BAE clocks up £10billion in new orders
Ukraine invasion and war in the Middle East boost demand
BAE Systems has chalked up £10bn in orders since the end of June as growing global tensions stoke further demand for military hardware.
The UK defence giant’s order intake for the year to date already stands at more than £30bn, close to the record £37bn achieved over the course of 2022.
That also means more jobs, with the number employed by the company rising by 5,000, or 6pc, over the first nine months of the year.
BAE has seen demand ramp up since Russia’s invasion of Ukraine last year and war in the Middle East has further raised the temperature.
A spokesman said: ‘The high order flow reflects continued customer confidence in our ability to deliver important capabilities at a time of heightening geopolitical risk.’
Chief executive Charles Woodburn ( pictured) added that trading had been in line with the upgraded financial guidance it gave three months ago. ‘We are delivering another year of good sales and earnings growth, together with strong cash flow generation,’ he said.
BAE’s share price has nearly doubled since February last year when the Ukraine war began. The company said it now expects to return £1.4bn to shareholders this year.
Many investors focused on environment, social and governance (ESG) funds – which tend to shun arms companies – have missed out.
The defence sector has benefited from strong demand since the invasion of Ukraine amid worries about further Russian aggression. And Western allies providing kit to Ukraine are ordering weapons and ammunition to replenish their own stocks.
Growing fears about China’s intentions towards Taiwan, as well as the war between Israel and Hamas, have further boosted the case for military spending.
BAE is on course to grow its annual sales by up to 7pc, or £1.6bn, from last year’s £23.3bn and add up to 8pc, or £200m, to last year’s £2.5bn profit haul. The company, whose main customers are the governments of the UK, USA, Saudi Arabia and Australia, said it had increasing exposure to ‘structurally growing’ defence markets. Contracts secured in recent months include £3.9bn of funding for the Aukus submarine programme involving Australia, the UK and the US. This phase includes detailed design of the sub and procurement for the building phase over the coming decades. And the funds will also mean ‘significant infrastructure expansion’ at BAE’s submarine base in Barrow-in-Furness, Cumbria, as well as investment in employee skills and the wider supply chain.
BAE said it was also making progress on a ship building facility in Glasgow, where it is in the process of making eight cuttingedge Royal Navy frigates.
And it has been ‘progressing’ in talks with Italian and Japanese companies that it is working with on a new fighter jet programme.
Jamie Murray of Shore Capital, said: ‘Given BAE’s global footprint, we view it as a principal beneficiary of growing global defence budgets, which should underpin long-term growth.’
Aarin Chiekrie of 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.’