Defence giant BAE Systems (LON:BA.) today said it was still on course to post positive growth in the full year after three of its four main divisions performed to expectations in the four months to May 4. The group insisted that at its Land & Armaments division, the return on sales would improve as rationalisation and efficiency programmes progressed. The company’s shares were down 0.8% at 346p.
Among the highlights since the start of 2010, BAE said it had been pleased by the contents of the US defence budget for fiscal year 2011, which identified growth in the investment account allocations at the upper end of BAE’s planning assumptions. In particular, BAE benefits from its significant involvement in the F-35 Lightning II programme, which the US has restated its commitment to.
Overall the company said it had enjoyed good order intake during the period, including £360m on the Astute class submarine programme, which included funding for the start of construction of a fifth boat and long lead procurement activities associated with Boat 6.
It was also awarded a four-year £127m contract by the UK Ministry of Defence to start development of a new generation of combat ships for the Royal Navy. Later on, it was awarded a £135m contract to begin series production of Archer 155mm self-propelled artillery gun systems for the Swedish and Norwegian armed forces. Further orders for £126m were also received for supply of Mine Resistant Ambush Protected vehicles. Elsewhere, the group said that it was unlikely to be hit hard by the UK Government’s decision in March not to select BAE’s proposal for the Future Rapid Effects System (FRES) Specialist Vehicles requirement.
In other news, BAE is set to sell the balance of its holding in Saab AB though a market placing in due course, which follows the recent sale of half of its 20.5% stake for £94m. The group as injected £4m for a 26% stake in a new land systems-focused joint venture with Mahindra & Mahindra in India. The move is being seen as a key step in BAE’s strategy to develop a position in India as one of its home markets.
http://www.investegate.co.uk/article.aspx?id=201007290700141170Q&fe=1
Bae came out with 6month highlights today - all is not lost in the defence sector it seems
Highlights
- Sales2 growth of 9%
- Underlying EBITA3 up 14% to £1,114m
- Underlying earnings4 per share increased by 14%
- Operating cash outflow of £185m
- Interim dividend increased by 9% to 7.0p per share
- £449m market purchase of shares
Order book down a tad at 43.6bn, but a tasty 9% hike in the divi.
Whilst there is ongoing uncertainty about the UK defence budget(with a Strategic Review in the offing in the not too distant future) it seems investors are focused on the likely negative impact of such UK cuts. The US defence market, imv, is far more important and the cuts are unlikely to be as brutal imo. In addition, with the recent Cameron trip to India to promote trade relations amongst other things, there is apparently a large "Hawk" trainer jet in the offing for Bae.
All in all, I'm quite happy to add to my holding at current levels.
Bae up 2.3% to 324. I believe the yield is somewhere in the 5% mark. One to hold for the long term and tuck away.
