BAE Systems, Britain’s largest defence company, announced yesterday that it is now receiving more business from the US than from the Ministry of Defence.
The company, which traces its roots to the Second World War aircraft builders Hawker Siddeley and Vickers-Armstrong, revealed that 40 per cent of its sales in the first six months came from America.
George Rose, the finance director, added that this had grown to 50 per cent since the $4.5 billion (£2.2 billion) acquisition of Armor Holdings was completed on July 31. By comparison, the UK accounts for about 39 per cent of the company’s business.
BAE has been pursuing a strategy of building its exposure to the US market and has completed 16 deals there since 1999. The company is now the world’s third-largest defence contractor after Boeing and Lockheed Martin. In the past two years it has overtaken Raytheon, General Dynamics and Northrop Grumman – key members of the US military-industrial complex.
BAE’s success in America comes despite a Department of Justice investigation into allegations of corruption in the company’s contracts with Saudi Arabia. A similar investigation by the Serious Fraud Office was shut down by the Government last year.
Defence analysts said yesterday that the strong growth in the US, and the quick approval of the Armor Holdings deal suggested that the US investigation was not yet impeding BAE’s business.
BAE’s success in America has been built on its land systems division, which makes armoured personnel carriers. Two years ago, the company bought UDI, the maker of Bradley Fighting Vehicles, and the Armor deal gives it greater capacity in this sector.
Demand for heavily armoured troop carriers is rising because of the conflicts in Iraq and Afghanistan. Older troop carriers are being refitted and new ones are being bought.
BAE’s transatlantic expansion has prompted speculation that the company could relocate from Britain, but Mike Turner, BAE chief executive, has consistently denied any such plans. However, Mr Turner did indicate that BAE would continue its global expansion when he signalled that the company was ready to make more acquisitions. He said: “We will be making more acquisitions and we are looking very carefully at options in each of the markets we operate in.”
BAE reported an 8 per cent rise in sales for the first six months of this year to £6.8 billion and operating profits up 19 per cent to £684 million.
Its order book stands at £31.7 billion, to be enhanced further when Saudi Arabia buys 72 Eurofighter Typhoons. The UK and Saudi governments are expected to sign the £20 billion Typhoon deal within a month.
Jeremy Batstone, of Charles Stanley stockbrokers, described the results as “superb” and noted that BAE achieved the figure despite much of its business being exposed to the weak US dollar.
BAE’s share price closed up 4p to 440¼p, having rallied back to the level it stood at when the Department of Justice announced its investigation in June.
Heritage trail
- The history of BAE Systems is tied to the great names of the British aerospace industry
- Among the companies from which it traces its heritage are Hawker Siddeley, which made the Hurricane; de Havilland, which made the Gipsy and Tiger Moths, and Vickers Armstrong, maker of the Supermarine Spitfire
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