Yahoo Finance BAE profits on the rise as defence spending increases
BAE Systems is set to reveal a rise in profits and revenue in its annual figures on Thursday - along with a new chief executive.
Speculation is growing that chief operating officer Charles Woodburn will be confirmed as the new boss of the defence group, taking over from long-serving Ian King.
Mr Woodburn joined the world’s second-biggest defence business last year from oil services group Schlumberger with a brief to learn the industry and was seen as heir apparent to Mr King.
His elevation to the top job could come as BAE announces it has turned the corner after years of constrained arms spending by cash-strapped governments.
A new focus on defence in an increasingly uncertain world is expected to see BAE report revenues having grown by 4pc to £18.7bn and pre-tax profits more than 10pc higher at at £ 1.23bn.
The company has had a good year. Major programmes have moved ahead including work starting on the massive Dreadnought programme to build the new generation of Trident nuclear missile submarines, a ramp up in production of F-35 fighter jets and confirmation of the new generation of Type 26 frigates.
However, a long hoped for order of Typhoon jets from Saudi Arabia has failed to materialise. Current orders for the fighters will mean that BAE’s Lancashire production line will run out of work in 2018, and without new demand it could be costly to restart manufacturing.
Rumours among the defence establishment and in the City that the RAF is considering ordering more Typhoons to support its ageing and overworked fleet have been scotched, meaning that without landing a Saudi deal, the company could suffer a major hit.
Zafar Khan, analyst at Societe Generale, said that 2017 could finally see the Saudi order appear and a boost from new US president Donald Trump.
“We expect 2017 to finally see the signing of the much-awaited £5bn Saudi contract for Typhoon which would be accompanied by a cash advance,” he said.
“Moreover, with the election of Donald Trump, we think BAE is well positioned to benefit from the likely growth in US defence budgets and higher spending by NATO member as he encourages them to honour their agreement to expend at least 2pc of GDP on define.”
