12th Nov 2015 13:14
LONDON (Alliance News) - FTSE 100-listed defence contractor BAE Systems PLC said it will cut jobs in its military arm due to an anticipated reduction in Typhoon fighter jet production, though it remains confident on it current outlook even as it slightly downgraded its adjusted earnings per share guidance for 2015.
BAE said it now expects to generate adjusted earnings per share of 38.00 pence for 2015, flat year-on-year and a slight downgrade on its previous expectations for a marginal improvement. The group had said its earnings for 2015 would be weighted to the second half.
BAE said it has continue to achieve solid growth in commercial markets in 2015 and is confident of an uptick in defence spending from both the UK and US governments given recent budget commitments made in the former and the Congressional budget approval secured in the latter.
The group said it taking actions to reduce its current production rate of Typhoon fighter jets in order to ensure production continuity at competitive costs over the medium term. As a result, the group will cut 371 jobs in its Military & Air Information business, which will hit its results for 2015.
The lower production rate for the Typhoon jets will mean sales of the jet will fall from around GBP1.3 billion in 2015 to about GBP1.1 billion in 2016.
The group said there is no timing certainty on orders for the Typhoon jets, but it remains confident it will meet its expectations for Typhoon contract awards in coming months.
BAE also is cutting jobs in Australia and will book a non-cash impairment on the value of its Williamstown shipyard assets in the country in 2015. The group said it welcomed the Australian government's plans to launch a naval shipbuilding strategy, but said it remains unclear whether this will benefit Williamstown.
In the US, BAE said its US ship repair business is seeking to respond to changes in its US Navy workload and said it has decided to retain its Intelligence and Security business, having seen interest in the division earlier this year.
"Overall the company is operating in an improving business environment and we continue to win new orders, with good prospects for the future," said Chief Executive Ian King.
Shares in BAE were up 6.1% to 464.60 pence early afternoon on Thursday, the best performer in the FTSE 100 as investors welcomed the action it is taking to mitigate market headwinds.
By Sam Unsted; [email protected]; @SamUAtAlliance
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