BAE Systems PLC — Report Publication Announcement 2016

Mar 25, 2016

BAE SYSTEMS
INSPIRED WORK

Notification of BAE Systems Annual Report 2015 and AGM

This notice advises you that you can read the full BAE Systems Annual Report 2015 and Notice of Annual General Meeting online at: www.baesystems.com/reporting

It also provides a brief overview of our performance in 2015.

For more information on e-communications, see the back page of this document.

Dear Shareholder

I am writing to advise you that the Company's Annual Report for 2015 has been published together with the Notice of Annual General Meeting. These documents are available to be viewed on the Company's AGM website page that you can access at: www.baesystems.com/reporting

This year's Annual General Meeting is to be held on 4 May 2016 at FIVE (Farnborough International Venue & Events), Farnborough, Hampshire starting at 11.00am. If you are unable to attend the meeting but wish to vote by proxy you can do so via the AGM website page. Simply click on the shareholder voting icon and use the numbers on the enclosed instruction card to access the voting system – even if you will be attending the meeting you can still vote by proxy and, if you wish, change your vote during the meeting.

Opposite you will see the top-level financial figures in respect of the Company's performance in 2015 and, overleaf, an overview of the different businesses within the BAE Systems Group. This is just a brief summary and is not a substitute for the full Annual Report that can be accessed online.

The Board has recommended a final dividend of 12.5p per share making a total of 20.9p per share for the year, an increase of 2% over 2014. Subject to shareholder approval at the 2016 AGM, the 2015 final dividend will be paid on 1 June 2016 to shareholders registered on 22 April 2016.

Yours sincerely

Sir Roger Carr Chairman
24 March 2016

Important information

It is recommended that you read the full Notice of Annual General Meeting before taking a decision on how to vote at the Annual General Meeting. It is also recommended that you read the full BAE Systems Annual Report 2015. This notice does not set out the matters on which shareholders are being asked to vote at the Annual General Meeting and is not a substitute for such documents.

If you have sold or otherwise transferred all your shares in BAE Systems plc, please forward this document at once to the purchaser or transferee or to the stockbroker, bank or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee. If you have sold or otherwise transferred only part of your holding of shares, you should retain this document.

Results in brief*

Sales¹
£17,904m
£16,637m (2014)

Underlying EBITA²
£1,683m
£1,702m (2014)

Operating profit
£1,502m
£1,300m (2014)

Underlying earnings³ per share
40.2p
38.0p (2014)

Basic earnings per share⁴
29.0p
23.4p (2014)

Order backlog⁵,⁶
£36.8bn
£40.5bn (2014)

Operating business cash flow⁶
£681m
£1,191m (2014)

Net debt (as defined by the Group)⁷
£(1,422)m
£(1,032)m (2014)

Dividend per share
20.9p
20.5p (2014)

• To be read in conjunction with the information overleaf

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Financial highlights

• Sales¹ increased by £1.3bn to £17.9bn, including a £0.8bn benefit to UK sales from increased aircraft deliveries to Saudi Arabia and sales from the trading of equipment on the European Typhoon programme and the increased activity across the naval business. Exchange translation added £0.2bn compared to prior year.
• Underlying EBITA² reduced by £19m, to £1,683m, impacted by both the previously announced Typhoon production slowdown and Australian shipyard impairment and rationalisation charges. There was an exchange translation benefit of £15m.
• Underlying earnings³ per share was 2.2p higher than in 2014, at 40.2p, including a 2.6p benefit from the previously announced overseas tax provision release and an additional 1.7p benefit from a UK tax provision release.
• The large order backlog¹,⁵ of £36.8bn underpins confidence in the future prospects for the business.

• Final dividend of 12.5p per share making a total of 20.9p per share for the year (an increase of 2% over 2014).

• Including share of equity accounted investments.

• Earnings before amortisation and impairment of intangible assets, finance costs and taxation expense (EBITA) excluding non-recurring items.
• Earnings excluding amortisation and impairment of intangible assets, non-cash finance movements on pensions and financial derivatives, non-recurring items and, in 2014, a credit in respect of the re-assessment of existing tax provisions.
• Basic earnings per share in accordance with International Accounting Standard 33, Earnings per Share.
• Comprises funded and unfunded unexecuted customer orders, and is stated after the elimination of intra-group orders.
• Net cash inflow from operating activities after capital expenditure (net), financial investment and dividends from equity accounted investments.
• Comprises cash and cash equivalents, less loans and overdrafts (including debt-related derivative financial instruments) and cash received on customers' account.

Segmental performance

Electronic Systems

Electronic Systems, with 12,400 employees¹, comprises the US and UK-based electronics activities, including electronic warfare systems, electro-optical sensors, military and commercial digital engine and flight controls, next-generation military communications systems and data links, persistent surveillance capabilities, and hybrid electric drive systems.

Operational and strategic highlights

Selected for the Eagle Passive Active Warning Survivability System programme with Boeing, potentially worth over $1.0bn (£0.7bn) over the life of the programme, to upgrade up to 400 US Air Force F-15 aircraft

Delivered the first international order for the Advanced Precision Kill Weapon System (APKWS™)

Awarded a five-year contract for the US Army's Enhanced Night Vision Goggle III and Family of Weapon Sights – Individual programme, with a potential value of $435m (£295m)

Acquired Eclipse Electronic Systems, Inc., a provider of leading-edge communications intelligence receivers and services

Selected by Boeing to provide the entire flight control electronics suite on the next-generation 777X aircraft programme following the award, in 2015, for the remote electronic units

Opened a state-of-the-art aviation technology manufacturing facility in Fort Wayne, Indiana

Sales¹
£2,638m

Cyber & Intelligence

Cyber & Intelligence, with 12,900 employees¹, comprises the US-based Intelligence & Security business and UK-headquartered Applied Intelligence business, and covers the Group's cyber security, secure government, and commercial and financial security activities.

