Profitable BAe admits Ordnance may be sold off

British Aerospace confirmed last week that its armaments subsidiary Royal Ordnance is subject to a wide-ranging review that could lead to it being sold. The business, which employs almost 4,500 in the UK, faces ‘major challenges that require it to look at a range of options’, said chief executive John Weston. He stressed that there […]

British Aerospace confirmed last week that its armaments subsidiary Royal Ordnance is subject to a wide-ranging review that could lead to it being sold.

The business, which employs almost 4,500 in the UK, faces ‘major challenges that require it to look at a range of options’, said chief executive John Weston. He stressed that there were no immediate implications for plant closures or job cuts.

Speaking after unveiling a 24% leap in first-half profits, Weston said the float of the group’s property business, Arlington, was on hold due to market conditions.

The fall in oil prices hit cashflows from the Saudi Arabian Al Yamamah arms-for-oil supply deal. But Weston said shortfalls would be made up by the Saudis, as they have been in the past.

Analysts mostly played down the oil price implications. Howard Wheeldon of Matheson Investment said: ‘Al Yamamah is a highly structured government-to-government deal and will go on for years.’

But City fears over oil caused BAe’s shares to fall 10%, by 36p, to 326p.

Pre-tax profits were up to £344m in the first half of the year, compared with £278m this time last year.

BAe revealed a record £23.8bn of advanced orders £12.9bn from defence orders and £10.9bn in commercial aerospace work.

Commercial aircraft made an £8m surplus on sales of £1.25bn. Defence operating profits rose 4% to £303m.