3rd Apr 2020 08:25
(Alliance News) - BAE Systems PLC said Friday it believes it is in a "strong position" to withstand any fallout caused by Covid-19 but expects a "challenging period".
The defence, security, and aerospace firm, however, has decided to defer its 2019 dividend to preserve cash.
Shares were down 2.6% early Friday in London at 485.30 pence.
BAE said its "large" order backlog, with long-term government contracts, should shield it from "these difficult times".
"In the first quarter of 2020, the pandemic has had no material impact on the financial performance of the group. We have received significant awards recently on the M109A7 self-propelled howitzer programme, in US ship repair and on the THAAD missile programme in Electronic Systems," BAE added.
As the second quarter has progressed, however, BAE has seen "more significant disruptions".
The firm continued: "We continue to assess the impact on our business of the measures announced by national governments, together with the actions the group has taken to support customers and suppliers. In parallel, cost control measures have been implemented to help limit the financial impact of disruptions to the business."
BAE said its liquidity position is "strong" and has access to a GBP2 billion revolving credit facility.
BAE said: "From this position of strength the group does typically have a working capital cash outflow in the first half of the year and actions are being taken internally to optimise cash flow while maintaining operational resilience and capability."
This includes postponing its 13.8 pence dividend declared for 2019. The firm said it recognises the "importance" of its dividend and intends to distribute it to shareholders.
"The timing of any payment will be contingent on prevailing macro-economic and social conditions over the coming months. An update on the dividend payment will be provided at the half year results on July 30, at which time the board will also review remuneration of the executive directors," BAE added.
The firm did note, however, that its acquisitions in the US of the Collins Aerospace Military Global Positioning System business and Raytheon's Airborne Tactical Radios business are still expected to complete in the coming months.
Both acquisitions are conditional on the completion of the proposed merger of Raytheon Co and United Technologies Corp.
Looking ahead, BAE has withdrawn its 2020 guidance.
"Whilst the Covid-19 pandemic will impact our previous guidance for 2020, at this stage it is not possible to predict either the duration of the disruption or its impact on the 2020 outturn. A further update will be provided when appropriate," the company said.
By Paul McGowan; [email protected]
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