Final Results

Financial key points
- Sales3 increased by 2% to £18.2bn

- Underlying EBITA4 increased by 3% to £1.9bn and underlying earnings5 per share increased by 9% to 42.0p
- Equitable conclusion reached on price escalation negotiations with the Kingdom of Saudi Arabia

- Order backlog3,7 of £42.7bn maintained at 2012 levels with non-UK/US order intake3 of £9.3bn

- Robust, investment grade balance sheet, with net debt9 of £699m at year end

- Non-cash goodwill impairment of £865m in US businesses, due to increased weighted average cost of capital and taking into account lower US defence spending

- Full year dividend increased by 3% to 20.1p per share

- £850m returned to shareholders in 2013, including £212m on the share repurchase programme

Ian King, BAE Systems plc Chief Executive, said: "Overall, the Group delivered a solid performance in 2013, against the background of reduced government spending and challenging market conditions. A proactive focus on costs and enhanced competitiveness protected our margins across the majority of the business and we secured further contract wins in the US, Saudi Arabia and internationally. We have started 2014 with good momentum with a settlement on Salam pricing, US budgets in place and a well-defined UK Maritime sector plan. Budget pressures in some of the Group's larger markets are expected to prevail but BAE Systems has a broad-based portfolio. Our strong order backlog and robust balance sheet provide a solid basis for growth over the medium term."

Outlook
Following last year's non-recurring benefit from the Salam price escalation settlement, together with continuing US budget pressures, the Group's reported earnings5 per share is expected to reduce by approximately 5% to 10% compared to 2013.
Reporting segments
Electronic Systems: Sales3, in US dollars, in 2014 are expected to be similar to those in 2013 with margins at the high end of a 12% to 14% range.

Cyber & Intelligence: Sales3 in 2014 are expected to be broadly in line with those in 2013 with margins in an improved 8% to 10% range.

Platforms & Services (US): In 2014, sales3 in the Land & Armaments business (adjusted for the transfer out of the UK Munitions business into Platforms & Services (UK)) are expected to be some 20% to 25% lower with margins of around 9%. Sales3 in the Support Solutions business are expected to be a little lower in 2014 with mid-single digit margins.

Platforms & Services (UK): Following the trading in 2013 of the price escalation on the Salam Typhoon contract, and excluding the transfer of the UK Munitions business, sales3 are expected to reduce by around 5% with margins expected to return to a 10% to 12% range.

Platforms & Services (International): Sales3 are expected to be similar to 2013 with margins expected to be in a 10% to 12% range.

Barclays Capital Underweight 404.95 400.40 380.00 380.00 Reiterates

Cantor Fitzgerald Buy 411.40 400.40 490.00 460.00 Retains

Half Yearly Report

FINANCIAL KEY POINTS
- The second half bias on Typhoon aircraft deliveries together with the expected lower volumes at Land & Armaments contributed to a 10% decrease in sales2 (6% at constant currency)

- Good margin performance in most businesses, whilst reduced volumes decreased underlying EBITA3 by 7% (4% at constant currency)

- The benefits of the share repurchase programme and lower tax rate largely offset the lower underlying EBITA3 resulting in underlying earnings4 per share of 17.7p

- Large order backlog2,6 of £39.7bn after exchange translation of £0.4bn

- Interim dividend increased by 2% to 8.2p per share

- £618m returned to shareholders in the period, including £235m on the share repurchase programme


Acquisition

BAE Systems announces it has entered into an agreement for the proposed bolt-on acquisition of Signal Innovations Group, Inc. (SIG), a provider of imaging technologies and analytics to the US intelligence and defence communities.

President of BAE Systems Inc. Intelligence and Security, DeEtte Gray said: "Combining SIG's technologies with our existing intelligence tools and analysis capabilities will enhance our customers' ability to analyse tactical and strategic intelligence from around the globe. Together, we also have the potential to leverage our capabilities and bring this technology to a number of innovative commercial applications in an affordable way."

The proposed acquisition is conditional upon receiving certain regulatory approvals. It is anticipated the proposed acquisition will be completed during the third quarter of 2014.

Interesting in light of the current call for more arms.

Westhouse Securities Sell 456.00 456.00 360.00 360.00 Reiterates

True skinny, but MACD and RSI look well overbought watching for now.

I guess most of the current geopolitical situation may be in the last months rise.

It's tempting I must admit, just reluctant to commit any more funds at mo, see how the yanks react today :0)

Resistance clearly @ 460.0 perhaps a retrace to see if support is valid @ 440.0 then go long skinny? Between devil and deep blue sea. Can't believe a word Putin says or doesn't say.

The Ukraine ceasefire may change the scenario short term?

