“The Group made good progress in strengthening the outlook and geographic base of the business, with a number of significant contract wins. The defence order backlog is now at a record high with visibility on many of our key programmes through the next decade. Delivering a strong operational performance and continued investment will enable us to meet our growth expectations and underpin the long term.”

Results in brief


Financial performance measures as defined by the Group
Financial performance measures defined in IFRS
Order intake
Order backlog
Operating profit
Basic earnings per share
Underlying EBITA 
Net cash flow from operating activities
Underlying earnings per share
Operating business cash flow
Net debt
Other financial highlights
Group’s share of the net pension deficit
Dividend per share

Financial highlights


Financial performance measures as defined by the Group
  • Order intake increased by £8.0bn to £28.3bn 
  • Order backlog increased by £9.7bn to £48.4bn following this year’s record order intake
  • Sales decreased £0.1bn to £18.4bn with the expected reduction in Typhoon production activity being largely offset by growth in our US businesses
  • Underlying EBITA decreased by £46m to £1,928m. There was an adverse exchange translation impact of £34m
  • Underlying earnings per share increased by 2% to 42.9p
  • Operating business cash flow decreased by £759m to £993m
  • Net debt increased by £152m compared with 31 December 2017
Financial performance measures defined in IFRS
  • Revenue decreased by £0.4bn to £16.8bn, a 1% decline on a constant currency basis
  • Operating profit increased by £186m to £1,605m. There was an adverse exchange translation impact of £31m
  • Basic earnings per share increased to 31.3p
  • Net cash flow from operating activities decreased by £697m to £1,200m 
Other financial highlights
  • Group’s share of the pre-tax accounting net pension deficit reduced by £0.1bn compared with 31 December 2017 to £3.9bn
  • Final dividend of 13.2p per share making a total of 22.2p per share for the year, an increase of 2% over 2017
Operational and strategic key points
  • Contract with the Qatar government for the supply of 24 Typhoon and nine Hawk aircraft, air and ground training, and ground support became effective in September. MBDA contract for the supply of missiles also became effective
  • Signature in March 2018 of a Memorandum of Intent between the Kingdom of Saudi Arabia and the UK government to aim to finalise discussions for the purchase of a further 48 Typhoon aircraft
  • RAF declaration of Typhoon Centurion standard, enabling transition of capabilities from Tornado to Typhoon
  • Announcement of the UK Combat Air Strategy and launch of the Tempest programme
  • Completion of the final four of 12 Typhoon deliveries to Oman
  • In November the first flight of a Hawk assembled in Saudi Arabia took place 
  • Integration of F 35 Lightning II onto aircraft carrier HMS Queen Elizabeth commenced, and the first F 35 deck landing completed
  • Order intake of £3.2bn for support services up to 2022 in respect of the continuation of Typhoon support in Saudi Arabia
  • Current German government position on export licensing may affect the Group’s ability to provide capability to Saudi Arabia which may have a consequential impact on the Group’s financial performance and relationships
  • Type 26 frigate selected for the Commonwealth of Australia’s Hunter Class nine ship Future Frigate programme with the framework agreement including the A$1.9bn (£1.1bn) scope for the initial design and productionisation signed in December
  • HMS Queen Elizabeth has undergone successful initial F 35 Lightning II flight trials
  • Cost growth on the Aircraft Carrier programme has resulted in a more conservative trading of contract profitability. Sea trials of HMS Prince of Wales are expected within the next year 
  • Type 26 selected as the design for the Canadian Surface Combatant programme
  • Receipt of the full £1.6bn contract for the seventh Astute Class submarine, Agincourt, with order intake in the year of £0.7bn 
  • Further £1.3bn funding extension for the Dreadnought programme received
  • Offshore Patrol Vessel programme quality issues have required the creation of a £47m loss provision
  • Management strengthened across segment to focus on programme schedule, execution and cost performance
  • CTA International, BAE Systems’ joint venture with Nexter, delivered 115 40mm cased telescopic cannons
  • In January 2019, entered into an agreement with Rheinmetall to create a joint UK based military land vehicle design, manufacturing and support business, subject to regulatory clearance
Electronic Systems
  • Continued production ramp ups on F 35 Lightning II hardware, with initial funding on Low Rate Initial Production Lot 13
  • Further awards for APKWS® laser guided rockets secured worth nearly $400m (£314m) and production capacity ramping towards 25,000 units per annum
  • Continued growth in classified work, increasing to 11% of the business
  • New facilities being established in Huntsville, Alabama and Manchester, New Hampshire to increase capacity and expand operations
  • Delivered the 10,000th electric hybrid bus system and continue to pursue expanding capabilities in the air and maritime domains
Platforms & Services (US)
  • Selected by the US Marine Corps for the Amphibious Combat Vehicle 1.1 programme
  • One of two competitors selected for the US Army’s Mobile Protected Firepower programme
  • Deliveries of the first batch of M777 ultra-lightweight howitzers to the Indian Army
  • Continued to deliver Mk45 Gun Systems to US and international customers
  • Secured $1.3bn (£1.0bn) in new orders across the four US shipyards 
  • In commercial shipbuilding, activities continue to complete the final ship
  • Divested the Mobile, Alabama shipbuilding yard
  • Management changes made and investment in process and automation improvements being implemented to position the business for its upcoming growth phase
  • An accident in a nitrocellulose drying facility at Radford sadly resulted in one fatality and injuries to two employees
Cyber & Intelligence
  • New awards valued at approximately $320m (£251m) to provide motion imagery analysis, training and research support services to the US intelligence community
  • Secured a five year, $90m (£71m) US Navy contract to provide engineering and technical support for fixed, airborne and mobile intelligence collection platforms
  • Awarded additional change proposals worth $55m (£43m) to support the US Air Force ICBM Integration Support Contractor programme
  • Applied Intelligence 2017 restructuring programme completed, returning the business to break-even


Guidance for 2019
Whilst the Group is subject to geopolitical uncertainties, the following guidance is provided on current expected operational performance.

Group guidance 
For the year ending 31 December 2019, the Group’s underlying earnings per share is expected to grow by mid-single digit compared to the full-year underlying earnings per share in 2018 of 42.9p, assuming a US$1.30 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 2018 are provided on pages 12 to 16.

For associated materials, please visit: https://resources.baesystems.com/?c=40479&k=78ad057633  

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Rachael Gordon
Strategic and External Communications Director
Air Communications

+44 (0) 7793 423682

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