REG - BAE SYSTEMS PLC - Half-year Report
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RNS Number : 0801T BAE SYSTEMS PLC 30 July 2025
BAE Systems plc
Half-yearly Report 2025
Charles Woodburn, Chief Executive, said "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. In this heightened global
threat environment, we continue to deliver mission critical capabilities to
armed forces around the world and invest in our people, technologies and
facilities to drive the improved efficiency, capacity and agility needed to
meet the increasing demand for our highly relevant products and services. The
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."
Financial highlights
Financial performance measures as defined by the Group(1) Six months ended 30 June 2025 Six months ended 30 June 2024 Variance(2)
Sales £14,621m £13,399m +11%
Underlying earnings before interest and tax (EBIT) £1,550m £1,393m +13%
Underlying earnings per share (EPS) - basic 34.7p 31.4p +12%
Free cash flow £(368)m £219m £(587)m
Order intake £13.2bn £15.1bn £(1.9)bn
As at 30 June 2025 As at 31 December 2024 Variance
Order backlog £75.4bn £77.8bn £(2.4)bn
Financial performance measures as derived from IFRS Six months ended 30 June 2025 Six months ended 30 June 2024 Variance(2)
Revenue £13,571m £12,477m +9%
Operating profit £1,327m £1,296m +2%
EPS - basic 32.3p 31.4p +3%
Net cash flow from operating activities £74m £757m £(683)m
Dividend per share 13.5p 12.4p +9%
As at 30 June 2025 As at 31 December 2024 Variance
Order book £57.0bn £60.4bn £(3.4)bn
As defined by the Group
- Sales increased 11%(2) in the period, with all sectors
contributing growth. Organic growth was 9%(2).
- Underlying EBIT was up 13%(2), increasing the Group's return
on sales for the period to 10.6%. Organic growth was 10%(2).
- Underlying EPS increased 12%(2) to 34.7p, after accounting
for the Group's underlying net finance costs and tax.
- Free cash outflow of £368m is inclusive of movements on
customer advances and is in line with expectations.
- Order intake of £13.2bn remained high across all sectors
and we closed the period with an order backlog of £75.4bn.
As derived from IFRS
- The reported growth in revenue of 9%(2) reflects the same
strong operational performance across the portfolio but excludes the impact of
our equity accounted investments.
- Operating profit increased 2%(2) as the growth in underlying
EBIT was offset by additional costs from the amortisation of acquired
intangibles, reflecting the significant acquisitions in the prior year which
included Ball Aerospace. The prior year also included a one-off profit on the
disposal of our partial interest in Air Astana of £75m.
- Basic EPS was up 3%(2) to 32.3p, after accounting for net
finance costs and tax.
- Net cash flow from operating activities is also inclusive of
movements in customer advances in the period, as well as timing of other
working capital requirements.
1. We monitor the underlying financial performance of the
Group using alternative performance measures (APMs). These measures are not
defined in International Financial Reporting Standards (IFRS) and therefore
are considered to be non-GAAP (Generally Accepted Accounting Principles)
measures. The relevant IFRS measures are presented where appropriate. The
purposes and definitions of non-GAAP measures are provided in the Alternative
performance measures section on page 38.
2. Growth rates for sales, underlying EBIT and underlying EPS
are on a constant currency basis (i.e. calculated by translating the results
from entities in functional currencies other than pounds sterling for the
period ended 30 June 2024 to pounds sterling at the average exchange rate of
such currencies for the period ended 30 June 2025). The comparatives have not
been restated. All other growth rates and year-on-year movements are on a
reported currency basis.
Delivering for our customers
Our focus on operational performance and contracting discipline enables our
consistent delivery of critical capabilities and technologies for our
customers. In the first half of the year, we secured £13.2bn of orders and
made good progress executing on our long-term major programmes.
Highlights in the period included the following:
- We laid the keel of HMS Dreadnought, the first of four
Dreadnought Class submarines we are constructing for the Royal Navy, at our
Barrow-in-Furness shipyard in the UK.
- Concept and assessment work on the Global Combat Air
Programme (GCAP) continues with our international partners and we received a
further £1.0bn of funding on the UK assessment phase contract in the first
half of the year.
- We launched Edgewing, a joint venture with our international
industry partners in Italy and Japan on GCAP, which will be accountable for
the design and development of the next generation combat aircraft under the
programme.
- We secured a $1.2bn (£0.9bn) contract to provide the US
Space Force with space-based missile tracking capabilities as the prime
contractor to design and build a constellation of satellites.
- Our Armored Multi-Purpose Vehicle (AMPV) celebrated its
500(th) delivery milestone and is on track, in full-rate production, to meet
the US Army's plan to field nearly 3,000 AMPVs in its Armored Brigade Combat
Team formations.
- We played a critical role in preparing Royal Navy ships for
the UK Carrier Strike Group 2025 and the Royal Navy selected our all-electric
Malloy T-150 uncrewed air systems (UAS) to transport vital supplies between
the ships for the first time during its ongoing deployment to the
Indo-Pacific.
- Her Royal Highness The Princess of Wales officially named
HMS Glasgow, the first of eight Type 26 frigates we are building for the Royal
Navy, at a ceremony in Glasgow, UK. Work continues on HMS Glasgow's sister
ships - HMS Cardiff moved to our Scotstoun yard last year to begin outfitting
whilst HMS Belfast, HMS Birmingham and HMS Sheffield are progressing at our
Govan site.
Investing to support future growth
We continue to invest in our technologies, facilities and people to boost
efficiency, capacity and innovation, deliver on our programmes and respond to
the emerging threats our government customers are facing:
- We opened a new shiplift and land-level repair complex at
our Jacksonville, Florida, shipyard. The $250m (£190m) investment
significantly enhances the capabilities of the complex and increases capacity
on the site to maintain and repair US Navy vessels and commercial ships.
- We officially opened the Janet Harvey Hall at our ship build
site in Glasgow, UK. The hall has capacity for two Type 26 frigates to be
constructed side-by-side, with HMS Belfast and HMS Birmingham currently under
construction in the hall.
- Her Royal Highness The Princess Royal officially opened our
Applied Shipbuilding Academy in Glasgow, UK. The £12m facility comprises a
multi-purpose flexible learning hub and provides a high quality, hands-on
training environment.
- Secretary of State for Defence, John Healey, opened our new
£25m artillery factory in Sheffield, which is the first to restore critical
gun barrel manufacturing capability in the UK and is on track to be
operational before the end of the year.
- We have invested more than £8m to develop innovative new
approaches in the production of energetics and propellants, which will support
the ramp up of our critical munitions production and strengthen supply chain
resilience for the UK and its allies.
- We made good progress against our target to recruit 2,400
graduates and apprentices in the UK this year. In South Australia, we welcomed
our largest ever cohort of apprentices, which is part of a wider intake of
more than 250 graduates, apprentices and interns in 2025.
Capital deployment
- The strength and outlook for the Group, alongside our
disciplined capital allocation, means that, after investing in our people,
technologies and capital expenditure, we have continued to make significant
returns to shareholders. In the first six months of the year, we returned
£849m to shareholders, a 5% increase compared to the £812m returned in the
first half of 2024. This reflected paying £622m in respect of the 20.6p 2024
final dividend (2024 £562m in respect of the 18.5p 2023 final dividend) and
repurchasing 15,038,662 (2024 19,403,928) ordinary shares at a total cost of
£227m including transaction costs (2024 £250m) under our ongoing buyback
programme.
- In addition, the Board has declared an interim dividend of
13.5p in respect of the first six months of the year, which will be paid
on
3 December 2025.
2025 Upgraded Group guidance(1)
Given the strong operational performance in the first half, we are upgrading
our sales and underlying EBIT guidance for the full year by 100bps each. Sales
are now expected to increase in the range of 8% to 10% whilst underlying EBIT
is expected to increase in the range of 9% to 11%. The share price increase
since the start of the year is expected to result in fewer shares being
repurchased which, along with a marginally higher tax rate, means our guidance
for EPS growth remains unchanged between 8% to 10%. Our free cash flow target
remains >£1.1bn.
Guidance is provided on a constant currency basis using an exchange rate of
$1.28:£1, which is in line with the actual 2024 exchange rate.
Year ended 31 December 2025 Updated guidance Previous guidance Year ended 31 December 2024
Results
Sales Increase in the range of 8% to 10% Increase in the range of 7% to 9% £28,335m
Underlying EBIT Increase in the range of 9% to 11% Increase in the range of 8% to 10% £3,015m
Underlying EPS Increase in the range of 8% to 10% Increase in the range of 8% to 10% 68.5p
Free cash flow target >£1.1bn >£1.1bn £2,505m
Sales
Increase in the range of 8% to 10%
Increase in the range of 7% to 9%
£28,335m
Underlying EBIT
Increase in the range of 9% to 11%
Increase in the range of 8% to 10%
£3,015m
Underlying EPS
Increase in the range of 8% to 10%
Increase in the range of 8% to 10%
68.5p
Free cash flow target
>£1.1bn
>£1.1bn
£2,505m
- Underlying net finance costs c.£400m
- Effective tax rate c.20%
- Non-controlling interests c.£90m
Sensitivity to foreign exchange rates: the Group operates in a number of
currencies, the most significant of which is the US dollar. As a guide,
a 5
cent movement in the £/$ exchange rate will impact sales by c.£525m,
underlying EBIT by c.£75m and underlying earnings per share
by c.1.4p.
1. Whilst the Group is subject to geopolitical and other
uncertainties, the Group guidance is provided on current expected operational
performance. The guidance is based on the measures used to monitor the
underlying financial performance of the Group. Reconciliations from these
measures to the financial performance measures defined in IFRS are provided in
the Alternative performance measures section on page 38.
For further information please contact:
Investor Relations Media Relations
Paul Checketts Kristina Anderson
Telephone: +44 (0) 1252 383455 Telephone: +44 (0) 7540 628673
Email: investors@baesystems.com Email: kristina.anderson@baesystems.com
Analyst and investor presentation
A presentation, for analysts and investors, of the Group's half year results
for 2025 will be available via webcast at 09.30am today (30 July 2025).
Details can be found on investors.baesystems.com, together with presentation
slides and a copy of this report. A recording of the webcast will be available
for replay later in the day.
About BAE Systems
We provide some of the world's most advanced, technology-led defence,
aerospace and security solutions, helping customers stay ahead of evolving
threats across land, sea, cyber and space. We are a skilled workforce of
109,700(1) people, working with customers and local partners in more than 40
countries to deliver military capability, protect national security and keep
critical information and infrastructure secure.
1. As at 30 June 2025 and including share of equity accounted
investments.
Shareholder information
Registered office
BAE Systems plc
6 Carlton Gardens
London
SW1Y 5AD
United Kingdom
Registered in England and Wales, No. 01470151
Interim management report
Half-year overview
We delivered a strong set of half-year results, building on the performance of
recent years. In the first half of 2025, we have:
- delivered increased sales and underlying EBIT compared to
the first half of 2024;
- secured £13.2bn of orders;
- delivered mission critical capabilities to our customers;
- sustained strong operational performance;
- enhanced our product portfolio by integrating the advanced
technologies and capabilities acquired through M&A activities in 2024; and
- increased our self-funded R&D and continued investment
in capital expenditure at high levels.
Our order backlog and programme incumbencies underscore our confidence in our
long-term, value-compounding model. Our global presence and diverse portfolio
of products and services provide high visibility for top-line growth and cash
generation in the coming years.
Delivering for our customers
Our overall operational performance was strong across all sectors in the first
half of the year, as our highly skilled employees continued to deliver mission
critical capabilities to our customers to help them stay ahead of evolving
threats.
Typhoon continues to play a visible and critical role in supporting defence
and security objectives of our government customers. In the UK, in recent
months, our teams have stepped up to support the Royal Air Force's heightened
response posture and ensure aircraft availability. This readiness to respond
enables us to work closely with our customers to understand and anticipate
their critical needs in challenging times.
We delivered extensive warship support and simulated training to the Royal
Navy in preparation for its eight-month Carrier Strike Group deployment to the
Indo-Pacific. The Royal Navy selected our all-electric Malloy T-150 UAS to
transport vital supplies between the ships during its ongoing deployment to
the Indo-Pacific, marking the first time it has used drones in this way on
such a deployment. Our teams are also embedded with armed forces personnel to
provide ongoing support and training to the aircraft, ships and crews
throughout this important mission.
Meanwhile, we continued to execute on complex, long-term programmes like
Dreadnought and Astute Class submarines, Type 26 and Hunter Class frigates,
Typhoon and F-35 jets, electronic warfare systems, combat vehicles and many
other programmes across our business.
We also maintained momentum on key strategic international collaborations.
Together with our industry partners in Italy and Japan, we launched our new
joint venture, Edgewing, to design and develop next-generation combat aircraft
under GCAP.
Working alongside our partner, ASC Pty Ltd, we started initial mobilisation
activities to support the delivery of the SSN-AUKUS fleet of conventionally
armed, nuclear-powered submarines for the Royal Australian Navy.
Our 2025 half-year financial performance
We have delivered a strong set of half-year results with increases across a
number of our key financial measures including sales, underlying EBIT,
underlying EPS and dividend per share. This underpins confidence in our
upgraded guidance for the full year.
On a constant currency basis, we grew sales by 11% and underlying EBIT by 13%,
pushing the Group's return on sales to 10.6%. Underlying EPS, which reflects
the Group's earnings after accounting for underlying net finance costs and tax
in the period, increased 12% to 34.7p.
Our order intake for the period was £13.2bn and we closed the half year with
an order backlog of £75.4bn. Further details of awards in the period are
included in the segmental reviews from page 11.
Our free cash flow for the period was an outflow of £368m. Free cash flow
reflects cash generated by the Group's operations, after servicing debt and
tax obligations, and is inclusive of movements on customer advances. During
the period, we saw a net free cash outflow as advances from customers flowed
out to the supply chain against the absence of any new material advances
received.
We ended the period with a strong balance sheet, featuring a cash position of
£2,153m and net debt (excluding lease liabilities) of £5,566m, after
increasing returns to shareholders in the period, through share buybacks and
dividends, to £849m. The Group's pension position, on
an IAS 19 basis,
remains in an accounting surplus.
Further details of the Group's financial performance in the period can be
found in the Group financial review on page 7.
Market backdrop of increased defence spending
The regions where we operate are poised for higher defence spending. We expect
this to provide significant opportunities across all our sectors.
In response to the increased global security challenges, at the NATO Summit in
June, member countries committed to investing 5% of GDP in defence - including
3.5% on core defence requirements and 1.5% on defence- and security-related
investments like infrastructure and industry. This represents a significant
increase from the previous benchmark of 2% of GDP. We have a strong,
established position in Europe and NATO and our range of products and services
aligns well to the capability requirements of these nations. These include
combat aircraft, combat vehicles, air defence, missile systems, artillery,
munitions, drones, electronic warfare and sensor technology.
In June, the UK Government published its National Security Strategy (NSS),
bringing together various strands of work that have been underway since the
2024 general election, including the Strategic Defence Review and the
Industrial Strategy. The NSS states the UK is entering a period in which it is
likely to face indirect and potentially direct confrontation with adversaries
and the country must adapt its national security approach in response. The
three pillars of the new strategic framework to address the increased threats
- security at home, strength abroad and increased sovereignty and asymmetric
capabilities - align well to our capabilities and provide commitment to our
long-term programmes. In conjunction with the NSS, the Government pledged to
meet the aforementioned NATO spending commitment and set a target date of 2035
for achieving the 5% level with an interim target of at least 4.1% expected to
be spent in 2027.
The US Department of Defense has submitted its fiscal year 2026 budget request
to Congress totalling $961bn. This includes a base request of $848bn and
reconciliation funding of $113bn, representing a 13% increase from the enacted
fiscal year 2025 budget . While details on the 2027 budget have not been
disclosed, residual defence reconciliation funds will be available in 2027 to
help bolster FY27 defence spending,
and the Administration has said it
intends to ensure the United States has unmatched military strength for years
to come. Our portfolio aligns with the key priorities of US and international
defence and intelligence customers, focusing on capabilities such as
electronic warfare, precision strike munitions, space systems, tactical
missile systems, counter-UAS, critical submarine components and combat
vehicles. Our expertise in space-based capabilities and electronic and sensor
technologies mean we are well positioned to contribute to the US Government's
Golden Dome project.
Our key markets in the Asia-Pacific and the Middle East are also expected to
increase spending and we will continue to support our government customers in
these regions with leading products and services.
Defence spending in the Kingdom of Saudi Arabia is around 7% of GDP per year
and the 2025 military budget is expected to increase by 5%. Areas of
longer-term focus for the Kingdom align well with our portfolio and include
combat aircraft, missile defence systems, naval vessels and further increasing
the localisation of its defence spend.
Australia's inaugural 2024 National Defence Strategy reintroduced the measure
of defence spending as a percentage of GDP with a promise to increase defence
investment from 1.9% to 2.4% by 2033 to 2034. The AUKUS security pact, which
will provide Australia with conventionally-armed nuclear-powered submarines,
is a key programme that is expected to see substantial increases in spending
from 2027.
In 2022, in response to the increased threat environment, the Japanese
Government made significant changes to its security strategy. It pledged to
double defence spending from 1% of GDP, a cap first put in place in 1976, to
2% by 2027. Increased investment is expected across multiple areas as the
country fundamentally reinforces its defence capabilities. We have partnered
with Japan and Italy to design and develop next-generation fighter jets under
GCAP, with the aircraft due to come into service in 2035. Through GCAP, we
continue to deepen our links with Japan.
