Very strong cash generation, a solid growth forecast for 2022 and a backdrop of war in Ukraine helped BAE Systems (BA.) to be a rare market riser on Thursday, up 2.7% to 617.2p.
For the year ended 31 December 2021, pre-tax profit rose to £2.11 billion from £1.60 billion year-on-year as revenue grew £0.2 billion to £19.52 billion as margins improved.
Order intake increased by £0.6 billion to £21.5 billion. The company declared a final dividend of 15.2 pence per share, taking the total dividend to 25.1 pence per share, up 6% on year.
Looking ahead to 2022, the company said it expected annual sales to grow between 2% to 4%. Free cash flow for 2022 was anticipated to be in excess of £1 billion, with a three-year target for 2022 to 2024 in excess of £4 billon.
SHIFTING THE CALCULUS
‘The three-year cash flow target for the period 2020 to 2022, originally set at £3.5 billion to £3.8 billion, has been upgraded to be in excess of £4 billion,’ the company said.
Longer term the arrival of a major conflict in Europe is likely to shift the calculus in terms of defence spending which would likely result in increased revenue for BAE and other defence businesses.
In her initial reaction to the numbers Jefferies analyst Chloe Lemarie said: ‘We note a particularly strong free cash flow at £1.9 billion for the financial year, 52% above consensus, leading to an increase in three-year rolling: now both 2020-22 & 2021-23 are targeting above £4bn in free cash flow generation.
‘We anticipate a solid reaction to the release, based on the free cash flow performance.’
