BAE
Systems plc
Half-yearly Report 2024
Charles Woodburn, Chief Executive, said: "Thanks to the outstanding
efforts of our employees around the world, we delivered a strong
operational and financial performance in the first half of the
year, giving us confidence to increase our year-end guidance across
all our key metrics. Working closely with our customers, we have
maintained momentum on key strategic activities, including AUKUS
and the Global Combat Air Programme. We also continued evolving our
technology portfolio through strategic acquisitions and the ongoing
integration of our new Space & Mission Systems
business.
"Our order intake shows that demand for our products and
services remains high and we are well positioned for sustained
growth in the coming years. We will keep investing in new
technologies, facilities and our people so that we can deliver on
our record order backlog and help our government customers stay
ahead in an uncertain world."
Financial highlights
Financial performance measures as defined by
Group1
|
Six months
ended
30 June
2024
|
Six
months
ended
30 June
2023
|
Variance2
|
Sales
|
£13,399m
|
£12,018m
|
+13%
|
Underlying EBIT
|
£1,393m
|
£1,258m
|
+13%
|
Underlying earnings per share -
basic
|
31.4p
|
29.6p
|
+7%
|
Free cash flow
|
£219m
|
£1,070m
|
-£851m
|
Order intake
|
£15.1bn
|
£21.1bn
|
-£6.0bn
|
|
As at
30 June
2024
|
As
at
31 December
2023
|
Variance3
|
Order backlog
|
£74.1bn
|
£69.8bn
|
+£4.3bn
|
Financial performance measures as derived from
IFRS
|
Six months
ended
30 June
2024
|
Six
months
ended
30 June
2023
|
Variance
|
Revenue
|
£12,477m
|
£10,997m
|
+13%
|
Operating profit
|
£1,296m
|
£1,233m
|
+5%
|
Earnings per share -
basic
|
31.4p
|
31.8p
|
-1%
|
Net cash flow from operating
activities
|
£757m
|
£1,484m
|
-£727m
|
Dividend per share
|
12.4p
|
11.5p
|
+8%
|
|
As at
30 June
2024
|
As
at
31 December
2023
|
Variance
|
Order book
|
£59.6bn
|
£58.0bn
|
+£1.6bn
|
As defined by Group
· The
13%2 growth in sales reflects the ongoing strong
programme performance across the portfolio and the acquisition of
the Space & Mission Systems (SMS) business in
February.
· Underlying earnings before interest and tax (EBIT) has grown
13%2, reflecting the increase in sales combined with
strong programme execution and the ongoing efforts of our internal
efficiency initiatives.
· Growth of 7%2 in underlying earnings per share
(EPS) is after the increase in underlying net finance costs,
incurred primarily as a result of the $4.8bn (£3.8bn) debt finance
raised in March, and the increased tax rate.
· Free
cash flow was £219m, with the comparative period of £1,070m
reflecting a high level of customer advances.
As derived from IFRS
· The
growth in revenue of 13% reflects the same strong operational
performance across the portfolio.
· Operating profit is up 5% as the growth in underlying EBIT is
offset by the additional amortisation of intangible assets acquired
with SMS.
· The
reduction in basic earnings per share on the prior period reflects
the increased interest cost and the amortisation of intangibles
acquired with SMS.
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. The
relevant IFRS measures are presented where appropriate. The
purposes and definitions of non-GAAP measures are provided in the
Alternative performance measures section on page 46.
2. Growth rates for sales,
underlying EBIT and underlying EPS are on a constant currency basis
(i.e. calculated by translating the results from entities in
functional currencies other than pounds sterling for the period
ended 30 June 2023 to pounds sterling at the average exchange rate
of such currencies for the period ended 30 June 2024). The
comparatives have not been restated. All other growth rates and
year-on-year movements are on a reported currency basis.
3. Order backlog includes
£2.2bn acquired with the SMS business in February.
Strategic progress
Alongside strong operational
delivery, we continued to invest in our people, research &
development (R&D) and capital expenditure, which underpins our
growth outlook. During the first half of the year, key areas of
progress included the following:
·
Under the AUKUS agreement, we were selected to
build Australia's new fleet of nuclear-powered submarines,
alongside ASC Pty Ltd.
·
We signed a contract, worth £4.6bn, for the
delivery of the first three Hunter Class frigates (Batch 1) in
Australia, following which, we entered the construction phase and
officially cut steel on the first ship at a ceremony at the Osborne
Naval Shipyard in Adelaide, South Australia.
·
We made progress against our 2024 target to
recruit 2,700 graduates and apprentices in the UK.
·
In February, we completed the acquisition of the
US-based Ball Aerospace business from Ball Corporation and formed
our new SMS business, which is reported within our Electronic Systems sector. Since the acquisition, the SMS
business has secured orders of £0.7bn and we are progressing with
the integration activities.
·
In February, Air Astana completed an initial
public offering (IPO) with a joint listing in London and
Kazakhstan. Following the IPO, our shareholding reduced from 49% to
17% - with cash proceeds on disposal of £166m and a profit on
disposal of £75m.
·
We completed two further acquisitions in the
uncrewed air systems (UAS) technology market, both of which form
part of FalconWorks®
in our Air sector.
Operational highlights
·
The sixth Astute class submarine, Agamemnon, was
officially named at our submarines site in Barrow-in-Furness,
Cumbria.
·
We delivered two further Typhoon aircraft to
Qatar - a total of 20 are now in service with the Qatar Emiri Air
Force.
·
A new concept model of the next-generation combat
aircraft, being developed by the Global Combat Air Programme
(GCAP), was unveiled at the Farnborough International Airshow in
July. This will be known as Tempest in the UK.
·
We marked the launch of satellites that will
bridge critical gaps in current space-based environmental
monitoring capabilities for the US Space Force.
·
Following the move to full-rate production, we
are now delivering five variants of Armored Multi-Purpose Vehicles
(AMPV) and, during the period, the US Marine Corps' fleet of
Amphibious Combat Vehicles (ACV) completed its first successful
operational deployment.
·
Within our Hägglunds business, based in Sweden,
we are expanding our production and delivery capabilities by
investing more than £160m in advanced manufacturing capabilities
and a new customer test and acceptance centre in the
period.
Capital deployment
·
We successfully raised $4.8bn (£3.8bn) of debt
finance, of which $4.0bn (£3.2bn) was used to refinance the bridge
loan facility associated with the Ball Aerospace
acquisition.
·
We completed the third and final tranche of the
up to £1.5bn share buyback programme, announced in July 2022 (2022
share buyback programme) on 24 July 2024. In the six months ending
30 June 2024, we repurchased 19,403,928 ordinary shares under the
2022 share buyback programme at a total cost (including transaction
fees) of £250m. The up to £1.5bn share buyback programme, which we
announced in August 2023 (2023 share buyback programme), commenced
on 25 July 2024.
·
The directors have declared an interim dividend
of 12.4p per share in respect of the half year ended 30 June 2024.
This represents an increase of 8% compared to the interim dividend
declared in respect of the half year ended 30 June 2023. This will
be paid on 2 December 2024, in line with our usual dividend
timetable.
2024 Upgraded Group guidance1
Sales guidance is increased by 200
bps to 12% to 14% reflecting continued strong operational
performance across all sectors.
Underlying EBIT guidance is
increased by 100 bps to 12% to 14% reflecting the sales profile and
strong operational performance.
Underlying earnings per share
guidance is increased by 100 bps to 7% to 9% aligned to underlying
EBIT. In addition, we have refined our guidance on underlying net
finance costs and the effective tax rate.
We have increased our in-year free
cash guide by £200m to >£1.5bn and we expect to deliver over
£6.0bn of free cash flow for the three year period ending
2024.
The Group guidance for 2024
incorporates the acquisition of Ball Aerospace2 and the
reduction in the Group's shareholding in Air Astana following its
initial public offering, both of which completed in February
2024.
Guidance is provided on a constant
currency basis using an exchange rate of $1.24:£1, which is in line
with the actual 2023 exchange rate. Sensitivity to foreign exchange rates: the Group operates in
a number of currencies, the most significant of which is the US
dollar. As a guide, a 5 cent movement in the £/$ exchange rate will
impact sales by c.£500m, underlying EBIT by c.£70m and underlying earnings per
share by c.1.3p.
Year ended 31 December 2024
|
Updated
Guidance
|
Previous
Guidance
|
Year ended
31 December 2023
Results
|
Sales
|
Increase
by 12% to 14%
|
Increase
by 10% to
12%
|
£25,284m
|
Underlying EBIT
|
Increase
by 12% to 14%
|
Increase
by 11% to
13%
|
£2,682m
|
Underlying EPS
|
Increase
by 7% to 9%
|
Increase
by 6% to
8%
|
63.2p
|
Free cash flow target
|
>£1.5bn
|
>£1.3bn
|
£2,593m
|
·
Underlying net finance costs
c.£360m to c.£375m (previously c.£350m to
c.£375m)
·
Effective tax rate c.20% (previously c.21%)
·
Non-controlling interests c.£80m
1. While
the Group is subject to geopolitical and other uncertainties, the
Group guidance is provided on current expected operational
performance. The guidance is based on the measures used to monitor
the underlying financial performance of the Group. Reconciliations
from these measures to the financial performance measures defined
in IFRS are provided in the Alternative performance measures
section on page 46.
2.
Guidance incorporates the acquisition of Ball Aerospace from 16
February 2024.
For further information please contact:
Analyst and investor presentation
A presentation, for analysts and
investors, of the Group's Half-yearly Results for 2024 will be
available at 7.15am BST today (1 August 2024) on the investor
website, followed by a Q&A at 9.00am BST.
Details can be found on
investors.baesystems.com,
together with presentation slides and a copy of this report. A
recording of the Q&A webcast will be available for replay later
in the day.
About BAE Systems
At BAE Systems, we provide some of
the world's most advanced, technology-led defence, aerospace and
security solutions. We are a workforce of around
100,0001 highly skilled people in more than 40
countries. Working with our customers and local partners, we
develop, engineer, manufacture and support products and systems
that deliver military capability, protect national security, and
keep critical information and infrastructure secure.
1. Including share of equity
accounted investments.
Shareholder information
Registered office
BAE Systems plc
6 Carlton Gardens
London
SW1Y 5AD
United Kingdom
Registered in England and Wales,
No. 01470151
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made on the basis of information available to it at this time,
appear in a number of places throughout this document and include
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its results in relation to operations, financial condition,
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Forward-looking statements are not
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ability of BAE Systems plc to meet its commitments and targets may
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even if results of operations, financial condition and liquidity of
BAE Systems plc, the development of the industry in which it
operates and/or performance against commitments and targets are
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indicative of results, developments or performance in subsequent
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These forward-looking statements
speak only as of the date of this document. Subject to the
requirements of the Disclosure Guidance and Transparency Rules, the
Market Abuse Regulation or applicable law, BAE Systems plc
explicitly disclaims any intention or obligation or undertaking
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circumstances after the date of it. All subsequent written and oral
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or to persons acting on its behalf are expressly qualified in their
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contained elsewhere in this document.
BAE Systems plc and its directors
accept no liability to third parties in respect of this document
save as would arise under English law. Accordingly, any liability
to a person who has demonstrated reliance on any untrue or
misleading statement or omission shall be determined in accordance
with Schedule 10A of the Financial Services and Markets Act 2000.
It should be noted that Schedule 10A and Section 463 of the
Companies Act 2006 contain limits on the liability of the directors
of BAE Systems plc so that their liability is solely to BAE Systems
plc.
Interim management report
Half-year overview
We have continued our operational
momentum and delivered a strong set of half-year results, building
on the performance of recent years. In the first half of 2024, we
have:
·
continued to assist our customers in delivering
urgent mission critical capability;
·
sustained strong operational
performance;
·
enhanced our portfolio through acquisitions
focused on high-end technologies;
·
increased self-funded R&D and capital
expenditure;
·
secured £15.1bn of orders which, combined with
£2.2bn of order backlog acquired with SMS, has set
a record order backlog of £74.1bn; and
·
delivered increased sales and underlying EBIT
compared to the first half of 2023.
The order backlog and programme
incumbencies underscore our confidence in our long-term,
value-creating model. Our global presence and diverse portfolio of
products and services provide high visibility for top-line growth
and cash generation in the coming years.
Our markets
Defence spending is high across
our key markets, which supports our existing programmes and
provides
a robust pipeline of opportunities across all our sectors, as we
look to support our customers in addressing the rising threat
environment.
In the US, we started the year
operating under Continuing Resolutions until the fiscal year 2024
budget legislation was passed, authorising Department of Defense
appropriations of $841.4bn. Bipartisan support continues for a
strong defence posture and a National Security Supplemental of
$95.3bn was passed in April, providing further funding for our
combat vehicle and ammunition programmes predominantly for Ukraine
and other international support.
Turning to 2025, per the Fiscal
Responsibility Act budget caps, the President's 2025 Budget Request
provides only 1% growth for defence spending at $849.8bn. Reaching
consensus, prior to the fiscal year start on 1 October, will be
challenged by its delayed release and the upcoming presidential and
congressional elections in November. Whilst the top line is
constrained, the budget is once again rooted
in the US National Defense Strategy and US National Intelligence
Strategy, and we remain well aligned to these strategic priorities
to address the rising threats. This alignment is further enhanced
with the addition of our SMS business this year.
In the UK, as expected, the new UK
Government has announced a Strategic Defence Review (SDR), due
to report in the first half of 2025. This review will consult
widely and is intended to consider the current capabilities and
resources of the UK Armed Forces against the threats the UK faces
and to make recommendations on the future defence plan. The SDR
will also consider when the UK might reach defence spending of 2.5%
GDP. It is clear that the UK Government sees the defence industry
as a key contributor to economic growth, calling it a "cornerstone
of a new industrial strategy".
In our UK business, growth is
grounded on key long-term contract programmes including
Dreadnought, AUKUS, Type 26 frigates, Typhoon support and upgrade
and our 15 year munitions partnering agreement.
In Europe, defence is increasing
as a priority and government spending continues to rise in line
with firm commitments. For NATO members, this has seen the majority
of members' defence budgets rising in line with their pledge to
achieve a minimum of 2% GDP to provide enough resources to restock
and build back military capability.
Australia continues to spend c.2%
of its GDP on defence with a significant commitment to fund
equipment procurement. The "National Defence Strategy" sets out how
Australia will focus on meeting the challenge posed by an
expansionist China. It plans to do this by deepening security ties
with its key partner, the US, its regional allies and the UK
through strategically important programmes such as AUKUS, as one
example. In order to grow resilience in its sovereign defence
industry, the Commonwealth also published its "Defence Industry
Development Plan". This sets out how government and industry will
work more closely on co-development, co-production and
co-sustainment of defence equipment and capability. The Plan
further sets out how the Commonwealth will provide more support to
defence exports and to grow the role of Australian suppliers in the
global defence supply chain through an expanded "Global Supply
Chain Program".
Strategic progress
The Australian Government's
selection of BAE Systems and ASC Pty Ltd to build Australia's new
fleet of nuclear powered submarines is the latest significant
development in the AUKUS trilateral security pact between
Australia, the UK and the US. Under the AUKUS agreement, Australia
and the UK will operate a common submarine of the future,
incorporating technology from all three nations, based on the UK's
next-generation design. We will now combine our complementary
skills, expertise and capabilities with ASC Pty Ltd under a
collaborative arrangement in Australia, ultimately leading to the
establishment of an incorporated joint venture.
We continue to make progress on
GCAP following the treaty between the UK,
Japan and Italy. As the UK's national lead on the programme, we
have begun to establish a pathway for sharing knowledge and
technology between the nations. This partnership will foster
innovation and technological advancements, as well as safeguarding
the future of our national combat air industry. A new concept model
of the next-generation combat aircraft, being developed by GCAP,
was unveiled at the Farnborough International Airshow in July. This
will be known as Tempest in the UK.
On 16 February, we completed the
acquisition of Ball Aerospace and renamed the business Space &
Mission Systems (SMS). The SMS business is reported in our
Electronic Systems sector. The integration programme is underway
and the business has secured a number of key contracts in the first
half of the year. There were successful launches of multiple
satellites with BAE Systems-built instruments: MethaneSAT will
provide reliable scientific data about the sources and scale of
methane emissions globally to help drive reductions in the future;
and the Weather System Follow-on - Microwave (WSF-M) satellite will
bridge critical gaps in current space-based environmental
monitoring capabilities for the US Space Force. We have established
synergy work streams to identify the most promising areas for
technology collaboration, new business partnerships and
opportunities for collaboration on existing platforms. Whilst still
early in the process, there are many long-term strategic
opportunities to secure.
Operational performance
Overall operational performance
was strong across all Sectors in the first half of the year. Some
of the notable milestones achieved include:
·
ramp up of CV90 production in our Swedish combat
vehicle business;
·
further deliveries of two Typhoon aircraft to
Qatar - with 20 now in service;
·
our Eagle Passive Active Warning Survivability
System successfully completed initial operational test and
evaluation;
·
SMS saw the launch of MethaneSAT, a programme the
team has been working on for many years;
·
official naming of the Sixth Astute class
submarine, Agamemnon; and
·
Hunter Class Frigate Programme entered the
construction phase with the official steel cut ceremony on the
first ship.
Our government customers have
provided a significant amount of BAE Systems produced equipment to
Ukraine and we remain closely engaged with our customers to provide
effective ongoing support, including through a new contract with
the UK Ministry of Defence to maintain and repair gifted L119 Light
Guns in Ukraine.
Evolving the business for long-term growth
Our focus on technology continues
to be aligned with the national defence strategies of our major
markets as our customers address the evolving global threat
environment. We expect self-funded R&D to rise with investments
in high-technology areas - including electronic warfare, autonomy,
laser-guided weapons, counter UAS, synthetic training,
electrification applications and space solutions.
