In its recent trading update, BAE Systems PLC has outlined its operational achievements and financial expectations for 2023, placing particular emphasis on the contribution of submarine programmes to its growth.

The company’s Chief Executive, Charles Woodburn, provided insights into the company’s current performance and future outlook.

BAE Systems has confirmed that its performance aligns with the upgraded forecasts issued at the 2023 half-year mark. A key highlight of this period is the significant order intake, with the company securing around £10 billion in new contracts.

Among the various projects, the SSN-AUKUS submarine programme stands out with a funding of £3.9 billion for its next phase. This long-term commitment, extending into detailed design and procurement through 2028, exemplifies the extended cycle nature of defence contracts and provides a stable foundation for BAE Systems’ future growth.

Woodburn commented on this, noting, “The high order flow reflects continued customer confidence in our ability to deliver important capabilities at a time of heightening geopolitical risk.”

In addition to the submarine programme, BAE Systems is actively engaged in a variety of global defence projects, such as AMPV full-rate production and Bradley fighting vehicle upgrades.

Woodburn highlighted the company’s operational efficiency and disciplined capital allocation, attributing these as key factors behind BAE Systems’ ongoing success. “We are delivering another year of good sales and earnings growth, together with strong cash flow generation,” he stated, emphasising the performance of the company.

Looking ahead, BAE Systems anticipates a 5-7% increase in sales, a 6-8% growth in underlying EBIT, and a 10-12% rise in underlying EPS for 2023. The company also projects its free cash flow to exceed £1.8 billion.

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George has a degree in Cyber Security from Glasgow Caledonian University and has a keen interest in naval and cyber security matters and has appeared on national radio and television to discuss current events. He also previously worked for the NHS. George is on Twitter at @geoallison
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John Clark
John Clark
12 days ago

Certainly with the imminent contract signing of GCAP and BAE Systems ‘effectively’ being the prime contractor, you can expect its share price to really take off…..

Along with AUKUS, it cements a huge amount of high value work for decades to come.

Expat
Expat
12 days ago
Reply to  John Clark

Not sure i agree a lot is already priced in at £11 quid a share. Dividend in only 2.5% I can get more from a bank and not take the capitol risk. Theirs better return from other companies outside the defence sector.

https://www.dividenddata.co.uk/dividendyield.py?market=ftse100&sort=yield&order=1

ABCRodney
ABCRodney
12 days ago
Reply to  John Clark

I suspect that there will be fringe benefits to AUKUS and other BAe US centric pipelines over the next 20 years. Everyone focuses attention on the high profile Big Buys and New projects, but BAe has another string to its bow which it is quietly and profitably expanding. The USN has a massive long term problem with its maintenance backlog and it’s especially critical regarding their SSN/SSBN fleet. That is estimated to take 20 years of expansion and investment to clear. BAe has a very good track record of delivering maintenance for the surface ships and is involved now with… Read more »

FormerUSAF
FormerUSAF
11 days ago
Reply to  ABCRodney

Did not realize BAES was providing propulsors and VPM payload tubes to USN, until a search completed, based upon your comment. Damn, am learning something new every day. 👍😁

ABCRodney
ABCRodney
11 days ago
Reply to  FormerUSAF

We are the Borg you will be assimilated, resistance is futile 😋 Seriously it is a massive 2 way process between UK and US. Your ex USAF so are probably aware that the B52 upgrade is powered by RR engines. So Sir it will be a loveley smooth ride, no nasty black smoke, use less Gas, longer range. more power and come with a Walnut dashboard, drinks cabinet and Tea Making facilities. The RR Key Fob is extra.😎 If only Congress hadn’t cancelled the GE/RR F136 engine for the F35. Didn’t anyone tell them that US combat aircraft have been… Read more »

