30th Jul 2020 10:20
(Alliance News) - BAE Systems PLC on Thursday said its profit declined in the first half of 2020, with higher operating costs playing a significant role in this, though the aerospace firm maintained its dividend.
Shares in BAE were up 3.4% at 493.30 pence in London in morning trading.
Farnborough, England-based BAE posted a GBP689 million pretax profit for the six months ended June 30, down 11% from GBP776 million a year before.
While revenue rose 5.9% to GBP9.18 billion from GBP8.67 billion a year prior, operating costs increased by 7.0% to GBP8.45 billion from GBP7.90 billion, depressing operating profit to GBP801 million from GBP836 million.
On top of this, BAE's share of results of equity accounted investments shrank to just GBP7 million from GBP60 million the previous year.
BAE maintained its dividend at 9.4p per share.
Including its two recent acquisitions, BAE predicts its annual sales will increase by a low-single digit percentage from 2019, thanks to increased volumes from the F-35 combat jet, Combat Vehicles, and electronic defence portfolio growth. This is expected to offset the commercial businesses shortfall.
Underlying earnings per share is expected to fall by a mid-single digit percentage from 2019's figure of 45.8 pence. This assumes a USD1.25 to sterling exchange rate and a tax rate of 19% - in line with the previous year. BAE acknowledged that the final tax rate will depend on the geographic mix of its profits.
Also for the year as whole, BAE is expecting free cash flow of GBP800 million - excluding a GBP1 billion pension payment. This is close to its original guidance and allows for the earnings decline.
Chief Executive Charles Woodburn said: "Assuming no significant Covid-19 resurgence, we expect a good second half to the year. Demand for our capabilities remains high and we recognise our role not only in supporting national security, but also in contributing to the economies of the countries in which we operate."
By Anna Farley; [email protected]
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