Investing to support future growth
We continue to invest in our technologies, facilities and people to drive
efficiencies and ensure our business has the capacity and agility to deliver
on our programmes, as well as anticipate and respond to higher defence
spending and the emerging threats our government customers are facing.
In 2024, we invested a record amount in R&D and capital expenditure, and
we continue to invest to support future growth. Our investment in self-funded
R&D is focused on key technology areas including electronic warfare,
autonomy, laser-guided weapons, uncrewed systems, synthetic training,
electrification applications and space solutions.
Through a combination of self-funded R&D and acquisitions, we have
established ourselves as one of Europe's leading producers of drone
capabilities and through research hubs embedded across our business, we
continued to explore transformational technologies that will further advance
our state-of-the-art capabilities in defence systems.
We are building on more than £1bn of capital expenditure in 2024, as we
increase capacity for the future and develop and modernise our systems and
facilities. This includes a new shipbuild assembly hall in Glasgow, UK, and a
modern shiplift and land-level repair complex in Florida, US, both of which
have already become operational. In the UK, a new artillery factory in
Sheffield and explosives filling facility in South Wales are on track to
become operational later in the year.
We continue to hire and train people to enable us to deliver for our
customers. We have grown our global workforce by more than 20,000 people over
the past five years and, in the UK alone, we intend to recruit more than 2,400
apprentice, undergraduate and graduate roles this year.
Our market differentiation
Our business has a unique combination of a diverse geographic footprint and
multi-domain capabilities. We believe our technologies, deep domain expertise
and global reach position BAE Systems as a leader in our industry and enable
us to support our customers to meet the elevated threat environment of today
and tomorrow. This breadth continues to be a real strength and a
differentiator.
Looking ahead, our key growth drivers are spread across major markets and
include huge multi-national endeavours, including GCAP and AUKUS, which are
significant for the Group in the medium and long term and highlight the global
reach, scale and longevity of our business.
Responsible business
We support our government customers to fulfil their primary obligation to keep
their citizens safe, while contributing to the economic and social development
of the communities and nations where we operate, helping to build a stronger
and more secure future.
Our people are the heart of everything we do, and it is critical that we
attract and retain the best talent so that we can support our customers'
requirements and our own long-term growth. We are fully committed to fostering
a workplace culture and environment where everyone feels they belong and can
contribute fully to our mission, which includes investing in our people's
skills development from early careers through to lifelong learning.
The safety, health and wellbeing of our people is an enduring priority. We are
committed to strengthening our safety management programme to improve our
performance in 2025 and beyond.
We continue to focus on resource efficiency, developing energy and
infrastructure strategies to reduce our greenhouse gas emissions across our
operations, while supporting our business growth.
We do all of this while maintaining a robust governance structure and high
standards. This includes continuing to operate under tight regulation and
complying fully with applicable trade controls and sanctions.
Outlook
We have a strong track record of delivering financial returns for investors
and, through the careful long-term sustainable management and governance of
our business, we are well placed to continue to generate good returns. This is
supported by our seven key advantages:
1. We provide customers with world-class defence products and
capabilities across multiple markets.
2. We undertake multi-decade programmes with long-term embedded
value. Our contract order backlog provides a high level of sales visibility,
driven by multi-year programmes.
3. We have a growing global opportunity pipeline. Our diverse
geographic footprint supports us in pursuing excellent opportunities across
all sectors as countries around the world face up to the multi-faceted threat
environment.
4. We foster a high-performance, innovative culture and
consistently invest in R&D to build on existing world-leading capabilities
and generate new innovative and disruptive technologies.
5. We have an intense focus on operational excellence, with
strong, consistent programme performance. We focus on creating value for our
investors and customers.
6. Sustainability is embedded in our business - it forms part of
our strategic framework and underpins our purpose.
7. We operate a value-compounding operating model, undertaking
our core business activities with a clear, consistent and careful capital
allocation.
Group financial review
Group income statement
Underlying -
as defined by the Group(1) Statutory -
as derived from IFRS
Six months ended 30 June 2025 Six months ended 30 June 2024 Six months ended 30 June 2025 Six months ended 30 June 2024
£m £m £m £m
Sales/Revenue 14,621 13,399 13,571 12,477
Underlying EBIT/Operating profit 1,550 1,393 1,327 1,296
Finance income 39 63 65 69
Finance costs (242) (243) (203) (202)
Net finance costs (203) (180) (138) (133)
Profit before tax 1,347 1,213 1,189 1,163
Tax expense (264) (225) (178) (175)
Profit for the period(2) 1,083 988 1,011 988
Six months ended 30 June 2025
Six months ended 30 June 2024
Six months ended 30 June 2025
Six months ended 30 June 2024
£m
£m
£m
£m
Sales/Revenue
14,621
13,399
13,571
12,477
Underlying EBIT/Operating profit
1,550
1,393
1,327
1,296
Finance income
39
63
65
69
Finance costs
(242)
(243)
(203)
(202)
Net finance costs
(203)
(180)
(138)
(133)
Profit before tax
1,347
1,213
1,189
1,163
Tax expense
(264)
(225)
(178)
(175)
Profit for the period(2)
1,083
988
1,011
988
Return on Sales/Revenue 10.6 % 10.4 % 9.8 % 10.4 %
10.4 %
9.8 %
10.4 %
Reconciliation of underlying EBIT to operating profit
Six months ended 30 June 2025 Six months ended 30 June 2024
£m £m
Underlying EBIT 1,550 1,393
Adjusting items (14) 46
Amortisation of programme, customer-related and other intangible assets, and (196) (143)
impairment of intangible assets
Net finance income and tax of equity accounted investments (13) -
Operating profit 1,327 1,296
1,393
Adjusting items
(14)
46
Amortisation of programme, customer-related and other intangible assets, and
impairment of intangible assets
(196)
(143)
Net finance income and tax of equity accounted investments
(13)
-
Operating profit
1,327
1,296
As defined by the Group
Sales for the period were £14.6bn (2024 £13.4bn) representing growth, on a
constant currency basis(3), of 11%. On an organic basis, sales grew 9% on a
constant currency basis. All sectors delivered growth in the period as
detailed below.
Electronic Systems recorded sales of £3.6bn (2024 £3.4bn), equating to
growth of 9% on a constant currency basis, which included the full
six-month benefit of our Space & Mission Systems (SMS) business and
increased demand in the Electronic Combat and Precision Strike & Sensing
businesses.
Our Platforms & Services sector posted sales of £2.5bn (2024 £2.1bn),
with growth of 21% on a constant currency basis, as the sector works to
deliver on the recent increased demand for combat vehicles both in the US,
through our Combat Mission Systems business which was up 27%, and, in Europe,
through our Hägglunds and Bofors businesses which were up 25% and 39%
respectively.
Our Air sector recorded sales of £4.3bn (2024 £4.0bn), representing growth
of 9% on a constant currency basis. The period saw an increase in design and
development activities on our Future Combat Air System programme, as well as
18% sales growth in MBDA. The acquisitions in FalconWorks® in the first half
of 2024, which expanded our capabilities in UAS, also contributed additional
sales in the period. The sector recorded organic growth of 8% on a constant
currency basis.
Maritime recorded sales of £3.2bn (2024 £2.9bn), which was an increase of
12% on a constant currency basis, with increased activities across the sector.
In Submarines, design work has continued on SSN-AUKUS and, in Naval Ships,
construction continued across the Type 26 programme. In our UK Munitions
business, sales have grown following additional investment to meet increased
demand.
Sales in the Cyber & Intelligence sector increased by 2% on a constant
currency basis, to £1.2bn (2024 £1.2bn), with growth from the prior year
acquisitions in the Digital Intelligence business.
Underlying EBIT was up 13% on a constant currency basis, to £1,550m (2024
£1,393m), resulting in an increased return on sales for the period of 10.6%
(2024 10.4%). On an organic basis, underlying EBIT grew 10% on a constant
currency basis.
Our Electronic Systems sector grew underlying EBIT to £541m (2024 £473m), an
increase of 17% on a constant currency basis, and generated a return on sales
of 15.0% (2024 14.0%). The growth in underlying EBIT benefitted from both the
sales growth in the period and a full six months of SMS. On an organic basis,
the sector saw an increase in underlying EBIT of 12% on a constant currency
basis.
Platforms & Services reported underlying EBIT of £292m (2024 £216m), an
increase of 37% on a constant currency basis, with the return on sales
increasing to 11.8% (2024 10.4%). The growth reflects the demand for combat
vehicles as production ramps up to deliver increased volumes across Bradley,
CV90 and AMPV, which is operating at full-rate production.
Our Air sector reported underlying EBIT of £500m (2024 £446m), an increase
of 13% on a constant currency basis, with a strong return on sales of 11.5%
(2024 11.1%) reflecting good operational performance.
The Maritime sector reported underlying EBIT of £220m (2024 £228m), a
decrease of 2% on a constant currency basis. The return on sales of 6.8% (2024
7.8%) reflected the timing of milestones in our Submarines business and
contract-related trade-ups posted on the Hunter Class programme in the prior
year.
Adjusting items totalled a net cost of £14m (2024 net gain of £46m) of which
£11m relates to the ongoing integration of Ball Aerospace, which was acquired
in 2024, and the remaining £3m to other historic acquisitions. The prior
period gain of £46m reflected a profit on the sale of a partial shareholding
in Air Astana of £75m and a settlement gain of £13m on a US pension buy-out,
offset by £42m of acquisition and integration-related costs, primarily in
relation to Ball Aerospace.
Underlying net finance costs were £203m (2024 £180m), an increase of £23m.
Of this, net costs of £234m (2024 £207m) related to the Group and net income
of £31m (2024 £27m) related to the Group's share of equity accounted
investments. The Group's underlying net finance costs increased as interest
income on cash and other financial instruments fell in the period from £63m
to £39m.
As derived from IFRS
Revenue was £13.6bn (2024 £12.5bn). Growth during the period of 9%, on a
reported currency basis, reflected the same drivers behind the increase in
sales for the period excluding the impact of MBDA in the Air sector and other
equity accounted investments.
Operating profit increased 2%, to £1,327m (2024 £1,296m), on a reported
currency basis. On an operating sector basis, this reflected the same drivers
as underlying EBIT, however, operating profit was impacted by additional costs
from amortisation of programme, customer-related and other intangible assets,
and impairment of intangible assets which increased by £53m to £196m in the
six month period ended 30 June 2025. The comparative period also reflected a
net income from adjusting items of £46m (as detailed above) with the current
period adjusting items being a cost of £14m as the Group continued
integration activities from acquisitions in the prior year.
Net finance costs were £138m (2024 £133m), consisting of finance income of
£65m (2024 £69m) and finance costs of £203m (2024 £202m).
1. The purposes and definitions of non-GAAP measures are
provided in the Alternative performance measures section on page 38.
2. On a Group basis, £42m (2024 £40m) of profit for the
period is attributable to non-controlling interests, with £1,041m (2024
£948m) attributable to equity shareholders. On an IFRS basis, £42m (2024
£40m) of profit for the period is attributable to non-controlling interests,
with £969m (2024 £948m) attributable to equity shareholders.
3. Calculated by translating the results from entities in
functional currencies other than pounds sterling for the period ended 30 June
2024 to pounds sterling at the average exchange rate of such currencies for
the period ended 30 June 2025. The comparatives have not been restated.
Orders
As defined by the Group(1) Six months ended 30 June 2025 Six months ended 30 June 2024
£bn £bn
Order intake(2) 13.2 15.1
As at 30 June 2025 As at 31 December 2024
£bn £bn
Order backlog(2) 75.4 77.8
As derived from IFRS As at 30 June 2025 As at 31 December 2024
£bn £bn
Order book(3) 57.0 60.4
15.1
As at 30 June 2025
As at 31 December 2024
£bn
£bn
Order backlog(2)
75.4
77.8
As derived from IFRS
As at 30 June 2025
As at 31 December 2024
£bn
£bn
Order book(3)
57.0
60.4
As defined by the Group
Order intake of £13.2bn remained high across all sectors:
- In Electronic Systems, the £3.8bn of order intake included
significant orders in the Electronic Combat business, together with the
missile warning and tracking system award to our space business in the US, a
capability essential for the Golden Dome project.
- In Platforms & Services, the £2.4bn of order intake
featured strong European contract awards in Bofors, as well as continued
orders for our US combat vehicle programmes.
- Our Air sector recorded £3.8bn of order intake for the
period including £1.4bn in MBDA, showing continued European growth, and a
further £1.0bn of funding for the UK assessment phase of the sixth generation
combat aircraft.
- The Maritime sector landed £2.0bn of orders for the next
major phase of Canada's River Class destroyer programme, Australia's Hobart
Class combat system upgrade and increased orders for the Royal Navy in our
Submarines business.
- Cyber and Intelligence contributed £1.4bn in new orders
across the half year.
Further details of awards in the period are covered in the segmental reviews
starting on page 11.
1. The purposes and definitions of non-GAAP measures are
provided in the Alternative performance measures section on page 38.
2. Including share of equity accounted investments.
3. Order book represents the transaction price allocated to
unsatisfied and partially satisfied performance obligations as defined by IFRS
15 Revenue from Contracts with Customers.
Earnings per share (EPS)
As defined by the Group(1) Six months ended 30 June 2025 Six months ended 30 June 2024
Underlying profit for the period attributable to equity shareholders £1,041m £948m
Underlying EPS - basic 34.7p 31.4p
As derived from IFRS Six months ended 30 June 2025 Six months ended 30 June 2024
Profit for the period attributable to equity shareholders £969m £948m
EPS - basic 32.3p 31.4p
1. The purposes and definitions of non-GAAP measures are
provided in the Alternative performance measures section on page 38.
As defined by the Group
Underlying EPS increased to 34.7p (2024 31.4p), 12% on a constant currency
basis. This is largely driven by the increase in the Group's profitability in
the period, as shown in the table below.
Movement in underlying EPS pence
As at 30 June 2024 31.4
Foreign exchange (0.4)
Underlying EBIT 4.7
Underlying net finance costs (0.7)
Tax rate (0.5)
Share buybacks 0.2
As at 30 June 2025 34.7
Foreign exchange
(0.4)
Underlying EBIT
4.7
Underlying net finance costs
(0.7)
Tax rate
(0.5)
Share buybacks
0.2
As at 30 June 2025
34.7
As derived from IFRS
Basic EPS increased 3% on a reported currency basis, to 32.3p (2024 31.4p),
with the gain in underlying profit being offset by amortisation on the
intangibles acquired in the six month period to 30 June 2024 and the prior
period further benefitting from the one-off gain on the Group's partial
disposal of Air Astana.
Net debt (excluding lease liabilities)
Components of net debt (excluding lease liabilities)(1) As at 30 June 2025 As at 31 December 2024
£m £m
Cash and cash equivalents 2,153 3,378
Debt-related derivative financial instruments (net) (25) 89
Loans - non-current (7,053) (7,713)
Loans - current (641) (699)
Net debt (excluding lease liabilities) (5,566) (4,945)
3,378
Debt-related derivative financial instruments (net)
(25)
89
Loans - non-current
(7,053)
(7,713)
Loans - current
(641)
(699)
Net debt (excluding lease liabilities)
(5,566)
(4,945)
1. The purposes and definitions of non-GAAP measures are
provided in the Alternative performance measures section on page 38.
Cash and cash equivalents of £2,153m (31 December 2024 £3,378m) are held
primarily for management of working capital as well as the repayment of debt
securities, pension funding when required and committed shareholder returns.
During the period, the Group paid £849m (2024 £812m) to shareholders,
through dividends and share buybacks, which accounted for the majority of the
cash movement.
The Group's net debt (excluding lease liabilities) at 30 June was £5,566m
(31 December 2024 £4,945m), a net increase of £621m from the position at
the start of the year. During the period, there was a decrease in the carrying
amount of the Group's outstanding loans of £718m reflective of foreign
exchange movements on the Group's US Dollar denominated borrowings, offset by
their associated derivatives. No loan repayments were made during the period.
Movement in net debt (excluding lease liabilities) £m
As at 1 January (4,945)
Operating business cash flow (8)
Interest and tax (360)
Free cash flow (368)
Shareholder returns (849)
Foreign exchange and other movements 596
As at 30 June (5,566)
Operating business cash flow
(8)
Interest and tax
(360)
Free cash flow
(368)
Shareholder returns
(849)
Foreign exchange and other movements
596
As at 30 June
(5,566)
Cash flow
As defined by the Group(1) Six months ended 30 June 2025 Six months ended 30 June 2024
£m £m
Free cash flow (368) 219
Operating business cash flow (8) 474
As derived from IFRS Six months ended 30 June 2025 Six months ended 30 June 2024
£m £m
Net cash flow from operating activities 74 757
Net cash flow from investing activities (73) (4,569)
Net cash flow from financing activities (1,160) 2,583
Net decrease in cash and cash equivalents (1,159) (1,229)
Cash and cash equivalents at 1 January 3,378 4,067
Effect of foreign exchange rate changes on cash and cash equivalents (66) (7)
Cash and cash equivalents at 30 June 2,153 2,831
219
Operating business cash flow
(8)
474
As derived from IFRS
Six months ended 30 June 2025
Six months ended 30 June 2024
£m
£m
Net cash flow from operating activities
74
757
Net cash flow from investing activities
(73)
(4,569)
Net cash flow from financing activities
(1,160)
2,583
Net decrease in cash and cash equivalents
(1,159)
(1,229)
Cash and cash equivalents at 1 January
3,378
4,067
Effect of foreign exchange rate changes on cash and cash equivalents
(66)
(7)
Cash and cash equivalents at 30 June
2,153
2,831
1. The purposes and definitions of non-GAAP measures are
provided in the Alternative performance measures section on page 38.
