BAE Systems is back on good terms with its oldest customer three years after cost over-runs on two key UK Ministry of Defence programmes threatened to sink the company.
The UK defence giant has also vowed to continue growing in the USA – its business there accounts for a quarter of its sales and was bolstered earlier this year with the acquisition of land systems specialist United Defense, making the Pentagon BAE’s biggest customer. BAE also says it will keep its 20% Airbus stake. The airframer’s buoyant performance has made it a cash cow for the UK company in recent years.
Last week BAE announced first half sales up 14% to £6.8 billion ($12.1 billion) and pre-tax profits up 35% to £426 million. Chief executive Mike Turner says programmes for the UK MoD, which include BAE’s share of the Eurofighter Typhoon, are “making a significant contribution to the bottom line”. Early in the decade, spiralling costs and delays on the MRA4 Nimrod maritime patrol aircraft and Astute submarine plunged BAE into loss and sent the share price plummeting.
Despite speculation that BAE intends to sell its Airbus stake to make defence acquisitions in the USA, Turner denies the company could invest the money more effectively. “At the present time with the returns we’re getting, why on earth would we want to take those away from our shareholders?” he says.
Following the United Defense acquisition, BAE has restructured its business into six new units (see chart). Turner says buying the manufacturer of Bradley armoured vehicles is “proving to have been an excellent move”. The takeover propelled BAE into the top six US defence contractors and chairman Dick Olver says the company’s aim is to become the “premier transatlantic aerospace and defence company”.
Source: Flight International
