LAND SYSTEMS DENT BAE SYSTEMS RESULTS
30 Jul 09. Highlights
– Sales growth of 28%
– Underlying EBITA up 19% to £979m
– Underlying earnings per share increased by 10%
– Operating cash inflow of £448m
– Interim dividend increased by 10.3% to 6.4p per share
Outlook
The Group continues to expect good growth for 2009 as a whole, despite a lower level of land vehicle sales. Compared to 2008, the Group’s trading results are expected to benefit from any continued weakness of sterling against the US dollar. We anticipate a stronger operating cash inflow in the second half year.
BAE Systems Half-yearly Report 2009
“BAE Systems continues to perform well with performance in the first
half of 2009 underpinning the Group’s expectations of good growth for the full year.”
BAE Systems continues to perform well with performance in the first half of 2009 underpinning the Group’s expectations of good growth for the full year. Headline sales1 growth in the six months was 28%. On a like-for-like basis, sales grew by 6%. Growth in underlying EBITA2 on a like-for-like basis was 3%. There was a cash inflow from operating activities of £448m in the first six months. BAE Systems’ strategy of investment in businesses with strong positions in attractive sectors of the defence and security markets continues. Despite the difficult economic environment and changes in priorities in many of its markets, the Group continues to develop plans for growth over the medium term.
In the US, the Group’s activities are well aligned to the changes in defence programme priorities announced by the US Secretary of Defense in April. The Group’s position in advanced electronic warfare systems is expected to deliver growth from the transition of F-22 systems to the production of systems for the F-35 Lightning II. The combination of electronic systems content in the US and significant UK airframe manufacturing makes BAE Systems a major participant in the F-35 programme. With the F-35 programme expected to progress to high volume production over the coming years and increasing near-term volumes on the Typhoon programme, tactical combat aircraft are becoming a major driver of growth in the Group following the recent period of strong growth from the Group’s land systems activities.
Power management continues to be a business with significant further growth potential. Globally, BAE Systems has supplied almost 2,000 hybrid electric drive systems, forming part of integrated power management systems for urban transport vehicles, and was selected, in the first half of 2009, to supply up to an additional 700 systems. In June, BAE Systems completed the acquisition of Advanced Ceramics Research, Inc. for $14m (£9m). The acquisition supports BAE Systems’ global Unmanned Aircraft Systems (UAS) strategy, adding small UAS platforms and ground segment capability to complement the Group’s existing UAS capabilities. The agreement between the four partner governments on the Eurofighter Typhoon programme to procure an initial third tranche of Typhoon aircraft was an important step. The agreement, when contracted, will represent order intake of approximately £2bn, and secures the development path to enhanced capabilities for the air forces of the partner nations and other potential customers. Through-life support activities continue to be a major element of the Group’s business. New contracts were awarded in the first half totalling over £1bn supporting the Royal Air Force Harrier and Typhoon aircraft in service.
In July, BVT Surface Fleet Limited (BVT) and the UK Ministry of Defence entered into a definitive Terms of Business Agreement which sets out a 15-year partnering arrangement, including lead roles for the BVT business on defined surface shipbuilding and support programmes. On 10 July, VT Group plc (VT) served a Put Option Intention Notice in relation to its proposed exit from the BVT joint venture. This is the first step in the exit process, wh