EUROPE'S biggest arms company, BAE Systems, has predicted more growth this year despite warning that crucial orders for defence equipment from the UK government could be delayed.
BAE, which employs almost 100,000 worldwide and builds everything from aircraft carriers to Nimrod spy planes, reported a 22 per cent rise in operating profits to £1.48 billion, on sales up 14 per cent to £15.71bn.
Chief executive Mike Turner sai
d yesterday that the expectation of future orders was "excellent" and the company expected to record more growth in 2008.
But the company also warned that there were signs that budget constraints may prompt the UK government to push back delivery times on the orders it has placed.
Turner, delivering his final set of results before stepping down after 40 years with the firm, said he could "see programmes spread out" over longer time periods, but did not expect any cancellations. A delay in spending could have a particular impact on BAE's largest Scottish operation at its Clyde shipyard, which employs around 3,500 people.
The UK government is expected to sign a £3.8bn contract to build two new aircraft carriers, as a joint venture between BAE Systems, Babcock and VT group. There have been recent reports that the government may sign off on the deal within a month, but that building could be delayed by a year until late 2009.
Staff at the Scottish yards are currently working on the construction of the Type-45 destroyer and the company is hoping move seamlessly on to the aircraft carrier project. Babcock is expected to conduct part of its work at its yard at Rosyth dockyard.
Defence analyst Howard Wheeldon, of BCG Partners, said that, while a reduction in spending could lead to the engineering expertise at the company being dismantle if work could not be found, it is possible the company may be able to find foreign buyers for more Type-45 ships.
He said "It is well known that the Saudi government has shown interest".
BAE has around 34,000 staff in the UK including more than 4,000 in Scotland. As well as its operations on the Clyde, the company employs 400 at a vehicle manufacturing and assembly plant in Hillend in Fife, and 500 at its regional airport headquarters in Prestwick.
In 2005 the company sold its avionics systems division, based at Crewe Toll in Edinburgh, to Italian defence giant Finmeccanica.
Despite the worries over the Scottish operations, the company was bullish about its business elsewhere.
"A further year of good growth is anticipated in 2008, including a full-year contribution from the former Armor Holdings business," BAE said in a statement.
It expects the main source of organic growth to be the US, where it completed the $4.5bn acquisition of Armor Holdings, the US armament and truck maker, last December.
Britain's continuing conflicts in Afghanistan and Iraq also generated major orders, the company said.
BAE said the conflicts had led to "numerous urgent operational requirement orders", including multiple ammunition orders worth more than £400m.
The company has faced investigations into its conduct, including a Serious Fraud Office investigation into its dealings in Saudi Arabia. Although the investigation was dropped in December, it is currently the subject of a judicial review.
While the results were largely in line with expectations, BAE's strong outlook statements boosted shares, which closed up 6p to 478p.
Wheeldon said the company was "leaner, fitter and far more efficient than at any time since it was privatised in the 1980s".
The full article contains 595 words and appears in The Scotsman newspaper.
