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BAE Systems has lifted its profit forecast for the full year as Britain’s defence champion continues to benefit from new orders on the back of heightened geopolitical tensions and increased military spending.
The FTSE 100 group said it won just over £15bn worth of new orders in the first six months of the year, with notable contract wins for warships in Australia as well as for its Swedish-made CV90 fighting vehicles from eastern European nations.
Demand has also been strong for new munitions as governments have restocked supplies sent to Ukraine in the wake of Russia’s full-scale invasion.
The new order haul bolstered BAE’s backlog to a record £74.1bn, which included that of the company’s recent acquisition of US space business Ball Corporation.
BAE chief executive Charles Woodburn said the company could not speculate on the outcome of the defence review launched by Britain’s Labour government, insisting it was good news that it was talking about military spending as a “driver for economic growth”.
There has been speculation that Labour might reduce its commitment to the tri-national Global Combat Air Programme to build a new fighter jet with Italy and Japan.
Woodburn said he was “confident in the military requirement” for such a programme — which will also involve drones and other systems — as well as in its industrial importance. The programme is already helping to support “in excess of 50,000 jobs” across the UK as part of the military aircraft sector.
BAE should, meanwhile, benefit from a closer relationship with the EU, according to Woodburn, who said there were “encouraging noises from both sides around the potential for a deepening partnership”.
Prime Minister Sir Keir Starmer has said his government wants to repair the UK’s relations with the EU through a new broad-based security pact. BAE already has a strong footprint in Europe, including through a 37.5 per cent stake in MBDA, the pan-European missile champion, and two businesses based in Sweden.
BAE now expects underlying profits for the full year to increase between 12 and 14 per cent, up from a previous prediction of 11 to 13 per cent. It is targeting free cash flow of more than £1.5bn, up from a previous forecast of more than £1.3bn.
The defence company is also making progress in Ukraine where it has opened a local office and is in talks with local partners about enabling them to produce spare parts for some of its weapons. Woodburn said the “intention is to . . . give them the ability to manufacture components for equipment that we provide over time”.
“We are making good progress . . . will see [something] in the second half of the year,” he added.
BAE said sales in the first six months of the year rose 13 per cent to £13.4bn. Underlying earnings before interest and tax were also up 13 per cent to £1.39bn.
Shares in the company have had a stellar run since Russia’s invasion of Ukraine and are up more than 17 per cent since January. They were trading at just over £13 on Thursday afternoon in London.
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