BAE profits fall in military spending squeeze
Europe’s biggest defence contractor BAE Systems reported a seven per cent fall in full-year profit, hit by continued cuts to military spending by the United States and Britain, a delay in key orders and the end of the Iraq war.
BAE Systems posted underlying earnings before interest, tax and amortisation (EBITA) of £2.02bn for the year to the end of December 2011.
The company, which is involved in the production of F-35 fighter jets and Astute class submarines, increased the total dividend 7.4 per cent to 18.8 pence but said the outlook was uncertain.
“BAE Systems is operating in a difficult business environment as defence spending reduces in its largest markets, the US and UK,” Chief executive Ian King said.
“Whilst little sales growth can be expected for the group in 2012 in the current market conditions, modest growth in underlying earnings per share is anticipated, assuming a satisfactory conclusion to Salam (Saudi Arabia Typhoon) negotiations in 2012 and excluding the benefit of a 2011 R&D tax settlement.”
BAE, which derives 47 per cent of its revenues from the US and 29 percent from Britain, has been hit by cuts to military spending as governments look to reduce their debts.
The US capped its military budget at last year’s levels for 2012, while Britain wants to cut defence spending by eight per cent over the next four years – a move expected to disrupt its procurement plans.