Investors in BAE Systems can expect another bumper year as rising geopolitical tensions in Europe and the Middle East boost defence spending globally.
The FTSE 100 defence giant maintained its guidance for the year ahead as conflict in Ukraine and Israel’s conflict with Hamas in Gaza rumbles on.
Sales are expected to rise 10 to 12 per cent on a 2023 total of £25.3bn. Underlying earnings before interest and taxation (EBIT) will increase 11 to 13 per cent, from last year’s £2.7bn.
The bumper profit means investors are set for a final dividend of 18.5p per share on 3 June 2024, subject to shareholder approval. BAE also said it had completed over 90 per cent of a three year share buyback programme of up to £1.5bn. A further £1.5bn repurchase scheme has been approved and will conclude after three years.
Underlying earnings per share are forecast to rise six to eight per cent, from 63.2p.
Charles Woodburn, BAE Systems Chief Executive, said: “Trading so far this year has been in line with expectations. Operational performance continues to be strong and our backlog and programme incumbencies underscore our confidence in our long-term value-creating model.
“We’re continuing to deliver on mission critical requirements for our customers, and progress our long-term strategic programmes within the elevated threat environment.
The rise in global conflict is not just limited to Ukraine and the Middle East. According to the latest edition of the International Institute for Strategic Studies’ Armed Conflict Survey, there were 183 ongoing conflicts in 2023, the highest number in three decades.
BAE Systems space segment has also seen growth. The firm announced a major £4.4bn acquisition of Ball Aerospace last year, which has now been granted regulatory approval
Woodburn added: “We have commenced the integration of our new Space & Mission Systems business in the US following the closing of the Ball Aerospace acquisition in February.
“Our global presence and diverse portfolio of products and services provide high visibility for top-line growth, margin expansion and cash generation in the coming years.”
Shares are up over 23 per cent in the year to date.
This comes as foreign secretary David Cameron is set to argue that NATO allies must commit to spending 2.5 per cent of GDP on defence, amid the need to adopt a “harder edge for a tougher world”.
The former Prime Minister has previously eluded to the need for the UK and its allies to “out-compete, out-cooperate [and] out-innovate”.