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BAE Systems - Trading update

12 November 2015



BAE Systems today issues this statement to provide an update on its business to reflect developments affecting near-term trading performance.

Ian King, Chief Executive BAE Systems plc, commented: "Overall the company is operating in an improving business environment and we continue to win new orders, with good prospects for the future. In the short term, action to extend the production life of Typhoon aircraft by reducing the current production rate and a charge to impair the carrying value of the Williamstown shipyard in Australia will impact the Group's 2015 results. Including a benefit of some 2 pence from adjustment of certain overseas tax provisions in the light of rulings received, the Group's underlying earnings per share for 2015 are expected to be around 38 pence."

Business environment
Defence and security remain the first priority of governments in all of our markets. In the UK, budget commitments to defence spending provide greater certainty and stability ahead of the forthcoming 2015 Strategic Defence and Security Review. In the US, the Group welcomed the recent Congressional budget approval which is expected to result in defence spend increasing above the previous Budget Control Act caps. We continue to achieve good growth in our businesses in adjacent commercial markets including cyber security and commercial electronics.

Military aircraft
In the Middle East, an agreement for the supply of 28 Typhoon aircraft for the Kuwait Air Force was announced in September. Subject to the formal contract, deliveries from the Italian Typhoon final assembly line are likely to commence around the end of the decade. To ensure production continuity at competitive costs over the medium term, actions are being taken to reduce the Group's current Typhoon production rate. As a result, the Group is today announcing a proposal to reduce the workforce of the Military Air & Information business by up to 371 roles. These changes will impact the Group's 2015 results. The lower production rate, together with the existing profile of contracted aircraft deliveries, is expected to result in Typhoon production sales reducing from approximately £1.3 billion in 2015 to approximately £1.1 billion in 2016.

Although there can be no certainty as to the timing of orders, discussions with current and prospective operators of the Typhoon aircraft continue to support the Group's expectations for additional Typhoon contract awards in the months ahead.

Agreement has been reached confirming the requirement for 22 Hawk advanced jet trainer aircraft, associated ground equipment and training aids for the Royal Saudi Air Force, which form part of an enhancement to the Kingdom's pilot training capacity.

Australia
In Australia, whilst the Group welcomed the announcement by the Government of its intention to launch a naval shipbuilding strategy, it is unclear whether this initiative will be sufficient to provide for the viability of the Williamstown, Melbourne shipyard. With no near-term prospect of work beyond the LHD programme and Air Warfare Destroyer block manufacture, the Group has announced further headcount reductions and a consolidation of its operating divisions from 3 to 2 to reduce management costs and remain competitive. A non-cash impairment of the carrying value of the Williamstown shipyard assets will be charged to the Group's 2015 results.

US
In October, BAE Systems was awarded the contract to provide the digital electronic warfare system for the US Air Force's Eagle Passive Active Warning Survivability System (EPAWSS) programme to upgrade up to 450 F-15 aircraft. The Group's initial EPAWSS contract is valued at $67 million and is expected to rise beyond $1 billion over the life of the programme. In September, the Group was notified that its solution for the US Army's Common Infrared Countermeasures (CIRCM) programme had not been selected.

BAE Systems' US ship repair business is responding to changes in the profile of its US Navy workload. Anticipated reductions in its Norfolk, Virginia, based work load on the Atlantic Coast will occur during 2015/16, with activity increasing subsequently following investment in capital facilities at the Group's San Diego shipyard on the Pacific Coast.

In October, BAE Systems' Platforms & Services (US) sector was awarded two contracts totalling $0.5 billion to supply armoured vehicles to US and international customers.

Following external interest, in April BAE Systems announced a strategic review of the manpower and services activities of its US-based Intelligence and Security (I&S) sector. The review has concluded that retaining the businesses delivers greater value. The business continues its good performance and order intake.

Conclusion
Overall, the Group expects good sales growth in 2015 and a robust order backlog at the half year of £37.3 billion underpins confidence in the future prospects for the business.

Full year results
BAE Systems will announce its financial results for the year ending 31 December 2015 on 18 February 2016.


Issued by:
BAE Systems plc
London

Market would appear to like this update.

so do i :-)
good call of yours a couple of weeks back

Thanks cynic.

Some resistance @ 470p if it breaks 490 next target.

Interactive Investor worth a read.



