Proactiveinvestors United Kingdom BAE Systems https://www.proactiveinvestors.co.uk Proactiveinvestors United Kingdom BAE Systems RSS feed en Tue, 23 Jul 2019 21:14:36 +0100 http://blogs.law.harvard.edu/tech/rss Genera CMS action@proactiveinvestors.com (Proactiveinvestors) action@proactiveinvestors.com (Proactiveinvestors) <![CDATA[News - BAE Systems gets one-off benefit from overseas tax deal ]]> https://www.proactiveinvestors.co.uk/companies/news/224125/bae-systems-gets-one-off-benefit-from-overseas-tax-deal-224125.html BAE Systems PLC (LON:EIG) said it will see an extra 5p of earnings per share thanks to a one-off tax benefit.

The FTSE 100 defence contractor said that as a result of unspecified agreements regarding “overseas tax matters” a one-off non-cash benefit has been recognised to 2019 earnings per share.

However, BAE also made a provision for estimated exposure to the UK's Controlled Foreign Company regime, following the European Commission’s decision in April that concluded the regime partially represents state aid.

The net earnings per share benefit arises in addition to the current 2019 underlying earnings per share guidance.

BAE said neither item is “not expected to have a material impact on the underlying tax rate in future years”.

Shares in the Company were little moved at 518.4p in early trading on Thursday.

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Thu, 18 Jul 2019 08:57:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/224125/bae-systems-gets-one-off-benefit-from-overseas-tax-deal-224125.html
<![CDATA[News - BAE upgraded to Equal Weight by Barclays as it backs firm as “defensive income investment” ]]> https://www.proactiveinvestors.co.uk/companies/news/212605/bae-upgraded-to-equal-weight-by-barclays-as-it-backs-firm-as-defensive-income-investment-212605.html BAE Systems PLC (LON:BA.) has been upgraded to Equal Weight from Underweight by Barclays as analysts said the firm was supported as “a defensive income investment” and increased their earnings per share (EPS) estimates for 2019 and 2020 by 4% and 11% respectively.

In a note, the bank said a “material” order book growth forecast for 2018, an improving cash profile from “longer-cycle phasing” in 2020, a 5% dividend yield, and an “undemanding value” with a 20% discount to US peers all backed the FTSE 100 defence firm as an income stock.

READ: BAE Systems exposed to possible defence spending constraints after Brexit, says UBS

Analysts added that earnings growth and cash generation were “central for price momentum for BAE” and were supported by mid-single-digit year-on-year revenue growth with a 20-year long cycle visibility.

The bank also said execution discipline on the ramp-up of franchise programmes such as combat vehicles, F35 jets, classified projects, and UK Maritime “should drive EPS growth”, modelling a 9% EPS compound annual growth rate (CAGR) for the three years to the end of 2021.

READ: BAE Systems reiterates forecast for flat 2018 earnings in anodyne trading update

Analysts also upped their target price for BAE to 550p from 497p, saying they had “more bullish growth and margin expectations” for the group’s Electronic Systems segment and the Platforms & Services business in the US.

The outlook from Barclays was more upbeat than a previous take from Swiss Bank UBS in December when the stock was cut to Neutral from Buy amid concerns Brexit-related defence spending cuts in the UK could hit its performance.

In lunchtime trading Tuesday, BAE shares were up 1.1% at 502.2p.

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Tue, 15 Jan 2019 12:47:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/212605/bae-upgraded-to-equal-weight-by-barclays-as-it-backs-firm-as-defensive-income-investment-212605.html
<![CDATA[News - BAE Systems exposed to possible defence spending constraints after Brexit, says UBS ]]> https://www.proactiveinvestors.co.uk/companies/news/210672/bae-systems-exposed-to-possible-defence-spending-constraints-after-brexit-says-ubs-210672.html BAE Systems PLC (LON:BA) shares fell on Thursday after UBS downgraded the stock to ‘neutral’ from ‘buy’ and cut its target price to 505p from 720p, citing a challenging UK economic outlook as Brexit looms.

UBS said the grim UK economic outlook will inevitably impact the government's defence spending, which could hit BAE’s performance.

Execution issues with US Maritime and Platforms & Services

The delayed UK defence spending review is expected in March or April next year but could be postponed in the event of a general election.

“With circa 28% of its profits from the UK in 2017, we consider BAE to have exposure to budget constraints, including limited wriggle room to rationalise costs and improve margins: in the context where the UK is willing to launch new programmes, it will be hard to argue for a reduced work force,” UBS said.

READ: BAE Systems maintains earnings guidance after mixed first-half

UBS lowered its estimates for earnings per share for the FTSE 100 defence firm on the back of slower earnings growth in the US platforms and maritime divisions and further investments needed for UK air activities.

“We model earnings growing to 48.7p in 2020 versus consensus at 50.40p, and free cash flow down to c.£1.13bn (from £1.49bn) with limited growth opportunity, and downside pressure from investments prepayments un-winding.”

In the first half, the company said there were some disappointments on certain long-standing programmes in US Maritime and Platforms & Services due to execution issues.

The group said it had taken steps to strengthen management and improve programme execution.

BAE could be less well placed than peers, says UBS

UBS expects the 2019/20 financial year to remain challenging, given the steep ramp-up planned for the armoured multi-purpose vehicle, the M109A7 self-propelled howitzer and amphibious combat vehicle for the US Army.

The broker said its analysis highlights the ground BAE has lost in terms of US government contract obligations versus US peers of similar size.

“The risk is BAE could be less well placed than peers and less able to capture the benefits of an enhanced US defence budget,” UBS said.

Shares fell 3.6% to 443p in morning trading.

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Thu, 06 Dec 2018 12:10:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/210672/bae-systems-exposed-to-possible-defence-spending-constraints-after-brexit-says-ubs-210672.html
<![CDATA[News - BAE Systems reiterates forecast for flat 2018 earnings in anodyne trading update ]]> https://www.proactiveinvestors.co.uk/companies/news/208821/bae-systems-reiterates-forecast-for-flat-2018-earnings-in-anodyne-trading-update-208821.html BAE Systems PLC (LON:BA.) has reiterated its forecast for earnings in 2018 with underlying earnings per share expected to be in line with the full-year underlying earnings per share for 2017.

In an anodyne trading update, the FTSE 100-listed defence company said its programmes to build ships and fighter jets for the UK, and combat vehicles and other equipment in the US were progressing.

READ: BAE Systems maintains earnings guidance after mixed first-half

Looking at international markets, BAE said the £5bn Qatar Typhoon and Hawk programme, effective in September, has stabilised Typhoon fighter jet production into the next decade and also extends Hawk trainer jet production.

The group added: “Whilst a degree of geopolitical turbulence exists, the potential pipeline for Typhoon remains positive with opportunities both with partner nations and through exports.”

The firm, which makes 16% of its annual sales from selling Typhoon fighter jets and other arms to Saudi Arabia, did not mention the country in its trading statement.

Companies have come under pressure for doing business with Saudi Arabia in the wake of the killing of Saudi journalist Jamal Khashoggi in the Saudi consulate in Turkey last month.

In response to the fairly uninspiring trading update, BAE shares were down 0.2% at 532.40p in morning trading on Thursday.

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Thu, 08 Nov 2018 09:29:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/208821/bae-systems-reiterates-forecast-for-flat-2018-earnings-in-anodyne-trading-update-208821.html
<![CDATA[News - BAE Systems shares take-off as Morgan Stanley ups rating to ‘overweight’ from ‘equal-weight’ ]]> https://www.proactiveinvestors.co.uk/companies/news/202743/bae-systems-shares-take-off-as-morgan-stanley-ups-rating-to-overweight-from-equal-weight-202743.html Morgan Stanley gave a boost to BAE Systems PLC (LON:BA.) on Monday, upgrading its rating for the blue-chip defence and civilian aircraft contractor to ‘overweight’ from ‘equal-weight’ following recent first-half results.

The US investment bank also hiked its target price for the FTSE 100-listed firm to 750p from 550p, with the stock currently changing hands at 633.60p each, up 1.3% on Friday's close.

READ: BAE Systems maintains earnings guidance after mixed first-half

In a note to clients, Morgan Stanley’s analysts said: “The defence spending backdrop is supportive, contract wins have improved visibility and we think earnings growth prospects are now higher than at any point in the last five years.”

They added: “The multiple has been slow to reflect this, and factoring in longer-term growth leads us to increase our target to 750p.”

BAE’s interims, posted on August 1, were a mixed bag, with strong performances in some areas offset by disappointments in others.

The group said its underlying earnings per share (EPS) for the full-year would be on a par with 2017 after it posted underlying EPS of 19.8p in the first half of 2018, down from 20.2p in the first half of last year.

Its sales at £8.8bn, were down 3% year-on-year on a constant currency basis, as a result of reduced production activity for the Typhoon fighter jet.

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Mon, 13 Aug 2018 10:10:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/202743/bae-systems-shares-take-off-as-morgan-stanley-ups-rating-to-overweight-from-equal-weight-202743.html
<![CDATA[News - BAE Systems maintains earnings guidance after mixed first-half ]]> https://www.proactiveinvestors.co.uk/companies/news/202000/bae-systems-maintains-earnings-guidance-after-mixed-first-half-202000.html Interim results from defence giant BAE Systems PLC (LON:BA.) were a mixed bag, with strong performances in some areas offset by disappointments in others.

The group said underlying earnings per share (EPS) for the full-year would be on a par with 2017 after it posted underlying EPS of 19.8p in the first half of 2018, down from 20.2p in the first half of last year.

READ: BAE Systems secures £20bn contract to build frigates for Australian navy

Underlying earnings (EBITA) of £874mln for the first half of the year were down from £967mln in the same period of 2017 but ahead of the £860mln predicted by Deutsche Bank.

Sales at £8.8bn, were down 3% year-on-year on a constant currency basis, as a result of reduced Typhoon production activity.

The order intake number declined to £9.7bn from £10.65bn the year before but the order backlog improved to £39.7bn from £38.7bn at the end of 2017. The order backlog does not yet include the initial contract on the SEA 5000 programme, or the contract for the supply of Typhoon and Hawk aircraft to Qatar, both of which are expected in the second half of the year.

Net debt deepened to £1.92bn at the end of June from £1.74bn a year earlier but the group's share of the pension deficit narrowed to £3.0bn from £3.9bn at the end of 2017.

The interim dividend was nudged up to 9.0p from 8.8p the previous year. With the shares trading at 648.6p (down 0.7% on the day), the shares are currently yielding 3.39%.

BAE Systems H1 like-for-like revenues -5% YoY, op. profit -11%, dividend +2%, order book +2.5% to £39.7bn, profits guidance unchanged; some H1 execution issues on US programmes to be covered by higher Electronic Systems earnings.

