Investment Case

At BAE Systems, we provide some of the world’s most advanced technology defence, aerospace and security solutions.

BAE Systems has strong, established positions supplying defence equipment, electronics and services, and cyber, intelligence and security solutions for governments. We also have a growing position in adjacent commercial markets, including avionics and cyber security.

2015 Sales by domain

Identifying opportunities in our markets to create value

We create value for our shareholders by identifying opportunities with customers in our principal markets and increasingly in international markets.

BAE Systems has a diverse portfolio, broadly balanced between an enduring services and support business, long-term platforms programmes, electronic systems, and activities in cyber and intelligence.

We report through our five principle reporting segments.

2015 Sales by destination

Alphabet Percentage
A 36
B 23
C 21
D 3
E 17
  • A - US
  • B - UK
  • C - Saudi Arabia
  • D - Australia
  • E - Others

Clear strategic framework to deliver our vision and mission

Our strategy sets out five key longer-term areas of focus to help us achieve our vision. Maintaining and growing our defence businesses remains a core part of our strategy. We also continue to pursue growth in adjacent markets, including cyber security and commercial avionics.

We will continue to support and develop our people and enhance competitiveness to drive success.

Vision

Our vision is to be the premier international defence, aerospace and security company.

Mission

Our mission is to safeguard and enhance our customers’ vital interests and deliver sustainable growth in shareholder value.

Strategy
  • Maintain and grow our defence businesses
  • Continue to grow our business in adjacent markets
  • Develop and expand our international business
  • Inspire and develop our people to drive success
  • Enhance overall financial performance and competitive positions
Strategic objectives
Continuously improve efficiency and competitiveness Continue to drive value from our defence platforms and services Accelerate the growth of our cyber, intelligence and security business Continue to win new international orders Continue to grow our electronic systems business Leverage our technology and engineering capabilities
Values

Our values are Trusted, Innovative and Bold.

Successfully managed portfolio

In November 1999, BAE Systems was formed with the merger between British Aerospace and Marconi Electronic Systems.

Key Acquisitions and Disposals

Acquisitions

Disposals

stratsec.net PTY Ltd

AUD $24m

January 2011

L-1 Intelligence Services Group

$297m

February 2011

ETI/AS

DKK 1.185bn

March 2011

Fairchild Imaging, Inc

$86m

April 2011

Armor Holdings Inc

$4.5bn

July 2007

Surveillance and Attack

$231m

February 2008

MTC

$375m (£188m)

June 2008

Tenix Defence Holdings Pty

A$697m (£328m)

June 2008

Detica

£543m

September 2008

BVT Surface Fleet Ltd (45%)

£346m

October 2009

Atlantic Marine Holding Co

$352m

July 2010

OASYS

$25m

October 2010

LM Flight & Engine Controls

$510m

September 2000

LM Aerospace Electronic Systems

$1.67bn

November 2000

Corbett Technologies

£9m

November 2002

Watkins Johnson Group

£38m

January 2000

Condor Pacific Industries

£40m

December 2002

Mevatec Corporation

£52m

March 2003

Advanced Power Technologies Inc

£18m

March 2003

Piper Group

£3m

April 2003

Alvis (29%)

£73m

September 2003

STI Government Systems

$26m (£15m)

May 2004

Boeing Commercial Electronics

$66m (£36m)

August 2004

Practical Imagineering Inc

$9m (£5m)

August 2004

Alvis plc (71%)

£268m

August 2004

Aerosystems International (50%) (1985 – 50%)

£15m

August 2004

DigitalNet Holdings Inc

$520m (£282m)

October 2004

Alphatec Inc

$88m (£48m)

November 2004

Integrated System Technologies Ltd

£117m

April 2005

United Defense Industries Inc

£2,205m

June 2005

Safariland LLC

$124m

July 2012

BAE Systems Safety Products Inc.

$32m

March 2012

Regional Aircraft

$187m

July 2011

Saab AB

SEK 1,553m

June 2011

SAAB - 10.3%

SEK1, 066m

May 2010

Surveillance and Attack

$231m

February 2008

Inertial Products

$140m

December 2007

Customer Training Centre

£6m

December 2007

XPS - 50%

£47m

March 2007

Selex - 25%

£24m

March 2007

XHRS - 50%

£10m

January 2007

Airbus SAS

€2.75bn

October 2006

Atlas Elekronik

€149m

August 2006

Aerostructures

£80m

March 2006

Thomson Marconi Sonar - 49.9% holding

€85m

September 2001

LH Systems - Joint Venture - 50% interest

$15m

June 2001

Flight Simulation and Training

$75m

April 2001

BAE Systems Canada Inc - 54% interest Canadian Dollars

$310m

April 2001

Avionics Power & Controls Systems

£60m

December 2000

Actuation Systems Inc

$87m

March 2000

This is not an exhaustive list. This reflects the material acquisitions and disposals by BAE Systems plc from 2000.

Source: Annual Report and Accounts, and RNS

A clear capital allocation policy

We aim to deliver sustainable value for our shareholders through our capital allocation policy by:

Pension funding
Organic investment
Dividends
Return of capital
when appropriate & balance sheet allows ; must deliver > WACC
M&A

Balance sheet management to maintain investment grade rating and ensure operating flexibility

Our business is enabled by our outstanding resources

We:

  • have 82,500 employees worldwide (as at 31 Dec 2015)
  • have a diverse range of talented people
  • invest in education and training for our existing workforce
  • work with education sectors to help shape the workforce of the future

We:

  • focus on technology innovation and engineering excellence
  • invest in next-generation research and technology programmes to improve the manufacturing and service of products, generating substantial intellectual property
  • spent £1,263m (2014 £1,343m) in 2015 on R&D, of which £168m (2014 £137m) was funded by the Group

We:

  • have comprehensive project management skills and processes
  • have a Lifecycle Management process that promotes the application of best practice programme execution

Our policies and procedures require that we:

  • work with suppliers who share our values and embrace our standards
  • set clear expectations for all suppliers
  • assess supplier performance and compliance with local legislation
  • work only with approved advisers

Supported by strong government processes and responsible trading principals

With a focus on the sider impacts of our business

Safety
To improve safety standards, we focus on raising awareness of our employees’ role in identifying, managing and reducing safety risks.
Diversity
We are committed to creating an inclusive workplace where a diverse range of talented people can work together.
Resource efficiency
We proactively manage the impact of our operations on the environment, with targets for the efficient use of resources set, and monitored, locally.
Community investment
We invest in the communities in which we operate through local recruitment, using local suppliers and supporting local charities.