BAE reported profits of £1.23bn this morning and upped its dividend by 11 per cent year-on-year, as it continued to cash in on increased UK defence spending and soaring demand amid the war in Ukraine.
Britain’s premier defence contractor saw an order intake of £21.1bn in the first half of 2023, resulting in a record order backlog of £66.2bn. Revenues also shot up 11 per cent to £11bn, with top line sales growing by just under £1.5bn to £12bn year-on-year.
As a result, the firm – who manufacture submarines and fighter jets and a slew of other military vehicles – upgraded its guidance for 2023, forecasting higher sales and earnings per share of between 10 to 12 per cent, which it said reflected higher profits.
Shares jumped nearly 5 per cent in early trading.
Charles Woodburn, BAE Systems Chief Executive, said: “We’ve delivered a strong financial performance in the first half of the year, thanks to the outstanding efforts of our employees.”
“With a record order backlog and good operational performance, we’re well positioned to continue delivering sustained growth in the coming years, giving us confidence to continue investing in new technologies, facilities, highly-skilled jobs and in our local communities.”
BAE said it had benefited from an “elevated global threat environment,” as Russia’s War in Ukraine and rising geopolitical uncertainty bumps up demand for weapons and defence systems.
Woodburn told analysts on a conference call following the announcement, that the firm had benefitted from its “strong presence across all theatres of warfare,” and global reach in countries ranging from the US, UK and Australia to the Middle East and Japan.
“I think that is definitely helping us in the current environment where global trends are pushing defensive security up government spending priorities… We’re seeing that come through in the numbers.”
Ascendant demand amid Putin’s war has ricocheted across the sector as a whole, with competitor Rolls-Royce seeing shares skyrocket 20 per cent last week after it doubled its profit guidance.
But the invasion of Ukraine has prompted not just a rise in weapon sales, but also a shift in focus from the UK government, with many analysts forecasting a move to more production of defence tech on home soil – to the benefit of companies’ like BAE.
That view is not without merit, based on the slew of recent lucrative contracts BAE have been awarded by the MoD.
Last month, the government handed BAE a £280m contract to boost the production of howitzer shells from UK factories.
In June, the company received a £270 million contract to manufacture radars for the Royal Navy, creating 400 high-skilled British jobs in the process.
Andy Chambers, director of industrials at Edison Group described the today’s results as “very strong,” with BAE benefitting from “a general rearmament among NATO countries as the war in Ukraine grinds on.”
He added: “With the opening of new facilities in Manchester, New Hampshire, Texas, and Iowa, the company aims to increase its capacity and achieve a faster turnaround of orders.”
“This bold strategy of expansion also hints at the BAE Systems’ long-term outlook – the company clearly expects a permanently scaled-up demand for armaments in an increasingly uncertain world.”