— Mike van Dulken (@Accendo_Mike) August 1, 2018

"We have made good progress in the first half strengthening the outlook through significant wins on the Australian SEA 5000 and US Amphibious Combat Vehicle programmes. These, combined with the launch of the UK Combat Air Strategy, provide good momentum into the second half and beyond,” said Charles Woodburn, the chief executive of BAE.

“Operationally, there have been some notably strong performances in our Electronic Systems and Air sectors, but also some disappointments on certain long-standing programmes in Maritime and Platforms & Services (US), where we have now taken steps to strengthen management and improve programme execution. In this transition earnings year, our group earnings guidance is maintained and, with a large order book and a positive outlook for defence budgets in a number of key markets, we have a strong foundation to deliver growth and sustainable cash flow," Woodburn said.

BAE Systems to upgrade US Army Black Hawk navigation systems https://t.co/HzzIP3m2Im

— UK Defence Journal (@UKDefJournal) August 1, 2018 ]]>
Wed, 01 Aug 2018 09:21:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/202000/bae-systems-maintains-earnings-guidance-after-mixed-first-half-202000.html
<![CDATA[News - BAE Systems secures £20bn contract to build frigates for Australian navy ]]> https://www.proactiveinvestors.co.uk/companies/news/199842/bae-systems-secures-20bn-contract-to-build-frigates-for-australian-navy-199842.html BAE Systems PLC (LON:BA.) has landed A$35bn (£20bn) contract to build frigates for the Australian navy, the UK defence company confirmed on Friday.

The group beat rival bids from Italy’s Fincantieri and Spain’s Navantia for the contract. Under the agreement, BAE will design and build nine Hunter class frigates for the Australian navy, replacing the current Anzac class frigates.

The company said it expects to begin negotiations with Australia’s Department of Defence on the initial design of the vessels by year end. Production of the first ship is expected to start in early 2020 in South Australia.

READ: BAE Systems awarded £2.4bn defence contracts for work on submarine programmes

Prime Minister Theresa May said the deal underlined Britain’s close relationship with Australia and was an example of the kind of trade deals the UK can secure after Brexit.

“The sheer scale and nature of this contract puts the UK at the very forefront of maritime design and engineering and demonstrates what can be achieved by UK industry and government working hand-in-hand,” she said.

“We have always been clear that as we leave the EU we have an opportunity to build on our close relationships with allies like Australia. This deal is a perfect illustration that the government is doing exactly that,” she said.

During the building process of the frigates, which will specialise in anti-submarine warfare, BAE will be put in charge of Australian state-owned shipbuilder ASC Shipbuilding in Adelaide. ASC Shipbuilding will become a subsidiary of BAE.

“This ensures BAE Systems is fully responsible and accountable for the delivery of the frigates and ensures the work will be carried out by Australian workers and create Australian jobs,” said Australian Prime Minister Malcolm Turnbull.

BAE shares were up almost 3% to 648.6p shortly before close of play in London on Friday.

--Updates for share price--

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Fri, 29 Jun 2018 07:27:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/199842/bae-systems-secures-20bn-contract-to-build-frigates-for-australian-navy-199842.html
<![CDATA[News - BAE Systems awarded £2.4bn defence contracts for work on submarine programmes ]]> https://www.proactiveinvestors.co.uk/companies/news/196926/bae-systems-awarded-24bn-defence-contracts-for-work-on-submarine-programmes-196926.html BAE Systems PLC (LON:BA) has been awarded two contracts worth a combined £2.4bn with the Ministry of Defence (MoD) to work on submarine programmes.

The government awarded BAE with a £1.5bn contract to deliver the seventh and last of the Astute class submarines, to be named Agincourt, the company said in a statement.

BAE landed a further £900mln contract for the construction of the next phase of the Dreadnought submarine programme to replace the four Vanguard submarines that make up the UK’s nuclear fleet.

"This multi-billion-pound investment in our nuclear submarines shows our unwavering commitment to keeping the UK safe and secure from intensifying threats,” said defence secretary Gavin Williamson.

"HMS Agincourt will complete the Royal Navy’s seven-strong fleet of hunter-killer attack subs, the most powerful to ever enter British service, whilst our nuclear deterrent is the ultimate defence against the most extreme dangers we could possibly face."

The contracts will cover work over the next year.

READ: BAE Systems maintains forecast for flat 2018 earnings, sees good prospects for adding to its order backlog

The Agincourt is scheduled for handover to the Royal Navy in the mid-2020s while the Dreadnoughts are not due to enter service until the 2030s.

Construction on the first of four new Dreadnought submarines started in October 2016.

The first three submarines in the Astute class are already in service with the Royal Navy. 

Shares in BAE were little changed at 633p in afternoon trading.

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Mon, 14 May 2018 13:16:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/196926/bae-systems-awarded-24bn-defence-contracts-for-work-on-submarine-programmes-196926.html
<![CDATA[News - BAE Systems maintains forecast for flat 2018 earnings, sees good prospects for adding to its order backlog ]]> https://www.proactiveinvestors.co.uk/companies/news/196705/bae-systems-maintains-forecast-for-flat-2018-earnings-sees-good-prospects-for-adding-to-its-order-backlog-196705.html BAE Systems PLC (LON:BA,) has maintained its forecast for flat earnings this year and said there were good prospects for adding to its order backlog later this year.

In a statement to be delivered to its annual general meeting on Thursday, the FTSE 100-listed defence company its “outlook remains unchanged with 2018 underlying earnings per share expected to be in line with 2017.”

READ: BAE Systems PLC takes off as Berenberg upgrades its rating to ‘buy’ from 'hold'

The group added that it has opportunities to win contracts in the US for amphibious combat vehicles and in Australia to help build military ships in 2018.

The company added that negotiations with Saudi Arabia over the terms of its intention to buy 48 Typhoon fighter jets were progressing.

Charles Woodburn, BAE’s chief executive said: "We have a large order backlog and strong franchises with good prospects to further these positions in the coming months.

“The new organisation structure is now established to drive our strategic priorities to deliver both in year targets and to provide a solid foundation for medium term growth."

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Thu, 10 May 2018 07:32:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/196705/bae-systems-maintains-forecast-for-flat-2018-earnings-sees-good-prospects-for-adding-to-its-order-backlog-196705.html
<![CDATA[News - BAE Systems PLC takes off as Berenberg upgrades its rating to ‘buy’ from 'hold' ]]> https://www.proactiveinvestors.co.uk/companies/news/195658/bae-systems-plc-takes-off-as-berenberg-upgrades-its-rating-to-buy-from-hold--195658.html BAE Systems PLC (LON:BA) shares rose on Tuesday as Berenberg upgraded its rating for the FTSE 100-listed firm to ‘buy’ from ‘hold’ and increased its price target to 700p from 605p, with the company ‘set to enter a phase of consistent growth.’

In a note to clients, analysts at Berenberg said the blue-chip defence contractor's fundamentals are improving after many years of lacklustre earnings development.

READ: BAE Systems sees 2017 sales and underlying earnings rise, but guides for flat earnings in 2018

They said: “BAE’s growth outlook is now much improved, and the defence market remains supportive, factors that are not reflected in the current valuation, in our view.”

The analysts added: “We expect the shares to outperform over the next year driven by a higher rating on this stronger growth profile.”

They said they estimate that 75% of BAE's group revenues will be in growth mode from 2019, underpinned by key programmes and margin expansion of 70 basis points over the next five years due to the mix of strong growth in Electronic Systems and improvement in other segments.

They also expect BAE's US business will be a key growth driver over the coming years, supported by rising US defence spending and strong programme positioning.

In late morning trading, BAE’s shares were up 1.9% to 617.0p.

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Tue, 24 Apr 2018 10:36:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/195658/bae-systems-plc-takes-off-as-berenberg-upgrades-its-rating-to-buy-from-hold--195658.html
<![CDATA[News - BAE Systems loses out to Rheinmetall on A$3.2bn Aussie order ]]> https://www.proactiveinvestors.co.uk/companies/news/193149/bae-systems-loses-out-to-rheinmetall-on-a32bn-aussie-order-193149.html BAE Systems PLC (LON:BA) has lost out to Rheinmetall on a A$3.15bn order for armoured reconnaissance vehicles.

The Australian defence ministry said it would enter exclusive final negotiations with Rheinmetall for the provision of 211 Boxer multi-role armoured vehicles.

The vehicles will be built by workers in Australia using Australian steel. The project should create up to 1,450 jobs, the defence ministry said.

Shares in BAE were down 0.65 at 577.6p in a rising market.

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Wed, 14 Mar 2018 10:39:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/193149/bae-systems-loses-out-to-rheinmetall-on-a32bn-aussie-order-193149.html
<![CDATA[News - BAE Systems lagging peers, says JP Morgan Cazenove, which downgrades to 'underweight' ]]> https://www.proactiveinvestors.co.uk/companies/news/192113/bae-systems-lagging-peers-says-jp-morgan-cazenove-which-downgrades-to-underweight--192113.html BAE Systems plc (LON:BA) is in the cross hairs of heavyweight broker JP Morgan Cazenove, which says the FTSE 100 defence and aerospace giant is lagging behind peers and has downgraded the stock.

BAE is cut to 'underweight' by the broker and the target put at 550p from 555p previously.

Shares are today down 2.25% at 571.87p, making it among the top five Footsie losers.

READ: BAE Systems sees 2017 sales and underlying earnings rise, but guides for flat earnings in 2018

Yesterday, the firm posted an increase in sales and earnings for full-year 2017 but said it expected 2018 underlying earnings to be flat, which was not what analysts had forecast.

"BAE’s lacklustre guidance for 2018 EBITA and FCF (free cash flow )suggests that, for the foreseeable future at least, it will continue to underperform its peers in US defence and in European civil aero," said JP Morgan analyst David Perry.

He reckons the US portfolio can grow over 5% per year for several years  but UK sales look flat at best and defence export sales are unpredictable by nature.

"BAE needs a new export Eurofighter (EF) order to fill a hole in its delivery schedule from 2019-21," notes the analyst.

Based on channel checks, the broker says it worries that Saudi Arabia won't order EFs (Eurofighter) in the coming year, he added.

BAE expects to generate free cash flow of £1bn per year on average in 2017-18. It pays out £700mln a year in dividends, leaving little left over for higher investment, M&A, or buybacks, said Perry.

"Many of BAE’s peers are currently making major strategic acquisitions and we fear BAE will fall further behind these peers."

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Fri, 23 Feb 2018 10:33:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/192113/bae-systems-lagging-peers-says-jp-morgan-cazenove-which-downgrades-to-underweight--192113.html
<![CDATA[News - BAE Systems sees 2017 sales and underlying earnings rise, but guides for flat earnings in 2018 ]]> https://www.proactiveinvestors.co.uk/companies/news/192036/bae-systems-sees-2017-sales-and-underlying-earnings-rise-but-guides-for-flat-earnings-in-2018-192036.html BAE Systems PLC (LON:BA) has reported an increase in sales and earnings for full-year 2017 but said it expects its 2018 underlying earnings to be flat sending its shares lower

The FTSE 100-listed defence and aerospace company saw its 2017 group sales increase to £19.63bn, up from £19.02bn in 2016, helping underlying earnings (EBITA) grow to £2.034bn from £1.905bn the previous year.

