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good result for bae

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    Here's some good need to worry about the BAE purchase order!

    BAE Systems FY earnings 22 pct up as sales, order book growth continues UPDATE
    February 21, 2008: 04:19 AM EST

    (updates with detail, company, analyst comment, price)
    LONDON, Feb. 21, 2008 (Thomson Financial delivered by Newstex) -- Defence and aerospace group BAE Systems PLC reported an ahead of expectations 22 pct rise in annual pretax earnings and a 14 pct increase in sales and forecast a further year of good growth.

    The Farnborough-based firm said full year earnings before interest, tax and amortisation (EBITA) were 1.48 bln stg against 1.20 bln last time, while sales jumped to 15.7 bln from 13.7 bln. The company's order book lifted to 38.6 bln from 31.7 bln previously.

    BAE said operating profits rose to 1.77 bln stg from 1.05 bln beforehand and the dividend per share was 12.8 pence against 11.3 pence a year ago. The firm's basic EPS increased to 26 pence from 19.9 pence last time.

    'We have excellent forward visibility and a further year of good growth is anticipated in 2008, including a full year contribution from the former Armor Holdings business,' outgoing chief executive Mike Turner told reporters on a conference call, adding, 'this is my last full year but I think you see that the company is in excellent shape going forward.'
    The company said it was seeing continued growth from its US businesses, which now account for some 50 pct of group sales, seeing especially strong demand for sophisticated electronic warfare and protection systems.

    The acquisition of Armor Holdings has delivered further progress to BAE's wheeled vehicle strategy, with the group saying the Armor acquisition is well on track to deliver its required return on investment.

    In addition, BAE said a part-year contribution would be expected following the anticipated completion this year of the proposed acquisitions of MTC Technologies (NASDAQ:MTCT) and Tenix Defence.

    Turner confirmed that BAE has an acquisition war chest of just under 5 bln stg made up of some 700 mln stg of net cash it closed the year with, term debt to the tune of 2.5 bln stg and a revolving credit facility of 1.5 bln stg. However, the company indicated it would likely focus its attention on the US for further purchases.

    'We are looking at each of our home markets but because of the US and the priority they give to defence and security spending there, we clearly have a number of targets in the US,' said Turner.

    The group said its UK-based businesses are 'performing well' with good programme schedule and cost performance. This performance improvement included a recovery to profitable trading for the land systems business in the UK. Benefits are now apparent as some of the earlier UK MoD programme relationships mature, BAE said.

    The UK government committed itself to the new Carrier programme in July, enabling BAE to enter into a Framework Agreement with VT Group for the creation of a joint venture which would, subject to completion, bring together both firms' surface warship building and surface support operations. And the company is looking to conclude the deal as soon as the British government outlines its plans.

    'We are ready to complete the JV when we know what the naval programme is going forward. It would not be wise of us to conclude the agreement with VT until we know the shape of the naval programme going forward and therefore what value each party brings to the joint venture,' said Turner.

    Despite the UK's commitment towards the Carrier programme, BAE expects Britain's government to stretch out its defence budget going forward instead of increasing it.

    'Unless more priority is given in the longer-term to defence equipment so the UK can continue to defend its interests and security around the world there will be a reduction in UK defence spending. I don't see the cancellation of programmes but the MoD budget situation is so severe on the equipment side that they are looking at stretching out a number of programmes,' said Turner.

    The group's multi-home market business focus continues to generate opportunities for growth, especially in Saudi Arabia where the group has a growing home market position, it said. In South Africa, BAE said its land systems OMC business is achieving growth through exports with its RG31 and RG32 mine protected vehicles.

    In Sweden, meanwhile, production of the CV90 infantry fighting vehicle is underway for the Dutch Army, while in Australia the group last month announced the proposed acquisition of Tenix Defence, a leading Australian defence contractor.

    Divisionally, the group's star performer was Land Systems, which delivered 41 pct organic growth and continuing strong prospects. Electronics, Intelligence & Support (EI&S) also stood out, producing an improved margin with expectation for good growth.

    Clive Forestier-Walker, an analyst at Numis Securities maintained his forecasts on the company but said 'there will be scope for upgrades in Land Systems, EI&S and particularly from Saudi related businesses where we believe that revenues could double over the next five years.'
    At 8.50 am shares in BAE Systems were trading 9 pence or 1.91 pct higher at 481 pence.
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