Operational and strategic highlights

Intelligence & Security

Strategic review of manpower and services businesses determined that retaining the businesses delivers greater value

Secured a ten-year contract with an expected value of over $1.0bn (£0.7bn) to provide information technology services to high-priority US government agencies

Secured a five-year, $278m (£189m) re-compete award to provide logistics and sustainment engineering services for radar, optical and telemetry systems

Applied Intelligence

Integration of the acquired SilverSky business substantially completed

Significant investment in engineering capabilities and product development

Strong performance in commercial cyber security products, with multi-year contracts awarded

Launch and initial take-up of cloud-based cyber security products in Europe, Canada and Asia-Pacific

Continued growth of security and digital services projects in government and critical national infrastructure in the UK and internationally

Sales¹
£1,848m

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Platforms & Services (US)

Platforms & Services (US), with 11,500 employees¹ and operations in the US, UK and Sweden, produces combat vehicles, weapons and munitions, and delivers US-based services and sustainment activities, including ship repair and the management of government-owned munitions facilities.

Operational and strategic highlights

Award of a five-year contract worth up to $332m (£225m) to perform technical support for the US Army's Bradley Fighting Vehicle and M113 family of vehicles

Low-Rate Initial Production contract options awarded, worth $245m (£166m), for US Army M109A7 (Paladin) self-propelled howitzers

Contract worth $104m (£71m) awarded for the engineering and manufacturing development phase of the competition for the Amphibious Combat Vehicle 1.1 programme

Secured naval gun system contracts with the US, Canada and Brazil

FNSS received a new export order for the PARS wheeled armoured vehicle

Continued challenges on commercial shipbuilding programmes

Workforce reductions announced in commercial shipbuilding, ship repair and BAE Systems Hägglunds

Sale of 75% interest in Land Systems South Africa completed

Platforms & Services (UK)

Platforms & Services (UK), with 29,600 employees¹, comprises the Group's UK-based air, maritime, combat vehicle, munitions and shared services activities.

Operational and strategic highlights

The Strategic Defence and Security Review announced in November 2015 provided clarity, continuity and stability for the UK business

Contracts awarded for the expansion of Typhoon's capabilities

£203m of F-35 Lightning II Lot 9 Low-Rate Initial Production orders received

£859m demonstration phase contract awarded for the Type 26 frigate programme

Full £1.3bn contract awarded for the fifth Astute Class submarine

Artful, the third Astute Class submarine, accepted by the Royal Navy in November

Third and final Khareef Class corvette accepted by the Royal Navy of Oman

€188m (£139m) contract award for 515 cased-telescopic cannons for the Ministry of Defence secured by our 50% joint venture, CTA International

Platforms & Services (International)

Platforms & Services (International), with 13,600 employees¹, comprises the Group's businesses in Saudi Arabia, Australia and Oman, together with its 37.5% interest in the pan-European MBDA joint venture.

Operational and strategic highlights

12 Typhoon aircraft delivered to Saudi Arabia in the year

Continued support to the operational capabilities of the Royal Saudi Air Force and Royal Saudi Naval Forces

Contract awarded in Saudi Arabia for a further 22 Hawk aircraft

Re-organisation of portfolio of interests in industrial companies in Saudi Arabia progressed

Customer acceptance of the second of two Landing Helicopter Dock ships in Australia

Headcount reductions and an impairment of assets at the Williamstown shipyard

Announced a consolidation of Australian operating divisions to reduce management costs and remain competitive

The UK and French governments signed a treaty relating to complex weapons technology

MBDA secured weapons package orders with Egypt and Qatar worth €1.1bn (£0.8bn) as part of agreed export contracts for Rafale aircraft

Sales¹

£2,779m

Sales¹

£7,405m

Sales¹

£3,742m

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About BAE Systems

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

We employ a skilled workforce of 82,500 people¹ in over 40 countries. Working with customers and local partners, our products and services deliver military capability, protect people and national security, and keep critical information and infrastructure secure.

1. Including share of equity accounted investments.

Financial calendar

Financial year end	31 December
Annual General Meeting	4 May 2016
2015 final ordinary dividend payable	1 June 2016
2016 half-yearly results announcement	28 July 2016
2016 interim ordinary dividend payable	30 November 2016
2016 full-year results:
- preliminary announcement	February 2017
- Annual Report	March 2017
2016 final ordinary dividend payable	June 2017

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 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, involve known and unknown risks, uncertainties and other important factors which could cause the actual results, performance or achievements of BAE Systems or the markets and economies in which BAE Systems operates to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. BAE Systems plc and its directors accept no liability to third parties in respect of this report save as would arise under English law.

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BAE Systems plc

6 Carlton Gardens

London SW1Y 5AD

United Kingdom

www.baesystems.com

Registered in England and Wales No. 1470151

© BAE Systems plc 2016. All rights reserved