Sorry Chris - misread your full post - I don't like gaps - call it 440p :-)

Investec note today:
"We are concerned that we have not yet seen the end of BAE’s negative earnings momentum, even if rising geopolitical concerns may explain the strong re-rating in recent months. We see limited growth opportunities to drive underlying earnings in the medium term, despite the heightened tensions, and downside risk to margins. The shares appear cheap on a PE basis, but less so on an adjusted 2015E EV/EBITA of 11.9x. In our view, a c.4.3% dividend yield does not compensate for downside earnings risk. Sell.
Forecasts: Post last week’s trading update, we reduce our FY14-16E EBIT forecasts by c.3% to reflect the £30m charge for commercial shipbuilding highlighted in the IMS, pricing pressure and the potential for further execution issues, which are difficult to predict (this sees our FY15/16E EBIT margin forecasts come down by 30bps). Our lower EBIT forecasts are partially offset by a lower tax rate (20%, down from 22%). Our updated FX forecasts (£1=$1.66 in FY14E from $1.71, and $1.63 for FY15E) have also been factored in. We cut our EPS forecasts by 1-2%
Geopolitics/budgets: Strategic statements and symbolic/limited air strikes do not portend a major change in Western defence budgets, in our opinion. However, rising geopolitical tensions in the Middle East and Eastern Europe have increased the likelihood of budgets stabilising in 2015/16 and beginning to grow at a measured pace thereafter. We do not see BAE as a major beneficiary if the conflict against IS in Iraq and Syria continues at current rates. However, investors are using BAE as the only liquid UK proxy in which to play increased geopolitical tensions in the region, in our view. We believe that weak fundamentals will override this kneejerk reaction. If the current US Continuing Resolution carries on into 2015, then we see further downside risk to earnings. We downgrade to Sell (from Hold)."

StockMarketWire.com
BAE Systems has entered into a definitive agreement to acquire Perimeter Internetworking Corp, which trades as SilverSky, a commercial cyber service provider, for $232.5m on a cash free and debt free basis.

SilverSky is a leading independent cloud-based managed security services provider operating in the fast-growing cyber security market providing services including email protection, network security and managed applications. Its customer base includes approximately 5,500 customers in the financial services, retail, healthcare, energy, critical infrastructure and manufacturing sectors.

SilverSky is largely focussed on the US market with a developing business in Asia and Europe. The business currently employs around 400 people with its headquarters in the Greater New York Area and principal operations in the US and the Philippines.

SilverSky is expected to generate sales for the 12 months ended 31 December 2014 of approximately $75m (£46.6m).

The proposed acquisition is expected to be accretive to earnings in the third year following closing with post tax returns expected to exceed BAE Systems' cost of capital in the fourth year following closing.

BAE Systems chief executive Ian King said: "The acquisition of SilverSky enhances our strategy to grow BAE Systems' Applied Intelligence commercial cyber security business. SilverSky has an established sales force, a complementary suite of scalable products and a large installed customer base, providing a proven route to commercial markets in the US and other countries for our combined capabilities.

"SilverSky's cloud-based email and network security solutions, its highly skilled resource in marketing and engineering, plus an experienced management team are an ideal fit for Applied Intelligence. Together, the enlarged business will offer corporate clients a suite of products and services to protect critical information and networks and detect cyber threats and financial crime. The enlarged business has outstanding growth opportunities."

The acquisition will be funded from BAE Systems' existing cash resources. The transaction is conditional upon receiving certain regulatory approvals and is expected to close before the end of 2014.

In the fervent hope of a Santa rally punt long on the spreads @ 469.32

Had a Limit Buy filled this morning @ 446.0 tight stop 436p

Stop to entry for risk free trade.

Stop to 456 to lock in + 10

Stop to 460 to lock in + 14 out this morning locking in profits.

Stopped out. Limit long left @ 465.0 stop 455.0

Filled.

Stop to entry for risk free trade.

The British-based defence contractor said in a statement the programme aims to engineer and produce a limited initial number of the vehicles, called the Armored Multi-Purpose Vehicle (AMPV), to replace the Vietnam War-era M113.

The initial 52-month term of the contract, worth about $383 million, calls for 29 vehicles to be produced among five variants, with an option to follow with 289 more, for a total contract value of $1.2 billion, BAE said in a statement.

"The AMPV capitalizes on proven Bradley and M109A7 designs, meeting the Army’s force protection and all-terrain mobility requirements while enabling the AMPV to manoeuvre with the rest of the Armored Brigade Combat Team (ABCT)," the statement said.

Work is expected to start immediately, mainly at the company’s facilities in York, Pennsylvania, and Sterling Heights, Michigan, it said.

The programme was aimed at ultimately replacing 2,897 M113 vehicles, at the brigade and below level, the U.S. Army said in a statement announcing the contract award. It said replacements for another 1,922 M113s supporting Echelons Above Brigade may have different requirements, which had yet to be decided.

(Reporting by Eric Walsh; Editing by Eric Beech)