BAE's Profit Sinks as US Defence Spending Declines

BAE Systems reported a 7.5% tumble in half-year profit as the US cut back its military spending.

Europe's biggest defence contractor said that dwindling US military spend was not enough to offset growing demand from the Middle East and Asia, and subsequently posted earnings before interest, tax and amortisation (Ebita) of £802m.

However, it told investors that its outlook has remained unchanged for 2014.

"Operationally, the group continues to perform well, benefiting from good programme performance on its large order backlog of almost £40bn," said Ian King, CEO at BAE.

"We continue to see a high level of activity in international markets, including from our substantial presence in the Kingdom of Saudi Arabia, while the US and UK environments remain more constrained. Sales are anticipated to be weighted towards the second half of 2014, including the timing of Typhoon aircraft deliveries.

"We are finalising a further £1.3bn of international orders and are at an advanced stage of negotiations on a further £1bn of UK sole source naval contracts. Excluding the impact of exchange translation, the group remains on track to deliver earnings in line with our expectations for the full year."

BAE shares traded flat, in the early session, by hovering around 427.10p.