BAE expects ‘good growth’ despite £44m loss

Jul 31 2009 by Andrew Mernin, The Journal

DEFENCE group BAE Systems yesterday said it continued to expect “good growth” for 2009 despite impairments causing it to report a first half loss.

BAE, which runs two plants on Tyneside, posted a £44m pre-tax loss, from a £791m profit last year, after taking non-cash hit relating to a previous acquisition and currency-related financial instruments.

But the firm, which has benefited in recent years from high levels of military spending, said sales in the six months to June 30 were 28% up on the same period last year at £9.94bn. On a like-for-like basis sales rose 6%.

Underlying earnings rose 19% to £979m from £820m.

“The group continues to expect good growth for 2009 as a whole, despite a lower level of land vehicle sales,” the firm said. It added that it expected to benefit from the continued weakness of sterling in the second half.

BAE said sales at its land and armaments division were expected to decline this year because the ``significant reduction” in deliveries for the US Mine Resistant Ambush Protected (MRAP) programme would be only partially offset by other activities.

The division has a 15-year contract with the Ministry of Defence (MoD), which covers around 80% of all general munitions used by UK armed forces.

Earlier this year the company announced plans to axe 50 jobs from its Newcastle plant on Scotswood Road. The plan for the restructuring of the vehicles business, which left the firm’s 300-strong Birtley workforce unaffected, also saw the closure of its Leeds, Guildford and Telford sites in April.

These job losses are expected to be complete by the middle of next year.

Meanwhile, the group yesterday said it was well positioned to deal with changes in US military spending policy as it has a stake in the production of the new F-35 Lightning II fighter jets.

BAE said it was a “major participant“ in the F-35 programme.