BAE Systems' American focus fuels profits rise

BAE Systems yesterday praised the success of its transatlantic strategy as it turned in a sharp rise in half-time profits and signalled further growth to come.

Chairman Dick Olver emphasised that the group was advancing on all fronts - bolstering its presence in the United States with the purchase of United Defense, refocusing its European operations and extracting larger returns from UK defence projects by cutting the level of risk.

"The successful implementation of our strategy is now benefiting the company's operational performance, strengthening our position as the premier transatlantic aerospace and defence company."

Sales rose almost 14% to £6.8bn in the six months to the end of June, while operating profit rose from £392m to £488m. Strong cashflow and the proceeds from the sale of part of the avionics business to Finmeccanica and the reduction of the group's stake in Saab meant net debt was only £360m higher at £2.2bn - despite the £2.2bn cost of the United Defense acquisition.

The group is also strengthening American representation in the boardroom with the appointment of two non-executives, Philip Carroll and Roberto Quarta.

Chief executive Mike Turner dismissed speculation that the group was planning to sell its 20% stake in Airbus to fund more US acquisitions. The civil aircraft manufacturer had made a strong contribution to the group's earnings, he said. "Why on earth should we take that away from shareholders?"

Finance director George Rose said Airbus and the US defence market each offered long-term growth rates of about 5% to 7%, and both had similar margins.

Asked about launch aid for the Airbus A350, Mr Turner said: "The UK government is competing with other governments in Europe to make sure the UK maximises its role in the A350 and future [Airbus] developments."

Mr Turner warned progress on technology transfer from the US was still slow. "If a technology gap opens up the US will be on its own; I don't think that's desired by the most informed people in the US."

Mr Olver dismissed rumours of tension between himself and his chief executive. "Mike and I are very happy in our current roles and plan to continue doing that for a long time to come," he said.