In 2018 BAE Systems made good progress delivering on our strategy and results were consistent with our earnings guidance.
It was a successful year for winning major competitive new business, with a number of significant contract wins; strengthening the outlook and geographic base of our business.
These included in Qatar the provision for 24 Typhoon and nine Hawk aircraft; in Australia we signed a contract providing the framework for the design and build of nine ships for the Future Frigate programme; in Canada our Type 26 design was selected for the Canadian Surface Combatant programme; and in the US we had successes with the Amphibious Combat Vehicle and Mobile Protected Firepower programmes.
Our order backlog closed at 48.4 billion pounds, a record high for our defence business, and providing excellent visibility for sales growth in the coming years.
Sales were little changed at 18.4 billion pounds and underlying earnings per share for the year increased to 42.9p; 2% higher than 2017 and in line with our guidance.
We continue to deliver value to our shareholders with a total dividend for the year of 22.2 pence per share, up 2% from 2017, representing a 15th year of dividend growth.
As usual, this morning we have issued a trading update on 2019 performance to date, confirming our guidance for the year.
Operationally, the Electronic Systems and Air sectors performed strongly in 2018.
Our US business, now more than 40% of Group sales, again delivered growth and is well set to maintain that momentum.
In Electronic Systems, we continued to ramp up production on F-35 hardware and have seen significant growth in classified work.
In the UK, currently around 25% of Group sales, the Modernising Defence Programme re-emphasised the UK’s commitment to strong defence and security.
The successful launch of the UK Combat Air Strategy - a significant milestone for our Air sector - sent a strong signal of intent about the UK’s commitment to retaining a leading position in combat air giving clear direction and focus.
In Applied Intelligence, our restructuring actions helped the business achieve its breakeven target.
There were a number of performance issues in the US Platforms and Services business and the UK Maritime sector. We have taken steps to address these issues - strengthening management and improving our focus on programme execution.
It is testament to the resilience and strength of the Group that these challenges were dealt with and the Group hit its earnings and cash targets.
During the year the Board and I were saddened to report the death of a valued colleague and injuries to two other employees following an accident at the US Army Ammunition Plant at Radford, Virginia. We are committed to learning the lessons from this tragedy, and the safety of our employees and customers remains our absolute priority.
Looking to the medium term, growth is underpinned by our record defence order backlog and an evolving pipeline of opportunities.
In the US, budget increases underpin growth in the coming years and we see positive momentum in support of military readiness and modernisation.
In the UK, we continue to have a stable outlook with long term contracted programmes in both Air and Maritime.
In Qatar, our relationship started a new chapter through the Typhoon, Hawk and MBDA programmes and will be a key market for us over the coming years.
Our business in Saudi Arabia represents around 14% of Group sales, and we continue to address current and potential new requirements as part of the long-standing agreements between the UK and the Kingdom. Following recent updates from the German Government regarding export licences, we are working closely with industry partners and the United Kingdom government in order to fulfil our contractual support arrangements in Saudi Arabia on the key European collaboration programmes.
And in Australia, currently 3% of Group sales, through the award of the Hunter Class nine ships Future Frigate programme our business should double in size over the next 5 years.
Throughout 2018 we continued to focus on my three strategic priorities of operational excellence… competitiveness… and technology. These have been embedded throughout the Group and provide the link between strategy and near-term business objectives for all our employees.
Operational excellence remains my number one priority and must be at the forefront of everything we do to ensure successful and predictable delivery of our order backlog. We are addressing performance issues in our business and investing in operational processes and training to position the business to meet the ramp up in new programmes.
The new organisational structure, put in place at the start of 2018, has settled down well and we are starting to see the benefits of increasing competitiveness and collaboration across the Group and with our industry partners.
We are also increasing technology collaboration across our business, as well as with our industry partners and academia.
We have technology plans in place that support sector strategies and over time, we will be increasing R&D funding through a blend of self- and jointly-funded customer programmes and through a pipeline of investment opportunities.
At the same time, recruiting and retaining talented people is a key priority. We want every employee to reach their full potential and we have programmes in place to support strategic workforce planning, career development and retention, as well as to improve diversity and inclusion.
Looking at 2019, we have started the year in line with expectations and confirmed our guidance.
In summary, our record defence order backlog gives us excellent visibility and a strengthened geographic base.
Our business is diverse, resilient and has a well-balanced portfolio with long-term positions on key programmes.
We have a clear and consistent strategy which is delivering results.
Governments in our major markets continue to prioritise defence and security - and there is a growing demand for our capabilities, products and services.
Investment in technology and our people will continue to position us for the long term and targeted good Free Cash Flow generation over the coming years supports shareholder returns and sustainable value creation.
I’ll now hand back to the Chairman to commence the formal proceedings of today’s meeting.