REG - BAE SYSTEMS PLC - Final Results
19/02/2025 07:15
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RNS Number : 5962X BAE SYSTEMS PLC 19 February 2025
BAE Systems plc
Preliminary Results Announcement 2024
Charles Woodburn, Chief Executive, said: "The results we're reporting today
reflect the outstanding efforts of our employees and continue our track record
of strong top-line and earnings growth, free cash flow and orders.
"We're supporting our customers around the world, while shaping our portfolio
towards higher growth and strategically important markets. Across our
business, we're also investing in our people, facilities and technologies to
drive efficiencies, boost capacity and increase our agility to deliver in a
rapidly evolving environment.
"Based on the exceptional visibility of our record order backlog and
sustainability of our value-compounding business model, we remain confident in
the positive momentum of our business into the future."
Financial highlights Year Year
ended
ended
Financial performance measures as defined by Group(1)
31 December
31 December Variance(2)
2024 2023
Sales £28,335m £25,284m 14%
Underlying earnings before interest and tax (EBIT) £3,015m £2,682m 14%
Underlying Earnings Per Share (EPS) 68.5p 63.2p 10%
Free cash flow £2,505m £2,593m £(88)m
Order intake £33.7bn £37.7bn £(4.0)bn
Order backlog £77.8bn £69.8bn £8.0bn
( ) Year Year
ended
ended
Financial performance measures as derived from IFRS
31 December
31 December
2024 2023 Variance(2)
Revenue £26,312m £23,078m 14%
Operating profit £2,685m £2,573m 4%
EPS - basic 64.9p 61.3p 6%
Net cash flow from operating activities £3,925m £3,760m £165m
Order book £60.4bn £58.0bn £2.4bn
Dividend per share 33.0p 30.0p 10%
As defined by Group
· The 14%(2) growth in sales and underlying EBIT reflects strong
programme performance across all sectors and the benefit of M&A activities
in the year, including the acquisition of Ball Aerospace (now Space &
Mission Systems (SMS)) in February.
· Growth of 10%(2) in underlying EPS reflects the increase in
underlying EBIT, partially offset by the increase in underlying net finance
costs incurred as a result of the $4.8bn (£3.8bn) debt finance raised in the
year.
· Free cash flow was £2,505m, reflecting a high level of
customer advances towards the end of the year and strong operational cash
conversion. This was offset by higher capital expenditure and net finance
costs.
· Our order backlog grew by 11% to a record £77.8bn, which
included order backlog of £3.0bn related to SMS.
As derived from IFRS
· The growth in revenue of 14% reflects the same strong programme
performance across the portfolio.
· Operating profit was up 4% as the growth in underlying EBIT was
offset by the additional amortisation of intangible assets acquired with SMS.
· Basic EPS was up 6%, also reflective of the additional finance
costs and amortisation of intangibles incurred as a result of M&A
activities in the year.
· The increase in net cash flow from operating activities was
driven by strong operational cash conversion.
Capital deployment
· The Board has recommended a final dividend of 20.6p, taking the
total dividend for 2024 to 33.0p - an increase of 10% on last year. Subject to
shareholder approval at the 2025 Annual General Meeting, the dividend will be
paid
on 2 June 2025 to shareholders on the share register on 22 April 2025.
· During the year, the Company repurchased 43m of shares under
our share buyback programmes, at a cost of £555m. Combined with dividends,
the Group returned £1,492m to shareholders in the year ended 31 December
2024.
· In March, we successfully raised $4.8bn (£3.8bn) of debt
finance following the $5.5bn (£4.4bn) acquisition of Ball Aerospace.
Delivering for our customers
Our continued focus on operational performance and contracting discipline
enables our consistent delivery of critical capabilities and technologies for
our customers worldwide. During the year, we secured £33.7bn of orders and
made good progress executing on our long-term major programmes. Highlights
included:
· we reached agreement with our international partners, Leonardo
SpA and Japan Aircraft Industrial Enhancement Co Ltd (JAIEC), to form a new
joint venture company, which will be accountable for the design, development
and delivery of a next generation combat aircraft under the Global Combat Air
Programme (GCAP), subject to regulatory approvals;
· under the AUKUS announcement, we were selected to deliver
Australia's new fleet of nuclear-powered submarines, alongside ASC Pty Ltd
(ASC). In November, we also entered into an initial mobilisation arrangement
with the Australian Government to progress its SSN-AUKUS programme together
with ASC;
· we signed a contract, worth £4.6bn, for the delivery of the
first three Hunter Class frigates 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;
· continued strong demand for our combat vehicles and, building on
an initial contract in May, our Hägglunds business received further orders in
December, bringing the total value to approximately $2.5bn (£2.0bn); and
· multiple satellite launches with our systems on board for the US
Space Force and NASA. We also completed testing and delivery of the primary
scientific instrument for the Nancy Grace Roman Space Telescope to NASA's
Goddard Space Flight Center.
Investing in tomorrow
Alongside good operational delivery, we continue to invest in our people,
research and development (R&D) and capital expenditure. Highlights
included:
· we recruited around 2,300 new apprentices and graduates in the
UK and, in the US our intern programme provided placement opportunities for
nearly 500 interns;
· we opened our new state-of-the-art shipbuilding academy in
Glasgow, UK, greatly enhancing our ability to develop and train our Naval
Ships workforce and expanding on our established academies in
Barrow-in-Furness and Samlesbury, UK;
· we made significant progress on the construction of our new
ship build assembly hall in Glasgow, which we expect to be fully operational
in 2025;
· we are investing more than £160m in our Hägglunds business,
based in Sweden, in advanced manufacturing capabilities and a new customer
test and acceptance centre to expand our production and delivery capabilities;
and
· we have committed to investing £220m in an advanced technology
factory in Rochester, UK, to support our UK-based Electronic Systems business,
which is expected to deliver increased capacity through a more efficient and
sustainable facility.
Shaping the portfolio
We continued to enhance our world class portfolio to strengthen our relevance
in a rapidly evolving global threat environment. Highlights included:
· making excellent progress on integration activities within our
new SMS business, with the bulk of our core systems and processes now
transitioned;
· reducing our shareholding in Air Astana from 49% to 17%,
following its Initial Public Offering (IPO) in February - with cash proceeds
on disposal of £166m and a profit on disposal of £75m; and
· completing several smaller acquisitions in the UK during the
year to strengthen our drone and counter-drone capabilities.
Group guidance(3) for 2025
Guidance is provided on the basis of an exchange rate of $1.28:£1, which is
in line with the actual 2024 exchange rate.
Year ended 31 December 2025 Year ended
31 December 2024
Results
Guidance
Sales Increase by 7% to 9% £28,335m
Underlying EBIT Increase by 8% to 10% £3,015m
Underlying EPS Increase by 8% to 10% 68.5p
Free cash flow target >£1.1bn £2,505m
Three-year cumulative free cash flow guidance Guidance
Cumulative free cash flow 2023-2025 In excess of £6.0bn
(previously in excess of £5.0bn)
Cumulative free cash flow 2024-2026 In excess of £5.5bn
(previously in excess of £5.0bn)
Cumulative free cash flow 2025-2027 In excess of £5.5bn
· Underlying net finance costs c.£400m
· Effective tax rate c.20%
· Non-controlling interests c.£90m
Sensitivity to foreign exchange rates: the Group operates in a number of
currencies, the most significant of which is the US dollar. As a guide, a 5
cent movement in the £/$ exchange rate will impact sales by c.£525m,
Underlying EBIT by c.£75m and Underlying EPS by c.1.4p.
1. We monitor the underlying financial performance of the Group using
alternative performance measures (APMs). 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.
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 year
ended 31 December 2023 to pounds sterling at the average exchange rate of such
currencies for the year ended 31 December 2024). The comparatives have not
been restated. All other growth rates and year-on-year movements are on a
reported currency basis.
3. 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.
For further information please contact:
Investor Relations Media Relations
Telephone: +44 (0) 1252 383455 Telephone: +44 (0) 7540 628673
Email: investors@baesystems.com (mailto:investors@baesystems.com) Email: kristina.anderson@baesystems.com
(mailto:kristina.anderson@baesystems.com)
Analyst and investor presentation
A presentation, for analysts and investors, of the Group's Results for 2024
will be available at 9.00am GMT today (19 February 2025) on the investor
website, followed by a live Q&A.
Details can be found on investors.baesystems.com
(https://investors.baesystems.com/) , together with the presentation slides
and a copy of this report. A recording of the webcast will be available for
replay later in the day.
About BAE Systems
We are supporting our customers so that they can stay ahead of evolving
threats across land, sea, air, cyber and space. We are a workforce of
107,400(¹) highly skilled people in more than 40 countries. Working with our
customers and local partners, we develop, engineer, manufacture and support
products and systems that deliver military capability, protect national
security and keep critical information and infrastructure secure.
1. As at 31 December 2024 and including share of equity accounted investments.
Shareholder information
Registered office
BAE Systems plc
6 Carlton Gardens
London
SW1Y 5AD
United Kingdom
Registered in England and Wales, No. 01470151
Cautionary statement:
All statements other than statements of historical fact included in this
document, including, without limitation, those regarding the financial
condition, results, operations and businesses of BAE Systems plc and its
strategy, plans and objectives and the markets and economies in which it
operates, are forward-looking statements. Such forward-looking statements,
which reflect management's assumptions made on the basis of information
available to it at this time, appear in a number of places throughout this
document and include statements regarding the intentions, beliefs or current
expectations of BAE Systems plc concerning, amongst other things, its results
in relation to operations, financial condition, liquidity, prospects, growth,
commitments and targets (including environmental, social and governance
commitments and targets), strategies and the industry in which it operates.
Forward-looking statements can be identified by the use of forward-looking
terminology such as "believes", "expects", "may", "intends", "will", "will
continue", "should", "would be", "seeks", "anticipates" or similar expressions
or the negative thereof or other variations thereof or comparable terminology.
By their nature, forward-looking statements involve risks and uncertainties
because they relate to events and depend on circumstances that may or may not
occur in the future.
Forward-looking statements are not guarantees of future performance and the
actual results of operations, financial condition and liquidity of BAE Systems
plc, the development of the industry in which it operates and the ability of
BAE Systems plc to meet its commitments and targets may differ materially from
those made in or suggested by the forward-looking statements contained in this
document. In addition, even if results of operations, financial condition and
liquidity of BAE Systems plc, the development of the industry in which it
operates and/or performance against commitments and targets are consistent
with the forward-looking statements contained in this document, those results,
developments or performance may not be indicative of results, developments or
performance in subsequent periods.
These forward-looking statements speak only as of the date of this document.
Subject to the requirements of the Disclosure Guidance and Transparency Rules,
the Market Abuse Regulation or applicable law, BAE Systems plc explicitly
disclaims any intention or obligation or undertaking publicly to release the
result of any revisions to any forward-looking statements in this document
that may occur due to any change in its expectations or to reflect events or
circumstances after the date of it. All subsequent written and oral
forward-looking statements attributable to either BAE Systems plc or to
persons acting on its behalf are expressly qualified in their entirety by the
cautionary statements referred to herein and contained elsewhere in this
document.
BAE Systems plc and its directors accept no liability to third parties in
respect of this document save as would arise under English law. Accordingly,
any liability to a person who has demonstrated reliance on any untrue or
misleading statement or omission shall be determined in accordance with
Schedule 10A of the Financial Services and Markets Act 2000. It should be
noted that Schedule 10A and Section 463 of the Companies Act 2006 contain
limits on the liability of the directors of BAE Systems plc so that their
liability is solely to BAE Systems plc.
Preliminary results statement
Overview
In November 2024, we celebrated the 25th anniversary of British Aerospace and
Marconi Electronic Systems coming together to create BAE Systems.
Even as the world around us has changed dramatically, our deep commitment to
collaboration and building long-term partnerships means that government
customers have trusted us for decades to develop the next generation of
defence and security capabilities.
Today, nations are facing increasingly varied and complex threats to security.
These growing threats have reinforced the essential nature of our work and
highlighted the need for continued global investment in defence.
By focusing on operational excellence, contracting discipline and growing our
workforce, we are consistently delivering critical capabilities and
technologies for our customers worldwide.
The fundamentals of the business are strong and 2024 was another year of
strong operational and financial performance, extending our track record of
delivery.
We know that our success relies on our people, their unwavering focus on
protecting those who protect us and our tireless commitment to responsible
business practices. We continue to invest in our people and our business for
the long term, which together with our broad geographic and product diversity,
positions us well for more growth in the years ahead.
Delivering for our customers
We made good operational progress in 2024, as our highly skilled employees
continued to support our customers, helping them to stay ahead of evolving
threats across land, sea, air, cyber and space.
Our focus on operational excellence continues to benefit our customers and
shareholders, as we execute on complex, long-term programmes like Dreadnought,
Type 26 and Hunter Class frigates, Typhoon and F-35 jets, electronic warfare
systems, combat vehicles, and many other programmes across our business.
We also maintained momentum on key strategic international collaborations,
which will define the next generation of capabilities and underpin our
business for decades to come. Working with our industry partners in Italy and
Japan, we reached agreement to form a joint venture, subject to regulatory
approvals, to design and develop next-generation fighter jets under GCAP
while, under the AUKUS announcements, we have been selected to partner with
the Australian submarine builder ASC Pty Ltd to deliver Australia's SSN-AUKUS
programme.
Our financial performance
We finished the year by delivering records across our key financial measures
of order backlog, sales, underlying EBIT, underlying EPS and dividend per
share.
On a constant currency basis, we grew sales and underlying EBIT by 14% and
underlying EPS by 10%. We delivered £2.5bn of free cash flow, taking our
three-year cumulative free cash flow to over £7.0bn.
Our order intake was £33.7bn which, combined with £3.0bn of order backlog in
SMS, pushed our order backlog to a record £77.8bn.
We ended 2024 with a strong balance sheet, featuring a cash position of
£3.4bn, after we returned a further £1.5bn to shareholders in the year. Our
net debt (excluding lease liabilities) of £4.9bn is an increase of £3.9bn
and primarily reflects M&A activity, including the $5.5bn (£4.4bn) Ball
Aerospace acquisition which was partially funded by debt raised during the
year.
Our strong financial performance gives us the strategic flexibility to invest
in the business to support its long-term strength and expected growth, whilst
maintaining focused and disciplined capital allocation.
Investing in tomorrow
Investing in our people, technologies and facilities is essential to achieving
our ambitions and ensuring our business has the agility to anticipate and
respond to the emerging threats our government customers face in a constantly
changing world.
We grew our global workforce by 7,600, including employees within our SMS
business, to 107,400 employees. Given the long-term nature of many of our
programmes, we are particularly focused on early careers to sustain our talent
pipeline, recruiting around 2,300 apprentices and graduates in the UK. We
increased our self-funded R&D to £357m, in key technology areas including
electronic warfare, autonomy, laser-guided weapons, uncrewed air systems
(UAS), synthetic training, electrification applications and space solutions.
We also increased capital expenditure, compared to 2023, taking it to over
£1.0bn as we continue to develop and modernise our systems and facilities to
deliver an effective working environment and build greater capacity for the
future, focused primarily on maritime, munitions, combat vehicles and
electronics.
Shaping the portfolio
Alongside our organic investment, we are evolving our portfolio with a focus
on the advanced technologies we believe will be highly relevant as our
customers address evolving global threats and which will help drive higher
growth. Notably, we completed the largest acquisition in the Company's
history: the acquisition of Ball Aerospace in the US, forming our new SMS
business and significantly enhancing our presence in the growing space market.
We also made a number of smaller acquisitions in the UK, which further
strengthen our UAS and counter UAS capabilities, and divested certain non-core
business areas.
Our capital distribution
The strength and outlook for the Group, alongside our disciplined capital
allocation, means that, after increasing investments in our people,
technologies and capital expenditure, we were able to increase returns to
shareholders. During the year, the Company repurchased £555m worth of shares
and paid £937m in dividends, returning £1,492m to shareholders. The Board
has recommended a 20.6p final dividend for approval by shareholders at the
2025 Annual General Meeting, which will take the total dividend in respect of
2024 to 33.0p - an increase of 10% on last year.
