Pension deficit spikes BAE Systems' guns
Friday 31 July 2009
BAE Systems posted a first-half loss of £82m yesterday as the group's pension deficit ballooned by 30 per cent to more than £3bn.
The slump – which was also partly blamed on £256m-worth of goodwill writedowns on a US acquisition – was shrugged off by BAE's chief executive, Ian King, as an accounting "quirk". Underlying earnings before interest, tax and amortisation rose 19 per cent to £979m on revenues up by 28 per cent to £9.9bn, and earnings per share rose 10 per cent to 17.8p.
"It is an accounting loss, not an actuarial loss," Mr King said. "We have agreed recovery plans with our trustees and the regulators appointed by the Government that go out for 20 years, but we still have to go through these quirks of accounting in the short term." Notwithstanding the underlying figures, the market was spooked, and the defence group's shares closed off 4.88 per cent at 311.75p.
Despite the recession, BAE is confident of its future. The order book has grown by nearly £4bn to £45bn in the first half, and the group is expanding in India, South Africa and Australia. "We are not immune, and we are vigilant, but we still see a lot of growth," Mr King said.
In the US, where BAE generates more than half its revenues, the group has been boosted by plans to increase funding for the F-35 joint strike-fighter programme. In the UK, the Eurofighter Typhoon will be the main driver for growth, the company said yesterday. And even the combination of the straitened public finances and the Strategic Defence Review due to start next year hold few concerns. "If the SDR meant the Government wanted to terminate any of our contracts, it would be for their convenience, which means we would recover all our costs," Mr King said.
Some City commentators also saw through the mark-to-market fluctuations. Allan Smylie, at Numis Securities, said: "The underlying operating business remains extremely robust."
BAE is not the only company wrestling with pension issues caused by the volatile markets. This week the airports operator BAA's first-half results were hit by a £219m pension deficit charge, which helped to pull its losses down to £546m, triple last year's level.
- 1 'Not suppost to cry': 9-year-old lists the worst things about being a boy
- 2 Iggy Azalea responds to Eminem rape lyrics: 'I'm bored of old men threatening young women'
- 3 Woman opens professional cuddling shop – gets 10,000 customers in first week
- 4 Lana Del Rey rape video: Marilyn Manson denies involvement in shocking leaked footage
- 5 Winnie the Pooh banned from Polish playground for being 'inappropriate hermaphrodite'
'Not suppost to cry': 9-year-old lists the worst things about being a boy
Duchess of Alba dead: Billionaire Spanish duchess who lived life by her own rules, dies at 88
Dennis Skinner takes Ukip MP Mark Reckless to task moments after he is sworn in
Mike Nichols dead: The Graduate director dies suddenly following cardiac arrest
Woman opens professional cuddling shop – gets 10,000 customers in first week
Rochester by-election: Ukip gains second MP as Tory defector Mark Reckless holds seat
'Muslims pre-date Columbus in discovering America,' says Turkish president Erdogan
Rochester by-election: Labour MP Emily Thornberry resigns after posting white van and England flags tweet
France 'blocks' Russian sailors from boarding a warship
'Beast of Bolsover' Dennis Skinner takes Ukip MP Mark Reckless to task moments after he is sworn in
Former Tory PM Sir John Major says 'we would not have an NHS without migrants'
iJobs Money & Business
Voluntary Only - Expenses Reimbursed: Reach Volunteering: Age Concern Slough a...
Voluntary Only - Expenses Reimbursed: Reach Volunteering: Crossroads Care is s...
£20000 - £25000 per annum + OTE £35,000: SThree: We consistently strive to be ...
£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...