BAE-annual-report-2014

Strategic Report
CHAIRMAN’S
LETTER
“ A YEAR OF STEADY
PROGRESS AND
ACHIEVEMENT.”
Sir Roger Carr, Chairman
My first year as Chairman of the Company has been both
stimulating and engaging. I have visited our businesses
throughout the United Kingdom, the United States of
America, the Kingdom of Saudi Arabia and Australia.
Without exception, I have been impressed by the
remarkable skills of our people, reassured by our
commitment to good corporate governance and proud
of our determination to serve, supply and protect those
that serve and protect us across the world.
The capabilities and pride of our people in what we do
was particularly evident at the naming ceremony in
Scotland of the HMS Queen Elizabeth aircraft carrier in
July, and at the prize-giving ceremony for the Chairman’s
Awards in Washington, D.C., in December.
The executive team has continued to demonstrate
their professionalism by effectively managing cost in
a challenging business environment, and delivering
underlying growth in earnings per share after adjusting
for the one-off, retrospective benefit from the Saudi
Arabian price agreement in 2013. Group cash flow has
continued to permit the buyback of shares, the support
of our pension obligations and the recommendation of a
final dividend of 12.3p per share, making a total of
20.5p per share for the year.
The growing uncertainty and political instability in many
parts of the world have undoubtedly increased many
governments’ focus on defence and helped to stabilise
budgets.
The message delivered by President Obama and Prime
Minister Cameron at the NATO Summit in Wales, UK,
calling for members to allocate 2% of Gross Domestic
Product to their defence budgets, reflected the change
in tone and sentiment, and reinforced the importance
of a thriving and innovative defence industry in the UK,
US and with other allies overseas.
Throughout the year, the Company continued to enjoy
a privileged position as a strategic supplier to the
UK, US, Kingdom of Saudi Arabia and Australia. We
have earned these positions over time through a mix of
product excellence, service ethic and a commitment to
working with each host nation to build local capability.
This approach was particularly visible this year in the
Kingdom of Saudi Arabia, where we announced a
reorganisation of our industrial interests which will
enhance our local relationships and will provide high-quality
employment for young people in the years to come.
In the second quarter of the year, the Board initiated
a comprehensive review of all our businesses in order
to deepen our understanding of current activity and
establish a platform for longer-term strategic planning.
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BAE Systems
Annual Report 2014