BAE Systems makes record profits in 2023

BAE Systems has reported that it made an operating profit of £2.7bn in 2023, amid increased military spending resulting from the Russia-Ukraine and Israel-Gaza conflicts.

The arms manufacturer’s profits were up 9% compared to 2022, after reporting record sales of £25.3bn last year, a figure also up 9% year-on-year.

BAE stated that its increased profitability reflects “strong programme execution” and “internal efficiency efforts”. Its order backlog has reached a record level of £69.8bn, driven by an order intake of £37.7bn following several significant awards in the year, which included SSN-AUKUS, Dreadnought and multiple combat vehicles orders in its Hägglunds business.

The FTSE 100 company has also suggested that global instability is increasing Government focus on defence budgets.

In its latest trading statement, the group’s board has recommended a final dividend of 18.5p, taking the total dividend for 2023 to 30.0p – an increase of 11.1% on last year. Subject to shareholder approval at the group’s 2024 annual general meeting, BAE will pay out on its dividends to shareholders on 3 June.

Chief executive of BAE, Charles Woodburn, said the group had delivered a “strong operational and financial performance” in 2023, and is “well positioned for sustained growth in the coming years”.

“We’ll keep driving the business forward, investing in new technologies, facilities and our people,” Woodburn added. “This will help us deliver on our order backlog and help ensure our Government customers stay ahead in an uncertain world, whilst delivering increased value to our shareholders and the communities where we operate.”

Equity analyst at Hargreaves Lansdown, Aarin Chiekrie, also highlighted that despite being based in the UK, 42% of BAE’s sales came from the US last year, making it the largest single contributor.

“On an absolute basis, US military spending trumps any other country in the world, so having a large exposure here is proving very beneficial and has helped the group bring in a record £37.7bn worth of orders in 2023,” Chiekrie commented.

BAE has already this month finalised the acquisition of the US-based Ball Aerospace business from Ball Corporation for $5.5bn (£4.4bn).

Upon completion of this deal, the group drew down $4.0bn (£3.2bn) under a bridge finance facility and paid $1.5bn (£1.2bn) in cash from its existing cash resources in settlement of the transaction.

Chiekrie added that BAE’s deal for Ball Aerospace would “further increase its footprint” in the US.

“Ball Aerospace has unique positions in critical space and nuclear deterrence technologies, and the deal looks like a good strategic fit,” Chiekrie said.

“The new business should enhance top-line growth and margins, contributing positively to the group’s expectations for sales and profits to rise at double-digit rates this year. Against a backdrop of elevated global tensions and rising military budgets, the sky’s looking bright for this jet-maker.”

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