Defence contractor BAE Systems said it expected “modest” growth in earnings this year, subject to continuing uncertainty over worldwide defence budgets.
The multinational group which employs more than 1,000 people in Fife, including 800 temporarily based on the Aircraft Carrier Alliance’s contract to build new warships in Rosyth said policy changes in the US and pressure on UK public spending had impacted performance.
BAE, which saw a proposed merger with EADS collapse in the autumn, put 3,600 US employees on notice of possible lay-off in February following a roll-back in spending on the other side of the Atlantic.
New funding legislation had eased that threat, the firm said, though funding for new ships remains unclear and adjustment in workforce may be required in the States.
However, executives also warned there was “insufficient” detail on which to base new outlook assumptions.
Meanwhile BAE used the year-to-date update to hail the benefits of its ongoing £1bn share repurchase programme, £65 million of which has been completed so far, and the prospect of a 3p per share rise in underlying earnings if a contract with Saudi Arabia can be satisfactorily renegotiated.
Overall the group said trading had been consistent with management expectations, with the home market “stable”.
It hailed February’s commissioning of the second of seven Astute class submarines by the Royal Navy, the handover of a sixth and final Type 45 destroyer in March and a five-year partnership with Vodafone for development of smartphone and tablet-based communications security products as particular highlights.
“In the UK, pressure on Government spending continues, but the defence equipment environment remains stable with no material changes to programmes, many of which are subject to long-term contracting arrangements,” BAE said.
“Discussions continue with the UK Government to balance naval surface shipbuilding capacity in the UK with future warship demand,” the company added.
The group, which also employs around 230 at its Hillend site by Glenrothes, said the international market “remained strong”, and it was pursuing significant opportunities.
Total orders of £2.3 billion have been secured so far this year, while talks over supplies to the Middle East continue.
“Discussions continue with the government of the Kingdom of Saudi Arabia relating to the formalisation of price escalation on the Salam Typhoon programme,” it said. “Aircraft deliveries on the programme recommenced in April.
“In March, a £0.6bn weapons contract was awarded under the Saudi British Defence Co-operation Programme.”
Non-executive director Sir Peter Mason retired from the board of BAE at yesterday’s annual meeting, with Ian Tyler joining in his stead. Stocks closed up almost 2% at 382.1p.