READ: BAE Systems upgraded to 'buy' by UBS but QinetiQ and Meggitt are hit by downgrades

The company said the increase in annual earnings was helped by an increase in production of the F-35 combat aircraft, with the programme receiving orders worth over £333mln.

It also highlighted growing demand for its Advanced Precision Kill Weapon System (APKWS™) laser-guided rockets also helped drive an increase in earnings, with awards totalling nearly £222mln over the period.

The company also said it had seen a reduction in net debt to £752mln from £1,542mln in 2016, and raised its dividend per share by 2% to 21.8p.

Looking to 2018, BAE said it expected earnings to be flat, reflecting organisational changes plus the adoption of a new accounting standard. That guidance was below analyst forecasts, which predicted earnings to grow by 2% in 2018.

In early morning trading, BAE shares were down 2.7% at 585.2p.

Analyst comment

In a note to investors, Beaufort Securities reiterated its “Buy” rating for BAE, citing a solid order backlog and an encouraging global economic trend with higher oil prices as indicators for positive momentum going forward.

The broker added that an “improving outlook” for defence budgets in a number of BAE’s markets was also a “good upside”.

-- Adds broker comment --

 

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Thu, 22 Feb 2018 08:00:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/192036/bae-systems-sees-2017-sales-and-underlying-earnings-rise-but-guides-for-flat-earnings-in-2018-192036.html
<![CDATA[News - BAE Systems upgraded to 'buy' by UBS but QinetiQ and Meggitt are hit by downgrades ]]> https://www.proactiveinvestors.co.uk/companies/news/189808/bae-systems-upgraded-to-buy-by-ubs-but-qinetiq-and-meggitt-are-hit-by-downgrades-189808.html UBS has been reviewing the engineering sector and has taken a shine to BAE Systems PLC (LON:BA) but turned bearish on QinetiQ Group PLC (LON:QQ).

Abandoning its neutral position to upgrade BAE to 'buy', the Swiss bank said the current valuation is undemanding following the pension agreement and confirmation of the Qatar order.

READ BAE Systems and Qatar sign around £5bn contract for the supply of Typhoon fighter aircraft READ BAE Systems' shares soar as UK pension funds top-up proves less than expected

UBS has increased its target price from 655p to 670p and said that using the actuarial UK deficit of around £2.1bn instead of the accounting deficit of £5.2bn in its net debt calculation would add around 90p to its price target.

“We think BAE’s end market exposure is amongst the most attractive in the sector; the company is exposed to growing defence budgets in the US (36% of sales) and Saudi Arabia (21%). In the US, the NDAA has authorised US$634bn base defence spending for 2018 (+15% YoY), while the Saudi government has approved a 10% increase in the 2018 budget to US$56bn. In this context, we view BAE’s valuation as undemanding,” UBS said.

“Capitalising current earnings accounts for 96% of the current equity value, implying the market attributes little value to future growth prospects,” it added.

Meanwhile, it expects a UK defence spending review in late 2018 to result in capability cuts, but believes the risk to BAE is limited, as BAE's UK activities are “longer cycle”.

“We expect the MoD [Ministry of Defence] to reduce shorter cycle spend in the run-up to the review, but think long-term commitments may increase in the context of budget uncertainty. Although investors appear concerned about the maritime business, this accounted for just £251m EBITA [underlying earnings] in 2016 (13% of group). We assume this falls to zero in our downside scenario and still arrive at a valuation of 505p,” UBS explained.

The shares currently trade at around 576p.

“Maritime sales are split out under the new divisional structure, facilitating investors’ appreciation about the worst-case scenario to earnings,” it added.

READ: UBS upbeat on European defence sector on US valuation gap; upgrades rating for QinetiQ

Fellow defence stock QinetiQ is less likely to emerge unscathed from any UK spending review and is downgraded from 'neutral' to 'sell' with the price target declining to 215p from 226p.

QinetiQ is heavily exposed with the Ministry of Defence accounting for two-thirds of revenues.

The bank sees particular risks to the shorter-cycle Cyber, Information and Training business, which accounts for 13% of group sales.

It is forecasting slower revenue growth from the second half of this year.

Over the longer term, it thinks the need for the MoD to appear to increase efficiency could encourage further outsourcing, which might potentially benefit QinetiQ, but probably not this year.

Finally, it has also downgraded aerospace company Meggitt PLC (LON:MGGT) to 'sell' from 'neutral' and chopped the target price to 440p from 485p.

UBS believes original equipment manufacturers are likely to cut back on outsourcing, and Meggitt is heavily exposed to this trend.

Previous attempts to raise prices have resulted in customers seeking alternative suppliers, UBS claims, highlighting Meggitt's vulnerability to dual sourcing.

Shares in Meggitt were down 3.8% at 473.5p on the downgrade; QinetiQ took a bigger hit, shedding 5.2% at 215.1p.

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Wed, 10 Jan 2018 13:17:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/189808/bae-systems-upgraded-to-buy-by-ubs-but-qinetiq-and-meggitt-are-hit-by-downgrades-189808.html
<![CDATA[News - BAE Systems and Qatar sign around £5bn contract for the supply of Typhoon fighter aircraft ]]> https://www.proactiveinvestors.co.uk/companies/news/188558/bae-systems-and-qatar-sign-around-5bn-contract-for-the-supply-of-typhoon-fighter-aircraft-188558.html BAE Systems PLC (LON:BA.) and the Government of the State of Qatar have entered into a contract, valued at approximately £5bn, for the supply of Typhoon aircraft to the Qatar Emiri Air Force along with a bespoke support and training package.

The contract provides for 24 Typhoon aircraft with delivery expected to commence in late 2022.

READ: BAE Systems' shares soar as UK pension funds top-up proves less then expected

BAE is the prime contractor for both the provision of the aircraft and the agreed arrangements for the in-service support and initial training.

Charles Woodburn, BAE Systems’ chief executive said "We are delighted to begin a new chapter in the development of a long-term relationship with the State of Qatar and the Qatar Armed Forces, and we look forward to working alongside our customer as they continue to develop their military capability".

READ: BAE heads lower as it announces plans to cut almost 2,000 jobs

At a ceremony in Doha, UK defence minister, Gavin Williamson and Qatari minister of state for defence Affairs, Khalid bin Mohammed al Attiyah, oversaw the signing of a deal which the British minister called a "massive vote of confidence, supporting thousands of British jobs and injecting billions into our economy".

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Mon, 11 Dec 2017 07:37:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/188558/bae-systems-and-qatar-sign-around-5bn-contract-for-the-supply-of-typhoon-fighter-aircraft-188558.html
<![CDATA[News - BAE Systems' shares soar as UK pension funds top-up proves less then expected ]]> https://www.proactiveinvestors.co.uk/companies/news/188026/bae-systems-shares-soar-as-uk-pension-funds-top-up-proves-less-then-expected-188026.html BAE Systems PLC (LON:BA) saw its shares jump today after it reached an agreement to revise the funding arrangements for its UK pension scheme which will see it increase annual contributions by less than some analysst had expected. 

It also separately announced that a change to a new accounting standard is not expected to have a material impact on the group’s results for 2018 and beyond.

READ: BAE heads lower as it announces plans to cut almost 2,000 jobs

In a statement, the FTSE 100 listed defence company said that after consultation with the UK Pensions Regulator, it has reached an agreement with the trustee boards of its UK defined-benefit pension schemes on the 2017 triennial funding valuations and deficit recovery plans.

As part of the agreement, the group said its annual deficit recovery payments will increase in 2018 to around £220mln from £205mln currently, and deficit contributions will then increase in line with any percentage growth in dividend payments made by the company.

At the end of March, BAE said its UK defined-benefit pension schemes had a combined deficit of £2.1bn which, it added, was "broadly similar" to the position at the last triennial review in 2014.

Under the new plans, it said deficit recovery payments will sUBSequently fall to around £50mln in 2022 before ending in 2026.

BAE added that its annual deficit contributions to US pension schemes are expected to remain at US$80mln through to 2022.

In morning trading, BAE was a top blue chip gainer, up 2%, or 11p at 555p.

READ: BAE Systems warns on the performance of its Cyber & Intelligence business

In a note to clients, analysts at UBS said: “Overall this is good news as we had modelled up to a £100mln top up in the UK scheme ie a total contribution of £400mln. The contribution over 2018-2020 is more likely to be £280mln pa.”

They added: “BAE is currently trading on 4.4% FCF yield for 2018. Assuming a lower pension contribution the stock would be on a 5-5.1% FCF yield in 2018-19.”

UBS repeated a ‘neutral’ rating and 655p price target for BAE shares.

In a separate statement, BAE - which is moving to the IFRS 15 accounting standard - said the switch would have no impact on the way it managed its contracts and therefore no material impact on its results.

The group will use IFRS15 for the first time when presenting its first half 2018 results.

 -- Adds share price, analyst comment --

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Thu, 30 Nov 2017 07:49:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/188026/bae-systems-shares-soar-as-uk-pension-funds-top-up-proves-less-then-expected-188026.html
<![CDATA[News - BAE heads lower as it announces plans to cut almost 2,000 jobs ]]> https://www.proactiveinvestors.co.uk/companies/news/185335/bae-heads-lower-as-it-announces-plans-to-cut-almost-2000-jobs-185335.html UK defence giant BAE Systems PLC (LON:BA.) has delivered a blow to the UK government and the manufacturing sector after it announced plans to cut almost 2,000 jobs – double what was being bandied around yesterday.

The FTSE 100 firm, which makes the Eurofighter Typhoon jet as well as Britain’s nuclear submarines, will axe 1,400 roles from its military air & information business, along with a further 375 jobs in its maritime services division and 150 in its applied intelligence business.

READ: Berenberg wings shares in BAE Systems, downgrading the defence contractor's rating to ‘hold’

BAE’s aerospace bases at Warton and Samlesbury in Lancashire will be worst hit, with 750 job losses expected. Another 400 posts will be axed in Brough, east Yorkshire, 340 in Portsmouth, 245 at RAF Marham in Norfolk and RAF Leeming in North Yorkshire, and 150 in London, Guildford and at other applied intelligence locations. There are a further 30 job losses at other UK locations.

BAE it was forced to reduce its headcount following a lack of orders for its Typhoon jets and that the cuts would help to keep the company “efficient” and “competitive”.

The London-based group has struggled to win new orders for its jets, with its rival Rafale, built by France’s Dassault Aviation, being favoured by the likes of Egypt and Qatar.

READ: BAE Systems warns on the performance of its Cyber & Intelligence business

BAE – which is worth almost £20bn – did agree a deal with Qatar for 24 Typhoons last month, and a potentially lucrative contract from Saudi Arabia is still under negotiation, but it had hoped for more interest.