In support of our growth outlook
and to help meet our customer aspirations, we are investing in our
people, facilities and technology. In the UK, we have made progress
against our 2024 target to recruit 2,700
graduates and apprentices.
Capital expenditure is expected to
rise compared to 2023 - focused on maritime, munitions and our
Swedish combat vehicle production capacity and capabilities. These
investments are all included within our rolling three-year cash
guidance.
Alongside our organic technology
investment strategy, we also continue to evolve our portfolio with
a focus on high-end technologies which we believe will be highly
relevant and will drive higher growth. In the first half of the
year, we have:
·
completed the acquisition of Ball Aerospace and
formed our SMS business in the US, significantly enhancing our
presence in the growing space market;
·
completed the acquisitions of Malloy Aeronautics
Ltd and Callen-Lenz Associates Ltd in the UK to significantly
strengthen our capabilities in UAS. These two businesses will sit
within FalconWorks®, our Air sector technology hub;
and
·
reduced our stake in Air Astana.
2024 half-year financial performance
We have delivered a strong set of
half-year financial results which underpins confidence in our
upgraded guidance for the full year.
On a constant currency basis,
sales growth was 13% with all sectors delivering sales growth in
the first half and including the benefit from the acquisition of
the SMS business in February.
Revenue growth in the first half
of the year was up 13% on a reported currency basis, reflective of
the same drivers behind the increase in sales for the period,
excluding the performance of MBDA and other equity accounted
investments.
Underlying EBIT was up 13% to
£1,393m, and underlying earnings per share was up 7% to 31.4p, both
on a constant currency basis. This was driven by the acquisition of
the SMS business alongside strong programme execution across the
portfolio.
Operating profit increased 5% to
£1,296m on a reported currency basis. The growth in underlying EBIT
was offset by the increase in amortisation of acquired intangibles
in the period.
Growth of 7%, on a constant
currency basis, in underlying EPS is after the increase in
underlying net finance costs, incurred primarily as a result of the
$4.8bn (£3.8bn) debt finance raised in March, and the increased tax
rate.
We closed the half-year with a
strong balance sheet, featuring a cash position of £2.8bn, net debt
(excluding lease liabilities) of £6.1bn, following the $4.8bn
(£3.8bn) of debt financing raised in March, and a net pension
position in an accounting surplus of £0.6bn.
We have a record order backlog of
£74.1bn, after order intake of £15.1bn and the acquisition of
£2.2bn of order backlog from the SMS business in the first half of
the year. Details of other awards in the period are included in the
segmental reviews on pages 14 to 24. Significant orders in the
period included:
·
a £4.6bn contract in Australia to deliver three
frigates under Batch 1 of the Hunter Class Frigate
Programme;
·
combat vehicle orders for CV90 in excess of
£0.8bn in our Hägglunds business, including a contract with the Swedish
Government to provide new-build CV90s to replenish the Swedish
Army's fleet; and
·
multiple domestic and export orders in MBDA,
including enhancements to Italian air defence systems.
Our Environmental, Social and Governance (ESG)
agenda
Global events have demonstrated
the need for strong defence and security in the face of aggression
by nation states. At BAE Systems, we provide critical capabilities
and support to our government customers and their allies to fulfil
their primary obligations to keep citizens safe, as well as
providing important economic and social contributions through the
provision of sustainable high-quality jobs.
In 2024, we are driving
sustainability actions to deliver on our business priorities and
continue to monitor performance through benchmarking, regulatory
screening and engagement. We are making good progress around our
work stream of building climate resilience. In the UK, our
renewable energy strategy is now in place to deliver 100% renewable
electricity by 2030. In support of creating opportunities for our
people and communities, we now have a record number of apprentices,
graduates and undergraduates in the business.
Our business foundations are built
on maintaining rigorous standards of governance and assurance and,
in 2024, we have refreshed our Code of Conduct and further deployed
our responsible supplier principles. These strong foundations of
business conduct are vital to deliver the wider business objectives
of continued success through partnering, collaboration and
innovation with suppliers, customers and research
institutes.
Outlook
We have strong visibility to
deliver on our value compounding model and our half-year results
underpin that confidence. We see significant potential in the years
ahead due to:
·
our continued focus on operational excellence
underpinned by a robust operating model;
·
continued investment in the business to support
future growth;
·
a large order backlog providing the foundation
for growth over the medium term;
·
leading technology solutions for our
customers;
·
the strength of our diversity across geographies
and technology;
·
our global opportunity pipeline to further
enhance growth;
·
scope to drive further margin expansion;
and
·
our strong balance sheet with good cash
generation, supporting value-enhancing capital
allocation.
Group financial review
Group income statement
As defined by Group1
|
|
|
As derived from IFRS
|
|
|
|
Six months
ended
30 June
2024
£m
|
Six
months ended
30 June
2023
£m
|
|
|
|
Six months
ended
30 June
2024
£m
|
Six
months ended
30 June
2023
£m
|
|
Sales
|
|
13,399
|
12,018
|
|
|
Revenue
|
12,477
|
10,997
|
|
Return on sales
|
10.4%
|
10.5%
|
|
|
Return on revenue
|
10.4%
|
11.2%
|
|
Underlying EBIT
|
|
1,393
|
1,258
|
|
|
Operating profit
|
1,296
|
1,233
|
|
Underlying net finance
costs
|
(180)
|
(111)
|
|
|
Net finance costs
|
(133)
|
(35)
|
|
Underlying tax expense
|
(225)
|
(206)
|
|
|
Tax expense
|
(175)
|
(193)
|
|
Underlying profit for the
period
|
988
|
941
|
|
|
Profit for the period
|
988
|
1,005
|
|
Attributable to:
|
|
|
|
|
Attributable to:
|
|
|
|
Equity shareholders
|
948
|
901
|
|
|
Equity shareholders
|
948
|
965
|
|
Non-controlling
interests
|
40
|
40
|
|
|
Non-controlling
interests
|
40
|
40
|
|
|
|
|
|
|
|
|
|
|
| |
1. The purposes and definitions of
non-GAAP measures are provided in the Alternative performance
measures section on page 46.
2. Current period compared with
prior period translated at current period exchange rates. The
comparatives have not been restated.
As defined by Group
Sales for the period were
£13.4bn (2023 £12.0bn) representing growth, on a constant currency
basis2, of 13% with all sectors delivering growth in the
period. The growth includes the effect of the SMS acquisition from
February.
Electronic Systems recorded sales
of £3.4bn (2023 £2.6bn), equating to growth of 34% on a constant
currency basis. This was driven by the acquisition of the SMS
business and organic growth of 11% in the underlying business, led
by the precision strike & sensing and commercial avionics
businesses.
Our Platforms & Services
sector posted sales of £2.1bn (2023 £1.9bn), with growth of 13% on
a constant currency basis, driven by increased vehicle production
in our Hägglunds and Combat Mission Systems businesses.
Our Air sector recorded sales of
£4.0bn (2023 £3.8bn), representing growth of 7% on a constant
currency basis. The sector saw increased activity on support
programmes and MBDA. This was offset by a reduced contribution from
the Qatar Typhoon programme as deliveries
complete.
Maritime recorded sales of £2.9bn
(2023 £2.6bn), which was an increase of 14% on a constant currency
basis, primarily due to increased activity on the Hunter Class
Frigate Programme.
Sales in the Cyber &
Intelligence sector increased by 4% on a constant currency basis,
to £1.2bn
(2023 £1.2bn).
Underlying EBIT was up 13%,
on a constant currency basis, to £1,393m (2023 £1,258m).
Our Electronic Systems sector grew
underlying EBIT to £473m (2023 £391m), an increase of 24% on a
constant currency basis. The growth in underlying EBIT reflected
the acquisition of SMS and organic growth in the underlying
business. As anticipated, the lower return on sales of 14.0% (2023
15.1%) reflected the impact of the SMS acquisition and the
anticipated absorption of lower pension recoveries
(FAS/CAS).
Platforms & Services reported
underlying EBIT of £216m (2023 £172m), an increase of 29% on a
constant currency basis, with the return on sales increasing to
10.4% (2023 9.1%). The growth reflected the strong operational
performance in our Hägglunds and Combat Mission Systems
businesses.
Our Air sector reported underlying
EBIT of £446m (2023 £454m), a return on sales of 11.1% (2023
12.0%). This reflected good operational performance, with the
comparative period benefitting from risk retirement.
The Maritime sector reported
underlying EBIT of £228m (2023 £193m) in line with the growth in
sales, generating a return on sales of 7.8% (2023 7.4%).
Reconciliation of underlying EBIT to operating
profit
|
|
Six months
ended
30 June
2024
£m
|
Six
months
ended
30
June
2023
£m
|
Underlying EBIT
|
|
1,393
|
1,258
|
Adjusting items
|
|
46
|
48
|
Amortisation of programme,
customer-related and other intangible assets and impairment of intangibles
|
|
(143)
|
(56)
|
Net finance income of equity
accounted investments
|
|
26
|
2
|
Tax expense of equity accounted
investments
|
|
(26)
|
(19)
|
Operating profit
|
|
1,296
|
1,233
|
Adjusting items totalled a
net gain of £46m (2023 £48m). During the period, the Group realised
a profit on the sale of its partial shareholding in Air Astana of
£75m and recognised a settlement gain of £13m on a US pension
buy-out. This was offset by £42m of acquisition-related costs,
primarily in relation to Ball Aerospace. The comparative period
comprised a settlement gain on a US pension annuity buy-out of
£51m, offset by charges relating to historical acquisitions and
disposals of £3m.
Amortisation of programme, customer-related and other
intangible assets and impairment of intangibles
resulted in a charge of £143m (2023 £56m), with
£86m relating to amortisation of intangibles acquired with the SMS
business.
Underlying net finance costs were £180m (2023 £111m), an increase of £69m largely
reflecting the additional interest expense on the $4.8bn (£3.8bn)
of debt financing raised during the period, of which $4.0bn
(£3.2bn) was used to fund the Ball Aerospace
acquisition.
Underlying tax expense of
£225m (2023 £206m) was an increase of £19m, reflecting the higher
underlying pre-tax profits and a marginal increase in the
underlying effective tax rate to 19%
(2023 18%).
As derived from IFRS
Revenue was £12.5bn (2023
£11.0bn), with growth during the period of 13% on a reported
currency basis, reflective of the same drivers behind the increase
in sales for the period.
Operating profit increased 5%
to £1,296m (2023 £1,233m), on a reported currency basis. On an
operating sector basis, this reflected the same drivers as the
growth in underlying EBIT. This growth was offset by adjusting
items and amortisation of programme, customer-related and other
intangible assets, details of which are provided in the sections
above.
Net finance costs were £133m
(2023 £35m), an increase of £98m also as a result of additional
interest costs incurred from the $4.8bn (£3.8bn) of debt financing
raised during the period.
Tax expense of £175m (2023
£193m) was a decrease of £18m and reflects an effective tax
rate
of 15% (2023 16%), which excludes the Group's share of tax expense
in our equity accounted investments after which the effective tax
rate was 17% (2023 17%).
Earnings per share (EPS)
As defined by Group1
|
|
Six months ended
30 June
2024
|
Six
months
ended
30 June
2023
|
Underlying profit for the period
attributable to equity shareholders
|
|
£948m
|
£901m
|
Underlying EPS - basic
|
|
31.4p
|
29.6p
|
As derived from IFRS
|
|
Six months ended
30 June
2024
|
Six
months
ended
30 June
2023
|
Profit for the period attributable
to equity shareholders
|
|
£948m
|
£965m
|
EPS - basic
|
|
31.4p
|
31.8p
|
1. The
purposes and definitions of non-GAAP measures are provided in the
Alternative performance measures section on page 46.
2. Current
period compared with prior period translated at current period
exchange rates. The comparatives have not been restated.
As defined by Group
Underlying EPS - basic increased to 31.4p (2023 29.6p), 7% on a constant currency
basis2. This is largely driven by the improved
underlying profit for the period as a result of the strong
operational performance across the portfolio and the acquisition of
the SMS business in February.
As derived from IFRS
EPS - basic decreased 1% to
31.4p (2023 31.8p) with the gain in underlying profit being offset
by amortisation on the intangibles acquired with SMS in the
period.
Cash flow
As defined by Group1
|
|
Six months
ended
30 June
2024
£m
|
Six
months
ended
30 June
2023
£m
|
Free cash flow
|
|
219
|
1,070
|
Operating business cash
flow
|
|
474
|
1,307
|
As derived from IFRS
|
|
Six months
ended
30 June
2024
£m
|
Six
months
ended
30 June
2023
£m
|
Net cash flow from operating
activities
|
|
757
|
1,484
|
Net cash flow from investing
activities
|
|
(4,569)
|
(129)
|
Net cash flow from financing
activities
|
|
2,583
|
(1,200)
|
Net (decrease)/increase in cash
and cash equivalents
|
|
(1,229)
|
155
|
Cash and cash equivalents at 1
January
|
|
4,067
|
3,107
|
Effect of foreign exchange rate
changes on cash and cash equivalents
|
|
(7)
|
(58)
|
Cash and cash equivalents at 30
June
|
|
2,831
|
3,204
|
1. The purposes and definitions of
non-GAAP measures are provided in the Alternative performance
measures section on page 46.
As defined by Group
Free cash flow of £219m (2023
£1,070m) was a decrease of £851m on the prior period.
Operating business cash flow of £474m (2023 £1,307m) was a decrease of £833m on the prior
period.
Both reflect the decrease in
customer advances as reflected in net cash flow from operating
activities described below.
As derived from IFRS
Net cash flow from operating activities
was an inflow of £757m (2023 £1,484m), a decrease
of £727m on the prior period. Although the Group saw increased
profitability in the six months to 30 June 2024, the comparative
period included a high level of customer advances in the Air and
Platforms & Services sectors, reflecting timing of orders and
the significant order intake.
Net cash flow from investing activities
was an outflow of £4,569m (2023 £129m). The
acquisition of subsidiaries, including Ball Aerospace, has
accounted for a net cash outflow of £4,536m. This is offset by cash
proceeds of £166m from the partial sale of the Group's shareholding
in Air Astana. There was no significant M&A activity in the
comparative period.
Net cash flow from financing activities
was an inflow of £2,583m (2023 outflow of
£1,200m). Cash returns to shareholders, through dividend and share
repurchases, of £812m (2023 £884m) were offset by the net proceeds
from debt financing raised in the period of £3,765m primarily to
fund the Ball Aerospace acquisition (2023 £166m net cash inflow
from a US private placement to fund the modern shiplift and
land-level repair complex at our Jacksonville, Florida shipyard in
the Platforms & Services sector).
The net cash outflow in respect of
derivative financial instruments was £25m (2023 £182m), reflective
of hedging against foreign exchange movements on the US
dollar-denominated borrowings.
Foreign exchange translation primarily arises in respect of the Group's US
dollar-denominated cash holdings.
Net debt (excluding lease liabilities)
Components of net debt (excluding lease
liabilities)
|
|
As at
30 June
2024
£m
|
As at
31
December
2023
£m
|
Cash and cash
equivalents
|
|
2,831
|
4,067
|
Debt-related derivative financial
instruments (net)
|
|
53
|
22
|
Loans - non-current
|
|
(8,234)
|
(4,432)
|
Loans - current
|
|
(738)
|
(679)
|
Net debt (excluding lease
liabilities)1
|
|
(6,088)
|
(1,022)
|
1. The
purposes and definitions of non-GAAP measures are provided in the
Alternative performance measures section on page 46.
Cash and cash equivalents of
£2,831m (2023 £4,067m) are held primarily for management of working
capital as well as the repayment of debt securities, pension
funding when required and committed shareholder returns. During the
period, the Group cash-settled $1.5bn (£1.2bn) of the $5.5bn
(£4.4bn) consideration for Ball Aerospace, with the balance funded
from debt raised during the period.
The Group's net debt (excluding lease
liabilities) at 30 June was £6,088m
(31 December 2023 £1,022m), a net increase of £5,066m from the
position at the start of the year. This was primarily as a result
of additional debt raised during the period of £3,765m, the
majority of which has been used to fund the Ball Aerospace
acquisition.
Other movements in net debt (excluding lease liabilities) comprised the
following:
Shareholder returns of £812m
(2023 £884m) reflected dividends of £562m (2023 £508m) and share
repurchases of £250m (2023 £376m). Dividends paid represented the
2023 final dividend (2023 represented the 2022 final dividend).
During the period to 30 June 2024, we repurchased 19,403,928 shares under the 2022 share buyback
programme (2023 40,460,554).
Other movements included
foreign exchange on the Group's US dollar-denominated cash and
borrowings, offset by their associated derivatives, and dividends
paid to non-controlling interests.
