18 Feb 10. BAE Systems plc Preliminary Announcement 2009
Results in brief
Underlying earnings3 per share
Basic (loss)/earnings per share4
Dividend per share
Cash inflow from operating activities
Net cash as defined by the Group6
18 Feb 10. The FT reported that BAE Systems announced a share buy-back programme of up to £500m on Thursday, a fortnight after saying it had struck a deal to end two corruption investigations.
The defence contractor also reported annual pre-tax profits of £282m, down from £2.37bn in 2008. The pre-tax profit figure was hit by
£973m of non-cash impairment charges that were largely due to the loss of a contract to supply vehicles to the US army, as well as a swing in finance costs related to accounting for currency hedges. Profits were also held back by £278m of exceptional charges that stemmed from a deal struck earlier this month to end two corruption probes. To settle an investigation by the US Department of Justice, the company has agreed to pay a fine of $400m (£256m) and plead guilty to one charge of conspiring to make false statements to the US government in connection with certain regulatory filings and undertakings. In the UK, it also agreed to pay a £30m penalty and plead guilty to a minor accounting offence to end an investigation by the Serious Fraud Office.
Underlying earnings before interest, tax and amortisation – one of BAE’s preferred performance measures – increased 17 per cent to £2.22bn. A final dividend of 9.6p has been declared, making a total of 16p for the year, an increase of 10 per cent.
“BAE Systems has again delivered a strong set of financial results. Our well-defined and proven global strategy is serving the business and our shareholders well. These results show growth underpinned by a strong balance sheet and a record order book. With our broad international business, and with opportunities to further develop our position in the key growth areas of combat aircraft, Readiness and Sustainment and security, we have a strategy focused on long-term sustainable growth.
“BAE Systems is a broadly-based and resilient business with a large order book, agile in developing the business and adapting its capabilities in anticipation of changing requirements.” Ian King, Chief Executive BAE Systems
Whilst the turnover and order books remain robust, there are two problem areas in BAE’s strategy. One is the continuing write downs on the Armor Holdings acquisition now £1bn of the $3.5bn paid for with Airbus shares, with not much growth to come, as admitted by the Company from this area. Looking ahead 10 years, one wonders if the money would have been safer in Airbus?
The other area is the U.K. where BAE has continued its key-systems strategy and now dominates the U.K. industry. But, again, looking ahead 10 years, there is the continued worry over the Land Systems business and lack of orders, where FRES and WCSP are critical to the survival of this segment.
Looking at the air side, rumours abound that, due to the U.K. government’s refusal to support Typhoon Tranche 3 that most of the key R&D work on the next phase of Typhoon will go abroad to EADS and Warton will be closed, thus bringing the curtain down on jet fighter production in the U.K. Nimrod still hangs in the balance, but there will be no export orders for this and a 9 aircraft order will hardly bring in large support revenues. Harrier support will end soon and Tornado will hang on for a few more years with UAVs filling some of the gap. Shipbuilding will almost certainly end up in an EADS-like European conglomerate.
Al Yamamah continues to generate huge revenues for the Company and would be a juicy bite for any Company looking to acquire