BAE Systems, Europe’s largest defence company, revealed yesterday that it is in dispute with VT, the defence services provider, over the price of their shipbuilding joint venture.
BAE and VT merged their shipbuilding yards on the River Clyde and in Portsmouth last year to create a company called BVT, but VT has decided to sell its 45 per cent stake in the venture for a previously agreed price of £380 million.
BAE claims that export contracts with Trinidad and Tobago and Oman did not perform as well as expected and is demanding a capital injection from VT as compensation — an amount thought to be in the range of £25 million to £50 million.
Howard Wheeldon, senior strategist at BGC Partners, a brokerage, said: “VT deserves its money because it has created a valuable business that could turn out to be an excellent export business for BAE and create a lot of long-term value.” Mr Wheeldon also believes that BAE has “kitchen-sinked” its half-year results to get all the bad news out so that it can concentrate on a promising second half.
The news of the dispute came as BAE reported a 19 per cent increase in underlying earnings to almost £1 billion in the first six months of this year.
However, the company’s pension fund deficit grew by £900 million due to a revaluation of its assets and it was also forced to write down the value of two acquisitions in the United States by £290 million.
The combination of these non-cash impairments resulted in BAE, which employs nearly 100,000 people worldwide, reporting an adjusted loss of £70 million in the first half yesterday, compared with a profit of £599 million in the same period last year.
Analysts at UBS said in a note that the impairments should not detract from the value of other parts of the businesses that BAE had acquired. They added that BAE had exceeded expectations for revenue and underlying earnings.
The stock market felt otherwise and the write-offs and increase in pension deficit resulted in a 16p, or 4.8 per cent, drop in the share price to 311.75p.
BAE’s sales in the first half increased by 28 per cent to £9.9 billion and its order book has grown by £4 billion to £45 billion. It also increased the interim dividend by 10.3 per cent to 6.4p a share and cut its net debt by £400 million to £316 million.
Ian King, the chief executive, said: “Our moves into the security market are going well on both sides of the Atlantic as government interest in this area is increasing. We are also making good inroads into India and we have real prospects there.”
VT said in a trading update that it was operating in line with expectations and expected to deliver savings of £15 million as part of a restructuring this year.
BAE and VT merged their shipbuilding yards on the River Clyde and in Portsmouth last year to create a company called BVT, but VT has decided to sell its 45 per cent stake in the venture for a previously agreed price of £380 million.
BAE claims that export contracts with Trinidad and Tobago and Oman did not perform as well as expected and is demanding a capital injection from VT as compensation — an amount thought to be in the range of £25 million to £50 million.
Howard Wheeldon, senior strategist at BGC Partners, a brokerage, said: “VT deserves its money because it has created a valuable business that could turn out to be an excellent export business for BAE and create a lot of long-term value.” Mr Wheeldon also believes that BAE has “kitchen-sinked” its half-year results to get all the bad news out so that it can concentrate on a promising second half.
The news of the dispute came as BAE reported a 19 per cent increase in underlying earnings to almost £1 billion in the first six months of this year.
However, the company’s pension fund deficit grew by £900 million due to a revaluation of its assets and it was also forced to write down the value of two acquisitions in the United States by £290 million.
The combination of these non-cash impairments resulted in BAE, which employs nearly 100,000 people worldwide, reporting an adjusted loss of £70 million in the first half yesterday, compared with a profit of £599 million in the same period last year.
Analysts at UBS said in a note that the impairments should not detract from the value of other parts of the businesses that BAE had acquired. They added that BAE had exceeded expectations for revenue and underlying earnings.
The stock market felt otherwise and the write-offs and increase in pension deficit resulted in a 16p, or 4.8 per cent, drop in the share price to 311.75p.
BAE’s sales in the first half increased by 28 per cent to £9.9 billion and its order book has grown by £4 billion to £45 billion. It also increased the interim dividend by 10.3 per cent to 6.4p a share and cut its net debt by £400 million to £316 million.
Ian King, the chief executive, said: “Our moves into the security market are going well on both sides of the Atlantic as government interest in this area is increasing. We are also making good inroads into India and we have real prospects there.”
VT said in a trading update that it was operating in line with expectations and expected to deliver savings of £15 million as part of a restructuring this year.