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Thursday, 1 March, 2001, 11:55 GMT
BAE takes 300m Nimrod charge
BAE Systems Hawk military aircraft
Hawk exports are lower than expected
BAE Systems, the UK defence and aerospace group, has reported annual profits in line with expectations, reassuring investors who feared there might be more bad news to come following January's profit warning.

The company formed from the merger of British Aerospace and Marconi Electronic Systems had warned of worse-than-expected performance in its military division and said job cuts this year would be inevitable.

BAE Systems Nimrod plane
Nimrod deal: A millstone round BAE's neck
In its results statement, BAE said it would be taking a 300m charge following a "major reassessment" of the Nimrod military aircraft programme for the Royal Air Force.

This would wipe 25% off its profits this year but enable BAE to cover all the costs associated with completing the contract.

Underpriced

Analysts said the Nimrod programme had been a millstone round the company's neck for some time.

The contract had been underpriced in 1995 and poorly renegotiated by BAE in 1998, they said.

The Nimrod is known as a maritime patrol aircraft.

Its design is based on the Comet, the first commercial jet airliner.

'Substantial Saudi contribution'

BAE said UK government military orders were still falling short of expected levels while exports of Hawk military aircraft were also lower than anticipated.

BAE said the restructuring programme announced in January would help it shift production focus to the Eurofighter Typhoon from the elderly Tornado fighter.

In the past, BAE has been strongly criticised by human rights groups for supplying military equipment including Hawks and Tornados to countries such as Indonesia, Zimbabwe and Saudi Arabia.

In its statement, BAE said the controversial Al Yamamah military programme in Saudi Arabia would "continue to contribute substantially" to the company's performance.

BAE said it would be stepping up investment aimed at expanding its Saudi business.

Airbus growth

BAE's business also includes a 20% stake in European plane maker Airbus, which has been a better performer.

BAE said Airbus was entering a phase of strong profitable growth, with orders booked worth $121bn.

The company's major initiative in the year was the official launch of the A380 super-jumbo project.

A rearrangement of Airbus's ownership structure from a consortium into an integrated company would also improve efficiency and provide cost savings, the company said.

Indian order

BAE said profit for 2000 before interest and excluding goodwill amortisation and one-off items was 15% down on the year before at 950m.

Sales worth 12.2bn were achieved in the year.

The outlook for 2001 was "broadly unchanged" from last year's performance excluding the Nimrod charge, BAE said.

"BAE Systems is now a well-balanced company underpinned by a strong order book, strong balance sheet and excellent cash generation," chief executive John Weston said.

Analysts said they expected the company's share price to hover at about 300p in 2001 although new orders - in particular a military contract expected from India - might lift the stock temporarily.

In mid-morning trading on Thursday, the share stood at 313p, up 19p, having traded in a range of 281-453p in 2000.

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See also:

10 Jan 01 | Business
BAE Systems plunges on grim outlook
14 Sep 00 | Business
BAE Systems profits boost
30 Nov 00 | Wales
Superjumbo orders take-off
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