As defined by the Group
Free cash flow was an outflow of £368m (2024 inflow of £219m). Free cash
flow reflects cash generated by the Group's operations, after servicing debt
and tax obligations.
Operating business cash flow was an outflow of £8m (2024 inflow of £474m)
after investing a net £400m (2024 £396m) in capital expenditure in the
period.
Both cash measures reflect movements on customer advances which have now begun
to flow to our supply chain as the Group works to deliver against these
contracts. No material advances were received in the first half of the year.
As derived from IFRS
Net cash flow from operating activities was an inflow of £74m (2024 £757m),
a decrease of £683m on the prior period. Although the Group saw increased
profitability in the six months ended 30 June 2025, working capital movements
in the period reflected timing of programmes and the outflow of customer
advances to the supply chain. The comparative period included a number of
large customer advances received immediately prior to the period end. No
material advances were received in the first half of the year.
Net cash flow from investing activities was an outflow of £73m (2024
£4,569m) as net capital expenditure of £400m (2024 £396m) was partially
offset by dividends received from the Group's equity accounted investments of
£287m (2024 £145m). In the comparative period, the acquisition of
subsidiaries, including Ball Aerospace, accounted for a net cash outflow of
£4,536m. This was offset by cash proceeds of £166m from the partial sale of
the Group's shareholding in Air Astana. There were no M&A transactions in
the current period.
Net cash flow from financing activities was an outflow of £1,160m (2024
inflow of £2,583m). Cash returns to shareholders, through dividends and share
buybacks, accounted for £849m (2024 £812m) of the outflow in the period
combined with interest paid on the Group's borrowings and other liabilities of
£267m (2024 £222m). The inflow in the prior period further reflected cash
proceeds from debt financing raised of £3,765m primarily to fund the Ball
Aerospace acquisition. The Group has not raised any cash from external debt
funding in the current period.
Foreign exchange translation primarily arises in respect of the Group's US
dollar-denominated cash holdings.
Exchange rates
Average Period end Year end
Six months ended 30 June 2025 Six months ended 30 June 2024 30 June 2025 30 June 2024 31 December 2024
£/$ 1.298 1.265 1.370 1.264 1.253
£/€ 1.187 1.170 1.167 1.180 1.210
£/A$ 2.046 1.921 2.091 1.893 2.023
1.265
1.370
1.264
1.253
£/€
1.187
1.170
1.167
1.180
1.210
£/A$
2.046
1.921
2.091
1.893
2.023
Segmental review
As defined by the Group(1)
Six months ended 30 June 2025 Sales Underlying EBIT Return on sales Operating business cash flow(2) Order intake Order backlog
£m £m % £m £bn £bn
Electronic Systems 3,599 541 15.0 % 298 3.8 12.1
Platforms & Services 2,478 292 11.8 % (252) 2.4 14.2
Air 4,343 500 11.5 % 214 3.8 26.5
Maritime 3,233 220 6.8 % (150) 2.0 21.7
Cyber & Intelligence 1,186 96 8.1 % (23) 1.4 1.8
HQ(3) 98 (99) - (95) 0.1 -
Deduct: Intra-group (316) - - - (0.3) (0.9)
Total 14,621 1,550 10.6 % (8) 13.2 75.4
541
15.0 %
298
3.8
12.1
Platforms & Services
2,478
292
11.8 %
(252)
2.4
14.2
Air
4,343
500
11.5 %
214
3.8
26.5
Maritime
3,233
220
6.8 %
(150)
2.0
21.7
Cyber & Intelligence
1,186
96
8.1 %
(23)
1.4
1.8
HQ(3)
98
(99)
-
(95)
0.1
-
Deduct: Intra-group
(316)
-
-
-
(0.3)
(0.9)
Total
14,621
1,550
10.6 %
(8)
13.2
75.4
As derived from IFRS
Six months ended 30 June 2025 Revenue Operating profit/(loss) Return on revenue Net cash flow from operating activities Order book
£m £m % £m £bn
Electronic Systems 3,592 357 9.9 % 374 8.1
Platforms & Services 2,470 292 11.8 % (146) 13.3
Air 3,470 487 14.0 % 37 14.5
Maritime 3,132 218 7.0 % (8) 20.8
Cyber & Intelligence 1,186 78 6.6 % 12 1.4
HQ(3) 19 (105) - (61) -
Deduct: Intra-group (298) - - - (1.1)
Deduct: Tax(4) - - - (134) -
Total 13,571 1,327 9.8 % 74 57.0
357
9.9 %
374
8.1
Platforms & Services
2,470
292
11.8 %
(146)
13.3
Air
3,470
487
14.0 %
37
14.5
Maritime
3,132
218
7.0 %
(8)
20.8
Cyber & Intelligence
1,186
78
6.6 %
12
1.4
HQ(3)
19
(105)
-
(61)
-
Deduct: Intra-group
(298)
-
-
-
(1.1)
Deduct: Tax(4)
-
-
-
(134)
-
Total
13,571
1,327
9.8 %
74
57.0
1. The purposes and definitions of non-GAAP measures are
provided in the Alternative performance measures section on page 38.
2. At a Group level, the key cash flow metric is free cash
flow (see the Alternative performance measures section on page 38). In the six
month period to 30 June 2025, free cash flow was an outflow of £368m (2024
inflow of £219m).
3. HQ comprises the Group's head office activities, together
with a 17% interest in Air Astana.
4. Tax is managed on a Group-wide basis.
Segmental performance: Electronic Systems
Electronic Systems, with 22,600¹ employees, comprises the Group's US- and
UK-based Electronic Systems business and the US-based
Space & Mission
Systems (SMS) business.
Financial performance
Financial performance measures defined by the Group(2) Financial performance measures derived from IFRS
Six months ended 30 June 2025 Six months ended 30 June 2024 Variance(3) Six months ended 30 June 2025 Six months ended 30 June 2024 Variance(3)
Sales £3,599m £3,383m +9 % Revenue £3,592m £3,394m +6 %
Underlying EBIT £541m £473m +17 % Operating profit £357m £301m +19 %
Return on sales 15.0 % 14.0 % +100 bps Return on revenue 9.9 % 8.9 % +100 bps
Operating business cash flow £298m £184m £114m Net cash flow from operating activities £374m £264m £110m
Order intake £3.8bn £3.2bn £0.6bn
As at 30 June 2025 As at 31 December 2024 Variance As at 30 June 2025 As at 31 December 2024 Variance
Order backlog £12.1bn £12.7bn £(0.6)bn Order book £8.1bn £8.6bn £(0.5)bn
Revenue
£3,592m
£3,394m
+6 %
Underlying EBIT
£541m
£473m
+17 %
Operating profit
£357m
£301m
+19 %
Return on sales
15.0 %
14.0 %
+100 bps
Return on revenue
9.9 %
8.9 %
+100 bps
Operating business cash flow
£298m
£184m
£114m
Net cash flow from operating activities
£374m
£264m
£110m
Order intake
£3.8bn
£3.2bn
£0.6bn
As at 30 June 2025
As at 31 December 2024
Variance
As at 30 June 2025
As at 31 December 2024
Variance
Order backlog
£12.1bn
£12.7bn
£(0.6)bn
Order book
£8.1bn
£8.6bn
£(0.5)bn
1. Including share of equity accounted investments.
2. The purposes and definitions of non-GAAP measures are
provided in the Alternative performance measures section on page 38.
3. Growth rates for sales and underlying EBIT are on a
constant currency basis. All other growth rates and year-on-year movements are
on a reported currency basis.
Operational performance
Demand was strong across our customer base in the first half of 2025, as
evidenced by our order intake. We supported customers on key electronic
warfare and precision-guided-munition programmes, while pursuing and maturing
new opportunities.
With the integration of our SMS business essentially complete, we continue to
realise benefits from focused cross-segment collaboration, identifying new
opportunities to unlock synergies and deliver growth. SMS core programmes in
defence remain aligned with US Government key priorities, and we are also
leveraging our proven capabilities in tactical systems to diversify our market
presence.
In our commercial businesses, airline traffic has exceeded pre-pandemic levels
and is growing globally, resulting in stronger demand for our original
equipment manufacturer deliveries and aftermarket services.
Key operational points for the period
- We celebrated the successful launch of NASA's
Spectro-Photometer for the History of the Universe, Epoch of Reionization and
Ices Explorer (SPHEREx) Observatory, equipped with the BAE Systems built
spacecraft bus, telescope and RAD750® single board computer and prepared
by our leading observatory integration and environmental testing.
- We introduced our new Elevation(TM) spacecraft product line
designed for multi-launch or rideshare missions, featuring common system
components and defined configurations for enhanced affordability and rapid
deployment.
- The US Space Force formally operationally accepted the
Weather System Follow-on-Microwave (WSF-M) satellite. As the mission prime,
we built the spacecraft bus and microwave imager. We continue to perform
mission operations to support WSF-M's critical space-based,
time-sensitive
data to enhance the safety and success of military mission planning and
operations around the globe.
- Under the Future Operationally Resilient Ground Evolution
Command and Control contract, worth $151m (£116m), we are developing
a
next-generation ground system for US Space Force missile-warning satellites.
- We are building the spacecraft bus for National Oceanic and
Atmospheric Administration's (NOAA) upcoming Space Weather Next L1 Series
mission under a $230m (£177m) contract to continue providing valuable data to
NOAA's Space Weather Prediction Center.
- We are under contract to deliver 13 Network Tactical Common
Data Link production systems to support US Navy requirements for real-time
intelligence, surveillance, reconnaissance and command and control and have
begun deliveries.
- Our Controls & Avionics team remains focused on
supporting Boeing's aircraft deliveries and is progressing the development of
the integrated flight control electronics and remote electronic units for the
new Boeing 777X aircraft, with the flight control system performing as
expected during flight-testing.
- Our EA-37B programme team is executing contracts, including
international support, valued at more than $1.3bn (£1.0bn). We are focused
on cross-decking the prime mission equipment as part of Baseline 3 and have
delivered five aircraft for formal testing and training, while continuing to
sustain the EC-130H. Future baselines are in development to continually evolve
the electromagnetic attack capability for the
US Air Force.
- The Eagle Passive Active Warning Survivability System
(EPAWSS) was successfully fielded in the first quarter of 2025, with two
F-15Es delivered to RAF Lakenheath in the UK, and we are under contract
through full-rate production (FRP) Lot 5.
- The F-35 Lightning II programme is on track to deliver
around 200 electronic warfare suites to Lockheed Martin in 2025, including 70
of the new Block 4 configuration.
- Production continues on the APKWS® laser-guidance kit
programme under an Indefinite Delivery, Indefinite Quantity contract. We
continue to demonstrate counter-UAS capability, recently in conjunction with
the Group's Malloy platforms.
Strategic and order highlights
- Our SMS team was awarded a $1.2bn (£0.9bn) US Space Systems
Command contract for the Resilient Missile Warning & Tracking - Medium
Earth Orbit Epoch 2 (RMWT-MEO E2) programme to build the next-generation RMWT
satellite system for the Department of Defense. As the prime contractor for
the mission, we will develop and integrate multiple satellite buses and
payloads, as well as be responsible for ground command and control and mission
operations.
- Our Navigation & Sensor Systems team continues
development on the next generation M-code technologies under the Space Force
Miniature Serial Interface Increment 2 programme.
- We secured a low-rate initial production contract worth $41m
(£32m) from the US Navy's Naval Air Systems Command for the production of
three units of the Advanced Survivability Pod for the P-8 Poseidon aircraft.
- The Air Force Research Laboratory awarded the Force
Optimization through Rapid-prototyping, Gear Enhancements & Innovative
Technology (FORGE-IT) contract worth $34m (£26m) to continue development and
deployment of the Battlefield Assisted Trauma Distributed Operations Kit
(BATDOK). Together, BATDOK and FORGE-IT will improve and modernise service
members' capabilities to provide medical care on the battlefield and during
transition to other facilities.
- We are taking a leadership position in the emerging market
for energy storage and power management solutions to support more-electric and
hybrid-electric aircraft and announced a state-of-the-art facility expansion
in Endicott, New York, to enhance energy storage systems production,
engineering and manufacturing capacity for aircraft electrification.
Looking forward
- Our Electronic Systems sector remains positioned for growth
in the medium term. We maintain a diverse portfolio of defence and commercial
products and capabilities for US and international customers. We expect to
benefit from applying innovative technology solutions to defence customers'
existing and changing requirements, building on our significant roles on F-35
Lightning II, F-15 upgrades, EA-37B, M-Code GPS upgrades and classified
programmes, as well as a number of precision weapon products.
- Over the long term, we are poised to build on our technology
strengths in emerging areas of demand, including precision weaponry, space
resilience, hyper-velocity projectiles, autonomous platforms and the
development of multi-domain capabilities.
- In our commercial portfolio, we continue to leverage our
electric drive power capabilities to address growing demand for low- and
zero-emission solutions across an increasing number of civil platforms, with
opportunities to migrate these technologies to defence applications.
- In SMS, we continue to drive future growth by leveraging
synergies across sectors and identifying areas where our businesses can
partner
to pursue and capture new and adjacent revenue opportunities for
the US Intelligence Community, Department of Defense and civilian
space
agencies.
Segmental performance: Platforms & Services
Platforms & Services, with 11,800(1) employees and operations in the US,
Sweden and the UK, manufactures and upgrades combat vehicles, weapons and
munitions, and delivers services and sustainment activities, including US
naval ship repair and the management and operation of two government-owned,
contractor-operated ammunition plants.
Financial performance
Financial performance measures defined by the Group(2) Financial performance measures derived from IFRS
Six months ended 30 June 2025 Six months ended 30 June 2024 Variance(3) Six months ended 30 June 2025 Six months ended 30 June 2024 Variance(3)
Sales £2,478m £2,085m +21 % Revenue £2,470m £2,061m +20 %
Underlying EBIT £292m £216m +37 % Operating profit £292m £215m +36 %
Return on sales 11.8 % 10.4 % +140 bps Return on revenue 11.8 % 10.4 % +140 bps
Operating business cash flow £(252)m £(13)m £(239)m Net cash flow from operating activities £(146)m £83m £(229)m
Order intake £2.4bn £2.8bn £(0.4)bn
As at 30 June 2025 As at 31 December 2024 Variance As at 30 June 2025 As at 31 December 2024 Variance
Order backlog £14.2bn £14.3bn £(0.1)bn Order book £13.3bn £13.6bn £(0.3)bn
Revenue
£2,470m
£2,061m
+20 %
Underlying EBIT
£292m
£216m
+37 %
Operating profit
£292m
£215m
+36 %
Return on sales
11.8 %
10.4 %
+140 bps
Return on revenue
11.8 %
10.4 %
+140 bps
Operating business cash flow
£(252)m
£(13)m
£(239)m
Net cash flow from operating activities
£(146)m
£83m
£(229)m
Order intake
£2.4bn
£2.8bn
£(0.4)bn
As at 30 June 2025
As at 31 December 2024
Variance
As at 30 June 2025
As at 31 December 2024
Variance
Order backlog
£14.2bn
£14.3bn
£(0.1)bn
Order book
£13.3bn
£13.6bn
£(0.3)bn
1. Including share of equity accounted investments.
2. The purposes and definitions of non-GAAP measures are
provided in the Alternative performance measures section on page 38.
3. Growth rates for sales and underlying EBIT are on a
constant currency basis. All other growth rates and year-on-year movements are
on a reported currency basis.
Operational performance
Across our Platforms & Services sector, we remain focused on delivering on
our commitments while diversifying and growing our portfolio in the US and
international markets across combat vehicles, munitions, artillery systems and
submarines. These actions position us to address our customers' priorities for
modernisation and advanced technologies, including missile defence and
autonomous weapons.
As the US vehicle market evolves, our Combat Mission Systems team continues to
work closely with military services to remain a trusted partner to deliver our
leading combat vehicles and other capabilities, while pursuing international
opportunities.
We continue to support the broader defence industrial base to ensure we have
the technology and capacity needed to equip our armed forces customers. We
have upgraded our welding, machining and heavy-lift capacity to further
support building submarines and continued to invest in infrastructure to
support customer needs, such as our Sterling Heights, Michigan,
next-generation technology hub called the Virtual Proving Ground where we can
collaborate with customers and industry partners using digital engineering. In
Sweden, we are expanding our operations to further enhance our capabilities to
meet the needs of international customers. In the UK, we began work on a new
facility in Sheffield to expand capacity for our artillery and defence
capabilities.
We are also monitoring Europe's increased defence spending and working to
understand and anticipate NATO's capability gaps, recognising our strengths as
a leading provider of proven combat vehicles and air-defence solutions to
enhance the region's readiness for the future.
Key operational points for the period
- Our AMPV celebrated its 500(th) delivery milestone and is on
track, in full-rate production, to meet the US Army's plan to field nearly
3,000 AMPVs in its Armored Brigade Combat Team formations.
- Our Hägglunds business is further expanding its production
capacity with a new production hall and test and verification facilities,
while also securing production partnerships in customer nations to accommodate
the significant vehicle orders received.
- Our Ordnance Systems Inc. business is in the final stages of
completing a new nitrocellulose facility in Radford, Virginia, which will
provide significantly enhanced capacity, quality and levels of automation to
reduce risk in the process.
