DEFENCE and aerospace firm BAE Systems yesterday launched an ambitious £1bn share buyback programme, as evidence of the “robust performance” of the FTSE firm.
Chief executive Ian King said he could see “green shoots” in the company, which gave it the confidence to unveil the buyback, although full implementation still hinges on discussions with Saudi Arabia over pricing of a key contract.
Despite its optimism, BAE yesterday posted a six per cent fall in profit,, and sales over the year fell seven per cent.
Full-year underlying earnings before interest, tax and amortisation fell to £1.9bn, hurt by unresolved discussions over pricing of the Saudi Arabian contract to supply the Gulf state with Typhoon aircraft.
BAE warned that its key UK and US markets would be “constrained” this year.
It has come under pressure from shrinking military budgets in the US and the UK, as governments try to reel in large budget deficits.
The UK government pledged in 2010 to slash its defence spending by eight per cent by 2014 while the US – from which BAE derives around 40 per cent of its income – already has plans in place to cut $487bn (£320bn) from its defence budget for the next decade.
BAE – whose proposed merger with European peer EADS collapsed in October as Germany refused to give it the green light – is “absolutely not” in discussions to revive the tie-up, King said yesterday.
Meanwhile, BAE yesterday inked a longevity swap with L&G to safeguard it against the risk that its 31,000 pensioners live longer than current estimates.