Bullish BAE Systems bucks trend
By Harriet Mann | Thu, 12th November 2015 - 17:03

LATEST BROKER VIEWS

Date Broker New target Recomm.
13 Nov Investec N/A Sell
13 Nov JP Morgan... 465.00 Neutral
13 Nov Barclays... 410.00 Underweight
10 Nov Jefferies... 600.00 Buy
9 Nov JP Morgan... 435.00 Underweight
9 Nov Berenberg 570.00 Buy
29 Oct Haitong... 560.00 Buy
29 Oct Credit Suisse 460.00 Neutral
28 Oct Exane BNP... 490.00 Neutral
19 Oct Barclays... 410.00 Underweight
Broker Recommendations for BAE Systems

LATEST BROKER VIEWS

Date Broker New target Recomm.
18 Nov Haitong... 560.00 Buy
18 Nov Berenberg 570.00 Buy
13 Nov Investec N/A Sell
13 Nov JP Morgan... 465.00 Neutral
13 Nov Barclays... 410.00 Underweight
10 Nov Jefferies... 600.00 Buy
9 Nov JP Morgan... 435.00 Underweight
9 Nov Berenberg 570.00 Buy
29 Oct Haitong... 560.00 Buy
29 Oct Credit Suisse 460.00 Neutral
Broker Recommendations for BAE Systems


Stop moved up to 470p. Looking a bit toppy. But ironically present time seems a no brainer to be long in both BA. and MGGT. Trend is your friend till it isn't.

These had a leg up after Friday's events, I meant to have had a look but other things to think about.

Even the likes of Chemring following the same path.

Whole sector up Stan, but you know the old saying, buy low sell high. Just make sure you have a good stop and in this market a day never mind a week is volatile. :0)

Stop to 479p

BA. should have set a limit @ 490p breached it yesterday, having a another attempt today. Stop still @ 479p.

Good call here Chris .

Fingers crossed jimmy, had a good run.

BAE Systems shares rise after Investec upgrades to buy
Sharecast


LONDON (ShareCast) - (ShareCast News) - Shares (Berlin: DI6.BE - news) in BAE Systems (LSE: BA.L - news) are up after Investec (LSE: INVP.L - news) upgraded the stock from 'sell' to 'buy' on Friday, as well as upgrading the target price from 410p to 530p. It (Other OTC: ITGL - news) comes a day after the FTSE 100 company announced it won an extension to its nuclear submarine deal from the UK Ministry of Defence, taking the value of the work on the Astute-class vessel to £1.3bn.
Investec said that BAE stands to benefit from the UK's Strategic Defence and Security Review (SDSR) out next week, which will clear up the country's defence and security priorities.
"The UK Government's "prosperity agenda" suggests the SDSR rhetoric may be more favourable to UK suppliers than previous reviews.
"A decision, as part of the SDSR, to extend the lives of the RAF's Tornado and Eurofighter Tranche 1 aircraft could also be positive." Investec also noted that the approval of a two-year US defence budget should help reduce uncertainty across the Atlantic for the company.
In addition, it said that there had been some bad news for the company recently, but the impact was smaller than expected and is now out of the way.
"BAE does not expect a follow-on order for Eurofighters from Saudi Arabia in 2015 and has decided to slow down production from 2016.
"The cut in production rates is in line with our forecasts, but encouragingly the financial impact will be smaller than we expected." Morgan Stanley (Xetra: 885836 - news) sees opportunities "We think the SDSR needn't pose any risks to BAE,and may in fact present some new opportunities," analysts at Morgan Stanley chipped in.
Among those opportunities, the broker pointed out the possibility of work in upgrading the RAF's Tranche-1 Typhoon jets, in the absence of which IHS Jane's in July said the UK's combat fleet levels could to historical lows.
Greater clarity on the final order size for the next generation F-35 air superiority figher would "be supportive for the long-term outlook" of BAE. Nonethless, a final decision was not expected until 2017.
Yet the biggest prize in the pipeline, with the Main Gate decision scheduled for 2016, was the Successor nuclear programme for the production of focur nuclear-powered submarines. That would be worth around £15bn in sales for BAE, analysts Jaime B Rowbotham and Joseph Ayoola said.

LATEST BROKER VIEWS

Date Broker New target Recomm.
20 Nov Investec 530.00 Buy
18 Nov Haitong... 560.00 Buy
18 Nov Berenberg 570.00 Buy
13 Nov Investec N/A Sell
13 Nov JP Morgan... 465.00 Neutral
13 Nov Barclays... 410.00 Underweight
10 Nov Jefferies... 600.00 Buy
9 Nov JP Morgan... 435.00 Underweight
9 Nov Berenberg 570.00 Buy
29 Oct Haitong... 560.00 Buy
Broker Recommendations for BAE Systems

Stop to 489p