Geopolitical tension and a trend by governments to restock military hardware have boosted profits at the UK defence company BAE Systems.
The company, whose products range from submarines to armed vehicles and from Typhoon fighter jets to missile guidance systems, posted a 14 per cent rise in earnings per share to 63.2 pence, beating analysts' expectations.
BAE Systems, whose biggest overseas customers are the US, Saudi Arabia and Australia, recorded a 9 per cent rise in sales last year to £25.3 billion ($31.9 billion).
The company's order book has reached a record level of £69.8 billion, with £37.7 billon being added last year, including orders for nuclear submarines for Britain's Royal Navy and "multiple combat vehicle orders" at its Hagglunds business.
"Instability in Europe, the Middle East and other parts of the world brings into sharp focus the vital role that we play in protecting national security," said BAE chief executive Charles Woodburn.
"While most of our order volume was driven by existing programme positions that predate the Ukraine conflict, orders to restock and upgrade heavy armour and munitions are starting to come through."
Record order book
BAE Systems predicted its sales would rise by a further 10 per cent to 12 per cent this year, as governments seek to replenish and increase their military arsenals in the face of growing geopolitical threats.
"Despite being a UK-based company, a whopping 42 per cent of its sales came from the US last year, making it the largest single contributor," said Aarin Chiekrie, equity analyst at Hargreaves Lansdown.
"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 £37.7 billon worth of orders in 2023."
Shares in BAE Systems put in a strong performance over the past year, rising more than 30 per cent, and Mr Woodburn said the company was "well-positioned" to deliver sustained growth.
Jamie Murray at Shore Capital said: "BAE Systems is a well-managed company with exposure to global defence markets, which have structural tailwinds."
"While these results are not jaw-dropping, they do reflect steady progress to the group’s long-term ambitions."
Sticking with London
In the Middle East, BAE Systems delivered 10 Typhoon fighter jets to Qatar last year, bringing the total to 18 in service with Qatar's air force.
The company said it was continuing to deliver services in Saudi Arabia under the terms of its five-year contract with the kingdom, "with the Tornado Support Service providing an enhanced and modernised solution for the Royal Saudi Air Force".
Even though BAE Systems made nearly half of its 2023 sales in the US, Mr Woodburn said the company had no plans to move its primary share listing from London.
"We're very happy with our with our London listing," he said.
"If you go back a few years, I think we were trading at a discount to some of our US peers but I think through the strong performance of the business over recent years, I think we've, in many ways, closed much of that gap."
