BAE Systems issues second profit warning in three months.

Investors Chronicle, December, 2002

BAE Systems investors can be forgiven for feeling shell shocked after the company issued its second profit warning in less than three months. The latest warning - which sent the shares to a seven-year low - was triggered by the UK Ministry of Defences (MoD) refusal to fund cost over-runs on the Astute submarine and Nimrod programmes. Analysts now expect BAE to take a GBP500m-GBP1bn charge on the programmes.

BAEs management has rightly been slammed for this warning. The companys hope that the MoD would foot the bill for the cost over-runs was optimistic. The MoD has never countenanced such compensation in the past, and BAEs recent adversarial dealings with the ministry would have been unlikely to change this stance.

Its alarming that BAE has already...

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