The cuts are expected to come into force in January as part of a wider set of “organisational changes” being brought in, which includes creating a chief technical officer role and tweaks to its various divisions.

BAE shares were down 0.7% to 614.3p in late afternoon trade.

--Updates for links and share price--

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Tue, 10 Oct 2017 10:26:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/185335/bae-heads-lower-as-it-announces-plans-to-cut-almost-2000-jobs-185335.html
<![CDATA[News - BAE Systems set to announce more than 1,000 job cuts ]]> https://www.proactiveinvestors.co.uk/companies/news/185264/bae-systems-set-to-announce-more-than-1000-job-cuts-185264.html UK defence firm BAE Systems PLC (LON:BA) is reportedly set to reveal plans to slash more than 1,000 jobs this week.

The job cuts will mainly affect BAE’s Warton plant in Preston, Lancashire, where it assembles the Eurofighter Typhoon jet, Sky News reported.

The decision to reduce the headcount is understood to be largely as a result of slowdown in production of the Typhoon amid uncertainty over the timing of an expected major order from Saudi Arabia.

BAE has won fewer orders won for the Typhoon this year than rival Rafale built by France’s Dassault Aviation.

In August the company said any new orders were unlikely to impact production rates positively for at least 24 months and that it would continue to review production.  A month later, however, the group said it had secured an order for 24 of the combat aircraft from Qatar.

The announcement of the job cuts is expected to be made tomorrow when the company releases a trading update. However, a source indicated to Sky that BAE may bring forward the announcement to later today due to the result of their early disclosure.

BAE, which employs 34,600 people in the UK, said in a statement: "BAE Systems continually reviews its operations to make sure we are performing as effectively and efficiently as possible, delivering our commitments to existing customers and ensuring we are best placed to secure future business.

It added: "If and when there are any changes proposed we are committed to communicating with our employees and their representatives first."

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Mon, 09 Oct 2017 11:50:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/185264/bae-systems-set-to-announce-more-than-1000-job-cuts-185264.html
<![CDATA[News - Berenberg wings shares in BAE Systems, downgrading the defence contractor's rating to ‘hold’ ]]> https://www.proactiveinvestors.co.uk/companies/news/184974/berenberg-wings-shares-in-bae-systems-downgrading-the-defence-contractor-s-rating-to-hold-184974.html Analysts at Berenberg winged shares in BAE Systems PLC (LON:BA) today, downgrading their rating to ‘hold’ from ‘buy’ following a recent sales briefing with the defence firm’s management.

In a note to clients, the German bank’s analysts also lowered their price target for the FTSE 100-listed firm to 600p from 632p, with the stock trading at 621p today, down 9.5p, or 1.5% on last night’s close.

READ: BAE Systems warns on the performance of its Cyber & Intelligence business

The analysts said the downgrade reflects a “reassessment of the likelihood and timing of key export wins, and our expectation of no organic revenue growth and modest earnings progression in the next two years.“

They added: “In the absence of a firm export order materialising for the Typhoon programme, we now forecast FY 2018/19 delivery rates falling c50% yoy from 20 in 2017 to 11 and five aircraft respectively.”

The analysts said: “This may result in a further slowdown of delivery rates which could generate negative sentiment around BAE’s largest franchise programme.”

EPS estimates reduced

They have cut their full year earnings per share estimates by 1%/6%/10% respectively for 2017, 2018, 2019 to reflect the lack of organic growth, principally driven by the step-down in their Typhoon production forecast, and weakness in the Applied Intelligence and US ship repair businesses.

The analysts noted that BAE shares currently trade on a full year 2019 EV/EBIT multiple of 13 times, a 10% discount to US peers  which, in their view, means the stock looks “fully valued at present given the near-term outlook.”

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Tue, 03 Oct 2017 10:37:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/184974/berenberg-wings-shares-in-bae-systems-downgrading-the-defence-contractor-s-rating-to-hold-184974.html
<![CDATA[News - Goldman Sachs gives lift to BAE Systems as it adds stock to 'Conviction Buy' list ]]> https://www.proactiveinvestors.co.uk/companies/news/182471/goldman-sachs-gives-lift-to-bae-systems-as-it-adds-stock-to-conviction-buy-list-182471.html Goldman Sachs has turned more bullish on blue chip defence contractor BAE Systems (LON:BA), upgrading the stock to its ‘Conviction Buy’ list after recent underperformance.

In early afternoon trading, the FTSE 100-listed firm’s shares were 2.3%, or 13.5p higher at 594p.

READ: BAE Systems warns on the performance of its Cyber & Intelligence business

In a note to clients, Goldman’s analysts reiterated their ‘buy’ rating on BAE shares while adding the stock to its influential list.

They noted that BAE shares were now trading at a wider-than-usual discount to its US peers having underperformed the FTSE 100 recently.

The analysts added: "We expect program growth, as well as a new Typhoon (combat aircraft) order from Saudi Arabia, to cement the outlook for 2019/2020.”

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Tue, 15 Aug 2017 12:45:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/182471/goldman-sachs-gives-lift-to-bae-systems-as-it-adds-stock-to-conviction-buy-list-182471.html
<![CDATA[News - BAE Systems warns on the performance of its Cyber & Intelligence business ]]> https://www.proactiveinvestors.co.uk/companies/news/181824/bae-systems-warns-on-the-performance-of-its-cyber-intelligence-business-181824.html Defence contractor BAE Systems PLC (LON:BA.) warned it would book a charge for the restructuring of its Cyber & Intelligence arm whose revenues have “softened”.

That said, resilient performances of the other component parts of the business mean BAE should hit full-year guidance, which sees earnings per share growing between 5-10%.

READ: UBS cuts stance on BAE Systems to reflect more “tempered outlook“ on the UK defence budget

The update was given as the company unveiled an 11% rise in underlying earnings (EBITDA) to £945mln for the six months ended June. Revenues rose almost 10% to £9.57bn, while the dividend advanced 0.2p a share to 8.8p.

Order book expands

While net debt was a comparatively modest £1.7bn, the company’s pension deficit currently sits at an eye-watering £5.9bn.

The order book, always a good measure of the company’s prospects, swelled by £3.6bn to £10.7bn after it landed contracts for three Type-26 frigates.

It also received the full contract for the Royal Navy’s sixth Astute Class submarine alongside an order for 145 lightweight howitzers from India.

Meets expectations

"BAE Systems' performance in the first half was consistent with our expectations and guidance for the year,” said chief executive Charles Woodburn.

“We have a sound platform for medium-term growth underpinned by a clear and consistent strategy.

“Strong programme execution, technology and enhanced competitive positions will be key in driving the business forward, and we will continue to focus on efficiency and meeting our customers' affordability challenges.”

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Wed, 02 Aug 2017 07:33:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/181824/bae-systems-warns-on-the-performance-of-its-cyber-intelligence-business-181824.html
<![CDATA[News - UBS cuts stance on BAE Systems to reflect more “tempered outlook“ on the UK defence budget ]]> https://www.proactiveinvestors.co.uk/companies/news/180761/ubs-cuts-stance-on-bae-systems-to-reflect-more-tempered-outlook-on-the-uk-defence-budget-180761.html UBS has cut its rating for BAE Systems PLC (LON:BA.) to reflect a more “tempered outlook “ on the UK defence budget, as well as on Saudi Arabia sales despite a recent positive ruling from the UK High Court.

In a note to clients, the Swiss bank’s analysts said they have downgraded their stance for  the FTSE 100-listed stock to ‘neutral’ from ‘buy’ and reduced their  target price by around 10% to 665p from 730p after chopping back estimates.

READ: BAE Systems dodges bullet as High Court throws out case to block arms sales to Saudi Arabia

They added that their underlying earnings (EBIT) forecasts have been lowered by 1% for 2017 and 8% per annum over 2018-21. 

The analysts pointed out that BAE has around 26% exposure to the UK defence budget which has, in their view, downside  risks in a post -Brexit economic slowdown. 

They also noted that the UK firm has around 35% of sales exposed to the US defence budget which the analysts still consider the fastest growing large defence budget at circa 4%-5% per annum over 2017-19. 

However, they added, the 'Trump  effect' in  defence may not be as strong as initially anticipated with the US President’s 2018 draft requesting a US$603bn base budget less than the late June request asking for a US$621.5bn base. 

The analysts think that BAE’s interim results - due on August 2 – are likely to be underwhelming, with the full-year group outlook expected to be reiterated despite a weak first-half, especially in Cyber activities. 

But they said BAE could benefit from further sterling weakness and higher bond yields which could reduce the group’s pension underfunding to around £6.4bn in the first-half.

In late morning trading, BAE shares were 0.5%, or 3p lower at 623.5p.

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Wed, 12 Jul 2017 11:01:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/180761/ubs-cuts-stance-on-bae-systems-to-reflect-more-tempered-outlook-on-the-uk-defence-budget-180761.html
<![CDATA[News - BAE Systems dodges bullet as High Court throws out case to block arms sales to Saudi Arabia ]]> https://www.proactiveinvestors.co.uk/companies/news/180627/bae-systems-dodges-bullet-as-high-court-throws-out-case-to-block-arms-sales-to-saudi-arabia-180627.html BAE Systems plc (LON:BA.) shares gained after the High Court dismissed a legal claim to block arms exports from the UK to Saudi Arabia.

Shares rose 2.02% to 630p in afternoon trading.

The defence company had faced a big hit to its sales if the case against the Secretary of State for International Trade was successful, since Saudi Arabia is one of its largest customers.

The Campaign Against Arms Trade (CAAT) had brought the case, claiming that permission for arms sales to Saudi Arabia should be refused as policy states that licences must be denied if there is a “clear risk” that arms could be used in “a serious violation of International Humanitarian Law”.

CAAT said Saudi Arabia’s military action in Yemen, in which 10,000 people have been killed during a bombing campaign led by the Middle Eastern nation, constituted a violation of this law.

Saudi Arabia has insisted that it is not targeting civilians in leading an international coalition against Houthi rebels who pose a major threat in the neighbouring country.

High Court rules there is no risk to violations of humanitarian law in Saudi Arabia

The case was thrown out of the High Court by Lord Justice Burnett and Justice Haddon-Cave, who concluded that the Secretary of State was “rationally entitled to conclude” the coalition was not deliberately targeting civilians.

The judges ruled that Saudi Arabia was respecting humanitarian law and is in “constructive dialogue with the UK about its processes and incidents of concern”. They added there was no “real risk” that there might be serious violations of International Humanitarian Law.

The decision was made after the judges reviewed publicly available information and secret material supplied by the Ministry of Defence.

Saudi Arabia accounted for about 21% of BAE’s £19bn annual sales last year.  

CAAT to appeal High Court decision on arms exports to Saudi Arabia

A spokesman for CAAT said: “This is a very disappointing verdict, and we are pursuing an appeal. If this verdict is upheld then it will be seen as a green light for government to continue arming and supporting brutal dictatorships and human rights abusers like Saudi Arabia that have shown a blatant disregard for international humanitarian law."

