BAE Systems sees marginal earnings growth after 2014 decline

Sales and underlying profits at BAE Systems fell in 2014 though the defence contractor met guidance and said its larger order backlog of £40.5bn continues to provide good visibility for the future.

The company also predicted marginal growth in underlying earnings in 2015, as it eased worries about defence spending in the UK and painted a positive outlook for the US market.

Sales totalled £16.64bn last year, down 8.5% on the £18.18bn generated in 2013, due to adverse currency movements, expected volume reductions in the land and armaments markets, and the previous year’s benefit from a one-off sale of Typhoon jets to Saudi Arabia.

Foreign exchange in particular had a £0.6bn negative impact on its top line.

Underlying operating profits declined 12% to £1.70bn from £1.93bn. Underlying earnings per share fell to 38p from 42p.

“In 2014, BAE Systems delivered a solid overall performance, in line with guidance,” said chief executive Ian King.

“Looking ahead, defence spending remains a high priority in a number of international markets. In the UK, we benefit from long-term contracts, notwithstanding continued pressure on public spending. We believe US budgets are now relatively stable, with some early indications of a modest improvement in 2016.”

BAE recommended a final dividend of 12.3p per share, taking the full-year payout to 20.5p, up 2% on 2013.

“In 2015, the group's underlying earnings per share are expected to be marginally higher than in 2014, including some reliance on anticipated naval and aircraft orders,” the company said.

The stock was down 2% at 511.5p in early trading on Thursday.