BAE SYSTEMS Delivers 2001 Financial Results to Plan With a Strong Order Book and Balance Sheet.

Business Editors

LONDON--(BUSINESS WIRE)--Feb. 14, 2002

BAE SYSTEMS today announced preliminary results that reflect the success of its strategies.

BAE SYSTEMS delivered to the plans it announced, and finished 2001 with a strong order book and balance sheet.

-- Profit before interest(a) of 1.26 billion Pounds Sterling/$1.81 billion, an
increase of 32.6% over last year

-- Order book 43.8 billion Pounds Sterling/$63.1 billion, up 6.8% from last
year

-- Earnings per share 23.4p

-- Dividend per share 9.0p (a) excluding exceptional items and goodwill
amortization

2001 was a year that brought significant changes to the company. Among these were the completion of the transformation of the merger to a unified company, the integration of the North American businesses acquired in 2000, and good progress in securing important new business. Most notable in new business secured were the Joint Strike Fighter, the Type 45 Destroyer, and the Airbus A380 order book.

2001 was a year of changes in the marketplace, most notably in the aftermath of the terrorist attacks on 11 September 2001 in the United States.

The profit of 1.26 billion Pounds Sterling/$1.81 billion was achieved on sales of 13.1 billion Pounds Sterling/$18.9 billion. The order book at the end of the year was up 6.8% from the previous year's end. Net debt was reduced by 7.6% to 0.8 billion Pounds Sterling/$1.2 billion.

Sir Richard Evans, chairman, said "2001 has been a transitional year in the company's development. Despite difficult markets, we have delivered on our plans and we have reshaped our commercial aerospace activities to remove risk and focus on the future growth we see in the commercial jet market. We have also brought about a fundamental shift in our defense business to reflect the growing emphasis on systems and the importance of the U.S. market."

John Weston, chief executive, added "Since the early nineties, we have been pursuing a strategy to transform the company into a world-wide business with systems engineering at its heart. The progress in 2001 has secured that transformation. Our strategy of targeting growth in defense systems and customer support is working to good effect."

BAE SYSTEMS has changed fundamentally in the last three years. Following the merger, significant acquisitions in North America, and the formation of the integrated joint Airbus company, Airbus SAS, the company is well positioned to address current and future markets, as a more broadly based company with a better spread of business risk.

In 2001, BAE SYSTEMS, as part of the Lockheed Martin team with Northrop Grumman, won the U.S. Department of Defense competition for the Joint Strike Fighter (JSF) program, with a combined U.S. and UK requirement for more than 3000 aircraft, not including exports.

This program is estimated to be worth more than 14 billion Pounds Sterling/$20.2 billion to BAE SYSTEMS before export orders, providing substantial workload and value over many years.

The North American businesses acquired in 2000 have been fully integrated into the company and have made a major contribution to the company's position in airborne electronic systems. Their trading performance is already ahead of initial expectations.

It was with regret that the company announced in November 2001 the closure of the RJ and RJX regional jet program, and the related re-structuring of our other commercial aerospace activities to bring them into line with their downturned market.

2001 was important to the company's European relationships, with the restructuring of Airbus, MBDA and AMS which strengthened those businesses.

Airbus demonstrated its capability to deliver a strong operating performance in 2001 after investment of 1.8bn Euros in future programs. The current market difficulties are a near term concern, and some recovery is already apparent. Medium term outlook is excellent. The order book for the Airbus A380 continues to grow, finishing the year at 85 firm orders.

Significant progress has been made on the Eurofighter Typhoon and Nimrod programs as the Eurofighter entered production and the Nimrod program stabilized in line with plan.

Two factors previously identified will adversely impact performance in 2002: the completion of export construction contracts will lead to a reduction in activity in the Programmes business group, and the downturn in the commercial aircraft market will result in a much reduced contribution from Airbus.

These reductions will be partly mitigated by the overall improvement in performance in the other business groups.

In 2003, an improved performance from defense activities and a maintained position at Airbus can be expected to result in a resumption of growth. Looking further ahead, the existing order book will deliver good growth in defense activity while prospects for Airbus remain excellent over the medium term.

About BAE SYSTEMS:

BAE SYSTEMS is a systems company, innovating for a safer world. BAE SYSTEMS employs 120,000 people and has annual sales of more than 13 billion Pounds Sterling/$18.9 billion. The company offers a global capability in air, sea, land and space with a world-class prime contracting ability supported by a range of key skills.

BAE SYSTEMS designs and manufactures military aircraft, surface ships, submarines, space systems, radar, avionics, communications, electronics, guided weapon systems and a range of other defense products. BAE SYSTEMS is dedicated to making the intelligent connections needed to deliver innovative solutions.

Issued by: BAE SYSTEMS, Farnborough, Hampshire GU14 6YU, UK Tel: [phone] Fax: [phone] www.baesystems.com

Note to Editors: (1 Pound Sterling=$1.4399 -- average exchange rate for 2001) (This material was released by BAE SYSTEMS plc, Farnborough, UK earlier this morning)