Worst UK loss as BAe goes pounds 1.2bn into red

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The Independent Online
BRITISH AEROSPACE, the country's largest manufacturing company, exporter and employer, yesterday announced a loss for last year of pounds 1.2bn - the biggest in UK corporate history.

Although pounds 1bn of that figure related to charges to cover the rationalisation of its regional aircraft business, the size of the loss nevertheless underlined the depth of the recession in BAe's domestic and overseas markets.

Dick Evans, chief executive of the defence, aerospace, Rover cars and property group, said that 10,000 jobs would be cut in 1993, reducing the workforce to 90,000, and warned that it was not relying on any recovery in the UK economy this year.

Despite the scale of the losses, the City marked BAe's shares up 13p to a close of 265p, largely due to its decision to pay a higher than expected final dividend of 4p.

Nevertheless, analysts remained confused and uncertain about the overall financial health of the business, with profits forecasts for this year ranging from pounds 60m to pounds 150m.

Leaving aside the pounds 1bn exceptional item to cover the restructuring of its regional aircraft business, which is being put into a joint venture with the Taiwan Aerospace Corporation, BAe made an operating loss of pounds 81m compared with a profit on pounds 215m in 1991.

The decline was largely due to a pounds 337m loss in BAe's commercial aircraft division, which makes the BAe146, Jetstream and Advanced Turbo Prop aircraft, the 125 business jet and Airbus wings. BAe was also forced to write off pounds 36m owing to the collapse of DAF, the Anglo-Dutch truck maker in which BAe was the biggest single shareholder with 11 per cent.

Profits from Land-Rover and Range Rover sales were more than cancelled out by losses on car sales, leaving Rover group with an overall loss of pounds 49m.

Although BAe will be free to sell Rover this August - five years after its controversial pounds 150m purchase from the Government - John Cahill, chairman, sought to dampen speculation about a sale, saying: 'We have no plans to sell Rover, it remains part of our core business.'

Mr Cahill confirmed, however, that BAe was seeking joint-venture partners for the remainder of its commercial aircraft business, where losses are running at about pounds 100m a year. BAe is thought to have made a slender profit last year from its 20 per cent share in the European Airbus programme.

The further cost-cutting measures are expected to save BAe about pounds 200m a year on top of the one-off savings achieved by the closure of the Hatfield regional aircraft plant and the switch of production to the group's other factories in Woodford, near Manchester and Prestwick, Ayr.

Mr Cahill said: 'Although a recovery in demand would be helpful, we are not counting on it. Cost reduction will continue to be the major focus of management.'

The 10,000 job losses this year have already been announced and no further significant redundancies are planned for 1993.

BAe's defence division, bolstered by the go-ahead for the Eurofighter 2000 project and a pounds 4bn order for 48 Tornado strike aircraft, made profits of pounds 352m against pounds 371m last year. BAe cut losses on its property arm from pounds 24m to pounds 2m but profits from construction halved to pounds 14m.

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