Defence spending cuts bite at BAE as profits fall
ONE of Bristol's biggest employers said it has been hit by cuts in defence spending across the world.
BAE Systems, which last year sold Filton Airfield to property developers in a deal worth a reported £120 million, saw its profits fall despite the sale.
The company, which was recently planning to merge with Airbus parent firm EADS, said defence cuts in Europe and the US had lead to a fall in profits. It added any growth in 2013 is likely come from other parts of the globe.
The company reported a 6.4 percent fall in earnings before interest and tax to £1.895 billion, which was lower than market predictions.
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The fall in profits was linked to a fall in business in the US and the reduction of support of for military forces in Iraq and Afghanistan.
Despite the fall in profits investors still appeared to be pleased with the numbers and shares increased on the market. Rumours that the merger with EADS is once again on the agenda have also emerged in recent days.
BAE Chief Executive Ian King said the firm's recent drift to cut costs and increase overseas sales had also helped. Shares in the firm were up 4.9 percent at 348.5 pence, valuing the company at £11.3 billion.
He added: "There are a lot of green shoots in this organisation which provides you with confidence that resilience is there."
Market analyst Sandy Morris said: "A £1billion-pound share buy back on top of one of the highest dividend yields in the market can only be interpreted as a very profound and positive signal about management's belief in the robustness of the business.
"And for them to do that whilst everyone probably has been concerned about and most likely exaggerating the potential impact of US spending cuts is clearly going to catch the market on the hop and pleasantly surprise it."
Mr King has moved to dispel the rumours about a merger.
He said the firm was "absolutely not" in discussions with EADS.
BAE's orders outside of the US and UK rose by £11.2 billion pounds over the year from £4.8 billion pounds in 2011. The increase is a reflection of the firm's drive to find business in the Middle East and India.
BAE added that 3,600 jobs in its US ship repair business was under threat after was notified by the US Navy that it was considering the potential to cancel, defer or revise maintenance plans on 13 ships.