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NO SURPRISES IN BAE RESULTS

14 Feb 02. BAE Systems said on Thursday that the impact of the crisis in thecivil aerospace sector on Airbus would hit earnings this year as it reporteda fall in profits for 2001. The results were in line with expectations,taking into account the exceptional items, valued at £518m already announcedand a £177m interest charge.
The world’s fourth largest defence contractor, which owns a 20 per centstake in Airbus, European civil jet maker, said the problems at Airbuscombined with the completion of a number of export contracts elsewhere would”adversely impact” earnings in 2002 and “delay the resumption of growth…we previously envisaged.” The company stated a number of new business winssuch as JSF, Type 45 and Airbus 380. In addition BATTLESPACE would suggestthat the company is well placed to win part of the Skynet 5 programme as itis on both teams, to be down selected for the Watchkeeper UAV programme inthe autumn with Northrop Grumman, win the FSTA tanker bid and in addition iswell placed on the CVF Future Carrier bid where some observers suggest thatthe Thales team is talking with BAE regarding a single source contract witha large part going to the Thales team after the current assessment period.In addition the request for a huge $48bn in defense spending by PresidentBush will show up in the accounts from the 3rd Quarter onwards. BAE hasstated that the Nimrod programme has been stabilised but at the end of theday this programme is not expected to contribute to the bottom line, withsome unconfirmed reports, denied by the company, suggesting that problemsstill remain with the different dimensions of the individual airframesconcerned.
BAE’s (UK:BA: news) shares were steady at one o’clock up 2 pence at 328.5pon Thursday recovering from its opening losses when the shares hit 320p. Theshares are near the same level they traded at a year ago, before reaching a12-month high of 380p last August and a 12-month low of 280p on September21. See London markets report.
BAE expects growth to resume next year, lifted by its core defenceactivities.”The outlook for our defence businesses remains good with a number ofimportant new programmes set to contribute to our profitability,” thecompany said.BAE Systems said pre-tax profits last year fell to £70m from £179m in 2000,depressed by £518m in exceptional items. The one-off charges included a£370m writedown to cover the closure of its regional jet business announcedlast November, £53m in relation to integration costs of Marconi ElectronicsSystems and £95m in relation to defence group rationalisation costs.
The company’s loss per share rose to 5.1p from 1.5p the previous year.Despite the underlying losses, BAE increased its annual dividend to 9p pershare from 8.5p.
Pre-tax profit before exceptional and goodwill rose 26 per cent to £1.08bn(2000: £859m), above analysts’ expectations. The consensus forecasts werefor pre-tax profits of just over £1bn.
ABN Amro said the result was within expectations, but said the marketforecasts may have to fall by five to 10 per cent. ABN Amro kept its “add”recommendation on the company.
Airbus flagged the cancellation of orders by airlines after September 11 andthe resultant cutback in production for the current year last month. BAEsaid it expected a “much reduced contribution” from Airbus this year. Seerecent Airbus story. BAE, however, is well positioned to take benefit fromthe sharp rise in US defence spending as President Bush strengthens themilitary in his “war against terrorism”.
The UK company in recent years has established itself as one of the leadsuppliers to the Pentagon through acquisitions.
Sir Richard Evans, BAE chairman, said: “Despite difficult markets, we havedelivered on our plans and we have reshaped our commercial aerospaceactivities to remove risk and focus on the future growth we see in thecommercial jet market.
“We have

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