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Last Updated: Thursday, 24 February, 2005, 16:48 GMT
Write-downs hit earnings at BAE
The Eurofighter consortium secured key orders last year
Defence giant BAE Systems plunged into the red last year following write-downs on some of its ventures.

But chief executive Mike Turner said the firm had moved "from a position of recovery to one of profitable growth".

If exceptional items and interest are not taken into account, annual pre-tax profits rose 3% to 1.01bn ($1.92bn) on the back of rising order books.

BAE also said its potential post-tax pension liabilities had increased to 3bn in 2004 from 2.1bn in 2003.

These latest pension figures were calculated under new accounting standards, known as the FRS17.

BAE said that returns had been better than expected but its pension pot had been hit by a reduction in bond yields and the longer life spans of its pensioners.

Strong orders

In the year to the end of December 2004, BAE made a pre-tax, post-exceptionals loss of 232m, against a profit of 233m a year earlier.

BAE said the write-downs mainly related to its merger with Marconi Electronic Systems and a deal with Italy's Finmeccanica.

The strong pre-exceptionals figure can be attributed to the strength of the order book.

The value of orders strengthened to 50.1bn from 46bn and the company's net cash jumped to 5m from a deficit of 870m at the end of 2003.

The Saudi Arabian government pays BAE in oil and the rise in the price of crude oil also helped boost BAE cashflow.

Sales boost

BAE's sales were also boosted by its partnership with missile maker MBDA, sales of Hawk trainer jets to India and its 20% stake in Airbus, the world's biggest plane maker.

"Airbus continues to build upon the strong performance of 2003 despite a number of challenges in the current commercial aircraft market and against a backdrop of rising fuel prices and adverse US dollar exchange rates," said Mr Turner.

On top of that, the company is part of the Eurofighter consortium, which secured firm orders from the UK, Germany, Italy and Spain in December.

BAE is increasingly looking to the US for growth.

It completed five US acquisitions last year and is now one of the top providers of IT system support to US government agencies.

Shares in BAE closed up 1.2% at 253 pence.

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