Profits slide at BAE Systems as cuts bite

DEFENCE group BAE Systems posted a worse-than-expected drop in first half profit and warned full-year earnings would be flat as it grapples with military spending cuts and problems with an Omani contract.

The company said profit before tax in the first six months of the year was £691m, down from £781m a year ago and below the £756m average analyst forecast.

The fall came after an anticipated 13% drop in headline sales to £9.2bn from £10.6bn a year ago but profits took a further knock from a charge of £160m taken on an Omani Offshore Patrol Vessel (OPV) contract.

A one-off benefit of £125m from a settlement agreement with Britain’s Ministry of Defence mitigated some of the damage.

The company, a major employer in Lancashire at two major aircraft manufacturing plants at Wharton and Salmesbury, has been trying to cut costs on the back of reduced orders from cash-strapped governments.

Earlier this month it said it was closing its historic Chadderton facility and has cut around 1,000 jobs at its factories in the region.