BAE Systems profits up and MOD reveal big contract awards

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BAE Systems report rising sales and profits


On Wednesday, BAE Systems reported rising sales and profits for the first half of 2017. Revenue for the six months to the end of June was up 8.9% to £9.01bn, with pre-tax profit rising more than a third to £714m. Underlying earnings increased 11% to £945m, though taking currency fluctuation into account, this translated to a 5% year-on-year increase. As the UK’s largest defence company, and the third largest in the world, BAE Systems’ performance is a bellwether for broader UK defence industry expectations in both the domestic and international markets. Announcing the results, Charles Woodburn - who assumed the position of CEO in July - said of the UK market that he expects defence and security is expected to remain a Government priority. In the US, he anticipated improvement in the defence budget outlook, but cautioned that this would take time to reach the order book. Mr Woodburn also took the opportunity to discuss his incoming priorities, indicating that his three strategic priorities were operational excellence, competitiveness and technology.


Airbus awarded MOD satellite communications contract


It was revealed this week that Airbus Defence & Space have been awarded a contract to supply the first element of Skynet-6, the UK’s next-generation military satellite communications capability. The contract will cover the manufacture, assembly, integration, test and launch of a first-of-class satellite. Expected to be operational by mid-2025, it will fill a potential capability gap as the first satellites within the existing Skynet-5 constellation are retired. The MOD has opted for a non-competitive route with Airbus, in part, to maintain domestic space capabilities, a MOD spokesperson confirming that “this will secure delivery of a sovereign and secure capability for the UK”. This is the first of three Skynet-6 work packages that will be awarded. A service delivery package to manage ground operations beyond 2022, and an enduring capability program to provide capacity beyond 2030 will be awarded on a competitive basis in due course. Boeing, Lockheed Martin and Thales Alenia Space are all rumoured challengers to Airbus for this work. A separate competition to appoint an acquisition partner for MOD is also expected to move forward in the near future.


Babcock awarded £107m Royal Navy supply contract


On Tuesday MOD announced a £107m, seven-year contract with Babcock International for the supply of more than 10,000 different types of consumable items for the Royal Navy, covering everything from fittings and fixtures to pistons and pumps. The agreement brings together eight existing contracts under a single deal, with the aim of delivering improved efficiencies and savings to the defence budget of around £3m per year. With significant flow-down opportunities for SMEs, companies within the UK supply chain include Liberty Dynamics and Andersalso, based in the West Midlands, Eriks and Edmundson, based in the South West and SPX Clyde Union in Scotland. It was also announced that BAE Systems have been awarded contracts worth £72m to support the Type-45 destroyer’s Sampson multi-function radar, and the Commander T101 tactical air defence radar.


Other News:


HMS Astute returns to Royal Navy fleet after major upgrade (Naval Technology)


It’s a Battle for Britain to Sell the Eurofighter (Bloomberg)

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