20th Feb 2014 08:04
LONDON (Alliance News) - Defence giant BAE Systems PLC Thursday reported a sharp drop in profit in 2013 as sharply higher impairment charges more than offset higher revenues, and the company warned that cuts to defence spending in the UK and US would continue to weigh on its performance in 2014.
BAE Systems, which was Wednesday buoyed by a deal on the increased price that Saudi Arabia will pay it for Eurofighter Typhoon jets the Middle East country had ordered several years ago, reported a net profit of GBP168 million for 2013, down from GBP948 million in 2012. It booked impairments of GBP887 million, up from GBP86 million, mainly to take account of cost of capital changes in its US business as well as the lower US defence spending.
BAE Systems, like peers in the sector, has been hit hard by a slowdown in defence spending, particularly in the US and the UK. Governments in those countries have been cutting defence spending after the wind-down of operations in recent conflict zones like Iraq and Afghanistan, and as federal budgets come under pressure in the wake of bank bailouts made during the financial crisis that significantly increased budget deficits and sovereign debt levels.
Excluding the impairments, BAE Systems' results met market expectations. Underlying earnings per share rose to 42.0 pence in 2013, from 38.7 pence in 2012, and underlying earnings before interest, tax, depreciation and amortisation rose to GBP1.93 billion, from GBP1.86 billion, as revenues rose to GBP18.18 billion, from GBP17.91 billion.
It increased its dividend to 20.1 pence, from 19.5 pence.
"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," Chief Executive Ian King said in a statement.
"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," he added.
The Saudi Arabia typhoon deal was known as the Salam deal.
BAE Systems said it had maintained its order backlog at GBP42.7 billion, including GBP(.3 billion of non-UK/US order intake.
By Steve McGrath; [email protected]; @SteveMcGrath1
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