FormerUSAF
FormerUSAF
11 days ago
Reply to  ABCRodney

Yes, yes, the BUFF aircrews are eagerly awaiting the tasteful, burl walnut wood trim and the hand-stiched, Connolly leather finished seats, but are also quite curious to learn where/how ‘The Spirit of Ecstasy’ mascot will be attached. 😁😉 Possible nose art? 🤔

Always believed cancellation of development of F136 engine was a mistake, ‘Penny wise, Pound foolish.’. Fair and open competition almost inevitably results in better products, courtesy of the postulated ‘unseen hand’ by Adam Smith. Suspect, but cannot prove, lobbying on behalf of vested interests, played a significant role in decision process. 🤔😱

FormerUSAF
FormerUSAF
11 days ago
Reply to  John Clark

BAE has an extensive record of acquisitions in the US, Ball Aerospace was simply the latest target. BAE is the sixth largest DoD contractor; generally bet on Uncle Sugar’s (US) largesse, usually in the form of cost+ contracts. Really, w/ Mad Vlad, the scumbag ChiComs and the crazy Mullahs acting in concert, deem defence/defense stocks to be a long-term play. Diversification is always recommended. The Capital Group Companies (~$2.6T in assets under management) is evidently the largest institutional investor. Capital Group is conservative in judgments, even w/in growth funds arena, plays in the shallow end of the pool and is… Read more »

FormerUSAF
FormerUSAF
11 days ago
Reply to  FormerUSAF

P.S. Should mention for potential conflict-of-interest consideration, am a long-term investor in various Capital Group mutual funds. Pleased w/ performance to date, but certainly not attempting to shill on their behalf. Would generally not mention investments, but have a personal track record w/ same.

Expat
Expat
12 days ago

Still I wouldn’t buy shares in BAe, capital employed is still not that great, earning per share is better elsewhere and the shares look overvalued at £11 per share so anyone investing now will likely take a haircut.

Jonathan
Jonathan
12 days ago
Reply to  Expat

Yes 2022/23 saw a 100% increase in share value from what was a steady ish £5-6 per share value for the previous decade. Essentially it’s been climbing since the start of the Ukraine war. What I’m not sure is how long it will sustain that, but the last 6 months has seen a steady 10-15% increase…at some point that’s going to reverse..but while we have the level of global instability and the order books are healthy I would say it’s still a fair bet for a while yet.

John Clark
John Clark
12 days ago
Reply to  Jonathan

It will likely spike after GCAP signature ( £15-16 ish), then ride high for a little while before a steady drop back to a more sustainable level.

The question is ‘are you feeling lucky’, roll the dice and splash some cash!

Jonathan
Jonathan
12 days ago
Reply to  John Clark

Indeed, buying single shares is always a bit of a gamble..sometimes an educated gamble but still one none the less…mixed portfolios are less fun, not going to light the world but far safer….

FormerUSAF
FormerUSAF
11 days ago
Reply to  Jonathan

👍👍

Rudeboy
Rudeboy
11 days ago
Reply to  John Clark

Markets will have already priced GCAP in I’m afraid.

It’s potential Typhoon orders that could increase the share price…

John Clark
John Clark
11 days ago
Reply to  Rudeboy

It’s all a risk, but the share price will likely spike after GCAP signature, as it’s still not a certainty.

The state of politics in the UK brings a lot of uncertainty and nervousness to partners like Japan, it is certainly not assuaged by Sunaks rearranging deckchairs on the Titanic, as per the antics of yesterday!

If it’s left to the next Labour administration, then it will be on a holding pattern until they have a SDSR.

mark one
mark one
12 days ago
Reply to  Expat

You are way too late though….. Had you invested years ago, you’d be laughing now…….

John Clark
John Clark
12 days ago
Reply to  mark one

Absolutely, I’ve just put 2 lots of £20,000 in two Coventry Building Society ISA’s (myself and wife) and we’ll get £2,000 tax free interest next year.

Absolutely safe investment and a good chunk towards next year’s holiday!

