UK giant BAE flies into Covid disruption
British military equipment maker BAE Systems Plc said yesterday that annual net profit fell as a result of coronavirus disruption in the first half of 2020.
Profit after tax sank 12% to almost £1.3 billion ($1.8 billion) last year, down from £1.5 billion in 2019, BAE said in a statement.
Sales and operating profit however both increased, it added.
“BAE Systems delivered a strong and resilient set of results in the face of a global pandemic, with higher year-on-year orders, sales, profit and free cash flow,” the company said.
“Pandemic-related disruptions did impact profit in the first half of the year but the second half was stronger.”
The group also noted that “operational delays and disruptions related to the Covid-19 pandemic were experienced across manufacturing and shipyard facilities”.
Sales nevertheless rose 4.0% to £20.9 billion, with a broadly similar gain forecast for 2021.
Operating profit was 1.6% higher at £1.9 billion.
“We have delivered a strong set of results against a challenging backdrop of the global pandemic,” said chief executive Charles Woodburn.
“Throughout 2020, we focused on keeping our people safe and supporting our communities, whilst continuing to deliver for our customers.”
The London-listed defence giant added that US acquisitions in early 2020, alongside higher pension scheme contributions, had placed it in a “position of strength”.
BAE purchased key electronics systems from US peers Raytheon Co and United Technologies Corp, whose merger necessitated asset sales.
It bought the military global positioning system (GPS) belonging to United subsidiary Collins Aerospace, as well as Raytheon’s airborne tactical radios business.
The United States, which has the world’s largest defence budget, now represents about 45% of BAE sales.
“During 2020, we have been resilient and agile in managing our response to the challenges created by the Covid-19 pandemic,” the group said.
“We entered the year in a position of strength, and addressed the pandemic-related challenges whilst also completing two major strategic actions in the year: firstly, the two US-based acquisitions; and secondly, accelerating payments into the UK pension scheme.”
BAE noted that civil aviation — which represents just 5% of sales — had been hit hard by coronavirus fallout.
“Covid-19 significantly impacted this market, and a recovery to 2019 levels is likely to be some years away.
“Despite the near-term challenges, this remains an important franchise for us.”
The pandemic has ravaged demand for air travel and grounded planes worldwide, but a longer-term recovery is forecast on the back of the global vaccines rollout.