Just a week prior to their annuals on Thursday (14 February 2002) Goldman Sachs put BAE on its ‘recommended’ list of stocks, saying it’s in the running for a merger with Italian Colleague Finmeccanica.
But the jitters experienced in the civil aviation sector following September 11 have sent BAE into turbulence, making it significantly reduce expectations for its subsidiary Airbus and draw a line on its regional jet business.
The company said it would not resume growth in 2002 and operating results were reduced by about £25m. In response to the downturn, BAE cut 6,000 jobs in Airbus and expects to diminish its aircraft deliveries for the year. Its activities in the aerostructures and avionics sectors and in North America will also be reduced.
Chief executive John Weston said: ‘While the impact of these changes in trading expectations for Airbus will postpone the company’s return to growth, the core defence businesses (worth 77% of the company’s half-year profit) are progressing well.’
But it has not all been bad news for BAE. Finance director George Rose will be looking to see whether sales in the US have continued to rise after last year’s growth of 31% and on the merger with Marconi’s defence arm.
The CIMA-qualified accountant will also keep an eye on key contracts, including a £6bn Airbus deal, two shipping contracts with the Ministry of Defence, and a £27m radar support contract with the Pentagon.
The company continues to be on the move, starting 2002 with the launch of a new subsidiary, BAE Systems Capital, and reorganising its business into three operating units highlighting the importance of its North American operations.
BAe Systems Capital will finance businesses in the defence sector as it seeks to cash in on the £4bn of defence equipment and logistics spending it estimates could be transferred contractors.
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