Exchange rates
|
Average
|
Period end
|
Year end
|
|
Six months
ended
30 June
2024
|
Six
months ended
30 June
2023
|
30 June
2024
|
30
June
2023
|
31
December
2023
|
£/$
|
1.265
|
1.233
|
1.264
|
1.271
|
1.275
|
£/€
|
1.170
|
1.141
|
1.180
|
1.165
|
1.154
|
£/A$
|
1.921
|
1.826
|
1.893
|
1.910
|
1.868
|
|
|
|
|
|
|
| |
Segmental review
The Group reports its performance
through six reporting segments.
|
As defined by
Group1
|
|
Six months ended 30 June
2024
|
Sales
£m
|
Underlying EBIT
£m
|
Return
on sales
%
|
Operating business cash flow3
£m
|
Order
intake
£bn
|
Order
backlog
£bn
|
|
Electronic Systems
|
3,383
|
473
|
14.0%
|
184
|
3.2
|
11.6
|
|
Platforms &
Services
|
2,085
|
216
|
10.4%
|
(13)
|
2.8
|
12.2
|
|
Air
|
4,009
|
446
|
11.1%
|
724
|
2.3
|
25.4
|
|
Maritime
|
2,929
|
228
|
7.8%
|
(247)
|
5.7
|
24.0
|
|
Cyber &
Intelligence
|
1,182
|
101
|
8.5%
|
16
|
1.2
|
1.9
|
|
HQ2
|
85
|
(71)
|
-
|
(190)
|
0.1
|
-
|
|
Deduct
Intra-group
|
(274)
|
-
|
-
|
-
|
(0.2)
|
(1.0)
|
|
Total
|
13,399
|
1,393
|
10.4%
|
474
|
15.1
|
74.1
|
|
|
As derived from
IFRS
|
Six months ended 30 June
2024
|
Revenue
£m
|
Operating profit
£m
|
Return
on revenue
%
|
Net cash
flow from operating activities
£m
|
Order
book
£bn
|
Electronic Systems
|
3,394
|
301
|
8.9%
|
264
|
8.2
|
Platforms &
Services
|
2,061
|
215
|
10.4%
|
83
|
11.7
|
Air
|
3,252
|
456
|
14.0%
|
697
|
16.3
|
Maritime
|
2,845
|
226
|
7.9%
|
(91)
|
23.1
|
Cyber &
Intelligence
|
1,182
|
97
|
8.2%
|
40
|
1.3
|
HQ2
|
5
|
1
|
-
|
(156)
|
-
|
Deduct
Intra-group
|
(262)
|
-
|
-
|
-
|
(1.0)
|
Deduct
Tax4
|
-
|
-
|
-
|
(80)
|
-
|
Total
|
12,477
|
1,296
|
10.4%
|
757
|
59.6
|
1. The purposes and definitions of
non-GAAP measures are provided in the Alternative performance
measures section on page 46.
2. HQ comprises the Group's head
office activities, together with a 17% interest in Air Astana as at
30 June 2024.
3. At a Group level, the key cash
flow metric is free cash flow (see Alternative performance measures
section on page 46). In 2024, free cash flow was £219m
(2023 £1,070m).
4. Tax is managed on a Group-wide
basis.
Segmental performance: Electronic Systems
Electronic Systems, with 22,6001 employees,
comprises the Group's US- and UK-based electronic solutions
business and the US-based Space & Mission Systems business. The
teams deliver electronic warfare systems, navigation systems,
electro-optical sensors, military and commercial digital engine and
flight controls, precision guidance and seeker solutions,
next-generation military communications systems and data links,
persistent surveillance capabilities, electric drive propulsion
systems, as well as space electronics, spacecraft and ground
systems.
Financial performance
Financial performance measures derived by
Group2
|
|
Financial performance measures derived from
IFRS
|
|
|
Six months
ended
30 June
2024
|
Six
months
ended
30 June
2023
|
|
|
Six months
ended
30 June
2024
|
Six
months
ended
30 June
2023
|
Sales
|
£3,383m
|
£2,583m
|
|
Revenue
|
£3,394m
|
£2,583m
|
Underlying EBIT
|
£473m
|
£391m
|
|
Operating profit
|
£301m
|
£386m
|
Return on sales
|
14.0%
|
15.1%
|
|
Return on revenue
|
8.9%
|
14.9%
|
Operating business
cash flow
|
£184m
|
£157m
|
|
Cash flow from
operating activities
|
£264m
|
£225m
|
Order intake
|
£3.2bn
|
£3.1bn
|
|
|
|
|
|
As at 30
June
2024
|
As at 31
December 2023
|
|
|
As at 30
June
2024
|
As at 31
December 2023
|
Order backlog
|
£11.6bn
|
£8.9bn
|
|
Order book
|
£8.2bn
|
£7.6bn
|
|
|
|
|
|
|
| |
-
Sales of £3.4bn reflected an increase of
34%3, driven by the acquisition of the SMS business and
organic growth of 11% in the underlying business which was led by
the precision strike & sensing and commercial avionics
businesses.
-
Underlying EBIT grew 24%3, generating
a return on sales of 14.0%. The growth in underlying EBIT reflects
the acquisition of SMS and the organic growth in the underlying
business. As expected, the lower return on sales reflected the
impact of the SMS acquisition and the anticipated absorption of
lower pension recoveries during the period (FAS/CAS).
-
Operating profit was down 22%, resulting in a
return on revenue of 8.9%, as the growth in underlying EBIT from
SMS was offset by acquisition-related costs and amortisation on the
acquired intangibles.
-
Order intake of £3.2bn includes orders of £0.7bn
awarded to the SMS business during the period. Order backlog of
£11.6bn includes £2.2bn of order book acquired with SMS in
February.
1.
Including share of equity accounted investments.
2. The
purposes and definitions of non-GAAP measures are provided in
the Alternative performance measures
section on page 46.
3.
Constant currency basis.
Operational performance
We continued to experience strong
demand across our customer base for Electronic Systems in the first
half of the year as evidenced by our order generation. We supported
existing customers on key electronic warfare and precision
guided-munition programmes, while pursuing and maturing new
opportunities.
On 16 February 2024, we completed
the Ball Aerospace acquisition to form our SMS business, which
delivers a range of products and differentiated technologies for
civil, commercial, and defence applications, including world-class
instruments, spacecraft, tactical hardware, ground systems, data
exploitation solutions and mission-enabling technologies for the US
Intelligence Community, Department of Defense, and civilian space
markets. In SMS, the integration remains a top priority and is
progressing at pace, as the team is on track to separate from the
Transition Services Agreements with Ball Corporation before
year-end.
In our commercial businesses,
airline traffic has returned to pre-pandemic levels, generating
stronger demand for aftermarket services. However, headwinds exist
in Original Equipment Manufacturer demand schedules as airframe
manufacturers address supply chain issues. Clean air regulations
continue to drive the transportation industry towards alternative
energy sources, like our propulsion solutions and energy storage
and power management developments for more-electric and
hybrid-electric aircraft.
Operational highlights
·
We are under contract to deliver seven Network
Tactical Common Datalink production systems to support US Navy
requirements for real time intelligence, surveillance,
reconnaissance, and command and control. After completing the
development programme phase in 2023, we have successfully delivered
our first system to the US Navy for installation on one of its
aircraft carriers.
·
The Compass Call programme is executing
contracts, inclusive of international support. Valued at more than
$1bn (£0.8bn) focused on the cross-decking of prime mission
equipment to the new EA-37B aircraft, while sustaining and
upgrading the existing EC-130H fleet. The next-generation system
evolves the US Air Force's electromagnetic attack capabilities and
is targeted to initially field in 2024.
·
The F-35 Lightning II programme is delivering on
Lot 16 electronic warfare (EW) systems and has delivered a
cumulative total of over 1,400 EW systems.
·
The Eagle Passive Active Warning Survivability
System successfully completed initial operational test and
evaluation in the first half of 2024.
·
The APKWS® laser-guidance kit
programme continues to execute production under an Indefinite
Delivery, Indefinite Quantity contract with more than 7,300 units
shipped in the first half of the year.
·
Our SMS team marked the launches of satellites
with our systems on board, including MethaneSAT that will provide
reliable scientific data about the sources and scale of methane
emissions globally, and the Weather System Follow-on - Microwave
(WSF-M) satellite that will bridge critical gaps in current
space-based environmental monitoring capabilities for the US Space
Force.
Strategic and order highlights
·
Our Dual Band Decoy team was selected by the US
Navy to develop one of the most advanced radio frequency (RF)
countermeasures in the world. The cutting-edge RF self-protection
jammer will initially be fielded on the US Navy's F/A-18E/F Super
Hornet.
·
Following a rapid-response contract and
demonstration in 2021 with the US Navy, our Advanced Survivability
Pod team received an engineering and manufacturing development
(EMD) contract from the US Navy worth $95m (£75m) for advanced
countermeasure pods to protect the P-8A Poseidon Multi-Mission
Maritime Aircraft from missiles and other threats. This award
builds on our platform survivability portfolio that uses the full
electromagnetic spectrum to detect, exploit, and counter advanced
threats.
·
We have signed a memorandum of understanding with
Eaton to expand collaboration and deliver electric drive solutions
for heavy-duty commercial vehicles. In addition, we signed a
long-term partnership agreement with bus manufacturer, GILLIG,
supplying our electric drive technology to power GILLIG's new
hydrogen fuel cell transit buses, enabling emissions-free
operations.
·
After receiving two new contracts in May on the
National Oceanic and Atmospheric Administration's (NOAA)
Geostationary Extended Observations (GeoXO) satellite
constellation, we are now contracted to build all three
hyperspectral instruments for the mission, including the Ocean
Color Instrument, the Atmospheric Composition Instrument, and the
GeoXO Sounder awarded in September 2023. The three GeoXO contracts
total approximately $1.3bn (£1.0bn) and are scheduled to launch in
the early 2030s, as NOAA's current geostationary weather satellites
near the end of their planned mission.
Looking forward
·
Our Electronic Systems sector remains positioned
for growth in the medium term. We maintain a diverse portfolio of
defence and commercial products and capabilities for US and
international customers and expect to benefit from applying
innovative technology solutions to defence customers' existing and
changing requirements, building on our significant roles on
F-35 Lightning II, F-15 upgrades, M-Code GPS upgrades and
classified programmes, as well as a number of precision
weapon products.
·
Over the long term, we are poised to build on our
technology strengths in emerging areas of demand, including
precision weaponry, space resilience, hyper-velocity projectiles,
autonomous platforms, and the development of multi-domain
capabilities.
·
In our commercial portfolio, we continue to
leverage our leading electric drive propulsion capabilities to
address growing demand for low and zero emission solutions across
an increasing number of civil platforms, with opportunities to
migrate these technologies to defence applications.
·
In SMS, we continue to secure new awards and grow
our strong space portfolio in alignment with the priorities
identified in the US National Defense Strategy and the US
Intelligence Strategy. We are also taking steps to capture new
opportunities and unlock synergies in collaboration with our other
business segments.
Segmental performance: Platforms &
Services
Platforms & Services, with 11,9001 employees,
with operations in the US, Sweden and UK, manufactures and
upgrades combat vehicles, weapons and munitions, and delivers
services and sustainment activities, including naval ship repair
and the management and operation of two government-owned ammunition
plants.
Financial performance
Financial performance measures derived by
Group2
|
|
Financial performance measures derived from
IFRS
|
|
|
Six months
ended
30 June
2024
|
Six
months
ended
30 June
2023
|
|
|
Six months
ended
30 June
2024
|
Six
months
ended
30 June
2023
|
Sales
|
£2,085m
|
£1,891m
|
|
Revenue
|
£2,061m
|
£1,864m
|
Underlying EBIT
|
£216m
|
£172m
|
|
Operating profit
|
£215m
|
£172m
|
Return on sales
|
10.4%
|
9.1%
|
|
Return on revenue
|
10.4%
|
9.2%
|
Operating business
cash flow
|
£(13)m
|
£21m
|
|
Cash flow from
operating activities
|
£83m
|
£95m
|
Order intake
|
£2.8bn
|
£4.1bn
|
|
|
|
|
|
As at 30
June
2024
|
As at 31
December 2023
|
|
|
As at 30
June
2024
|
As at 31
December 2023
|
Order backlog
|
£12.2bn
|
£11.5bn
|
|
Order book
|
£11.7bn
|
£11.1bn
|
|
|
|
|
|
|
| |
-
Sales were £2.1bn, an increase of 13%3
driven by increased vehicle production in our Hägglunds and Combat
Mission Systems businesses.
-
Underlying EBIT grew 29%3, reflecting
a return on sales of 10.4%, following a period of strong
operational performance.
-
Order intake was £2.8bn for the period,
reflecting continued demand for AMPVs and CV90s. The comparative
period saw significant demand for combat vehicles and included a
number of large awards including the Czech Republic award for 246
CV90s worth $2.2bn (£1.8bn).
1.
Including share of equity accounted investments.
2. The
purposes and definitions of non-GAAP measures are provided in
the Alternative performance measures
section on page 46.
3.
Constant currency basis.
Operational performance
Our customers continue to
prioritise defence spending to enhance and replenish capabilities
and manage sustainment of their defence materiel as ongoing global
uncertainty and conflicts continue. Our business remains focused on
meeting growing customer demand for our products and services,
including munitions, tracked combat vehicles, artillery systems and
support services.
In the US, our Combat Mission
Systems team continues to produce at heightened volumes across
multiple combat vehicle and naval programmes. This work is carried
out across our manufacturing network, with support from our
engineering teams across the US. Our ongoing production expansion
efforts continue, with investment in advanced manufacturing
technologies to ensure we are able to deliver at the pace our
customers need. This includes investment in robotic welding
capability, test and integration, paint, and high-precision
machining.
Our BAE Systems Hägglunds team is
growing its order backlog with additional awards for our CV90
combat vehicles for Sweden and partner nations. Ongoing builds and
upgrades continue for the current fleet of CV90s for a number of
nations.
In our support services
operations, modernisation and maintenance activities continue in
our US shipyards for the US Navy's non-nuclear fleet. We are also
working with the US Government to finalise its first significant
order under a new 10-year contract for the US Army's Holston Army
Ammunition Plant and we continue to operate and modernise the
Radford Army Ammunition Plant under contract into 2026.
Operational highlights
·
Our US Army customer continues to grow its fleet
of AMPVs, which we are now delivering in five variants. In
addition, the AMPV team designed and integrated a new universal top
plate for the vehicle, which provides flexibility to quickly
integrate new mission equipment based on an assigned role. The US
Marine Corps is also growing its fleet of ACVs, which had its first
successful operational deployment in the first
half.
·
Our Hägglunds team is expanding production and
delivery capabilities by investing more than $200m (£160m) in
advanced manufacturing capabilities, a new customer test and
acceptance centre and office space.
·
We continue to progress a modern shiplift and
land-level repair complex at our Jacksonville, Florida, shipyard
that is expected to be operational in early 2025. While recent
developments show US Navy ship repair requirements are stabilising,
we have continued to operate at a scaled-back level at our San
Diego shipyard in response to reduced demand for Pacific-coast ship
repair services.
Strategic and order highlights
·
Our Hägglunds business received a new order for
CV9035 MkIIIC vehicles, as well as associated integrated logistic
support for the Swedish Army. In addition, the Swedish Government
signed a framework agreement with Denmark to deliver new CV90s for
the Danish Army and Sweden is procuring more new-build CV90
vehicles to expand Ukraine capabilities. The new contract will
provide the opportunity for other nations to join in the
procurement of CV90 MkIIICs.
·
We secured a $754m (£596m) Year 2 order from the
US Army for AMPV, as the programme entered into full-rate
production.
·
Our Combat Mission Systems team also secured a
five-year contract, valued up to $318m (£251m), from the US Army to
perform technical and sustainment support services for its fleet of
M109A6 and A7 Self-Propelled Howitzers and their companion, M992A3
carrier, ammunition, tracked vehicles.
·
The US Navy awarded our Norfolk Ship Repair yard
an $87m (£69m) contract for repair work aboard the dock landing
ship USS Carter Hall (LSD 50).
·
In March, our Hägglunds business signed a
framework agreement with the Danish Ministry of Defence Acquisition
and Logistics Organisation to provide repair and maintenance
services for the Danish Army's CV90s over a 15-year period, worth
approximately $355m (£281m) including options. Hägglunds also
received a contract from Denmark for the Mid-Life Upgrade of 44
CV9035 vehicles at a value of $300m (£237m).
·
The UK Ministry of Defence has awarded a contract
to our Weapon Systems UK business to provide Maintenance, Repair
and Overhaul (MRO) services in Ukraine for the L119 gun through a
partnership with a British maintenance specialist already
delivering MRO services in the country.
Looking forward
·
We continue to focus on increased long-term
demand from US and international customers. We remain a critical
provider of US Army combat vehicles with our current franchises of
AMPV, M109A7, M88 and additional Bradley infantry fighting vehicles
and are experiencing increased international interest in these
products.
·
In Sweden, we have an ongoing pipeline of future
business opportunities for the CV90 and BvS10 from our Hägglunds
business, as well as for artillery systems and munitions from our
Bofors business.
·
We continue to manage and operate the US Army's
Radford and Holston ammunition plants and remain focused on key
modernisation activities.
·
We are maintaining our strong positions on naval
guns, missile launch programmes and submarine programmes, as well
as US Navy ship repair and modernisation activities where the
business has invested in capitalised infrastructure and facilities
in key home ports.
Segmental performance: Air
Air, with 26,7001 employees, comprises the Group's
UK‑based air build and support activities for European and
international markets, US programmes, development of our Future
Combat Air Systems and FalconWorks®, alongside our
business in the Kingdom of Saudi Arabia and interests in our
European joint ventures: Eurofighter and MBDA.
Financial performance
Financial performance measures derived by
Group2
|
|
Financial performance measures derived from
IFRS
|
|
|
Six months
ended
30 June
2024
|
Six
months
ended
30 June
2023
|
|
|
Six months
ended
30 June
2024
|
Six
months
ended
30 June
2023
|
Sales
|
£4,009m
|
£3,786m
|
|
Revenue
|
£3,252m
|
£3,054m
|
Underlying EBIT
|
£446m
|
£454m
|
|
Operating profit
|
£456m
|
£456m
|
Return on sales
|
11.1%
|
12.0%
|
|
Return on revenue
|
14.0%
|
14.9%
|
Operating business
cash flow
|
£724m
|
£1,330m
|
|
Cash flow from
operating activities
|
£697m
|
£1,307m
|
Order intake
|
£2.3bn
|
£8.4bn
|
|
|
|
|
|
As at 30
June
2024
|
As at 31
December 2023
|
|
|
As at 30
June
2024
|
As at 31
December 2023
|
Order backlog
|
£25.4bn
|
£27.2bn
|
|
Order book
|
£16.3bn
|
£18.5bn
|
|
|
|
|
|
|
| |
-
Sales were £4.0bn, an increase of 7%3
reflecting increasing activity on support programmes and MBDA. This
is offset by a reduced contribution from the Qatar Typhoon
programme as deliveries complete.
