BAE Systems 1H Profit Soars, Expects Growth Despite Squeeze

29th Jul 2010 07:42

By Jonathan Buck Of DOW JONES NEWSWIRES LONDON (Dow Jones)--U.K. defense giant BAE Systems PLC (BA.LN) Thursday reported net profit soared in the first half, partly due to the strength of its support and services activities, and said it continues to expect to grow in 2010 despite the anticipated squeeze on defense spending at some of its biggest customers. However, the London-based company, whose products include Challenger tanks, Tornado jet fighters, Astute class submarines and aircraft carriers, said the value of its order book at June 30 fell to GBP43.6 billion from GBP44.3 billion a year earlier. "The group anticipates a challenging trading environment as governments look for cost savings to address budgetary pressures and enhance value for money," BAE Systems said in a statement. It added that a substantial program of cost cutting and efficiency improvements already was underway, including a reduction in headcount of 3,300 jobs in the first half. BAE Systems employs more than 100,000 workers worldwide. At the same time, the company said it had grown its customer support and services business, delivering enhanced capabilities while reducing costs for its customers. BAE Systems in the six-month period ended June 30 posted net profit of GBP618 million compared with a net loss of GBP82 million in the same period a year earlier. Year-ago figures were restated to account for the sale earlier this year of half of BAE Systems' 20.5% stake in Swedish defense group Saab AB (SAAB-B.SK). Earnings before interest, tax and amortization, a measure closely watched by analysts, rose 14% to GBP1.11 billion from GBP978 million. Sales climbed 9% to GBP10.64 billion from GBP9.75 billion. According to consensus figures provided by the company, analysts had expected Ebita of GBP979 million and revenue of GBP10 billion. Basic earnings per share rose to 16.1 pence per share from a loss of 2.1 pence per share. The company raised its dividend 9% to 7 pence. BAE Systems counts the U.K., the U.S., Australia, India, Saudi Arabia, South Africa and Sweden as its "home" markets. It generates more than half of its sales in the U.S. and is the sixth-largest supplier to the U.S. Defense Department, the world's biggest spender on defense. Its shares Wednesday closed at 317 pence. They have fallen 10% in value since the start of 2010, largely on concerns about the outlook for defense spending as cash-strapped governments--especially the U.K.'s--look for ways to cut costs. The British government currently is carrying out a strategic defense and security review, which is due to report in the autumn. -By Jonathan Buck, Dow Jones Newswires; +44 (0)207 842 9237; [email protected] (END) Dow Jones Newswires July 29, 2010 02:42 ET (06:42 GMT)