Our market differentiation
Our business has a unique combination of a diverse geographic footprint and
multi-domain capabilities. We believe our technologies, expertise and global
reach position BAE Systems as a leader in our industry and enable us to
support our customers to meet the elevated threat environment of today and
tomorrow. This breadth continues to be a real strength and a differentiator.
Looking ahead, our key growth drivers are spread across major markets and
include huge multi-national endeavours, including GCAP and AUKUS, which are
significant for the Group in the medium and long term, and highlight the
global reach, scale and longevity of our business.
Responsible business
The work we do is vital. We support our government customers to fulfil their
primary obligation to keep their citizens safe, whilst contributing to the
economic and social development of the communities and nations in which we
operate, helping to build a stronger and more secure future.
Our people are the heart of everything we do and it is critical that we
attract and retain the very best talent so that we can support our customers'
requirements and our own long-term growth. We remain fully committed to
fostering a workplace culture and environment where everyone feels they belong
and can thrive, which includes investing in our people's skills development
from early careers through to lifelong learning.
The safety, health and wellbeing of our people is an enduring priority.
Despite our focused efforts, our safety performance deteriorated in 2024 and
we are committed to strengthening our safety management programme to improve
our performance in 2025 and beyond.
We continue to focus on resource efficiency, ensuring that our energy and
infrastructure strategies reduce our greenhouse gas emissions across our
operations, while supporting our business growth.
We do all of this while maintaining a robust governance structure and high
standards. This includes continuing to operate under tight regulation and
complying fully with applicable trade controls and sanctions.
Board changes
In September, Lord Sedwill stood down from the Board as a Non-Executive
Director due to his evolving parliamentary and other commitments.
Summary investment case
We have a strong track record of delivering financial returns for investors
and, through the careful long-term sustainable management and governance of
our business, we are well placed to continue to generate good returns. This is
supported by our seven key advantages:
1. We provide customers with world-class defence products and capabilities
across multiple markets.
2. We undertake multi-decade programmes with long-term embedded value. Our
contract order backlog provides a high level of sales visibility, driven by
multi-year programmes.
3. We have a growing global opportunity pipeline. Our diverse geographic
footprint supports us in pursuing excellent opportunities across all sectors
as countries around the world face up to the multi-faceted threat environment.
4. We foster a high-performance, innovative culture and consistently invest
in R&D to build on existing world-leading capabilities and generate new
innovative and disruptive technologies.
5. We have an intense focus on operational excellence, with strong,
consistent programme performance. We focus on creating value for our investors
and customers.
6. Sustainability is embedded in our business - it forms part of our
strategic framework and underpins our purpose.
7. We operate a value-enhancing operating model, undertaking our core
business activities with a clear, consistent and careful capital allocation.
Group financial review
Group income statement Underlying - Statutory -
as defined by the Group(1)
as derived from IFRS
2024 2023 2024 2023
£m
£m
£m
£m
Sales/Revenue 28,335 25,284 26,312 23,078
Underlying EBIT/Operating profit 3,015 2,682 2,685 2,573
Finance income 117 131 135 172
Finance costs (513) (342) (488) (419)
Net finance costs (396) (211) (353) (247)
Profit before tax 2,619 2,471 2,332 2,326
Tax expense (469) (472) (291) (386)
Profit for the year(2) 2,150 1,999 2,041 1,940
Return on Sales/Revenue 10.6% 10.6% 10.2% 11.1%
Reconciliation of underlying EBIT to operating profit 2024 2023
£m
£m
Underlying EBIT 3,015 2,682
Adjusting items 23 40
Amortisation of programme, customer-related and other intangible assets, (344) (116)
and impairment of equity accounted investments and intangible assets
Net finance income and tax of equity accounted investments (9) (33)
Operating profit 2,685 2,573
As defined by the Group
Sales for the year were £28.3bn (2023 £25.3bn) representing growth, on a
constant currency basis(3), of 14% (2023 9%). All sectors delivered growth in
the year as detailed below.
Electronic Systems recorded sales of £7.2bn (2023 £5.5bn), equating to
growth of 35% (2023 9%) on a constant currency basis and including the
benefit of SMS. Excluding SMS, our Electronic Systems sector delivered
organic growth of 9% driven by the precision strike & sensing and
commercial aviation businesses.
Our Platforms & Services sector posted sales of £4.4bn (2023 £3.9bn),
with growth of 15% (2023 8%) on a constant currency basis. The US combat
vehicles business grew following demand for Armored Multi-Purpose Vehicles
(AMPV) and Bradley vehicles, while Hägglunds and Bofors both grew with
European demand for CV90 and Archer.
The Air sector recorded sales of £8.5bn (2023 £8.1bn), representing growth
of 7% (2023 4%) on a constant currency basis. Activities in MBDA increased
combined with our acquisitions in FalconWorks(®), which have expanded our
capabilities in UAS.
Maritime recorded sales of £6.2bn (2023 £5.5bn), with growth of 12% (2023
22%) on a constant currency basis. The ramp-up of the Hunter Class frigate
programme in Australia contributed significantly to the growth, with our
submarines business in the UK also making a material contribution from design
work on SSN-AUKUS in the year. Demand for munitions also increased on 2023.
Sales in the Cyber & Intelligence sector grew to £2.4bn (2023 £2.3bn),
an increase of 6% (2023 6%) on a constant currency basis.
Underlying EBIT was up 14% (2023 9%), on a constant currency basis, to
£3,015m (2023 £2,682m).
Our Electronic Systems sector grew underlying EBIT to £1,071m (2023 £878m),
an increase of 25% (2023 5%), on a constant currency basis, and including the
benefit of SMS. Excluding SMS, our Electronic Systems sector had organic
growth of 6% following the increase in sales. Return on sales was 14.9% (2023
16.1%) due to absorption of lower pension recoveries and incorporation of SMS.
Platforms & Services reported underlying EBIT of £448m (2023 £354m), an
increase of 29% (2023 10%) on a constant currency basis, with return on sales
increasing to 10.2% (2023 9.0%). This was driven by full-rate production
volumes on AMPV, combined with growth in our Hägglunds and Bofors businesses.
Our Air sector reported underlying EBIT of £1,007m (2023 £949m), an increase
of 7% (2023 12%) on a constant currency basis, maintaining a strong return on
sales of 11.8% (2023 11.8%). This was driven by higher sales volumes.
Maritime reported underlying EBIT of £474m (2023 £425m), growth of 12%
(2023 20%) on a constant currency basis in line with sales, delivering a
return on sales of 7.7% (2023 7.7%).
Finally, Cyber & Intelligence reported underlying EBIT of £199m (2023
£199m), with a return on sales of 8.3% (2023 8.6%).
Adjusting items totalled a net gain of £23m (2023 £40m). During the year,
the Group realised a net profit of £94m on the disposal of a number of
businesses, the most significant being the partial disposal of our partial
shareholding in Air Astana which generated a profit of £75m. In addition, we
recognised a settlement gain of £13m on a US pension buyout. This was largely
offset by £72m of acquisition and integration-related costs, primarily in
relation to Ball Aerospace, and £12m of other costs related to historic
business transactions.
Underlying net finance costs were £396m (2023 £211m), an increase of £185m.
Of this, net costs of £455m (2023 £231m) related to the Group and net income
of £59m (2023 £20m) related to the Group's share of equity accounted
investments.
As derived from IFRS
Revenue was £26.3bn (2023 £23.1bn) with growth during the year of 14% (2023
9%), on a reported currency basis, reflective of the same drivers behind the
increase in sales for the year excluding the impact of MBDA in the Air sector
and other equity accounted investments.
Operating profit increased 4% (2023 8%), to £2,685m (2023 £2,573m), on a
reported currency basis. On an operating sector basis this reflected the same
drivers as underlying EBIT, however, operating profit also reflected
additional costs from the amortisation of acquired intangibles and impairment
of equity accounted investments and intangibles, which increased by £228m to
£344m in 2024. Of the £344m incurred in the year, £213m related to the
assets acquired with Ball Aerospace.
Net finance costs were £353m (2023 £247m), an increase of £106m reflective
of the additional cost of debt raised during the year. Interest on loans and
financial instruments totalled £482m compared to £286m in 2023.
1. The purposes and definitions of non-GAAP measures are provided in
the Alternative performance measures section on page 46.
2. On a Group basis, £85m (2023 £83m) of profit for the year is
attributable to non-controlling interests, with £2,065m (2023 £1,916m)
attributable to equity shareholders. On an IFRS basis, £85m (2023 £83m) of
profit for the year is attributable to non-controlling interests, with
£1,956m (2023 £1,857m) attributable to equity shareholders.
3. Current year compared with prior year translated at current year
exchange rates. The comparatives have not been restated.
Earnings per share (EPS)
As defined by the Group(1) 2024 2023
Underlying earnings for the year attributable to equity shareholders £2,065m £1,916m
Underlying EPS 68.5p 63.2p
As derived from IFRS 2024 2023
Profit for the year attributable to equity shareholders £1,956m £1,857m
Basic EPS 64.9p 61.3p
As defined by the Group
Underlying EPS increased to 68.5p (2023 63.2p), 10% on a constant currency
basis. This is largely driven by the improved underlying profit for the year,
with detailed movements set out in the table below.
As derived from IFRS
Basic EPS increased 6% to 64.9p (2023 61.3p) with the gain in underlying
profit being offset by amortisation on the intangibles acquired within the
year, predominantly within our SMS business.
Movement in underlying EPS
2024 2023
pence pence
As at 1 January 63.2 55.5
Foreign exchange (1.0) (0.2)
Underlying EBIT (excluding impact of M&A activity) 5.7 5.8
Impact of M&A activity 0.6 -
Underlying net finance costs (excluding impact of M&A activity) (1.4) 0.8
Tax 1.0 (0.2)
Share repurchases 0.4 1.5
As at 31 December 68.5 63.2
Orders
As defined by the Group(1) 2024 2023
£bn
£bn
Order intake(2) 33.7 37.7
Order backlog(2) 77.8 69.8
As derived from IFRS 2024 2023
£bn
£bn
Order book(3) 60.4 58.0
Order intake, was £33.7bn which, combined with £3.0bn of order backlog in
SMS, pushed order backlog to a record of £77.8bn. Order intake remained high
across all sectors. Details of awards in the year are covered in the
segmental reviews on pages 14 to 24 with significant orders in the year
including:
· In Maritime, a contract worth £4.6bn for 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.
· Our Hägglunds business, within the Platforms & Services sector,
received orders worth a total of approximately $2.5bn (£2.0bn) for CV9035
MkIIIC vehicles for Sweden and Denmark.
· Our Air sector confirmed orders totalling £1.1bn for our work share
on additional Typhoon aircraft, including 25 for the Spanish Air Force and up
to 24 for the Italian Air Force.
1. The purposes and definitions of non-GAAP measures are provided in
the Alternative performance measures section on page 46.
2. Including share of equity accounted investments.
3. Order book represents the transaction price allocated to
unsatisfied and partially satisfied performance obligations as defined by IFRS
15 Revenue from Contracts with Customers.
Net debt (excluding lease liabilities)
Components of net debt(1) 2024 2023
£m
£m
Cash and cash equivalents 3,378 4,067
Debt-related derivative financial instruments (net) 89 22
Loans - non-current (7,713) (4,432)
Loans - current (699) (679)
Net debt (excluding lease liabilities) (4,945) (1,022)
Cash and cash equivalents of £3,378m (2023 £4,067m) are held primarily for
management of working capital as well as the repayment of debt securities,
pension funding when required and committed shareholder returns. During the
year, the Group cash-settled $1.5bn (£1.2bn) of the $5.5bn (£4.4bn)
consideration for Ball Aerospace, with the balance funded from debt raised
during the year.
The Group's net debt (excluding lease liabilities) at 31 December 2024 was
£4,945m (2023 £1,022m),
a net increase of £3,923m (2023 decrease of £1,001m) from the position at
the start of the year. This was primarily as a result of M&A activities in
the year, including the $5.5bn (£4.4bn) acquisition of Ball Aerospace which
was partially funded by debt finance raised during the year.
Other movements comprised foreign exchange on the Group's US
dollar-denominated cash and borrowings, offset by their associated
derivatives, and dividends paid to non-controlling interests.
Movement in net debt (excluding lease liabilities) 2024 2023
£m
£m
As at 1 January (1,022) (2,023)
Operating business cash flow 3,093 3,218
Interest and tax (588) (625)
Shareholder returns (1,492) (1,418)
Business transactions and other (4,936) (174)
As at 31 December (4,945) (1,022)
1. The purposes and definitions of non-GAAP measures are provided in
the Alternative performance measures section on page 46.
Balance sheet
( ) 2024 2023
£m
£m
Goodwill 13,297 11,386
Other intangible assets 2,965 713
Property, plant and equipment, right-of-use assets and investment property 6,636 5,003
Equity accounted investments and other investments 906 916
Working capital (6,386) (5,468)
Lease liabilities net of finance lease receivables (1,817) (1,396)
Group's share of IAS 19 post-employment benefits surplus 768 229
Net tax assets and liabilities 422 474
Net other financial assets and liabilities (69) (112)
Net debt (excluding lease liabilities) (4,945) (1,022)
Net assets 11,777 10,723
Goodwill of £13.3bn (2023 £11.4bn) was an increase of £1.9bn on the prior
year, driven by M&A activities including the acquisition of Ball
Aerospace.
Other intangible assets of £3.0bn (2023 £0.7bn) was an increase of £2.3bn
on the prior year, also driven by the acquisition of Ball Aerospace and other
M&A activities.
Property, plant and equipment, right-of‑use assets and investment property
was £6.6bn (2023 £5.0bn), an increase of £1.6bn. Property, plant and
equipment increased by a net £1.2bn, reflecting M&A activities and capex
spend across the business, offset by depreciation.
Equity accounted investments and other investments was £906m (2023 £916m).
The partial disposal of the Group's partial shareholding in Air Astana and
disposal of its 49% interest in FNSS were offset by a net increase in the
Group's share of profits of its remaining equity accounted investments.
Working capital saw a £0.9bn decrease, in aggregate, mainly reflecting the
movement on customer advances and the impact of M&A activities.
Lease liabilities, net of finance lease receivables, was £1.8bn (2023
£1.4bn), with the increase being driven by lease renewals in the year,
mainly in the Air sector.
The Group's share of the net IAS 19 post-employment benefits surplus
was £0.8bn (2023 £0.2bn),
net of a 25% (2023 35%) withholding tax of £0.4bn (2023 £0.4bn). The
increase in the net surplus of £0.5bn largely reflects changes in the
underlying assumptions. Details of the Group's post-employment benefit schemes
are provided in note 6.
Cash flow
As defined by Group(1) 2024 2023
£m £m
Free cash flow 2,505 2,593
Operating business cash flow 3,093 3,218
As derived from IFRS 2024 2023
£m £m
Net cash flow from operating activities 3,925 3,760
Net cash flow from investing activities (5,269) (541)
Net cash flow from financing activities 695 (2,188)
Net (decrease)/increase in cash and cash equivalents (649) 1,031
Cash and cash equivalents at 1 January 4,067 3,107
Effect of foreign exchange rate changes on cash and cash equivalents (40) (71)
Cash and cash equivalents at 31 December 3,378 4,067
As defined by the Group
Free cash flow of £2,505m (2023 £2,593m) was above guidance, with higher
than anticipated customer advances towards the end of the year together with
good operational cash conversion.
Operating business cash flow of £3,093m (2023 £3,218m) was a decrease of
£125m (2023 increase of £666m) driven by the increase in capex spend in the
year, with over £1.0bn (2023 £0.8bn) being invested across our systems and
facilities.
As derived from IFRS
Net cash flow from operating activities was £3,925m (2023 £3,760m), an
increase of £165m (2023 £921m) primarily resulting from increased
profitability of the Group in the year.