-
Return on sales of 11.1% reflected good
operational performance, with the comparative period benefitting
from risk retirement.
-
Operating business cash flow was £0.7bn. The
comparative period reflected customer advances and down payments
from the significant level of awards in the first half of 2023
including agreement of a further five-year Salam Typhoon support
contract, valued at £3.7bn, as well as multiple awards in MBDA
across both the import and export markets.
1.
Including share of equity accounted investments.
2. The
purposes and definitions of non-GAAP measures are provided in
the Alternative performance measures
section on page 46.
3.
Constant currency basis.
Operational performance
We continue to work with our UK
and international customers to support their existing platforms and
provide new enhanced capabilities. We made further deliveries of
Typhoon aircraft to Qatar. Our US Programmes division remains
focused on delivery execution across all production lines. Our
Future Combat Air and FalconWorks® organisations
continue to invest in our people, facilities and cutting-edge
technologies.
Operational highlights
·
In the Kingdom of Saudi Arabia, we have continued
to deliver services under the five-year Saudi British Defence
Co-operation Programme and Salam Programme including our support to
the Royal Saudi Air Force's Tornado and Typhoon fleets.
·
Activity on our Qatar Typhoon and Hawk programmes
continued with two further Typhoon deliveries in the first half of
the year - a total of 20 Typhoon aircraft are now in service with
the Qatar Emiri Air Force.
·
In the first half, we continued to make good
progress on discussions with our Japanese and Italian partners on
GCAP. We also continued developing the UK flying combat air
demonstrator, which will test next-generation skills, tools,
processes and techniques needed to underpin GCAP and the entry into
service of the core aircraft platform, which will be called Tempest
in the UK, by 2035. At Farnborough International Airshow we
unveiled a new concept model of the next-generation combat
aircraft.
·
Through FalconWorks®, our Air sector
continues to invest in promising new and innovative technologies
for the future, including the development of uncrewed systems in
collaboration across industry.
Strategic and order highlights
·
We have sustained production of the rear fuselage
assemblies for the F-35 at full-rate levels at our Samlesbury site
in the UK, with approximately 150 aft fuselages being completed
annually. We have agreed pricing with Lockheed Martin for F-35
production lots 18/19, supporting the continuation of Major Unit
production deliveries at Samlesbury into 2027.
·
On GCAP, concept and assessment work continues
with our international partners in all three nations under their
respective national contracts.
·
During the first half of 2024, we completed the
acquisitions of Malloy Aeronautics Ltd and Callen-Lenz Associates
Ltd, strengthening the position of the Group in the fixed wing and
rotary UAS domains.
·
MBDA secured significant orders in the first half
of 2024, in particular in the Air Defence domain. These include
production orders for ASTER missiles for the Italian Armed Forces,
Patriot GEM-T missiles (under the European Sky Shield Initiative
via the COMLOG Joint Venture) for the NATO Support and Procurement
Agency and an expansion of Sea Ceptor with the Common Anti-Air
Module Missile to include Polish, Swedish and Kingdom of Saudi
Arabian navies.
Looking forward
·
GCAP is a strategically important partnership
that will foster innovation, technological advancements and
safeguard long-term industrial capability to design, develop,
manufacture and maintain combat aircraft and the wider systems
within which they will operate in the UK.
·
We will continue to focus on ensuring that
deliveries of Typhoon aircraft and support are made in line with
agreed customer milestones on our existing contracts. Current
Typhoon production and support sales are underpinned by existing
contracts and we continue to pursue a number of export
opportunities in Europe and the Middle East to extend production
beyond the latter part of this decade.
·
We expect production of the rear fuselage
assemblies for the F-35 to be sustained at current levels. The
business plays a significant role in the F-35 sustainment programme
in support of Lockheed Martin and support volumes should increase
as the number of jets in service continues to rise.
·
In the Kingdom of Saudi Arabia, the In-Kingdom
Industrial Participation programme continues to make good progress
consistent with our long-term strategy, whilst supporting the
Kingdom's National Transformation Plan and Vision 2030. A
demonstration of this long-term strategy and commitment took place
at the World Defense Show in Riyadh in February 2024, at which the
Royal Saudi Air Force conducted an official acceptance ceremony,
attended by key personnel from our customer and stakeholder
community, for the final in-Kingdom manufactured Hawk
Aircraft.
·
We expect our Saudi in-Kingdom support business
to remain stable underpinned by long-standing contracts that are
anticipated to be renewed every five years, while we continue to
address the Kingdom's current and future combat air
requirements.
·
Our FalconWorks® organisation will
continue to pursue internal and external investment opportunities
which enhance our capabilities and technologies.
·
MBDA has a strong order backlog and development
programmes continue to improve the long-term capabilities of the
business in air, land and sea domains. MBDA continues to be well
placed to benefit from increased defence spending in Europe and
internationally.
Segmental performance: Maritime
Maritime, with 28,5001 employees, comprises the
Group's UK‑based maritime and land activities, including major
submarine, ship build and support programmes, as well as our
Australian business.
Financial performance
Financial performance measures derived by
Group2
|
|
Financial performance measures derived from
IFRS
|
|
|
Six months
ended
30 June
2024
|
Six
months
ended
30 June
2023
|
|
|
Six months
ended
30 June
2024
|
Six
months
ended
30 June
2023
|
Sales
|
£2,929m
|
£2,603m
|
|
Revenue
|
£2,845m
|
£2,541m
|
Underlying EBIT
|
£228m
|
£193m
|
|
Operating profit
|
£226m
|
£192m
|
Return on sales
|
7.8%
|
7.4%
|
|
Return on revenue
|
7.9%
|
7.6%
|
Operating business
cash flow
|
£(247)m
|
£(79)m
|
|
Cash flow from
operating activities
|
£(91)m
|
£37m
|
Order intake
|
£5.7bn
|
£4.2bn
|
|
|
|
|
|
As at 30
June
2024
|
As at 31
December 2023
|
|
|
As at 30
June
2024
|
As at 31
December 2023
|
Order backlog
|
£24.0bn
|
£21.3bn
|
|
Order book
|
£23.1bn
|
£20.4bn
|
|
|
|
|
|
|
| |
-
Sales of £2.9bn were up 14%3,
primarily due to increased activity on the Hunter Class Frigate
Programme (HCFP).
-
Underlying EBIT was up 19%3, in line
with the growth in sales, generating a return on sales of 7.8%
(2023 7.4%).
-
Operating business cash outflow of £247m was due
to the ongoing capital investment programmes across a number of
sites including the Ship Build Assembly Hall in Glasgow and our
munitions facilities in Glascoed, combined with timing of receipts
and payments.
-
Order intake of £5.7bn has pushed order backlog
to £24.0bn, primarily driven by the award of £4.6bn for Batch 1 of
the HCFP.
1.
Including share of equity accounted investments.
2. The
purposes and definitions of non-GAAP measures are provided in
the Alternative performance measures
section on page 46.
3.
Constant currency basis.
Operational performance
Our major Maritime platform
programmes continue to progress, with construction of the first
three Dreadnought Class submarines and the final two Astute Class
submarines continuing at Barrow-in-Furness. Construction on the
first four City Class Type 26 frigates is underway with the fifth
ship currently forecast to commence construction later this year.
In Australia, the HCFP has transitioned to the construction phase.
We continue to support customer requirements in both Munitions and
Maritime Services. Ongoing investments in our facilities and our
people support this delivery and, with the future potential of the
AUKUS trilateral programme, the sector is well positioned for
growth.
Operational highlights
·
We achieved a key milestone on the Astute
programme with the official naming of the sixth boat, Agamemnon, in
April. The next major step for Agamemnon is the launch which is
expected later this year.
·
The build of the first three of four Dreadnought
Class submarines is also well underway at our Barrow-In-Furness
site in Cumbria.
·
Construction is underway on the first four City
Class Type 26 frigates with a focus on skilled and experienced
resource availability, including within the supply chain. The fifth
ship, HMS Sheffield, is currently forecast to commence construction
later this year. The first City Class Type 26, HMS Glasgow, is
progressing through the key stages of outfit, test and
commissioning, while the second ship, HMS Cardiff, is being
prepared to enter the water for the first time later this year. HMS
Belfast continues steelwork construction and unit consolidation
ahead of benefiting from final consolidation in our new Ship Build
Assembly Hall in Govan, Glasgow.
·
In Australia, the HCFP has six schedule
protection blocks in production and the programme successfully
completed the Production Readiness Review. We entered the
construction phase and officially cut steel on the first ship at a
ceremony at the Osborne Naval Shipyard in Adelaide, South Australia
in June.
·
We have made good progress on the installation of
Radar 1 as part of the JORN Phase 6 upgrade with the successful
completion of Half Radar trials. The penultimate ship of the Anzac
frigate upgrade programme, HMAS Ballarat, has returned to
water.
·
Our Maritime Services business has continued to
support the Royal Navy, responding quickly to ensure HMS Prince of
Wales was prepared and ready to deploy for NATO exercises in the
Arctic. HMS Diamond was also activated to deploy from Gibraltar as
part of Operation Kipion.
·
Investment activity continues across our
Munitions business to meet customer demand. This includes a new
155mm facility in Glascoed and an additional machining line in
Washington, Tyne & Wear.
·
In RBSL, the Challenger 3 programme has delivered
the first two prototype series vehicles, with the first undergoing
successful live firing trials. The RBSL Vehicle Support Services
continue to support the UK Ministry of Defence and international
customers.
Strategic and order highlights
·
In Australia, the release of the Surface
Combatant Review confirmed a commitment to the production of six
Hunter Class frigates, with the contract for the first batch of
three ships awarded in June. Following the cancellation of the
TransCAP element of the Anzac frigate upgrade programme, we are
working with the Commonwealth to determine the appropriate
utilisation of our Henderson facility in Western
Australia.
·
Following the £3.95bn contract from the UK
Ministry of Defence last year, we have made substantial progress on
the SSN-AUKUS programme, reaching key design maturity milestones.
In March, as part of the AUKUS trilateral security pact, the
Australian Government announced it had selected BAE Systems and ASC
Pty Ltd to build Australia's new future fleet of nuclear powered
submarines.
·
In March, former UK Prime Minister Rishi Sunak
visited our Barrow-in-Furness site to announce the publication of
the Government's Defence Nuclear Enterprise Command Paper, which
sets out the critical role of the town and BAE Systems' skilled
workforce in helping to deliver the national
endeavour.
·
The build of our new Ship Build Assembly Hall in
Govan is maturing according to schedule and is expected to be fully
operational in 2025. The build of our Applied Shipbuilding Academy
in Scotstoun is on schedule and due to formally open later this
year, providing world-class training and upskilling opportunities
for our entire Naval Ships workforce.
Looking forward
·
The outlook for our Maritime sector remains
positive based on long-term contracted positions, with a number of
UK, Australian and international opportunities.
·
Our Submarines business is executing across three
long-term programmes: Astute; Dreadnought; and SSN-AUKUS.
Investment continues in the facilities at our Barrow-in-Furness
shipyard in order to provide the capabilities to deliver these
long-term programmes.
·
In shipbuilding, sales are underpinned by the
manufacture of Type 26 frigates. In warship support, the fleet time
support, upkeeps and capability insertions across a number of
vessel classes provide a sustainable business in technical services
and upgrades.
·
In Australia, we are a key partner to the
Commonwealth in the delivery of its National Defence Strategy
(NDS), which seeks a strategy of denial and an integrated, focused
force. AUKUS nuclear powered submarines, an enhanced lethality
surface fleet, strategic surveillance and long range strike are
prioritised in the Integrated Investment Plan which supports the
NDS.
·
As the UK Ministry of Defence's long-term
strategic partner for munitions supply, we continue to focus our
operations in support of the UK Ministry of Defence and the UK's
NATO allies, as well as other customers.
Segmental performance: Cyber &
Intelligence
Cyber & Intelligence, with 11,0001 employees,
comprises the US‑based Intelligence & Security business and
UK‑headquartered Digital Intelligence business, and covers the
Group's cyber security activities for national security, central
government and government enterprises.
Financial performance
Financial performance measures derived by
Group2
|
|
Financial performance measures derived from
IFRS
|
|
Six months
ended
30 June
2024
|
Six
months
ended
30 June
2023
|
|
|
Six months
ended
30 June
2024
|
Six
months
ended
30 June
2023
|
Sales
|
£1,182m
|
£1,157m
|
|
Revenue
|
£1,182m
|
£1,157m
|
Underlying EBIT
|
£101m
|
£96m
|
|
Operating profit
|
£97m
|
£88m
|
Return on sales
|
8.5%
|
8.3%
|
|
Return on revenue
|
8.2%
|
7.6%
|
Operating business
cash flow
|
£16m
|
£51m
|
|
Cash flow from
operating activities
|
£40m
|
£86m
|
Order intake
|
£1.2bn
|
£1.4bn
|
|
|
|
|
|
As at 30
June
2024
|
As at 31
December 2023
|
|
|
As at 30
June
2024
|
As at 31
December 2023
|
Order backlog
|
£1.9bn
|
£2.0bn
|
|
Order book
|
£1.3bn
|
£1.4bn
|
-
Sales increased by 4%3, to £1.2bn,
with the US business seeing increased operations.
-
Underlying EBIT was up 7%3 delivering
a return on sales of 8.5%.
-
Order backlog has remained steady against the
prior year, with a book-to-bill4 ratio of
1.0.
1.
Including share of equity accounted investments.
2. The
purposes and definitions of non-GAAP measures are provided in
the Alternative performance measures
section on page 46.
3.
Constant currency basis.
4. Ratio
of Order intake to Sales.
Operational performance
Our Intelligence & Security
business has demonstrated strong performance, providing innovative
solutions to government customers in the US Department of Defense,
federal agencies and civilian organisations. Our focus remains on
creating a robust pipeline of qualified business opportunities
across our US-based business areas, including Air & Space Force
Solutions, Integrated Defense Solutions and Intelligence Solutions.
In Digital Intelligence, we have
continued to work collaboratively to collect, connect and
understand complex data for governments, nation states, armed
forces and commercial businesses in both the UK and international
markets. Our services, solutions and products span customers in Law
Enforcement, National Security, Central Government, Critical
National Infrastructure, Telecommunications, Defence and
Space.
Operational highlights
·
As part of the Ball Aerospace acquisition in
mid-February, we acquired Topaz Intelligence, which is now part of
our Intelligence & Security business. This acquisition expands
our Modelling & Simulation portfolio to provide data
intelligence-as-a-service to drive agile decision making for
customers.
·
We successfully delivered a prototype
constructive simulation solution with the goal of enhancing mission
command, training and predictive analysis capabilities from the
tactical to the operational level to the US Army Europe and Africa
Command in support of its war planning exercise effort "Austere
Challenge 2024" that was conducted in March.
·
In Digital Intelligence, we have made good
progress in advancing or securing positions on strategic programmes
in National Security, Defence and the Middle East.
·
During the period, in collaboration with
University of Portsmouth, we launched the UK's first ever degree
apprenticeship in Space Systems Engineering.
Strategic and order highlights
·
Our Intelligence Solutions business was awarded
multiple contracts with a total potential life cycle value of more
than $600m (£474m).
·
In February 2024, BAE Systems was notified that
we were not selected for the ISC 2.0 contract, which followed
corrective action taken by the US Air Force following an earlier
sustained protest upheld by the Government Accountability Office
(GAO). Subsequently, in March 2024, we filed a protest to this
award and were notified in June 2024 that the GAO had sustained our
protest and recommended the US Air Force take additional corrective
action. The Air Force has not yet stated
what corrective action it will take. Our current ISC 1.0 contract
runs through January 2025.
·
Our Integrated Defense Solutions business was
awarded a five-year, $87m (£69m) contract to provide engineering
and technical services for new and legacy Mobile Deployable C5ISR
systems and platforms. Under this US Naval Air Systems Command
contract, we will continue our support to a variety of C5ISR
products including small craft, transportable systems, en-route
communication systems, and intra-platform systems for US Navy,
Special Operations Forces, Homeland Security and other Department
of Defense agencies.
·
We secured a spot on the Federal Bureau of
Investigation's ITSSS-2 BPA - the largest IT contract vehicle ever
established by the FBI with accessibility broadly within the
Department of Justice and an estimated spend of $8bn (£6bn) over
the next eight years. This award is crucial to defending and
growing our work for this critical customer.
·
In Digital Intelligence, we secured key renewals
and extensions on existing contracts as well as seeing the
emergence of new customers across the UK and international
markets.
·
In the space domain, our Digital Intelligence
business has consolidated In-Space Missions with space expertise
across the Digital Intelligence business to focus and expand
capabilities in this area.
Looking forward
·
Our Intelligence & Security business
continues to maintain a promising pipeline of qualified business
opportunities. Despite some delays in Department of Defense
procurement decisions, we have observed an increase in demand
driven by ongoing global security threats.
·
The outlook for our US Government services in
Intelligence & Security is strong, offering opportunities for
mid-term growth. However, market conditions remain highly
competitive and are subject to shifts in response to US Government
priorities.
·
We continue to actively expand our wargaming
capabilities to new markets and customers both domestically and
internationally, enhancing our potential for growth and
diversification in the modelling, simulation and synthetic training
environment through the strong positions held by both Bohemia
Interactive Simulations and Pitch Technologies.
