BAE Systems impacted by COVID-19 disruption, expects strong second-half recovery

© Reuters. Trade visitors walk past an advertisement for BAE Systems at Farnborough International Airshow in Farnborough, Britain

LONDON (Reuters) – British defence company BAE Systems (L:) on Thursday said first-half profit would be impacted by the coronavirus pandemic, but its second-half performance would be much stronger as its business returns to “full operational tempo”.

BAE, which makes Typhoon fighter jets and warships, said that demand for its defence products, which account for 90% of group revenues, remained strong but some manufacturing lines had been affected by disruption linked to the pandemic.

The group’s liquidity was strong, it said, and operating cashflow was broadly in line with expectations. Having in April deferred its decision on its final dividend payment in relation to 2019, BAE said it would provide an update next month.

In its pre-close statement on Thursday, BAE said first-half profit would come in about 15% lower than last year, hit by disruption costs and reduced sales of its higher-margin commercial equipment where it produces, for example, electronic systems for passenger jets.

The company warned that these commercial units, primarily based in the U.S., which also provide systems to buses and other means of transport, would all be impacted by weaker demand in the near-term.

At its shipyards and factories across Britain, 90% of employees were now back working, whether that was from home or on site, and its U.S. facilities were also operating. The company said it continued to focus on cost control.

Productivity levels were affected during the pandemic as the company brought in protective safety measures and as a result of supply chain challenges.

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