"This case has seen an increased scrutiny of the government’s toxic relationship with Saudi Arabia. It is a relationship that more than ever needs to be examined and exposed."

BAE was unable to be reached for comment. 

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Mon, 10 Jul 2017 15:00:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/180627/bae-systems-dodges-bullet-as-high-court-throws-out-case-to-block-arms-sales-to-saudi-arabia-180627.html
<![CDATA[News - JPMorgan Cazenove clips BAe System's wings with downgrade to 'neutral' ]]> https://www.proactiveinvestors.co.uk/companies/news/179735/jpmorgan-cazenove-clips-bae-system-s-wings-with-downgrade-to-neutral--179735.html JPMorgan Cazenove today clipped the wings of blue chip defence contractor BAe Systems PLC (LON:BA.) with a downgrade in rating, mainly on valuation grounds but also with some “speedbumps” ahead.

The US bank said it has reduced its stance on the FTSE 100-listed firm to ‘neutral’ from ‘overweight’ and removed the stock from its Analyst Focus List.

READ: Goldman Sachs takes BAe Systems off its Conviction List after strong outperformance

JPMorgan’s price target for BAe’s shares was left unchanged at 685p.

In reaction, in mid-morning trading, BAe shares were 0.8%, or 5p lower at 659.5p.

In a note to clients, JPMorgan’s analysts said: “The main reason is valuation after a c40% rally in the shares since January 4, 2016."

But they added: “We also see a few near-term speedbumps: (1) recent developments in UK politics may delay sought after Saudi Arabia (SA) contracts; and (2) stubbornly low real bond yields in the UK may affect the pension triennial review due to be wrapped up in H2 2017.”

 

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Fri, 23 Jun 2017 10:28:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/179735/jpmorgan-cazenove-clips-bae-system-s-wings-with-downgrade-to-neutral--179735.html
<![CDATA[News - Goldman Sachs takes BAe Systems off its Conviction List after strong outperformance ]]> https://www.proactiveinvestors.co.uk/companies/news/179147/goldman-sachs-takes-bae-systems-off-its-conviction-list-after-strong-outperformance-179147.html Goldman Sachs has removed BAE Systems PLC (LON:BA.) from its ‘Conviction List’, citing the stock’s “strong performance and more muted potential for further upside”.

In a note to clients, analysts at the US investment bank said their 2017/18 sales estimates for the FTSE 100-listed defence contractor “fall by 5%/9%, owing to lower growth in US Cyber and the continuing delay to the follow-on Eurofighter order from Saudi Arabia.”

READ: Defence budgets boost to lift BAE Systems in 2017 after solid growth in 2016

However, they pointed out, their underlying earnings (EBIT) forecasts for the period fall by just 0.3%/1.0%, reflecting expectations for margin improvement in US Platforms & Services and Cyber and Intelligence.

The analysts noted that since being added to the Conviction List on July 1 2016, BAe’s share price has risen by 14% versus the FTSE 100 index.

They keep a ‘buy’ rating on the stock, however, and increase their price target to 763p from 697p, driven by a roll-forward to higher 2018 cash flow.

In mid-morning trading, BAe shares were changing hands at 663p, down 0.6% or 4p on last night’s close.

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Tue, 13 Jun 2017 10:58:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/179147/goldman-sachs-takes-bae-systems-off-its-conviction-list-after-strong-outperformance-179147.html
<![CDATA[News - Better-than-expected balance sheet sees Citi upgrade BAE target price ]]> https://www.proactiveinvestors.co.uk/companies/news/173804/better-than-expected-balance-sheet-sees-citi-upgrade-bae-target-price-173804.html Citi has upgraded its price target for defence and aerospace specialist BAE Systems PLC (LON:BA.) after conceding that the group’s pension underfunding was less than it had anticipated.

"Prior to the 2016 results we were too conservative in our...forecasts," the bank said in a note to clients this morning.

Before the release of BAE’s final results last Friday (23 February), Citi analysts reckoned pension underfunding had worsened by 80p per share in the second half although it turned out it was actually flat.

Similarly, Citi said they also got it wrong with regards to its debt forecast. The balance sheet corrections increased BAE’s fair value by 130p, analysts said.

However, Citi added it had slightly lowered its 2017 and beyond profit forecasts which would have a 40p negative knock-on effect on its value of the company.

The combined outcome is that Citi has upped its price target for the stock by 90p to 720p, which implies a 15% upside.

“We continue to regard BAE as steady,” the analysts concluded.

Shares in BAE edged higher to 616p on Monday morning.

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Mon, 27 Feb 2017 10:10:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/173804/better-than-expected-balance-sheet-sees-citi-upgrade-bae-target-price-173804.html
<![CDATA[News - Defence budgets boost to lift BAE Systems in 2017 after solid growth in 2016 profits and revenues ]]> https://www.proactiveinvestors.co.uk/companies/news/173594/defence-budgets-boost-to-lift-bae-systems-in-2017-after-solid-growth-in-2016-profits-and-revenues-173594.html Defence contractor BAE Systems PLC  (LON:BAE) has reported solid growth in its 2016 profits and revenues and said it anticipates further progress in 2017 thanks to increased defence budgets globally.

The maker of  fighter jets and submarines said its underlying earnings (EBITA) increased to £1.905m, on a constant currency basis, for the year to December 31, 7% higher than the £1.683bn it posted a year earlier.

The FTSE 100-listed group saw its revenue increase to £17.79bn, up from £16.79bn in 2015, while order intake increased significantly to £22.40bn, up from £14.9bn a year earlier.

BAE was boosted by contract wins in the US and the UK, including the engineering and manufacturing development contract for the US Air Force's Eagle Passive Active Warning Survivability System.

The group said it expects its underlying earnings per share, in constant currencies, to rise by 5% to 10% in 2017, driven by strong defence budgets globally and growth across its divisions.

The company is to pay a final dividend of 12.70p a share, taking its total 2016 payout to 21.30p, up 2.0% on 2015.

In early trading, BAE shares were 1.3%, or 8p higher at 613.5p.

Defence needed …

BAE’s outgoing chief executive, Ian King said: “"2016 was a good year for BAE Systems. Our strategy is well defined; we have a large order backlog, long-term programme positions, strong programme execution and a well-balanced portfolio.

“With an improved outlook for defence budgets in a number of our markets, we are well placed to continue to generate attractive returns for shareholders.”

King's long-anticipated retirement after nearly nine years at the helm of the group was confirmed yesterday,  when the company said he will leave at the end of June to be replaced by former oil company executive Charles Woodburn, currently BAE's chief operating officer.

Andy Chambers, analyst at Edison Investment Research said: “Ian King is leaving BAE in a healthy condition.”

He added:  “Shareholders should be grateful to him. The dividend has continued to grow, notwithstanding the pension deficit concerns, and the share price is up by 25% from the starting point and has more than doubled from the lows in 2011.”

And Chambers said: “.With a strong order book of £42bn (+14%) representing more than two years sales, Charles Woodburn takes over a company which is guiding for mid-high single digit underlying EPS growth once again.

“With defence spending now on the rise the share price is at its high for the 21st century. “

 -- Adds share price, broker comment --

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Thu, 23 Feb 2017 08:01:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/173594/defence-budgets-boost-to-lift-bae-systems-in-2017-after-solid-growth-in-2016-profits-and-revenues-173594.html
<![CDATA[News - Is it time to buy BAE? This Wall Street bank thinks so ]]> https://www.proactiveinvestors.co.uk/companies/news/170798/is-it-time-to-buy-bae-this-wall-street-bank-thinks-so-170798.html BAE Systems PLC (LON:BA.) stands to be a major beneficiary of an upturn in defence spending here in the UK and in the US.

That at least is the conclusion of Goldman Sachs, which has picked out the aerospace giant as one of its top cyclical plays for 2017.

It has included the stock on its conviction ‘buy’ list with a 697p a share price target.

“BAE is particularly well positioned to take advantage this budget growth,” said the Wall Street bank in a note to clients.

It is in strong position as a contributor to the F-35 Joint Strike Fighter and builder of the Britain’s new Astute and Dreadnaught-class of submarines, Goldman pointed out.

And it says BAE is entering a “sustained period” of organic growth in the region of 4-6% between now and 2020, augmented by dividend growth of around 6% over that period.

A potential drag on performance is the sizeable pension deficit.

Medium-term growth, meanwhile, relies on securing a deal for Eurofighters from Saudi Arabia, which isn’t a slam dunk.

At 11.55am, the shares, up 20% in the year to date, were changing hands for 600p (up 1.5p).

The consensus price target currently stands at 607p, compared with 550p six months ago.

Of the ten analysts logged as following BAE by the Broker Forecasts website, eight are in the Goldman camp as ‘buyers’.

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Wed, 21 Dec 2016 11:59:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/170798/is-it-time-to-buy-bae-this-wall-street-bank-thinks-so-170798.html
<![CDATA[News - BAE reiterates guidance; expects more Typhoon orders ]]> https://www.proactiveinvestors.co.uk/companies/news/167009/bae-reiterates-guidance-expects-more-typhoon-orders-167009.html Defence firm BAE Systems PLC (LON:BA.) said it expects further contract awards for its Typhoon aircraft.

In a trading statement in which it reiterated full-year earnings guidance it said export activity continues to be supported by the UK government and, although there can be no certainty as to the timing of orders, discussions with current and prospective operators of the Typhoon aircraft continue to support the group's expectations for additional Typhoon contract awards.

Discussions between BAE Systems, the UK government and the Saudi Arabian government are progressing to define the scope and terms of the next five-year Saudi British Defence Co-operation Programme.

Trading this year has been in line with management expectations, and the group continues to expect underlying earnings per sharer t be five to ten per cent higher than last year’s 36.6p.

In its home market, the company said it had made good progress with its Ministry of Defence customer on implementing the Strategic Defence and Security Review.

On the maritime side of things, the UK Successor Submarine production programme commenced with first steel cut on the 5 October and around £1.3bn of funding committed for the initial production award.

“In surface ships we are progressing towards defining an overall Type 26 build contract and a contract is being finalised for the fourth and fifth new River Class Offshore Patrol Vessels,” the company said.

Across the pond, the US defence outlook remains positive in BAe’s view, and the ramp-up on a number of the group’s production programmes remains on course.

In August, the group delivered ship number six stateside under its commercial shipbuilding contracts. The remaining two ships are expected to be completed next year.

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Thu, 06 Oct 2016 08:19:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/167009/bae-reiterates-guidance-expects-more-typhoon-orders-167009.html
<![CDATA[News - BAE Systems annual earnings fall but dividend rises ]]> https://www.proactiveinvestors.co.uk/companies/news/122678/bae-systems-annual-earnings-fall-but-dividend-rises-122678.html Defence company BAE Systems (LON:BA.) posted lower underlying earnings but increased its dividend and forecast higher earnings per share in 2016.

