30th Jul 2015 11:54
LONDON (Alliance News) - Defence contractor BAE Systems PLC on Thursday said its pretax profit fell in the first half of 2015 despite revenue increasing and said its order backlog has weakened since the end of 2014.
FTSE 100-listed BAE said its pretax profit fell to GBP508 million from GBP541 million in the half to the end of June, thanks primarily to higher financing costs. Revenue increased to GBP8.47 billion from GBP7.61 billion, boosted by incremental equipment sales on the Typhoon jet programme and a favourable exchange rate effect.
But BAE said its order backlog has weakened since the start of the year, falling to GBP37.3 billion at the end of June from GBP39.7 billion at the end of December 2014.
BAE said it will pay an interim dividend of 8.4 pence per share, up 2% from the 8.2 pence per share it paid a year earlier.
The group also said that it remains on track to deliver sales and underlying earnings growth for the full year which will be marginally higher than in 2014, though it said this remains dependent on anticipated aircraft orders and the review of its operations at the Melbourne shipyard facility in Australia, which may lead to it having to book restructuring charges.
"Overall, the business performed well during the first half of 2015 during which we have leveraged our capabilities in adjacent growth markets and maintained disciplined cost control. We have also continued to invest in developing skills and new technologies for the future. These actions have provided resilience through an extended period of reduced defence spending in some key markets and ensured that BAE Systems is well positioned to benefit from a generally improving market environment," said Chief Executive Ian King.
BAE shares were up 0.7% to 472.70 pence on Thursday.
BAE said trading in its UK business remains stable, with much of the business driven by long-term contracts, and it does not expect the recent supportive announcements from the UK government on a hike to defence spending, nor the outcome of the Strategic Defence and Security Review, to materially disrupt its business.
In its air business, BAE expects production of rear fuselage assemblies for the F-35 Lightning II figher jet to increase significantly in coming year on the back of an anticipates rise in demand from the US armed forces and international customers. In its naval business, BAE said its order backlog is healthy and offers good long-term revenue visibility.
In the US, where defence spending has been constrained in recent years, the outlook is improving, BAE said, with indications that budgets are set to grow. It said its forecasts for the current year include stable funding and support from the Department of Defense for key programmes, including the F-35 Lightning. It added signs of improvement are emerging on 2016 budget proposals.
The group's US defence electronics business is performing well and its commercial aerospace electronics business has continued to grow, following a contract win for the Boeing 777X airliner. Intelligence and security trading also was solid in the period, against a tough market, while the group's US-based combat vehicles programme is stabilising following several years of contraction.
BAE said its business in Saudi Arabia, supplying equipment to the country air force, remains stable within its international operations, but reiterated that it continues to face a challenging outlook for its naval shipbuilding business in Australia. Following the run-off from a high volume of activity on the Landing Helicopter Dock programme, the business is seeing an increasing workload gap from the Williamstown shipyard in Melbourne, and BAE is still considering its options on the site.
The group also expects a ramp-up in activity for its cyber security operations in the second half, with the SilverSky business it acquired in December now fully-integrated and a solid pipeline in place.
By Sam Unsted; [email protected]; @SamUAtAlliance
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