Annual Report PDF - Black Sun Plc

Directors’ Report: Business ReviewChief Executive’s review continuedIn October, BAE Systems completed the acquisition of OASYSTechnology, LLC, a US manufacturer of electro-optical systemsand sub-assemblies, for an initial cash consideration of $24m(£15m) and a potential earn out of up to $29m (£18m). Theacquisition complements BAE Systems’ existing electro-opticalcapabilities, technologies and product offerings.In January 2011, the Group completed the acquisition ofstratsec.net Pty Limited, an Australian information securitycompany supplying government and commercial customers.The A$24m (£16m) acquisition supports the Group’s strategyto add capabilities and footprint in the growing area of Cyber& Intelligence.In February 2011, BAE Systems completed the acquisitionof L-1 Identity Solutions, Inc.’s Intelligence Services Group,a leading provider of security and counter threat capabilities tothe US government, for a cash consideration of approximately$297m (£190m).In December, the Group entered into a definitive agreement toacquire ETI A/S, a leading Danish Cyber & Intelligence companyproviding advanced technology products and services togovernment and commercial clients worldwide, for a cashconsideration of DKK1.2bn (£138m).In January 2011, the Group entered into an agreement toacquire the 91.3% outstanding equity of Fairchild Imaging, Inc.for a cash consideration of $86m (£55m). The California-basedbusiness provides solid-state electronic imaging components,cameras, and systems for aerospace, industrial, medical andscientific imaging applications. The acquisition complementsthe Group’s electro-optics and night vision capabilities.The proposed acquisitions of ETI A/S and Fairchild areconditional, among other things, upon receiving regulatoryapproval.In January 2011, the Group announced a recommended€217m (£186m) cash offer for Norkom Group plc, a provider ofinnovative counter-fraud and anti-money laundering solutions tothe global financial services industry.In June, BAE Systems completed the sale of half of itsnon-strategic 20.5% shareholding in Saab AB for a cashconsideration of SEK1,041m (£92m). The sale of the Group’sremaining investment in Saab is expected in due course.In September, BAE Systems announced that it was reviewingstrategic options with regard to its Platform Solutions business.In January 2011, the Group announced that the sale of thebusiness was no longer being pursued.Cash flowGood cash generation has been achieved in the year, and isexpected to continue, notwithstanding any short-term volatility.Use of this cash flow is expected to include a focus on pursuingopportunities for enhanced equity returns through investmentin the business by way of organic development or preciselytargeted acquisitions. In addition, the Group will continue tomeet its pension funding obligations. Accelerated returns ofcapital to shareholders remain an option to address extendedperiods of balance sheet inefficiency.Market environmentThe global defence market is expected to become increasinglycompetitive as government budgets remain under pressure.The Group now has better clarity as to the priorities of its UKand US customers following the publication of the UK StrategicDefence and Security Review, and the US Quadrennial DefenseReview. Long-term spending commitments are beingestablished across the Group’s key home markets.Against this backdrop, BAE Systems is positioned to weathermarket pressures with a geographically diverse and targetedportfolio of businesses.Each of the Group’s market segments, Services, ElectronicSystems and Platforms, enjoy common attributes of long-termdemand, customers with whom the Group has strongrelationships and key intellectual property.p20for more information on the Group’s home and export marketsInBAE SYSTEMS’ GLOBAL DEFENCE MARKET POSITION (US$BN)50403020100LockheedMartin42.0BAE SystemsBoeingNorthropGrumman33.4 31.9 30.7General DynamicsTop ten global defence companies (based on 2009 defence revenues)Source: Defense News25.9 23.115.0 13.3 13.0 11.12009, BaE Systems was the second largest global defence supplier.This represented a continuation of the Group’s position in its home andexport markets.RaytheonEADSFinmeccanicaL-3 CommunicationsUnited Technologies10 www.baesystems.com