BAE, which is involved in making Eurofighter Typhoon jets and aircraft carriers for the Royal Navy, said underlying pre-tax earnings before interest and amortisation (EBITA) fell to £1.68bn from £1.7bn a year ago.

It blamed the fall in EBITA on a previously announced Typhoon production slowdown and Australian shipyard impairment and rationalisation charges.

The company's order backlog also dropped to £36.8bn from £40.5bn a year ago.

But sales rose to £17.9bn from £16.6bn and operating profit increased to £1.5bn from £1.3bn last time. Pre-tax profit advanced to £1.09bn from £882mln beforehand.

Underlying earnings per share lifted to 40.2p from 38p previously and the company increased its total dividend per share by 2% to 20.9p.

The group forecast underlying earnings per share in 2016 would increase by between 5% and 10% against the adjusted underlying earnings per share of 36.6p in 2015.

Shares in the company rose 10.2p, or 2%, to 509.5p in the first hour of trading in London.

Chief executive Ian King said pointed out that its cyber security and commercial electronics businesses, which it is hoping will provide a major source of future growth, were continuing to expand.

King added: "The group is well placed to continue to generate attractive returns for shareholders as defence budgets recover."

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Thu, 18 Feb 2016 08:35:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/122678/bae-systems-annual-earnings-fall-but-dividend-rises-122678.html
<![CDATA[News - Defence shares rise on government's forces plan ]]> https://www.proactiveinvestors.co.uk/companies/news/119578/defence-shares-rise-on-government-s-forces-plan-119578.html Shares in defence companies were on the up on Monday as the British government prepared to outline its flagship defence review.

The stock of companies such as BAE Systems (LON:BA.), Cobham (LON:COB) and QinetiQ (LON:QQ.) gained 6.6p to 498.6p, 1.2p to 293p and 1.7p to 262.5p respectively.

Shares in Rolls-Royce (LON:RR.) also rose 14p, or 2.5%, to 566p on talk that it was planning 2,000 job cuts as part of a bid to revive its flagging business.  

Prime Minister David Cameron is likely to say the focus of UK defence policy going forward is to combat state-based threats and terrorism, including the so-called Islamic State.

Cameron was in Paris on Monday morning for talks with French President Francois Hollande following the atrocities in the French capital earlier this month.

He said Britain should be joining France and the US in fighting IS and is set to try to persuade UK lawmakers this week to back air-strikes against IS targets in Syria.

But ministers have said they do not plan to hold a vote on the matter until they can be certain of winning, following an earlier vote in which Cameron was defeated.

The Strategic Defence and Security Review will outline an extra £12bn of spending on equipment such as a new fleet of marine patrol aircraft.

It is likely to include plans to create two 5,000-strong "strike brigades" by 2025 that the UK can rapidly deploy to help it respond to "diverse" threats.

There will be nine new Boeing P8 maritime patrol aircraft, making up for a decision in the last review in 2010 to axe a new generation of Nimrod aircraft

The review is also set to include a 10-year life extension for some of the RAF's fighter jets to 2040 and work to give them ground attack capabilities, in effect adding two more frontline squadrons to the air force.

Defence secretary Michael Fallon told the BBC the government had decided to spend more on defence than on welfare.

He added: "We're faced with a threat we didn't see five years ago so we have to gear up and make sure our armed forces have the equipment and configuration they need."

The BBC quoted Labour shadow defence minister Maria Eagle as saying she was glad to see the government was going to "put straight the botched decisions made five years ago" and make sure the UK was able to patrol its own seas.

Meanwhile, Brussels remained in shutdown mode on Monday, with universities, schools and the metro shut, as police hunt for the prime suspect in the Paris attacks.

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Mon, 23 Nov 2015 13:15:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/119578/defence-shares-rise-on-government-s-forces-plan-119578.html
<![CDATA[News - BAE Systems to cut 370 UK jobs in Eurofighter jet shake-up ]]> https://www.proactiveinvestors.co.uk/companies/news/119125/bae-systems-to-cut-370-uk-jobs-in-eurofighter-jet-shake-up-119125.html Defence group BAE Systems (LON:BA.) is cutting 371 jobs as it extends the life of Eurofighter Typhoon jets.

BAE said the cuts were needed to ensure the European-made fighter jet was cost competitive in the medium term.

The lower production rate, together with the existing profile of contracted aircraft deliveries, is expected to result in Typhoon production sales reducing from about £1.3bn in 2015 to about £1.1bn in 2016.

BAE has faced challenges over its role in the Typhoon programme, having faced delays in negotiating a contract for the jets with Saudi Arabia.

Chief executive Ian King said: "Although there can be no certainty as to the timing of orders, discussions with current and prospective operators of the Typhoon aircraft continue to support the group's expectations for additional Typhoon contract awards in the months ahead."

The company also plans to cut capacity at its Williamstown shipyard in Australia. It said both moves would affect earnings this year.

Despite the news, shares in BAE rose 19.4p to 457.7p after it said its markets were improving and it was still winning orders.

BAE said it continued to achieve good growth in businesses in adjacent commercial markets such as cyber security and commercial electronics.

It may also bag a deal from India for 20 more Hawk trainer jets during a visit to Britain this week by Indian Prime Minister Narendra Modi, according to reports.

Including a benefit of some 2p from adjustment of certain overseas tax provisions in the light of rulings received, the group's underlying earnings per share for 2015 are expected to be around 38p.

Broker Investec noted comments by BAE that the outlook for US defence spending had improved and clarity on UK defence budgets should be forthcoming in due course.

The broker said in a note: "Whilst BAE may not benefit immediately, we believe the longer-term outlook is improving. Sell recommendation placed under review."

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Thu, 12 Nov 2015 15:53:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/119125/bae-systems-to-cut-370-uk-jobs-in-eurofighter-jet-shake-up-119125.html
<![CDATA[News - BAE Systems confident as it eyes recovery in defence budgets ]]> https://www.proactiveinvestors.co.uk/companies/news/66367/bae-systems-confident-as-it-eyes-recovery-in-defence-budgets-77455.html Blue chip aerospace and engineering group BAE Systems (LON:BA.) expects earnings to rise this year as the US defence market heats up.

The weapons giant, along with its rival Rolls-Royce, has been hit by shrinking military budgets from the UK and America in recent years.

However, today it forecast higher underlying earnings over the next twelve months, despite posting a sales decline in 2014.

“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,” said chief executive Ian King.

“We believe US budgets are now relatively stable, with some early indications of a modest improvement in 2016."

In its full-year 2014, revenues for the firm declined to £16.6bn, down from £18bn in 2013, while profit before tax fell to £1.7bn from £1.9bn.

King claimed the drop in annual earnings was down to the absence of a one-off benefit from a price settlement with Saudi Arabia over the sale of Eurofighter Typhoons, which boosted 2013, the conclusion of some contracts in the US and currency headwinds.

Shares in the group slipped 1% to 518p, but have performed well in recent months and analysts attributed today’s decline to profit taking.

“Given the shares are up 19% over the last six months vs the FTSE 100 up 2% we believe that investors should be taking profits,” said JP Morgan Cazenove.

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Thu, 19 Feb 2015 09:39:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/66367/bae-systems-confident-as-it-eyes-recovery-in-defence-budgets-77455.html
<![CDATA[News - BAE Systems 2013 sales fall below expectations ]]> https://www.proactiveinvestors.co.uk/companies/news/55840/bae-systems-2013-sales-fall-below-expectations-65971.html UK defence giant BAE Systems (LON:BA.) reported sales for 2013 that fell below expecations against a backgrounds of reduced government spending and challenging market conditions.

The group's sales for the year to December 31 came in at £18.2 billion, which was a 2% increase on the £17.9bn posted in 2012, but below consensus of £18.9bn.

Underlying earnings per share (EPS) were 42 pence a share - slighly lower than the 42.3p which had been expected.

Chief executive Ian King described the performance last year as "solid" against the challenging backdrop.

Yesterday, it emerged that a new pricing deal had been struck for the 72 aircraft ordered by Saudi Arabia in 2007, which allows the group to recognise current and historic profit and contractually entitles the firm to cash profit not yet paid.

"A proactive focus on costs and enhanced competitiveness protected our margins across the majority of the business and we secured further contract wins in the US, Saudi Arabia and internationally.

"We have started 2014 with good momentum with a settlement on Salam pricing, US budgets in place and a well-defined UK Maritime sector plan.

"Budget pressures in some of the group's larger markets are expected to prevail but BAE Systems has a broad-based portfolio.

"Our strong order backlog and robust balance sheet provide a solid basis for growth over the medium term," said King.

Shares edged lower by 0.41% to 435p each.

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Thu, 20 Feb 2014 08:12:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/55840/bae-systems-2013-sales-fall-below-expectations-65971.html
<![CDATA[News - BAE Systems due Eurofighter price boost ]]> https://www.proactiveinvestors.co.uk/companies/news/55801/bae-systems-due-eurofighter-price-boost-65931.html BAE Systems (LON:BA.) is due a boost as a deal was agreed to lift the prices of Eurofighter jets sold to Saudi Arabia.

Under an existing contract prices were fixed at 2005 levels, but the UK government has agreed a deal with Saudi Arabia over “price escalation” which will now be reflected in the Eurofighter contracts.

BAE says cash settlement is expected to follow in the early part of this year.

"This is an equitable outcome for all parties, I am pleased that we have been able to conclude this negotiation, which builds on our long standing relationship with this much valued customer," chief executive Ian King said.

In London, BAE Systems shares were up 6.8p or 1.55% trading at 444p.

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Wed, 19 Feb 2014 09:02:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/55801/bae-systems-due-eurofighter-price-boost-65931.html
<![CDATA[News - BAE Systems flying low after it warns on Eurofighter deal ]]> https://www.proactiveinvestors.co.uk/companies/news/54348/bae-systems-flying-low-after-it-warns-on-eurofighter-deal--64380.html Nearly £700mln was wiped from the value of BAE Systems (LON:BA.) after the United Arab Emirates ruled out acquiring 60 Eurofighter Typhoons.

In early trade the stock dropped 5% to 420.49p, although it stock got as low as 428p.

Broker reaction was understandably quite negative with heavyweight JP Morgan Cazenove repeating its ‘underweight’ rating and 355p a share price target.

“The news is setback and odd in many ways,” the broker said in a note to clients.

UBS, meanwhile, retained its ‘buy’ recommendation but pegged back its valuation 15p a share to 475p.

The Swiss bank is still confident it will land another major order – this time with Saudi Arabia.

“The statement also stated that there is still no agreement on price escalation with Saudi but ‘a timely agreement in the new year would be reflected in trading for 2013’,” said UBS. 

“We read this as no agreement by calendar year end 2013, but there is a clear process to contract signature that, if all goes according to plan, will enable it to be recognised in 2013 result.”  


