Bae Systems Net Income dropped on 11.8% in 2016 and Revenue decreased on 6.0%
23 Feb 2017 • About Bae Systems (
$BA.) • By InTwits
Bae Systems reported 2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Bae Systems is a company in decline: 2016 revenue growth was -6.0%, 5 years revenue CAGR was -3.3%
- Bae Systems has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.9%. At the same time it's in pair with industry average of 4.4%.
- CAPEX is quite volatile: 2,054 in FY2016, 1,928 in FY2015, 657 in FY2014, 737 in FY2013, 604 in FY2012
- The company has highly profitable business model: ROIC is at 26.0%
- It operates with high leverage: Net Debt/EBITDA is 0.8x while industry average is 0.0x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Bae Systems ($BA.) key annual financial indicators
| mln. £ | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 26,457 | 26,389 | 25,419 | 25,656 | 24,112 | -6.0% |
| EBITDA | 3,460 | 3,274 | 3,087 | 2,830 | 2,707 | -4.4% |
| Net Income | 1,503 | 263 | 1,219 | 1,403 | 1,237 | -11.8% |
Balance Sheet
|
|---|
| Cash | 5,449 | 3,681 | 3,596 | 3,738 | 3,418 | -8.6% |
| Short Term Debt | 34 | 666 | 751 | 349 | 0 | -100.0% |
| Long Term Debt | 4,819 | 4,181 | 4,469 | 5,562 | 5,463 | -1.8% |
Cash flow
|
|---|
| Capex | 569 | 369 | 433 | 549 | 553 | 0.8% |
Ratios
|
|---|
| Revenue growth | -7.2% | -0.3% | -3.7% | 0.9% | -6.0% | |
| EBITDA growth | -1.9% | -5.4% | -5.7% | -8.3% | -4.4% | |
| EBITDA Margin | 13.1% | 12.4% | 12.1% | 11.0% | 11.2% | 0.2% |
| Net Income Margin | 5.7% | 1.0% | 4.8% | 5.5% | 5.1% | -0.3% |
| CAPEX, % of revenue | 2.2% | 1.4% | 1.7% | 2.1% | 2.3% | 0.2% |
| ROIC | 26.3% | 12.8% | 26.0% | 27.9% | 26.0% | -1.9% |
| ROE | 23.8% | 4.7% | 28.3% | 38.0% | 28.4% | -9.6% |
| Net Debt/EBITDA | -0.2x | 0.4x | 0.5x | 0.8x | 0.8x | -0.0x |
Revenue and profitability
The company's Revenue decreased on 6.0% in 2016. EBITDA Margin showed almost no change in 2016.
Net Income marign showed almost no change in 2016.
Capital expenditures (CAPEX) and working capital investments
In 2016 Bae Systems had CAPEX/Revenue of 2.3%. Bae Systems's CAPEX/Revenue increased slightly on 0.89 pp from 1.4% in 2013 to 2.3% in 2016. For the last three years the average CAPEX/Revenue was 2.0%.
Return on investment
The company operates at high and attractive ROIC (26.04%) and ROE (28.41%). ROIC decreased slightly on 1.9 pp from 27.9% to 26.0% in 2016. ROE decreased on 9.6 pp from 38.0% to 28.4% in 2016.
Leverage (Debt)
Debt level is 0.8x Net Debt / EBITDA and 2.0x Debt / EBITDA. Net Debt / EBITDA decreased slightly on 0.013x from 0.8x to 0.8x in 2016. Debt decreased on 7.6% in 2016 while cash decreased on 8.6% in 2016.
Valuation
The company's trades at EV/EBITDA 0.8x and P/E 0.2x while industy averages are 15.6x and 19.1x. Bae Systems's EV/(EBITDA-CAPEX) is 1.1x with the industry average at 19.0x.
