Radio Modernisation programme
 Electronic Systems       Electric drive systems for new zero-emission capable hybrid transit buses in
                          Philadelphia
 Platform & Services      Amphibious Combat Vehicle programme Lot 2 full rate production
 Platform & Services      USS Essex and USS Mustin ship repair and maintenance
 Platform & Services      7-year support, sustainment & readiness for Norwegian CV90s
 Air                      11-year contract for support to the UK's Royal Air Force Hawk fleet
 Air                      MBDA order flow from Rafale exports
 Cyber and Intel          US Navy Naval Air Warfare Center Webster Outlying Field support
 Cyber and Intel          Lifecycle management and sustainment of the US Navy's C5ISR systems

 

Defence spending outlook in our key markets

Our geographic diversity positions us strongly as many of the countries in
which we operate have announced or are making plans to increase spending to
counter the elevated and evolving threat environment on multiple fronts.

In the US, the spending outlook is positive. The Fiscal Year 2022 Omnibus
Appropriations bill was signed into law on 9 March. This FY22 budget of $743bn
maintains funding support for many of our key programmes: combat vehicles;
F-35 and other electronic warfare programmes; and precision weapon systems.
The President's Fiscal Year 2023 Budget Request includes $773bn for the
Department of Defense and the business remains well aligned to the current US
National Defense Strategy readiness and modernisation priorities of the US
military services. We expect continued alignment with the 2022 National
Defense Strategy release.

In the UK, the Defence Command Paper renewed commitments to our major
long-term programmes in complex warship, submarine and combat aircraft design
and build, allowing for long-term investment in these key sovereign
capabilities, as well as strong support for the cyber domain. The opportunity
pipeline is positive with domestic, export and collaboration opportunities
identified and we have the capabilities to support our UK customer in its
space ambitions.

In Europe, the significant step up in German defence expenditure is important
for long-term defence funding. We see other nations increasing or likely to
increase their defence budgets to address the threat environment and for NATO
countries to move to, and even beyond, their 2% of GDP commitments. We remain
well placed through our positions on Eurofighter Typhoon, our shareholding in
MBDA, our BAE Systems Hägglunds and Bofors businesses based in Sweden,
through US Foreign Military Sales and we are pursuing a number of significant
opportunities in the region.

Our portfolio is well positioned to benefit from increased defence spending in
Asia Pacific through our Australia business, which is already set to grow
significantly due to our contracted positions and through export opportunities
from our UK, US and Australian business to the region. The AUKUS announcement
is strategically significant, and a clear example of how nations are looking
to co-ordinate capabilities in multi domain operations to address the threat
environment. As the largest defence provider in the UK and Australia and a top
10 prime contractor to the US DoD, we are well positioned to support our
government customers in these nations as discussions progress.

In the Middle East, our longstanding relationships at government and company
levels, continued regional instability and the nature of our long-term
contracts, mean we expect defence and security to remain a priority. The
renewal of certain existing long-term support contracts is tracking in line
with expectations and we continue to progress a number of opportunities with
existing customers.

 

 Portfolio and sector re-alignment

As disclosed in the Annual Report and reflecting the changes in operational
reporting lines effective from the beginning of the year, the BAE Systems
Australia business will transition 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 will report within the
Cyber & Intelligence segment.

The re-presented 2021 sales performance to reflect these changes is detailed
below. There is no change to the guidance ranges following this segmental
representation.

 

 Year ended 31 December 2021  As reported  Reclassification  Re-presented

                              £m           £m                £m
 Electronic Systems           4,491        -                 4,491
 Platforms & Services         3,395        -                 3,395
 Air                          8,321        (872)             7,449
 Maritime                     3,416        753               4,169
 Cyber & Intelligence         1,752        171               1,923
 HQ/intra-group               (65)         (52)              (117)

 Group Sales                  21,310       -                 21,310

 

In March, we completed the acquisition of Bohemia Interactive Simulations
(BISim), a leading developer of advanced military simulation and training
software. BISim expands our modelling and simulation capabilities to meet
growing global demand for agile military training that helps to protect
military personnel and reduce the environmental impacts of live training,
while supporting the carbon net zero ambitions of our customers and ourselves.

 

ESG

It is important to recognise the defence industry's contribution to security
and prosperity and that BAE Systems is a responsible, government-backed,
strictly regulated and ethically-led defence and security company.

Global events have more than ever demonstrated the need for strong defence and
security in the face of aggression by nation states. The defence industry and
we at BAE Systems provide critical capabilities and support to our governments
and their allies to fulfill their primary obligations to keep their citizens
safe, as well as providing important positive economic and societal
contributions from the provision of sustainable high-quality and well-paid
jobs.

Additionally, we continue to advance our capabilities in sustainable
technologies with a number of electric-hybrid contracts won in the period. We
are harnessing our expertise in energy management systems and flight controls
to support the development of electric propulsion systems for future flight,
with GE Aviation selecting us to provide energy management solutions for
NASA's hybrid electric technology demonstrator programme.

The progress we are making on our sustainability agenda has been reflected in
an improvement in ratings from a number of providers, and we have maintained
our AA leader class rating with MSCI.

Board

As previously announced, Dame Carolyn Fairbairn and Ian Tyler will be standing
down from their roles as Non-Executive Directors at today's Annual General
Meeting (AGM). Nicole Piasecki will succeed Ian Tyler as Chair of the
Remuneration Committee with effect from the close of the AGM.

Final dividend

The 2021 final dividend of 15.2 pence per share will be paid, subject to
shareholder approval, on 1 June 2022.

 

Investor engagement

We will host a capital markets event in October with a focus on the Digital
Intelligence business, technology advancements and an update on our ESG
agenda.

 

2022 Interim results

BAE Systems will announce its interim results for the half year ending 30 June
2022 on 28 July 2022.

 

For further information please contact:

 Investors                                                           Media
 Martin Cooper,                                                      Kristina Anderson,

 Investor Relations Director                                         Director, Media Relations

 Telephone: +44 (0)1252 383455                                       Telephone: +44 (0) 7540 628673

 Email: investors@baesystems.com (mailto:investors@baesystems.com)   Email: Kristina.anderson@baesystems.com
                                                                     (mailto:Kristina.anderson@baesystems.com)

 

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