BAE Systems’ share price dipped in midweek trading, as a decline in its first-half order backlog overshadowed upgrades it made to full-year guidance.
At £17.72 per share, BAE Systems shares were last 2.7% lower on Wednesday.
In a strong first half, the FTSE 100 defense firm said sales rose 11% year on year to £14.6 billion. On an organic basis sales were up 9%.
At its Air division, sales rose 9% on a constant currency basis to £4.3 billion. BAE said this partly reflected “[increased] design and development activities on our Future Combat Air System program,” as well as improved sales at the MBDA European missile systems joint venture.
Maritime and Electronic Systems sales were up 12% and 9% on the same basis, to £3.2 billion and £3.6 billion respectively. Platforms & Services sales boomed 21%, to £2.5 billion.
Underlying earnings before interest and tax (EBIT) increased 13%, to £1.6 billion, while operating profit ticked 2% higher to £1.3 billion.
The company raised the interim dividend 9%, to 13.5p per share.
Orders down
Despite its improved sales and profits, BAE Systems saw its order intake edge lower to £13.2 billion in the first half. This was £15.1 billion in the corresponding 2024 period.
The group’s total order backlog rose by £1.3 billion year on year, to £75.4 billion. However, it was down from record levels of £77.8 billion punched at the close of 2024.
Net cash flow declined to £74 million from £757 million in the same period last year. The company said that despite higher profits, “working capital movements in the period reflected timing of programs and the outflow of customer advances to the supply chain.”
It recorded a free cash outflow of £368 million. BAE recorded positive free cash flow of £219 million a year before.
Guidance Raised
Chief executive Charles Woodburn commented that “our teams have delivered another strong operational and financial performance in the first half of the year, giving us the confidence to upgrade our guidance.”
Describing the current “heightened global threat environment,” he added that “he breadth and depth of our geographic and product portfolio, together with our trusted track record of delivery, strengthen our confidence in the positive momentum of our business products and services.”
BAE Systems’ solid first half mean it now expects sales to rise between 8% and 10% over the course of 2025. Growth of 7% to 9% had previously been projected.
Underlying EBIT growth is also now tipped at 9% to 11%, up from the previous forecast of 8% to 10%.
The company kept its free cash flow target held at above £1.1 billion.
Solid Update
Analyst Aarin Chiekrie of Hargreaves Lansdown described today’s update as “a blockbuster set of first-half results,” commenting that BAE enjoyed growth across all its divisions.
He added that almost 45% of total sales originated from the US, and suggested that “BAE looks well-positioned to tap into new funding available for some of the administration’s big-money projects, including the Golden Dome missile defense system.”
Chiekrie also noted that “with NATO members recently committing to boost defense spending from 2% to 5% of GDP by 2035, that figure looks set to rise even further in the years ahead.”