Net cash flow from investing activities was an outflow of £5,269m (2023
£541m). M&A investment in the year was significant with a number of
acquisitions, including Ball Aerospace, accounting for a net cash outflow of
£4.8bn. This was offset by cash proceeds of £194m from non-core business
disposals in the year, including the partial disposal of the Group's partial
shareholding in Air Astana, combined with interest and dividends from our
equity accounted investments. There was no significant M&A activity in
the comparative year. Capex also remained high, with over £1.0bn of cash
invested in the year.
Net cash flow from financing activities was an inflow of £695m (2023 outflow
of £2,188m), an increase of £2,883m (2023 decrease of £145m).
Cash returns to shareholders, through dividend and share repurchases,
increased £74m to £1,492m. Although dividends increased, the value of share
repurchases was lower. Dividends paid represent the 2023 final dividend and
the 2024 interim dividend. During 2024, we repurchased 43m shares under the
2022 and 2023 share buyback programmes (2023 59m shares under the
2022 share buyback programme). This year also saw a net cash inflow from
debt financing in the year of £3,139m primarily to fund the Ball Aerospace
acquisition (2023 £162m from a private placement).
Exchange rates
Average Year end
2024 2023 2024 2023
£/$ 1.278 1.244 1.253 1.275
£/€ 1.181 1.150 1.210 1.154
£/A$ 1.938 1.874 2.023 1.868
1. The purposes and definitions of non-GAAP measures are provided in
the Alternative performance measures section on page 46.
Segmental review
As defined by the Group(1)
Sales Underlying EBIT Return Operating business cash flow Order Order
£m
£m
on sales
£m
% intake backlog
£bn £bn
Year ended 31 December 2024
Electronic Systems 7,189 1,071 14.9% 801 7.3 12.7
Platforms & Services 4,390 448 10.2% 732 7.4 14.3
Air 8,519 1,007 11.8% 1,243 8.3 26.8
Maritime 6,187 474 7.7% 436 8.7 23.2
Cyber & Intelligence 2,411 199 8.3% 139 2.4 1.8
HQ(2) 203 (184) - (258) 0.2 -
Deduct Intra-group (564) - - - (0.6) (1.0)
Total 28,335 3,015 10.6% 3,093(3) 33.7 77.8
As derived from IFRS
Revenue Operating profit Return on revenue Net cash flow from operating activities Order
£m
£m
%
£m
book
£bn
Year ended 31 December 2024
Electronic Systems 7,186 708 9.9% 1,044 8.6
Platforms & Services 4,344 456 10.5% 976 13.6
Air 6,880 1,009 14.7% 1,359 15.6
Maritime 6,002 465 7.7% 734 22.3
Cyber & Intelligence 2,411 182 7.5% 194 1.3
HQ(2) 24 (135) - (207) -
Deduct Intra-group (535) - - - (1.0)
Deduct Tax(4) - - - (175) -
Total 26,312 2,685 10.2% 3,925 60.4
1. The purposes and definitions of non-GAAP measures are provided in the
Alternative performance measures section on page 46.
2. HQ comprises the Group's head office activities, together with a 17%
interest in Air Astana as at 31 December 2024.
3. At a Group level, the key cash flow metric is free cash flow (see
Alternative performance measures on page 46). In 2024, free cash flow
was £2,505m (2023 £2,593m).
4. Tax is managed on a Group-wide basis.
Segmental performance: Electronic Systems
Electronic Systems, with 22,400¹ employees, comprises the Group's US- and
UK-based Electronic Systems business and the US-based Space & Mission
Systems business.
Financial performance
Financial performance measures defined by Group(2) Financial performance measures derived from IFRS
2024 2023 2024 2023
Variance(3) Variance(3)
Sales £7,189m £5,458m +35% Revenue £7,186m £5,456m +32%
Underlying EBIT £1,071m £878m +25% Operating profit £708m £806m -12%
Return on sales 14.9% 16.1% -120bps Return on revenue 9.9% 14.8% -490bps
£811m Cash flow from operating activities £1,044m £961m
Operating business cash flow £801m £(10m) £83m
Order intake £7.3bn £6.7bn £0.6bn
Order backlog £12.7bn £8.9bn £3.8bn Order book £8.6bn £7.6bn £1.0bn
1. Including share of equity accounted investments.
2. The purposes and definitions of non-GAAP measures are provided in
the Alternative performance measures section on page 46.
3. Growth rates for sales and underlying EBIT are on a constant
currency basis. All other growth rates and year-on-year movements are on a
reported currency basis.
Operational performance
We continued to experience strong demand across our customer base for
Electronic Systems in 2024 as evidenced by our order intake. We supported
existing customers on key electronic warfare and precision guided-munition
programmes, while pursuing and maturing new opportunities.
After completing the Ball Aerospace acquisition in mid-February to form our
SMS business, we have made excellent progress in integrating the organisation
into our US operations. SMS is realising cost synergies and meeting key
workforce integration milestones. It also continues to hold and reap benefits
from 'synergy summits' to identify areas where our businesses can partner to
pursue and capture new revenue opportunities for the US Intelligence
Community, Department of Defense and civilian space agencies.
In our commercial businesses, airline traffic exceeded pre-pandemic levels,
generating stronger demand for aftermarket services. However, Original
Equipment Manufacturer demand schedules are recovering from supply chain and
labour relation issues experienced by airframe manufacturers.
Key operational points for the year
· Our SMS team marked multiple satellite launches with our systems on
board; the Weather System Follow-on Microwave satellite to bridge critical
gaps in environmental monitoring capabilities for the US Space Force and
NASA's Europa Clipper mission that will orbit Jupiter and conduct detailed
observations of one of its moons.
· We completed testing and delivered the primary scientific instrument
for the Nancy Grace Roman Space Telescope to NASA's Goddard Space Flight
Center. The Roman Space Telescope is scheduled to launch by 2027 and we were
selected as one of three teams to mature a next-generation stable optical
system for the Habitable Worlds Observatory - NASA's next flagship
astrophysics mission.
· The F-35 Lightning II programme completed deliveries on Lot 16 and is
delivering Lot 17/18/DTIP+ electronic warfare (EW) systems for a cumulative
total of over 1,600 EW systems as at year end.
· The US Air Force Commander of Air Combat Command declared the F-15EX
programme of record had successfully achieved initial operating capability by
delivering eight F-15EXs equipped with the Eagle Passive Active Warning
Survivability System. BAE Systems is on contract through Boeing for Full-Rate
Production Lot 5.
· The EA-37B programme is executing contracts, inclusive of
international support, valued at more than $1.0bn (£0.8bn). The team is
focused on the cross-decking of prime mission equipment to the new EA-37B
aircraft while sustaining and upgrading the existing EC-130H fleet. We have
delivered three EA-37B aircraft for formal testing and training to the US Air
Force, which will evolve its electromagnetic attack capabilities.
· We are under contract to deliver additional Network Tactical Common
Datalink production systems to support US Navy requirements for real-time
intelligence, surveillance, reconnaissance, and command and control. Systems
are currently being installed on US Navy aircraft carriers and
Constellation-class guided-missile frigates.
· We delivered our first RAD510™ software development unit to a space
customer. The RAD510 builds on our proven legacy of space processing to
provide the next generation of radiation-hardened space computing. These
software development units will enable our customers to integrate their
software for testing prior to receiving flight units for their space systems.
Strategic and order highlights
· We continue to support the F-35 Block 4 EW modernisation that is on
track to begin incremental production starting with Lot 17, with full lot
complete by Lot 19.
· We were awarded the first task order of $116m (£91m), with
follow-on production awards expected, to provide terminals and spares for the
Multifunctional Information Distribution System Joint Tactical Radio System
from Data Link Solutions, our joint venture with Collins Aerospace, Inc.
· Production continues on the APKWS(®) laser-guidance kit programme
under an Indefinite Delivery, Indefinite Quantity (IDIQ) contract, and we
demonstrated the APKWS counter-unmanned aircraft systems capability, leading
to orders supporting both ground-to-air and air-to-air configurations.
· Our Navigation & Sensor Systems team received the annual order
for military GPS receivers for strategic munitions under another five-year
IDIQ contract with a major US defence prime.
· After receiving two new contracts in May on the National Oceanic and
Atmospheric Administration's (NOAA) Geostationary Extended Observations
(GeoXO) satellite constellation, SMS is contracted to build all three
hyperspectral instruments for the mission totalling approximately
$1.3bn (£1.0bn). The GeoXO satellites are expected to launch in the early
2030s as NOAA's current geostationary weather satellites near the end of
their planned mission.
Looking forward
· Our Electronic Systems sector remains positioned for growth in the
medium term. We maintain a diverse portfolio of defence and commercial
products and capabilities for US and international customers and expect to
benefit from applying innovative technology solutions to defence customers'
existing and changing requirements, building on our significant roles on F-35
Lightning II, F-15 upgrades, EA-37B, M-Code GPS upgrades, classified
programmes, as well as a number of precision weapon products.
· Over the long term, we are poised to build on our technology
strengths in emerging areas of demand, including precision weaponry, space
resilience, hyper-velocity projectiles, autonomous platforms and the
development of multi-domain capabilities.
· In our commercial portfolio, we continue to leverage our electric
drive propulsion capabilities to address growing demand for low- and
zero-emission solutions across an increasing number of civil platforms, with
opportunities to migrate these technologies to defence applications.
· In SMS, we continue to grow our expanding space portfolio, while also
leveraging our proven capabilities in tactical systems to diversify our market
presence. We continue to focus on cross-segment collaboration to identify new
opportunities, unlock synergies and drive future growth.
Segmental performance: Platforms & Services
Platforms & Services, with 11,600(1) employees and operations in the US,
Sweden and the UK, manufactures and upgrades combat vehicles, weapons and
munitions, and delivers services and sustainment activities, including US
naval ship repair and the management and operation of two government-owned,
contractor-operated ammunition plants.
Financial performance
Financial performance measures defined by Group(2) Financial performance measures derived from IFRS
2024 2023 2024 2023
Variance(3) Variance(3)
Sales £4,390m £3,922m +15% Revenue £4,344m £3,842m +13%
Underlying EBIT £448m £354m +29% Operating profit £456m £373m +22%
Return on sales 10.2% 9.0% +120bps Return on revenue 10.5% 9.7% +80bps
Operating business cash flow £426m Cash flow from operating activities £976m £624m
£732m £306m £352m
Order intake £7.4bn £7.7bn £(0.3)bn
Order backlog £14.3bn £11.5bn £2.8bn Order book £13.6bn £11.1bn £2.5bn
1. Including share of equity accounted investments.
2. The purposes and definitions of non-GAAP measures are provided in
the Alternative performance measures section on page 46.
3. Growth rates for sales and underlying EBIT are on a constant
currency basis. All other growth rates and year-on-year movements are on a
reported currency basis.
Operational performance
We have continued to scale operations to meet continued demand for our
products and services, including munitions, tracked combat vehicles,
artillery systems and support services.
In the US, our Combat Mission Systems team continues to produce at increased
volumes across our key combat vehicle and naval programmes. Our US network
of manufacturing facilities is delivering against customer demand, with
support from our operations and engineering teams. We also continue to expand
our production capabilities, whilst leveraging our investments in advanced
manufacturing technologies, such as robotic welding capability, test and
integration, paint and high-precision machining.
Our Hägglunds team continues to grow a record backlog of orders, with more
contracts for CV90 combat vehicles for Sweden and partner nations looking
to replenish combat vehicle fleets, mainly following donations in kind to
Ukraine. In parallel, major upgrade programmes continue for existing fleets
of CV90s for a number of nations.
In our support services operations, modernisation and maintenance
activities continue in our US shipyards for the US Navy's non-nuclear
fleet. In addition, the team is investing to expand our submarine
manufacturing offering in order to meet the US Navy's shipbuilding
requirements by taking on additional production programmes.
Across the US Army's two munitions facilities at the Radford and Holston
ammunition plants, we are working to support the US Army's efforts to increase
155mm artillery ammunition production.
Key operational points for the year
· Full-rate production of the US Army's AMPV programme is underway and
we are delivering all five variants in the family of vehicles to Armored
Brigade Combat Teams. The team has invested in the development of four
additional AMPV prototypes, each featuring different mission equipment
packages, further demonstrating the modular platform's future capability
options. The US Marine Corps is also growing its fleet of Amphibious Combat
Vehicles, which had its first successful operational deployment.
· Our Hägglunds team continues to ramp up production capabilities with
investments of more than $200m (£160m) in advanced manufacturing
capabilities, a new customer test and acceptance centre and additional office
space. A third weld line for CV90s is under construction and expected to be
operational in 2026.
· We continue to progress a modern shiplift and land-level repair
complex at our Jacksonville, Florida, shipyard that is expected to be
operational in 2025.
· Two portfolio-adjusting transactions completed in December: the sale
of our 49% share of our Turkish joint venture FNSS to partner Nurol
Holdings and the sale of the Anniston Forge and Spares business in Alabama,
US.
Strategic and order highlights
· Our Combat Mission Systems team secured a $754m (£590m) order from
the US Army for the second phase of AMPV full-rate production, securing
production through to February 2027. We also received a follow-on contract
to this second phase for additional AMPVs, valued at $184m (£144m).
· We secured a five-year contract, valued up to $318m (£249m), from
the US Army to perform technical and sustainment support services for its
fleet of M109A6 and A7 Self-Propelled Howitzers and their companion, M992A3
Ammunition Carriers. In addition, we received a $493m (£386m) contract for
additional orders of the M109A7 and M992A3, extending new production through
to July 2026.
· Using supplemental funding, the US Army contracted BAE Systems to
deliver conversions of legacy analogue Bradleys to the modern A4 variant.
The most recent September and December contracts, jointly worth over $800m
(£626m), include the conversions of more A4 variants, some of which are
replacing the Bradleys the US Government has provided to Ukraine. These
production contracts extend vehicle deliveries into 2027.
· In the first half, our Hägglunds business signed a framework
agreement with the Danish Ministry of Defence to provide repair and
maintenance services for the Danish Army's CV90s over a 15-year period,
worth approximately $355m (£278m) including options.
· Building on an initial contract in May, our Hägglunds business
received orders in December bringing the total value to approximately $2.5bn
(£2.0bn) for CV9035 MkIIIC vehicles for both Sweden and Denmark. In addition
to spares, logistics and training support, the agreement includes more than
165 new-build vehicles, plus some vehicles for Ukraine.
· Our US Ship Repair business received multiple US Navy contracts in
the year supporting backlog into 2025. Our Jacksonville Ship Repair business
was awarded contracts by General Dynamics Electric Boat for deck module
fabrication for both US Navy Columbia- and Virginia-class submarines.
Looking forward
· We continue to shape our business to deliver on increased demand from
US and international customers for production and sustainment of combat
vehicles and artillery systems. We are also maintaining our position as a key
supplier of US Army combat vehicles through our AMPV, M109A7 and M88
franchises. In addition, following the performance of Bradley in Ukraine, we
are working with the US Army to develop the most advanced Bradley
configuration to date, the M2A4E1, which features an enhanced range of defence
capabilities. We are seeing increased international interest in these
products.
· Across our Swedish businesses, we continue to build a growing
pipeline of business opportunities for the CV90, BvS10 and Beowulf from our
Hägglunds business, as well as for artillery, naval and air defence systems
and munitions from our Bofors business.
· We are maintaining our strong positions on naval guns, missile launch
and submarine programmes, as well as US Navy ship repair and modernisation
activities where the business has invested in capitalised infrastructure and
facilities in key home ports.
Segmental performance: Air
Air, with 27,800¹ employees, comprises the Group's UK‑based air build and
support activities for European and international markets, US programmes,
development of our Future Combat Air System and FalconWorks(®), alongside our
business in the Kingdom of Saudi Arabia and interests in our European joint
ventures: Eurofighter and MBDA.
