BAE reaps Airbus dividend

An increasingly bold transatlantic strategy, a strong performance in its large-scale military programmes for the MoD and growing returns from its share in Airbus helped

deliver robust half-year profits.

While the UK’s biggest defence company strengthened its position in the US, its European growth was boosted by a good showing by Airbus, in which BAE Systems owns a 20 per cent stake.

The civil aircraft manufacturer was responsible for £176m in underlying profits for BAE, on revenues up 16 per cent to £1.5bn.

Airbus secured net new orders for 276 aircraft, including a further 10 firm orders for the A380, representing a 39 per cent market share of total order units placed in the first half of 2005.

Chief executive Mike Turner used the group’s interim results to dismiss any suggestion that the company would be selling its stake in Airbus any time soon.

BAE’s Airbus holding is worth an estimated £2.5bn, and speculation has been rife that it planned to dispose of it — most likely to EADS, which owns the remaining 80 per cent and has first refusal on any disposal by its UK partner.

‘I do not see disposal in the short term,’ said Turner, who added that the group’s MoD work was now also making a significant contribution to BAE’s overall performance.

Turnover at BAE Systems rose by 13.6 per cent to £6.8bn in the six months ending June, with operating profits rising to £488m from £392m. Proceeds from the sale of elements of its former avionics business to Italy’s Finmeccanica, plus the reduction of BAE Systems stake in Saab from 34.2 per cent to 20.5 per cent, were examples of the ‘refocusing’ of its European operations, said the company.

Meanwhile, the group’s growth in the US was epitomised by its purchase of combat vehicle manufacture UDI.

‘The acquisiton was a key step in the company’s strategy to build BAE Systems as the premier transatlantic aerospace and defence company,’ said Turner.

‘The group is now well placed to support the US military’s growing emphasis on interoperability, affordable transformation and force sustainment and to meet emerging customer requirements with increased emphasis on land systems, including the refurbishment and upgrade of existing vehicles and equipment.’

As a sign of further inroads into America, the US Navy has also chosen the group to provide precision geopositioning software.