- Our Combat Mission Systems has entered into an agreement
with Wojskowe Zakłady Motoryzacyjne S.A. to support the Polish Land Forces'
M88 Armored Recovery Vehicle fleet operational readiness.
- At our Jacksonville, Florida, shipyard we continued
fabrication work under an order from a prime US contractor in relation to
Virginia- and Columbia-class submarines. In June, the shipyard also commenced
operations of its $250m (£190m) shiplift and land-level repair facility. This
investment has increased the shipyard's repair capacity by 300%.
Strategic and order highlights
- Our UK Weapon Systems business was awarded a contract worth
over $81m (£62m) by the UK Ministry of Defence to deliver 150 artillery
barrels. The team was also awarded a $162m (£125m) contract from the US Army
for new M777 structures, the first of which will be produced at our new
multi-million-pound artillery development and production facility in
Sheffield, UK, as well as within the US supply chain.
- We received a $357m (£275m) order to procure long-lead
material for additional AMPVs for the US Army, continuing the programme's
full-rate production. The business also received a $214m (£165m) award for
the US Army's M109A7 Paladin Self-Propelled Howitzer programme.
- Our Combat Mission Systems business was awarded a $70m
(£54m) contract from General Dynamics for the production of Virginia Payload
Module missile tubes for Block VI Virginia-class submarines.
- The Swedish Government announced a support package worth
nearly $300m (£231m) in total, including 18 ARCHERs, further TRIDON Mk2
Ground Based Air Defence systems and additional medium calibre ammunition.
- The US Marine Corps placed two orders for Amphibious Combat
Vehicles (ACVs) totalling more than $360m (£277m) for full-rate production of
60 ACV-30mm vehicles, which includes fielding support, spares and test
equipment. The contract includes a series of options to produce up to 150
vehicles.
- In May, our Ship Repair business secured a nearly $109m
(£84m) contract from the US Navy for the dry-docking maintenance of the
guided missile destroyer, USS The Sullivans, with work scheduled to begin in
the second half of the year.
Looking forward
- We continue to shape our business to deliver on increased
demand from US and international customers for production and sustainment of
combat vehicles and artillery systems. We have seen renewed interest in the
M777 artillery capability. We are also maintaining our position as a key
supplier of US Army combat vehicles through our AMPV, M109A7 and M88
franchises. In addition, following the performance of Bradley Fighting
Vehicles in Ukraine, we are working with the US Army to develop the most
advanced Bradley configurations to date, the M2A4 and the M2A4E1, which both
feature enhanced defence capabilities. We are seeing increased international
interest in these products.
- Across our Swedish businesses, we continue to build a
growing pipeline of business opportunities for the CV90, BvS10 and Beowulf
from our Hägglunds business, as well as for artillery, naval and air defence
systems and munitions from our Bofors business.
- We are maintaining our strong positions on naval guns,
missile launch and submarine programmes, as well as US Navy ship repair and
modernisation activities where the business has invested in infrastructure and
facilities in key home ports.
Segmental performance: Air
Air, with 29,100¹ employees, comprises the Group's UK‑based air build and
support activities for European and international markets, US programmes,
development of our Future Combat Air System (FCAS) and FalconWorks®,
alongside our business in the Kingdom of Saudi Arabia and interests in our
European joint ventures: Eurofighter and MBDA.
Financial performance
Financial performance measures defined by the Group(2) Financial performance measures derived from IFRS
Six months ended 30 June 2025 Six months ended 30 June 2024 Variance(3) Six months ended 30 June 2025 Six months ended 30 June 2024 Variance(3)
Sales £4,343m £4,009m +9 % Revenue £3,470m £3,252m +7 %
Underlying EBIT £500m £446m +13 % Operating profit £487m £456m +7 %
Return on sales 11.5 % 11.1 % +40 bps Return on revenue 14.0 % 14.0 % - bps
Operating business cash flow £214m £724m £(510)m Net cash flow from operating activities £37m £697m £(660)m
Order intake £3.8bn £2.3bn £1.5bn
As at 30 June 2025 As at 31 December 2024 Variance As at 30 June 2025 As at 31 December 2024 Variance
Order backlog £26.5bn £26.8bn £(0.3)bn Order book £14.5bn £15.6bn £(1.1)bn
Revenue
£3,470m
£3,252m
+7 %
Underlying EBIT
£500m
£446m
+13 %
Operating profit
£487m
£456m
+7 %
Return on sales
11.5 %
11.1 %
+40 bps
Return on revenue
14.0 %
14.0 %
- bps
Operating business cash flow
£214m
£724m
£(510)m
Net cash flow from operating activities
£37m
£697m
£(660)m
Order intake
£3.8bn
£2.3bn
£1.5bn
As at 30 June 2025
As at 31 December 2024
Variance
As at 30 June 2025
As at 31 December 2024
Variance
Order backlog
£26.5bn
£26.8bn
£(0.3)bn
Order book
£14.5bn
£15.6bn
£(1.1)bn
1. Including share of equity accounted investments.
2. The purposes and definitions of non-GAAP measures are
provided in the Alternative performance measures section on page 38.
3. Growth rates for sales and underlying EBIT are on a
constant currency basis. All other growth rates and year-on-year movements are
on a reported currency basis.
Operational performance
We continue to work with our UK and international customers to support their
existing platforms and provide new enhanced capabilities. Our US Programmes
division remains focused on delivery execution across all production lines.
Our FCAS and FalconWorks® organisations continue to invest in our people,
facilities and cutting-edge technologies.
Key operational points for the period
- In the Kingdom of Saudi Arabia, we continued to deliver
services under the five-year Saudi British Defence Co-operation and Salam
programmes, including our support to the Royal Saudi Air Force's Tornado and
Typhoon fleets and the Royal Saudi Naval Force's Hunter mine warfare vessels.
- Activity on our Qatar Typhoon and Hawk programmes continues,
with 22 of the 24 Typhoon aircraft in service to date with the Qatar
Emiri
Air Force.
- We continue to deliver Typhoon major units in support of
core European customer orders, with five delivered in the first half of the
year.
- We continue to progress construction of the UK's Flying
Combat Air Demonstrator, which will test next-generation skills, tools,
processes and techniques needed to underpin GCAP and the entry into service of
the core aircraft platform, which will be called Tempest in the UK, by 2035.
In July, alongside our industry partners and the Ministry of Defence, we
revealed the design as the aircraft reached a major milestone, with two thirds
of its structural weight now in manufacturing.
- Our US Programmes business completed 74 F-35 aft fuselages
in the first half of the year. The current Production Lots 18/19 support the
continuation of production deliveries at Samlesbury, UK, through to Q1 2027.
Negotiations are ongoing with Lockheed Martin for Lots 20-22 which will
continue production to 2030.
- The Royal Navy selected our all-electric Malloy T-150 UAS to
transport vital supplies between UK Carrier Strike Group ships for the first
time during its ongoing deployment to the Indo-Pacific this year.
Strategic and order highlights
- We launched Edgewing, a joint venture with our international
partners, Leonardo (Italy) and Japan Aircraft Industrial Enhancement Co. Ltd.
(Japan), on GCAP. The new company, based in Reading, UK, will be accountable
for the design and development of the next generation combat aircraft and will
remain the design authority for the life of the product, which is expected to
go out beyond 2070.
- Concept and assessment work on GCAP continues with our
international industry partners in all three nations under their respective
national contracts. We received a further £1.0bn of funding on the UK
assessment phase contract in the first half of the year.
- We secured a further £97m of funding for the phase 4
enhancements programme to continue the development of Typhoon capability. In
addition, we achieved £205m of funding in support of the mobilisation of the
Radar Mk2 production contract.
- In July, the Republic of Türkiye and the UK Government
signed a Memorandum of Understanding relating to the potential purchase of
Typhoon aircraft and we are working closely with the two governments to
formalise an agreement for procurement of the aircraft and associated
supplies.
- MBDA has continued to secure significant orders in the first
half of 2025. Orders received include: French Air Force, Italian Air Force and
Army and UK Royal Navy further production orders for ASTER 15 & 30 Block 1
missile; Indian Navy Rafale weapon package order for the Meteor Beyond Visual
Range Air-to-Air Missile (BVRAAM), MICA, SCALP and Exocet AM39; and, a South
Korean production order for the Meteor BVRAAM which will enable the Air Force
to benefit from a common stockpile for both KF-21 and F-35.
Looking forward
- GCAP is a strategically important partnership that will not
only drive innovation and technological advancement but also promote
significant economic activity in the UK, Japan and Italy, with the aim of
securing the future of their respective combat air industries for decades.
- We will continue to focus on ensuring that deliveries of
Typhoon aircraft and support are made in line with customer expectations.
Future Typhoon production and support sales are underpinned by existing
contracts. We continue to pursue future sales of Typhoon in Europe and the
Middle East.
- We expect production of the rear fuselage assemblies for the
F-35 to be sustained at current levels of approximately 150 aft fuselages. We
continue to play a significant role in the F-35 sustainment programme in
support of Lockheed Martin.
- In the Kingdom of Saudi Arabia, the In-Kingdom Industrial
Participation programme continues to make good progress consistent with our
long-term strategy, while supporting the Kingdom's National Transformation
Plan and Vision 2030.
- We expect our Saudi in-Kingdom support business to remain
stable, underpinned by long-standing contracts, while we continue to address
the Kingdom's current and future combat air requirements.
- Our FalconWorks® organisation will continue to pursue
internal and external investment opportunities which enhance our capabilities
and technologies.
- MBDA is well placed to benefit from increased defence
spending in Europe and internationally. The business has a strong order
backlog and development programmes continue to enhance the long-term
capabilities of the business in air, land and sea domains.
Segmental performance: Maritime
Maritime, with 30,800¹ employees, comprises the Group's UK‑based maritime
and land activities, including ship build and support activities, major
submarine build programmes, as well as our Australian business.
Financial performance
Financial performance measures defined by the Group(2) Financial performance measures derived from IFRS
Six months ended 30 June 2025 Six months ended 30 June 2024 Variance(3) Six months ended 30 June 2025 Six months ended 30 June 2024 Variance(3)
Sales £3,233m £2,929m +12 % Revenue £3,132m £2,845m +10 %
Underlying EBIT £220m £228m -2 % Operating profit £218m £226m -4 %
Return on sales 6.8 % 7.8 % -100 bps Return on revenue 7.0 % 7.9 % -90 bps
Operating business cash flow £(150)m £(247)m £97m Net cash flow from operating activities £(8)m £(91)m £83m
Order intake £2.0bn £5.7bn £(3.7)bn
As at 30 June 2025 As at 31 December 2024 Variance As at 30 June 2025 As at 31 December 2024 Variance
Order backlog £21.7bn £23.2bn £(1.5)bn Order book £20.8bn £22.3bn £(1.5)bn
Revenue
£3,132m
£2,845m
+10 %
Underlying EBIT
£220m
£228m
-2 %
Operating profit
£218m
£226m
-4 %
Return on sales
6.8 %
7.8 %
-100 bps
Return on revenue
7.0 %
7.9 %
-90 bps
Operating business cash flow
£(150)m
£(247)m
£97m
Net cash flow from operating activities
£(8)m
£(91)m
£83m
Order intake
£2.0bn
£5.7bn
£(3.7)bn
As at 30 June 2025
As at 31 December 2024
Variance
As at 30 June 2025
As at 31 December 2024
Variance
Order backlog
£21.7bn
£23.2bn
£(1.5)bn
Order book
£20.8bn
£22.3bn
£(1.5)bn
1. Including share of equity accounted investments.
2. The purposes and definitions of non-GAAP measures are
provided in the Alternative performance measures section on page 38.
3. Growth rates for sales and underlying EBIT are on a
constant currency basis. All other growth rates and year-on-year movements are
on a reported currency basis.
Operational performance
Our major Maritime platforms continue to progress through their long-term
programmes. We have delivered five of the seven Astute Class submarines to the
Royal Navy and continue construction on the first three of four Dreadnought
Class submarines. Construction of the initial five UK Type 26 frigates and the
first Australian Hunter Class frigate are also underway. We also continue to
deliver on customer requirements in both munitions and services. Ongoing
investments in our facilities and our people support our current and future
delivery. Our investment and high levels of customer demand mean the sector is
well positioned for growth.
Key operational points for the period
- The sixth Astute Class submarine, Agamemnon, is in its
in-water phase, whilst we continue construction on the final vessel in the
class.
- We continue to make progress on the four Dreadnought Class
submarines, with advancing levels of construction underway on the first three
submarines in the class, at our site in Barrow-in-Furness, UK.
- The Devonshire Dock Hall at Barrow-in-Furness, UK, has been
working at full operational capacity during the period, following the fire in
2024.
- In the UK, the Type 26 frigate programme of eight ships is
progressing. Investment continues both internally and through the supply chain
to support delivery, with the transition from design to production an ongoing
area of focus. We have five ships in build during 2025; HMS Glasgow and HMS
Cardiff have both entered the water and are progressing through final outfit
at our Scotstoun shipyard, with HMS Glasgow undergoing system testing and
commissioning. Unit construction and block integration of HMS Belfast, HMS
Birmingham and HMS Sheffield continues at our Govan shipyard.
- In Australia, construction of the Hunter Class frigate is
progressing with 32 of the 78 units of the first ship in production.
- Alongside this, the final Anzac Class frigate, HMAS
Parramatta, was returned to water at the Henderson shipyard, with completion
of the upgrade programme expected before the end of the year.
- The upgrade programme for the Royal Australian Air Force's
Hawk Aircraft is approaching finalisation with installation of 28 of the 33
engines completed.
- Our specialist teams have played a critical role in the
national endeavour to generate, support and sustain the Portsmouth-based ships
which deployed as part of the UK's Carrier Strike Group 2025.
- Our investment in munitions continues at pace, including a
new explosive filling facility at Glascoed, UK, enabling a sixteen-fold
increase in production capacity of 155mm artillery shells.
- In RBSL, the Challenger 3 programme has delivered a total of
four prototype tanks, with another four in build, marking significant
progress. The Boxer programme is expected to move to full-rate production in
2025. To date, a total of five UK-built vehicles have been delivered and are
currently undergoing planned reliability trials.
Strategic and order highlights
- It was announced that the Canadian Government will be
working with Australia to establish an Arctic Over The Horizon Radar (A-OTHR)
capability. As the enterprise partner for Australia's over the horizon radar
system, JORN, we will support the government in this important agreement.
- We secured an order of £284m for the Combat System upgrade
of the first of the three Hobart Class Air Warfare Destroyers.
- Following the cancellation of the TransCAP element of the
Anzac Class frigate upgrade programme, we have continued to work with the
Commonwealth of Australia to determine the appropriate use of our Henderson
facility in Western Australia.
- The initial mobilisation phase of the SSN-AUKUS programme in
Australia has commenced to support the delivery of the SSN-AUKUS fleet of
conventionally armed, nuclear-powered submarines for the Royal Australian
Navy.
- We signed a contract with Canada's Irving Shipbuilding Inc.,
marking the start of the next major phase on the River Class destroyer
programme. The ship is based on the Type 26 platform with specified design
changes to meet the Royal Canadian Navy's requirements. Under this new
contract, we will provide support and consultancy services throughout the
build phase.
- The formal naming of HMS Glasgow by her Sponsor, Her Royal
Highness The Princess of Wales, took place in May.
- In the UK, Her Royal Highness The Princess Royal officially
opened our Applied Shipbuilding Academy in Glasgow and our new Ship Build
Assembly Hall was officially named as the Janet Harvey Hall and opened by the
Lord Provost of Glasgow at an event at our Govan shipyard.
Looking forward
- Our Submarines business is executing across three long-term
programmes: Astute, Dreadnought and SSN-AUKUS. Our focus remains on
strengthening our workforce, supply chain and infrastructure to provide the
capability, capacity and resilience required to deliver these programmes.
- We will continue to work alongside ASC Pty Ltd to deliver
initial mobilisation activities to support Australia's SSN-AUKUS programme.
- Preparations for the commencement of the construction of the
sixth Type 26 frigate, HMS Newcastle, are well underway with long-lead
equipment items already in progress .
- In Australia, we are a key partner to the Commonwealth in
the delivery of its National Defence Strategy, which seeks a strategy of
denial and an integrated, focused force. AUKUS nuclear-powered submarines, an
enhanced lethality surface fleet, strategic surveillance and long-range strike
are prioritised in the Integrated Investment Plan which supports this.
- Our Defence Solutions business has exported the second
Commander SL radar to an international customer. We have a number of exciting
technology programmes in development, including our Next Generation
Explosives, fusing and adaptable ammunition.
Segmental performance: Cyber & Intelligence
Cyber & Intelligence, with 10,800(1) employees, comprises the US‑based
Intelligence & Security business and UK‑headquartered Digital
Intelligence business, which covers the Group's cyber security activities for
national security, central government and government enterprises.
