BAE Systems 2013 profits up but sees decline in future earnings

20th Feb 2014 07:05

Military hardware manufacturer BAE Systems has reported a three percent increase in earnings before interest, tax, and amortisation (EBITA) to 1.9bn pounds for the year to December 31st 2013, but warned that profits in 2014 could fall by up to 10 per cent on the back of pressures on US government spending.BAE said once it factored in the one-off benefit of a pricing settlement with Saudi Arabia on a Typhoon fighter jet deal combined with "continuing US budget pressures" earnings per share would fall by 5% -10% next year. Shares in the company fell sharply on the news.Sales were up £18.1bn from £17.9bn in 2012 and the full-year dividend has been lifted to 20.1p a share, an increase of 3%.Chief Executive Ian King said the result was achieved against a backdrop of reduced government spending in BAE's main markets. He warned that that budget pressures in some of the group's larger markets "are expected to prevail" but added that its "strong order backlog and robust balance sheet provide a solid basis for growth over the medium term".BAE on Wednesday said it had settled the pricing on its 72-jet Salam deal - part of the massive Al-Yamamah deal. The talks had been going for three years and in October the company warned that any further delay would take 6p-7p off 2013 earnings per share.A settlement was vital given the collapse of a £6bn Typhoon deal with the United Arab Emirates (UAE) two months ago.King said BAE's order backlog of £42.7bn had been held at 2012 levels with a non-UK/US order intake of £9.3bn. Net debt at year-end was £699m. There was also a non-cash goodwill impairment of £865m in its US businesses, due to increased weighted average cost of capital and taking into account lower US defence spending, he added."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," King said.He admitted he was "disappointed" with the UAE decision not to buy the Typhoons, adding that the jet had "fully met the customer's exacting requirements"."We continue to pursue a number of opportunities in international markets. Building on the successful sale of Typhoon and Hawk aircraft in Saudi Arabia and Oman, a number of military aircraft-related opportunities have been identified," King said.BAE shares were down 35.1p, or 8%, to 401.7p at 8.10. FP