Disappointing Results Drag Down BAE Systems

LONDON -- BAE Systems (ISE: BA.L) released disappointing half-year results this morning, pushing its share price down over 2% on opening, taking some of the shine off recent increases. Sales were down 10%, down to 8,334 million pounds from 2011's 9,229 million pounds, with a 3% fall in underlying EBITA, at 939 million pounds compared to 968 million pounds in the six months to June 2011.

Profits were hit by a delay in completion of the Project Salam deal with Saudi Arabia, and it may take several more months to conclude ongoing pricing negotiations. An additional factor was generally lower military spending by U.S. and U.K. governments -- a situation that looks set to continue given the macroeconomic challenges both countries face for the next few years.

In a statement this morning, the company said:

The Group outlook for 2012 is unchanged. In line with forecast, there is a greater bias to the second half trading from the existing order book. The performance of the Group in the first half of 2012 reflects the anticipated further reduction in volume within the Group's land activities and that contractual deliveries under the Typhoon Salam programme do not recommence until 2013. The planned conclusion of negotiations relating to the formalisation of price escalation on the Salam programme is expected to contribute to the Group's second half performance.

Despite the results, BAE increased its interim dividend by 4% to 7.8 pence per share -- covered by around twice underlying earnings -- and with an order backlog increased to 40 billion pounds and continued success reported for its cost-reduction programmes, there's still some good news for shareholders.

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