·
In Digital Intelligence, we continue to ensure
the business is optimally placed to take advantage of favourable
market conditions. Going forward, we are looking to progress
strategic engagements and campaigns with key customers and gain
accreditation for cross-domain products for the US
market.
Principal risks and uncertainties
Having considered recent
geopolitical and macroeconomic events, the Group believes the
principal risks and uncertainties we face for the remainder of the
year are included in, and are therefore unchanged from, those
reported in the Annual Report 2023.
The Group's principal risks and
uncertainties at 31 December 2023 were detailed on pages 70 to 77
of the Annual Report 2023, and related to the following areas:
government customers, defence spending and terms of trade; contract
risk, execution and supply chain; international markets; cyber
security; people; safety; acquisitions; climate change and the
environment; laws and regulations; outbreak of contagious diseases;
and pension funding.
Responsibility statement of the directors in respect of the
half-yearly financial report
Each of the directors (as detailed
below) confirms that to the best of his/her knowledge:
- The condensed set of
financial statements has been prepared in accordance with United
Kingdom adopted International Accounting Standard 34 Interim
Financial Reporting.
- The interim management
report on pages 1 to 25 includes a fair review of the information
required by:
(a) DTR 4.2.7R of the Disclosure
Guidance and Transparency Rules (DTR), being an indication of
important events that have occurred during the first six months of
the financial year and their impact on the condensed set of
financial statements; and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
(b) DTR 4.2.8R of the DTR, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or the performance of the Company
during that period; and any changes in the related party
transactions described in the last annual report that could do
so.
For and on behalf of the
directors:
Cressida Hogg
Chair
31 July 2024
Directors
Cressida Hogg
|
Chair
|
Charles Woodburn
|
Chief Executive
|
Tom Arseneault
|
President and Chief Executive
Officer of BAE Systems, Inc.
|
Brad Greve
|
Chief Financial Officer
|
Nick Anderson
|
Non-executive director
|
Crystal E. Ashby
|
Non-executive director
|
Angus Cockburn
|
Non-executive director
|
Dame Elizabeth Corley
|
Non-executive director
|
Jane Griffiths
|
Non-executive director
|
Ewan Kirk
|
Non-executive director
|
Stephen Pearce
|
Non-executive director
|
Nicole Piasecki
|
Non-executive director
|
Lord Mark Sedwill
|
Non-executive director
|
Independent review report to BAE Systems
plc
Conclusion
We have been engaged by the
Company to review the condensed set of financial statements in the
Half-yearly Financial Report for the six months ended 30 June 2024
which comprises the Condensed consolidated income statement, the
Condensed consolidated statement of comprehensive income, the
Condensed consolidated statement of changes in equity, the
Condensed consolidated balance sheet, the Condensed consolidated
cash flow statement and related notes 1 to 13.
Based on our review, nothing has
come to our attention that causes us to believe that the condensed
set of financial statements in the Half-yearly Financial Report for
the six months ended 30 June 2024 is not prepared, in all material
respects, in accordance with United Kingdom adopted International
Accounting Standard 34 and the Disclosure Guidance and Transparency
Rules of the United Kingdom's Financial Conduct
Authority.
Basis for Conclusion
We conducted our review in
accordance with International Standard on Review Engagements (UK)
2410 "Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council for use in the United Kingdom (ISRE (UK) 2410). A
review of interim financial information consists of making
inquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
(UK) and consequently does not enable us to obtain assurance that
we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
As disclosed in note 1, the annual
financial statements of the group are prepared in accordance with
United Kingdom adopted international accounting standards. The
condensed set of financial statements included in this Half-yearly
Financial Report has been prepared in accordance with United
Kingdom adopted International Accounting Standard 34, "Interim
Financial Reporting".
Conclusion Relating to Going Concern
Based on our review procedures,
which are less extensive than those performed in an audit as
described in the Basis for Conclusion section of this Report,
nothing has come to our attention to suggest that the directors
have inappropriately adopted the going concern basis of accounting
or that the directors have identified material uncertainties
relating to going concern that are not appropriately disclosed.
This Conclusion is based on the
review procedures performed in accordance with ISRE (UK) 2410;
however future events or conditions may cause the entity to cease
to continue as a going concern.
Responsibilities of the directors
The directors are responsible for
preparing the Half-yearly Financial Report in accordance with the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
In preparing the Half-yearly
Financial Report, the directors are responsible for assessing the
group's ability to continue as a going concern, disclosing as
applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to
liquidate the Company or to cease operations, or have no realistic
alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the Half-yearly
Financial Report, we are responsible for expressing to the Company
a conclusion on the condensed set of financial statements in the
Half-yearly Financial Report. Our conclusion, including our
conclusion relating to going concern, are based on procedures that
are less extensive than audit procedures, as described in the basis
for conclusion paragraph of this report.
Use of our report
This report is made solely to the
Company in accordance with ISRE (UK) 2410. Our work has been
undertaken so that we might state to the Company those matters we
are required to state to it in an independent review report and for
no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the Company,
for our review work, for this report, or for the conclusions we
have formed.
Deloitte LLP
Statutory Auditor
London
United Kingdom
31 July 2024
Condensed consolidated income statement
(unaudited)
|
|
Six months ended
30 June 2024
|
|
Six
months ended
30 June 2023
|
|
|
Note
|
£m
|
Total
£m
|
|
£m
|
Total
£m
|
Continuing operations
|
|
|
|
|
|
|
Revenue
|
2
|
|
12,477
|
|
|
10,997
|
Operating costs
|
|
|
(11,418)
|
|
|
(9,926)
|
Other income
|
|
|
159
|
|
|
102
|
Share of results of equity
accounted investments
|
|
|
78
|
|
|
60
|
Operating profit
|
2
|
|
1,296
|
|
|
1,233
|
Finance income
|
|
69
|
|
|
69
|
|
Finance costs
|
|
(202)
|
|
|
(104)
|
|
Net finance costs
|
3
|
|
(133)
|
|
|
(35)
|
Profit before tax
|
|
|
1,163
|
|
|
1,198
|
Tax expense
|
4
|
|
(175)
|
|
|
(193)
|
Profit for the period
|
|
|
988
|
|
|
1,005
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
Equity shareholders
|
|
|
948
|
|
|
965
|
Non-controlling
interests
|
|
|
40
|
|
|
40
|
|
|
|
988
|
|
|
1,005
|
|
|
|
|
|
|
|
Earnings per share
|
5
|
|
|
|
|
|
Basic earnings per
share
|
|
|
31.4p
|
|
|
31.8p
|
Diluted earnings per
share
|
|
|
31.0p
|
|
|
31.4p
|
|
|
|
|
|
|
| |
Condensed consolidated statement of comprehensive income
(unaudited)
|
Six months ended
30 June 2024
|
|
Six
months ended
30 June 2023
|
|
Other
reserves
£m
|
Retained earnings
£m
|
Total
£m
|
|
Other
reserves
£m
|
Retained
earnings
£m
|
Total
£m
|
Profit for the period
|
-
|
988
|
988
|
|
-
|
1,005
|
1,005
|
Other comprehensive income
|
|
|
|
|
|
|
|
Items that will not be reclassified to the income
statement:
|
|
|
|
|
|
|
|
Consolidated:
|
|
|
|
|
|
|
|
Remeasurements on post-employment
benefit schemes and other investments
|
-
|
415
|
415
|
|
-
|
(157)
|
(157)
|
Tax on items that will not be
reclassified to the income statement
|
-
|
(24)
|
(24)
|
|
-
|
(6)
|
(6)
|
Share of the other comprehensive
income/(expense) of associates and joint ventures accounted for
using the equity method (net of tax)
|
-
|
14
|
14
|
|
-
|
(9)
|
(9)
|
Items that may be reclassified to the income
statement:
|
|
|
|
|
|
|
|
Consolidated:
|
|
|
|
|
|
|
|
Currency translation on foreign
currency net investments
|
16
|
-
|
16
|
|
(589)
|
-
|
(589)
|
Reclassification of cumulative
currency translation reserve on partial disposal of joint venture
accounted for using the equity method
|
35
|
-
|
35
|
|
-
|
-
|
-
|
Fair value (loss)/gain arising on
hedging instruments during the period
|
(21)
|
-
|
(21)
|
|
23
|
-
|
23
|
Cumulative fair value loss/(gain)
on hedging instruments reclassified to the income
statement
|
61
|
-
|
61
|
|
(20)
|
-
|
(20)
|
Tax on items that may be
reclassified to the income statement
|
(1)
|
-
|
(1)
|
|
-
|
-
|
-
|
Share of the other comprehensive
income of associates and joint ventures accounted for using the
equity method (net of tax)
|
4
|
-
|
4
|
|
6
|
-
|
6
|
Total other comprehensive income/(expense) for the period
(net of tax)
|
94
|
405
|
499
|
|
(580)
|
(172)
|
(752)
|
Total comprehensive income/(expense) for the
period
|
94
|
1,393
|
1,487
|
|
(580)
|
833
|
253
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
Equity shareholders
|
94
|
1,349
|
1,443
|
|
(570)
|
793
|
223
|
Non-controlling
interests
|
-
|
44
|
44
|
|
(10)
|
40
|
30
|
|
94
|
1,393
|
1,487
|
|
(580)
|
833
|
253
|
Condensed consolidated statement of changes in equity
(unaudited)
|
Attributable to equity holders of BAE Systems plc
|
|
|
|
Issued
share
capital
£m
|
Share
premium
£m
|
Other
reserves
£m
|
Retained
earnings
£m
|
Total
£m
|
Non-controlling
interests
£m
|
Total
equity
£m
|
Balance at 1 January
2024
|
81
|
1,253
|
6,403
|
2,822
|
10,559
|
164
|
10,723
|
Profit for the period
|
-
|
-
|
-
|
948
|
948
|
40
|
988
|
Total other comprehensive income for the
period
|
-
|
-
|
94
|
401
|
495
|
4
|
499
|
Total comprehensive income for the
period
|
-
|
-
|
94
|
1,349
|
1,443
|
44
|
1,487
|
Share-based payments (inclusive of
tax)
|
-
|
-
|
-
|
71
|
71
|
-
|
71
|
Cumulative fair value gain on
hedging instruments transferred to the balance sheet (net of
tax)
|
-
|
-
|
(2)
|
-
|
(2)
|
-
|
(2)
|
Ordinary share
dividends
|
-
|
-
|
-
|
(562)
|
(562)
|
(6)
|
(568)
|
Purchase of own shares
|
(1)
|
-
|
1
|
(250)
|
(250)
|
-
|
(250)
|
At 30 June 2024
|
80
|
1,253
|
6,496
|
3,430
|
11,259
|
202
|
11,461
|
|
|
|
|
|
|
|
|
| |
Balance at 1 January
2023
|
82
|
1,252
|
6,951
|
2,930
|
11,215
|
185
|
11,400
|
Profit for the period
|
-
|
-
|
-
|
965
|
965
|
40
|
1,005
|
Total other comprehensive expense for the
period
|
-
|
-
|
(570)
|
(172)
|
(742)
|
(10)
|
(752)
|
Total comprehensive
(expense)/income for the period
|
-
|
-
|
(570)
|
793
|
223
|
30
|
253
|
Share-based payments (inclusive of
tax)
|
-
|
-
|
-
|
50
|
50
|
-
|
50
|
Cumulative fair value loss on
hedging instruments transferred to the balance sheet (net of
tax)
|
-
|
-
|
9
|
-
|
9
|
-
|
9
|
Ordinary share
dividends
|
-
|
-
|
-
|
(508)
|
(508)
|
(12)
|
(520)
|
Purchase of own shares
|
(1)
|
-
|
1
|
(371)
|
(371)
|
-
|
(371)
|
At 30 June 2023
|
81
|
1,252
|
6,391
|
2,894
|
10,618
|
203
|
10,821
|
Condensed consolidated balance sheet
(unaudited)
|
|
Note
|
30 June
2024
£m
|
31
December
2023
£m
|
Non-current assets
|
|
|
|
|
Intangible assets
|
|
|
16,045
|
12,099
|
Property, plant and
equipment
|
|
|
4,502
|
3,635
|
Right-of-use assets
|
|
|
1,774
|
1,311
|
Investment property
|
|
|
57
|
57
|
Equity accounted
investments
|
|
|
713
|
832
|
Other investments
|
|
|
76
|
84
|
Contract and other
receivables
|
|
|
704
|
633
|
Post-employment benefit
surpluses
|
|
6
|
1,197
|
804
|
Other financial assets
|
|
|
245
|
227
|
Deferred tax assets
|
|
|
375
|
609
|
|
|
|
25,688
|
20,291
|
Current assets
|
|
|
|
|
Inventories
|
|
|
1,355
|
1,156
|
Trade, contract and other
receivables
|
|
|
7,090
|
6,185
|
Current tax
|
|
|
95
|
160
|
Other financial assets
|
|
|
159
|
205
|
Cash and cash
equivalents
|
|
|
2,831
|
4,067
|
|
|
|
11,530
|
11,773
|
Total assets
|
|
|
37,218
|
32,064
|
Non-current liabilities
|
|
|
|
|
Loans
|
|
|
(8,234)
|
(4,432)
|
Lease liabilities
|
|
|
(1,614)
|
(1,273)
|
Contract liabilities
|
|
|
(1,750)
|
(1,955)
|
Other payables
|
|
|
(1,728)
|
(1,594)
|
Post-employment benefit
obligations
|
|
6
|
(619)
|
(575)
|
Other financial
liabilities
|
|
|
(210)
|
(227)
|
Deferred tax
liabilities
|
|
|
(13)
|
(10)
|
Provisions
|
|
|
(396)
|
(332)
|
|
|
|
(14,564)
|
(10,398)
|
Current liabilities
|
|
|
|
|
Loans
|
|
|
(738)
|
(679)
|
Lease liabilities
|
|
|
(230)
|
(147)
|
Contract liabilities
|
|
|
(4,212)
|
(3,865)
|
Trade and other
payables
|
|
|
(5,586)
|
(5,436)
|
Other financial
liabilities
|
|
|
(220)
|
(295)
|
Current tax
|
|
|
(10)
|
(285)
|
Provisions
|
|
|
(197)
|
(236)
|
|
|
|
(11,193)
|
(10,943)
|
Total liabilities
|
|
|
(25,757)
|
(21,341)
|
Net assets
|
|
|
11,461
|
10,723
|
|
|
|
|
|
Capital and reserves
|
|
|
|
|
Issued share capital
|
|
|
80
|
81
|
Share premium
|
|
|
1,253
|
1,253
|
Other reserves
|
|
|
6,496
|
6,403
|
Retained earnings
|
|
|
3,430
|
2,822
|
Total equity attributable to equity holders of BAE Systems
plc
|
|
|
11,259
|
10,559
|
Non-controlling interests
|
|
|
202
|
164
|
Total equity
|
|
|
11,461
|
10,723
|
Approved by the Board of BAE
Systems plc on 31 July 2024 and signed on its behalf by:
C
N Woodburn
|
B
M Greve
|
Chief Executive
|
Chief Financial Officer
|
Condensed consolidated cash flow statement
(unaudited)
|
Note
|
Six months
ended
30 June
2024
£m
|
Six
months
ended
30 June
2023
£m
|
Profit for the period
|
|
988
|
1,005
|
Tax expense
|
4
|
175
|
193
|
Adjustment in respect of research
and development expenditure credits
|
|
(22)
|
(19)
|
Share of results of equity
accounted investments
|
|
(78)
|
(60)
|
Net finance costs
|
3
|
133
|
35
|
Depreciation, amortisation and
impairment
|
|
501
|
386
|
Net gain on disposal of property,
plant and equipment and investment property
|
|
(3)
|
-
|
Gain in respect of partial
disposal of equity accounted investment
|
11
|
(75)
|
-
|
Cost of equity-settled employee
share schemes
|
|
62
|
52
|
Movements in provisions
|
|
10
|
(15)
|
Difference between pension funding
contributions paid and the pension charge
|
|
(61)
|
(117)
|
(Increase)/decrease in working
capital:
|
|
|
|
Inventories
|
|
(170)
|
(114)
|
Trade, contract and other
receivables
|
|
(558)
|
(468)
|
Trade and other payables, and
contract liabilities
|
|
(65)
|
733
|
Tax paid net of research and
development expenditure credits received
|
|
(80)
|
(127)
|
Net cash flow from operating activities
|
|
757
|
1,484
|
Dividends received from equity
accounted investments
|
|
145
|
123
|
Interest received
|
|
47
|
49
|
Principal element of finance lease
receipts
|
|
5
|
5
|
Purchase of property, plant and
equipment and investment property
|
|
(385)
|
(332)
|
Purchase of intangible
assets
|
|
(78)
|
(49)
|
Proceeds from funding related to
assets
|
|
62
|
73
|
Proceeds from sale of property,
plant and equipment, investment property and intangible
assets
|
|
5
|
5
|
Purchase of subsidiary
undertakings, net of cash and cash equivalents acquired
|
10
|
(4,536)
|
-
|
Cash flow in respect of partial
disposal of equity accounted investment and other business
disposals
|
11
|
166
|
(3)
|
Net cash flow from investing activities
|
|
(4,569)
|
(129)
|
Interest paid
|
|
(222)
|
(159)
|
Equity dividends paid
|
7
|
(562)
|
(508)
|
Purchase of own shares
|
7
|
(250)
|
(376)
|
Dividends paid to non-controlling
interests
|
|
(6)
|
(12)
|
Principal element of lease
payments
|
|
(117)
|
(129)
|
Cash inflow from derivative
financial instruments (excluding cash flow hedges)
|
|
49
|
60
|
Cash outflow from derivative
financial instruments (excluding cash flow hedges)
|
|
(74)
|
(242)
|
Cash inflow from draw down of
bridge loan facility
|
|
3,180
|
-
|
Cash outflow from repayment of
bridge loan facility
|
|
(3,168)
|
-
|
Cash inflow from bond
finance/private placement
|
|
3,753
|
166
|
Net cash flow from financing activities
|
|
2,583
|
(1,200)
|
Net (decrease)/increase in cash and cash
equivalents
|
|
(1,229)
|
155
|
Cash and cash equivalents at 1
January
|
|
4,067
|
3,107
|
Effect of foreign exchange rate
changes on cash and cash equivalents
|
|
(7)
|
(58)
|
Cash and cash equivalents at 30 June
|
|
2,831
|
3,204
|
Notes to the Condensed consolidated financial
statements
1. Preparation of the Condensed consolidated financial
statements
Basis of preparation and statement of
compliance
The annual financial statements of
the Group will be prepared in accordance with UK-adopted
International Accounting Standards (IAS), in conformity with the
requirements of the Companies Act 2006. The Condensed consolidated
set of financial statements included in this Half-yearly Report
have been prepared in accordance with UK-adopted IAS 34 Interim
Financial Reporting and the Disclosure Guidance and Transparency
Rules of the UK Financial Conduct Authority. These Condensed
consolidated financial statements do not comprise statutory
accounts within the meaning of Section 435 of the Companies Act
2006 and should be read in conjunction with the Annual Report 2023.
