Defence giant BAE Systems, whose advanced technology and development division has its headquarters at Filton, suffered a headline sales decline of 14% last year and expects “little sales growth” this year in the current market conditions.
Sales fell from £22.27bn in 2010 to £19.15bn in 2011 at the world’s second-biggest defence company due to a number of factors, including fewer military vehicles ordered by the US military following withdrawal from Iraq.
Cutbacks in UK defence spending also had an impact BAE while experienced a delay in securing some of the contract changes to its multi-billion pound deal to sell 72 Eurofigher Typhoons to Saudi Arabia.
The firm said: “BAE Systems is operating in a difficult business environment as defence spending reduces in its largest markets, the US and UK. These market pressures have been apparent for some time.”
It added, however, that it is “well positioned on a number of key platforms programmes, such as Typhoon and F-35 combat aircraft, as well as in the areas of naval ships and fighting vehicles. These programmes form a large core of business with good, multi-year order book visibility. Additionally, such programmes can generate substantial Services business throughout the in-service life of the product”.
The company continued: “The development of business across a broad international base of operations provides a robust portfolio of activity and contributes to the resilience of the business at a time when defence spending is under pressure in the US and UK markets.”
The group employs around 600 at Filton after axing 74 jobs as part of 3,000 redundancies announced last year. Pre-tax profit edged higher to £1.49bn from £1.45bn, while basic earnings per share from continuing operations increased from 27.9p to 37p. The total dividend was raised by 7.4% to 18.8p. Operating business cash flow fell from £1.18bn to £634m while net debt surged from £242m to £1.438bn.
Following the results, Investec said it would cut its underlying profit forecasts for the group by about 5%, citing the performance of BAE’s Electronic Systems division as the ‘main culprit’. The broker also put its ‘hold’ recommendation and price target of 300p under review, noting that the group has announced no new share buy-back.
