BAE fires on Whitehall mandarins

DEFENCE giant BAE Systems continues to shake off the disastrous period of delays and cost overruns that overwhelmed it nearly two years ago.

Chief executive Mike Turner welcomed the Government's decision to pay up to 15% of extra costs on big projects, but complained that the group still encounters resistance from Whitehall.

BAE swung from £616m losses to £233m pre-tax profits last year. Operating cash flow rose 500% to £836m. It was helped by strong US sales and a pick-up at 20pcowned Airbus. Higher oil prices boosted its support business. The order book rose 8% to £46bn.

Turner told MPs this week that shareholders would be 'delighted' if he never did any work for the Ministry of Defence again. Yesterday he explained that BAE's problems were not with Defence Secretary Geoff Hoon, but with 'people further down the organisation'.

He said they 'are unhappy we are de-risking [projects]. They think, give it to industry and then blame them'.

Turner is optimistic that more orders for the Typhoon Eurofighter will emerge from talks with governments.

BAE is targeting growth and acquisitions in the US. But Turner tried to back away from talk of a US merger, saying he spent just '1%' of his time on the issue.

News from the pension fund was ominous for British workers. Last year's stock market gains were almost wiped out by steadily accumulating liabilities, leaving the deficit under accounting standard FRS17 virtually unchanged at £3bn.

Chairman Sir Richard Evans, due to retire in May, says the group is 'getting pretty close' to picking his successor.

BAE was hit in 2002 by as much as £1bn in overruns on the Astute submarine and Nimrod patrol plane projects. That knocked the shares nearly two-thirds to 104p. Yesterday they rose 5 1/4p to 189 1/2p, or 12 times likely earnings. Dividends are held at 9.2p.