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BAE Systems maintains earnings guidance after mixed first-half

There was no change to earnings guidance, as some programme execution issues encountered on certain long-standing programmes in Platforms & Services (US) and Maritime in the first half are expected to be covered primarily by higher earnings in the Electronic Systems business and the Cyber & Intelligence sector.

A fighter jet
The term "defence" is sometimes a misnomer when it comes to weapons

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%.

"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.

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