War keeps BAE flying high as military orders flow

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Transport Reporter

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Shareholders in BAE systems could be set for a windfall of hundreds of millions of pounds after Kazakhstan's Air Astana lists in London.
Shareholders in BAE systems could be set for a windfall of hundreds of millions of pounds after Kazakhstan's Air Astana lists in London.

BAE Systems has backed its bumped-up annual earnings guidance as geopolitical tension keeps demand for military kits soaring.

In an update on the London Stock Exchange, the security and aerospace giant said trading had been in line with expectations after a strong third quarter, with £10bn in orders booked since the half-year mark.

BAE backed its August forecast for annual earnings to rise as high as 12 per cent in 2023, primarily driven by Russia’s invasion of Ukraine. Shares were marginally up 0.09 per cent in early trading.

Geopolitical tension has grown across the globe in recent years and the stability of the entire Middle East region is now under threat following Hamas’s attack on Israel in early October.

Charles Woodburn, BAE Systems chief executive, said: “Trading has been in line with the upgraded guidance we issued at the time of our 2023 half-year results. We are delivering another year of good sales and earnings growth, together with strong cash flow generation.”

Among the £10bn worth of orders since June was £3.9bn in funding for the SSN-AUKUS nuclear-powered submarine programme.

“Order flow on new and existing programmes, renewals on incumbent positions and progress with our opportunity pipeline remains strong,” he added.

“These underpin our confidence and visibility for good top-line growth in the coming years, and we continue to reinforce our value-compounding model with a sharp focus on operational performance and disciplined capital allocation.”

In August, BAE announced a bumper dividend for its shareholders in August after bringing in orders worth over £21bn in the first half of 2023.

Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said: “Given the elevated threat environment, demand for BAE’s products and services has remained strong with around £10bn of order intakes since the half-year mark.”

“That takes the year-to-date figure up to around £30bn, and because these are typically long-cycle orders, with payments spread over several years, it gives BAE multi-year revenue visibility.”

Analysts noted that the regulatory process surrounding BAE’s mammoth $5.55bn acquisition of Ball Aerospace was progressing well and should add around $2.2bn in revenue to the company’s top line.

Chekrie said: “It looks like a good fit for BAE. Ball Aerospace provides mission-critical space systems and defence technologies across air, land and sea – complementing BAE’s suite of products nicely.”