Defence contractor BAE Systems has reported a 6 per cent fall in first-half profits, weighed down by budget cuts in the US, and said its prospects for double-digit earnings growth for the full year hinged on a successful conclusion to talks with Saudi authorities over a jet deal.
The contract, known as the Salam deal, was first signed with Saudi Arabia in 2007 but has been delayed by pricing negotiations.
BAE, which makes Eurofighter Typhoon jets and aircraft carriers, also said the full implementation of a £1 billion share buy-back programme also depended on the “satisfactory resolution” to the Salam talks. The group has so far bought back about £90 million worth of shares.
For the six months to the end of June, BAE reported underlying pre-tax profits of £865m, down from £922m a year earlier, on sales 1 per cent higher at £8.4bn. Its order backlog grew to £43.1bn, from £40bn a year ago.
The group, headed by chief executive Ian King, said: “Including both the benefit from the share repurchase programme and downside arising from reductions to US defence budgets, double-digit growth in underlying earnings per share is anticipated for 2013.
“This outlook assumes the satisfactory conclusion to Salam pricing negotiations this year.”
Despite the dip in profits, BAE hiked its interim dividend by 3 per cent to 8p a share.