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BAE Systems has reported a drop in profits for the first six months of the year, as military spending cuts start to have an impact. Profits dipped to £691m down from £781m a year ago, while global sales dropped 13 per cent to £9.2bn. Despite the dip in profit’s the company said that it would be raising its dividend by 7 per cent and purchasing £500m of its own shares in moves designed to reassure investors that the company can survive the cuts in spending announced by the UK and under consideration in the United States.
According to the company’s Chief executive, Ian King, the company would be focusing on new areas of business such as cyber weapons.
"We continue to pursue the fast lanes of growth in the areas of military and technical services, cyber and intelligence and high-end electronics," he said.
"The order book is pretty strong relative to the conditions that exist; we also have an order backlog, so orders we have won, but are not yet funded because in the U.S. it is done on a yearly cycle. That's showing good progression."
BAE, which is involved in the production of F-35 jets and Astute class submarines, said it continued to expect a fall in sales for the full year, primarily due to weakness at its land and armaments unit, which makes artillery and armoured vehicles. Sales in that division fell by 40 per cent in the first half impacted by a drop in US orders.
The group has cut around 15,000 employees over the past two years in a bid to lower costs and the company has been hit by Britain’s decision to slash its defence budget by 8 percent to reduce its deficit. It makes around a fifth of its revenue in the UK.
There are also concerns about the future path of U.S. defence expenditure which accounts for half group revenues.