The comparative figures for the year ended 31 December 2023 are not
the Group's statutory accounts for that financial year. Those
financial statements have been reported upon by the Group's auditor
and delivered to the Registrar of Companies. The report of the
auditor was unqualified, did not include a reference to any matters
to which the auditor drew attention by way of emphasis without
qualifying their report and did not contain statements under
Section 498 (2) or (3) of the Companies Act 2006.
The accounting policies adopted in
the preparation of these Condensed consolidated financial
statements to 30 June 2024 are consistent with the accounting
policies applied by the Group in its Consolidated financial
statements as at, and for the year ended, 31 December 2023 as
required by the Disclosure Guidance and Transparency Rules of the
UK Financial Conduct Authority.
The Condensed consolidated
financial statements are presented in pounds sterling and, unless
stated otherwise, rounded to the nearest million. They have been
prepared under the historical cost convention, as modified by the
revaluation of certain financial assets and financial liabilities
(including derivative financial instruments).
Going concern
The Group continues to conduct
ongoing risk assessments in relation to its business operations and
liquidity. Demand from the Group's key customers remains strong,
underpinned by our order backlog, programme positions and pipeline
of opportunities across all sectors. The Group also continues to
work with, and support, its supply chain to actively address the
risk of disruption.
The Group's liquidity and solvency
has remained strong. Cash flow forecasting is performed by the
businesses on a monthly basis. The Group also monitors a rolling
forecast of its liquidity requirements to ensure that there is
sufficient cash to meet operational needs and maintain adequate
headroom.
After making due enquiries and
having undertaken these assessments, the directors have a
reasonable expectation that the Group has adequate resources and
will be able to continue in operational existence for the
foreseeable future, being at least 12 months from the date of
approval of this report. For this reason they continue to adopt the
going concern basis in preparing the Group's Condensed consolidated
financial statements.
New
and amended standards adopted by the Group
The following standards,
interpretations and amendments to existing standards became
effective on 1 January 2024 and have not had a material impact
on the Group:
- Amendments to IAS 1: Classification of Liabilities as Current
or Non-current;
- Amendments to IAS 1: Non-current Liabilities with
Covenants;
- Amendments to IAS 7 and IFRS 7: Supplier Finance
Arrangements; and
- Amendments to IFRS 16: Lease Liability in a Sale and
Leaseback.
No other new or amended standards,
which became applicable for the period ending 30 June 2024, had a
material impact on the Group or required the Group to change its
accounting policies.
Critical accounting judgement and sources of estimation
uncertainty
The determination of the Group's
accounting policies requires judgement. The subsequent application
of these policies requires estimates and the actual outcome may
differ from that calculated. As at 31 December 2023, the key
critical accounting judgements and sources of estimation
uncertainty assessed as having a significant risk of causing
material adjustments to the carrying amount of assets and
liabilities are set out in note 1 to the Consolidated financial
statements in the Annual Report 2023.
During the six month period ended
30 June 2024, the Group has re-assessed these key areas of critical
accounting judgement and sources of estimation uncertainty and
consider there have been no changes from those disclosed in the
Group's 2023 audited financial statements.
Impact of climate ambitions on the Condensed consolidated
financial statements
In preparing the Condensed
consolidated financial statements management has considered the
potential impact of climate change and the impact of
climate-related risks and opportunities and the Group's net zero
ambitions and decarbonisation activities on the Group's financial
results.
As a responsible defence business,
sustainability is embedded in our strategic framework, with one of
the Group's long-term objectives being to advance and integrate our
ESG agenda. The products and services we provide are complex,
diverse and developed over extended periods of time. Sustainability
and the impact of our operations is considered in the planning and
ongoing production of our products and services, including
incorporation of the impact of the Group's net zero ambitions and
decarbonisation activities. These are embedded in our financial
reporting, forecasting and governance processes.
Estimates and judgement are
required in determining how the Group will pursue its net zero
ambitions. These, as well as mitigating actions required from the
detailed review of climate risks and opportunities, have been
factored into the current and future plans of the Group through the
Integrated Business Plan (IBP). The IBP is the Group's annual
long-term strategy review and five-year plan for each segment,
including the investment case to decarbonise.
The more immediate financial
impacts of climate-related risks, and the actions being taken to
address them, are reflected in the financial results of the Group
for the period. These are not considered to have had a material
impact.
2. Segmental analysis and revenue
recognition
The Group has five sectors which,
together with HQ, make its six reporting segments as defined by
IFRS 8 Operating Segments.
The Space & Missions Systems
(SMS) business, which was acquired in February 2024, has been
reported within the pre-existing Electronic Systems reporting
segment. SMS has been combined with the existing Electronic Systems
business due to the similarities in services and products offered,
being the provision of advanced defence electronic solutions such
as tactical missile & munition subsystems, C4ISR, and civil and
military space electronics.
Sales1 and revenue by reporting
segment
|
Sales1
|
|
Deduct:
Group's share of revenue
of
equity accounted
investments
|
|
Add:
Subsidiaries' revenue from equity accounted investments
|
|
Revenue
|
|
Six months
ended
30 June
2024
£m
|
Six
months
ended
30 June
2023
£m
|
|
Six months
ended
30 June
2024
£m
|
Six
months
ended
30 June
2023
£m
|
|
Six months
ended
30 June
2024
£m
|
Six
months ended
30 June
2023
£m
|
|
Six months
ended
30 June
2024
£m
|
Six
months
ended
30 June
2023
£m
|
Electronic Systems
|
3,383
|
2,583
|
|
(128)
|
(115)
|
|
139
|
115
|
|
3,394
|
2,583
|
Platforms &
Services
|
2,085
|
1,891
|
|
(24)
|
(27)
|
|
-
|
-
|
|
2,061
|
1,864
|
Air
|
4,009
|
3,786
|
|
(1,383)
|
(1,391)
|
|
626
|
659
|
|
3,252
|
3,054
|
Maritime
|
2,929
|
2,603
|
|
(86)
|
(65)
|
|
2
|
3
|
|
2,845
|
2,541
|
Cyber &
Intelligence
|
1,182
|
1,157
|
|
-
|
-
|
|
-
|
-
|
|
1,182
|
1,157
|
HQ
|
85
|
214
|
|
(80)
|
(209)
|
|
-
|
-
|
|
5
|
5
|
|
13,673
|
12,234
|
|
(1,701)
|
(1,807)
|
|
767
|
777
|
|
12,739
|
11,204
|
Intra-group
sales/revenue
|
(274)
|
(216)
|
|
-
|
-
|
|
12
|
9
|
|
(262)
|
(207)
|
|
13,399
|
12,018
|
|
(1,701)
|
(1,807)
|
|
779
|
786
|
|
12,477
|
10,997
|
|
|
|
|
|
Intra-group revenue
|
|
Revenue
from external customers
|
|
|
|
|
|
|
|
Six months
ended
30 June
2024
£m
|
Six
months
ended
30 June
2023
£m
|
|
Six months
ended
30 June
2024
£m
|
Six
months
ended
30 June
2023
£m
|
Electronic Systems
|
|
|
|
|
|
|
90
|
73
|
|
3,304
|
2,510
|
Platforms &
Services
|
|
|
|
|
|
|
33
|
26
|
|
2,028
|
1,838
|
Air
|
|
|
|
|
|
|
18
|
17
|
|
3,234
|
3,037
|
Maritime
|
|
|
|
|
|
|
43
|
27
|
|
2,802
|
2,514
|
Cyber &
Intelligence
|
|
|
|
|
|
|
73
|
59
|
|
1,109
|
1,098
|
HQ
|
|
|
|
|
|
|
5
|
5
|
|
-
|
-
|
|
|
|
|
|
|
|
262
|
207
|
|
12,477
|
10,997
|
Sales1 and revenue by customer
location
|
|
|
|
|
Sales1
|
|
Revenue
|
|
|
|
|
|
|
|
|
Six months
ended
30 June
2024
£m
|
Six
months
ended
30 June
20232
£m
|
|
Six months
ended
30 June
2024
£m
|
Six
months
ended
30 June
20232
£m
|
UK
|
|
|
|
|
|
|
3,390
|
3,118
|
|
3,212
|
2,921
|
Europe (excluding UK)
|
|
|
|
|
|
|
1,403
|
1,226
|
|
844
|
641
|
US
|
|
|
|
|
|
|
5,961
|
5,191
|
|
5,983
|
5,189
|
Canada
|
|
|
|
|
|
|
79
|
81
|
|
79
|
81
|
Kingdom of Saudi Arabia
|
|
|
|
|
|
|
1,469
|
1,223
|
|
1,411
|
1,220
|
Qatar
|
|
|
|
|
|
|
199
|
305
|
|
125
|
225
|
Australia
|
|
|
|
|
|
|
594
|
469
|
|
591
|
468
|
Asia and Pacific (excluding
Australia)
|
|
|
|
|
|
|
184
|
207
|
|
163
|
113
|
Other
|
|
|
|
|
|
|
120
|
198
|
|
69
|
139
|
|
|
|
|
|
|
|
13,399
|
12,018
|
|
12,477
|
10,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
1. Sales
is an alternative performance measure defined in the Alternative
performance measures section on page 46. Sales includes both
revenue from the Group's own subsidiaries as well as recognising
the strategic importance in its industry of its equity accounted
investments. It is presented here as our internal measure of
segmental performance and to provide additional information on
performance to the user.
2. Sales
and revenue figures for 2023 to UK and Rest of Europe have been
re-presented to reflect the workshare on the Typhoon
programme.
Operating profit/(loss) by reporting
segment
|
Underlying
EBIT3
|
|
Adjusting
items4
|
|
Amortisation of programme, customer-related and other
intangible assets, and impairment of intangibles
|
|
Finance
and tax (expense)/income
of equity accounted investments
|
|
Operating
profit/(loss)
|
|
Six months ended
30 June
2024
£m
|
Six months ended
30 June
2023
£m
|
|
Six months ended
30 June
2024
£m
|
Six months ended
30 June
2023
£m
|
|
Six months ended
30 June
2024
£m
|
Six months ended
30 June
2023
£m
|
|
Six months ended
30 June
2024
£m
|
Six months ended
30 June
2023
£m
|
|
Six months ended
30 June
2024
£m
|
Six months ended
30 June
2023
£m
|
Electronic Systems
|
473
|
391
|
|
(38)
|
40
|
|
(134)
|
(45)
|
|
-
|
-
|
|
301
|
386
|
Platforms &
Services
|
216
|
172
|
|
6
|
5
|
|
-
|
-
|
|
(7)
|
(5)
|
|
215
|
172
|
Air
|
446
|
454
|
|
(2)
|
-
|
|
-
|
-
|
|
12
|
2
|
|
456
|
456
|
Maritime
|
228
|
193
|
|
-
|
-
|
|
-
|
-
|
|
(2)
|
(1)
|
|
226
|
192
|
Cyber &
Intelligence
|
101
|
96
|
|
5
|
3
|
|
(9)
|
(11)
|
|
-
|
-
|
|
97
|
88
|
HQ
|
(71)
|
(48)
|
|
75
|
-
|
|
-
|
-
|
|
(3)
|
(13)
|
|
1
|
(61)
|
|
1,393
|
1,258
|
|
46
|
48
|
|
(143)
|
(56)
|
|
-
|
(17)
|
|
1,296
|
1,233
|
Net finance costs
|
|
|
|
|
|
|
|
|
|
|
|
|
(133)
|
(35)
|
Profit before tax
|
|
|
|
|
|
|
|
|
|
|
|
|
1,163
|
1,198
|
Tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
(175)
|
(193)
|
Profit for the period
|
|
|
|
|
|
|
|
|
|
|
|
|
988
|
1,005
|
3.
Underlying EBIT is an alternative performance measure defined in
the Alternative performance measures section on page 46.
It provides a measure of operating profitability,
excluding one-off events or adjusting items that are not considered
to be part of the ongoing operational transactions of the business,
to enable management to monitor the performance of recurring
operations over time, and which is comparable across the Group. It
is presented here as our internal measure of segmental performance
and to provide additional information on performance to the
user.
4.
Adjusting items are items which have been determined by management
as being material by their size or incidence and not relevant to an
understanding of the Group's underlying business performance. A
breakdown of adjusting items is included in the Alternative
performance measures section on page 46.
3.
Net finance costs
|
Six months ended
30 June
2024
£m
|
Six
months
ended
30 June
2023
£m
|
Interest income on cash and other
financial instruments
|
63
|
50
|
Net interest income on
post-employment benefit obligations
|
6
|
19
|
Finance income
|
69
|
69
|
Interest expense on loans and
other financial instruments
|
(231)
|
(133)
|
Facility fees
|
(2)
|
(3)
|
Interest expense on lease
liabilities
|
(33)
|
(26)
|
Net present value expenses on
provisions and other payables
|
(4)
|
(4)
|
Gain/(loss) on remeasurement of
financial instruments at fair value through profit or
loss1,2
|
41
|
(224)
|
Foreign exchange
gains2,3
|
27
|
286
|
Finance costs
|
(202)
|
(104)
|
Net finance costs
|
(133)
|
(35)
|
1. Comprises gains and losses on
derivative financial instruments, principally held to manage the
Group's exposure to interest rate fluctuations on current and
anticipated external borrowings and exchange rate fluctuations on
balances with the Group's subsidiaries and equity accounted
investments.
2. The net gain or loss on
remeasurement of financial instruments at fair value through profit
or loss and the net gain or loss on foreign exchange are presented
within finance costs as the gains and losses relate to the same
underlying transactions.
3. The foreign exchange
gains/losses primarily reflects exchange rate movements on US
dollar-denominated borrowings.
4. Tax expense
The Group's reported tax expense
was £175m (2023 £193m). The underlying effective tax rate was 19%
(2023 18%) and has been determined by calculating an estimated
annual tax rate for each country or entity, and then applying those
rates to half year profits or losses.
The Group's underlying effective
tax rate is sensitive to the geographic mix of profits and is
impacted by the UK's enactment of the Organisation for Economic
Co-operation and Development's Global Anti-Base Erosion Model Rules
(Global Minimum Tax) effective from 1 January 2024. The Group has
applied the temporary exception issued by the International
Accounting Standards Board from the accounting requirements for
deferred taxes in IAS 12. Accordingly, the Group neither recognises
nor discloses information about deferred tax assets and liabilities
related to Global Minimum Tax income taxes.
5. Earnings per share
|
Six months ended
30 June 2024
|
|
Six
months ended
30 June 2023
|
|
£m
|
Basic
pence
per share
|
Diluted pence
per share
|
|
£m
|
Basic
pence
per share
|
Diluted
pence
per share
|
Profit for the period attributable
to equity shareholders
|
948
|
31.4
|
31.0
|
|
965
|
31.8
|
31.4
|
|
|
|
|
|
|
Six months ended
30 June
2024
|
Six
months ended
30 June
2023
|
Number of shares
|
|
|
|
|
|
Millions
|
Millions
|
Weighted average number of
ordinary shares used in calculating basic earnings per
share
|
3,016
|
3,039
|
Effect of dilutive potential
ordinary shares:
Incremental ordinary shares in
respect of employee share schemes
|
38
|
37
|
Weighted average number of
ordinary shares used in calculating diluted earnings per
share
|
3,054
|
3,076
|
6. Post-employment benefits
Summary of movements in net post-employment benefit
obligations
|
UK
£m
|
US
and
other
£m
|
Total
£m
|
Total net IAS 19 surplus/(deficit)
at 1 January 2024 (net of withholding tax)
|
717
|
(420)
|
297
|
Add back: withholding tax on
surpluses
|
441
|
-
|
441
|
Total net IAS 19 surplus/(deficit)
at 1 January 2024
|
1,158
|
(420)
|
738
|
Actual return on assets excluding
amounts included in net finance costs
|
(906)
|
(71)
|
(977)
|
Decrease in liabilities due to
changes in financial assumptions
|
1,225
|
125
|
1,350
|
Decrease in liabilities due to
changes in demographic assumptions
|
51
|
-
|
51
|
Experience
(losses)/gains
|
(75)
|
47
|
(28)
|
Contributions in excess of/(less
than) service cost
|
76
|
(4)
|
72
|
Settlements
|
-
|
13
|
13
|
Business acquisitions
|
-
|
(142)
|
(142)
|
Net interest
income/(expense)
|
29
|
(9)
|
20
|
Total net IAS 19 surplus/(deficit) at 30 June
2024
|
1,558
|
(461)
|
1,097
|
Withholding tax on
surpluses
|
(415)
|
-
|
(415)
|
Total net IAS 19 surplus/(deficit) at 30 June 2024 (net of
withholding tax)
|
1,143
|
(461)
|
682
|
Allocated to equity accounted
investments
|
(104)
|
-
|
(104)
|
Group's share of net IAS 19 surplus/(deficit) excluding
Group's share of
amounts allocated to equity accounted investments at 30 June
2024
|
1,039
|
(461)
|
578
|
|
|
|
|
Represented by:
|
|
|
|
Post-employment benefit
surpluses
|
1,135
|
62
|
1,197
|
Post-employment benefit
obligations
|
(96)
|
(523)
|
(619)
|
|
1,039
|
(461)
|
578
|
Surplus recognition
A number of schemes are in an
accounting surplus position. The surpluses have been recognised on
the basis that the future economic benefits are unconditionally
available to the Group, which is assumed to be via a refund. The
Authorised Surplus Payments Charge (Variation of Rate) Order 2024
became effective from 6 April 2024 and reduced the withholding tax
rate from 35% to 25% for authorised surplus payments and therefore
the surplus has been recognised net of withholding tax of 25% as at
30 June 2024 (2023 35%). This tax would be levied prior to the
future refunding of any surplus and therefore the surplus has been
presented on a net basis as this is not deemed to be an income tax
of the Group.