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Fri, 20 Dec 2013 10:34:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/54348/bae-systems-flying-low-after-it-warns-on-eurofighter-deal--64380.html
<![CDATA[News - BAE Systems downgraded amid worries over Saudi jet fighter deal ]]> https://www.proactiveinvestors.co.uk/companies/news/53086/bae-systems-downgraded-amid-worries-over-saudi-jet-fighter-deal-63031.html BAE Systems (LON:BA), owner of the Portsmouth shipyard earmarked for closure earlier this week, has been downgraded by Investec. 

However it is jet fighters rather than frigates that concerns the City broker and specifically negotiations over a Saudi order for 72 Typhoon jet fighters, known as the Salam deal.

Investec has pegged back its recommendation to ‘hold’ from ‘buy’ and has rolled back its price target to 460p from 485p a share.

The stock is currently changing hands for 454.1p, down 1.3p in busy opening to trade.

“BAE remains relatively inexpensive, while continuing to offer an attractive yield,” Investec said in a note to clients. 

“However, as we near the end of 2013, we are increasingly concerned that the Salam pricing agreement slips through yet another year end (which would have a major impact on full-year earning per share and cash) and that there is a lack of near-term positive catalysts.”


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Fri, 08 Nov 2013 08:42:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/53086/bae-systems-downgraded-amid-worries-over-saudi-jet-fighter-deal-63031.html
<![CDATA[News - BAE Systems confirms end of shipbuilding at Portsmouth ]]> https://www.proactiveinvestors.co.uk/companies/news/53023/bae-systems-confirms-end-of-shipbuilding-at-portsmouth-62950.html BAE Systems (LON:BA.) has confirmed 500 years of shipbuilding in Portsmouth is to come to an end while there will also be sizeable job losses at shipyards in Scotland and Bristol.

In total, 1775 jobs are to go after what the company describes as a significant drop in demand for new warships, following the passing of peak activity in work on two aircraft carriers and six Type 45 destroyers for the UK government and two export contracts.

Some 940 jobs will go in Portsmouth, though there will still be a repairs and maintenance facility based at the yard. The remainder of the cuts will be in Govan and Scotstoun in Glasgow, Rosyth in Fife and Filton, near Bristol.

Shipbuilding operations at Portsmouth will end in the second half of 2014 with work outstanding on the second of the aircraft carriers switched to Glasgow.

BAE added it had also agreed to restructure the contract to build the aircraft carriers with the cost and fees to be shared with the government on a 50:50 basis, while a proposed new contract for Type 26 destroyers will be based around the shipyards in Glasgow.

A contract for three offshore patrol vessels was also announced on Wednesday to support the yards until work begins on the Type 26 ships in 2016.

The cost of the restructuring will be borne by the Ministry of Defence, BAE said.

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Wed, 06 Nov 2013 12:18:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/53023/bae-systems-confirms-end-of-shipbuilding-at-portsmouth-62950.html
<![CDATA[News - BAE Systems' export pipeline offsets US weakness ]]> https://www.proactiveinvestors.co.uk/companies/news/50129/bae-systems-export-pipeline-offsets-us-weakness-59681.html Revenue may have been below expectations but earnings announced on Thursday by defence firm BAE Systems (LON:BA.) were 3% ahead of expectations, according to Deutsche Bank.

That was despite an unexpected £32mln litigation provision.

“Although there was good news on H1 [first half] earnings, the balance sheet brought less positive news with the pension deficit falling less than expected (a £273mln fall pre-tax to £4.3bn vs DBe [Deutsche Bank estimate] of £3.5bn) and net debt £200mln higher than expected due to weaker than forecast FCF [free cash flow],” the German bank noted.

After weighing up all the factors, Deutsche has opted to leave its forecasts largely unchanged. The current year earnings per share (EPS) is left untouched while forecasts for EPS in 2014 and 2015 are pared by 1% because of lower assumed revenues.

Nevertheless, Deutsche’s sum of the parts based price target is modestly increased to 415p from 400p.

“Although BAE is weathering the US defence cuts well thus far, remains very much on top of cost control and has some good long-term export potential in the pipeline, at the current 451p share price we believe this is priced in and we maintain our Hold,” Deutsche Bank said.

The key risks and potential share price catalysts, in the bank’s view, are significant export contract wins and greater cuts to US defence spending.

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Fri, 02 Aug 2013 11:21:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/50129/bae-systems-export-pipeline-offsets-us-weakness-59681.html
<![CDATA[News - BAE Systems' outlook remains full of 'ifs' and 'buts' ]]> https://www.proactiveinvestors.co.uk/companies/news/47488/bae-systems-outlook-remains-full-of-ifs-and-buts-56656.html The future remains hard to predict at BAE Systems (LON:BA.), what with continued speculation over US spending cuts and the seemingly interminable wrangling over its Salam Typhoon programme.

The group said trading so far this year has been in line with expectations and it is making no changes to its guidance of modest growth in underling earnings in 2013.

That guidance comes with a number of caveats, however.

First, is the effect on US defence spending arising from the sequestration process.

In March 2013, legislation was passed to set funding levels for the remainder of the 2013 fiscal year, which has allowed some limited flexibility to enable near-term priorities to be pursued.

In April, a presidential request for a fiscal 2014 budget was tabled which would replace sequestration with selective spending cuts. BAE will await the fall-out from this request before deciding whether to adjust its outlook.

The group also noted that if it can successfully conclude negotiations with Saudi Arabia on the formalisation of the Salam Typhoon fighter jet programme price escalation, this would increase earnings per share by around 3p and allow the company to be more enthusiastic in its share repurchase scheme.

The company has initiated a share repurchase programme of up to £1bn over three years, but the key phrase here seems to be “up to”; finally nailing the Salam Typhoon issue would give the company more leeway to buy back shares.

Investec's analyst Andrew Gollan did not find a lot to write home about in the interim management statement.

"We are unlikely to change our recommendation, estimates or SoTP-based price target with no real catalyst here one way or other, in our view," Gollan said.

Investec rates the shares no better than a 'hold' and has a sum of the parts price target of 370p.

"The company provides a summary of recent highlights including a number of contract wins.

In the US, the group confirms that the March funding legislation underpins spend on the majority of ships for the current year, and therefore mitigates employee notices (possible layoffs), although minor adjustments might still be required.

"In the UK, defence equipment spending is stable although it remains challenging. In international markets, activity levels are good with orders worth £2.3bn received year to date," Gollan notes.

BAE shares gained altitude in early trade, rising 1.6% to 380.6p in the first hour.

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Wed, 08 May 2013 08:55:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/47488/bae-systems-outlook-remains-full-of-ifs-and-buts-56656.html
<![CDATA[News - BAE Systems' low R&D spend irks JP Morgan ]]> https://www.proactiveinvestors.co.uk/companies/news/46731/bae-systems-low-rd-spend-irks-jp-morgan-55759.html BAE Systems (LON:BA.) ran into flak after JP Morgan rummaged through the detail of the weapons and aerospace group’s annual report and promptly downgraded the shares.

The US broker said a cut in research spending was not apparent in the preliminary statement and without that the company would not have beaten its forecast for underlying earnings in 2012. A pension gain will also reverse under new accounting rules.

More pertinently, JP Morgan says that BAE’s R&D spending is the lowest in the sector, which had translated into the lowest organic growth in its sector.

In 2012, BAE spent just 0.9% of its sales on self-funded R&D against the defence sector average of 3.5% and civil aerospace average of 6%.

BAE’s self-funded R&D has consistently been the lowest of all the aerospace and defence manufacturing companies, added the broker, and over the last six years BAE’s average organic growth has been well below the sector average.

The broker has cut its earnings per share forecasts for the next three years by 6%,10%,11% respectively and downgraded its stance to 'underweight'.

Its target price rises slightly to 365p, but this represents 8% potential downside said JPM.

Shares in BAE eased nearly 2% to 390p.

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Fri, 12 Apr 2013 10:45:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/46731/bae-systems-low-rd-spend-irks-jp-morgan-55759.html
<![CDATA[News - BAe Systems wary over US budget uncertainty ]]> https://www.proactiveinvestors.co.uk/companies/news/45229/bae-systems-wary-over-us-budget-uncertainty--53955.html Shares in military hardware giant firm BAE Systems (LON:BA.) rallied as it predicted higher earnings in the current year, though it came with some very heavy caveats.

The jet fighter, warship and weapons group said it expected underlying earnings per share to rise “modestly” in 2013, though this assumed no impact from possible heavy US defence cuts if the country’s budget deficit row is not resolved.

BAe is also locked in talks over price increases on its huge Typhoon jet fighter contract with Saudi Arabia. If these are resolved satisfactorily, it will add a further 3p to earnings said the company.

Deferral of sales and profits from the Salam Typhoon contract meant underlying earnings reduced by 6% to £1.9bln in 2013, with revenues 7% lower at £17.8bln. Pre-tax profits were £1.37bn against £1.47bn the year before.

BAe, which has shed 26,000 jobs over the past four years, said it would start a £1bn share buyback programme to run for the next three years, while the dividend rises by 4% to 19.5p.

Orders at the year-end rose were £42bn, an 8% increase.

Shares rose by 3% to 344.3p.

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Thu, 21 Feb 2013 08:56:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/45229/bae-systems-wary-over-us-budget-uncertainty--53955.html
<![CDATA[News - BAE shares stall as EADS merger is scrapped ]]> https://www.proactiveinvestors.co.uk/companies/news/41081/bae-shares-stall-as-eads-merger-is-scrapped-48975.html Shares in the aerospace and defence giant BAE Systems (LON:BA.) stalled on the runway after the group’s controversial £28bn merger was finally scrapped.

The shares fell 1.4 per cent to 320.8 pence in the aftermath of the announcement that it and partner EADS finally caved in to intense political opposition to the deal.

BAE chief executive Ian King: "We are obviously disappointed that we were unable to reach an acceptable agreement with our various government stakeholders. 

“We believe the merger presented a unique opportunity for BAE Systems and EADS to combine two world class and complementary businesses to create a world leading aerospace, defence and security group.

“However, our business remains strong and financially robust.

“We continue to see opportunities across our platforms and services offerings and in the various international markets in which we operate. 

“We remain committed to delivering total shareholder value and look to the future with confidence."

A deadlock between Europe’s three main nations was at the heart of the problem.

Britain wanted to ensure that the French and German governments, part owner of EADS, did not have a combined stake in the new company of more than 18 per cent.

However, the pair had sought a combined stake of 27 per cent, though it is understood that German Chancellor Angela Merkel was against the deal altogether.

The British government's preferred outcome in any merged company would have seen the three governments receive a 'special share' in the company.

 

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Wed, 10 Oct 2012 14:08:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/41081/bae-shares-stall-as-eads-merger-is-scrapped-48975.html
<![CDATA[News - BAE/EADS merger runs into turbulence from the City ]]> https://www.proactiveinvestors.co.uk/companies/news/40983/baeeads-merger-runs-into-turbulence-from-the-city-48872.html The multi-billion pound merger between defence giant BAE Systems (LON:BA.) and Franco-German aerospace firm EADS is “the wrong deal at the wrong time”, according to Societe Generale.

