UPDATE 1-BAE sees 6-7 pence per share hit if Saudi deal delayed

Thu Oct 10, 2013 3:06am EDT

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LONDON Oct 10 (Reuters) - British defence contractor BAE Systems said its earnings could be hit by 6-7 pence per share should it fail to reach agreement on a jet deal with Saudi Arabia this year.

The group, however, said it was still assuming the deal would be completed, enabling it to maintain its outlook.

It anticipates double-digit growth in underlying earnings per share for 2013 on expectations that it agrees pricing with Saudi Arabia over the purchase of 72 Eurofighter Typhoon jets.

"However, should negotiations extend beyond the year end, earnings per share for 2013 would be impacted by approximately 6 to 7 pence," it said on Thursday.

The company, which otherwise said it was trading in line with its expectations, has been locked in pricing negotiations with Saudi Arabia over the purchase of the Eurofighter Typhoon jets and said on Aug. 1 that it expected the long-awaited deal to complete in the second half of this year.

The so-called Salam deal was signed in 2007 and is said to be worth about 4.5 billion pounds ($7.17 billion). BAE builds the Eurofighter alongside European aerospace group EADS and Italian defence contractor Finmeccanica

BAE said the government shutdown in the United States had not made any material impact to its overall financial performance but expected its U.S. operations to be hit should it not be resolved.

Since the shutdown on Oct. 1, about 1,200 employees from its intelligence & security and support business have been temporarily told not to report to work, it said.

It also said discussions with the Ministry of Defence about the future of its major shipyards in Britain were continuing, and it was also in talks with the government about potential changes to the contract for the Queen Elizabeth Class aircraft carriers.

In international markets, where it has stepped up its efforts to counter reduced spending in the U.S. and Europe, BAE said it had achieved 5 billion pounds of non-US and UK orders in the year to date, and it was continuing to pursue multiple opportunities, including prospects in he United Arab Emirates

It had so far purchased 34 million shares for 134 million pounds under a 1 billion pound share buyback program that it launched in February, whose full implementation is subject to the conclusion of the Salam deal.

Shares in BAE Systems were trading down 0.2 percent at 438.6 pence at 0706 GMT.

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