BAE-annual-report-2014

Strategic Report
OBJECTIVE 2014 PERFORMANCE REFERENCE
5. ELECTRONIC
SYSTEMS
Be agile, sustain
revenues and deliver
strong bottom line
performance
Electronic Systems outperformed its major competitors by delivering a 3% increase
in like-for-like sales 1 , with an improved margin of 15.4% (2013 14.0%). The business
achieved important contract wins in defence markets and, in the high-growth
commercial aircraft electronics market, Electronic Systems strengthened its
positions across major aircraft platforms, with wins on Boeing contracts, including
the 777X programme.
P28
6. CYBER
& INTELLIGENCE
Enhance and grow
our positions in cyber,
intelligence and
security
Whilst the Intelligence & Security business continued to face challenging market
conditions, with budget pressures impacting its US government customers, order
backlog 1,2 increased by 7%. In September, Intelligence & Security acquired Signal
Innovations Group, a leading provider of imaging technologies and analytics to the
US intelligence community. Applied Intelligence delivered organic sales growth of
10% and order book grew by a further 37% following a 60% increase in 2013. A UK
government customer selected the business as one of four strategic suppliers on a
technology framework and multi-year framework contracts were awarded for Service
Integration and Applications Management services. In December, Applied Intelligence
acquired SilverSky, a commercial cyber service provider, to enhance its commercial
cyber growth strategy.
P31
7. PLATFORMS
& SERVICES (US)
Drive value from our
land portfolio and
deliver sustainable,
profitable growth in
the services sector
8. PLATFORMS
& SERVICES (UK)
Deliver sustainably
profitable through-life
businesses in the air,
maritime, combat
vehicles and munitions
sectors
9. PLATFORMS
& SERVICES
(INTERNATIONAL)
Grow our Platforms &
Services (International)
business
In Land & Armaments, there was continued focus on cost reduction and margin
increased to 10.3% (2013 8.8%). Efforts to sustain and grow vehicle programmes
resulted in significant awards, including the US Army’s Armored Multi-Purpose Vehicle
programme, Bradley and M88 vehicles, and the Low-Rate Initial Production of the
M109A7 self-propelled howitzer. In Support Solutions, whilst performance was
impacted by charges taken on commercial shipbuilding programmes, the US-based
ship repair business continued to perform well, receiving orders totalling $1.5bn
(£1.0bn) on various US Navy vessels, and operational challenges on the Radford Army
Ammunition Plant contract were mitigated significantly. Whilst successfully executing
phase one of the Korean F-16 upgrade programme, the contract was terminated for
convenience by the customer in November.
Strong programme performance delivered a return on sales of 11.7%. Development of
the Typhoon platform continued and a £365m contract was received for the integration
of the E-Scan radar onto the aircraft. Potential management redundancies were
announced to align the organisational operating model of the air business with its
strategy and to improve competitiveness. The consolidation of UK shipbuilding
operations in Glasgow progressed to plan, with shipbuilding operations in Portsmouth
ceasing during the year. Over £1bn of contracts were awarded by the Royal Navy,
including for the construction of three Offshore Patrol Vessels, support to the surface
fleet and Spearfish torpedo upgrade.
Sales 1 reduced by £0.5bn to £3.6bn, including £143m for exchange translation.
In Saudi Arabia, the Group continued to support the operational capabilities of the
Royal Saudi Air Force and Royal Saudi Naval Forces, and to develop the industrial base.
A reorganisation of industrial partner companies in Saudi Arabia to support their
future growth commenced. In Australia, whilst activity on the Landing Helicopter Dock
programme ramped down, a four-year contract was awarded to support the two vessels
in service and BAE Systems continues to engage with the Australian government
regarding the sustainment of shipbuilding capability following delivery of the second
ship in 2015. Additional blocks were contracted on the Air Warfare Destroyer
programme. MBDA received a number of significant contracts and is pursuing actively
a number of export opportunities.
P34
P37
P40
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
1. Including share of equity accounted investments.
2. Comprises funded and unfunded unexecuted customer orders.
BAE Systems
Annual Report 2014
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