- Defence giant increases dividend by 11%
- Full year revenue up 9% to £23.07 billion
- Order book up £9.1 billion
Shares in BAE Systems (BA.) fell over 3% to £12.11 in morning trading despite the defence giant reporting a 9% increase in revenue to £23.07 billion for the year ending 31 December.
Full year sales were up 9% to £25.28 billion, and the company also announced a 11% increase in dividend to 30p – a welcome boost for shareholders.
These upbeat figures come as no surprise due to the ongoing conflicts in the Middle East and Ukraine.
Order intake for the full year was up £600 million to £37.7 billion.
Charles Woodburn, CEO was upbeat about the latest figures: ‘Our performance, combined with our global footprint and record order intake, means we are well-positioned for sustained growth in the coming years. We will keep driving the business forward, investing in modern technologies, facilities, and our people.’
Ball deal and buybacks in focus for BAE Systems amid Middle East conflict
The shares briefly made a new all-time high before falling back, suggesting the some profit taking following a strong run up in the shares.
Over the last five years the shares have gained 160% compared with a 6% gain in the FTSE 100.
BAE guided for 2024 sales to grow between 10% and 12% and an underlying EBIT growth range of 11% to 13%.
This incorporates the company’s recent purchase of US-based Ball Aerospace for $5.5billion and the reduction in the group’s shareholding in Air Astana from 49% to circa 16% following its IPO (initial public offering).
EXPERT VIEW
Jarek Pominkiewicz, equity research analyst at Quilter Cheviot said: ‘Despite a slight miss in underlying earnings before interest and taxation (EBIT) margin, down 20 basis points to 10.6% against consensus, this is not a concern, largely attributable to better-than-expected maritime sales which are inherently lower-margin, cost-plus work.
‘The resilience of the defence sector, where BAE Systems operates as the UK's leading defence contractor, has been extraordinary amidst broader economic challenges. The company's success is less about the pandemic's direct effects and more tied to the geopolitical landscape and increasing defence expenditure demands. With a diversified portfolio in combat systems, cybersecurity, and intelligence, BAE is well-placed to benefit from the escalating tensions between Russia and the West, driving the need for enhanced defence capabilities.
‘Considering the changing geopolitical dynamics, particularly in Eastern Europe and the Baltic region, there is a growing recognition of the need to bolster defence spending. This is evident from the public discourse and commitments by NATO countries to increase their defence budgets beyond the 2% GDP target, in response to the heightened perception of threat. BAE Systems will benefit from this and is well positioned for growth.’
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