BAe to announce pounds 750m provision

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The Independent Online
BRITISH Aerospace is this week likely to produce half-year results every bit as bad as the worst stock market predictions with provisions - mainly for closure and rationalisation in the group's regional aircraft division - expected to total about pounds 750m.

The provisions will be presented by the new chairman, John Cahill, as part of a deck-clearing exercise that should put the company on a reasonable footing for the future.

Directors are also expected to announce a substantial cut in the dividend to what they believe to be a sustainable level. Though no final decision has yet been made, the most likely option is for the dividend to be halved this year.

The size of provisions will shock analysts, many of whom thought that an imminent deal with Taiwan Aerospace Corporation would greatly reduce the need to make massive write-offs.

Heads of agreement on a 50/50 joint venture with the Taiwanese, which could save at least some of the regional aircraft business and the 12,000 jobs that depend on it, are likely to be announced with the interim results on Wednesday. BAe was planning to close the heavily loss-making business in its entirety in the absence of finding a joint venture partner.

The company has repeatedly surprised the stock market with bad news since announcing a pounds 432m rights issue a year ago. Mr Cahill hopes this week's results will mark the nadir in the group's fortunes. Analysts are expecting a strong recovery in profits next year.

(Photograph omitted)

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