The French broker says the deal looks good for BAE given its 40% holding in the combined group and possibility of sharing the strong growth prospect of EADS’ Airbus.

However, it does not rate the deal – which will create the world’s largest aerospace and defence firm – for EADS shareholders.

“For EADS the benefits are less obvious to us,” said analyst Zafar Khan.

“EADS is yet to enjoy the recovery and growth in Airbus and a geographically well diversified order backlog of eight years would suggest that Airbus is significantly less cyclical than previously feared.

“Merging with BAE at this point in the civil cycle gives away a lot of this upside,” he added.

“We find this merger proposal difficult to comprehend, particularly as managements claim that the overlap is very limited.”

He also believes EADS will gain no benefit from BAE’s US exposure as it expects its business there will be ring fenced in a bid to get the green light from the US authorities.

BAE counts the US government as one of its biggest customers and it is feared it could give the merger the thumbs down after intense lobbying from US aerospace and defence rival Boeing.

BAE has said from the outset it will not go ahead with the £28 bln deal without approval from the US government.

The SocGen analyst reckons BAE is clearly “in play now” and says its price will be supported by the prospect of further moves if this deal falls through.

As a result, he upgrades BAE to ‘hold’ from ‘sell’ with a higher target price of 350 pence from 300 pence.

The broker’s comments come on the morning that BAE’s largest shareholder Invesco Perpetual – which owns over 13% of the company – expressed its disapproval at the proposed deal.

It said in a statement that it has “significant reservations” about the merger, adding that it does not understand the “strategic logic” behind the move.

“Invesco believes the merger would materially jeopardize BAE's unique and privileged position in the United States defence market, and has been unable to identify any corresponding benefits to offset this,” it said.

“Invesco is very concerned that the level of state shareholding in the combined group will heavily impair its commercial prospects - especially in the United States -and result in governance arrangements driven more by political considerations than shareholder value creation.”

It reckons BAE can deliver significant value to shareholders in its own right, without the need for a merger.

The deal has seen a raft of opposition since it was first proposed last month.

The German government could reportedly block the move after demanding its stake is equal with France’s and after suggesting a Berlin base for the newly merged company.

As for the UK, 45 MPs signed a letter calling for Prime Minster David Cameron to obstruct the merger.

The two parties will announce on Wednesday whether they will continue talks or part ways, although a deadline extension could be requested.

Shares in BAE fell 3 pence or 1% to 324.8 pence.

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Mon, 08 Oct 2012 13:08:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/40983/baeeads-merger-runs-into-turbulence-from-the-city-48872.html
<![CDATA[News - BAE and EADS unveil merger talks to create defence giant ]]> https://www.proactiveinvestors.co.uk/companies/news/40261/bae-and-eads-unveil-merger-talks-to-create-defence-giant-48034.html British defence giant BAE Systems (LON:BA.) last night revealed it is in talks with European aerospace firm EADS over a possible merger.

The tie-up would see the new firm – which would be 40 per cent owned by BAE Systems’ shareholders and 60 per cent owned by EADS’ – become the world biggest aerospace firm and challenge US heavyweight Boeing.

Under UK rules, the two parties must now announce a decision on whether to team up or not by 5pm on 10 October.

“The potential combination would create a world class international aerospace, defence and security group with substantial centres of manufacturing and technology excellence in France, Germany, Spain, the UK and the USA,” said BAE in a statement.

BAE said the two companies had a “long history of collaboration” and are currently partners in a number of different projects, including the Eurofighter and MBDA joint ventures.

The company added the talks are underway with a range of governments about the potential deal.

It said a possible alliance would benefit shareholders and customers on both sides, in terms of cost savings and new business opportunities.

If a deal were to go through, BAE said EADS – which typically pays shareholders a lower proportion of its earnings as a dividend – would pay £200 mln to its shareholders to even up the payout ratios.

The normal dividends will remain unaffected.

 

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Thu, 13 Sep 2012 07:38:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/40261/bae-and-eads-unveil-merger-talks-to-create-defence-giant-48034.html
<![CDATA[News - BAE Systems profits hit as Saudi jet deal stalls ]]> https://www.proactiveinvestors.co.uk/companies/news/38784/bae-systems-profits-hit-as-saudi-jet-deal-stalls-46349.html Defence specialist BAE Systems (LON:BA.) saw its profits fall over five per cent after a deal to supply fighter jets in Saudi Arabia suffered delays.

Saudi Arabia struck a deal with BAE in 2007 to buy 72 Typhoon aircraft, 24 of which have already been delivered.

But the deal, worth an estimated £4.5 billion, hit a speed bump after the two parties struggled to come to an agreement over changes to the prices.

The final 48 planes twin-engine fighters will be built by BAE once this is resolved.

“In line with previous guidance, modest growth in underlying earnings per share is anticipated, assuming a satisfactory conclusion to the Salam [Saudi Arabia programme] pricing negotiations in 2012,” said BAE.

Pre-tax profits for the six months to 30 June were £655 million, down from £691 million in the same period last year, while sales were 10 per cent lower at £8.3 billion.

Earnings before interest, tax and amortisation dipped 3 per cent to £939 million from £968 million.

The company, which is Europe’s largest defence firm, said military spending cuts in the US also affected its performance.

Although it said the outlook for defence spending in the UK had stabilised, BAE admits the risk of further US budget reductions remains.

BAE insisted that it expects trading to be stronger in the second half given the existing order book.

The company pushed its interim dividend up to 7.8 pence from 7.5 pence.

Shares in the defence firm fell 1.1 per cent to 309.1 pence.

 

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Thu, 02 Aug 2012 10:44:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/38784/bae-systems-profits-hit-as-saudi-jet-deal-stalls-46349.html
<![CDATA[News - BAE Systems first half sales slip; launches £0.5bn buyback ]]> https://www.proactiveinvestors.co.uk/companies/news/26176/bae-systems-first-half-sales-slip-launches-05bn-buyback-31244.html Defence and aerospace group BAE Systems (LON:BA) reported falls in revenues and profits for the first six months of the year.

However, shares in BAE rallied 5 percent this morning as it hiked the interim dividend 7.1 percent to 7.5 pence and announced a share buyback of up to £500 million. BAE said that the increase in dividends reflected its anticipated full year financial performance in 2011.

On the financial side, BAE’s sales dropped from £10.6 billion a year earlier to £9.23 billion in the first half of 2011, while earnings slipped from £1.1 billion to £968 million. Meanwhile, the group’s net debt was reduced from £1.2 billion at 30 June 2010 to £1.12 billion and its order book stood at £36.9 billion, down from £43.4 billion a year earlier.

The reduction in sales resulted from a £160 million charge for the costs of completing the offshore patrol vessel programme (OPV) deal in Oman.

BAE expects sales to pick up in the second half, when it is set to negotiate changes to the Saudi Salam programme.

In terms of the full year outlook, BAE is still anticipating a reduction in sales due to the government’s spending cuts and unfavourable changed in currency rates.

Due to lower revenues, full year earnings per share are expected to be flat compared to 2010.

Shares in BAE climbed 15 pence (5 percent) to 307.8 pence this morning, giving the group a market group of £10.5 billion.

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Thu, 28 Jul 2011 09:35:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/26176/bae-systems-first-half-sales-slip-launches-05bn-buyback-31244.html
<![CDATA[News - BAE Systems sales to drop in 2011 after UK spending review ]]> https://www.proactiveinvestors.co.uk/companies/news/21491/bae-systems-sales-to-drop-in-2011-after-uk-spending-review-25628.html BAE Systems (LON:BA) expects a reduction in sales this year due to a reduction in activity in the UK businesses following the strategic defence and security review by the UK government.

Shares in the company dropped 3.6% on the update, making BAE the heaviest faller in the FTSE 100.

The defence and aerospace systems manufacturer reported its 2010 results today, which showed that headline sales were up 1.8% year on year and underlying earnings per share climbed 1.7% to 40.8 pence.

Underlying EBITDA (earnings before interest, taxes, depreciation and amortisation) climbed 0.8% to £2.2 billion after a charge of £100 million taken in respect of the terminated Trinidad and Tobago ship contract.

Profit for the year amounted to £1.03 billion, compared to a £61 million loss in 2009.

BAE said it would mitigate the impact of lower activity by improving return on sales through reducing costs and improving efficiency.

The total dividend has increased by 9.4% to 17.5 pence.

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Thu, 17 Feb 2011 09:54:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/21491/bae-systems-sales-to-drop-in-2011-after-uk-spending-review-25628.html
<![CDATA[News - BAE Systems to buy Norkom for €217 mln ]]> https://www.proactiveinvestors.co.uk/companies/news/20624/bae-systems-to-buy-norkom-for-217-mln-24584.html  

BAE Systems (LON:BA) is to take over Dublin-based and AIM-listed Norkom Group (LON:NORK) in a recommended €217million deal.

Norkom is a technology company that specialises in software to protect financial firms from financial crime, as well as providing compliance software. The new business is seen as complementary to BAE’s digital security arm, Detica. The deal will expand BAE’s presence in the sector.

The FTSE100 constituent is offering Norkom shareholders €2.10 per share, a 35 percent premium to yesterday’s closing price. The takeover has already been recommended by Norkom’s board.

BAE has already secured almost 45 percent of Norkom’s share capital, after Norkom’s management and major shareholders - TVC Holdings - backed the bid.

"Countering financial crime is a priority for governments and financial institutions,” BAE chief executive Ian King said.

“There is a compelling logic to the combination of Detica's NetReveal® product and the complementary capabilities and customer reach of Norkom.  

“The combination will result in a significantly enhanced offering for customers and present an opportunity for accelerated growth for the BAE Systems Group in the fast growing cyber and intelligence services sector."

 

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Fri, 14 Jan 2011 08:54:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/20624/bae-systems-to-buy-norkom-for-217-mln-24584.html
<![CDATA[News - BAE Systems gobbles up New Hampshire based Oasys Technology ]]> https://www.proactiveinvestors.co.uk/companies/news/69135/bae-systems-gobbles-up-new-hampshire-based-oasys-technology-8205.html BAE Systems (LON:BA, PINK:BAESY) is set to acquire New Hampshire based electro-optical engineering specialist OASYS Technology in a deal worth US$25m.

OASYS develop and manufacture electo-optical technology, which is used in night-vision, reconnaissance & surveillance, Helmet Mounted Displays (HMDs), laser sub-systems as well as illumination and imaging systems.

The specialist engineering group is currently owned by 5 individual employees.

The $25m cash deal also includes a further $30m in potential ‘earnouts’ and BAE is expected to fund the transaction from its cash resources.

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Tue, 07 Sep 2010 17:04:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/69135/bae-systems-gobbles-up-new-hampshire-based-oasys-technology-8205.html