2024 half year results

Financial performance measures as defined by the Group ¹

Financial performance measures as derived from IFRS

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 of the full report.
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 guidance ¹

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.

• 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 of the full report.
2. Guidance incorporates the acquisition of Ball Aerospace from 16 February 2024.