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BAE Systems profits from 'urgent orders' from Iraq and Afghanistan |
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Written by Mark Milner, Industrial Editor, Guardian.co.uk
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Thursday, 21 February 2008 |
BAE Systems chief executive, Mike Turner, warned that budget constraints
would hit UK defence spending but said the company was well positioned to cope
with any slowdown in the order programme.
Turner said it was no secret that the defence budget was under pressure and it
was "quite likely" that some big programmes could see their delivery times
extended.
"In the long term it's an issue the UK politicians have to decide where their
priorities are towards defence spending as opposed to other priorities."
There has been speculation that the need to curb defence spending could mean a
reduction in the number of the Astute submarines or Eurofighter Typhoon jets
which would be built.
Turner declined to be drawn into detail of possible spending restraints but
acknowledged there could be some changes to the programme to build two aircraft
carriers for the Royal Navy.
"We have talked to the MoD about what we can do to help with the challenge (of
budget pressures). It is up to them to make the decisions about what they can
afford. That is something we have taken into account in our business planning."
Turner, who steps down as chief executive in August, was speaking as BAE
announced a strong performance for 2007 and predicted another good performance
in the current year.
Sales rose by almost £2bn to £15.7bn, the order book increased by almost £7bn to
£38.6bn and underlying profits rose by more than fifth to £1.48bn.
"We have excellent forward visibility and a further year of good growth is
anticipated in 2008," the company said in a statement.
Analysts broadly welcomed the results and the upbeat statement, with several
attaching a buy recommendation to the stock.
BAE said that all its four business areas had shown good profits performance.
Today's figures showed a particularly strong performance by the land and
armaments business where underlying profits rose from £168m to £312m.
BAE has been building up its land systems business, buying United Defense
Industries and, more recently, Armor Holdings in the US. The purchases have
brought a string of multi-million orders for upgrades to armoured fighting
vehicles and for mine-resistant, ambush-protected vehicles. It is expected to
complete two smaller acquisitions, Tenix Defence and MTC Technologies this year.
In the UK the company said: "The British Army's operations in Afghanistan and
Iraq have resulted in numerous urgent operational requirement orders to enhance
FV340 and Warrior vehicles and many small and medium-calibre ammunition orders
in excess of £400m."
The company operates with what it terms six home markets: the UK, US, Saudi
Arabia, Sweden, Australia and South Africa and there are signs that it may seek
to build up a similar presence in India where it is developing several joint
ventures.
Despite recent acquisitions BAE retains a strong balance sheet and said it was
open to further opportunities.
The company has seen a number of arms deals come under scrutiny, including an
investigation by the Serious Fraud Office into a Saudi Arabian contract which
was halted by Tony Blair last year. The company has always denied any wrong
doing.
BAE said that underlying its performance "are principles of ethical conduct,
good governance, our values of policies and processes that guide the group's
business and the behaviour of its people, with a clear system of delegated
authority within a 'one company' approach."
Source: Guardian Unlimited, UK
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