Solid 2013 results for BAE Systems despite Govt budget pressures

Posted on 20 Feb 2014 by Tim Brown

Aerospace and defence manufacturing company BAE Systems has reported a solid 2013 financial result but has warned it is expecting a drop in profits as pressure on US government spending continues.

The comapny recorded a 3% increase in earnings before interest, tax, and amortisation (EBITA) to £1.9bn and underlying earnings increased by 9% to £0.42 per share.

BAE Systems only recently finally settled the pricing of a deal to sell 72 Eurofighter jets to Saudi Arabia, which was originally agreed in 2007.  The conclusion to the negotiations mean the deal was included in the 2013 full-year results.

Ian King, BAE Systems plc Chief Executive, said that overall “the Group delivered a solid performance” in 2013, against the backdrop of reduced government spending and hinted at strong prospects for 2014.

“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,” said Mr King. “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.”

According to Reuters, with the Salam deal price finalised, BAE Systems and Saudi Arabia are likely to commence discussions on a second batch of Eurofighter aircraft, which could see the Saudi Air Force order a further 48 to 72 planes.

Mr King confirmed the continued positive business relationship with the country: “I am pleased that we have been able to conclude this negotiation which builds on our long-standing relationship with this much-valued customer.”

However, the BAE Systems conceded that due to the non-recurring benefit of the Salam price settlement together with continuing US budget pressures, the Group’s reported profit is expected to reduce by approximately 5% to 10% compared to 2013.