Stream­lined BAE aims to fly

De­fence gi­ant set to cut jobs to re­main com­pet­i­tive

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DE­FENCE BE­HE­MOTH BAE (BA.) is plan­ning to make job cuts across three di­vi­sions to im­prove ef­fi­ciency, oper­a­tional ef­fec­tive­ness and ‘drive competitiveness’.

The di­vi­sion most im­pacted by this stream­lin­ing pro­gramme is the mil­i­tary air and in­for­ma­tion busi­ness which is set to cull 1,400 roles. The com­pany says these ac­tions are needed as pro­duc­tion of both its Eurofighter Ty­phoon jet and its Hawk train­ing jet winds down.

While BAE re­cently got a lift from a let­ter of in­tent to buy 24 Ty­phoon jets and six Hawks by Qatar, a lack of cer­tainty over fu­ture or­ders has prompted the ac­tion.

A fur­ther 375 jobs in mar­itime ser­vices and 150 in cy­ber in­tel­li­gence are set to go.

Beren­berg an­a­lyst Char­lotte Key­worth fore­saw a need to ad­dress is­sues with Ty­phoon pro­gramme in a piece of re­search on 2 Oc­to­ber.

Down­grad­ing the stock from ‘buy’ to ‘hold’, she noted that in the ab­sence of a firm ex­port or­der ma­te­ri­al­is­ing for the Ty­phoon, ‘we now fore­cast full year 2018 and 2019 de­liv­ery rates fall­ing around 50% year-onyear from 20 in 2017 to 11 and five air­craft re­spec­tively’.

This is the first de­fin­i­tive cost cut­ting move by BAE’s chief ex­ec­u­tive Charles Wood­burn, who took over in July. He re­it­er­ates guid­ance for un­der­ly­ing earn­ings per share for 2017 to be 5% to 10% higher than 2016’s fig­ure of 40.3p and is also ex­pect­ing a small re­duc­tion in net debt. Com­ment­ing on the up­date Citibank says: ‘BAE Sys­tems is a re­silient busi­ness that we be­lieve can weather bumps in the road (such as these re­dun­dancy/re­or­ga­ni­za­tion charges) and still meet ex­pec­ta­tions, sup­ported by 3.6% div­i­dend yield.’ (DS)

Busi­ness is set to cull 1,400 roles

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