Settlement gain
In June 2024, $145m (£114m) of the
US defined benefit obligation liabilities were settled via payment
of a lump sum to participants. The premium of $128m (£101m) created
a one-off accounting gain of $17m (£13m). This gain has been
recognised as an Adjusting item in the income statement.
Principal actuarial assumptions
The assumptions used are estimates
chosen from a range of possible actuarial assumptions which, due to
the long-term nature of the obligation covered, may not necessarily
occur in practice.
|
UK
|
|
US
|
|
30 June
2024
|
31
December 2023
|
|
30 June
2024
|
31
December
2023
|
Financial assumptions
|
|
|
|
|
|
Discount rate - past service
(%)
|
5.1
|
4.5
|
|
5.3
|
4.8
|
Discount rate - future service
(%)
|
5.2
|
4.6
|
|
5.3
|
4.8
|
Retail Prices Index (RPI)
inflation (%)
|
2.9
|
2.8
|
|
n/a
|
n/a
|
Rate of increase in salaries
(%)
|
2.9
|
2.8
|
|
n/a
|
n/a
|
Rate of increase in deferred
pensions (CPI/RPI) (%)
|
2.2/2.9
|
2.1/2.8
|
|
n/a
|
n/a
|
Rate of increase in pensions in
payment (%)
|
1.7 - 3.6
|
1.6 -
3.6
|
|
n/a
|
n/a
|
Demographic assumptions
|
|
|
|
|
|
Life expectancy of a male
currently aged 65 (years)
|
85 - 88
|
85 -
89
|
|
88
|
88
|
Life expectancy of a female
currently aged 65 (years)
|
88 - 90
|
88 -
89
|
|
89
|
89
|
Life expectancy of a male
currently aged 45 (years)
|
86 - 89
|
86 -
89
|
|
87
|
87
|
Life expectancy of a female
currently aged 45 (years)
|
89 - 91
|
89 -
90
|
|
89
|
89
|
Life expectancy
For its UK pension schemes, the
Group has used the Self-Administered Pension Schemes S3 mortality
tables based on year of birth (as published by the Institute and
Faculty of Actuaries) for both pensioner and non-pensioner members,
in conjunction with the results of an investigation into the actual
mortality experience of scheme members and information on the
demographic profile of the scheme's membership.
In addition, to allow for future
improvements in longevity, the Continuous Mortality Investigation
2023 tables (published by the Institute and Faculty of Actuaries)
have been used (at the 2023 year end, the Continuous Mortality
Investigation 2022 tables were used), with an assumed long-term
rate of mortality improvements of 1.0% per annum (2023 1.0%), an
initial rate adjustment parameter ('A') of 0.2% (2023 0.2%), a
smoothing parameter ('Sk') of 7 (2023 7) and the following
weighting ('W') parameters: W2023 35% (2023 n/a), W2022 35% (2023
35%), W2021 0% (2023 0%) and W2020 0% (2023 0%).
For the majority of the US
schemes, the mortality tables used at 30 June 2024 are a blend of
the fully generational PRI-2012 White Collar table and the PRI-2012
Blue Collar table, both projected using Scale MP-2021.
Sensitivity analysis
The sensitivity information has been
derived using scenario analysis from the actuarial assumptions as
at 30 June 2024 and keeping all other assumptions as set out
above.
Financial
assumptions
The estimated impact of changes in
the discount rate and inflation assumptions on the defined benefit
pension obligation, together with the estimated impact on scheme
assets, is shown in the table below. The estimated impact on scheme
assets takes into account the Group's risk management activities in
respect of interest rate and inflation risk. The sensitivity
analysis on the defined benefit obligation is measured on an IAS 19
accounting basis.
|
Decrease/(increase)
in
pension obligation1
£bn
|
(Decrease)/increase
in
scheme assets1
£bn
|
Discount rate:
|
|
|
0.5 percentage point
increase/decrease
|
1.2/(1.3)
|
(1.2)/1.4
|
1.0 percentage point
increase/decrease
|
2.3/(2.8)
|
(2.4)/2.9
|
2.0 percentage point
increase/decrease
|
4.1/(6.2)
|
(4.3)/6.4
|
3.0 percentage point
increase/decrease
|
5.7/(10.5)
|
(6.0)/10.8
|
|
(Increase)/decrease
in
pension obligation1
£bn
|
Increase/(decrease)
in
scheme assets1
£bn
|
Inflation:
|
|
|
0.1 percentage point
increase/decrease
|
(0.1)/0.1
|
0.2/(0.1)
|
0.5 percentage point
increase/decrease
|
(0.6)/0.6
|
0.8/(0.7)
|
1.0 percentage point
increase/decrease
|
(1.2)/1.2
|
1.6/(1.4)
|
Demographic
assumptions
Changes in the life expectancy
assumption, including the benefit of longevity swap arrangements,
would have the following effect on the total net IAS 19
surplus:
|
(Decrease)/increase
in net
surplus1
£bn
|
Life expectancy:
|
|
One-year
increase/decrease
|
(0.7)/0.7
|
1. Before allocation to equity
accounted investments and deduction of withholding tax.
Virgin Media case
The Company is aware that the Court
of Appeal have recently upheld the High Court's ruling in relation
to Section 37 of the Pension Schemes Act 1993. The case affects
defined benefit schemes that provided contracted-out benefits
before 6 April 2016 based on meeting the reference scheme test.
Where scheme rules were amended, potentially impacting benefits
accrued from 6 April 1997 to 6 April 2016, schemes needed the
actuary to confirm that the reference scheme test was still being
met by providing written confirmation under Section 37 of the
Pension Schemes Act 1993. Rejection of the appeal now confirms that
alterations to the scheme rules were void and ineffective because
of the absence of written actuarial confirmation required. The
potential impact of this, if any, has not yet been confirmed and,
in light of the recent ruling, the Company will continue to assess
this in the second half of the year.
7. Capital distributions
Equity dividends
|
Six months ended
30 June
2024
£m
|
Six
months ended
30 June
2023
£m
|
Prior year final 18.5p dividend
per ordinary share paid in the period (2023 16.6p)
|
562
|
508
|
The directors have declared an
interim dividend of 12.4p per ordinary share in respect of the
period ended
30 June 2024, totalling approximately £375m. This will be paid
on 2 December 2024 to shareholders registered
on 25 October 2024. The ex-dividend date is 24 October 2024. This
is in line with our usual dividend timetable.
Shareholders who do not at present
participate in the Company's Dividend Reinvestment Plan and wish to
receive the interim dividend in shares rather than cash should
complete a mandate form for the Dividend Reinvestment Plan and
return it to the registrars for receipt no later than 8 November
2024.
Capital
The Group funds its operations
through a mixture of equity funding and debt financing, including
bank and capital market borrowings. The capital structure of the
Group reflects the judgement of the directors of an appropriate
balance of funding required. Our policy is to maintain the Group's
investment grade credit rating and ensure operating flexibility,
whilst:
· meeting its pension obligations;
· investing in research and technology and pursuing other
organic investment opportunities;
· paying dividends in line with the Group's policy of long-term
sustainable cover of around two times underlying
earnings;
· making accelerated returns of capital to shareholders when
the balance sheet allows and when the return from doing so is in
excess of the Group's weighted average cost of capital;
and
· investing in value-enhancing acquisitions, where market
conditions are right and where they deliver on the Group's
strategy.
Purchase of own shares
In July 2022, the directors
approved a share buyback programme of up to £1.5bn (the 2022 share
buyback programme). The 2022 share buyback programme was completed
on 24 July 2024. In total, 163,907,003 ordinary shares were
repurchased under the 2022 share buyback programme for a total cost
(including transaction costs) of £1,508m.
In August 2023, the directors
approved a further share buyback programme of up to £1.5bn (the
2023 share buyback programme). The 2023 share buyback programme
commenced on 25 July 2024. The 2023 share buyback programme is
expected to complete within three years of its
commencement.
In the six months ended 30 June
2023, 40,460,554 ordinary shares were repurchased under the 2022
share buyback programme for a total cost (including transaction
costs) of £371m.
In the six months ended 30 June
2024, 19,403,928 ordinary shares were repurchased under the 2022
share buyback programme at a total cost (including transaction
costs) of £250m.
All ordinary shares acquired have
been subsequently cancelled, with the nominal value of ordinary
shares cancelled deducted from share capital against the capital
redemption reserve.
As part of the 2022 buyback
programme, it was agreed that should a better alternative use for
the Company's cash reserves be identified, the share buyback
programmes would be ceased and the money instead used for the
alternative purpose. Therefore, when the Company issued a mandate
to the brokers to purchase shares on their behalf, the mandate was
structured such that it could be revoked at any point. As such, no
financial liability has been recognised for shares not yet
purchased under the 2022 programme at 30 June.
As the mandate for the first
tranche of the 2023 share buyback programme can be revoked at any
time, no financial liability has been recognised for shares not yet
purchased under the first tranche of the 2023 share buyback
programme.
8. Fair value
measurement
Fair value of financial instruments
Certain of the Group's financial
instruments are held at fair value.
The fair value of a financial
instrument is the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between
market participants at the balance sheet date.
The fair values of financial
instruments held at fair value have been determined based on
available market information at the balance sheet date, and the
valuation methodologies listed below:
- the fair values of forward foreign exchange contracts are
calculated by discounting the contracted forward values and
translating at the appropriate balance sheet rates;
- the fair values of both interest rate and cross-currency
swaps are calculated by discounting expected future principal and
interest cash flows and translating at the appropriate balance
sheet rates; and
- the fair values of money market funds are calculated by
multiplying the net asset value per share by the investment held at
the balance sheet date.
The derivative fair values are
based on reputable third party forecast data, and then adjusted for
credit risk, including the Group's own credit risk, and market
risk. Due to the variability of the valuation factors, the fair
values presented at 30 June may not be indicative of the amounts
the Group will realise in the future.
Fair value hierarchy
The fair value measurement
hierarchy is as follows:
- Level 1 - Quoted prices (unadjusted) in active markets for
identical assets or liabilities;
- Level 2 - Inputs other than quoted prices included within
level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices);
and
- Level 3 - Inputs for the asset or liability that are not
based on observable market data (i.e. unobservable
inputs).
Carrying amounts and fair values of certain financial
instruments
|
30 June
2024
|
|
31
December 2023
|
|
Carrying amount
£m
|
Fair
value
£m
|
|
Carrying
amount
£m
|
Fair
value
£m
|
Financial instruments measured at fair
value:
|
|
|
|
|
|
Non-current
|
|
|
|
|
|
Other investments at fair value
through other comprehensive income
|
76
|
76
|
|
84
|
84
|
Other financial assets
|
245
|
245
|
|
227
|
227
|
Contingent consideration in
business combination (note 10)
|
(41)
|
(41)
|
|
-
|
-
|
Other financial
liabilities
|
(210)
|
(210)
|
|
(227)
|
(227)
|
Current
|
|
|
|
|
|
Other financial assets
|
159
|
159
|
|
205
|
205
|
Money market funds
|
944
|
944
|
|
1,375
|
1,375
|
Contingent consideration in
business combination (note 10)
|
(20)
|
(20)
|
|
-
|
-
|
Other financial
liabilities
|
(220)
|
(220)
|
|
(295)
|
(295)
|
Financial instruments not measured at fair
value:
|
|
|
|
|
|
Non-current
|
|
|
|
|
|
Loans
|
(8,234)
|
(7,735)
|
|
(4,432)
|
(4,045)
|
Current
|
|
|
|
|
|
Loans
|
(738)
|
(735)
|
|
(679)
|
(672)
|
All of the financial assets and
liabilities measured at fair value are classified as level 2 using
the fair value hierarchy, except for money market funds, which are
classified as level 1; other investments, which are at a
combination of level 1 and level 3; and the contingent
consideration liability which is measured at level 3. The fair
value of the contingent consideration has been valued based on the
discounted expected cash flows. The total value of investments
classified as level 3 is immaterial. There were no transfers
between levels during the period. Alternative valuation techniques
would not materially change the valuations presented.
Financial assets and liabilities
in the Group's Condensed consolidated balance sheet are either held
at fair value or at amortised cost. With the exception of loans,
the carrying value of financial instruments measured at amortised
cost approximates their fair value. For the bonds included within
loans, the fair value of loans presented in the table above is
derived from market prices as of 30 June, classified as level 1
using the fair value hierarchy.
9. Related party transactions
The Group has a related party
relationship with its equity accounted investments and pension
schemes. Transactions with related parties occur in the normal
course of business, are priced on an arm's-length basis and settled
on normal trade terms. The more significant transactions are
disclosed below:
|
Six months
ended
30 June
2024
£m
|
Six
months
ended
30 June
2023
£m
|
Sales to related
parties
|
779
|
786
|
Purchases from related
parties
|
184
|
287
|
Management recharges
|
2
|
4
|
|
|
|
|
30 June
2024
£m
|
31
December
2023
£m
|
Amounts owed by related
parties
|
126
|
79
|
Amounts owed to related
parties
|
1,834
|
1,746
|
10. Acquisitions
Businesses acquired during
2024
Ball Aerospace
On 16 February 2024, the Group
acquired 100% of the share capital of the Ball Aerospace division
(now BAE Systems Space & Mission Systems) for consideration of
$5.5bn (£4.4bn), of which c.$0.75bn is expected to be recoverable
under a tax benefit associated with the acquisition. Upon
completion, the Group drew down $4.0bn (£3.2bn) under a bridge
finance facility and paid $1.5bn (£1.2bn) in cash from the Group's
existing cash resources, in settlement of the transaction.
Following bond finance raised in March of $4.8bn (£3.8bn), the
Group subsequently repaid the bridge finance facility.
Space and Mission Systems is a
leading provider of spacecraft, mission payloads, optical systems,
and antenna systems. Headquartered in Colorado, with more than
5,200 employees, it has existing customer relationships among the
Intelligence Community, US Department of Defense, and civilian
space agencies. It is well positioned across several markets:
military and civil space, C4ISR, and missile and munitions. The
space market exposure extends across positions in defence,
intelligence, and scientific missions. The Tactical Solutions
business is well positioned to capture expected increases in demand
for missiles and munitions.
The acquisition enhances our
portfolio of advanced defence electronic solutions and is reported
as part of our Electronic Systems sector.
Other acquisitions
On 31 January 2024, the Group
acquired 100% of the share capital of Malloy Aeronautics Ltd and,
on 2 May 2024, the Group acquired 100% of the share capital of
Callen-Lenz Associates Ltd. Both entities operate in the UAS
technology market and form part of FalconWorks®, the
research and development business within the Air sector.
Total consideration of £291m
includes £61m of contingent consideration. The value of contingent
consideration is dependent on a number of factors, including the
financial and operational performance of the acquired
businesses.
The results and financial position
of all three acquired businesses have been consolidated from the
date of each acquisition under the requirements of IFRS 3 Business
Combinations. The fair values acquired are provisional figures,
being the best estimates currently available, as the Group
continues to finalise the valuation of intangibles acquired due to
the complexity and nature of the acquisitions.
Acquisition consideration and provisional fair value of net
assets acquired
|
|
|
|
Ball
Aerospace
£m
|
Other
£m
|
Total
£m
|
Intangible assets
|
|
|
|
2,271
|
106
|
2,377
|
Property, plant and
equipment
|
|
|
|
694
|
-
|
694
|
Right-of-use assets
|
|
|
|
77
|
-
|
77
|
Receivables
|
|
|
|
309
|
14
|
323
|
Deferred tax assets
|
|
|
|
43
|
-
|
43
|
Inventories
|
|
|
|
17
|
6
|
23
|
Lease liabilities
|
|
|
|
(61)
|
-
|
(61)
|
Post-employment benefit
obligations
|
|
|
|
(142)
|
-
|
(142)
|
Contract liabilities
|
|
|
|
(175)
|
(16)
|
(191)
|
Payables
|
|
|
|
(160)
|
(14)
|
(174)
|
Provisions
|
|
|
|
(11)
|
-
|
(11)
|
Current tax
|
|
|
|
1
|
-
|
1
|
Cash and cash
equivalents
|
|
|
|
7
|
39
|
46
|
Net identifiable assets
acquired
|
|
|
|
2,870
|
135
|
3,005
|
Goodwill
|
|
|
|
1,482
|
156
|
1,638
|
Net assets acquired
|
|
|
|
4,352
|
291
|
4,643
|
Satisfied by:
|
|
|
|
|
|
|
Cash consideration
|
|
|
|
4,352
|
230
|
4,582
|
Contingent
consideration
|
|
|
|
-
|
61
|
61
|
Total consideration
|
|
|
|
4,352
|
291
|
4,643
|
The net outflows of cash in
respect of the acquisitions are as follows:
|
|
£m
|
£m
|
£m
|
Cash consideration
|
|
4,352
|
230
|
4,582
|
Less: Cash and cash equivalents
acquired
|
|
(7)
|
(39)
|
(46)
|
Net cash outflows in respect of the acquisition of
businesses
|
|
4,345
|
191
|
4,536
|
The goodwill recognised is
primarily attributable to expected synergies from the products and
services being provided and the enhancement of capabilities in new
and emerging areas of technology. Goodwill of £1,482m is expected
to be deductible for tax purposes. No impairment losses have been
recognised in respect of goodwill in the period ended
30 June 2024.
The acquisitions contributed £590m
to the Group's revenue and £65m to the Group's underlying
EBIT1 between the date of acquisition and 30 June 2024.
