BAE Systems says H1 profit to fall but demand is high
BAE Systems
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16:40 26/04/24
BAE Systems said first-half profit would fall by about 15% because of Covid-19 disruption but that demand for its services was high and it expects much stronger trading in the second half.
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The FTSE 100 defence company said the Covid-19 crisis affected its business in the second quarter, which ends on 30 June, with sites in air and maritime and US commercial avionics most affected.
Sales in the first half will be broadly stable but profit will be affected by under-recovery of costs, lower volumes in high-margin commercial work and a worse sales mix. The company said it would update investors on its dividend with first-half results after scrapping its final payout for 2019.
At the UK-based air and maritime business disruption particularly affected cost recoveries and sales volumes, though this was partly offset by strong operational performance and cost controls. Product deliveries at the MBDA missiles business was hit because of the European location of factories.
In the US the controls and avionics business will be hit in the near term especially in commercial aftermarket and product delivery activities. The power and propulsion business has been affected by reduced demand for mass transit and trading has reduce for commercial cyber operations.
BAE said productivity had improved at its defence business, which makes up about 90% of revenue, and that many defence operations had well over 90% of employees working.
"Demand for our capabilities remains high with order intake in line with our original expectations for the year," BAE said. "As we return towards full operational tempo we expect the business performance in the second half to be much stronger than in the first half, assuming no new significant Covid-19 related disruptions."