‘Streamlined’ BAE Systems hitting its financial targets

Typhoon jets

BAE Systems which announced 750 job losses at its Warton and Salmesbury sites in Lancashire among a total of 2,000 redundancies across the UK in late 2017 is reaping the financial rewards of “streamlining” its operation.

Sales for the year ending December 31 increased by £0.6bn to £19.6bn, largely reflecting currency translation, while underlying EBITDA grew 4% to just over £2bn.

The group’s share of the pre-tax accounting pension deficit reduced to £2.2bn compared with December, 2016 when it stood at £3.6bn.

During the year the company’s US-based Electronic Systems business received orders on the F-35 Lightning II programme worth more than £333m.

There was also growing demand for its Advanced Precision Kill Weapon System (APKWS) laster-guided rockets totalling nearly £222m during the year, with more than 13,000 delivered.

BAE’s US-based Intelligence & Security business secured six contracts valued at more than £133m, increasing the Full-Motion Video Intelligence, Surveillance and Reconnaissance analysis support it provides to the US intelligence community.

It received a £306m contract for the third and final option for Low-Rate Initial Production of 48 M109A7 self-propelled howitzers and ammunition carriers under the Paladin Integrated Management programme.

The job losses across the company in November were said to have been prompted by a fall away in orders for the Typhoon aircraft, but in December, BAE Systems and the Qatar government entered into a contract, valued at approximately £5bn, for the supply of 24 of the fighter planes.

Alongside supplying the aircraft, the agreement provides for the supply of ground support to the Qatar Armed Forces and delivery of technical and pilot training in Qatar.

Meanwhile, the full £3.7bn production contract for the first batch of three Type 26 frigates was signed in June, with £2.8bn of order intake in the year. Production of the first ship, Glasgow, started in July.

Under the seven-boat Astute Class submarine programme, BAE received the full £1.4bn contract for the sixth submarine from the Royal Navy and the fourth boat, Audacious, was launched.

It also agreed contracts under the Saudi British Defence Co-operation Programme to provide ongoing support services to the Royal Saudi Air Force and Royal Saudi Naval Forces for a further five years to December 31, 2021.

In November, the 2017 UK triennial pension funding valuations were reconciled and, where necessary, deficit recovery plans were agreed with the trustees and certified by the scheme actuaries after consultation with the Pensions Regulator.

BAE chief executive Chris Woodburn said: “We delivered a good performance in 2017, consistent with our expectations for the year.

“We start 2018 with a streamlined organisation and a strong focus on programme execution, technology and enhanced competitiveness, providing a solid foundation for medium-term growth.

“With an improving outlook for defence budgets in a number of our markets, we are well placed to generate good returns for shareholders.”