Financial performance
Financial performance measures defined by the Group(2) Financial performance measures derived from IFRS
Six months ended 30 June 2025 Six months ended 30 June 2024 Variance(3) Six months ended 30 June 2025 Six months ended 30 June 2024 Variance(3)
Sales £1,186m £1,182m +2 % Revenue £1,186m £1,182m - %
Underlying EBIT £96m £101m -3 % Operating profit £78m £97m -20 %
Return on sales 8.1 % 8.5 % -40 bps Return on revenue 6.6 % 8.2 % -160 bps
Operating business cash flow £(23)m £16m £(39)m Net cash flow from operating activities £12m £40m £(28)m
Order intake £1.4bn £1.2bn £0.2bn
As at 30 June 2025 As at 31 December 2024 Variance As at 30 June 2025 As at 31 December 2024 Variance
Order backlog £1.8bn £1.8bn £- bn Order book £1.4bn £1.3bn £0.1bn
Revenue
£1,186m
£1,182m
- %
Underlying EBIT
£96m
£101m
-3 %
Operating profit
£78m
£97m
-20 %
Return on sales
8.1 %
8.5 %
-40 bps
Return on revenue
6.6 %
8.2 %
-160 bps
Operating business cash flow
£(23)m
£16m
£(39)m
Net cash flow from operating activities
£12m
£40m
£(28)m
Order intake
£1.4bn
£1.2bn
£0.2bn
As at 30 June 2025
As at 31 December 2024
Variance
As at 30 June 2025
As at 31 December 2024
Variance
Order backlog
£1.8bn
£1.8bn
£- bn
Order book
£1.4bn
£1.3bn
£0.1bn
1. Including share of equity accounted investments.
2. The purposes and definitions of non-GAAP measures are
provided in the Alternative performance measures section on page 38.
3. Growth rates for sales and underlying EBIT are on a
constant currency basis. All other growth rates and year-on-year movements are
on a reported currency basis.
Operational performance
Intelligence & Security demonstrated solid performance despite revenue
headwinds due to shifting US Government priorities and delays
in new
solicitations and awards. We continue to work on maintaining a strong pipeline
of qualified opportunities to deliver mission-critical integration
capabilities aligned with evolving customer needs and national security
priorities. Our Intelligence & Security business continues to
strategically position itself in key technology domains critical to driving
faster, more impactful outcomes for our customers, including automation,
artificial intelligence and autonomy.
In our Digital Intelligence business, we continue to work collaboratively to
collect, connect and understand complex data for governments, nation states,
armed forces and commercial businesses in both the UK and international
markets. Our services, solutions and products span customers in Law
Enforcement, National Security, Central Government, Critical National
Infrastructure, Telecommunications, Defence and Space. In the first half of
2025, the integration of Kirintec, which was acquired in 2024, and demand in
the security market and rigorous cost control is helping to compensate for
delays in the defence business.
Key operational points for the period
- We established an Innovation & Strategy organisation
that will leverage the collective technological strengths, partnerships and
expertise, enabling the Intelligence & Security business to effectively
adapt to the rapidly evolving defence and security landscape.
- To capitalise on a growing US border security budget, our
Intelligence & Security business participated in the Customs and Border
Protection Border Security Expo where we displayed our view of an integrated
digital border, which included an autonomous vehicle with counter-UAS
technology and an integrated sensor package.
- To continue to address the growing operational planning and
rehearsal market, we have grown our software development workforce and made
internal investments to enhance our Bohemia Interactive Simulations products
on prime contracts and to fund advancements in artificial intelligence
capabilities.
- In Digital Intelligence, our space business continues to
focus on the readiness of our low earth orbit satellite, Azalea, for launch
later this year, to deliver high quality information and intelligence in real
time. In National Security and Government, we are focused on transitioning our
work to new frameworks secured in 2024. Our Defence business continues to
progress campaigns for key programmes.
- Following the acquisition of Kirintec, we have continued the
integration programme. Kirintec provides electronic warfare capabilities
within our Digital Intelligence business and specialises in cyber and
electromagnetic activities alongside the production of counter-improvised
explosive devices and counter-UAS products for military customers.
Strategic and order highlights
- In January 2025, our Air and Space Force Solutions business
secured a contract for $799m (£616m) to extend our Integration Support
Contract services to the US Air Force with options through to July 2027.
- Our Intelligence Solutions business won two additional task
orders on the National Geospatial-Intelligence Agency GEO-SPI B Indefinite
Duration Indefinite Quantity (IDIQ) contract. Since its initial award in 2023,
the business has secured a total of 11 task orders on this IDIQ with
a
combined value of more than $500m (£385m).
- Our Integrated Defense Solutions business was awarded
multiple re-compete contracts in the first half of the year with a combined
total potential lifecycle value of more than $250m (£193m).
- We secured a $149m (£115m) prime contract from a restricted
customer. This award represents the continuation of programme management and
financial intelligence support for an intelligence community customer.
Looking forward
- Our Intelligence & Security business maintains a strong
pipeline of qualified business opportunities. Although the US Department of
Defense has experienced procurement decision delays, we are observing a
notable demand for capabilities aligned to the current administration's
priorities, particularly in areas such as border security and nuclear
deterrence.
- The US defence services market remains competitive and our
Intelligence & Security business is focused on adapting to evolving
customer requirements to ensure we continue to deliver mission-critical
solutions.
- In our Digital Intelligence business, we continue to
progress the transformation roadmap to ensure we are well placed to take
advantage of favourable market conditions over the medium and long term. We
are continuing to drive operational efficiencies, through system integration
and the simplified organisational structure embedded at the beginning of the
year.
- Investment in our product portfolio continues with good
progress made on developing cross-domain products for the US and other
international markets, low earth orbit satellites and multi-domain network
solutions for the defence market.
Principal risks and uncertainties
Having considered recent geopolitical and macroeconomic events, the Group
believes the principal risks and uncertainties we face for the remainder of
the year are included in, and are therefore unchanged from, those reported in
the Annual Report 2024.
The Group's principal risks and uncertainties at 31 December 2024 were
detailed on pages 58 to 65 of the Annual Report 2024 and related to the
following areas: government customers, defence spending and terms of trade;
contract risk, execution and supply chain; security (including cyber
security); international markets; people; safety; acquisitions; business
interruption; climate transition and environmental factors; and legal risk.
Responsibility statement of the directors in respect of the Half-yearly
Financial Report
Each of the directors (as detailed below) confirms that to the best of his/her
knowledge:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules
(DTR), being an indication of important events that have occurred during the
first six months of the financial year and their impact on the condensed set
of financial statements; and a description of the principal risks and
uncertainties for the remaining six months of the financial year; and
(b) DTR 4.2.8R of the DTR, being related party transactions that have
taken place in the first six months of the current financial year and that
have materially affected the financial position or the performance of the
Company during that period; and any changes in the related party transactions
described in the last annual report that could do so.
For and on behalf of the directors:
Cressida Hogg
Chair
29 July 2025
Directors
Cressida Hogg Chair
Charles Woodburn Chief Executive
Tom Arseneault President and Chief Executive Officer of BAE Systems, Inc.
Brad Greve Chief Financial Officer
Nick Anderson Non-executive director
Crystal E. Ashby Non-executive director
Angus Cockburn Non-executive director
Dame Elizabeth Corley Non-executive director
Jane Griffiths Non-executive director
Ewan Kirk Non-executive director
Stephen Pearce Non-executive director
Nicole Piasecki Non-executive director
Independent review report to BAE Systems plc
Conclusion
We have been engaged by the Company to review the condensed set of financial
statements in the Half-yearly Financial Report for the six months ended
30 June 2025 which comprises the Condensed consolidated income statement, the
Condensed consolidated statement of comprehensive income, the Condensed
consolidated statement of changes in equity, the Condensed consolidated
balance sheet, the Condensed consolidated cash flow statement and related
notes 1 to 13.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the Half-yearly
Financial Report for the six months ended 30 June 2025 is not prepared, in
all material respects, in accordance with United Kingdom adopted International
Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" issued by the Financial Reporting
Council for use in the United Kingdom
(ISRE (UK) 2410). A review of interim
financial information consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with United Kingdom adopted international accounting
standards. The condensed set of financial statements included in this
Half-yearly Financial Report has been prepared in accordance with United
Kingdom adopted International Accounting Standard 34, "Interim Financial
Reporting".
Conclusion relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this Report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This Conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410; however future events or conditions may cause the entity to
cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the Half-yearly Financial Report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the Half-yearly Financial Report, the directors are responsible
for assessing the group's ability to continue as a going concern, disclosing
as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the
Company or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the review of the financial information
In reviewing the Half-yearly Financial Report, we are responsible for
expressing to the Company a conclusion on the condensed set of financial
statements in the Half-yearly Financial Report. Our conclusion, including our
conclusion relating to going concern, are based on procedures that are less
extensive than audit procedures, as described in the basis for conclusion
paragraph of this report.
This report is made solely to the Company in accordance with ISRE (UK) 2410.
Our work has been undertaken so that we might state to the Company those
matters we are required to state to it in an independent review report and for
no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company, for our review work,
for this report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London
United Kingdom
29 July 2025
Condensed consolidated income statement (unaudited)
Six months ended 30 June 2025 Six months ended 30 June 2024
Note £m Total £m Total
£m £m
Continuing operations
Revenue 2 13,571 12,477
Operating costs (12,425) (11,418)
Other income 80 159
Share of results of equity accounted investments 101 78
Operating profit 2 1,327 1,296
Finance income 65 69
Finance costs (203) (202)
Net finance costs 3 (138) (133)
Profit before tax 1,189 1,163
Tax expense 4 (178) (175)
Profit for the period 1,011 988
Attributable to:
Equity shareholders 969 948
Non-controlling interests 42 40
1,011 988
Earnings per share 5
Basic earnings per share 32.3p 31.4p
Diluted earnings per share 32.0p 31.0p
£m
Total
£m
Continuing operations
Revenue
2
13,571
12,477
Operating costs
(12,425)
(11,418)
Other income
80
159
Share of results of equity accounted investments
101
78
Operating profit
2
1,327
1,296
Finance income
65
69
Finance costs
(203)
(202)
Net finance costs
3
(138)
(133)
Profit before tax
1,189
1,163
Tax expense
4
(178)
(175)
Profit for the period
1,011
988
Attributable to:
Equity shareholders
969
948
Non-controlling interests
42
40
1,011
988
Earnings per share
5
Basic earnings per share
32.3p
31.4p
Diluted earnings per share
32.0p
31.0p
Condensed consolidated statement of comprehensive income (unaudited)
Six months ended 30 June 2025 Six months ended 30 June 2024
Other Retained Total Other Retained Total
reserves earnings reserves earnings
£m £m £m £m £m £m
Profit for the period - 1,011 1,011 - 988 988
Other comprehensive income
Items that will not be reclassified to the income statement:
Consolidated:
Remeasurements on post-employment benefit schemes - (174) (174) - 424 424
Remeasurements on other investments - 5 5 - (9) (9)
Tax on items that will not be reclassified to the income statement - (3) (3) - (24) (24)
Share of the other comprehensive (expense)/income of associates and joint - (14) (14) - 14 14
ventures accounted for using the equity method (net of tax)
Items that may be reclassified to the income statement:
Consolidated:
Currency translation on foreign currency net investments (857) - (857) 16 - 16
Reclassification of cumulative currency translation reserve on disposal of - - - 35 - 35
interest in joint venture accounted for using the equity method
Fair value gain/(loss) arising on hedging instruments during the period 41 - 41 (21) - (21)
Cumulative fair value loss on hedging instruments reclassified to the income 27 - 27 61 - 61
statement
Tax on items that may be reclassified to the income statement (14) - (14) (1) - (1)
Share of the other comprehensive (expense)/income of associates and joint (1) - (1) 4 - 4
ventures accounted for using the equity method (net of tax)
Total other comprehensive (expense)/income for the period (net of tax) (804) (186) (990) 94 405 499
Total comprehensive (expense)/income for the period (804) 825 21 94 1,393 1,487
Attributable to:
Equity shareholders (791) 782 (9) 94 1,349 1,443
Non-controlling interests (13) 43 30 - 44 44
(804) 825 21 94 1,393 1,487
Retained
earnings
Total
Other
reserves
Retained
earnings
Total
£m
£m
£m
£m
£m
£m
Profit for the period
-
1,011
1,011
-
988
988
Other comprehensive income
Items that will not be reclassified to the income statement:
Consolidated:
Remeasurements on post-employment benefit schemes
-
(174)
(174)
-
424
424
Remeasurements on other investments
-
5
5
-
(9)
(9)
Tax on items that will not be reclassified to the income statement
-
(3)
(3)
-
(24)
(24)
Share of the other comprehensive (expense)/income of associates and joint
ventures accounted for using the equity method (net of tax)
-
(14)
(14)
-
14
14
Items that may be reclassified to the income statement:
Consolidated:
Currency translation on foreign currency net investments
(857)
-
(857)
16
-
16
Reclassification of cumulative currency translation reserve on disposal of
interest in joint venture accounted for using the equity method
-
-
-
35
-
35
Fair value gain/(loss) arising on hedging instruments during the period
41
-
41
(21)
-
(21)
Cumulative fair value loss on hedging instruments reclassified to the income
statement
27
-
27
61
-
61
Tax on items that may be reclassified to the income statement
(14)
-
(14)
(1)
-
(1)
Share of the other comprehensive (expense)/income of associates and joint
ventures accounted for using the equity method (net of tax)
(1)
-
(1)
4
-
4
Total other comprehensive (expense)/income for the period (net of tax)
(804)
(186)
(990)
94
405
499
Total comprehensive (expense)/income for the period
(804)
825
21
94
1,393
1,487
Attributable to:
Equity shareholders
(791)
782
(9)
94
1,349
1,443
Non-controlling interests
(13)
43
30
-
44
44
(804)
825
21
94
1,393
1,487
Condensed consolidated statement of changes in equity (unaudited)
Attributable to equity holders of BAE Systems plc
Issued share capital Share Other Retained Total Non-controlling Total
premium reserves earnings interests equity
£m £m £m £m £m £m £m
Balance at 1 January 2025 80 1,253 6,447 3,836 11,616 161 11,777
Profit for the period - - - 969 969 42 1,011
Total other comprehensive expense for the period - - (791) (187) (978) (12) (990)
Total comprehensive (expense)/income for the period - - (791) 782 (9) 30 21
Share-based payments (inclusive of tax) - - - 101 101 - 101
Cumulative fair value gain on hedging instruments transferred to the balance - - (12) - (12) - (12)
sheet
Ordinary share dividends - - - (622) (622) (17) (639)
Purchase of own shares - - - (236) (236) - (236)
At 30 June 2025 80 1,253 5,644 3,861 10,838 174 11,012
Balance at 1 January 2024 81 1,253 6,403 2,822 10,559 164 10,723
Profit for the period - - - 948 948 40 988
Total other comprehensive income for the period - - 94 401 495 4 499
Total comprehensive income for the period - - 94 1,349 1,443 44 1,487
Share-based payments (inclusive of tax) - - - 71 71 - 71
Cumulative fair value gain on hedging instruments transferred to the balance - - (2) - (2) - (2)
sheet
Ordinary share dividends - - - (562) (562) (6) (568)
Purchase of own shares (1) - 1 (250) (250) - (250)
At 30 June 2024 80 1,253 6,496 3,430 11,259 202 11,461
Other
reserves
Retained
earnings
Total
Non-controlling
interests
Total
equity
£m
£m
£m
£m
£m
£m
£m
Balance at 1 January 2025
80
1,253
6,447
3,836
11,616
161
11,777
Profit for the period
-
-
-
969
969
42
1,011
Total other comprehensive expense for the period
-
-
(791)
(187)
(978)
(12)
(990)
Total comprehensive (expense)/income for the period
-
-
(791)
782
(9)
30
21
Share-based payments (inclusive of tax)
-
-
-
101
101
-
101
Cumulative fair value gain on hedging instruments transferred to the balance
sheet
-
-
(12)
-
(12)
-
(12)
Ordinary share dividends
-
-
-
(622)
(622)
(17)
(639)
Purchase of own shares
-
-
-
(236)
(236)
-
(236)
At 30 June 2025
80
1,253
5,644
3,861
10,838
174
11,012
Balance at 1 January 2024
81
1,253
6,403
2,822
10,559
164
10,723
Profit for the period
-
-
-
948
948
40
988
Total other comprehensive income for the period
-
-
94
401
495
4
499
Total comprehensive income for the period
-
-
94
1,349
1,443
44
1,487
Share-based payments (inclusive of tax)
-
-
-
71
71
-
71
Cumulative fair value gain on hedging instruments transferred to the balance
sheet
-
-
(2)
-
(2)
-
(2)
Ordinary share dividends
-
-
-
(562)
(562)
(6)
(568)
Purchase of own shares
(1)
-
1
(250)
(250)
-
(250)
At 30 June 2024
80
1,253
6,496
3,430
11,259
202
11,461
Condensed consolidated balance sheet (unaudited)
Note 30 June 2025 31 December 2024
£m £m
Non-current assets
Goodwill 12,568 13,297
Other intangible assets 2,629 2,965
Property, plant and equipment 4,804 4,843
Right-of-use assets 1,633 1,755
Investment property 44 38
Equity accounted investments 634 823
Other investments 84 83
Contract receivables 83 108
Other receivables 656 626
Post-employment benefit surpluses 6 1,128 1,271
Other financial assets 281 265
Deferred tax assets 299 315
24,843 26,389
Current assets
Inventories 1,371 1,324
Contract receivables 4,013 3,749
Trade and other receivables 3,155 2,914
Current tax 175 176
Other financial assets 291 212
Cash and cash equivalents 2,153 3,378
11,158 11,753
Total assets 36,001 38,142
Non-current liabilities
Loans (7,053) (7,713)
Lease liabilities (1,561) (1,658)
Contract liabilities (1,695) (1,720)
Other payables (1,863) (1,859)
Post-employment benefit obligations 6 (480) (503)
Other financial liabilities (302) (193)
Deferred tax liabilities (23) (14)
Provisions (378) (363)
(13,355) (14,023)
Current liabilities
Loans (641) (699)
Lease liabilities (173) (183)
Contract liabilities (4,135) (4,504)
Trade and other payables (6,103) (6,383)
Other financial liabilities (323) (264)
Current tax (40) (55)
Provisions (219) (254)
(11,634) (12,342)
Total liabilities (24,989) (26,365)
Net assets 11,012 11,777
Capital and reserves
Issued share capital 80 80
Share premium 1,253 1,253
Other reserves 5,644 6,447
Retained earnings 3,861 3,836
Total equity attributable to equity holders of BAE Systems plc 10,838 11,616
