BAE Systems flying high as global tensions up spending
RISING defence spending in an uncertain world will raise defence giant BAE Systems’ profits to higher altitude next year, the firm said today.
The Farnborough-based weapons maker hiked its performance outlook for the 12 months by 5% to 10% due to rising geopolitical tensions, which will lead to more demand for fighter jets and systems.
The shares hit a 17-year high of 620p, gaining 14.5p, or 2.4%.
Chief executive Ian King said: “We are seeing encouraging signs of return to growth in budgets. We are well posi- tioned to ramp up.” King yesterday announced his intention to retire from the group, with replacement Charles Woodburn taking over in July.
He bowed out with a formidable set of numbers: sales jumped by £1.1 billion to £19 billion last year, mainly due to the drop in sterling, and underlying profits rose 13% to £1.9 billion.
BAE’s major customers are based around the world, with a focus on the US and Middle East countries such as Saudi Arabia.
The election of US President Donald Trump, plus rising tensions in the Middle East due to wars in Syria and Yemen, has shaken up the pipeline of orders, up to £42 billion from £36.8 billion. US defence markets have returned to growth while demand for its Typhoon, F-35 and Hawk planes has also been strong.
Underlying earnings per share, which the company uses to gauge performance, should be 5%-10% higher next year thanks to a predicted 5% rise in electronic systems and international sales mainly to the Middle East.
BAE’s giant pension scheme showed signs of stress, with the deficit rising to £6.1 billion from £4.5 billion. The group is approaching its triennial valuation and is trying to ease the pressure. @signorbow