The UK's stable defence budget, courtesy of reforms brought about by former Investors Chronicle journalist, and current procurement secretary, Bernard Gray, meant BAE Systems' results were grounded in a renewed sense of security in its home defence market. That, combined with the Saudi Arabia signing a £1.6bn aircraft training contract, meant that questions over the US defence budget should not affect the company's ability to fund its generous dividend.
Diversifying revenue streams is the main priority and BAE achieved some success after nearly tripling order intake from outside the US and UK to £4.3bn. That will go some way to offset the risks in the US, where a fiscal squeeze could significantly affect the defence budget this year. Operationally, the increasingly pronounced shift away from boots on the ground meant that BAE's cyber intelligence division, which comprises its Detica acquisition, boosted revenues by 10 per cent to £714m, but higher levels of investment in the business meant operating profit was flat at £54m. The capital intensive platforms division, which makes everything from aircraft to field guns, boosted profts by a third to £410m buoyed by the Eurofighter and Type 45 contracts.
Management said a positive conclusion to the Saudi Salam negotiations should ensure modest EPS growth this year, but for now Investec forecasts full-year adjusted pre-tax profits of £1.74bn and EPS of 38.5 (2011: £1.82bn and 45.4p).
BAE SYSTEMS (BA.) | ||||
|---|---|---|---|---|
| ORD PRICE: | 307p | MARKET VALUE: | £10bn | |
| TOUCH: | 306-307p | 12-MONTH HIGH: | 335p | LOW:241p |
| DIVIDEND YIELD: | 6.2% | PE RATIO: | 8 | |
| NET ASSET VALUE: | 116p* | NET DEBT: | 33% | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 9.23 | 691 | 14.5 | 7.5 |
| 2012 | 8.33 | 655 | 14.5 | 7.8 |
| % change | -10 | -5 | - | +4 |
Ex-div: 17 Oct Payment: 30 Nov *Includes intangible assets of £11.2bn, or 345p a share | ||||
