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BAE SYSTEMS PLC – BUSINESS UPDATE

BAE Systems plc has today issued its interim management statement for the period from 1 July 2010 to 20 October 2010.

Trading for the period has been consistent with management expectations at the time of the half-year results announcement on 29 July 2010.

Ian King, Chief Executive BAE Systems, said:

“BAE Systems has continued to perform in line with management expectations. We remain focused on our proven strategy that will deliver long term sustainable value for shareholders. The US defence market continues to generate substantial business opportunities and we have announced a number of strategic acquisitions in the period which will strengthen our customer support and services activities. And in the UK, the Strategic Defence and Security Review has given us the basis on which to adapt our plans.”

Key contract wins in the period:
• $629m contract for the upgrade of 1,700 Caiman MRAP vehicles taking new orders for mine protected vehicles to more than $1bn for the year to date
• $123m for further production of thermal weapon sights for the US Army
• Approved to provide engineering and technical services to the US Army and other federal customers under a ten–year $16.4bn US government-wide contract called Rapid Response – 3rd Generation
• Received a multi ship, multi option contract, with a potential value of $365m on 11 Arleigh Burke DDG-51 class destroyers
• Continued to develop presence in Indian market; signed agreement with Hindustan Aeronautics Limited to supply products and services worth over £500m to enable 57 Hawk Advanced Jet Trainer aircraft to be built under licence in India for the Indian Air Force and Indian Navy.

M&A activity in the period:
• Completed $352m acquisition of Atlantic Marine which has naval sustainment operations at Mayport and Jacksonville, Florida, Moss Point, Mississippi, and Mobile, Alabama.
• Completed acquisition of OASYS Technology LLC, a US manufacturer of electro-optical systems and sub-assemblies for an initial cash consideration of approximately $25m.
• Announced definitive agreement to acquire L-1 Identity Solutions, Inc.'s Intelligence Services Group for cash consideration of $296m.

Strategic Defence and Security Review (SDSR)

• The business is planned on conservative assumptions and although the detail behind the changes identified by the SDSR will take some time to refine, the removal of a number of uncertainties with regard to our UK business is welcomed.
• BAE Systems has made allowances in its planning assumptions for possible changes and has accelerated efficiency improvements to both mitigate likely reductions in activity and to improve programme affordability for the UK customer.
• Some modest impact on UK performance for 2010 is anticipated with a reduction in the Group’s financial planning assumptions resulting in an approximately one pence reduction in earnings per share, per annum, thereafter.
• The Company will now work with the UK Ministry of Defence to address the detailed programme implications of the changes.

About BAE Systems
BAE Systems is a global defence, security and aerospace company with approximately 107,000 employees worldwide. The Company delivers a full range of products and services for air, land and naval forces, as well as advanced electronics, security, information technology solutions and customer support services. In 2009 BAE Systems reported sales of £22.4 billion (US$ 36.2 billion)

Issued by:
BAE Systems, Farnborough, Hampshire GU14 6YU, UK
Tel: +44 (0) 1252 384719 Fax: +44 (0) 1252 383947
24hr media hotline: + 44 (0) 7801 717739