BAE Systems IMS

A global defence, aerospace and security company. BAE Systems delivers a range of products and services for air, land and naval forces, as well as advanced electronics, security, information technology solutions and support services.  I have a holding in my income portfolio (epic code: BA.)

BAE Systems issued an Interim Management Statement today declaring that group order intake for the period from 1 January 2014 to 23 August 2014 was £7.9bn, including £2.6bn from non-UK/US markets.

In August, they announced the proposed sale of its 75% holding in BAE Systems Land Systems South Africa Proprietary Limited for a cash consideration of approximately 641m Rand (£36m).  A goodwill impairment charge of approximately £70m is expected to be taken during the year ending 31 December 2014 against the carrying value of the South African business.

As reported in the Group's half year results, £12m of charges were taken on commercial shipbuilding programmes in the US Support Solutions business.  Recent reviews have shown a further exposure in the region of £30m net of tax.

Despite the charges mentioned management expect in aggregate, the year's earnings outlook for the Group remains unchanged.  They had previously stated that their guidance for the full year (excluding the effects of foreign exchange translation) is for underlying EPS to be 5-10% lower than 2013, which would place it in a range of 37.8p to 39.9p.  At today's closing price of 470.2p that places the shares on a P/E range of 11.8 to 12.4, with a yield of 4.3%.

Despite the 10% increase in the SP since their interims the shares are still good value and, in support I'll repeat what I said here,  "...although 2012 saw the first fall in global military expenditure in real terms since 1998, recent events around the world have created a need for more, not less military expenditure.  With just the UK and USA achieving NATO targets for defence spending of 2%, there will be pressure for increases as the world becomes less stable.  As a strong global supplier, BAE will be a beneficiary of increased defence spending..."