Non-controlling interests 174 161
Total equity 11,012 11,777
4,843
Right-of-use assets
1,633
1,755
Investment property
44
38
Equity accounted investments
634
823
Other investments
84
83
Contract receivables
83
108
Other receivables
656
626
Post-employment benefit surpluses
6
1,128
1,271
Other financial assets
281
265
Deferred tax assets
299
315
24,843
26,389
Current assets
Inventories
1,371
1,324
Contract receivables
4,013
3,749
Trade and other receivables
3,155
2,914
Current tax
175
176
Other financial assets
291
212
Cash and cash equivalents
2,153
3,378
11,158
11,753
Total assets
36,001
38,142
Non-current liabilities
Loans
(7,053)
(7,713)
Lease liabilities
(1,561)
(1,658)
Contract liabilities
(1,695)
(1,720)
Other payables
(1,863)
(1,859)
Post-employment benefit obligations
6
(480)
(503)
Other financial liabilities
(302)
(193)
Deferred tax liabilities
(23)
(14)
Provisions
(378)
(363)
(13,355)
(14,023)
Current liabilities
Loans
(641)
(699)
Lease liabilities
(173)
(183)
Contract liabilities
(4,135)
(4,504)
Trade and other payables
(6,103)
(6,383)
Other financial liabilities
(323)
(264)
Current tax
(40)
(55)
Provisions
(219)
(254)
(11,634)
(12,342)
Total liabilities
(24,989)
(26,365)
Net assets
11,012
11,777
Capital and reserves
Issued share capital
80
80
Share premium
1,253
1,253
Other reserves
5,644
6,447
Retained earnings
3,861
3,836
Total equity attributable to equity holders of BAE Systems plc
10,838
11,616
Non-controlling interests
174
161
Total equity
11,012
11,777
Approved by the Board of directors of BAE Systems plc on 29 July 2025 and
signed on its behalf by:
C N Woodburn B M Greve
Chief Executive Chief Financial Officer
Condensed consolidated cash flow statement (unaudited)
Note Six months ended 30 June 2025 Six months ended 30 June 2024
£m £m
Profit for the period 1,011 988
Tax expense 4 178 175
Adjustment in respect of research and development expenditure credits (25) (22)
Share of results of equity accounted investments (101) (78)
Net finance costs 3 138 133
Depreciation, amortisation and impairment 578 501
Net gain on disposal of property, plant and equipment, and investment property (1) (3)
Gain in respect of divestment of interest in equity accounted investment 11 - (75)
Cost of equity-settled employee share schemes 78 62
Movement in provisions 1 10
Difference between pension funding contributions paid and the pension charge (10) (61)
Increase in working capital:
Inventories (121) (170)
Trade, contract and other receivables (944) (558)
Trade and other payables, and contract liabilities (574) (65)
Tax paid net of research and development expenditure credits received (134) (80)
Net cash flow from operating activities 74 757
Dividends received from equity accounted investments 287 145
Interest received 41 47
Principal element of finance lease receipts 3 5
Purchase of property, plant and equipment, and investment property (376) (385)
Purchase of intangible assets (87) (78)
Purchase of other investments (2) -
Proceeds from funding related to assets 56 62
Proceeds from sale of property, plant and equipment, investment property and 9 5
intangible assets
Purchase of subsidiary undertakings, net of cash and cash equivalents acquired (4) (4,536)
Proceeds from divestment of interest in equity accounted investment 11 - 166
Net cash flow from investing activities (73) (4,569)
Interest paid (267) (222)
Equity dividends paid 7 (622) (562)
Purchase of own shares (227) (250)
Dividends paid to non-controlling interests (17) (6)
Principal element of lease payments (106) (117)
Cash inflow from derivative financial instruments (excluding cash flow hedges) 230 49
Cash outflow from derivative financial instruments (excluding cash flow (151) (74)
hedges)
Cash inflow from draw-down of bridge loan facility - 3,180
Cash outflow from repayment of bridge loan facility - (3,168)
Cash inflow from bond finance - 3,753
Net cash flow from financing activities (1,160) 2,583
Net decrease in cash and cash equivalents (1,159) (1,229)
Cash and cash equivalents at 1 January 3,378 4,067
Effect of foreign exchange rate changes on cash and cash equivalents (66) (7)
Cash and cash equivalents at 30 June 2,153 2,831
988
Tax expense
4
178
175
Adjustment in respect of research and development expenditure credits
(25)
(22)
Share of results of equity accounted investments
(101)
(78)
Net finance costs
3
138
133
Depreciation, amortisation and impairment
578
501
Net gain on disposal of property, plant and equipment, and investment property
(1)
(3)
Gain in respect of divestment of interest in equity accounted investment
11
-
(75)
Cost of equity-settled employee share schemes
78
62
Movement in provisions
1
10
Difference between pension funding contributions paid and the pension charge
(10)
(61)
Increase in working capital:
Inventories
(121)
(170)
Trade, contract and other receivables
(944)
(558)
Trade and other payables, and contract liabilities
(574)
(65)
Tax paid net of research and development expenditure credits received
(134)
(80)
Net cash flow from operating activities
74
757
Dividends received from equity accounted investments
287
145
Interest received
41
47
Principal element of finance lease receipts
3
5
Purchase of property, plant and equipment, and investment property
(376)
(385)
Purchase of intangible assets
(87)
(78)
Purchase of other investments
(2)
-
Proceeds from funding related to assets
56
62
Proceeds from sale of property, plant and equipment, investment property and
intangible assets
9
5
Purchase of subsidiary undertakings, net of cash and cash equivalents acquired
(4)
(4,536)
Proceeds from divestment of interest in equity accounted investment
11
-
166
Net cash flow from investing activities
(73)
(4,569)
Interest paid
(267)
(222)
Equity dividends paid
7
(622)
(562)
Purchase of own shares
(227)
(250)
Dividends paid to non-controlling interests
(17)
(6)
Principal element of lease payments
(106)
(117)
Cash inflow from derivative financial instruments (excluding cash flow hedges)
230
49
Cash outflow from derivative financial instruments (excluding cash flow
hedges)
(151)
(74)
Cash inflow from draw-down of bridge loan facility
-
3,180
Cash outflow from repayment of bridge loan facility
-
(3,168)
Cash inflow from bond finance
-
3,753
Net cash flow from financing activities
(1,160)
2,583
Net decrease in cash and cash equivalents
(1,159)
(1,229)
Cash and cash equivalents at 1 January
3,378
4,067
Effect of foreign exchange rate changes on cash and cash equivalents
(66)
(7)
Cash and cash equivalents at 30 June
2,153
2,831
Notes to the Condensed consolidated interim financial statements
1. Preparation of the Condensed consolidated financial statements
Basis of preparation and statement of compliance
The annual financial statements of the Group will be prepared in accordance
with UK-adopted International Accounting Standards (IAS), in conformity with
the requirements of the Companies Act 2006. The Condensed consolidated set of
financial statements included in this Half-yearly Report have been prepared in
accordance with UK-adopted IAS 34 Interim Financial Reporting and the
Disclosure Guidance and Transparency Rules of the UK Financial Conduct
Authority. These Condensed consolidated financial statements do not comprise
statutory accounts within the meaning of Section 435 of the Companies Act 2006
and should be read in conjunction with the Annual Report 2024. The comparative
figures for the year ended 31 December 2024 are not the Group's statutory
accounts for that financial year. Those financial statements have been
reported upon by the Group's auditor and delivered to the Registrar of
Companies. The report of the auditor was unqualified, did not include a
reference to any matters to which the auditor drew attention by way of
emphasis without qualifying their report and did not contain statements under
Section 498 (2) or (3) of the Companies Act 2006.
The accounting policies adopted in the preparation of these Condensed
consolidated financial statements to 30 June 2025 are consistent with the
accounting policies applied by the Group in its Consolidated financial
statements as at, and for the year ended, 31 December 2024 as required by the
Disclosure Guidance and Transparency Rules of the UK Financial Conduct
Authority.
The Condensed consolidated financial statements are presented in pounds
sterling and, unless stated otherwise, rounded to the nearest million. They
have been prepared under the historical cost convention, as modified by the
revaluation of certain financial assets and financial liabilities (including
derivative financial instruments).
Going concern
The Group continues to conduct ongoing risk assessments in relation to its
business operations and liquidity. Demand from the Group's key customers
remains strong, underpinned by our order backlog, programme positions and
pipeline of opportunities across all sectors. The Group also continues to work
with, and support, its supply chain to actively address the risk of
disruption.
The Group's liquidity and solvency has remained strong. Cash flow forecasting
is performed by the businesses on a monthly basis. The Group also monitors a
rolling forecast of its liquidity requirements to ensure that there is
sufficient cash to meet operational needs and maintain adequate headroom.
After making due enquiries and having undertaken these assessments, the
directors have a reasonable expectation that the Group has adequate resources
and will be able to continue in operational existence for the foreseeable
future, being at least 12 months from the date of approval of this report. For
this reason they continue to adopt the going concern basis in preparing the
Group's Condensed consolidated financial statements.
New and amended standards adopted by the Group
The following amendments to existing standards became effective on 1 January
2025 and have not had a material impact on the Group:
- Amendments to IAS 21: Lack of Exchangeability.
Critical accounting judgement and key sources of estimation uncertainty
The determination of the Group's accounting policies requires judgement. The
subsequent application of these policies requires estimates and the actual
outcome may differ from that calculated. As at 31 December 2024, the critical
accounting judgements and key sources of estimation uncertainty assessed as
having a significant risk of causing material adjustments to the carrying
amount of assets and liabilities are set out in note 1 to the Consolidated
financial statements in the Annual Report 2024.
During the six month period ended 30 June 2025, the Group has re-assessed
these key areas of critical accounting judgement and sources of estimation
uncertainty and consider there have been no changes from those disclosed in
the Group's 2024 audited financial statements.
Impact of climate ambitions on the Condensed consolidated financial statements
In preparing the Condensed consolidated financial statements, management has
considered the potential impact of climate change. As a responsible defence
business, sustainability is embedded in our strategic framework, with one of
the Group's long-term objectives to advance and integrate our sustainability
agenda. The products and services we provide are complex, diverse and
developed over extended periods of time. Sustainability and the impact of our
operations is considered in the planning and ongoing production of our
products and services, including incorporation of the impact of the Group's
decarbonisation ambitions and activities. These are embedded in our financial
reporting, forecasting and governance processes.
Estimates and judgement are required in determining how the Group will pursue
its decarbonisation ambitions. These, as well as mitigating actions required
from the detailed review risks and opportunities resulting from climate
transition and environmental factors, have been factored into the current and
future plans of the Group through the Integrated Business Plan (IBP). The IBP
is the Group's annual long-term strategy review and five-year plan for each
segment, including the investment case to decarbonise.
The more immediate financial impacts of climate transition and environmental
factors, and the actions being taken to address them, are reflected in the
financial results of the Group for the period. These are not considered to
have had a material impact.
2. Segmental analysis and revenue recognition
The Group has five sectors which, together with HQ, make its six reporting
segments as defined by IFRS 8 Operating Segments:
- Electronic Systems comprises the US- and UK-based
electronics solutions business and the US-based SMS business, which have been
aggregated together due to the similarities of the services offered. The teams
deliver electronic warfare systems, navigation systems, electro-optical
sensors, military and commercial digital engine and flight controls, precision
guidance and seeker solutions, next-generation military communications systems
and data links, persistent surveillance capabilities, electric drive
propulsion systems as well as space electronics, spacecraft and ground
systems.
- Platforms & Services, with operations in the US, Sweden
and UK, manufactures and upgrades combat vehicles, weapons and munitions, and
delivers services and sustainment activities, including naval ship repair, and
the management and operation of two government owned, contractor-operated
ammunition plants.
- Air comprises the Group's UK‑based air build and support
activities for European and international markets, US programmes, development
of our Future Combat Air System and FalconWorks®, alongside our business in
the Kingdom of Saudi Arabia and interests in our European joint ventures:
Eurofighter and MBDA.
- Maritime comprises the Group's UK-based maritime and land
activities, including ship build and support activities, major submarine build
programmes, as well as our Australian business.
- Cyber & Intelligence comprises the US-based Intelligence
& Security business and UK-headquartered Digital Intelligence business,
which have been aggregated together due to the similarities of the services
offered. Together, they cover the Group's cyber security activities for
national security, central government and government enterprises.
- HQ comprises the Group's head office and UK-based shared
services activities.
The Board (the chief operating decision maker as defined by IFRS 8 Operating
Segments) monitors the results of these reporting segments to assess
performance and make decisions about the allocation of resources. Segmental
performance is evaluated based on key performance indicators - sales(1) and
underlying EBIT(2). Net finance costs and tax expense are managed on a Group
basis.
Revenue and sales(1) by reporting segment
Revenue Deduct: Add: Sales(1)
Sales to equity accounted investments Share of sales by equity accounted investments
Six months ended 30 June 2025 Six months ended 30 June 2024 Six months ended 30 June 2025 Six months ended 30 June 2024 Six months ended 30 June 2025 Six months ended 30 June 2024 Six months ended 30 June 2025 Six months ended 30 June 2024
£m £m £m £m £m £m £m £m
Electronic Systems 3,592 3,394 (123) (139) 130 128 3,599 3,383
Platforms & Services 2,470 2,061 - - 8 24 2,478 2,085
Air 3,470 3,252 (655) (626) 1,528 1,383 4,343 4,009
Maritime 3,132 2,845 (2) (2) 103 86 3,233 2,929
Cyber & Intelligence 1,186 1,182 - - - - 1,186 1,182
HQ 19 5 - - 79 80 98 85
13,869 12,739 (780) (767) 1,848 1,701 14,937 13,673
Intra-group revenue/sales (298) (262) (18) (12) - - (316) (274)
13,571 12,477 (798) (779) 1,848 1,701 14,621 13,399
Add:
Share of sales by equity accounted investments
Sales(1)
Six months ended 30 June 2025
Six months ended 30 June 2024
Six months ended 30 June 2025
Six months ended 30 June 2024
Six months ended 30 June 2025
Six months ended 30 June 2024
Six months ended 30 June 2025
Six months ended 30 June 2024
£m
£m
£m
£m
£m
£m
£m
£m
Electronic Systems
3,592
3,394
(123)
(139)
130
128
3,599
3,383
Platforms & Services
2,470
2,061
-
-
8
24
2,478
2,085
Air
3,470
3,252
(655)
(626)
1,528
1,383
4,343
4,009
Maritime
3,132
2,845
(2)
(2)
103
86
3,233
2,929
Cyber & Intelligence
1,186
1,182
-
-
-
-
1,186
1,182
HQ
19
5
-
-
79
80
98
85
13,869
12,739
(780)
(767)
1,848
1,701
14,937
13,673
Intra-group revenue/sales
(298)
(262)
(18)
(12)
-
-
(316)
(274)
13,571
12,477
(798)
(779)
1,848
1,701
14,621
13,399
Revenue from Intra-group revenue
external customers
Six months ended 30 June 2025 Six months ended 30 June 2024 Six months ended 30 June 2025 Six months ended 30 June 2024
£m £m £m £m
Electronic Systems 3,484 3,304 108 90
Platforms & Services 2,433 2,028 37 33
Air 3,445 3,234 25 18
Maritime 3,095 2,802 37 43
Cyber & Intelligence 1,110 1,109 76 73
HQ 4 - 15 5
13,571 12,477 298 262
Intra-group revenue
Six months ended 30 June 2025
Six months ended 30 June 2024
Six months ended 30 June 2025
Six months ended 30 June 2024
£m
£m
£m
£m
Electronic Systems
3,484
3,304
108
90
Platforms & Services
2,433
2,028
37
33
Air
3,445
3,234
25
18
Maritime
3,095
2,802
37
43
Cyber & Intelligence
1,110
1,109
76
73
HQ
4
-
15
5
13,571
12,477
298
262
2. Segmental analysis and revenue recognition continued
Revenue and sales(1) by customer location
Revenue Sales(1)
Six months ended 30 June 2025 Six months ended 30 June 2024 Six months ended 30 June 2025 Six months ended 30 June 2024
£m £m £m £m
UK 3,768 3,212 3,981 3,390
Europe (excluding UK) 937 844 1,564 1,403
US 6,447 5,983 6,447 5,961
Canada 81 79 81 79
Kingdom of Saudi Arabia 1,388 1,411 1,390 1,469
Qatar 117 125 158 199
Australia 597 591 601 594
Asia and Pacific (excluding Australia) 166 163 255 184
Other 70 69 144 120
13,571 12,477 14,621 13,399
3,212
3,981
3,390
Europe (excluding UK)
937
844
1,564
1,403
US
6,447
5,983
6,447
5,961
Canada
81
79
81
79
Kingdom of Saudi Arabia
1,388
1,411
1,390
1,469
Qatar
117
125
158
199
Australia
597
591
601
594
Asia and Pacific (excluding Australia)
166
163
255
184
Other
70
69
144
120
13,571
12,477
14,621
13,399
Operating profit/(loss) by reporting segment
Operating Finance and tax expense/(income) of equity accounted investments Amortisation of programme, customer-related and other intangible assets, and Adjusting Items Underlying EBIT(2)
profit/(loss) impairment of intangible assets
Six months ended 30 June 2025 Six months ended 30 June 2024 Six months ended 30 June 2025 Six months ended 30 June 2024 Six months ended 30 June 2025 Six months ended 30 June 2024 Six months ended 30 June 2025 Six months ended 30 June 2024 Six months ended 30 June 2025 Six months ended 30 June 2024
£m £m £m £m £m £m £m £m £m £m
Electronic Systems 357 301 - - 173 134 11 38 541 473
Platforms & Services 292 215 - 7 - - - (6) 292 216
Air 487 456 5 (12) 8 - - 2 500 446
Maritime 218 226 2 2 - - - - 220 228
Cyber & Intelligence 78 97 - - 15 9 3 (5) 96 101
HQ (105) 1 6 3 - - - (75) (99) (71)
Operating profit 1,327 1,296 13 - 196 143 14 (46) 1,550 1,393
Net finance costs (138) (133)
Profit before tax 1,189 1,163
Tax expense (178) (175)
Profit for the period 1,011 988
Finance and tax expense/(income) of equity accounted investments
Amortisation of programme, customer-related and other intangible assets, and
impairment of intangible assets
Adjusting Items
Underlying EBIT(2)
Six months ended 30 June 2025
Six months ended 30 June 2024
Six months ended 30 June 2025
Six months ended 30 June 2024
Six months ended 30 June 2025
Six months ended 30 June 2024
Six months ended 30 June 2025
Six months ended 30 June 2024
Six months ended 30 June 2025
Six months ended 30 June 2024
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
Electronic Systems
357
301
-
-
173
134
11
38
541
473
Platforms & Services
292
215
-
7
-
-
-
(6)
292
216
Air
487
456
5
(12)
8
-
-
2
500
446
Maritime
218
226
2
2
-
-
-
-
220
228
Cyber & Intelligence
78
97
-
-
15
9
3
(5)
96
101
HQ
(105)
1
6
3
-
-
-
(75)
(99)
(71)
Operating profit
1,327
1,296
13
-
196
143
14
(46)
1,550
1,393
Net finance costs
(138)
(133)
Profit before tax
1,189
1,163
Tax expense
(178)
(175)
Profit for the period
1,011
988
1. Sales is an alternative performance measure defined in the
Alternative performance measures section on page 38. Sales includes both
revenue from the Group's own subsidiaries as well as recognising the strategic
importance in its industry of its equity accounted investments. It is
presented here as our internal measure of segmental performance and to provide
additional information on performance to the user.
