BAE warns of ‘softening’ in cyber security operations as profits rise to £945m
2 August 2017
Defence giant BAE Systems has seen interim earnings rise 11%, but cautioned over a restructuring at its struggling cyber security operations.
The group said it would take a charge in the second half for overhauling its cyber and intelligence arm, where revenues are "softening".
But it expects this hit to be offset by stronger performances elsewhere in the group, helping it meet full-year guidance.
BAE reported underlying operating profits of £945 million for the six months to June 30, up from £849 million a year earlier - a rise of 11%, or 5% with a boost from the weak pound stripped out.
The weak pound against a strong dollar has helped BAE as it makes sales in the United States more valuable when translated into sterling earnings.
BAE said it would continue to keep a tight rein on costs, but is hopeful of higher spending worldwide.
Chief executive Charles Woodburn said: "We will continue to focus on efficiency and meeting our customers' affordability challenges.
“With the expected improvement in the defence budget outlook in a number of our markets, the group is well placed to continue to generate good returns for shareholders.”
BAE said the cyber security business needs restructuring to improve returns and pledged an “increasingly focused investment programme in engineering capabilities and product development” to support future growth.
Its applied intelligence arm, which forms part of the cyber security division, made a loss of £27 million in the first half.
But it expects the business to be close to an underlying break-even over the full year, with restructuring costs stripped out.
Shares in the group rose 3% after the results as BAE stuck by its guidance for earnings per share growth of between 5% and 10%.
BAE also said it expected defence and security to “remain a priority” in the UK despite the minority government result of the general election.
It added: “Negotiations on the terms of the UK’s exit from the EU will provide greater clarity as to the economic outlook in the medium term.”
Mr Woodburn took the reins on June 30 after former boss Ian King retired following nine years at the helm.