Financial performance
Financial performance measures defined by Group(2) Financial performance measures derived from IFRS
2024 2023 2024 2023
Variance(3) Variance(3)
Sales £8,519m £8,058m +7% Revenue £6,880m £6,517m +6%
Underlying EBIT £1,007m £949m +7% Operating profit £1,009m £948m +6%
Return on sales 11.8% 11.8% - Return on revenue 14.7% 14.5% +20bps
Operating business cash flow £1,669m Cash flow from operating activities £1,359m £1,808m
£1,243m £(426)m £(449)m
Order intake £8.3bn £11.0bn £(2.7)bn
Order backlog £26.8bn £27.2bn £(0.4)bn Order book £15.6bn £18.5bn £(2.9)bn
1. Including share of equity accounted investments.
2. The purposes and definitions of non-GAAP measures are provided in
the Alternative performance measures section on page 46.
3. Growth rates for sales and underlying EBIT are on a constant
currency basis. All other growth rates and year-on-year movements are on a
reported currency basis.
Operational performance
We continue to work with our UK and international customers to support their
existing platforms and provide new enhanced capabilities. Deliveries of
Typhoon aircraft to Qatar continue, alongside support to the in-service
fleet. Our US Programmes division remains focused on delivery execution across
all production lines. Our Future Combat Air and FalconWorks(®) organisations
continue to invest in our people, facilities and cutting-edge technologies.
Key operational points for the year
· In the Kingdom of Saudi Arabia, we continued to deliver services
under the five-year Saudi British Defence Co-operation and Salam programmes,
including our support to the Royal Saudi Air Force's Tornado and Typhoon
fleets.
· Activity on our Qatar Typhoon and Hawk programmes continued with four
Typhoon deliveries in the year.
22 Typhoon aircraft have entered into service with the Qatar Emiri Air Force.
· Development continued on the UK's Combat Air flying demonstrator,
which will test the next-generation skills, tools, processes and techniques
needed to underpin GCAP and the entry into service of the core aircraft
platform, which will be called Tempest in the UK.
· Through FalconWorks(®), we continue to invest in promising new and
innovative technologies for the future, including the development of uncrewed
systems in collaboration across industry. PHASA-35(®), our persistent
high-altitude solar-powered aircraft, completed another successful
stratospheric flight trials programme during the year.
Strategic and order highlights
· We have agreed to form a joint venture with Leonardo in Italy and
JAIEC in Japan, subject to regulatory approvals, for the design and
development of a next-generation combat aircraft, under GCAP.
· Alongside this, concept and assessment work on GCAP continues with
our international partners in Italy and Japan under our respective national
contracts.
· We also confirmed orders for our workshare on an additional 25
Typhoon aircraft for the Spanish Air Force and for an order for up to 24
Typhoon aircraft for the Italian Air Force. These were valued at a combined
initial total of £1.1bn.
· We sustained production of the rear fuselage assemblies for the F-35
at full-rate levels at our Samlesbury site in the UK, with 152 aft fuselages
completed, and agreed pricing with Lockheed Martin for F-35 production lots
18/19. This supports the continuation of production deliveries at Samlesbury
into 2027.
· During the first half of 2024, we completed the acquisitions of
Malloy Aeronautics and Callen-Lenz, strengthening our position in the fixed
wing and rotary UAS domains.
· MBDA continued to secure significant orders through 2024. These
include a large production order from the Polish Armament Agency to supply
launchers and CAMM-ER (Common Anti-Air Modular Missile Extended Range) for
the NAREW Air Defence System. Other air defence production orders were
received for Aster missiles for the Italian Armed Forces, Patriot GEM-T
missiles (under the European Sky Shield Initiative via the COMLOG Joint
Venture) for the NATO Support and Procurement Agency, and an expansion of Sea
Ceptor with CAMM to include the Polish, Swedish and Saudi Arabian navies.
Looking forward
· GCAP is a strategically important partnership that will foster
innovation, technological advancements and safeguard long-term industrial
capability to design, develop, manufacture and maintain combat aircraft and
the wider systems within which they will operate in the UK.
· We will continue to focus on ensuring that deliveries of Typhoon
aircraft and support are made in line with agreed customer milestones. Future
Typhoon production and support sales are underpinned by existing contracts and
discussions continue to secure potential further contract awards.
· We expect production of the rear fuselage assemblies for the F-35 to
be sustained at current levels. We play a significant role in the F-35
sustainment programme in support of Lockheed Martin and support volumes should
increase as the number of jets in service continues to rise.
· In the Kingdom of Saudi Arabia, the In-Kingdom Industrial
Participation programme continues to make good progress consistent with our
long-term strategy, whilst supporting the Kingdom's National Transformation
Plan and Vision 2030. This included a further package of industrialisation
agreed during 2024 on our Salam programme.
· We expect our Saudi in-Kingdom support business to remain stable
underpinned by long-standing contracts while we continue to address
the Kingdom's current and future combat air requirements.
· Our FalconWorks(®) organisation will continue to pursue internal and
external investment opportunities which enhance our capabilities and
technologies.
· MBDA has a strong order backlog. Development programmes continue
to improve the long-term capabilities of the business in air, land and sea
domains. MBDA continues to be well placed to benefit from increased defence
spending in Europe and internationally.
Segmental performance: Maritime
Maritime, with 30,100¹ employees, comprises the Group's UK‑based maritime
and land activities, including ship build and support activities, major
submarine build programmes, as well as our Australian business.
Financial performance
Financial performance measures defined by Group(2) Financial performance measures derived from IFRS
2024 2023 2024 2023
Variance(3) Variance(3)
Sales £6,187m £5,536m +12% Revenue £6,002m £5,391m +11%
Underlying EBIT £474m £425m +12% Operating profit £465m £423m +10%
Return on sales 7.7% 7.7% - Return on revenue 7.7% 7.8% -10bps
Operating business cash flow £291m Cash flow from operating activities £734m £629m
£436m £145m £105m
Order intake £8.7bn £10.1bn £(1.4)bn
Order backlog £23.2bn £21.3bn £(1.9)bn Order book £22.3bn £20.4bn £1.9bn
1. Including share of equity accounted investments.
2. The purposes and definitions of non-GAAP measures are provided in
the Alternative performance measures section on page 46.
3. Growth rates for sales and underlying EBIT are on a constant
currency basis. All other growth rates and year-on-year movements are on a
reported currency basis.
Operational performance
Our major Maritime platform programmes continue to progress. We have delivered
five of the seven Astute Class submarines to the Royal Navy and continue
construction on the first three Dreadnought Class submarines.
Construction of the first five UK Type 26 frigates and first Australian Hunter
Class frigate is also underway, while we continue to deliver on customer
requirements in both Munitions and Maritime Services. Ongoing investments
in our facilities and our people support our delivery and, with the future
potential of the AUKUS trilateral programme, the sector is well positioned
for growth.
Key operational points for the year
· We launched the sixth Astute Class submarine, Agamemnon, marking the
start of its in-water phase, while we continue construction on the final
vessel in the class.
· We continued to make progress on the four Dreadnought Class
submarines, with advancing levels of construction underway on the first three
submarines in the class, at our site in Barrow-in-Furness, UK.
· On the Type 26 frigate programme of eight ships, investment continues
both internally and within the supply chain to support delivery, with the
transition from design to production remaining a key area of focus. HMS
Glasgow is progressing from final outfit through to the key stages in her test
and commissioning phase in advance of first of class sea trials. The second of
class, HMS Cardiff, entered the water in August, before transitioning to our
Scotstoun shipyard for further outfit in advance of testing and
commissioning. Unit construction continues on HMS Belfast and HMS Birmingham
at our Govan shipyard. Cut steel on the fifth ship, HMS Sheffield, took place
in November.
· In October, there was a fire in our Devonshire Dock Hall facility in
Barrow-in-Furness, UK, the impact of which is currently being assessed.
· In Australia, we successfully completed the Hunter Class Frigate
Programme Production Readiness Review and entered the construction phase,
officially cutting steel on the first ship in June.
· Alongside this, the upgrade and sustainment of the Anzac Class
frigates continues to progress with the penultimate ship, HMAS Ballarat, being
returned to water. The final ship, HMAS Parramatta, is expected to be
returned in 2025.
· We made good progress on the installation of Radar 1 as part of the
Jindalee Operational Radar Network Phase 6 upgrade with successful completion
of half-radar trials enabling our team to start the full upgrade.
· Investment activity across our Munitions business continues at pace.
This includes an additional manufacturing line in Washington, UK, and an
explosives filling facility in Monmouthshire, UK.
· In RBSL, the Challenger 3 programme has delivered four prototype
series vehicles, with two of those vehicles completing the initial phase of
trials. A further four prototype series vehicles will be completed in 2025,
two of which are nearing completion, ahead of entering the next phase of
trials in 2025.
Strategic and order highlights
· In Australia, the release of the Surface Combatant Review confirmed
the Government's commitment to the production of six Hunter Class frigates,
with the contract for the first batch of three ships awarded in June.
· Following the cancellation of the TransCAP element of the Anzac
Class frigate upgrade programme, we are working with the Commonwealth to
determine the appropriate use of our Henderson facility in Western Australia.
· We secured an order of £958m for the continuation of funding for
Dreadnought Boats 2 to 4.
· In March, as part of the AUKUS trilateral security pact, the
Australian Government announced its selection of BAE Systems and ASC Pty Ltd
(ASC) to build Australia's SSN-AUKUS submarines. In December, we were
awarded the first Tasking Statement under the mobilisation arrangements,
following successful government-to-government engagement to initiate
Australia's SSN-AUKUS build programme.
· The Ministry of Defence awarded our Combat Systems team within our
Naval Ships business a £285m contract to support the Royal Navy's Shared
Infrastructure, Combat Management Systems and warship networks.
· The build of our new Ship Build Assembly Hall in Govan, UK, is
maturing to schedule and we expect it to be fully operational in 2025. Our
Applied Shipbuilding Academy in Glasgow, UK, opened in July, and is already
proving to be a key training facility for our Naval Ships current and future
workforce.
Looking forward
· Our Submarines business is executing across three long-term
programmes: Astute, Dreadnought and SSN-AUKUS. Our focus remains on
strengthening our workforce, supply chain and infrastructure to provide the
capability, capacity and resilience required to deliver these long-term
programmes.
· We will work with ASC to deliver initial mobilisation activities to
support Australia's SSN-AUKUS submarine build programme.
· We submitted design and production outputs for the Canadian River
Class destroyer to enable our partner, Irving Shipbuilding Inc., to
manufacture the production test module in Canada.
· In Australia, we are a key partner to the Commonwealth in the
delivery of its National Defence Strategy (NDS), which seeks a strategy of
denial and an integrated, focused force. AUKUS nuclear-powered submarines, an
enhanced lethality surface fleet, strategic surveillance and long-range strike
are prioritised in the Integrated Investment Plan which supports the NDS.
· As the UK Ministry of Defence's long-term strategic partner for
munitions supply, we continue to focus our operations in support of the UK
Ministry of Defence and the UK's NATO allies, as well as other customers.
Segmental performance: Cyber & Intelligence
Cyber & Intelligence, with 10,900¹ employees, comprises the US‑based
Intelligence & Security business and UK‑headquartered Digital
Intelligence business and covers the Group's cyber security activities for
national security, central government and government enterprises.
Financial performance
Financial performance measures defined by Group(2) Financial performance measures derived from IFRS
2024 2023 2024 2023
Variance(3) Variance(3)
Sales £2,411m £2,321m +6% Revenue £2,411m £2,321m +4%
Underlying EBIT £199m £199m +2% Operating profit £182m £179m +2%
Return on sales 8.3% 8.6% -30bps Return on revenue 7.5% 7.7% -20bps
Operating business cash flow £204m Cash flow from operating activities £194m £261m
£139m £(65)m £(67)m
Order intake £2.4bn £2.5bn £(0.1)bn
Order backlog £1.8bn £2.0bn £(0.2)bn Order book £1.3bn £1.4bn £(0.1)bn
1. Including share of equity accounted investments.
2. The purposes and definitions of non-GAAP measures are provided in
the Alternative performance measures section on page 46.
3. Growth rates for sales and underlying EBIT are on a constant
currency basis. All other growth rates and year-on-year movements are on a
reported currency basis.
Operational performance
Our Intelligence & Security business performed well, delivering innovative
solutions to government customers within the US Department of Defense, federal
agencies and civilian organisations. We continue to focus on maintaining a
robust pipeline of qualified business opportunities to provide ongoing
mission-critical integration capabilities that address evolving customer and
national security requirements.
Our Digital Intelligence business saw continued demand in the security market
and rigorous cost control helped to compensate for constrained customer
budgets in other areas.
Key operational points for the year
· As part of the Ball Aerospace acquisition in February, we acquired
Topaz Intelligence, which expands our modelling and simulation portfolio to
provide data intelligence-as-a-service to drive agile decision-making for
customers.
· Through our Bohemia Interactive Simulations business, we secured a
follow-on development and production order from the US Army PEO-STRI for VBS4,
Mantle and BlueIG product licences in support of the Training Simulation
Software and Training Management Tools programme to address advanced
US Army-wide training solutions.
· Our Air and Space Force Solutions business continues to expand its
presence under the Instrumentation Radar Support Program providing support to
33 ranges around the world for the US Army, US Navy, US Air Force, US Space
Force, Department of Energy, NASA and various international ranges. During
2024, we were awarded 250+ task orders valued at $198m (£155m). Under this
contract, we will provide six mobile mechanical and multiple object
radar tracking systems, systems engineering and range support activities.
· In our Digital Intelligence business investment in our product
portfolio continues, with good progress made on developing cross-domain
products for the US and other international markets, low Earth orbit
satellites and multi-domain network solutions for the defence market.
Strategic and order highlights
· Our Intelligence Solutions business secured over $300m (£235m)
in task orders on an IDIQ contract from an agency. Task orders include
delivery of analytics support for critical and core mission functions to the
agency and its mission partners.
· We were notified, in June 2024, that the Government Accountability
Office had sustained our protest on the Integration Support Contract (ISC) 2.0
procurement and recommended the US Air Force take additional corrective
action. The Air Force subsequently cancelled the solicitation. In January
2025, we were awarded an extension to our current ISC services contract with
options through to July 2027, with an increased programme ceiling value of
nearly $1.2bn (£0.9bn).
· Our Integrated Defense Solutions business was awarded a
cost-plus-fixed-fee contract worth $122m (£95m) for systems engineering and
integration services and expert studies in support of the US Trident II
Strategic Weapons Systems Program and D5LE2 Life Extension 2 Strategic System
Programs Alteration.
· We also secured a $251m (£196m) contract from the US Navy for
on-site technical expertise and system engineering to validate total AEGIS
ship combat system design in support of the US Navy, Missile Defense Agency
and foreign militaries.
· Our Integrated Defense Solutions business was also awarded multiple
re-compete contracts in the year with a combined total potential lifecycle
value of over $500m (£391m).
· Our acquisition of Kirintec in Digital Intelligence further
expands our product offering. Kirintec specialises in: cyber and
electromagnetic activities; counter-improvised explosive devices;
and counter-uncrewed aerial vehicle products for military customers. Our
Digital Intelligence team will look to leverage this capability to accelerate
growth in the defence market in the UK and internationally.
Looking forward
· Our Intelligence & Security business maintains a strong pipeline
of qualified business opportunities. While there have been some delays
in procurement decisions from the US Department of Defense, we are seeing an
increase in demand driven by persistent global security challenges.
· The US defence services market remains fiercely competitive and can
change quickly based on US government priorities. Our Intelligence Solutions
business has identified cyber security as a key focus area for business growth
and we continue to pursue opportunities in the Intelligence Community,
federal/civilian agencies and the US Department of Defense.
· We are actively broadening our wargaming capabilities across new
markets and customers, both in the US and internationally. This strategy
enhances our growth potential and diversification in the modelling, simulation
and synthetic training environment in support of a positive outlook for this
market area.
· In Digital Intelligence, we will continue to progress the
transformation roadmap to ensure the business is well placed to take
advantage of favourable market conditions over the medium and long term,
whilst also driving operational efficiencies, through system integration and a
simplified organisational structure.
