09 Aug 2007 | Ref. 248/2007
BAE Systems plc Interim Report 2007
Results in brief
| Results from continuing operations | Six months to 30 June 2007 | Restated(6) Six months to 30 June 2006 |
| Sales(1) | £6,891m | £6,376m |
| EBITA(2) | £700m | £600m |
| Operating profit | £643m | £540m |
| Underlying earnings(3) per share | 15.3p | 11.6p |
| Basic earnings per share(4) | 15.3p | 9.1p |
| Order book(5) | £31.7bn | £30.2bn |
| Other results including discontinued operations | ||
| Interim dividend per share | 5.0p |
4.4p |
| Cash inflow/(outflow) from operating activities | £165m | £(293)m |
| Net cash/(debt) as defined by the Group | £1,266m | £(1,582)m |
Highlights
- 43% sales growth in the Land & Armaments business
- Underlying earnings3 per share up 31.9% at 15.3p
- Interim dividend increased 13.6% to 5.0p per share
- Acquisition of Armor Holdings Inc. completed on 31 July
- Formation of UK naval surface ship joint venture announced
Outlook
Building on the strong first half performance, the previously anticipated good growth outlook for 2007 as a whole is expected to benefit further from the US-led Land & Armaments and UK Programmes & Support sectors where growth is ahead of expectations.
We anticipate good operating cash flow for the full year.
1 including share of equity accounted investments
2 earnings before amortisation and impairment of intangible assets, finance costs and taxation expense
3 earnings excluding amortisation and impairment of intangible assets, and non-cash finance movements on pensions and financial derivatives (see note 5)
4 basic earnings per share in accordance with International Accounting Standard 33
5 including share of equity accounted investments’ order books and after the elimination of intra-group orders of £1.4bn (2006 £1.2bn)
6 restated following the sale of the Group’s interest in Airbus SAS
Interim results statement
“BAE Systems is performing well and is committed to maintaining its focus on continued value generation and its drive to embed a high performance culture.”
BAE Systems’ performance continues to benefit from a combination of good, profitable growth and programme execution, as well as from the successful implementation of its strategy as the premier global defence and aerospace company. In particular, the Group is successfully identifying and accessing the higher growth sectors of the US defence market. In the first half of 2007 BAE Systems’ US-derived businesses achieved organic growth of 12%.
The high tempo of military operations continues to generate growth in requirements for land systems in support of US and UK armed forces deployed on overseas operations. The implementation of the Group’s strategy to establish a strong position in the land sector has been a notable success over the past three years, with both current and anticipated demand for land vehicles and systems supporting the strategy.
To complement the Group’s now well-established tracked combat vehicles position, BAE Systems has been evolving a strategy to address newly emerging growth opportunities in the wheeled utility vehicle sector. In particular, recognising that the past distinction between front-line and support theatres of operation have become less distinct, BAE Systems has identified significant business opportunities for improved survivability and capability in the utility vehicle fleets. Increasingly the capability of these utility vehicles will converge with that of combat vehicles.
In July, BAE Systems completed the acquisition of Armor Holdings Inc. for $4.5bn (£2.2bn). Armor Holdings is a leading provider of utility vehicles and armour technology. The transaction was financed from a combination of existing resources and £750m raised earlier in the year by way of a share placing.
Negotiations continue towards a contract for the supply of Typhoon aircraft and associated training and support under the Understanding Document signed in December 2005 between the UK government and the Kingdom of Saudi Arabia. BAE Systems continues to progress its strategy in Saudi Arabia as a key home market with substantial employment and investment in future in-Kingdom industrial capability.
Consistent with the UK government’s defence industrial strategy and following their commitment to the new Carrier programme and a Terms of Business Agreement supporting a long-term relationship between industry and the UK Ministry of Defence (MoD), the Group announced the formation of a new joint venture, consolidating the UK naval surface ship activities of BAE Systems and the VT Group.
At the beginning of the year the Group revised its organisation to reflect the UK customer’s focus on managing defence equipment on a through-life capability basis. With the resulting integration of the UK programmes and former UK customer support activities, the Group is now reported through five business groups as described in the reviews that follow.
Corruption allegations continue to be made against the Group. The long-running investigation by the UK’s Serious Fraud Office into business in a number of markets continues and, in June, BAE Systems was notified by the US Department of Justice that it had commenced a formal investigation relating to the Group’s compliance with anti-corruption laws, including its business concerning the Kingdom of Saudi Arabia. The Group will co-operate with such investigations to the fullest extent possible.
Notwithstanding these investigations, BAE Systems is performing well and is committed to maintaining its focus on continued value generation and its drive to embed a high performance culture. The Group continues to seek to apply the very highest standards in its business practices and, as part of that drive, the Board has asked the UK’s former Lord Chief Justice, Lord Woolf, to form an independent committee to consider and evaluate the application of BAE Systems’ policies and processes relating to ethics and business conduct. The Committee’s conclusions and recommendations will be published in full and the Board has committed to implement the findings of the Committee.
For further information, please contact:
John Neilson, BAE Systems
Tel: + 44 (0) 1252 384795 Mob: + 44 (0)7802 337704
john.neilson@baesystems.com
Mike Sweeney, BAE Systems
Tel: + 44 (0)1252 383074 Mob: + 44 (0)7801 716452
mike.sweeney2@baesystems.com
Issued by:
BAE Systems, Farnborough, Hampshire GU14 6YU, UK
Tel: +44 (0) 1252 384710 Fax: +44 (0) 1252 383947
www.baesystems.com
