Half-year results

Financial performance measures as defined by the Group

Six months
30 June
Six months
30 June
31 December
Order intake
Order backlog
Underlying earnings per share excluding one-off tax benefit
including one-off tax benefit 26.9p 19.8p 42.9p
Operating business
cash flow
Net debt
Pension and dividend
Six months
30 June
Six months ended
30 June
31 December 2018
Group's share of the net pension deficit
Dividend per share

Financial performance measures defined in IFRS

 Six months
30 June
Six months
30 June
31 December
Operating profit
Basic earnings per share
Net cash flow from operating activities

The first half performance underpins our guidance for the full year with improvements being made on a number of operational fronts. Our priority is to deliver consistent and strong operational performance for our customers and shareholders to enable us to meet our growth expectations over the medium term. Charles Woodburn, Chief Executive, BAE Systems

Financial highlights

Financial performance measures as defined by the Group

  • Order backlog of £47.4bn has reduced marginally over the first half of the year with trading on multi-year, long-term contracts in Air partly offset by further growth in the US businesses.
  • Sales increased by 4% on a constant currency basis to £9.4bn.
  • Underlying EBITA of £999m increased by 9% on a constant currency basis and excluding the estimated impact of IFRS 16.
  • Underlying earnings per share increased by 11% to 21.9p, excluding the one-off tax benefit. The Group’s underlying effective tax rate (excluding the one-off tax benefit) for the first half of the year was 17%, consistent with the prior year.
  • Operating business cash outflow of £309m.
  • Net debt at £1.9bn (£904m at 31 December 2018).

Financial performance measures defined in IFRS

  • Revenue increased to £8.7bn, up 4% on a constant currency basis.
  • Operating profit increased to £896m, up 7% on a constant currency basis and excluding the estimated impact of IFRS 16.
  • Basic EPS increased to 25.0p, up 69%, driven by the profit performance and the £161m one-off tax benefit.

Pension and dividend

  • The Group’s share of the pre-tax accounting net pension deficit increased to £4.3bn (31 December 2018 £3.9bn). The funding position is currently estimated to be approximately £2.0bn lower than the accounting position.
  • Interim dividend increased by 4.4% to 9.4p per share.

One-off tax benefit

A one-off tax benefit of £161m was recognised in the first half of the year, arising from agreements reached in respect of an overseas tax matter, net of a provision taken in respect of the estimated exposure arising from the EU’s decision regarding the UK’s Controlled Foreign Company regime.

Operational and strategic key points



  • Working closely with industry partners and the UK government to continue to fulfil contractual support arrangements in Saudi Arabia on the key European collaboration programmes.
  • The Qatar Typhoon and Hawk programme has been mobilised and the contract amended to accelerate aircraft deliveries.
  • The UK Tornado fleet successfully retired from service on schedule in March 2019.
  • 500th F-35 aft fuselage was delivered with the business ramping up to full rate production in 2020.
  • Next phase of the Tempest next-generation combat air programme was contracted.
  • In Australia the mobilisation of the Hunter Class frigate programme commenced.

Maritime and Land UK

  • A further £0.8bn of funding was received on the Dreadnought programme.
  • The second of the five Offshore Patrol Vessels (OPV) was accepted by the customer and the third OPV is close to acceptance.
  • HMS Prince of Wales aircraft carrier sea trials are expected to commence in the second half.
  • BAE Systems’ Type 26 design was selected for the Canadian Surface Combatant programme.
  • The UK combat vehicles joint venture between Rheinmetall and BAE Systems Land UK was formally launched on 1 July 2019.

Electronic Systems

  • Continued production ramp up on F-35 electronic warfare systems and APKWS® product line.
  • The business continues to experience growth in classified work.
  • Establishing new facilities in Huntsville, Alabama and Manchester, New Hampshire expanding capacity as the business delivers on increased order backlog.
  • Acquired Riptide Autonomous Solutions, a developer of unmanned underwater vehicles, securing a flexible platform for integrating our electronic solutions and mission capabilities.

Platforms & Services (US)

  • Implementation of process and automation improvements in Combat Vehicles production.
  • Armored Multi-Purpose Vehicle Low-Rate Initial Production has commenced.
  • M109A7 deliveries progressing as we work towards a revised production schedule, on track to achieve production of eight vehicles per month by year end.
  • The first of the Amphibious Combat Vehicles (ACVs) is undergoing acceptance testing in conjunction with the US Marine Corps ahead of the first delivery.
  • Investments are ongoing to modernise facilities, manufacturing technologies and processes.
  • The US Ship Repair business received orders totalling $427m (£336m) and concluded commercial shipbuilding operations.

Cyber & Intelligence

  • Disposal process is underway of the Applied Intelligence ex-SilverSky business together with an exit from the loss making UK-based Managed Security Services business. A restructuring charge of £25m has been recognised in the first half of the year.
  • The US-based Intelligence & Security (I&S) business continues to increase its bid pipeline, perform on existing contracts and win new orders, capturing its first Federated Secure Cloud opportunity.

Guidance for 2019

Whilst the Group is subject to geopolitical uncertainties, the following guidance is provided on current expected operational performance.
We expect the Group’s underlying earnings per share (excluding the one-off tax benefit) 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.
Whilst there is no change to Group-level earnings per share guidance, the first half restructuring charge taken at Applied Intelligence, together with slightly higher HQ costs, are expected to be covered by improved operational performance and a slightly lower effective tax rate.
In 2019 the Group now expects net debt to be broadly unchanged from the net debt at 31 December 2018. This is a slight improvement from the previous guidance reflecting a net timing mix on the Qatar Typhoon programme and the M109A7 programme. The Group continues to target in excess of £3bn of free cash flow over the three-year period 2019-2021, 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 the six months ended 30 June 2019 are provided in the Group financial review on pages 10 to 16.


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