Consolidated income statement
for the year ended 31 December
2024 2023
Note £m Total £m Total
£m
£m
Continuing operations
Revenue 2 26,312 23,078
Operating costs (24,106) (20,917)
Other income 266 204
Share of results of equity accounted investments 213 208
Operating profit 2 2,685 2,573
Finance income 135 172
Finance costs (488) (419)
Net finance costs 3 (353) (247)
Profit before tax 2,332 2,326
Tax expense 4 (291) (386)
Profit for the year 2,041 1,940
Attributable to:
Equity shareholders 1,956 1,857
Non-controlling interests 85 83
2,041 1,940
Earnings per share 5
Basic earnings per share 64.9p 61.3p
Diluted earnings per share 64.1p 60.4p
Consolidated statement of comprehensive income
for the year ended 31 December
2024 2023
Other Retained earnings Total Other Retained earnings Total
reserves
£m
£m
reserves
£m
£m
£m
£m
Profit for the year - 2,041 2,041 - 1,940 1,940
Other comprehensive income
Items that will not be reclassified to the income statement:
Consolidated:
Remeasurements on post-employment benefit schemes - 414 414 - (658) (658)
Remeasurements on other investments - - - - (11) (11)
Tax on items that will not be reclassified to the income statement - (25) (25) - 4 4
Share of the other comprehensive income/(expense) of associates and joint - 15 15 - (25) (25)
ventures accounted for using the equity method (net of tax)
Items that may be reclassified to the income statement:
Consolidated:
Currency translation on foreign currency net investments - -
4 4 (510) (510)
Reclassification of cumulative currency translation reserve on divestment of 3 - 3 - - -
interest in equity accounted investments and other business disposals
Fair value loss arising on hedging instruments during the year (36) - (36) (4) - (4)
Cumulative fair value loss/(gain) on hedging instruments reclassified to the 69 - 69 (19) - (19)
income statement
Tax on items that may be reclassified to the income statement (7) - (7) 3 - 3
Share of the other comprehensive income of associates and joint ventures 4 - 4 11 - 11
accounted for using the equity method (net of tax)
Total other comprehensive income/(expense) for the year (net of tax) 37 404 441 (519) (690) (1,209)
Total comprehensive income/(expense) for the year 37 2,445 2,482 (519) 1,250 731
Attributable to:
Equity shareholders 38 2,357 2,395 (511) 1,175 664
Non-controlling interests (1) 88 87 (8) 75 67
37 2,445 2,482 (519) 1,250 731
Consolidated statement of changes in equity
for the year ended 31 December
Attributable to equity holders of BAE Systems plc
Issued Share Other Retained earnings Total Non-controlling Total
share
premium
reserves
£m
£m
interests
equity
capital
£m
£m
£m
£m
£m
At 1 January 2023 82 1,252 6,951 2,930 11,215 185 11,400
Profit for the year - - - 1,857 1,857 83 1,940
Total other comprehensive expense for the year - - (511) (682) (1,193) (16) (1,209)
Total comprehensive (expense)/income for the year - - (511) 1,175 664 67 731
Share-based payments (inclusive of tax) - - - 132 132 - 132
Cumulative fair value gain on hedging instruments transferred to the balance - - (38) - (38) - (38)
sheet (net of tax)
Ordinary share dividends - - - (857) (857) (88) (945)
Purchase of own shares (1) - 1 (558) (558) - (558)
Proceeds from unclaimed asset programme - 1 - - 1 - 1
At 31 December 2023 81 1,253 6,403 2,822 10,559 164 10,723
Profit for the year - - - 1,956 1,956 85 2,041
Total other comprehensive income for the year - - 38 401 439 2 441
Total comprehensive income for the year - - 38 2,357 2,395 87 2,482
Share-based payments (inclusive of tax) - - - 145 145 - 145
Cumulative fair value loss on hedging instruments transferred to the balance - - 5 - 5 - 5
sheet (net of tax)
Ordinary share dividends - - - (937) (937) (90) (1,027)
Purchase of own shares (1) - 1 (551) (551) - (551)
At 31 December 2024 80 1,253 6,447 3,836 11,616 161 11,777
Consolidated balance sheet
as at 31 December
Note 2024 2023
£m £m
Non-current assets
Goodwill 13,297 11,386
Other intangible assets 2,965 713
Property, plant and equipment 4,843 3,635
Right-of-use assets 1,755 1,311
Investment property 38 57
Equity accounted investments 823 832
Other investments 83 84
Contract and other receivables 734 633
Post-employment benefit surpluses 6 1,271 804
Other financial assets 265 227
Deferred tax assets 315 609
26,389 20,291
Current assets
Inventories 1,324 1,156
Trade, contract and other receivables 6,663 6,185
Current tax 176 160
Other financial assets 212 205
Cash and cash equivalents 3,378 4,067
11,753 11,773
Total assets 38,142 32,064
Non-current liabilities
Loans (7,713) (4,432)
Lease liabilities (1,658) (1,273)
Contract liabilities (1,720) (1,955)
Other payables (1,859) (1,594)
Post-employment benefit obligations 6 (503) (575)
Other financial liabilities (193) (227)
Deferred tax liabilities (14) (10)
Provisions (363) (332)
(14,023) (10,398)
Current liabilities
Loans (699) (679)
Lease liabilities (183) (147)
Contract liabilities (4,504) (3,865)
Trade and other payables (6,383) (5,436)
Other financial liabilities (264) (295)
Current tax (55) (285)
Provisions (254) (236)
(12,342) (10,943)
Total liabilities (26,365) (21,341)
Net assets 11,777 10,723
Capital and reserves
Issued share capital 80 81
Share premium 1,253 1,253
Other reserves 6,447 6,403
Retained earnings 3,836 2,822
Total equity attributable to equity holders of BAE Systems plc 11,616 10,559
Non-controlling interests 161 164
Total equity 11,777 10,723
Approved by the Board of directors of BAE Systems plc on 18 February 2025 and
signed on its behalf by:
B M Greve
C N Woodburn
Chief Executive Chief Financial Officer
Consolidated cash flow statement
for the year ended 31 December
Note 2024 2023
£m
£m
Profit for the year 2,041 1,940
Tax expense 4 291 386
Adjustment in respect of research and development expenditure credits (45) (53)
Share of results of equity accounted investments (213) (208)
Net finance costs 3 353 247
Depreciation, amortisation and impairment 1,097 787
Net loss/(gain) on disposal of property, plant and equipment, and investment 6 (10)
property
Gain in respect of divestment of interests in equity accounted investments and 11 (94) -
other business disposals
Cost of equity-settled employee share schemes 144 110
Movement in provisions 24 -
Difference between pension funding contributions paid and the pension charge (249) (169)
(Increase)/decrease in working capital:
Inventories (144) (223)
Trade, contract and other receivables (121) (287)
Trade and other payables, and contract liabilities 1,010 1,635
Tax paid net of research and development expenditure credits received (175) (395)
Net cash flow from operating activities 3,925 3,760
Dividends received from equity accounted investments 158 134
Interest received 130 126
Principal element of finance lease receipts 12 10
Purchase of property, plant and equipment, and investment property (990) (826)
Purchase of intangible assets (173) (131)
Proceeds from funding related to assets 153 149
Proceeds from sale of property, plant and equipment, investment property and 23 19
intangible assets
Purchase of subsidiary undertakings, net of cash and cash equivalents acquired 10 (4,776) (14)
Cash flow in respect of divestment of interests in equity accounted 11 194 (8)
investments and other business disposals
Net cash flow from investing activities (5,269) (541)
Interest paid (543) (356)
Equity dividends paid 7 (937) (857)
Purchase of own shares (555) (561)
Dividends paid to non-controlling interests (89) (88)
Principal element of lease payments (190) (292)
Cash inflow from derivative financial instruments (excluding cash flow hedges) 136 193
Cash outflow from derivative financial instruments (excluding cash flow (266) (389)
hedges)
Cash inflow from bond finance/private placement 3,753 162
Cash outflow from repayment of bond finance (626) -
Cash inflow from draw-down of bridge loan facility 3,180 -
Cash outflow from repayment of bridge loan facility (3,168) -
Net cash flow from financing activities 695 (2,188)
Net (decrease)/increase in cash and cash equivalents (649) 1,031
Cash and cash equivalents at 1 January 4,067 3,107
Effect of foreign exchange rate changes on cash and cash equivalents (40) (71)
Cash and cash equivalents at 31 December 3,378 4,067
Notes to the accounts
1. Preparation of the Consolidated financial statements
Basis of preparation and statement of compliance
The Consolidated financial statements of BAE Systems plc for the year ended 31
December 2024, which were approved by the Board of directors on 18 February
2025, have been prepared on a going concern basis and in accordance with
UK-adopted international accounting standards and the Companies Act 2006
applicable to companies reporting under IFRS.
These condensed consolidated financial statements do not comprise statutory
accounts within the meaning of Section 434 of the Companies Act 2006 but have
been derived from the statutory accounts for the year ended 31 December 2024.
These statutory accounts have been audited and will be delivered to the
Registrar of Companies in accordance with Section 441 of the Companies Act
2006 in due course.
The comparative figures for the year ended 31 December 2023 are not the
Group's statutory accounts for that financial year. Those statutory accounts
have been reported upon by the Group's auditor and delivered to the Registrar
of Companies. The reports of the auditor in relation to the statutory accounts
for the years ended 31 December 2024 and 31 December 2023 are unmodified, did
not include a reference to any matters to which the auditor drew attention by
way of emphasis without modifying its report and did not contain statements
under Section 498(2) or (3) of the Companies Act 2006.
The Consolidated financial statements are presented in pounds sterling and,
unless stated otherwise, rounded to the nearest million. They have been
prepared under the historical cost convention, as modified by the revaluation
of certain financial assets and financial liabilities (including derivative
financial instruments).
Changes in accounting policies
The following standards, interpretations and amendments to existing standards
became effective on 1 January 2024 and have not had a material impact on the
Group:
- Amendments to IAS 1: Classification of Liabilities as Current or
Non-current;
- Amendments to IAS 1: Non-current Liabilities with Covenants;
- Amendments to IAS 7 and IFRS 7: Supplier Finance Arrangements; and
- Amendments to IFRS 16: Lease Liability in a Sale and Leaseback.
The following other standards, interpretations and amendments to existing
standards have been issued but were not mandatory for accounting periods
beginning on 1 January 2024. These either have been, or are expected to be,
endorsed by the UK Endorsement Board and are not expected to have a material
impact on the Group:
- Amendments to IAS 21: Lack of Exchangeability, effective from 1
January 2025;
- Amendments to IFRS 9 and IFRS 7: Amendments to the Classification and
Measurement of Financial Instruments, effective from 1 January 2026;
- Amendments to IFRS 9 and IFRS 7: Contracts Referencing
Nature-dependent Electricity, effective from 1 January 2026;
- Annual Improvements to IFRS Accounting Standards - Volume 11,
effective from 1 January 2026;
- IFRS 19 Subsidiaries without Public Accountability: Disclosures,
effective from 1 January 2027; and
- Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets
between an Investor and its Associate or joint venture.
The following new standard is expected to change the presentation of the
Consolidated financial statements:
- IFRS 18 Presentation and Disclosure in Financial Statements, effective
from 1 January 2027.
Key sources of estimation uncertainty
The application of the Group's accounting policies requires the use of
estimates. In response to the potential impact of risks and uncertainties, the
Group undertakes risk assessments and scenario planning in order to be able to
respond to potential rapid changes in circumstances. The Group considers a
range of estimates and assumptions in the application of its accounting
policies and management's assessment of the carrying value of assets and
liabilities. In the event that these estimates or assumptions prove to be
inaccurate, there may be an adjustment to the carrying values of assets and
liabilities within the next year. Areas of the Group's financial statements
which could be materially impacted may include, but are not limited to:
Revenue and profit recognition
The Group accounts for revenue in accordance with IFRS 15 Revenue from
Contracts with Customers. For most of the Group's contracts, revenue and
associated margin are recognised progressively over time as costs are
incurred, and as risks have been mitigated or retired.
The ultimate profitability of contracts is based on estimates of revenue and
costs, including allowances for technical and other risks which are reliant on
the knowledge and experience of the Group's project managers, engineers, and
finance and commercial professionals. Material changes in these estimates
could affect the profitability of individual contracts. Revenue and cost
estimates are reviewed and updated at least quarterly, or more frequently as
determined by events or circumstances.
The long-term nature of many of the Group's contracts means that judgements
are made in estimating future costs on a contract, as well as when risks will
be mitigated or retired. The impact of global supply chain issues, volatility
in global energy prices, and the ongoing response to climate change, have
increased uncertainty in relation to these judgements and estimates. The Group
continues to work closely and collaboratively with its key customers to
deliver effectively on its contracts and commitments. However, the volume,
scale, complexity and long-term nature of its programmes mean that potential
sensitivities would be wide-ranging and not practicable to calculate. Owing to
the potential future impact of current uncertainties, the Group's estimates
and assumptions related to revenue recognition could be impacted by issues
such as reduced productivity as a result of operational disruption, production
delays and increased costs as a result of disruption to the supply chain,
changing working practices to move towards our decarbonisation ambitions or,
where there is uncertainty as to the recovery from customers, of programme
costs incurred.
Revenue and profit is recognised only to the extent that it is highly probable
that there will not be a reversal of revenue in the future. Therefore, in any
given reporting year, the Group would expect to recognise an amount of revenue
that did not meet the highly probable threshold at the end of the previous
reporting year, but subsequently became highly probable in the current
reporting year. Accordingly, the Group has recognised £0.2bn (2023 £0.3bn)
of revenue in respect of performance obligations satisfied or partially
satisfied in previous years. This continues to provide an approximation of the
potential revenue sensitivity arising as a result of management's estimates
and assumptions for variable consideration, future costs, and technical and
other risks; however, it may not reflect the full potential impact on the
contract receivables and contract liabilities balances.
Post-employment benefit obligations
A number of actuarial assumptions are made in assessing the value of
post-employment benefit obligations, including the discount rate, inflation
rate and mortality assumptions. For each of the actuarial assumptions used,
there is a wide range of possible values and management estimates a point
within that range that most appropriately reflects the Group's circumstances.
If estimates relating to these actuarial assumptions are no longer valid, or
change due to changing economic and social conditions, then the potential
obligations due under these schemes could change significantly.
Discount and inflation rates could change significantly as a result of a
prolonged economic downturn, monetary policy decisions and interventions or
other macroeconomic issues. The impact of estimates made with regard to
mortality projections may also change.
Similarly, the values of many assets are subject to estimates and assumptions,
in particular those which are held in unquoted pooled investment vehicles. The
associated fair value of these unquoted pooled investments is estimated with
consideration of the most recently available valuations provided by the
investment or fund managers. These valuations inherently incorporate a number
of assumptions, including the impact of climate change, on the underlying
investments. The overall level of estimation uncertainty in valuing these
assets could therefore give rise to a material change in valuation within the
next 12 months.
Furthermore, estimates are required around the Group's ability to access its
defined benefit surpluses, and on what basis, which then determines the
associated rate of tax to apply. Depending on the outcome, judgement is then
required to determine the presentation of any tax payable in recovering a
surplus. Note 6 provides information on the key assumptions and analysis of
their sensitivities.
Critical judgements made in applying accounting policies
In the course of preparing the Consolidated financial statements and when
applying its accounting policies, the Group has been required to make
judgements with regard to the actions required to enable the business to
continue to meet customers' requirements in an operating environment still
dominated by global economic uncertainties. No critical judgements have been
made in the process of applying the Group's accounting policies, other than
those involving estimates, that have had a significant effect on the amounts
recognised in the Consolidated financial statements.
Impact of climate on the Consolidated financial statements
In preparing the Consolidated financial statements, management has considered
the potential impact of climate change. As a responsible defence business,
sustainability is embedded in our strategic framework, with one of the Group's
long-term objectives to advance and integrate our ESG agenda. The products and
services we provide are complex, diverse and developed over extended periods
of time. Sustainability and the impact of our operations is considered in the
planning and ongoing production of our products and services, including
incorporation of the impact of the Group's decarbonisation ambitions and
activities. These are embedded in our financial reporting, forecasting and
governance processes.
