The new chief executive of BAE Systems yesterday signalled that he would not be making any big changes to the defence group’s strategy as he reported a rise in first-half profits.
Announcing his first set of results since taking charge last month, Charles Woodburn said: “I think evolution, not revolution, is the order of the day.”
After spending more than a year getting to grips with the group as chief operating officer, before replacing the long-standing chief executive Ian King, Mr Woodburn added: “I think it’s an amazing business.
“It is an absolutely leading engineering and technology company and it is an absolute privilege to be here leading it. There are lots of opportunities, we have a clear strategy and a robust order backlog.”
Group sales in the six months to the end of June were £9.56 billion, up from £8.7 billion a year earlier, and underlying profits were £945 million, up from £849 million. Its order intake was £10.6 billion, up from £7 billion, while the order backlog increased to £42.3 billion from £36.3 billion.
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Highlights included a £3.7 billion contract for the first three Type 26 frigates and a £1.4 billion contract for the sixth Astute class submarine for the Royal Navy, as well as starting sea trials for the new Queen Elizabeth class aircraft carrier. “It’s clear that we have the right strategy that harnesses our strengths, so we will continue to stay the course,” Mr Woodburn said. “It’s very much a case of evolution not revolution. It’s a good strategy bolstered by the macro-environment we now operate in.”
BAE also secured a £417 million contract to supply howitzers to India, delivered two Typhoon aircraft in Oman and won Typhoon support contracts in Saudi Arabia.
Mr Woodburn said BAE expected to benefit from governments spending more on defence in some of its biggest markets, but it also aimed to improve its operational performance, efficiency and competitiveness to deliver value for money for customers.
It wants to harness its global buying power and this year appointed a chief procurement officer, while also making the most of its size and reach by increasing collaboration across the group, such as a combat vehicle project in Australia, drawing on expertise from across BAE.
Technology is a key focus and Mr Woodburn said: “We have some amazing technologies in the business and for an engineer such as myself it is fascinating to see the depths of our capabilities.”
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Spending on research and development increased by 35 per cent to £111 million in the first half of the year.
There was no update on a long-expected Typhoon order from Saudi Arabia, but Mr Woodburn said the business was confident of winning further international orders. He pointed out that more than half of Typhoon revenues now come from support and after-sales.
He added: “With the expected improvement in the defence budget outlook in a number of our markets, the group is well placed to continue to generate good returns for shareholders.”
BAE made no change to its forecast for this year and said underlying earnings per share would be 5-10 per cent higher. Shareholders are to get an interim dividend of 8.8p, up from 8.6p.
Sandy Morris, analyst at Jefferies, said; “While BAE’s outlook in the USA is probably positive, that in the UK and Saudi Arabia is arguably not, so we end up with a tie.
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“Unless the world gets scarier still, BAE’s overall progress may remain sedate.”
Shares in BAE were up 10¼p, or 1.68 per cent, to 617¼p.
Profile
Charles Woodburn may be a relative newcomer to the defence industry but, as an engineer who carved out a high-flying career in oil, he can talk the same language as his colleagues at BAE Systems (Peter Cunliffe writes).
He stepped into the chief executive’s shoes last month, replacing the highly regarded Ian King, who stepped down in June.
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Appointing somebody without a defence background marked a stepchange for BAE but at the time Sir Roger Carr, the chairman, said the new man brought fresh perspectives.
BAE appointed Mr Woodburn, 46, below, to the newly created role of chief operating officer in May last year, allowing him to gain a deep understanding of the business and the defence sector.
Mr Woodburn, who has a PhD in engineering from Cambridge, is no stranger to multibillion-pound projects. He spent more than two decades in the oil industry, with nearly six years as chief executive of Expro and 15 years at Schlumberger.