2. Underlying EBIT is an alternative performance measure
defined in the Alternative performance measures section on page 38. It
provides a measure of operating profitability, excluding one-off events or
adjusting items that are not considered to be part of the ongoing operational
transactions of the business, to enable management to monitor the performance
of recurring operations over time, and which is comparable across the Group.
It is presented here as our internal measure of segmental performance and to
provide additional information on performance to the user.
3. Net finance costs
Six months ended 30 June 2025 Six months ended 30 June 2024
£m £m
Interest income on cash and other financial instruments 39 63
Net interest income on post-employment benefit obligations 26 6
Finance income 65 69
Interest expense on loans and other financial instruments (224) (231)
Facility fees (2) (2)
Interest expense on lease liabilities (38) (33)
Net present value expenses on provisions and other payables (9) (4)
(Loss)/gain on remeasurement of financial instruments at fair value through (78) 41
profit or loss(1,2)
Foreign exchange gains(2,3) 148 27
Finance costs (203) (202)
Net finance costs (138) (133)
63
Net interest income on post-employment benefit obligations
26
6
Finance income
65
69
Interest expense on loans and other financial instruments
(224)
(231)
Facility fees
(2)
(2)
Interest expense on lease liabilities
(38)
(33)
Net present value expenses on provisions and other payables
(9)
(4)
(Loss)/gain on remeasurement of financial instruments at fair value through
profit or loss(1,2)
(78)
41
Foreign exchange gains(2,3)
148
27
Finance costs
(203)
(202)
Net finance costs
(138)
(133)
1. Comprises gains and losses on derivative financial
instruments, principally held to manage the Group's exposure to interest rate
fluctuations on current and anticipated external borrowings and exchange rate
fluctuations on balances with the Group's subsidiaries and equity accounted
investments.
2. The net gain or loss on remeasurement of financial
instruments at fair value through profit or loss and the net gain or loss on
foreign exchange are presented within finance costs as the gains and losses
relate to the same underlying transactions.
3. Foreign exchange gains primarily reflects exchange rate
movements on US dollar-denominated borrowings and balances with the Group's
subsidiaries and equity accounted investments.
4. Tax expense
The Group's reported tax expense was £178m (2024 £175m). The underlying
effective tax rate was 20% (2024 19%) and has been determined by calculating
an estimated annual tax rate for each country or entity, and then applying
those rates to half year profits or losses.
The Group's underlying effective tax rate is sensitive to the geographic mix
of profits and is impacted by the UK's enactment of the Organisation for
Economic Co-operation and Development's Global Anti-Base Erosion Model Rules
(Global Minimum Tax) effective from 1 January 2024. The Group has applied the
temporary exception issued by the International Accounting Standards Board
from the accounting requirements for deferred taxes in IAS 12. Accordingly,
the Group neither recognises nor discloses information about deferred tax
assets and liabilities related to Global Minimum Tax income taxes.
5. Earnings per share
Movement in shares for the purpose of calculating earnings per share Ordinary shares Treasury shares Contingently returnable shares held in trust Outstanding shares for purpose of earnings per share Weighted average share movement in the period
millions millions millions millions millions
At 1 January 2025 3,195 (184) (15) 2,996
Ordinary shares repurchased in the period (14) - - (14) (7)
Net shares issued in the period - 17 1 18 10
At 30 June 2025 3,181 (167) (14) 3,000
At 1 January 2024 3,239 (204) (20) 3,015
Ordinary shares repurchased in the period (20) - - (20) (10)
Net shares issued in the period - 17 4 21 11
At 30 June 2024 3,219 (187) (16) 3,016
Six months ended 30 June 2025 Six months ended 30 June 2024
millions millions
Outstanding shares for purpose of earnings per share at 1 January 2,996 3,015
Average ordinary shares repurchased in the period (7) (10)
Average ordinary shares issued in the period (net) 10 11
Weighted average shares for the purpose of calculating basic earnings per 2,999 3,016
share at 30 June
Incremental ordinary shares in respect of employee share schemes 29 38
Weighted average shares for the purpose of calculating diluted earnings per 3,028 3,054
share at 30 June
Six months ended 30 June 2025 Six months ended 30 June 2024
Profit for the period attributable to equity shareholders (£m) 969 948
Basic earnings per share (pence) 32.3 31.4
Diluted earnings per share (pence) 32.0 31.0
(184)
(15)
2,996
Ordinary shares repurchased in the period
(14)
-
-
(14)
(7)
Net shares issued in the period
-
17
1
18
10
At 30 June 2025
3,181
(167)
(14)
3,000
At 1 January 2024
3,239
(204)
(20)
3,015
Ordinary shares repurchased in the period
(20)
-
-
(20)
(10)
Net shares issued in the period
-
17
4
21
11
At 30 June 2024
3,219
(187)
(16)
3,016
Six months ended 30 June 2025
Six months ended 30 June 2024
millions
millions
Outstanding shares for purpose of earnings per share at 1 January
2,996
3,015
Average ordinary shares repurchased in the period
(7)
(10)
Average ordinary shares issued in the period (net)
10
11
Weighted average shares for the purpose of calculating basic earnings per
share at 30 June
2,999
3,016
Incremental ordinary shares in respect of employee share schemes
29
38
Weighted average shares for the purpose of calculating diluted earnings per
share at 30 June
3,028
3,054
Six months ended 30 June 2025
Six months ended 30 June 2024
Profit for the period attributable to equity shareholders (£m)
969
948
Basic earnings per share (pence)
32.3
31.4
Diluted earnings per share (pence)
32.0
31.0
6. Post-employment benefits
Summary of movements in post-employment benefit obligations
UK defined benefit pension schemes US and other pension schemes US healthcare schemes Kingdom of Saudi Arabia end of service Total
benefit
£m £m £m £m £m
Surplus/(deficit) at 1 January 2025 1,105 (230) 71 (178) 768
Actual return on assets excluding amounts included in net finance costs (510) 71 - - (439)
Decrease/(increase) in liabilities due to changes in financial assumptions 359 (41) (1) (2) 315
Decrease in liabilities due to changes in demographic assumptions 23 - - - 23
Experience (losses)/gains (130) (4) 1 - (133)
Contributions in excess of/(less than) service cost 36 (15) (1) (5) 15
Past service cost - plan amendments - - (2) - (2)
Net interest income/(expense) 44 (5) 2 (5) 36
Foreign exchange adjustments - 12 (6) 14 20
Movement in withholding tax on surpluses 45 - - - 45
Surplus/(deficit) at 30 June 2025 972 (212) 64 (176) 648
Represented by:
Post-employment benefit surpluses 1,062 2 64 - 1,128
Post-employment benefit obligations (90) (214) - (176) (480)
972 (212) 64 (176) 648
Total
£m
£m
£m
£m
£m
Surplus/(deficit) at 1 January 2025
1,105
(230)
71
(178)
768
Actual return on assets excluding amounts included in net finance costs
(510)
71
-
-
(439)
Decrease/(increase) in liabilities due to changes in financial assumptions
359
(41)
(1)
(2)
315
Decrease in liabilities due to changes in demographic assumptions
23
-
-
-
23
Experience (losses)/gains
(130)
(4)
1
-
(133)
Contributions in excess of/(less than) service cost
36
(15)
(1)
(5)
15
Past service cost - plan amendments
-
-
(2)
-
(2)
Net interest income/(expense)
44
(5)
2
(5)
36
Foreign exchange adjustments
-
12
(6)
14
20
Movement in withholding tax on surpluses
45
-
-
-
45
Surplus/(deficit) at 30 June 2025
972
(212)
64
(176)
648
Represented by:
Post-employment benefit surpluses
1,062
2
64
-
1,128
Post-employment benefit obligations
(90)
(214)
-
(176)
(480)
972
(212)
64
(176)
648
Principal actuarial assumptions
The assumptions used are estimates chosen from a range of possible actuarial
assumptions which, due to the long-term nature of the obligation covered, may
not necessarily occur in practice.
UK US
30 June 2025 31 December 2024 30 June 2025 31 December 2024
Financial assumptions
Discount rate - past service (%) 5.6 5.5 5.4 5.5
Discount rate - future service (%) 5.8 5.6 5.4 5.5
Retail Prices Index (RPI) inflation (%) 2.6 2.9 n/a n/a
Rate of increase in salaries (%) 2.6 2.9 2.8 2.8
Rate of increase in deferred pensions (CPI/RPI) (%) 2.1/2.6 2.3/2.9 n/a n/a
Rate of increase in pensions in payment (%) 1.6 - 3.5 1.7 - 3.6 n/a n/a
Demographic assumptions
Life expectancy of a male currently aged 65 (years) 85 - 88 85 - 88 88 88
Life expectancy of a female currently aged 65 (years) 88 - 90 88 - 91 89 89
Life expectancy of a male currently aged 45 (years) 86 - 89 86 - 89 87 87
Life expectancy of a female currently aged 45 (years) 89 - 92 89 - 92 89 89
Life expectancy
For its UK pension schemes, the Group has used the Self-Administered Pension
Schemes S3 mortality tables based on year of birth (as published by the
Institute and Faculty of Actuaries) for both pensioner and non-pensioner
members, in conjunction with the results of an investigation into the actual
mortality experience of scheme members and information on the demographic
profile of the scheme's membership.
In addition, to allow for future improvements in longevity, the Continuous
Mortality Investigation 2023 tables (published by the Institute and Faculty of
Actuaries) have been used (at the 2024 year end, the Continuous Mortality
Investigation 2023 tables were used), with an assumed long-term rate of
mortality improvements of 1.0% per annum (2024 1.0%), an initial rate
adjustment parameter ('A') of 0.2% (2024 0.2%), a smoothing parameter ('Sk')
of 7 (2024 7) and the following weighting ('W') parameters: W2023 35% (2024
35%), W2022 35% (2024 35%), W2021 0% (2024 0%) and W2020 0% (2024 0%).
For the majority of the US schemes, the mortality tables used are a blend of
the fully generational PRI-2012 White Collar table and the PRI-2012 Blue
Collar table, both projected using November 2024 Aon Endemic Projection Scale
MP-2021.
Virgin Media case
The Group is aware of the 'Virgin Media v NTL Pension Trustees Ltd and others'
case and continues to monitor developments in this area of the law with the
help of its advisors. The Group was satisfied that it remained appropriate to
make no adjustment to the financial statements following the Court of Appeal's
decision to uphold the ruling of the High Court against Virgin Media, as any
resulting change in pension obligations, if any, were not anticipated to be
material to the Company. On 5 June 2025, the Government announced that it will
introduce legislation that would enable such confirmation to be obtained
retrospectively. Whilst the detail of that legislation is not yet known, the
Group remains of the view no adjustments to the financial statements are
needed.
7. Capital distributions
Equity dividends
Six months ended 30 June 2025 Six months ended 30 June 2024
£m £m
Prior year final 20.6p dividend per ordinary share paid in the period (2024 622 562
2023 final dividend of 18.5p)
The directors have declared an interim dividend of 13.5p per ordinary share in
respect of the period ended 30 June 2025, totalling approximately £407m.
This will be paid on 3 December 2025 to shareholders registered on 24 October
2025. The ex-dividend date
is 23 October 2025.
A Dividend Reinvestment Plan ("DRIP") is provided by Equiniti Financial
Services Limited. The DRIP enables the Company's shareholders to
elect to
have their cash dividend payments used to purchase the Company's shares. The
last date to receive elections to join the DRIP
is 12 November 2025. More
information can be found at www.shareview.co.uk/info/drip.
Capital
The Group funds its operations through a mixture of equity funding and debt
financing, including bank and capital market borrowings. The capital structure
of the Group reflects the judgement of the directors of an appropriate balance
of funding required. Our policy is to maintain the Group's investment grade
credit rating and ensure operating flexibility, whilst:
- meeting its pension obligations;
- investing in research and technology and pursuing other
organic investment opportunities;
- paying dividends in line with the Group's policy of
long-term sustainable cover of around two times underlying earnings;
- making accelerated returns of capital to shareholders when
the balance sheet allows and when the return from doing so is in excess of the
Group's weighted average cost of capital; and
- investing in value-enhancing acquisitions, where market
conditions are right and where they deliver on the Group's strategy.
Purchase of own shares
In July 2022, the directors approved a share buyback programme of up to
£1.5bn (the 2022 share buyback programme). The 2022 share buyback programme
was completed on 24 July 2024. In total, 163,907,003 ordinary shares were
repurchased under the 2022 share buyback programme for a total cost (including
transaction costs) of £1,508m.
In August 2023, the directors approved a further share buyback programme of up
to £1.5bn (the 2023 share buyback programme). The 2023 share buyback
programme commenced on 25 July 2024. The 2023 share buyback programme is
expected to complete within three years of its commencement.
In the six months ended 30 June 2024, 19,403,928 ordinary shares were
repurchased under the 2022 share buyback programme at a total cost (including
transaction costs) of £250m.
In the six months ended 30 June 2025, 15,038,662 ordinary shares were
repurchased under the 2023 share buyback programme at a total cost (including
transaction costs) of £236m.
All ordinary shares acquired have been subsequently cancelled, with the
nominal value of ordinary shares cancelled deducted from share capital against
the capital redemption reserve.
As part of the 2023 buyback programme, it was agreed that should a better
alternative use for the Company's cash reserves be identified, the share
buyback programmes would be ceased and the money instead used for the
alternative purpose. Therefore, when the Company issued a mandate to the
brokers to purchase shares on their behalf, the mandate was structured such
that it could be revoked at any point. As such, no financial liability has
been recognised for shares not yet purchased under the 2023 programme at 30
June.
8. Fair value measurement
Fair value of financial instruments
Certain of the Group's financial instruments are held at fair value.
The fair value of a financial instrument is the price that would be received
to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the balance sheet date.
The fair values of financial instruments held at fair value have been
determined based on available market information at the balance sheet date,
and the valuation methodologies listed below:
- the fair values of forward foreign exchange contracts are
calculated by discounting the contracted forward values and translating at the
appropriate balance sheet rates;
- the fair values of both interest rate and cross-currency
swaps are calculated by discounting expected future principal and interest
cash flows and translating at the appropriate balance sheet rates; and
- the fair values of money market funds are calculated by
multiplying the net asset value per share by the investment held at the
balance sheet date.
The derivative fair values are based on reputable third party forecast data,
and then adjusted for credit risk, including the Group's own credit risk, and
market risk. Due to the variability of the valuation factors, the fair values
presented at 30 June may not be indicative of the amounts the Group will
realise in the future.
Fair value hierarchy
The fair value measurement hierarchy is as follows:
- Level 1 - Quoted prices (unadjusted) in active markets for
identical assets or liabilities;
- Level 2 - Inputs other than quoted prices included within
level 1 that are observable for the asset or liability, either directly (i.e.
as prices) or indirectly (i.e. derived from prices); and
- Level 3 - Inputs for the asset or liability that are not
based on observable market data (i.e. unobservable inputs).
