Predictably, the slump in defence spending both in America and the UK put a hole in profits at BAE Systems (BA.) last year. Failure to agree pricing on the Salam Typhoon programme with Saudi Arabia did, too. But the damage was not as bad as feared and a decision to buy back £1bn of shares over the next three years put a rocket under its share price even in the face of a heavy market sell-off.
Underlying cash profit fell 6 per cent to £1.89bn and adjusted EPS of 38.9p was just 2 per cent less than the previous year. Hefty prepayments from Saudi and Oman left BAE with £387m of net cash, too, and order intake from outside the US and UK more than doubled to £11.2bn. However, BAE still did 41 per cent of its business in the States last year and sales at the platform & services (US) division tumbled 14 per cent after a slump in demand for armoured vehicles – BAE predicts a further 10 per cent slide in 2013.
UK sales will jump 25 per cent, though, if BAE starts delivering planes to the Saudis again, generating “modest” growth in group earnings - UBS forecasts adjusted EPS of 43.9p this year. If not, and full sequestration does occur in the US on 1 March, BAE admits sales may plummet up to 15 per cent. It’s already slashing costs to protect the bottom line and thousands more jobs could go.
BAE SYSTEMS (BA.) | ||||
|---|---|---|---|---|
| ORD PRICE: | 349p | MARKET VALUE: | £ 11.3bn | |
| TOUCH: | 348-349p | 12-MONTH HIGH: | 367p | LOW: 268p |
| DIVIDEND YIELD: | 5.6% | PE RATIO: | 11 | |
| NET ASSET VALUE | 114p* | NET CASH: | £387m | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£bn) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 18.5 | 2.37 | 49.6 | 14.5 |
| 2009 | 22.0 | 0.27 | -1.9 | 16.0 |
| 2010 | 22.3 | 1.41 | 30.5 | 17.5 |
| 2011 | 19.2 | 1.47 | 37.0 | 18.8 |
| 2012 | 17.8 | 1.37 | 32.8 | 19.5 |
| % change | -7 | -7 | -11 | +4 |
Ex-div: 17 Apr Payment: 03 Jun *Includes intangible assets of £10.9bn, or 336p per share | ||||
