Defence giant BAE Systems this morning said that it was on track to hit sales and earnings forecasts for 2021.
The firm, a major supply to the Ministry of Defence (MoD) and other governments around the world, said that it was well positioned for growth in the coming years due to plans to increase defence spending around the world.
BAE is forecasting sales growth of 5 per cent – 7 per cent and underlying operating profit growth over 10 per cent.
But shares in the firm slid 0.9 per cent after the open today.
After last year’s disruption, BAE said that the performance of its US ship repair business had improved, and that it had ramped up combat vehicle production.
Likewise, its applied intelligence division had had a good start to the year, it said, after a restructuring programme.
Its air, maritime, electronic systems and intelligence and security divisions all continue to perform strongly, BAE added.
Chief executive Charles Woodburn, who was recently the subject of a shareholder revolt over a bonus deal designed to keep him at the company, said:
“Our good operational performance underlines our confidence in the full year guidance for top line growth and margin expansion and our three-year cash targets.
“Strategically, our geographically diverse portfolio is aligned to growing defence budget areas; we’re ramping up investment in self-funded research and development aligned to customer focus areas and we’re leveraging our leading capabilities in evolving markets to ensure we’re increasingly well placed to deliver for all our stakeholders.”
Lee Wild, head of equity strategy at Interactive Investor, commented: “Just over five months into the new financial year and BAE Systems is still on track to hit targets for revenue, margins and cash.
“There’s comfort at the size of BAE’s order book, and new orders, led by Dreadnought submarine funding of £848m, have exceeded expectations.
“As always, there’s plenty for governments to spend their vast military budgets on, and many of BAE’s biggest customers plan to pump even more cash into defence.”
Laura Hoy, equity analyst at Hargreaves Lansdown, agreed: “Management also noted that President Biden’s proposed 2022 defence budget, which falls roughly in line with the current year’s spend, should support the group’s revenue growth ambitions. We’re inclined to agree.
“About half of BAE’s total revenue comes from the US, so the new President’s commitment to maintaining defence spending offers a sigh of relief.”