BAE Systems: Sales Up But Profits Down
20 February 2014, 11:17
BAE Systems has revealed a rise in sales but a big drop in profits, four months after announcing nearly 1,000 ship-building job losses in Portsmouth.
The defence firm saw a 2% increase in 2013 to £18.2 billion.
However, profit after tax dropped 82% at £176 million last year, with the fall mostly down to cuts in defence spending in the US. Managers say they expect a further drop in earnings this year.
Shares in BAE are down after they reported the huge dip in profits.
Ian King, Chief Executive, BAE Systems, said:
“Overall, the Group delivered a solid performance in 2013, against the background of reduced government spending and challenging market conditions. A proactive focus on costs and enhanced competitiveness protected our margins across the majority of the business and we secured further contract wins in the US, Saudi Arabia and internationally.
"We have started 2014 with good momentum with a settlement on Salam pricing, US budgets in place and a well-defined UK Maritime sector plan. Budget pressures in some of the Group's larger markets are expected to prevail but BAE Systems has a broad-based portfolio. Our strong order backlog and robust balance sheet provide a solid basis for growth over the medium term.”
The firm, which employs approximately 4,600 people across its Maritime businesses in the Solent area, has provided this breakdown:
- Sales increased by 2% to £18.2bn
- Underlying EBITA increased by 3% to £1.9bn and underlying earnings per share increased by 9% to 42.0p
- Equitable conclusion reached on price escalation negotiations with the Kingdom of Saudi Arabia
- Order backlog of £42.7bn maintained at 2012 levels with non-UK/US order intake of £9.3bn
- Robust, investment grade balance sheet, with net debt of £699m at year end
- Full year dividend increased by 3% to 20.1p per share
- £850m returned to shareholders in 2013
- Agreement reached with the Ministry of Defence to restructure the UK naval ships business and consolidate complex warship capability in Glasgow in light of future workload reductions
- Renegotiation of the Queen Elizabeth Class contract as part of the Aircraft Carrier Alliance
- Structural completion of HMS QUEEN ELIZABETH achieved following the delivery of all sections to Rosyth, including the forward island, constructed in Portsmouth
- Formal handover of the first two Khareef Class corvettes, AL SHAMIKH and AL RAHMANI, to the Royal Navy of Oman and arrival of the first of Class in Oman
- Delivery of the third and final Ocean Patrol Vessel, ARAGUARI, to the Brazilian Navy and arrival at her home port in Brazil
- First four Type 26 Global Combat Ship design contracts awarded to Rolls Royce, MTU, David Brown Gear Systems and Rohde & Schwarz covering propulsion and communications equipment
- Sixth and final Type 45, HMS DUNCAN, delivered to the Royal Navy and accepted into service four months early
- Type 45 £35m support contract extension signed, with Class Output Management (COM) supporting HMS DARING on a global tour, including disaster relief operations in the Philippines
- Further five year contract signed, worth £22m, to provide maintenance to the Royal Navy River Class Vessels
- ARTISAN 3D radar fitted to HMS IRON DUKE, HMS OCEAN and HMS ARGYLL with successful completion of ‘first of class’ sea trials
- Full Operating Capability achieved for the Maritime Composite Training System at HMS Collingwood, which enables BAE Systems to train Royal Navy personnel
- Continued work to support the Royal Navy’s 2030 vision of a Modern Base for a Modern Navy, with plans underway to prepare for the arrival of HMS QUEEN ELIZABETH
- Commercial ferry maintenance contract signed, extending maintenance work to Red Funnel and WightLink for another five years"
John Hudson, Managing Director of BAE Systems Maritime, said:
“The past 12 months have been incredibly busy for our Maritime businesses. Reaching agreement with the Ministry of Defence on the restructuring of our naval ships business was essential to secure the long-term future of this industry in the UK. We are now working with our employees, their representative and partners on the Strategic Maritime Taskforce to explore all potential opportunities to mitigate the impact of this announcement.