BAE earnings warning sees shares plunge 10pc
BAE Systems has said today that 2014 earnings per share could drop by as much as 10 per cent.
Shares have dropped ten per cent on the news this morning.
The firm has been hit by budgetary pressures from the US, “challenging market conditions” and the lack of the one-off lift from its Typhoon jet contract with Saudi Arabia which 2013 saw.
This year, the company says it’s “pursuing opportunities in the Middle East and Asia Pacific” in a bid to address “changes in market conditions”.
Profit before tax plummeted 65 per cent to £422m from £1.2bn in 2012.
Operating profit fell 50 per cent to £806m from £1.6bn.
Lower US defence spending and increased weighted cost of capital meant a one-off goodwill impairment charge of £865m to BAE's US businesses, impacting headline profit figures.
Yesterday, the huge defence contractor announced it's finally agreed a new price on the Salam deal with Saudi, following years of difficult negotiations.
Sales increased two per cent in the year, to £18.2bn. BAE said it has an order backlog of £42.7bn, maintaining 2012 levels.
Ian King, chief executive, said:
A proactive focus on costs and enhanced competitiveness protected our margins across the majority of the business and we secured further contract wins in the US, Saudi Arabia and internationally.
We have started 2014 with good momentum with a settlement on Salam pricing, US budgets in place and a well-defined UK Maritime sector plan.
Budget pressures in some of the Group's larger markets are expected to prevail but BAE Systems has a broad-based portfolio. Our strong order backlog and robust balance sheet provide a solid basis for growth over the medium term.
A final dividend of 12.1p will see a total for the year of 20.1p per share – a three per cent increase from 2012.
