Qioptiq logo Raytheon Global MilSatCom

BAE Systems – Resilient, Looking Forward and Protecting The Future By Howard Wheeldon, FRAeS, Wheeldon Strategic Advisory Ltd.





Having started the year from an already strong position, with demand remaining high and having taken actions to further enhance resilience, while COVID-19 and geopolitical uncertainties remain, BAE Systems first half year period results show very clearly that during what has been an unprecedented period of difficulty and change, this is a company that can move through the second half of the year and into future beyond with increased confidence.

Displaying renewed confidence as it looks forward into the second half of the year and having deferred payment of the proposed 13.8p per share dividend in respect of the second half FY2019 period when full year results were announced due to COVID-19 concerns, BAE Systems has this morning also confirmed that the deferred dividend will now be paid to shareholders this September and also that, assuming that there are no major additional or unforeseen COVID-19 related disruptions, a 9.4p per share interim FY2020 dividend will be paid in November.

Importantly, in respect of forward guidance BAE Systems told investors that Including the two acquisitions announced earlier this year (the first of which – Airborne Tactical Radios has already been completed – that it expects group sales to increase by a low-single digit percentage compared to last year, as it sees we see increased volumes from F-35, Combat Vehicles and growth in the electronic defence portfolio, offsetting any shortfall in commercial businesses. The company said that it anticipated underlying earnings per share to be in “mid-single digit percentage lower than last year’s 45.8p” – this assuming a US$1.25 to sterling exchange rate and at a tax rate that is now expected to be 19%, an in-line with last year. The final [EPS] rate is, according to the statement, dependent on the geographic mix of profits and BAE Systems said that now expects free cash flow, as defined by the Group, excluding the £1bn pension payment, to be approximately £800m for the full year, close to our original guidance allowing for the lower earnings.  

Charles Woodburn, CEO of BAE Systems said in the statement accompanying the results that “We have delivered a robust performance in the first half of the year, thanks to the efforts of all of our employees. We started the year from a strong position and we have taken actions to enhance our resilience, ensuring we continued to deliver against our customer priorities, whilst keeping our employees safe. Assuming no significant COVID-19 resurgence, we expect a good second half to the year. Demand for our capabilities remains high and we recognise our role not only in supporting national security, but also in contributing to the economies of the countries in which we operate.”

In what for the majority of large manufacturing companies has been an unprecedented period of change requiring fast action to better protect the well-being of employees through the COVID-19 pandemic whilst at the same time, continuing to meet customer priorities and the important supply chain as they too worked through what has been a very difficult period for all involved at the same time as preserving and protecting capabilities and the overall financial strength of the business, all that I can say is that BAE Systems has done very well. 

The company had previously warned that FY2020 earnings would be lower than last year due to COVID-19 disruption and what has been announced this morning should have come as little surprise. Underlying Earnings per share declined 15% on revenue which was up 4% on a constant currency basis. Period end net debt stood at £2bn – this following the issue of a £1 billion 10-year 3.4% bond issue which was used to contribute £1 billion into the UK pension scheme – and order backlog increased 6%.       

Highlights in respect of divisional performance as noted in the statement include:


The Qatar Typhoon programme achieved key milestones ahead of schedule.

Production of F-35 rear fuselage assemblies will ramp up to full rate by 2021. 50 assemblies have been delivered in the period.

The sector continues to work closely with industry partners and the UK government to continue to fulfil contractual support arrangements in Saudi Arabia on the key European collaboration programmes.

Negotiations for the transition through to mid-2022 to a reduced scope support solution for the Omani Typhoon fleet are ongoing and expected to conclude early in the second half of the year.

The next phase of the Tempest next-generation Future Combat Air programme continues.

In Australia the Hunter Class frigate programme is progressing to plan and ASC Shipbuilding has been integrated into our Australian operations.

Maritime and Land UK

The build phase of the River Class Offshore Patrol Vessel programme remains on target for completion in 2020, with the fourth vessel, HMS Tamar, accepted by the customer in the period.

Construction of the first two City Class Type 26 frigates for the Royal Navy continues to progress.

The fourth Astute Class submarine, HMS Audacious, was accepted and left our Barrow site in April to begin sea trials with the Royal Navy.

Construction of the first two Dreadnought Class submarines continues to advance.

An 18-month extension to the Maritime Support Delivery Framework (MSDF) to provide engineering and support services to Portsmouth Naval Base and the Portsmouth flotilla was signed in March.

Ship support maintained at Portsmouth Naval Base under challenging COVID-19 conditions.

RBSL is expected to secure the contract for its share of work on the Mechanised Infantry Vehicle programme in the second half of the year.

Electronic Systems

F-35 electronic warfare systems deliveries for Lot 12 completed, with over 650 electronic warfare systems delivered to date.

Successful demonstration of APKWS® ground-launch capability.

Terminal High Altitude Area Defense (THAAD) seeker is executing at full rate production and received an additional order to design and manufacture next-generation infrared seekers.

The business continues to experience growth in classified work.

Demand in the commercial business lines of Controls & Avionics Solutions, and Power & Propulsion Solutions, has been impacted by COVID-19.

Acquired the Airborne Tactical Radios business from Raytheon Technologies Corporation, expanding our full spectrum communications portfolio with multi-band radios and advanced cryptographic technologies.

Platforms & Services (US)

Implementation of process and automation improvements is under way in Combat Mission Systems production.

M109A7 vehicle consistently delivering at full rate production levels.

Armoured Multi-Purpose Vehicle Low-Rate Initial Production under way, with the first vehicle to be completed in the second half of the year.

Amphibious Combat Vehicle Low-Rate Initial Production continues along with design development of two new mission variants.

Bradley award for $267m (£216m) received in June.

The US Ship Repair business received orders totalling $430m (£348m) in the period, including a $200m (£162m) award to service the USS Boxer in San Diego.

US Navy awards totalling $166m (£134m) for the production of missile canisters supporting the Vertical Launching System, with a maximum value of up to $955m (£773m) over five years if all options are exercised.

Cyber & Intelligence

The US-based Intelligence & Security business continues to increase its bid pipeline, perform on existing contracts and win new orders.

Exit from the loss-making UK-based Enterprise Managed Security Services business was completed.

Discussions regarding the sale of the Applied Intelligence US-based software-as-a-service business are continuing.

Applied Intelligence’s Government business continues to perform well, and the Financial Services business delivered growth in order intake in the period despite COVID-19 disruption.


Defence is an ever-changing world and with a culture of innovation and always seeking to achieve best performance being at the heart of everything that it does, BAE Systems knows all too well that in order to maintain a technical edge with a continuous process of innovation and investing in the future is an essential requirement in order to continue to successfully compete on the world stage.

This is a company that has strategic priorities, vision and strong values and one that also has a very strong focus on technology, innovation and engineering excellence. The list of innovative projects and research projects that BAE Systems is engaged on vast and ongoing but when it comes to speed, agility and responding to change look no further than how, through the COVID-19 pandemic, BAE Systems deployed 3D printing capabilities and collaborated with its supply chain in order to donate more than 150,000 items of Personal Protective Equipment (PPE) to healthcare workers in the US and the UK and in how it played a significant role supporting ventilator production as part of the VentilatorChallengeUK consortium.

CHW (London – 30th July 2020)

Howard Wheeldon FRAeS 

Wheeldon Strategic Advisory Ltd,

M: +44 7710 779785

Skype: chwheeldon



Back to article list