Expat
Expat
11 days ago
Reply to  mark one

Yes, I agree. My point is this trading statement is not all roses. Time to buy 2-3 years back.

ABCRodney
ABCRodney
11 days ago
Reply to  Expat

Really 😊NSS.

Chris
Chris
12 days ago

10 billion of MOD contracts in 6 months. That’s 20% of total UK defense spending PER YEAR.

mark one
mark one
12 days ago
Reply to  Chris

Indeed. but we spell it “defence” 😎

Tom
Tom
12 days ago

Oh right… so maybe worth a punt on some shares, short term?

David Lloyd
David Lloyd
12 days ago
Reply to  Tom

Wars are good for business, if you are in the armaments game

Tom
Tom
12 days ago
Reply to  David Lloyd

Sad but true.

JJ Smallpiece
JJ Smallpiece
12 days ago

And they still pay poor salaries to permanent staff.

ABCRodney
ABCRodney
11 days ago
Reply to  JJ Smallpiece

6.6% last year, 6% this year and 2 X £1000 cost of living payments for 34K staff ! Yep very badly paid 😏
Fun comes next year when the 2 year deal ends.

JJ Smallpiece
JJ Smallpiece
11 days ago
Reply to  ABCRodney

6% of a low base salary is still a low salary. Many are on less than £40k as graduate educated engineers. Plenty of other companies pay better

Richard Beedall
Richard Beedall
11 days ago

More possible good news for BAE Systems. According to Defence News, the first Australian AUKUS sub will now be built in the UK. I’m not completely convinced that is right, but it does make sense from a timeline and risk perspective for at least the common hull of the RAN’s first boat to be constructed at Barrow, otherwise the delivery date of “late 2030’s” looks extremely ambitious. Final fit-out could still be in Australia – particularly for American kit that the RN is not buying. The big questionnaire is whether the Devonshire Dock Hall will be sufficient, or whether a… Read more »

Louis
Louis
10 days ago

There’s been a lot of conflicting statements about where the first Australian AUKUS will be built.
Amazing news if this is accurate, exports are a rarity in British shipbuilding.
Time to get Canada onboard AUKUS as well.
DDH can assemble 3 at a time I believe which is enough capacity, the build speed would just have to be increased.

Richard Beedall
Richard Beedall
10 days ago
Reply to  Louis

DDH can assemble up to 3 subs at a time, I’ve visited the yard and seen that personally. But from American CRO report, a SSBN requires 3 times(!) the man hours of a SSN to assemble and complete. At a guess, Dreadnought will be taking space in the DDH for at least 8 years. Maybe they get it down to 7 years for her sister ships, but basically the DDH is booked out for the next decade, leaving no obvious capacity for the the first of class RN AUKUS to begin assembly in the early 2030’s, let alone a RAN… Read more »

Louis
Louis
10 days ago

I think the RN subs will take a bit longer than that. Dreadnought started build in 2016 for entry into service early 2030s, Valiant 2019 and Warspite 2023.
BAE is heavily recruiting- 10k-17k apparently- and facilities are being expanded which will speed up the build.
Build can of course start before there is space in DDH.

Richard Beedall
Richard Beedall
10 days ago
Reply to  Louis

Regardless of when construction of Dreadnought nominally started, her assembly in the DDH only began at the end of 2022, and I believe that she still consists of only two hull rings – so a long way still to go. A reasonable guesstimate is that the nearly complete sub will be rolled out c.2030, with perhaps two years of commissioning, testing, trials and work-up before entering service in the “early 2030’s”.

Louis
Louis
10 days ago

Sure
A space will open up for SSN AUKUS when Valiant is launched 2 years after Dreadnought. That’s 2032 which should allow to enter service late 2030s. With Warspite and the first SSN AUKUS launching mid 2030s, 2 more could enter construction, with 1 going to the Australians for delivery right near the end of the 2030s and commissioning in the early 2040s.