BAE Systems Profit Jumps in 2016

BAE Systems Profit Jumps in 2016, Further Growth Seen on Brighter Outlook for Defense Budgets

7:32 AM, Feb 23, 2017 — British defense company BAE Systems (BA.L) has projected that its underlying earnings will increase by up to 10% in 2017 amid improved outlooks for defense budgets in several markets after posting a gain in its operating profit last year which was buoyed by higher order intakes.

The company, which employs more than 80,000 people in 40 countries, generated sales of 19 billion pounds ($23.70 billion) in 2016, up from 17.90 billion pounds in the prior year, according to preliminary results published on Thursday. Underlying earnings per share were worth 40.3 pence, 7% higher than the adjusted underlying earnings per share of 37.8 pence in 2015 and in line with the company’s guidance. Underlying earnings before interest, tax, depreciation and amortization (EBITDA) rose to 1.91 billion pounds from 1.68 billion pounds in the previous year.

Operating profit as defined by the International Financial Reporting Standards (IFRS) measure increased to 1.74 billion pounds year-on-year, up 10% on a constant currency basis. The company’s order intake rose to 22.44 billion pounds from 14.92 billion pounds in the prior year while the order backlog advanced to 42 billion pounds from 36.8 billion pounds over the same time frame.

The group said that in the US there had been signs of a return to growth in defense budgets, with it saying that the new administration is “expected to further increase defense and security spending”. The group said that it is targeting growth of 5-to-10% in its underlying earnings per share this year and said that it has recommended a final dividend of 12.7 pence per share making a total of 21.3 pence per share for the year, an increase of 2% compared to 2015.

Ian King, chief executive of BAE Systems, said: “2016 was a good year for BAE Systems. Our strategy is well defined; we have a large order backlog, long-term program positions, strong program execution and a well-balanced portfolio. With an improved outlook for defense budgets in a number of our markets, we are well placed to continue to generate attractive returns for shareholders.”