BAE Systems Raises Dividend on Higher Pretax Earnings, Sees More Earnings Growth This Year

By Robert Wall

LONDON--British weapons maker BAE Systems PLC declared a higher dividend on improved full-year pretax earnings which it said could rise as much as 10% this year amid signs defense spending in some of its most important markets is on the up.

A higher tax bill weighed on the London-based company's net profit which fell slightly to GBP913 million pounds ($1.14 billion) from GBP918 million the year before.

But underlying earnings before interest, taxes and amortization rose 7% to GBP1.91 billion pounds from GBP1.68 billion on a 6.2% rise in revenue to GBP19.02 billion.

In the year, the company won a share of a contract to supply Eurofighter Typhoon combat jets to Kuwait and a GBP472 million contract extension for work on the Type 26 frigate. In January, it secured a long-discussed deal from India for 145 M777 howitzers.

BAE Wednesday said Chief Executive Officer Ian King would step down to be replaced by Chief Operating Officer Charles Woodburn on July 1. Mr. Woodburn joined Europe's largest arms maker by sales a year ago from a career in the oil and gas industry.

BAE is expected to enter a period of rising earnings driven by higher defense spending in the U.S., U.K. and other markets after a period during which budgets grew little or contracted. Military spending in the U.S. was already poised to increase before President Donald Trump took office and could get a further boost.

The company also faces some difficulties. Deliveries of Eurofighter Typhoon jets to European customers and Saudi Arabia are largely done, which should lead sales for its U.K. platform business to slump around 5%. The U.K. also is reviewing whether licenses to sell weapons to Saudi Arabia were granted properly amid political tension in Britain over the Middle East country's military operations in Yemen.

The company said underlying earnings a share should advance 5% to 10% in 2017 from last year's 40.3 pence.

BAE Systems said it would pay a final dividend of 12.7 pence a share, making for a full-year dividend of 21.3 pence a share 2016, a 2% increase over 2015.

-Write to Robert Wall at robert.wall@wsj.com

(END) Dow Jones Newswires

February 23, 2017 02:58 ET (07:58 GMT)

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