BAE Systems, a major weapons builder in the FTSE 100, has recently affirmed its full-year trading guidance due to the strength in the global defence market. The company’s share price has seen a 0.6% increase in Thursday’s session, reaching £13.90 per share. BAE Systems is on track to achieve sales growth between 10% and 12% in 2024, while underlying earnings before interest and tax (EBIT) are expected to rise between 11% and 13%. The company also predicts that full-year free cash flow will exceed £1.3 billion, following a 2023 figure of £2.6 billion. Additionally, cumulative free cash flow between 2024 and 2026 is anticipated to surpass £5 billion.
The demand for BAE Systems’ hardware is on the rise, with Western governments increasing their defence spending in response to Russia’s invasion of Ukraine. The company has experienced significant growth, with its share price increasing by around 150% since the beginning of 2022, driven by soaring revenues and orders. In 2023, BAE Systems reported record orders of £37.7 billion, representing a year-on-year increase of approximately £600 million. The company’s order backlog has also seen a substantial improvement, reaching £69.8 billion compared to £58.9 billion a year earlier. BAE Systems noted that defence spending remains high across its sectors and key markets, with recent developments such as the US supplemental aid package to Ukraine and the UK Government’s commitment to spend 2.5% of GDP by 2030 expected to further boost momentum.
In addition to its strong performance in the defence market, BAE Systems announced that its Ball Aerospace unit has been rebranded as Space & Mission Systems, following the company’s acquisition of the division for $5.6 billion in February. BAE Systems stated that the integration program is underway, with the business securing several key contracts at the start of the year. The company also expects capital expenditure to increase from 2023 levels, with a focus on maritime, munitions, and Swedish combat vehicle production capacity and capabilities. Moreover, BAE Systems plans to recruit a record 2,700 new apprentices, graduates, and undergraduates to support its growth plans.
CEO Charles Woodburn expressed confidence in BAE Systems’ performance, stating that trading so far this year has been in line with expectations. He emphasized the company’s strong operational performance and backlog, highlighting its long-term value-creating model. Woodburn also pointed out that BAE Systems’ global presence and diverse portfolio of products and services provide a high level of visibility for future top-line growth, margin expansion, and cash generation over the coming years. With a positive outlook and a strong presence in the global defence market, BAE Systems is well-positioned for continued growth and success in the future.
