- Full year sales and profit up 14%
- Guidance underwhelms
- Dividend hiked by 10%
Meeting consensus expectations is often not enough to satisfy investors and that appears to be the case with aerospace and defence group BAE Systems (BA.), whose shares flipflopped between losses and gains despite delivering double-digit full year sales and profit growth.
The shares have doubled since the Russian invasion of Ukraine, comfortably outperforming the FTSE 100 index.
CEO Charles Woodburn commented: ‘The results we're reporting today reflect the outstanding efforts of our employees and continue our track record of strong top-line and earnings growth, free cash flow and orders.
‘Based on the exceptional visibility of our record order backlog and sustainability of our value-compounding business model, we remain confident in the positive momentum of our business into the future.’
Sales and operating profit increased by 14% to £28.3 billion and £3 billion respectively, broadly in line with market expectations. The company hiked the full year dividend by 10% to 33p per share and bought back £555 million shares, taking total shareholder returns in 2024 to £1.49 billion.
MODEST GUIDANCE
Looking ahead the company expects another year of growth with sales and operating profit projected to increase by 8% and 9% respectively taking the middle of the guidance range.
Jamie Murray at Shore Capital the guidance is broadly inline with his forecasts which means he does not expect to ‘materially’ upgrade his numbers.
‘Whilst BAE is a beneficiary of higher defence spending, its size and exposure to long-term contracts, restrict its ability to rapidly grow the topline,’ explained Murray.
Head of investment analysis at AJ Bell, Laith Khalaf said: The recent momentum in BAE Systems came to a halt on the company’s full-year results. BAE, like other European defence names, has been in demand with investors as the US recently signalled the continent would need to take more responsibility for its own security.
‘Longer-term, BAE will be encouraged by the direction of travel, with European countries likely to look not only to boost their military expenditure, but also production capabilities on this side of the Atlantic to reduce the reliance on US imports.
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author (Martin Gamble) and the editor (Steven Frazer) own shares in AJ Bell.
