BAE Systems warns German arms ban may affect ability to support Saudi Arabia

Shares fell in BAE Systems after the defence giant warned that Germany’s ban on selling arms to Saudi Arabia may affect its ability to provide combat aircraft support services to the kingdom.

At the end of last year BAE Systems reached a deal with Saudi Arabia to extend its support services for Eurofighter Typhoon combat aircraft.

The company said it is “reliant on the approval of export licences by a number of governments in order to continue supplies to Saudi Arabia”.

“In this context, the position on export licensing currently adopted by the German government may affect the group’s ability to provide the required capability to the kingdom.”

Farnborough International Airshow
BAE Systems chief executive Charles Woodburn (Andrew Matthews/PA)

BAE Systems said it is “working closely with the UK Government to minimise the risk of any such occurrence and the impact it would have on financial performance, the supply chain and relationships”.

Shares fell 6% to 474p on the news.

Meanwhile, the company posted a 14% rise in annual profits and said it expects earnings to grow in 2019.

Pre-tax profits came to £1.22 billion for 2018 compared with £1.07 billion the previous year.

However, revenue slipped to £16.82 billion from £17.22 billion due to lower production of Typhoon aircraft.

BAE’s order intake increased to £8.28 billion from £20.26 billion, with the company having an order backlog of £48.4 billion.

For 2019, the group expects underlying earnings per share to grow by mid-single digits compared with 42.9p per share last year.

Chief executive Charles Woodburn said: “The group made good progress in strengthening the outlook and geographic base of the business, with a number of significant contract wins.

“The defence order backlog is now at a record high with visibility on many of our key programmes through the next decade.

“Delivering a strong operational performance and continued investment will enable us to meet our growth expectations and underpin the long term.”