If the acquisitions had completed on 1 January 2024, the Group's
revenue would have been £12,720m and the Group's underlying
EBIT1 would have been £1,419m for the period ended
30 June 2024.
Contractual cash flows on trade,
other and contract receivables are recognised net of expected
credit losses. The amount of gross trade receivables acquired was
£335m, of which £14m relates to other acquisitions. Management's
best estimate at the acquisition date of contractual cash flows not
expected to be collected was £12m in relation to Ball Aerospace.
The fair value of trade receivables at acquisition date is shown in
the table above.
No contingent liabilities have
been recognised or require disclosure in respect of these
acquisitions.
Acquisition-related costs
of £42m have been included as an adjusting
item in operating costs in the Condensed
consolidated income statement for the period ending 30 June
2024.
1.
Underlying EBIT is an alternative performance measure defined in
the Alternative performance measures section on page 46. It is
presented here as our internal measure of segmental performance, to
provide additional information on performance to the
user.
11. Disposals
Disposal of partial share of equity
accounted investment
On 12 January 2024, Air Astana
announced its intention to proceed with a joint initial public
offering (IPO) on the London Stock Exchange, the Astana
International Exchange in Kazakhstan, and the Kazakhstan Stock
Exchange. On
9 February 2024, the IPO was launched. As a result of the IPO, the
total shareholding held by BAE Systems in Air Astana reduced from
49% to 17%. The Group's 49% shareholding in Air Astana had a
carrying value of £84m at
31 December 2023. The profit on disposal of the share of the
Group's equity accounted investment is shown below. The Group has
continued to equity account for the remaining
investment.
|
£m
|
Total cash proceeds on disposal of
partial shareholding in equity accounted investment
|
166
|
Less: Carrying amount of share of
equity accounted investment disposed
|
(56)
|
Profit on disposal before tax and reclassification of foreign
currency translation reserve
|
110
|
Reclassification of foreign
currency reserve
|
(35)
|
Profit on disposal before tax
|
75
|
|
|
12. Contingent liabilities
The Group believes that any
significant liability in respect of its guarantees and performance
bond arrangements, and legal actions and claims not already
provided for, is remote.
13. Events after the reporting period
There were no events after the
reporting period which would materially impact the balances
reported in this
Report.
Alternative performance measures
We monitor the underlying
financial performance of the Group using alternative performance
measures (APMs). These measures are not defined in IFRS and,
therefore, are considered to be non-GAAP measures. Accordingly, the
relevant IFRS measures are also presented where
appropriate.
The Group uses these APMs as a
mechanism to support year-on-year business performance and cash
generation comparisons, and to enhance management's planning and
decision-making on the allocation of resources. The APMs are also
used to provide information in line with the expectations of
investors, and when setting guidance on expected future business
performance. The Group presents these measures to the users to
enhance their understanding of how the business has performed
within the year, and does not consider them to be more important
than, or superior to, their equivalent IFRS measures. As each APM
is defined by the Group, they may not be directly comparable with
equivalently-named measures in other companies.
Purpose, definitions, breakdowns
and reconciliations to the relevant statutory measure, where
appropriate, are included below.
Sales
Purpose
Enables management to monitor the
revenue of both the Group's own subsidiaries as well recognising
the strategic importance in its industry of its equity accounted
investments, to ensure programme performance is understood and in
line with expectations.
Definition
Revenue plus the Group's share of
revenue of equity accounted investments, excluding subsidiaries'
revenue from equity accounted investments.
Reconciliation of sales to revenue
|
|
Six months
ended
30 June
2024
£m
|
Six
months ended
30 June
2023
£m
|
Sales
|
|
13,399
|
12,018
|
Deduct: Group's share of revenue
of equity accounted investments
|
|
(1,701)
|
(1,807)
|
Add: Subsidiaries' revenue from
equity accounted investments
|
|
779
|
786
|
Revenue
|
|
12,477
|
10,997
|
Underlying EBIT
Purpose
Provides a measure of operating
profitability, excluding one-off events or adjusting items that are
not considered to be part of the ongoing operational transactions
of the business, to enable management to monitor the performance of
recurring operations over time, and which is comparable across the
Group.
Definition
Operating profit excluding
amortisation of programme, customer-related and other intangible
assets, impairment of intangible assets, net finance costs and tax
expense of equity accounted investments (EBIT) and adjusting items.
The exclusion of amortisation of acquisition-related intangible
assets is to allow consistent comparability internally and
externally between our businesses, regardless of whether they have
been grown organically or via acquisition.
Reconciliation of underlying EBIT to operating
profit
|
|
Six months
ended
30 June
2024
£m
|
Six
months
ended
30 June
2023
£m
|
Underlying EBIT
|
|
1,393
|
1,258
|
Adjusting items
|
|
46
|
48
|
Amortisation of programme,
customer-related and other intangible assets, and impairment of
intangibles
|
|
(143)
|
(56)
|
Net finance income of equity
accounted investments
|
|
26
|
2
|
Tax expense of equity accounted
investments
|
|
(26)
|
(19)
|
Operating profit
|
|
1,296
|
1,233
|
Return on sales
Purpose
Provides a measure of operating
profitability, excluding one-off events, to enable management to
monitor the performance of recurring operations over time, and
which is comparable across the Group.
Definition
Underlying EBIT as a percentage of
sales - also referred to as margin.
|
|
Six months
ended
30 June
2024
£m
|
Six
months
ended
30 June
2023
£m
|
Sales
|
|
13,399
|
12,018
|
Underlying EBIT
|
|
1,393
|
1,258
|
Return on sales
|
|
10.4%
|
10.5%
|
Underlying earnings per share (EPS)
Purpose
Provides a measure of the Group's
underlying performance, which enables management to compare the
profitability of the Group's recurring operations over
time.
Definition
Profit for the period attributable
to shareholders, excluding post-tax impact of amortisation of
programme, customer-related and other intangible assets, impairment
of intangible assets, non-cash finance movements on pensions and
financial derivatives, and adjusting items attributable to
shareholders, being underlying earnings, divided by number of
shares as defined for Basic EPS in accordance with IAS 33 Earnings
per Share.
Reconciliation of underlying profit attributable to equity
shareholders
|
Six months
ended
30 June
2024
£m
|
Six
months
ended
30 June
2023
£m
|
Underlying profit for the period attributable to equity
shareholders
|
948
|
901
|
Adjustments:
|
|
|
Adjusting items
|
46
|
48
|
Amortisation of programme,
customer-related and other intangible assets and impairment of
intangibles
|
(143)
|
(56)
|
Net interest income on
post-employment benefit obligations
|
7
|
20
|
Fair value and foreign exchange
adjustments on financial instruments and investments
|
66
|
58
|
Tax impact of
adjustments
|
24
|
(6)
|
Profit for the period attributable to equity
shareholders
|
948
|
965
|
Reconciliation of underlying EBIT to underlying profit for
the period attributable to equity shareholders
|
|
Six months
ended
30 June
2024
£m
|
Six
months
ended
30 June
2023
£m
|
Underlying EBIT
|
|
1,393
|
1,258
|
Group and equity accounted
investments underlying net finance costs (see reconciliation page
48)
|
|
(180)
|
(111)
|
Underlying tax expense (see
reconciliation page 49)
|
|
(225)
|
(206)
|
Underlying profit for the
period
|
|
988
|
941
|
Deduct: Non-controlling
interests
|
|
(40)
|
(40)
|
Underlying profit for the period attributable to equity
shareholders
|
|
948
|
901
|
|
|
|
|
Weighted average number of
ordinary shares used in calculating basic earnings per
share
|
3,016
|
3,039
|
Underlying EPS - basic
|
|
31.4p
|
29.6p
|
Weighted average number of
ordinary shares used in calculating diluted earnings per
share
|
3,054
|
3,076
|
Underlying EPS - diluted
|
|
31.0p
|
29.3p
|
Adjusting items
Purpose
To adjust items of financial
performance from the reported underlying results which have been
determined by management as being material by their size or
incidence and not relevant to an understanding of the Group's
underlying business performance.
Definition
Adjusting items include profit or
loss on business transactions, the impact of substantively enacted
tax rate changes, and costs incurred which are one-off in nature,
for example; non-routine costs or income relating to
post-retirement benefit schemes and other items which management
has determined as not being relevant to an understanding of the
Group's underlying business performance.
|
Six months
ended
30 June
2024
£m
|
Six
months
ended
30 June
2023
£m
|
Profit on disposal of equity
accounted investments
|
75
|
-
|
Acquisition-related
costs
|
(42)
|
(3)
|
Gain related to settlement on US
pension buy-out
|
13
|
51
|
Adjusting items
|
46
|
48
|
Underlying net finance costs
Purpose
Provides a measure of net finance
costs associated with the operational borrowings of the Group that
is comparable over time.
Definition
Net finance costs for the Group
and its share of equity accounted investments, excluding net
interest income/expense on post-employment benefit obligations and
fair value and foreign exchange adjustments on financial
instruments.
|
Six months ended
30 June
2024
£m
|
Six
months
ended
30 June
2023
£m
|
Net finance costs -
Group
|
(133)
|
(35)
|
Deduct:
|
|
|
Net interest income on
post-employment benefit obligations
|
(6)
|
(19)
|
Fair value and foreign exchange
adjustments on financial instruments
|
(68)
|
(62)
|
Underlying net finance costs - Group
|
(207)
|
(116)
|
Net finance income - equity
accounted investments
|
26
|
2
|
(Deduct)/add back:
|
|
|
Net interest income on
post-employment benefit obligations
|
(1)
|
(1)
|
Fair value and foreign exchange
adjustments on financial instruments
|
2
|
4
|
Underlying net finance income - equity accounted
investments
|
27
|
5
|
Total of Group and equity accounted investments' underlying
net finance costs
|
(180)
|
(111)
|
Underlying effective tax rate
Purpose
Provides a measure of tax expense
for the Group, excluding one-off items, that is comparable over
time.
Definition
Tax expense for the Group and its
share of equity accounted investments, excluding any one-off tax
benefit/expense related to adjusting items and other items excluded
from underlying EBIT, as a percentage of underlying profit before
tax.
Calculation of the underlying effective tax
rate
|
|
Six months ended
30 June
2024
£m
|
Six
months
ended
30 June
2023
£m
|
Underlying EBIT (see
reconciliation on page 46)
|
|
1,393
|
1,258
|
Group and equity accounted
investments' underlying net finance costs (see reconciliation on
page 48)
|
|
(180)
|
(111)
|
Underlying profit before tax
|
|
1,213
|
1,147
|
|
|
|
|
Group tax expense
|
|
(175)
|
(193)
|
Tax expense of equity accounted
investments
|
|
(26)
|
(19)
|
Exclude:
|
|
|
|
Tax (income)/expense in respect of
taxable adjusting items
|
|
(4)
|
2
|
Tax (income)/expense in respect of
other items excluded from underlying profit
|
|
(20)
|
4
|
Underlying tax expense
|
|
(225)
|
(206)
|
|
|
|
|
Underlying effective tax rate
|
|
19%
|
18%
|
Free cash flow
Purpose
Provides a measure of cash generated
by the Group's operations after servicing debt and tax obligations,
available for use in line with the Group's capital allocation
policy.
Definition
Net cash flow from operating
activities, including dividends received from equity accounted
investments, interest paid, net of interest received, net capital
expenditure and financial investments, and principal elements of
lease payments and receipts.
Reconciliation from free cash flow to net cash flow from
operating activities
|
|
Six months ended
30 June
2024
£m
|
Six
months
ended
30 June
2023
£m
|
Free cash flow
|
|
219
|
1,070
|
Add back:
|
|
|
|
Interest paid, net of interest
received
|
|
175
|
110
|
Net capital expenditure and
financial investment
|
|
396
|
303
|
Principal element of lease
payments and receipts
|
|
112
|
124
|
Deduct:
|
|
|
|
Dividends received from equity
accounted investments
|
|
(145)
|
(123)
|
Net cash flow from operating activities
|
|
757
|
1,484
|
Operating business cash flow
Purpose
Provides a measure of cash generated
by the Group's operations, which is comparable across the Group, to
service debt and meet tax obligations, and in turn available for
use in line with the Group's capital allocation policy.
Definition
Net cash flow from operating
activities excluding tax paid net of research and development
expenditure credits received and including net capital expenditure
(net of proceeds from funding of assets) and lease principal
amounts, financial investment and dividends from equity accounted
investments.
Reconciliation from operating business cash flow to net cash
flow from operating activities
|
|
Six months
ended
30 June
2024
£m
|
Six
months
ended
30 June
2023
£m
|
Operating business cash flow
|
|
474
|
1,307
|
Add back:
|
|
|
|
Net capital expenditure and
financial investment
|
|
396
|
303
|
Principal element of lease
payments and receipts
|
|
112
|
124
|
Deduct:
|
|
|
|
Dividends received from equity
accounted investments
|
|
(145)
|
(123)
|
Tax paid net of research and
development expenditure credits received
|
|
(80)
|
(127)
|
Net cash flow from operating activities
|
|
757
|
1,484
|
Reconciliation of operating business cash flow to net cash
flow from operating activities by reporting
segment
|
Operating business cash flow
|
Deduct:
Dividends received from equity accounted investments
|
Add
back: Net capital expenditure, lease principal amounts and
financial investment
|
Net
cash flow from operating activities
|
|
Six months ended
30 June
2024
£m
|
Six months ended
30 June
2023
£m
|
Six months ended
30 June
2024
£m
|
Six months ended
30 June
2023
£m
|
Six months ended
30 June
2024
£m
|
Six months ended
30 June
2023
£m
|
Six months ended
30 June
2024
£m
|
Six months ended
30 June
2023
£m
|
Electronic Systems
|
184
|
157
|
(6)
|
(4)
|
86
|
72
|
264
|
225
|
Platforms &
Services
|
(13)
|
21
|
-
|
-
|
96
|
74
|
83
|
95
|
Air
|
724
|
1,330
|
(135)
|
(110)
|
108
|
87
|
697
|
1,307
|
Maritime
|
(247)
|
(79)
|
(4)
|
(3)
|
160
|
119
|
(91)
|
37
|
Cyber &
Intelligence
|
16
|
51
|
-
|
-
|
24
|
35
|
40
|
86
|
HQ
|
(190)
|
(173)
|
-
|
(6)
|
34
|
40
|
(156)
|
(139)
|
|
474
|
1,307
|
(145)
|
(123)
|
508
|
427
|
837
|
1,611
|
Tax paid net of research and
development expenditure credits received
|
|
(80)
|
(127)
|
Net cash flow from operating activities
|
|
|
|
|
757
|
1,484
|
Net debt (excluding lease liabilities)
Purpose
Allows management to monitor
indebtedness of the Group, to ensure the Group's capital structure
is appropriate and capital allocation policy decisions are suitably
informed.
Definition
Cash and cash equivalents, less
loans (including debt-related derivative financial instruments).
Net debt does not include lease liabilities.
Components of net debt (excluding lease
liabilities)
|
|
30 June
2024
£m
|
31 December
2023
£m
|
Cash and cash
equivalents
|
|
2,831
|
4,067
|
Debt-related derivative financial
instruments (net)
|
|
53
|
22
|
Loans - non-current
|
|
(8,234)
|
(4,432)
|
Loans - current
|
|
(738)
|
(679)
|
Net debt (excluding lease liabilities)
|
|
(6,088)
|
(1,022)
|
Order intake
Purpose
Allows management to monitor the
order intake of the Group together with its equity accounted
investments, providing insight into future periods' sales
performance.
Definition
Funded orders received from
customers including the Group's share of order intake of equity
accounted investments.
|
|
Six months
ended
30 June
2024
£bn
|
Six
months
ended
30 June
2023
£bn
|
Order intake
|
|
15.1
|
21.1
|
Order backlog
Purpose
Supports future years' sales
performance of the Group together with its equity accounted
investments.
Definition
Funded and unfunded unexecuted
customer orders including the Group's share of order backlog of
equity accounted investments. Unfunded orders include the elements
of US multi-year contracts for which funding has not been
authorised by the customer.
Reconciliation of order backlog, as defined by Group, to
order book1
|
30 June
2024
£bn
|
31
December 2023
£bn
|
Order backlog, as defined by
Group
|
74.1
|
69.8
|
Deduct:
|
|
|
Unfunded order backlog
|
(4.5)
|
(2.3)
|
Share of order backlog of equity
accounted investments
|
(13.6)
|
(13.5)
|
Add back: Order backlog in respect
of orders from equity accounted investments
|
3.6
|
4.0
|
Order book1
|
59.6
|
58.0
|
1. Order
book represents the transaction price allocated to unsatisfied and
partially satisfied performance obligations as defined by IFRS 15
Revenue from Contracts with Customers.