Today we have announced the Group’s interim financial results for the first six months of 2018. It has been a busy first half of the year, during which we’ve had major competitive business wins and a commitment from the UK Government and industry to a future Combat Air programme. Together these successes underline our world-leading technology capability and skills, and provide good momentum into the second half and beyond.
Developments over the last six months have shown that BAE Systems is diverse and resilient, with an exceptionally well-placed portfolio; and that we are making good progress in delivering our strategy.
We benefit from a positive outlook in many of our key markets, and it is clear that defence and security remain a priority for governments around the world.
In the UK, our business is centred around our long-term contracted positions in Air and Maritime.
The recently announced UK Combat Air Strategy is a strong signal of intent about the Government’s commitment to retain a leading position in this sector. It enables us, and our industry partners, to plan for the long-term, and also protect and invest in the key skills and technologies that are vital to the UK.
In the US, the 2018 Defence budget and the President’s proposal for 2019, maintain the positive momentum. We benefit from a US portfolio that remains very closely aligned with our customer’s priorities and growth areas.
Over the past year, we’ve continued to drive increased focus and effort on our three strategic priority areas: operational excellence, competitiveness and technology.
These are key to the successful delivery of our order book, to deliver growth and to become stronger, smarter and sharper.
The new streamlined structure put in place from the start of the year is making a difference - and driving greater focus in each of the three priority areas.
Operationally, we’ve had some notably strong performances, in Electronic Systems and Air.
Our Applied Intelligence business has achieved a much-improved performance in the first half and the restructuring actions to return the business to profitability are taking hold.
We have however had some performance issues on certain long-standing programmes in the US Platforms and Services business and the UK Maritime sector. In both of these areas we have taken steps to improve focus on programme execution and strengthen management.
We are obtaining efficiencies in procurement, using our scale, following the appointment of global and national category managers.
I’m pleased that we’ve started to see the benefits of more collaboration across the Group, and also with industry partners, academia and others.
Winning the Australian SEA 5000 programme to deliver nine Hunter Class frigates is an obvious success.
And, with our Chief Technology Officer in place, we now have the framework and plans to increase R&D funding over the long term, which we will achieve through a blend of company and jointly funded customer programmes, and from a pipeline of investment opportunities and targeted bolt-on acquisitions.
Looking across the Group, we’ve reinforced our core market positions in the past six months.
In the growing US market, there’s strong demand for our Electronic Systems products; we have a robust outlook in Combat Vehicles, enhanced by the recent Amphibious Combat Vehicles contract; and, our ship repair business is well supported by the US budget outlook.
In the UK, we expect Typhoon production to be stable based on the current order book and anticipated finalisation of the Qatar order. Indeed, the pipeline of opportunities for Typhoon is as positive as it’s been in quite some time, and this includes continued progress towards reaching agreement on a further 48 Typhoon aircraft for the Kingdom of Saudi Arabia.
Contracts for the final Astute Class boat and for further funding on the Dreadnought programme in our Submarines business also underline our long term position in the Maritime sector, and the SEA 5000 win will drive strong growth into our Australian business.
In summary, BAE Systems is diverse and resilient, our strategy is clear and we have the right focus areas.
The hard work of our employees over the last six months has resulted in significant new business wins, which gives us good momentum into the second half of the year and beyond and I am excited by the opportunities that lie ahead for the Group.