Ian King, Chief Executive, said: “2016 was a good year for BAE Systems. Our strategy is well defined; we have a large order backlog, long-term programme positions, strong programme execution and a well-balanced portfolio. With an improved outlook for defence budgets in a number of our markets, we are well placed to continue to generate attractive returns for shareholders.”

Results in brief

Financial performance measures as defined by the Group

Key points

Financial performance measures as defined by the Group

• Sales increased by £1.1bn to £19.0bn, almost all of which was due to exchange translation.
• Underlying EBITA increased to £1,905m, or 7% on a constant currency basis.
• Underlying earnings per share of 40.3p, 7% higher than adjusted 2015 underlying earnings per share of 37.8p, in line with guidance.
• Operating business cash flow increased by £323m to £1,004m.
• Net debt of £1.5bn.
• Order intake increased by £7.5bn to £22.4bn.
• Order backlog increased by £5.2bn to £42.0bn.

Financial performance measures defined in IFRS

• Revenue increased by £1.0bn to £17.8bn, almost all of which was due to exchange translation.
• Operating profit increased to £1,742m, or 10% on a constant currency basis.
• Basic earnings per share of 28.8p.
• Net cash flow from operating activities increased by £421m to £1,229m.

Other financial highlights

• Group’s share of the pre-tax accounting net pension deficit increased by £1.6bn compared with 31 December 2015 to £6.1bn, largely unchanged from 30 June 2016.
• Final dividend of 12.7p per share making a total of 21.3p per share for the year, an increase of 2% over 2015.

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 8.
   2. International Financial Reporting Standards.
   3. Including share of equity accounted investments.
   4. Re-presented to reclassify interest paid from operating to investing activities.
   5. 2015 underlying earnings per share (40.2p) excluding tax provision releases (‑4.3p) and adjusted to 2016 exchange rates (+1.9p).

Operational and strategic review

• Awarded a $146m (£118m) engineering and manufacturing development contract for the US Air Force’s Eagle Passive Active Warning Survivability System as a follow-on to the technology maturation and risk reduction phase.
• On the F-35 combat aircraft programme, delivered the 250th electronic warfare suite in the US, received orders for additional Low-Rate Initial Production in the US and UK, and selected to provide maintenance, repair, overhaul and upgrade services to support a range of aircraft system components in the UK and Australia for the Europe and Pacific regions, respectively.
• On Typhoon, partnership arrangement for support to the UK fleet expected to be worth at least £2.1bn over a ten-year period and £1.0bn of orders for BAE Systems’ workshare on 28 aircraft for Kuwait.
• Continued provision of support agreed under the Saudi British Defence Co-operation Programme to the Royal Saudi Air Force and Royal Saudi Naval Forces through to 2021.
• To support the US Navy’s re-balance to the Asia-Pacific region, a new dry dock arrived in our San Diego shipyard in December.
• In maritime in the UK, £472m extension to the Type 26 frigate demonstration phase contract, £287m contract for two additional Offshore Patrol Vessels, including support services for the five-ship programme, and £1.3bn of funding for the Dreadnought Class submarine programme, including design, initial manufacture, materials and facilities investment.
• Roll-out of the first prototype Armored Multi-Purpose Vehicle for the US Army and delivery of the first prototype Amphibious Combat Vehicles for the US Marine Corps.
• Secured a $542m (£439m) contract to provide 145 M777 lightweight howitzers to India in January 2017.
• Continued growth in commercial cyber security and counter-fraud from investment in product development, and sales and marketing.
• Judicial Review proceedings into the process followed by the UK government in granting defence export licences to the Kingdom of Saudi Arabia are under way with a judgment expected in the near future.