Appendix 1: Peers in Aerospace & Defense
Below you can find Bae Systems benchmarking vs. other companies in Aerospace & Defense industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Chemring Group ($BC88) | | -36.2% | -14.7% | -6.4% | 26.5% |
| Rolls-Royce Hldgs ($RR.) | | 20.4% | -6.2% | -0.1% | 9.0% |
| Qinetiq Group ($QQ.) | | -9.6% | -41.1% | -2.4% | -1.1% |
| Boeing Co ($BOE) | | 6.0% | 4.8% | 5.9% | -1.6% |
| Cobham ($85GU) | | 2.3% | 3.5% | 11.9% | -6.2% |
| |
|---|
| Median (5 companies) | | 2.3% | -6.2% | -0.1% | -1.1% |
|---|
| Bae Systems ($BA.) | | -0.3% | -3.7% | 0.9% | -6.0% |
Top companies by Gross margin, %
| Top | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Chemring Group ($BC88) | 25.4% | 31.1% | 31.4% | 27.8% | 25.9% |
| Rolls-Royce Hldgs ($RR.) | 22.4% | 21.6% | 23.3% | 23.8% | 20.4% |
| Cobham ($85GU) | 32.9% | 31.8% | 30.3% | 32.0% | 19.4% |
| Boeing Co ($BOE) | 16.0% | 15.4% | 15.4% | 14.6% | 14.6% |
| |
|---|
| Median (4 companies) | 23.9% | 26.3% | 26.8% | 25.8% | 19.9% |
|---|
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Chemring Group ($BC88) | 11.1% | -0.4% | 16.1% | 11.4% | 14.6% |
| Qinetiq Group ($QQ.) | 28.8% | -5.4% | 16.8% | 17.9% | 13.6% |
| Boeing Co ($BOE) | 9.9% | 9.7% | 10.3% | 9.7% | 8.2% |
| Rolls-Royce Hldgs ($RR.) | 13.9% | 14.5% | 14.8% | 16.1% | 6.5% |
| Cobham ($85GU) | 20.5% | 21.8% | 13.4% | 12.9% | -27.3% |
| |
|---|
| Median (5 companies) | 13.9% | 9.7% | 14.8% | 12.9% | 8.2% |
|---|
| Bae Systems ($BA.) | 13.1% | 12.4% | 12.1% | 11.0% | 11.2% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Cobham ($85GU) | 2.8% | 3.2% | 3.4% | 4.7% | 4.3% |
| Rolls-Royce Hldgs ($RR.) | 3.6% | 4.6% | 4.7% | 3.5% | 3.9% |
| Qinetiq Group ($QQ.) | 1.5% | 2.0% | 3.1% | 3.2% | 3.8% |
| Boeing Co ($BOE) | 2.1% | 2.4% | 2.5% | 2.5% | 2.8% |
| Chemring Group ($BC88) | 4.1% | 2.6% | 2.7% | 2.2% | 2.2% |
| |
|---|
| Median (5 companies) | 2.8% | 2.6% | 3.1% | 3.2% | 3.8% |
|---|
| Bae Systems ($BA.) | 2.2% | 1.4% | 1.7% | 2.1% | 2.3% |
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Boeing Co ($BOE) | 31.8% | 25.4% | 29.5% | 38.9% | 38.5% |
| Qinetiq Group ($QQ.) | 44.3% | -17.2% | 17.4% | 26.8% | 24.7% |
| Chemring Group ($BC88) | 4.9% | -6.3% | 4.4% | 1.4% | 5.8% |
| Rolls-Royce Hldgs ($RR.) | 18.0% | 15.8% | 13.8% | 15.3% | -1.1% |
| Cobham ($85GU) | 13.9% | 9.0% | 2.6% | 0.5% | -36.7% |
| |
|---|
| Median (5 companies) | 18.0% | 9.0% | 13.8% | 15.3% | 5.8% |
|---|
| Bae Systems ($BA.) | 26.3% | 12.8% | 26.0% | 27.9% | 26.0% |
Top companies by Net Debt / EBITDA
| Top | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Chemring Group ($BC88) | 3.0x | | 2.1x | 3.6x | 1.3x |
| Rolls-Royce Hldgs ($RR.) | -0.7x | -0.8x | -0.3x | 0.1x | 0.6x |
| Boeing Co ($BOE) | 0.0x | 0.1x | -0.3x | -0.1x | 0.1x |
| Qinetiq Group ($QQ.) | 0.3x | | -1.3x | -1.3x | -2.6x |
| |
|---|
| Median (4 companies) | 0.3x | 0.1x | -0.3x | 0.1x | 0.4x |
|---|
| Bae Systems ($BA.) | -0.2x | 0.4x | 0.5x | 0.8x | 0.8x |