Estimates and judgement are required in determining how the Group will pursue
its decarbonisation ambitions. These, as well as mitigating actions required
from the detailed review of climate risks and opportunities, have been
factored into the current and future plans of the Group through the Integrated
Business Plan (IBP). The IBP is the Group's annual long-term strategy review
and five-year plan for each segment, including the investment case to
decarbonise.
There are a number of core practices and processes that support the business
to remain resilient and adapt to the impacts of climate change, whilst
controlling the financial impacts to the Group. These include:
- Maintenance and investment in our infrastructure - our products are designed
and built to remain in service for decades to come, and require development
and construction over a significant period of time. In order to deliver
complex engineering and technologically advanced products, we continuously
invest in the maintenance and upkeep of our global sites and facilities. The
Group regularly invests in its facilities to ensure they are maintained and
adapted to enable our operations. Regular maintenance and investing in Group
infrastructure is embedded in our strategy, and the expected associated costs
are reflected in our IBP. Insurance also provides underlying cover for more
immediate and unexpected impacts of climate change.
- Investment in renewable energy - during the year, the Group has continued to
contract for Power Purchase Agreements (PPAs) to invest in renewable energy,
providing long-term security of energy and pricing.
- Proactive estate management - a large part of our business is based on sites
that are leased to the Group, as reflected in our right-of-use assets in the
Consolidated financial statements. Although some facilities, such as
shipyards, are required to be in certain locations, many of our operations are
not tied to a particular location. Given the long-term outlook of our
business, future physical impacts of climate change could be mitigated through
movement of activities on these sites to facilities that will be less impacted
by climate change. As and when sites are identified that would benefit from
relocation, the associated costs are reflected within the IBP. We have not
currently identified any sites which require relocation due to climate change.
We also use opportunities to build new infrastructure and refurbish existing
buildings to upgrade energy efficiency.
The more immediate financial impacts of climate-related risks, and the actions
being taken to address them, are reflected in the financial results of the
Group for the year. These are not considered to have had a material impact.
Areas impacted by climate-related risks and opportunities include:
- Goodwill and other intangible assets - the annual impairment review uses
cash flow projections from the IBP, which incorporates any financial impact of
climate-related risks and opportunities identified. This includes product
repair and adaptation, as well as investment in facilities to progress the
Group's decarbonisation ambitions. All Cash-Generating Units showed sufficient
headroom after incorporation of climate-related costs and opportunities.
- Property, plant and equipment - the useful economic life of existing
capitalised assets across the Group has been reviewed in light of any repairs,
upgrades to existing infrastructure, or future investment in facilities that
will be required as a result of the climate-related risks and opportunities
identified across our sites. No significant impairment of assets has been
identified from this review.
- Right-of-use assets, lease liabilities, and financial assets and liabilities
- the Group has continued to contract for PPAs during the year to provide more
sustainable energy from renewable sources. Once the projects are completed,
and where the accounting for these agreements falls within the scope of IFRS
16 Leases, the relevant right-of-use assets and corresponding liabilities will
be recognised in the Consolidated financial statements. The associated costs
of the arrangement will be recognised in line with the term of the agreement.
The Group has also considered whether any embedded derivatives have arisen,
within the scope of IFRS 9 Financial Instruments, as a result of the PPAs
entered into during the year. None are considered to exist at the balance
sheet date; however, this will continue to be monitored as the associated
contractual arrangements are refined and the construction of the facilities
approaches completion.
- Pension plans - in assessing the value of pension assets for the UK schemes,
the Group has considered the impact of climate change which is incorporated
into the cash flow projections used in valuing infrastructure investment
assets and pooled investment vehicle cash flows upon which the Group bases its
assessment. There is also alignment between the UK Main Scheme and the Group's
climate change objectives with consistent long-term decarbonisation ambitions.
This has not materially impacted the Group's net pension position during the
year.
- Deferred tax assets - the recoverability of deferred tax assets is dependent
on the future availability of profits, which in turn could be impacted by
climate-related matters. The recoverability of deferred tax assets has been
reviewed against the Group's future forecasts resulting from the IBP process,
which incorporate identified climate-related risks and opportunities. No
material risk to the recoverability of deferred tax assets has been
identified.
- Share-based payments - the award of Performance Shares within the 2023
Director's Long-Term Incentive framework has a 10% weighting based on the
reduction of Group GHG emissions (Scope 1 and 2) aligned to a science-based
pathway. The ability to meet this target will impact the amount and timing of
any share-based payments over the term of the policy. The introduction of this
condition has not materially impacted the financial results of the Group for
the current year.
2. Segmental analysis and revenue recognition
The Group has five sectors which, together with HQ, make its six reporting
segments as defined by IFRS 8 Operating Segments. The SMS business, which was
acquired in February 2024, has been reported within the pre-existing
Electronic Systems reporting segment. SMS has been combined with the existing
Electronic Systems business due to the similarities in services and products
offered, being the provision of advanced defence electronic solutions such as
tactical missile and munition subsystems, C4ISR, and civil and military space
electronics.
Revenue and sales(1) by reporting segment
Revenue Deduct: Add: Sales(1)
Sales to equity accounted investments
Share of sales by equity accounted investments
2024 2023 2024 2023 2024 2023 2024 2023
£m
£m
£m
£m
£m
£m
£m
£m
Electronic Systems 7,186 5,456 (258) (253) 261 255 7,189 5,458
Platforms & Services 4,344 3,842 - - 46 80 4,390 3,922
Air 6,880 6,517 (1,413) (1,405) 3,052 2,946 8,519 8,058
Maritime 6,002 5,391 (6) (5) 191 150 6,187 5,536
Cyber & Intelligence 2,411 2,321 - - - - 2,411 2,321
HQ 24 10 - - 179 461 203 471
26,847 23,537 (1,677) (1,663) 3,729 3,892 28,899 25,766
Intra-group revenue/sales (535) (459) (29) (23) - - (564) (482)
26,312 23,078 (1,706) (1,686) 3,729 3,892 28,335 25,284
Revenue from external customers Intra-group revenue
2024 2023 2024 2023
£m
£m
£m
£m
Electronic Systems 6,988 5,299 198 157
Platforms & Services 4,288 3,796 56 46
Air 6,840 6,484 40 33
Maritime 5,915 5,305 87 86
Cyber & Intelligence 2,271 2,194 140 127
HQ 10 - 14 10
26,312 23,078 535 459
Revenue and sales(1) by customer location
Revenue Sales(1)
2024 2023 2024 2023
£m
£m
£m
£m
UK 7,039 6,102 7,439 6,629
Europe (excluding UK) 1,733 1,533 2,842 2,706
US 12,559 10,700 12,536 10,672
Canada 189 177 189 177
Kingdom of Saudi Arabia 2,892 2,687 2,962 2,688
Qatar 259 450 468 711
Australia 1,158 943 1,170 949
Asia and Pacific (excluding Australia) 354 264 455 421
Other 129 222 274 331
26,312 23,078 28,335 25,284
Operating profit/(loss) by reporting segment
Operating Finance and tax expense/(income) Amortisation of programme, customer-related and other intangible assets, and Adjusting Items Underlying EBIT(2)
profit/(loss)
of equity accounted investments impairment of equity accounted investments and intangible assets
2024 2023 2024 2023 2024 2023 2024 2023 2024 2023
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
Electronic Systems 708 806 - - 307 93 56 (21) 1,071 878
Platforms & Services 456 373 9 2 - - (17) (21) 448 354
Air 1,009 948 (14) 1 10 - 2 - 1,007 949
Maritime 465 423 4 2 5 - - - 474 425
Cyber & Intelligence 182 179 - - 22 20 (5) - 199 199
HQ (135) (156) 10 28 - 3 (59) 2 (184) (123)
Operating profit 2,685 2,573 9 33 344 116 (23) (40) 3,015 2,682
Net finance costs (353) (247)
Profit before tax 2,332 2,326
Tax expense (291) (386)
Profit for the year 2,041 1,940
1. Sales is an alternative performance measure defined in the
Alternative performance measures section on page 46. Sales includes both
revenue from the Group's own subsidiaries as well as recognising the strategic
importance in its industry of its equity accounted investments. It is
presented here as our internal measure of segmental performance and
to provide additional information on performance to the user.
2. Underlying EBIT is an alternative performance measure defined in
the Alternative performance measures section on page 46. It provides a measure
of operating profitability, excluding one-off events or adjusting items that
are not considered to be part of the ongoing operational transactions of the
business, to enable management to monitor the performance of recurring
operations over time, and which is comparable across the Group. It is
presented here as our internal measure of segmental performance and
to provide additional information on performance to the user.
3. Net finance costs
2024 2023
£m
£m
Interest income on cash and other financial instruments 116 130
Interest income on finance lease receivables 1 1
Net interest income on post-employment benefit obligations 18 41
Finance income 135 172
Interest expense on loans and other financial instruments (482) (286)
Facility fees (4) (14)
Interest expense on lease liabilities (73) (53)
Net present value expenses on provisions and other payables (13) (9)
Loss on remeasurement of financial instruments at fair value through profit or (6) (267)
loss(1,2)
Foreign exchange gains(2,3) 90 210
Finance costs (488) (419)
Net finance costs (353) (247)
1. Comprises gains and losses on derivative financial instruments, principally
held to manage the Group's exposure to interest rate fluctuations on current
and anticipated external borrowings and exchange rate fluctuations on balances
with the Group's subsidiaries and equity accounted investments.
2. The net gain or loss on remeasurement of financial instruments at fair
value through profit or loss and the net gain or loss on foreign exchange are
presented within finance costs as the gains and losses relate to the same
underlying transactions.
3. Foreign exchange gains reflects exchange rate movements on US
dollar-denominated borrowings and balances with the Group's subsidiaries and
equity accounted investments.
4. Tax expense
The following table reconciles the theoretical income tax expense, using the
UK corporation tax rate, to the reported tax expense. The UK corporation tax
rate increased from 19% to 25% with effect from 1 April 2023. A blended rate
of 23.5% is used in the prior year comparative column below to reflect this
change. The reconciling items represent, besides the impact of tax rate
differentials and changes, non-taxable benefits or non-deductible expenses
arising from differences between the local tax base and the reported financial
statements.
2024 2023
£m
£m
Profit before tax 2,332 2,326
UK corporation tax rate 25.0% 23.5%
Expected income tax expense (583) (547)
Effect of tax rates in foreign jurisdictions, including US state taxes 3 (7)
Expenses not tax effected (12) (19)
Income not subject to tax 162 125
Research and development tax credits 38 22
Adjustments in respect of prior years 72 (24)
Adjustments in respect of equity accounted investments 55 48
Tax rate adjustment - 1
Other (26) 15
Tax expense (291) (386)
5. Earnings per share
Movement in shares for the purpose of calculating earnings per share Ordinary shares millions Treasury shares millions Contingently Outstanding shares for purpose of earnings per share Weighted average share movement in the year millions
millions
returnable
shares
held
in trust millions
At 1 January 2023 3,297 (220) (22) 3,055
Ordinary shares repurchased in the year (58) - - (58) (38)
Net shares issued in the year - 16 2 18 14
At 31 December 2023 3,239 (204) (20) 3,015
Ordinary shares repurchased in the year (44) - - (44) (20)
Net shares issued in the year - 20 5 25 18
At 31 December 2024 3,195 (184) (15) 2,996
2023 Number of shares
2024 Number of shares
millions millions
Outstanding shares for purpose of earnings per share at 1 January 3,015 3,055
Average ordinary shares repurchased in the year (20) (38)
Average ordinary shares issued in the year (net) 18 14
Weighted average shares for the purpose of calculating 3,013 3,031
basic earnings per share at 31 December
Incremental ordinary shares in respect of employee share schemes 40 41
Weighted average shares for the purpose of calculating diluted earnings per 3,053 3,072
share at 31 December
2024 2023
Profit for the year attributable to equity shareholders (£m) 1,956 1,857
Basic earnings per share (pence) 64.9 61.3
Diluted earnings per share (pence) 64.1 60.4
6. Post-employment benefits
Introduction
The majority of the UK and US defined benefit pension schemes are funded by
the Group's subsidiaries and equity accounted investments. The individual
pension schemes' funding requirements are based on actuarial measurement
frameworks set out in their funding policies.
The funding valuations are performed by professionally qualified independent
actuaries and include assumptions which differ from the actuarial assumptions
used for IAS 19 accounting purposes shown on page 38. The purpose of the
funding valuations is to design funding plans which ensure that the schemes
have sufficient funds available to meet future benefit payments.
UK valuations
Funding valuations of the Group's UK defined benefit pension schemes are
performed at least every three years. The most recent triennial funding
valuation for the Main Scheme was carried out as at 31 March 2024. This
valuation was concluded and signed off on 6 February 2025.
The results of the most recent triennial valuation for the Main Scheme are
shown below. This valuation was agreed with the Trustees and certified by the
Scheme Actuary after consultation with the Pensions Regulator in the UK.
Main
Scheme as at
31 March 2024
£bn
Market value of assets 19.2
Present value of liabilities (18.4)
Funding surplus 0.8
Percentage of accrued benefits covered by the assets at the valuation date 104%
The other UK schemes were also in surplus at their most recent triennial
valuations.
The valuations were determined using the following mortality assumptions:
Life expectancy of a male currently aged 65 (years) 86 - 89
Life expectancy of a female currently aged 65 (years) 88 - 90
Life expectancy of a male at age 65, currently aged 45 (years) 88 - 91
Life expectancy of a female at age 65, currently aged 45 (years) 90 - 93
As part of the process of the Main Scheme's 2021 valuation, the Trustees and
the Group agreed to update the methodology to use a cash flow matching
strategy, such that assets are invested with the aim of the expected income
directly matching the expected benefit payments of the Main Scheme. The most
recent triennial valuation at 31 March 2024 has been carried out using the
same principles. The cash flow matching strategy aims to manage risk through a
defined amount of risk buffer assets, which equate to the agreed prudence
margin in the valuation. The risk buffer assets are measured over time to
ensure the Main Scheme is sufficiently funded. The asset portfolio is
currently invested in a selection of bonds designed to match the pension
payments for current pensioners, as well as a mix of growth-seeking assets
aimed to generate returns for the pension payments for future pensioners. Over
time, assets from the return-seeking portfolio will be realised to purchase
additional, lower-risk assets to match the increasing current pensioner
payments.
The valuations for the other schemes use a different method in that discount
rates were directly based on prudent levels of expected returns for the assets
held by the schemes, reflecting the planned investment strategies and maturity
profiles of each scheme. The discount rates are curves which provide a
different rate for each year into the future. Under IAS 19, the discount rate
for accounting purposes is based on third-party AA corporate bond yields. The
inflation assumptions for each of the valuations were derived based on the
difference between the yields on index-linked and fixed-interest long-term
government bonds.
The inflation assumption is a curve which provides a different rate for each
year into the future.
There have been no changes to the contributions or benefits, as set out in the
rules of the schemes, for pension scheme members as a result of the new
funding valuation.
The results of future triennial valuations and associated funding requirements
will be impacted by a number of factors, including the future performance of
investment markets and anticipated members' longevity.
US valuations
The Group's US pension schemes are valued annually, with the latest valuations
performed as at 1 January 2024. The actuarial present value of accumulated
plan benefits is determined by an independent actuary and uses actuarial
assumptions to adjust the accumulated plan benefits earned by participants to
reflect the time value of money and the probability of payment between the
valuation date and the expected date of payment.
Contributions
Under the terms of the trust deeds of the UK schemes, the Group is required to
have a funding plan determined at the conclusion of the triennial funding
valuations.
Equity accounted investments make regular contributions to the schemes in
which they participate in line with the schedule of contributions and are
allocated a share of funding contributions.
