Government defence spending cut has started to bite BAE Systems, which reported a marginal growth in revenue and nearly flat earnings from continuing operations.
The company’s pre-tax profit was reported at £1.4 billion in 2010, more five-folds jump from £266 million it reported in 2009. However, underlying profit from continuing operations, excluding exceptional items, rose only by 0.8% while sales remained nearly flat at £22.4 billion.
The negligible sales growth of 1.8% over 2009 figures can be attributed fall in government orders from the UK and US. Defence budget cuts have resulted in revenue loss of 6% in the land and armaments division.
The UK based defence firm said it does not expect sales to pick up in the unit – which among others produces artillery and armoured vehicles, in the current year.
In its preliminary results, the company said: “It is expected that pressures on defence budgets, particularly in the US and UK, will continue.
“Recent statements by the US Secretary of Defense indicated that the 2011 US defence budget is likely to include anticipated cost efficiencies, programme reductions and potential cancellations”.
BAE’s order book has shrunk by nearly 25%. It is yet to recover a staggering 54% drop in sales a year before.
The company is trying to improve profitability by cutting costs, and has already announced late last year its plans to shed around 1,400 jobs in the UK.
The US government is also investigating the death of an employee its Pennsylvania facility.
BAE also disclosed that it is continuing discussions with the US Justice Department following a settlement reached with UK authorities over a bribery case in Tanzania.