BAE Systems has predicted higher earnings this year as western governments ramp up military spending to help Ukraine after posting record new orders in 2022.
The FTSE 100 group, which builds everything from Eurofighter Typhoon jets to nuclear submarines and combat vehicles as well as making ammunition for the British military, said it took in a record £37bn in new orders, propelling its order backlog to £58.9bn.
The strong order haul, which mostly predated the war in Ukraine, included a contract to build an additional five Type 26 frigates for the Royal Navy as well as a contract with Slovakia for its CV90 combat vehicle.
Charles Woodburn, BAE chief executive, said the company expected “continued momentum in the medium to long term as governments replenish stocks, recapitalise equipment and support allies”.
BAE is the main supplier of ammunition for the British Armed Forces and in January began a new 15-year supply contract.
It had been waiting for a formal agreement to cover the additional output required by Ukraine but Woodburn said on Thursday that the company was now “receiving additional orders for munitions” while declining to give further details.
The company is in talks to finalise a contract with the Czech Republic for 210 of its CV90 vehicles. Woodburn said the discussions, as well as those with Slovakia last year, had “moved quicker because of the threat environment and the [Russian] invasion”.
BAE has seen its shares soar as western governments have pledged to increase military spending following Russia’s invasion of Ukraine. Its shares have risen 50 per cent over the past 12 months. They were trading 1 per cent lower at 890p by Thursday lunchtime.
The group, which generates a significant portion of its earnings in US dollars, also benefited from a strong dollar against the sterling.
Sales to the end of December 2022 increased 9 per cent to £23.3bn on a reported basis. They were up 4.4 per cent on a constant currency basis, BAE’s preferred metric.
Underlying earnings before interest and tax rose 12 per cent to £2.5bn on a reported basis. They were up 5 per cent on a constant currency basis.
Free cash flow of £2bn exceeded analyst expectations. BAE said it would propose a 7.6 per cent increase in its final dividend to 27p.
BAE gave a bullish outlook for the coming year. It expects sales to increase by between 3 per cent to 5 per cent in 2023, with higher growth in particular in its electronic systems business, which provides secure communication systems and other technologies to a range of government customers.
Underlying earnings before interest and taxes are expected to improve by 4 per cent to 6 per cent.
