BAE Systems is expected to make a profit of £3 billion this year, as the wars in Ukraine and the Middle East are boosting the company’s coffers.
The company, which builds the UK’s nuclear submarine fleet, squadrons of fighter planes, and produces missiles, shells, and bullets, has reported sales that were 9 percent higher than expected, and profit before tax and interest was 2.68 billion pounds.
After the £4.4 Billion takeover of Ball Aerospace in the US – the largest acquisition ever made by BAE Systems – the company now guides analysts to sales of around £28 Billion this year and profits of £3 Billion for the first-time — an increase of approximately 11 per cent on a year-on year basis.
BAE shares reached a new record of £12.54. The group is now valued at approximately £38 billion.
The Russian invasion of Ukraine 2022 coincided with a double-digit increase in BAE shares over the last two years. BAE’s shares were trading between £5-£6 before the pandemic.
BAE shares fell in Wednesday’s late trading, closing at £12.411/2, down by 0.9 percent, or 11 1/2p.
Analysts noted that margins were constrained more than expected, and conservative estimates of £1.3 billion in free cashflow by 2024.
Charles Woodburn, BAE’s chief executive, stated that 2023 was not so much about cashflows, which were much higher than expected at £2.6 billion for the year.
He cited instead three major milestones: the confirmation of the construction of the next-generation submarines, after the Astute class and Dreadnought Class currently in production. The tripartite deal with Japan and Italy for the future Tempest Fighter Jet. And the acquisition of Ball which brings BAE to a new frontier in space — and its employees increase BAE’s global payroll to over 100,000 people.
Woodburn said that “these three pillars will set us up for many decades of opportunity.”
Woodburn said that the company had cash on its balance sheets of over £4 billion and that the net debt was halved, to only £1 billion, even after £560 millions of share buybacks in the last year. He also spoke of “a long-hopper” for takeovers, which would most likely be bolt-on purchases, such as the recent purchase of Berkshire drone maker Malloy Aeronautics.
Recently, the group’s coffers grew by £180 million from the sale of Kazakhstan flag carrier Air Astana. BAE held a legacy investment of two decades in the airline, which was indirectly a result of a failed arms deal in this region. BAE’s stake in the airline was reduced from 49 to 16 percent during its recent listing.
The company highlighted operational highlights of the year, including a UK government demand for an eight-fold increase in BAE 155mm shells after clearing out stocks for Ukraine; Czech Republic orders for 146 CV90 infantry combat vehicles in its BAE Hagglunds Swedish Joint Venture; and delivery of 10 Eurofighter Typhoons to the Qatar Emiri Air Force. 18 of these aircraft are now in service.