A busy year for BAE Systems’ naval ships division on the Clyde contributed to the defence giant’s operating profits rising 7.6 per cent to £1.5bn in 2015 while sales rose £1.3bn to £17.9bn.
As the world’s third largest defence contractor unveiled its full year results for 2015 on Thursday, the managing director of BAE’s naval ships business Michael Ord said that the building at BAE's Clyde yards of the final sections of the Royal Navy’s second aircraft carrier had made it a busy year.
He also said that the company had a full programme of work for the years ahead including the building of offshore patrol vessels and the building of eight Type 26 frigates, for which a £859m demonstration contract was awarded by the MoD last year.
"This is an exciting time for our naval ships business in Glasgow,” he said. “The UK Government’s reaffirmed commitment to our complex warship industry in [November’s] strategic defence and security review provides clarity and future opportunities for our business."
BAE is forecasting a 10 per cent jump in earnings this year as military budgets recover and demand for cyber and commercial electronics grows.
Underlying profits fell slightly as Europe’s largest defence contractor slowed the rate at which it producers fighter jets so it can keep the production line running longer.
The company said it expected underlying earnings per share to rise 5-10 per cent in 2016 from adjusted underlying earnings per share of 36.6p last year.
After years of austerity which saw drastic cuts in Western defence budgets, a rise in global geo-political uncertainty and a consequent rise in military spending in the US and Europe is now beginning to benefit defence contractors.
The UK currently accounts for around a fifth of BAE’s sales as does Saudi Arabia, while just over a third comes from North America.
Along with Rolls-Royce, the maker of Eurofighter Typhoon warplanes and Astute-class submarines is currently working on plans to build a £31bn replacement for the UK’s submarine-borne Trident nuclear weapon systems, the submarines of which would be built at Barrow.
According to analyst Steve Clayton of Hargreaves Lansdown defence companies are now at an "inflection point" where traditional weapon platforms such as jets and submarines are becoming less important than data processing and surveillance capabilities.
“Cyber security, both national and commercial, is an area BAE is keen to grow, but it is not yet big enough in the business to drive the overall group forward on its own,” he said.
BAE appeared to unveil succession plans earlier this week when it appointed former oil executive Charles Woodburn as the company’s new chief operating officer as heir apparent for chief executive Ian King, who is expected to retire within the next year and a half.
The company, which announced a 20.9p a share dividend up from 20.5p last year, has extended the term of chairman Roger Carr until February 2020.
BAE Systems employs around 3,000 people in Scotland across its naval ships business in Glasgow, its maritime services facility at Hillend and its regional aircraft operations at Prestwick.
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