In 2024, total employer contributions to the Group's pension schemes were
£407m (2023 £274m), including amounts funded by equity accounted investments
of £22m (2023 £30m), and included approximately £48m (2023 £68m) of
payments associated with the share buyback programme in respect of the Main
Scheme and £156m (2023 £9m) of contributions to the US schemes, the
significant majority of which were to improve the funding position of the US
schemes.
Contributions in 2025 to the Group's pension schemes are expected to be at a
lower level than 2024, primarily reflecting the impact of updated market
conditions on the cost of benefit accrual and the one-off nature of the
majority of the US contributions made in 2024.
IAS 19 accounting
Principal actuarial assumptions
The assumptions used are estimates chosen from a range of possible actuarial
assumptions which, due to the long-term nature of the obligation covered, may
not necessarily occur in practice.
UK US
2024 2023 2022 2024 2023 2022
Financial assumptions
Discount rate - past service (%) 5.5 4.5 4.8 5.5 4.8 5.0
Discount rate - future service (%) 5.6 4.6 4.8 5.5 4.8 5.0
Retail Prices Index (RPI) inflation (%) 2.9 2.8 3.0 n/a n/a n/a
Rate of increase in salaries (%) 2.9 2.8 3.0 2.8 n/a n/a
Rate of increase in deferred pensions (CPI/RPI) (%) 2.3/2.9 2.1/2.8 2.3/3.0 n/a n/a n/a
Rate of increase in pensions in payment (%) 1.7 - 3.6 1.6 - 3.6 1.7 - 3.6 n/a n/a n/a
Demographic assumptions
Life expectancy of a male currently aged 65 (years) 85 - 88 85 - 89 86 - 89 88 88 87
Life expectancy of a female currently aged 65 (years) 88 - 91 88 - 89 88 - 90 89 89 89
Life expectancy of a male currently aged 45 (years) 86 - 89 86 - 89 87 - 90 87 87 87
Life expectancy of a female currently aged 45 (years) 89 - 92 89 - 90 89 - 91 89 89 89
Life expectancy
For its UK pension schemes, the Group has used the Self-Administered Pension
Schemes S3 mortality tables based on year of birth (as published by the
Institute and Faculties of Actuaries) for both pensioner and non-pensioner
members, in conjunction with the results of an investigation into the actual
mortality experience of scheme members and information on the demographic
profile of the scheme's membership.
In addition, to allow for future improvements in longevity, the Continuous
Mortality Investigation 2023 tables (published by the Institute of Actuaries)
have been used (in 2023, the Continuous Mortality Investigation 2022 tables
were used), with an assumed long-term rate of mortality improvements of 1.0%
per annum (2023 1.0%), an initial rate adjustment parameter ('A') of 0.2%
(2023 0.2%), a smoothing parameter ('Sk') of 7 (2023 7) and the following
weighting ('W') parameters: W2023 35%, W2022 35% (2023 35%), W2021 0% (2023
0%), W2020 0% (2023 0%).
For the majority of the US schemes, the mortality tables used at 31 December
2024 are a blend of the fully generational PRI-2012 White Collar table and the
PRI-2012 Blue Collar table, both projected using November 2024 Aon Endemic
Projection Scale MP-2021.
Summary of movements in post-employment benefit obligations
UK defined benefit pension schemes US and other pension schemes US healthcare schemes Kingdom of Saudi Arabia end of service Total
£m
£m
£m
£m
benefit
£m
Surplus/(deficit) at 1 January 2024 649 (307) 55 (168) 229
Actual return on assets excluding amounts included in net
finance costs
(1,628) (94) (4) - (1,726)
Decrease in liabilities due to changes in financial assumptions 1,745 179 4 14 1,942
Decrease/(increase) in liabilities due to changes in demographic assumptions 46 (19) 12 1 40
Experience gains/(losses) 95 46 2 (5) 138
Contributions in excess of/(below) service cost 138 114 (2) (11) 239
Settlements - 13 - - 13
Business acquisitions - (147) - - (147)
Net interest income/(expense) 58 (18) 4 (8) 36
Foreign exchange adjustments - 3 - (1) 2
Movement in withholding tax on surpluses(1) 2 - - - 2
Surplus/(deficit) at 31 December 2024 1,105 (230) 71 (178) 768
1. This includes £113m from the increase in the surplus offset by £115m from
the change in withholding tax rate from 35% to 25%.
Virgin Media case
As noted in the Annual Report 2023, the Group is aware of the 'Virgin Media v
NTL Pension Trustees Ltd and others' case and continues to monitor
developments in this area of the law with the help of its advisors. Following
the Court of Appeal's decision to uphold the ruling of the High Court against
Virgin Media, the Group has been considering the extent to which the defined
benefit schemes are exposed to the outcomes of this case and any resulting
change in pension obligations, if any, is not anticipated to be material to
the Company. The Group is therefore satisfied that it remains appropriate to
make no adjustment to the financial statements on this basis but will keep
the matter under review.
SMS business
In February 2024, the Group completed the acquisition of the US-based Ball
Aerospace business from Ball corporation and formed our new SMS business.
This transaction included a funded defined benefit pension scheme, now
referred to as the SMS Plan, which resulted in the recognition of a net
defined benefit obligation on acquisition of £147m.
Settlement gain
In June 2024, $145m (£113m) of the US defined benefit obligation liabilities
were settled via payment of a lump sum to participants. The premium of $128m
(£100m) created a one-off accounting gain of $17m (£13m). This gain has been
recognised in the Consolidated income statement, and as an adjusting item.
Surplus recognition
A number of schemes are in an accounting surplus position. The surpluses have
been recognised on the basis that the future economic benefits are
unconditionally available to the Group, which is assumed to be via a refund.
The surplus has been recognised net of withholding tax of 25% at 31 December
2024 (2023 35%) based on the enacted legislation at that date. This tax would
be levied prior to the future refunding of any surplus and therefore the
surplus has been presented on a net basis as this is not deemed to be an
income tax of the Group.
Sensitivity analysis
The sensitivity information has been derived using scenario analysis from the
actuarial assumptions as at 31 December 2024 and keeping all other assumptions
as set out above.
Financial assumptions
The estimated impact of changes in the discount rate and inflation assumptions
on the defined benefit pension obligation, together with the estimated impact
on scheme assets, is shown in the table below. The sensitivity analysis on the
defined benefit obligation is measured on an IAS 19 accounting basis.
Decrease/(increase) (Decrease)/increase
in pension obligation(1) in scheme assets(1)
£bn £bn
Discount rate:
0.5 percentage point increase/decrease 1.0/(1.1) (1.0)/1.1
1.0 percentage point increase/decrease 1.9/(2.3) (2.0)/2.3
2.0 percentage point increase/decrease 3.5/(5.2) (3.6)/5.0
(Increase)/decrease Increase/(decrease)
in pension obligation(1) in scheme assets(1)
£bn £bn
Inflation:
0.1 percentage point increase/decrease (0.1)/0.1 0.1/(0.1)
0.5 percentage point increase/decrease (0.5)/0.5 0.6/(0.5)
1.0 percentage point increase/decrease (1.0)/1.0 1.2/(1.0)
Demographic assumptions
Changes in the life expectancy assumption, including the benefit of longevity
swap arrangements, would have the following effect on the total net IAS 19
surplus:
(Decrease)/increase
in net surplus(1)
£bn
Life expectancy:
One-year increase/decrease (0.6)/0.6
1. Before deduction of withholding tax.
7. Capital distributions
Equity dividends
2024 2023
£m
£m
Final 18.5p dividend per ordinary share paid in the year (2023 16.6p) 562 508
Interim 12.4p dividend per ordinary share paid in the year (2023 11.5p) 375 349
937 857
After the balance sheet date, the directors proposed a final dividend of 20.6p
per ordinary share. The dividend proposed amounts to approximately £622m,
although the final payment is likely to be lower as a result of the impact of
share repurchases. Subject to shareholder approval, the dividend will be paid
on 2 June 2025 to shareholders registered on 22 April 2025. The provisional
ex-dividend date is 17 April 2025. The payment of this dividend will not have
any tax expense consequences for the Group.
Purchase of own shares
In July 2022, the directors approved a share buyback programme of up to
£1.5bn (the 2022 share buyback programme). The 2022 share buyback programme
was completed on 24 July 2024. In total, 163,907,003 ordinary shares were
repurchased under the 2022 share buyback programme for a total cost (including
transaction costs) of £1,508m.
In August 2023, the directors approved a further share buyback programme of up
to £1.5bn (the 2023 share buyback programme). The 2023 share buyback
programme commenced on 25 July 2024. The 2023 share buyback programme is
expected to complete within three years of its commencement.
In the year ended 31 December 2023, 58,689,756 ordinary shares were
repurchased under the 2022 share buyback programme for a total cost (including
transaction costs) of £558m. In the year ended 31 December 2024, 22,220,182
ordinary shares were repurchased under the 2022 share buyback programme at a
total cost (including transaction costs) of £287m. A further 20,901,154
ordinary shares were repurchased under the 2023 share buyback programme at
a total cost (including transaction costs) of £264m.
All ordinary shares acquired have been subsequently cancelled, with the
nominal value of ordinary shares cancelled deducted from share capital against
the capital redemption reserve.
As part of the 2022 and 2023 buyback programmes, it was agreed that should a
better alternative use for the Company's cash reserves be identified,
the share buyback programmes would be ceased and the money instead used for
the alternative purpose. Therefore, when the Company issued a mandate to the
brokers to purchase shares on its behalf, the mandate was structured such that
it could be revoked at any point. As such, no financial liability has been
recognised for shares not yet purchased under the programmes at 31 December.
8. Fair value measurement
Fair value of financial instruments
Certain of the Group's financial instruments are held at fair value.
The fair value of a financial instrument is the price that would be received
to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the balance sheet date.
The fair values of financial instruments held at fair value have been
determined based on available market information at the balance sheet date and
the valuation methodologies listed below:
- the fair values of forward foreign exchange contracts are calculated
by discounting the contracted forward values and translating at the
appropriate balance sheet rates;
- the fair values of both interest rate and cross-currency swaps are
calculated by discounting expected future principal and interest cash flows
and translating at the appropriate balance sheet rates; and
- the fair values of money market funds are calculated by multiplying
the net asset value per share by the investment held at the balance sheet
date.
The derivative fair values are based on reputable third party forecast data
and then adjusted for credit risk, including the Group's own credit risk and
market risk. Due to the variability of the valuation factors, the fair values
presented at 31 December may not be indicative of the amounts the Group will
realise in the future.
Fair value hierarchy
The fair value measurement hierarchy is as follows:
- Level 1 - Quoted prices (unadjusted) in active markets for identical
assets or liabilities;
- Level 2 - Inputs other than quoted prices included within level 1 that
are observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices); and
- Level 3 - Inputs for the asset or liability that are not based on
observable market data (i.e. unobservable inputs).
Carrying amounts and fair values of certain financial instruments
2024 2023
Carrying amount Fair Carrying amount Fair
£m
value
£m
value
£m
£m
Financial instruments measured at fair value:
Non-current
Other investments at fair value through other comprehensive income 83 83 84 84
Other financial assets 265 265 227 227
Contingent consideration arising from business combinations (65) (65) - -
Other financial liabilities (193) (193) (227) (227)
Current
Other financial assets 212 212 205 205
Money market funds 1,227 1,227 1,375 1,375
Contingent consideration arising from business combinations (6) (6) - -
Other financial liabilities (264) (264) (295) (295)
Financial instruments not measured at fair value:
Non-current
Loans (7,713) (7,261) (4,432) (4,045)
Current
Loans (699) (695) (679) (672)
All of the financial assets and liabilities measured at fair value are
classified as level 2 using the fair value hierarchy, except for money market
funds, which are classified as level 1; other investments, which are at a
combination of level 1 and level 3; and the contingent consideration liability
which is measured at level 3. The fair value of the contingent consideration
has been valued based on the discounted expected cash flows. The total value
of investments classified as level 3 is immaterial. There were no transfers
between levels during the period. Alternative valuation techniques would not
materially change the valuations presented.
Financial assets and liabilities in the Group's Consolidated balance sheet are
either held at fair value or at amortised cost. With the exception of loans,
the carrying value of financial instruments measured at amortised cost
approximates their fair value. For the bonds included within loans the fair
value of loans presented in the table above is derived from market prices as
of 31 December, classified as level 1 using the fair value hierarchy. The fair
value of the private placement included within loans has been valued based on
the interest yield on an equivalent observable bond, applied to the private
placement cash flows, and has been classified as level 2 using the fair value
hierarchy.
9. Related party transactions
The Group has a related party relationship with its equity accounted
investments and pension schemes. Transactions with related parties occur in
the normal course of business, are priced on an arm's-length basis and settled
on normal trade terms. The more significant transactions are disclosed below:
Year ended Year ended
31 December
31 December
2024
2023
£m
£m
Sales to related parties 1,706 1,686
Purchases from related parties 512 658
Management recharges 3 8
31 December 31 December
2024
2023
£m
£m
Amounts owed by related parties 54 79
Amounts owed to related parties(1) 2,192 1,746
1. At 31 December 2024, £1,975m (2023 £1,509m) was owed by BAE Systems plc
and £217m (2023 £237m) by other Group subsidiaries.
10. Acquisitions
Businesses acquired during 2024
Ball Aerospace
On 16 February 2024, the Group acquired 100% of the share capital of the Ball
Aerospace division (now BAE Systems Space & Mission Systems) for
consideration of $5.5bn (£4.4bn), of which c.$0.8bn is expected to be
recoverable under a tax benefit associated with the acquisition. Upon
completion, the Group drew down $4.0bn (£3.2bn) under a bridge loan facility
and paid $1.5bn (£1.2bn) in cash from the Group's existing cash resources,
in settlement of the transaction. In March 2024, the Group raised $4.8bn
(£3.8bn) by way of bond issuance and subsequently repaid the bridge loan
facility.
Space & Mission Systems is a leading provider of spacecraft, mission
payloads, optical systems and antenna systems. Headquartered in Colorado, with
more than 5,200 employees, it has existing customer relationships among the
Intelligence Community, US Department of Defense and civilian space agencies.
It is well positioned across several markets: military and civil space, C4ISR,
and missile and munitions. The space market exposure extends across positions
in defence, intelligence and scientific missions. The Tactical Solutions
business is well positioned to capture expected increases in demand for
missiles and munitions.
The acquisition enhances our portfolio of advanced defence electronic
solutions and is reported as part of our Electronic Systems segment.
Kirintec
On 3 September 2024, the Group acquired 100% of the share capital of Kirintec
Ltd for total consideration of £282m, including £30m of contingent
consideration. Kirintec undertakes cyber and electromagnetic activities
alongside the production of counter-improvised explosive devices and
counter-unmanned aerial vehicle products for military customers. The
acquisition of Kirintec enhances our electronic warfare capabilities and forms
part of the Digital Intelligence business within the Cyber & Intelligence
segment.
Other acquisitions
On 31 January 2024, the Group acquired 100% of the share capital of Malloy
Aeronautics Ltd and, on 2 May 2024, the Group acquired 100% of the share
capital of Callen-Lenz Associates Ltd. Both entities operate in the UAS
technology market and form part of FalconWorks(®), the research and
development business within the Air segment.
Total consideration of £292m includes £61m of contingent consideration. The
value of contingent consideration is dependent on a number of factors,
including the financial and operational performance of the acquired
businesses.
