LONDON – Defence group BAE Systems plc described its announcement of the 2014 preliminary full-year results as “a solid overall performance, in line with guidance” after reporting a £1.5 billion fall in sales to £16.6 billion, largely due to £0.6bn of adverse exchange rate.
Chief Executive Ian King said: “We continue to win significant new business with over £10 billion of new orders from the UK and US for the third successive year. As a result, the large order backlog of £40.5 billion continues to provide good, multi-year visibility across many of our businesses.
“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. We believe US budgets are now relatively stable, with some early indications of a modest improvement in 2016.
“These are competitive times and we will continue to invest in and develop the technology, skills and market positions needed to drive the business forward. The Group is well positioned to continue to deliver shareholder value.”
The Group forecast that underlying earnings per share in 2015 are expected to be marginally higher than in 2014, largely due to anticipated naval and aircraft orders.
But it said the economic environment in the UK remains challenging, placing further pressure on many areas of public spending, including the UK defence budget. Despite this,Typhoon production and the Group’s extensive in-service military aircraft support and upgrade business in the UK provide a strong core of high-performing business.
2014 saw a significant acceleration of capability expansion on to the Typhoon combat aircraft platform. Activity is underway to integrate additional weapons and sensors onto the aircraft for the four European partner nations and international customers. In November, the formal launch of a funded, multi-nation development programme for an advanced, electronically-scanned radar was a key milestone in the Typhoon platform’s evolution.
BAE Systems’ participation in the F-35 Lightning II combat aircraft programme includes UK-manufactured rear fuselage and empennage assemblies as well as electronic systems content from the Group’s US-based business. The Group expects significant growth in production volume with the planned acceleration of aircraft deliveries.
US budgets are now relatively stable, with some early indications of a modest improvement in 2016. Only minor trading disruption was apparent in the last quarter of 2014 as the government operated under a Continuing Resolution until the mid-December passage of an omnibus appropriations bill for the 2015 fiscal year. This included stable Department of Defense funding compared with 2014, and included funding for ground vehicle programmes and for additional F-35 Lightning II aircraft.
Overall, 2014 saw signs of greater stability and improving clarity emerge in markets where budgets have been constrained in recent years by the wider economic picture.
“In this challenging, but stabilising environment, BAE Systems has delivered a solid overall performance, building on the good programme execution of recent years. Defence and Security continues as a high priority in a number of the group’s domestic and international markets, including the Kingdom of Saudi Arabia.”
A further 11 Typhoon aircraft were delivered to Saudi Arabia during the year under the current 72-aircraft Salam Typhoon contract, on which a February 2014 agreement was agreed on price escalation.
In the UK, Artful, the third of a planned series of Astute Class submarines, was launched in May. Alongside the build of of Astute Class boats, engineering work continues to accelerate as part of the assessment phase of the Successor submarine progamme, the potential replacement of Vanguard Class submarines intended to enter service towards the end of the next decade.
The build of two Queen Elizabeth Class aircraft carriers is progressing well. The first carrier was named on 4 July and subsequently floated out of her assembly dock, allowing the assembly of blocks for the second vessel to begin while outfitting of the first carrier continued. The Group welcomed the October announcement by Prime Minister David Cameron to commit to the operation of both vessels, providing a continuous-at-sea UK carrier capability.
Work continue on the Type 26 warship assessment phase.
Martin Brodie had a career of nearly 30 years in aerospace with Rolls-Royce plc, where he held senior positions in the Corporate Communications team, covering military and civil aerospace, and in the headquarters office in London. Before joining Rolls-Royce, Martin spent a decade as a journalist wit
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