Charles Woodburn, Chief Executive, said: “We delivered a good performance in 2017, consistent with our expectations for the year."
"We start 2018 with a streamlined organisation and a strong focus on programme execution, technology and enhanced competitiveness, providing a solid foundation for medium term growth. With an improving outlook for defence budgets in a number of our markets, we are well placed to generate good returns for shareholders.”
Financial performance measures as defined by the Group
-- Sales increased by £0.6bn to £19.6bn largely reflecting currency translation.
-- Underlying EBITA increased to £2,034m, a 4% increase on a constant currency basis.
-- Underlying earnings per share increased by 8% to 43.5p.
-- Operating business cash flow increased by £748m to £1,752m.
-- Net debt reduced by £790m compared with 31 December 2016.
-- Order intake of £20.3bn.
-- Order backlog of £41.2bn was unchanged on a constant currency basis.
Financial performance measures defined in IFRS
-- Revenue increased by £0.5bn to £18.3bn largely reflecting currency translation.
-- Operating profit decreased to £1,480m, including a £384m non-cash goodwill impairment in Applied Intelligence reflecting lower growth assumptions.
-- Basic earnings per share decreased by 7% to 26.8p.
-- Net cash flow from operating activities increased by £668m to £1,897m.
Other financial highlights
-- Group’s share of the pre-tax accounting net pension deficit reduced by £2.2bn compared with 31 December 2016 to £3.9bn.
-- Final dividend of 13p per share making a total of 21.8p per share for the year, an increase of 2% over 2016.
Operational and strategic review
-- Our US-based Electronic Systems business received orders on the F-35 Lightning II programme worth over $450m (£333m) for additional hardware production and five years of support.
-- Growing demand for our Advanced Precision Kill Weapon System (APKWS™) laser-guided rockets, with awards totalling nearly $300m (£222m) during the year and over 13,000 units delivered at 31 December.
-- During the year, our US-based Intelligence & Security business secured six task order contracts valued at more than $180m (£133m), increasing the Full-Motion Video Intelligence, Surveillance and Reconnaissance analysis support we provide to the US intelligence community.
-- In Applied Intelligence, the underlying loss for the year was £61m, including £24m for a restructuring charge. The first half loss of £27m was followed by a reduced second half loss, before the restructuring charge, of £10m as the cost-reduction actions under the ongoing restructuring started to deliver bottom-line benefit.
-- We received a $414m (£306m) contract for the third and final option for Low-Rate Initial Production of 48 M109A7 self-propelled howitzers and ammunition carriers under the Paladin Integrated Management programme. The award contains options for a further 180 vehicle sets over three years of Full-Rate Production.
-- Under a contract signed in 2012, the first eight Typhoon and all eight Hawk aircraft for Oman were delivered to the Sultanate of Oman in the year. The remaining four Typhoon aircraft are scheduled to be delivered in 2018.
-- In December, BAE Systems and the Government of Qatar entered into a contract, valued at approximately £5bn, for the supply of 24 Typhoon aircraft. Alongside supplying the aircraft, the agreement provides for the supply of ground support to the Qatar Armed Forces and delivery of technical and pilot training in Qatar. The contract is subject to financing conditions and receipt by the Group of first payment which are expected to be fulfilled no later than mid-2018.
-- The full £3.7bn production contract for the first batch of three Type 26 frigates was signed in June, with £2.8bn of order intake in the year. Production of the first ship, Glasgow, commenced in July.
-- Under the seven-boat Astute Class submarine programme, we received the full £1.4bn contract for the sixth submarine from the Royal Navy and the fourth boat, Audacious, was launched.
-- We agreed contracts under the Saudi British Defence Co-operation Programme to provide ongoing support services to the Royal Saudi Air Force and Royal Saudi Naval Forces for a further five years to 31 December 2021.
-- In November, the 2017 UK triennial pension funding valuations and, where necessary, deficit recovery plans were agreed with the trustees and certified by the scheme actuaries after consultation with the Pensions Regulator.
Guidance for 2018
The Group and segmental guidance for 2018 below is based on the Group’s actual financial performance for 2017 as re-presented to reflect both the organisational changes described in the results statement below and the impact of the adoption of IFRS 15, Revenue from Contracts with Customers.
For the year ending 31 December 2018, we expect the Group’s underlying earnings per share to be in line with full-year underlying earnings per share in 2017 of 42.1p.*
* Compared with the Group’s actual financial performance for 2017 as re-presented to reflect the impact of the adoption of IFRS 15 from 43.5p to 42.1p and assuming a US$1.40 to sterling exchange rate.
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 International Financial Reporting Standards for 2017 are provided on below.
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