Acquisition consideration and provisional fair value of net assets acquired
Ball Aerospace(1) Kirintec(2) Total
£m
£m Other(1) £m
£m
Intangible assets 2,270 127 104 2,501
Property, plant and equipment 690 3 1 694
Right-of-use assets 77 - - 77
Receivables 310 5 13 328
Deferred tax assets 44 - - 44
Inventories 17 10 4 31
Lease liabilities (61) - - (61)
Post-employment benefit obligations (147) - - (147)
Contract liabilities (186) - (17) (203)
Payables (164) (9) (10) (183)
Deferred tax liabilities - (17) (26) (43)
Provisions (12) - - (12)
Current tax - 2 - 2
Cash and cash equivalents 7 40 39 86
Net identifiable assets acquired 2,845 161 108 3,114
Goodwill 1,507 121 184 1,812
Net assets acquired 4,352 282 292 4,926
Satisfied by:
Cash consideration 4,352 252 231 4,835
Contingent consideration - 30 61 91
Total consideration 4,352 282 292 4,926
1. Final fair values.
2. Provisional fair values being the best estimate currently available.
The net outflows of cash in respect of the acquisitions are as follows:
Ball Kirintec Total
£m
Aerospace Other £m
£m £m
Cash consideration 4,352 252 231 4,835
Contingent consideration paid in the year in respect of acquisitions - - 27 27
Less: Cash and cash equivalents acquired (7) (40) (39) (86)
Net cash outflow in respect of acquisitions 4,345 212 219 4,776
The goodwill recognised is primarily attributable to expected synergies from
the products and services being provided and the enhancement of capabilities
in new and emerging areas of technology. Goodwill of £1,507m is expected to
be deductible for tax purposes. No impairment losses have been recognised in
respect of goodwill in the year ended 31 December 2024.
The acquisitions contributed £1,537m to the Group's revenue and £195m to the
Group's underlying EBIT(1) between the date of acquisition and 31 December
2024. If the acquisitions had completed on 1 January 2024, the Group's revenue
would have been £26,588m and the Group's underlying EBIT(1) would have been
£3,050m for the year ended 31 December 2024.
Contractual cash flows on trade, other and contract receivables are recognised
net of expected credit losses. The amount of gross receivables acquired was
£340m. Management's best estimate at the acquisition date of contractual
cash flows not expected to be collected was £1m in relation to trade
receivables and £11m related to other receivables in relation to Ball
Aerospace. The fair value of receivables at acquisition date is shown in the
table above.
No contingent liabilities have been recognised or require disclosure in
respect of these acquisitions.
Acquisition-related costs of £51m have been included as an adjusting item in
operating costs in the consolidated income statement for the year ended 31
December 2024.
1. Underlying EBIT is an alternative performance measure defined in
the Alternative performance measures section on page 46. It is presented here
as our internal measure of segmental performance, to provide additional
information on performance to the user.
Businesses acquired during 2023
Eurostep acquisition
On 31 October 2023, the Group acquired 100% of the share capital of Eurostep,
a secure data sharing company headquartered in Sweden, for consideration of
£9m. The company forms part of the Cyber & Intelligence segment, within
the Digital Intelligence business.
The results and financial position of the acquired businesses have been
consolidated from the date of acquisition.
11. Disposals
Business disposals during 2024
On 31 October 2024, the Group completed the sale of BAE Systems Imaging Solutions Inc., previously reported within the Electronic Systems segment, and, on 31 December 2024, the Group completed the sale of its forge facilities and related services which formed the Anniston business within the Platforms & Services segment. Total net cash proceeds from the disposals were £8m and, after accounting for disposal costs and cumulative currency translation, the loss on the disposals before tax totalled £4m.
Disposal of interests in equity accounted investments in 2024
Air Astana
On 12 January 2024, Air Astana announced its intention to proceed with a joint initial public offering (IPO) on the London Stock Exchange, the Astana International Exchange in Kazakhstan, and the Kazakhstan Stock Exchange. On 9 February 2024, the IPO was launched. As a result of the IPO, the total shareholding held by BAE Systems in Air Astana reduced from 49% to 17%. The Group's 49% shareholding in Air Astana had a carrying value of £84m at 31 December 2023. The profit on disposal of the share of the Group's equity accounted investment is shown below. The Group has continued to equity account for the remaining investment within the HQ segment.
FNSS
On 10 December 2024, the Group sold its 49% shareholding in FNSS Savunma
Sistemleri A.S. FNSS was included in the Platforms & Services segment. The
profit recognised on disposal of the Group's equity accounted investment is
shown below:
Air Astana Total
£m
FNSS £m
£m
Total cash proceeds on divestment of interest in equity accounted investment 166 20 186
Less: Carrying amount of share of equity accounted investment disposed (56) - (56)
Profit on disposal before tax and reclassification of foreign currency 110 20 130
translation reserve
Reclassification of foreign currency reserve (35) 3 (32)
Profit on disposal before tax 75 23 98
Business disposals during 2023
There were no business disposals in 2023. The Group incurred cash outflows of £8m in 2023 relating to the 2022 disposal of the financial crime detection business from Digital Intelligence, which had been fully provided for in 2022.
12. Contingent liabilities
The Group believes that the likelihood of any significant liability arising in
respect of its guarantees and performance bond arrangements, and legal
actions and claims not already provided for, is remote.
13. Events after the reporting period
There were no events after the reporting period which would materially impact
the balances reported in this Report
Alternative performance measures
We monitor the underlying financial performance of the Group using alternative
performance measures (APMs). These measures are not defined in IFRS and,
therefore, are considered to be non-GAAP (Generally Accepted Accounting
Principles) measures. Accordingly, the relevant IFRS measures are also
presented where appropriate.
The Group uses these APMs as a mechanism to support year-on-year business
performance and cash generation comparisons, and to enhance management's
planning and decision-making on the allocation of resources. The APMs are also
used to provide information in line with the expectations of investors, and
when setting guidance on expected future business performance. The Group
presents these measures to the users to enhance their understanding of how the
business has performed within the year, and does not consider them to be more
important than, or superior to, their equivalent IFRS measures. As each APM is
defined by the Group, they may not be directly comparable with
equivalently-named measures in other companies.
Purpose, definitions, breakdowns and reconciliations to the relevant statutory
measure, where appropriate, are included below.
Sales
Purpose
Enables management to monitor the revenue of both the Group's own subsidiaries
as well as recognising the strategic importance in its industry of its equity
accounted investments, to ensure programme performance is understood and in
line with expectations.
Definition
Revenue plus the Group's share of revenue of equity accounted investments,
excluding subsidiaries' revenue from equity accounted investments.
Reconciliation of sales to revenue 2024 2023
£m
£m
Sales 28,335 25,284
Deduct: Group's share of revenue of equity accounted investments (3,729) (3,892)
Add: Subsidiaries' revenue from equity accounted investments 1,706 1,686
Revenue 26,312 23,078
Underlying EBIT
Purpose
Provides a measure of operating profitability, excluding one-off events or
adjusting items that are not considered to be part of the ongoing operational
transactions of the business, to enable management to monitor the performance
of recurring operations over time, and which is comparable across the Group.
Definition
Operating profit excluding amortisation of programme, customer-related and
other intangible assets, impairment of equity accounted investments and
intangible assets, net finance costs and tax expense of equity accounted
investments (EBIT) and adjusting items. The exclusion of amortisation of
acquisition-related intangible assets is to allow consistent comparability
internally and externally between our businesses, regardless of whether they
have been grown organically or via acquisition.
Reconciliation of underlying EBIT to operating profit 2024 2023
£m
£m
Underlying EBIT 3,015 2,682
Adjusting items 23 40
Amortisation of programme, customer-related and other intangible assets and (344) (116)
impairment of equity accounted investments and intangible assets
Net finance income of equity accounted investments 59 14
Tax expense of equity accounted investments (68) (47)
Operating profit 2,685 2,573
Return on sales
Purpose
Provides a measure of operating profitability, excluding one-off events, to
enable management to monitor the performance of recurring operations over
time, and which is comparable across the Group.
Definition
Underlying EBIT as a percentage of sales. Also referred to as margin.
2024 2023
£m
£m
Sales 28,335 25,284
Underlying EBIT 3,015 2,682
Return on sales 10.6% 10.6%
Underlying earnings per share (EPS)
Purpose
Provides a measure of the Group's underlying performance, which enables
management to compare the profitability of the Group's recurring operations
over time.
Definition
Profit for the year attributable to shareholders, excluding post-tax impact of
amortisation of programme, customer-related and other intangible assets,
impairment of equity accounted investments and intangible assets, non-cash
finance movements on pensions and financial derivatives, and adjusting items
attributable to shareholders, being underlying earnings, divided by number of
shares as defined for Basic EPS in accordance with IAS 33 Earnings per Share.
Reconciliation of underlying earnings to profit attributable to equity 2024 2023
shareholders
£m
£m
Underlying earnings for the year attributable to equity shareholders 2,065 1,916
Adjustments:
Adjusting items 23 40
Amortisation of programme, customer-related and other intangible assets and (344) (116)
impairment of equity accounted investments and intangible assets
Net interest income on post-employment benefit obligations 20 44
Fair value and foreign exchange adjustments on financial instruments and 82 (66)
investments
Tax impact of adjustments 110 39
Profit for the year attributable to equity shareholders 1,956 1,857
Reconciliation of underlying EBIT to underlying earnings 2024 2023
£m
£m
Underlying EBIT 3,015 2,682
Group and equity accounted investments underlying net finance costs (see (396) (211)
reconciliation on page 48)
Underlying tax expense (see reconciliation on page 49) (469) (472)
Underlying profit for the year 2,150 1,999
Deduct: Non-controlling interests (85) (83)
Underlying earnings for the year attributable to equity shareholders 2,065 1,916
Weighted average number of ordinary shares used in calculating basic EPS 3,013 3,031
Underlying EPS - basic 68.5p 63.2p
Weighted average number of ordinary shares used in calculating diluted EPS 3,053 3,072
Underlying EPS - diluted 67.6p 62.4p
Adjusting items
Purpose
To adjust items of financial performance from the reported underlying results
which have been determined by management as being material by their size or
incidence and not relevant to an understanding of the Group's underlying
business performance.
Definition
Adjusting items include profit or loss on business transactions, the impact of
substantively enacted tax rate changes, and costs incurred which are one-off
in nature, for example, non-routine costs or income relating to
post-retirement benefit schemes and other items which management has
determined as not being relevant to an understanding of the Group's underlying
business performance.
2024 2023
£m
£m
Net profit on business disposals 94 -
Gain related to settlements on the pension schemes 13 60
Acquisition and integration-related costs (72) (20)
Other (12) -
Adjusting items 23 40
Underlying net finance costs
Purpose
Provides a measure of net finance costs associated with the operational
borrowings of the Group that is comparable over time.
Definition
Net finance costs for the Group and its share of equity accounted investments,
excluding net interest income/expense on post-employment benefit obligations
and fair value and foreign exchange adjustments on financial instruments.
2024 2023
£m
£m
Net finance costs - Group (353) (247)
(Deduct)/add back:
Net interest income on post-employment benefit obligations (18) (41)
Fair value and foreign exchange adjustments on financial instruments (84) 57
Underlying net finance costs - Group (455) (231)
Net finance income - equity accounted investments 59 14
(Deduct)/add back:
Net interest income on post-employment benefit obligations (2) (3)
Fair value and foreign exchange adjustments on financial instruments 2 9
Underlying net finance income - equity accounted investments 59 20
Total of Group and equity accounted investments' underlying net finance costs (396) (211)
Underlying effective tax rate
Purpose
Provides a measure of tax expense for the Group, excluding one-off items, that
is comparable over time.
Definition
Tax expense for the Group and its share of equity accounted investments,
excluding any one-off tax benefit/expense related to adjusting items and other
items excluded from underlying EBIT, as a percentage of underlying profit
before tax.
Calculation of the underlying effective tax rate
2024 2023
£m
£m
Underlying EBIT (see reconciliation on page 46) 3,015 2,682
Group and equity accounted investments' underlying net finance costs (see (396) (211)
reconciliation on page 48)
Underlying profit before tax 2,619 2,471
Group tax expense (291) (386)
Tax expense of equity accounted investments (68) (47)
Exclude:
Tax (expense)/income in respect of taxable adjusting items (33) 11
Tax expense in respect of other items excluded from underlying profit (77) (49)
Tax rate adjustment - (1)
Underlying tax expense (469) (472)
Underlying effective tax rate 18% 19%
Free cash flow
Purpose
Provides a measure of cash generated by the Group's operations after servicing
debt and tax obligations, available for use in line with the Group's capital
allocation policy.
Definition
Net cash flow from operating activities, including dividends received from
equity accounted investments, interest paid, net of interest received, net
capital expenditure and financial investments, and principal elements of lease
payments and receipts.
Reconciliation from free cash flow to net cash flow from operating activities
2024 2023
£m
£m
Free cash flow 2,505 2,593
Add back:
Interest paid, net of interest received 413 230
Net capital expenditure and financial investment 987 789
Principal element of lease payments and receipts 178 282
Deduct:
Dividends received from equity accounted investments (158) (134)
Net cash flow from operating activities 3,925 3,760
Operating business cash flow
Purpose
Provides a measure of cash generated by the Group's operations, which is
comparable across the Group, to service debt and meet tax obligations, and in
turn available for use in line with the Group's capital allocation policy.
Definition
Net cash flow from operating activities excluding tax paid net of research and
development expenditure credits received and including net capital expenditure
(net of proceeds from funding of assets) and lease principal amounts,
financial investment and dividends from equity accounted investments.
Reconciliation from operating business cash flow to net cash flow from 2024 2023
operating activities
£m
£m
Operating business cash flow 3,093 3,218
Add back:
Net capital expenditure and financial investment 987 789
Principal element of lease payments and receipts 178 282
Deduct:
Dividends received from equity accounted investments (158) (134)
Tax paid net of R&D expenditure credits received (175) (395)
Net cash flow from operating activities 3,925 3,760
Reconciliation of operating business cash flow to net cash flow from operating
activities by reporting segment
Operating business cash flow Deduct: Dividends received from equity accounted investments Add back: Net capital expenditure, lease principal amounts and financial Net cash flow from operating activities
investment
2024 2023 2024 2023 2024 2023 2024 2023
£m
£m
£m
£m
£m
£m
£m
£m
Electronic Systems 801 811 (11) (8) 254 158 1,044 961
Platforms & Services 732 426 (1) - 245 198 976 624
Air 1,243 1,669 (138) (112) 254 251 1,359 1,808
Maritime 436 291 (8) (7) 306 345 734 629
Cyber & Intelligence 139 204 - - 55 57 194 261
HQ (258) (183) - (7) 51 62 (207) (128)
3,093 3,218 (158) (134) 1,165 1,071 4,100 4,155
Tax paid net of R&D expenditure credits received (175) (395)
Net cash flow from operating activities 3,925 3,760
Net debt (excluding lease liabilities)
Purpose
Allows management to monitor indebtedness of the Group, to ensure the Group's
capital structure is appropriate and capital allocation policy decisions are
suitably informed.
Definition
Cash and cash equivalents, less loans (including debt-related derivative
financial instruments). Net debt does not include lease liabilities.
Components of net debt 2024 2023
£m
£m
Cash and cash equivalents 3,378 4,067
Debt-related derivative financial instruments (net) 89 22
Loans - non-current (7,713) (4,432)
Loans - current (699) (679)
Net debt (excluding lease liabilities) (4,945) (1,022)
Order intake
Purpose
Allows management to monitor the order intake of the Group together with its
equity accounted investments, providing insight into future years' sales
performance.
Definition
Funded orders received from customers including the Group's share of order
intake of equity accounted investments.
2024 2023
£bn
£bn
Order intake 33.7 37.7
Order backlog
Purpose
Supports future years' sales performance of the Group together with its equity
accounted investments.
Definition
Funded and unfunded unexecuted customer orders including the Group's share of
order backlog of equity accounted investments. Unfunded orders include the
elements of US multi-year contracts for which funding has not been authorised
by the customer.
Reconciliation of order backlog, as defined by the Group, to order book(1) 2024 2023
£bn
£bn
Order backlog, as defined by the Group 77.8 69.8
Deduct:
Unfunded order backlog (5.3) (2.3)
Share of order backlog of equity accounted investments (16.6) (13.5)
Add back: Order backlog in respect of orders from equity accounted investments 4.5 4.0
Order book(1) 60.4 58.0
1. Order book represents the transaction price allocated to
unsatisfied and partially satisfied performance obligations as defined by IFRS
15 Revenue from Contracts with Customers.
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