BAE Systems posts 15 per cent profit rise

13-09-2006

BAE Systems has posted a 15 per cent rise in first-half profits following a strong increase in sales, with new orders for military equipment in the US helping to boost the company's performance.

Announcing results for the six months to June 30th, Europe's largest defence firm said that pre-tax profit for the period was £491 million, up from £426 million at the same time last year.

The UK-based company reported a 21 per cent increase in half-year sales to £8.2 billion, with sales helped by the £592 million worth of US orders BAE Systems received during the first six months of 2006, including work it is undertaking on behalf of the US army to refurbish and upgrade M2 Bradley and M113 fighting vehicles that are being used in Iraq.

In a statement, BAE Systems said that it expected "modest organic growth" across its defence businesses for the full year, by which time the company will have benefited from a complete year of trading by its newly-acquired US armoured vehicle maker, United Defence.

United Defence, which was bought by BAE Systems in June 2005, contributed sales of £777 million to the company's results during the first six months of the year.

"The good first half results underpin the outlook for the full year; that is for modest organic growth from our defence businesses together with a full year contribution from the former United Defence activities," BAE Systems said in the statement accompanying its half-year results.

Commenting on the results, BAE Systems chief executive Mike Turner said: "BAE Systems has delivered a good first half financial performance, with good programme schedule and cost execution right across the group."

The company said that it expected the contribution to profits made by Airbus to weaken over the second half, with BAE Systems having announced last week that it intends to sell its 20 per cent stake in plane maker for €2.75 million (£1.9 million).

Under the deal, Airbus' majority-owner, the European Aeronautic Defence and Space Company (EADS) will take control of the business outright.

BAE Systems, which first announced in April that it was considering selling its stake in Airbus, before fresh production delays hit the delivery of its new A380 super jumbo planes, hopes to net around €1.78 million (£1.2 million) from the sale and proposes to return up to £500 million to investors by re-buying their shares in the wake of the proposed disposal.

In today's statement, the company added that the resolution of a deficit in its UK pension schemes had been a "priority" for the firm over the fast half.

BAE Systems, which has increased contribution rates to the retirement schemes in order to address the deficit said that additional contributions for 2006 had mostly been completed during the first six months of the year.




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