BAE Systems: Defence Manufacturer Predicts Fall In Earnings

British defence company BAE Systems has warned its earnings this year will fall following the coronavirus pandemic.

However, the manufacturer, which is involved in a number of UK defence projects, said it will restart dividend payments as it expects the defence sector to bounce back in the second half of the year.

Charles Woodburn, the company's Chief Executive, said: "Assuming no significant COVID-19 resurgence, we expect a good second half to the year.

"Demand for our capabilities remains high and we recognise our role not only in supporting national security, but also in contributing to the economies of the countries in which we operate."

He added: "We started the year from a strong position and we have taken actions to enhance our resilience, ensuring we continued to deliver against our customer priorities, whilst keeping our employees safe."

BAE Systems is involved in a number of UK defence projects - including Typhoon fighter jets, Royal Navy warships and Astute-class submarines. 

Earlier this year, the firm said it was expecting "more significant disruptions" to the business year after coronavirus had little impact on the opening three months.

Figures in BAE System's 2020 half-year results, published on Thursday, show a 15% drop in underlying earnings per share to 18.7 pence in the six months to the end of June.

The company also said annual earnings per share would be a mid-single digit percentage less than last year’s return of 45.8 pence.

It also reported its underlying profits had decreased from £999 million at the same point last year to £895 million in 2020 - a decrease of 11%.

However, the company added it expect sales to "increase by a low-single digit percentage compared to last year" as it sees "increased volumes in F-35, combat vehicles and growth in the electronic defence portfolio".

BAE Systems warned of "geopolitical uncertainties" and said there "remains considerable uncertainty" over COVID-19.

It said the disruption of the pandemic, new working practices and a fall in demand for civil aviation products had all impacted the figures.

Paul Everitt, CEO of ADS, which supports over 1,000 aerospace firms, told Forces News how COVID-19 has impacted the industry.

"BAE and the broader defence industry have come through much better, certainly, than the civil aerospace manufacturers who have obviously been much more exposed to difficulties that airline have had to endure during the pandemic," he said.

Regarding potential job losses within defence, Mr Everitt said the autumn months will present a "bigger challenge" to firms, with the Government expected to reveal its Integrated Review alongside a Comprehensive Spending Review and the Budget.

Cover image: Staff at BAE Warton in Lancashire (Picture: PA).