LONDON, 12 September 2003 — British aerospace and defense giant BAE Systems said yesterday that a robust performance by its part-owned aircraft-maker Airbus had helped it to grow interim pretax profits despite difficult conditions. Pretax profits rose to 56 million pounds (79.8 million euros, $88.5 million) in the six months to June from 41 million in the same period of the previous year, the company said in a statement.
But BAE, which last year plunged to a pretax loss after cost overruns on two major projects, said sales had dipped to 5.68 billion pounds in the first half from 5.70 billion. Its bottom line also remained in the red, with net losses of 47 million pounds against 63 million a year earlier.
“We anticipate the underlying trading performance for the company’s defense businesses to remain broadly in line with 2002, before taking account of the exceptional charges last year,” the company said.
European aircraft-maker Airbus, in which BAE holds a 20-percent stake, had a successful first half of the year, despite a difficult airline market which was adversely impacted by the Iraq war and the SARS virus, the company said.
Airbus secured net orders for 175 commercial aircraft and 180 A400M military transport aircraft, compared with 104 aircraft orders in the first half of last year, it said. “Airbus delivered a good first-half performance in what remains a difficult market and we anticipate a similar number of aircraft deliveries to last year,” it said.
BAE shares dipped 0.72 percent to 172.75 pence in late trading here, though many analysts expressed relief that the results contained no nasty surprises, in contrast to past occasions.
The figures were nonetheless marred somewhat by a report in the Guardian newspaper that BAE had operated a 20 million-pound slush fund to bribe Saudi officials involved in the arms trade.
The paper reported that it had obtained a confidential letter from Britain’s Serious Fraud Office to the Ministry of Defense that also suggested that BAE executives had helped themselves to some of the money.
The daily said BAE’s Chairman Sir Richard Evans might have shown personal complicity in the operation of the slush fund, sports cars and yachts.
BAE chief executive Mike Turner refuted the allegations. “Clearly we deny all such allegations. We always operate in line with the laws of the UK and any other country we do business in,” he told journalists on a conference call.
Last year, BAE stunned shareholders with a number of profit warnings after delays and cost overruns at the Astute attack submarine and Nimrod maritime patrol aircraft programs for the British Defense Ministry.
The problems resulted in the company’s first full-year loss in over a decade and caused some shareholders to call for a management re-shuffle. Evans said the company’s management had focused on addressing the key issues that had arisen from the challenges of 2002.
But he acknowledged: “While good progress has been made, we recognize that there is much more to do to deliver acceptable profitable growth and increased shareholder value.”