Defence giant BAE Systems secures £28bn worth of orders so far this year
BAE Systems, one of the largest defence companies in the UK, has secured £10bn worth of orders in the second half of this year so far.
The London-listed defence firm, which builds military-grade jets, submarines and satellites, has kept its guidance in place while many businesses in the UK nudge them lower amid the economic downturn.
The invasion of Ukraine has boosted defence and security companies, with government customers looking to act upon “elevated threat” levels, according to chief executive Charles Woodburn.
BAE secured £18bn in orders in the first half of the year, taking the total so far to £28bn, and has used its strong balance sheet to increase its spend in research and development.
The defence giant has secured £4.2bn from the British government for five war ships, Type 26 frigates for the Royal Navy, prime minister Rishi Sunak announced today.
The company secured at least four large contracts with the US military earlier this year, including a $383m (£323m) contract for multiple launch rocket system support services.
Woodburn added: “Looking forward, our large order backlog, diverse portfolio position and focus on programme performance position us well for another year of top line growth and margin expansion in 2023.
“We see sales growth coming from all sectors and opportunities to further enhance the medium-term outlook as our customers address the elevated threat environment.”
Growing defence budgets
Shares in BAE rose a little over three per cent to 748.6p per share by late-morning, bringing a positive boost to the stock price after recent weakness.
Broker Jefferies, which has placed a Buy rating on the company, said in a note this morning: “Regarding defence spending outlook… the commitment to defence in its major markets remains robust.”
Defence budgets in Europe and the US are only expected to grow over the next five years, according to onlookers.
“Our experts expect the Tempest fighter aircraft programme to be one of the main winners in the UK’s planned defence spending increase,” Olly Anibaba, analyst at investment research company Third Bridge, said today.
“The Russia-Ukraine conflict has highlighted the effectiveness of BAE’s Advanced Precision Kill Weapon System (APKWS). Our experts expect APKWS to be adopted by more NATO allies.”
Anibaba added that BAE should be approaching mergers and acquisitions (M&A) with “more urgency”, as it risks being squeezed out of one of the large next-generation programmes in the US for combat vehicles.
BAE is also seeing continued losses in its US ship repair business, as the firm doubles down on its space-based security offering with a new satellite.