BAE Systems sets sights on higher profits as defence spending rises Proactive uses images sourced from Shutterstock
BAE Systems PLC (LSE:BA.) upgraded its full-year guidance after higher defence spending helped lift first-half sales and orders, while free cash flow improved sharply.
Sales increased 9% to £15.8 billion in the six months to June, with growth across all divisions. Underlying operating profit rose 11% to £1.7 billion and underlying earnings per share climbed 13% to 38.9p.
Order intake increased to £16.4 billion from £13.2 billion, leaving BAE with a record backlog of £84 billion.
The defence group now expects sales to grow by between 8% and 10% in the 2026 financial year, up from its previous forecast of 7-9%, with underlying operating profit growth expected to reach 10-12%, compared with the previous 9-11% range. Guidance for underlying earnings per share growth was raised to 11-13% from 9-11%.
BAE also lifted its free cash flow target to more than £2 billion from more than £1.3 billion. Its cumulative target for 2024-2026 increased to more than £6.7 billion from £6 billion.
First-half free cash flow reached £1.8 billion, compared with an outflow of £368 million last year, helped by customer advances.
Chief executive Charles Woodburn said: “The global threat picture remains highly volatile and governments are responding with sustained increases in their defence budgets.”
BAE secured orders including a £5.9 billion contract supporting Britain’s Dreadnought nuclear submarine programme and more than £5 billion of contracts for the Global Combat Air Programme.
The interim dividend was raised 11% to 15p a share. BAE returned £933 million to shareholders through dividends and buybacks during the half.