Carrying amounts and fair values of certain financial instruments
30 June 2025 31 December 2024
Carrying Fair Carrying Fair
amount value amount value
£m £m £m £m
Financial instruments measured at fair value:
Non-current
Other investments at fair value through other comprehensive income 84 84 83 83
Other financial assets 281 281 265 265
Contingent consideration in business combinations (64) (64) (65) (65)
Other financial liabilities (302) (302) (193) (193)
Current
Other financial assets 291 291 212 212
Money market funds 787 787 1,227 1,227
Contingent consideration in business combinations (9) (9) (6) (6)
Other financial liabilities (323) (323) (264) (264)
Financial instruments not measured at fair value:
Non-current
Loans (7,053) (6,766) (7,713) (7,261)
Current
Loans (641) (640) (699) (695)
Fair
value
Carrying
amount
Fair
value
£m
£m
£m
£m
Financial instruments measured at fair value:
Non-current
Other investments at fair value through other comprehensive income
84
84
83
83
Other financial assets
281
281
265
265
Contingent consideration in business combinations
(64)
(64)
(65)
(65)
Other financial liabilities
(302)
(302)
(193)
(193)
Current
Other financial assets
291
291
212
212
Money market funds
787
787
1,227
1,227
Contingent consideration in business combinations
(9)
(9)
(6)
(6)
Other financial liabilities
(323)
(323)
(264)
(264)
Financial instruments not measured at fair value:
Non-current
Loans
(7,053)
(6,766)
(7,713)
(7,261)
Current
Loans
(641)
(640)
(699)
(695)
All of the financial assets and liabilities measured at fair value are
classified as level 2 using the fair value hierarchy, except for money market
funds, which are classified as level 1; other investments, which are at a
combination of level 1 and level 3; and the contingent consideration liability
which is measured at level 3. The fair value of the contingent consideration
has been valued based on the discounted expected cash flows. The total value
of investments classified as level 3 is immaterial. There were no transfers
between levels during the period. Alternative valuation techniques would not
materially change the valuations presented.
Financial assets and liabilities in the Group's Condensed consolidated balance
sheet are either held at fair value or at amortised cost. With the exception
of loans, the carrying value of financial instruments measured at amortised
cost approximates their fair value. For the bonds included within loans, the
fair value of loans presented in the table above is derived from market prices
as of 30 June, classified as level 1 using the fair value hierarchy. The fair
value of the private placement included within loans has been valued based on
the interest yield on an equivalent observable bond, applied to the private
placement cash flows, and has been classified as level 2 using the fair value
hierarchy.
9. Related party transactions
The Group has a related party relationship with its equity accounted
investments and pension schemes. Transactions with related parties occur in
the normal course of business, are priced on an arm's-length basis and settled
on normal trade terms. The more significant transactions are disclosed below:
Six months ended 30 June 2025 Six months ended 30 June 2024
£m £m
Sales to related parties 798 779
Purchases from related parties 217 184
Management recharges 2 2
30 June 2025 31 December 2024
£m £m
Amounts owed by related parties 75 54
Amounts owed to related parties 2,106 2,192
779
Purchases from related parties
217
184
Management recharges
2
2
30 June 2025
31 December 2024
£m
£m
Amounts owed by related parties
75
54
Amounts owed to related parties
2,106
2,192
10. Acquisitions
Businesses acquired during 2024
Ball Aerospace
On 16 February 2024, the Group acquired 100% of the share capital of Ball
Aerospace (now BAE Systems Space & Mission Systems) for consideration of
$5.5bn (£4.4bn). The net assets acquired, including intangible assets
identified, were valued at £2,845m resulting in goodwill
of £1,507m.
Kirintec
On 3 September 2024, the Group acquired 100% of the share capital of Kirintec
Ltd for total consideration of £282m, including £30m of contingent
consideration. The net assets acquired, including intangible assets
identified, were provisionally valued at £161m resulting in provisional
goodwill of £121m. The purchase price allocation for the acquisition was
finalised within the current period with no significant changes. The final
goodwill arising on acquisition was valued at £122m.
Other acquisitions
On 31 January 2024, the Group acquired 100% of the share capital of Malloy
Aeronautics Ltd and, on 2 May 2024, the Group acquired 100% of the share
capital of Callen-Lenz Associates Ltd. Total consideration was £292m
including £61m of contingent consideration. The net assets acquired,
including intangible assets identified, were valued at £108m resulting in
goodwill of £184m at 31 December 2024. Since the year end, the Group has
adjusted the net assets acquired with Callen-Lenz Associates Ltd by £16m,
which has resulted in an increase to goodwill. As a result, total goodwill of
£200m has been recognised in respect of these acquisitions.
11. Disposals
Businesses disposals during 2025
There were no business disposals during the six month period ended 30 June
2025.
Disposal of interest in equity accounted investment during the six month
period ended 30 June 2024
Air Astana
On 9 February 2024, Air Astana launched a joint initial public offering (IPO).
As a result of the IPO, the total shareholding held by BAE Systems in Air
Astana reduced from 49% to 17%. The Group received cash proceeds of £166m and
realised a profit on the disposal of £75m, after accounting for the carrying
value of the investment and currency reserve reclassifications.
12. Contingent liabilities
The Group believes that any significant liability in respect of its guarantees
and performance bond arrangements, and legal actions and claims not already
provided for, is remote.
13. Events after the reporting period
There were no events after the reporting period which would materially impact
the balances reported in this Report.
Alternative performance measures
We monitor the underlying financial performance of the Group using APMs. These
measures are not defined in IFRS and, therefore, are considered to be non-GAAP
(Generally Accepted Accounting Principles) measures. Accordingly, the relevant
IFRS measures are also presented where appropriate.
The Group uses these APMs as a mechanism to support year-on-year business
performance and cash generation comparisons, and to enhance management's
planning and decision-making on the allocation of resources. The APMs are also
used to provide information in line with the expectations of investors, and
when setting guidance on expected future business performance. The Group
presents these measures to the users to enhance their understanding of how the
business has performed within the year, and does not consider them to be more
important than, or superior to, their equivalent IFRS measures. As each APM is
defined by the Group, they may not be directly comparable with
equivalently-named measures in other companies.
The purpose, definition, breakdown and reconciliation to the relevant
statutory measure, where appropriate, are included below.
Sales
Purpose
Enables management to monitor the revenue of both the Group's own subsidiaries
as well as recognising the strategic importance in its industry of its equity
accounted investments, to ensure programme performance is understood and in
line with expectations.
Definition
Revenue plus the Group's share of revenue of equity accounted investments,
excluding subsidiaries' revenue from equity accounted investments.
Reconciliation of sales to revenue Six months ended 30 June 2025 Six months ended 30 June 2024
£m £m
Sales 14,621 13,399
Deduct: Group's share of revenue of equity accounted investments (1,848) (1,701)
Add: Subsidiaries' revenue from equity accounted investments 798 779
Revenue 13,571 12,477
13,399
Deduct: Group's share of revenue of equity accounted investments
(1,848)
(1,701)
Add: Subsidiaries' revenue from equity accounted investments
798
779
Revenue
13,571
12,477
Underlying EBIT
Purpose
Provides a measure of operating profitability, excluding one-off events or
adjusting items that are not considered to be part of the ongoing operational
transactions of the business, to enable management to monitor the performance
of recurring operations over time, and which is comparable across the Group.
Definition
Operating profit excluding amortisation of programme, customer-related and
other intangible assets, impairment of equity accounted investments and
intangible assets, net finance income/costs and tax expense of equity
accounted investments (EBIT) and adjusting items. The exclusion of
amortisation of acquisition-related intangible assets is to allow consistent
comparability internally and externally between our businesses, regardless of
whether this is through organic growth or acquisitions.
Reconciliation of underlying EBIT to operating profit Six months ended 30 June 2025 Six months ended 30 June 2024
£m £m
Underlying EBIT 1,550 1,393
Adjusting items (14) 46
Amortisation of programme, customer-related and other intangible assets, and (196) (143)
impairment of intangible assets
Net finance income of equity accounted investments 32 26
Tax expense of equity accounted investments (45) (26)
Operating profit 1,327 1,296
1,393
Adjusting items
(14)
46
Amortisation of programme, customer-related and other intangible assets, and
impairment of intangible assets
(196)
(143)
Net finance income of equity accounted investments
32
26
Tax expense of equity accounted investments
(45)
(26)
Operating profit
1,327
1,296
Return on sales
Purpose
Provides a measure of operating profitability, excluding one-off events, to
enable management to monitor the performance of recurring operations over
time, and which is comparable across the Group.
Definition
Underlying EBIT as a percentage of sales, also referred to as margin.
Six months ended 30 June 2025 Six months ended 30 June 2024
£m £m
Sales 14,621 13,399
Underlying EBIT 1,550 1,393
Return on sales 10.6 % 10.4 %
10.4 %
Underlying earnings per share (EPS)
Purpose
Provides a measure of the Group's underlying performance, which enables
management to compare the profitability of the Group's recurring operations
over time.
Definition
Profit for the period attributable to shareholders, excluding post-tax impact
of amortisation of programme, customer-related and other intangible assets,
impairment of equity accounted investments and intangible assets, non-cash
finance movements on pensions and financial derivatives, and adjusting items
attributable to shareholders, being underlying earnings, divided by number of
shares as defined for Basic EPS in accordance with IAS 33 Earnings per Share.
Reconciliation of underlying earnings to profit attributable to equity Six months ended 30 June 2025 Six months ended 30 June 2024
shareholders
£m £m
Underlying profit for the period attributable to equity shareholders 1,041 948
Adjustments:
Adjusting items (14) 46
Amortisation of programme, customer-related and other intangible assets, and (196) (143)
impairment of intangible assets
Net interest income on post-employment benefit obligations 28 7
Fair value and foreign exchange adjustments on financial instruments and 69 66
investments
Tax impact of adjustments 41 24
Profit for the period attributable to equity shareholders 969 948
948
Adjustments:
Adjusting items
(14)
46
Amortisation of programme, customer-related and other intangible assets, and
impairment of intangible assets
(196)
(143)
Net interest income on post-employment benefit obligations
28
7
Fair value and foreign exchange adjustments on financial instruments and
investments
69
66
Tax impact of adjustments
41
24
Profit for the period attributable to equity shareholders
969
948
Reconciliation of underlying EBIT to underlying earnings Six months ended 30 June 2025 Six months ended 30 June 2024
£m £m
Underlying EBIT 1,550 1,393
Group and equity accounted investments' underlying net finance costs (see (203) (180)
reconciliation on page 40)
Underlying tax expense (see reconciliation on page 41) (264) (225)
Underlying profit for the period 1,083 988
Deduct: Non-controlling interests (42) (40)
Underlying earnings for the period attributable to equity shareholders 1,041 948
Weighted average number of ordinary shares used in calculating basic EPS 2,999 3,016
Underlying EPS - basic 34.7p 31.4p
Weighted average number of ordinary shares used in calculating diluted EPS 3,028 3,054
Underlying EPS - diluted 34.4p 31.0p
1,393
Group and equity accounted investments' underlying net finance costs (see
reconciliation on page 40)
(203)
(180)
Underlying tax expense (see reconciliation on page 41)
(264)
(225)
Underlying profit for the period
1,083
988
Deduct: Non-controlling interests
(42)
(40)
Underlying earnings for the period attributable to equity shareholders
1,041
948
Weighted average number of ordinary shares used in calculating basic EPS
2,999
3,016
Underlying EPS - basic
34.7p
31.4p
Weighted average number of ordinary shares used in calculating diluted EPS
3,028
3,054
Underlying EPS - diluted
34.4p
31.0p
Adjusting items
Purpose
To adjust items of financial performance from the reported underlying results
which have been determined by management as being material by their size or
incidence and not relevant to an understanding of the Group's underlying
business performance.
Definition
Adjusting items include profit or loss on business transactions, the impact of
substantively enacted tax rate changes, and costs incurred which are one-off
in nature, for example, non-routine costs or income relating to
post-retirement benefit schemes and other items which management has
determined as not being relevant to an understanding of the Group's underlying
business performance.
Six months ended 30 June 2025 Six months ended 30 June 2024
£m £m
Profit on disposal of interest in equity accounted investment - 75
Acquisition and integration-related costs (14) (42)
Gain related to settlements on the pension schemes - 13
Adjusting items (14) 46
75
Acquisition and integration-related costs
(14)
(42)
Gain related to settlements on the pension schemes
-
13
Adjusting items
(14)
46
Underlying net finance costs
Purpose
Provides a measure of net finance costs associated with the operational
borrowings of the Group that is comparable over time.
Definition
Net finance costs for the Group and its share of equity accounted investments,
excluding net interest income/expense on post-employment benefit obligations
and fair value and foreign exchange adjustments on financial instruments.
Six months ended 30 June 2025 Six months ended 30 June 2024
£m £m
Net finance costs - Group (138) (133)
Deduct:
Net interest income on post-employment benefit obligations (26) (6)
Fair value and foreign exchange adjustments on financial instruments (70) (68)
Underlying net finance costs - Group (234) (207)
Net finance income - equity accounted investments 32 26
(Deduct)/add back:
Net interest income on post-employment benefit obligations (2) (1)
Fair value and foreign exchange adjustments on financial instruments 1 2
Underlying net finance income - equity accounted investments 31 27
Total of Group and equity accounted investments' underlying net finance costs (203) (180)
(133)
Deduct:
Net interest income on post-employment benefit obligations
(26)
(6)
Fair value and foreign exchange adjustments on financial instruments
(70)
(68)
Underlying net finance costs - Group
(234)
(207)
Net finance income - equity accounted investments
32
26
(Deduct)/add back:
Net interest income on post-employment benefit obligations
(2)
(1)
Fair value and foreign exchange adjustments on financial instruments
1
2
Underlying net finance income - equity accounted investments
31
27
Total of Group and equity accounted investments' underlying net finance costs
(203)
(180)
Underlying effective tax rate
Purpose
Provides a measure of tax expense for the Group, excluding one-off items, that
is comparable over time.
Definition
Tax expense for the Group and its share of equity accounted investments,
excluding any one-off tax benefit/expense related to adjusting items and other
items excluded from underlying EBIT, as a percentage of underlying profit
before tax.
Six months ended 30 June 2025 Six months ended 30 June 2024
Calculation of the underlying effective tax rate £m £m
Underlying EBIT (see reconciliation on page 38) 1,550 1,393
Group and equity accounted investments' underlying net finance costs (see (203) (180)
reconciliation on page 40)
Underlying profit before tax 1,347 1,213
Group tax expense (178) (175)
Tax expense of equity accounted investments (45) (26)
Exclude:
Tax effect of taxable adjusting items (3) (4)
Tax effect of other items excluded from underlying profit (38) (20)
Underlying tax expense (264) (225)
1,393
Group and equity accounted investments' underlying net finance costs (see
reconciliation on page 40)
(203)
(180)
Underlying profit before tax
1,347
1,213
Group tax expense
(178)
(175)
Tax expense of equity accounted investments
(45)
(26)
Exclude:
Tax effect of taxable adjusting items
(3)
(4)
Tax effect of other items excluded from underlying profit
(38)
(20)
Underlying tax expense
(264)
(225)
Underlying effective tax rate 20 % 19 %
19 %
Free cash flow
Purpose
Provides a measure of cash generated by the Group's operations after servicing
debt and tax obligations, available for use in line with the Group's capital
allocation policy.
Definition
Net cash flow from operating activities, including dividends received from
equity accounted investments, interest paid, net of interest received, net
capital expenditure and financial investments, and principal elements of lease
payments and receipts.
Six months ended 30 June 2025 Six months ended 30 June 2024
Reconciliation from free cash flow to net cash flow from operating activities £m £m
Free cash flow (368) 219
Add back:
Interest paid, net of interest received 226 175
Net capital expenditure and financial investment 400 396
Principal element of lease payments and receipts 103 112
Deduct:
Dividends received from equity accounted investments (287) (145)
Net cash flow from operating activities 74 757
219
Add back:
Interest paid, net of interest received
226
175
Net capital expenditure and financial investment
400
396
Principal element of lease payments and receipts
103
112
Deduct:
Dividends received from equity accounted investments
(287)
(145)
Net cash flow from operating activities
74
757
Operating business cash flow
Purpose
Provides a measure of cash generated by the Group's operations, which is
comparable across the Group, to service debt and meet tax obligations, and in
turn available for use in line with the Group's capital allocation policy.
Definition
Net cash flow from operating activities excluding tax paid net of research and
development expenditure credits received and including net capital expenditure
(net of proceeds from funding of assets) and lease principal amounts,
financial investment and dividends from equity accounted investments.
Reconciliation from operating business cash flow to net cash flow from Six months ended 30 June 2025 Six months ended 30 June 2024
operating activities
£m £m
Operating business cash flow (8) 474
Add back:
Net capital expenditure and financial investment 400 396
Principal element of lease payments and receipts 103 112
Deduct:
Dividends received from equity accounted investments (287) (145)
Tax paid net of research and development expenditure credits received (134) (80)
Net cash flow from operating activities 74 757
474
Add back:
Net capital expenditure and financial investment
400
396
Principal element of lease payments and receipts
103
112
Deduct:
Dividends received from equity accounted investments
(287)
(145)
Tax paid net of research and development expenditure credits received
(134)
(80)
Net cash flow from operating activities
74
757
Reconciliation of operating business cash flow to net cash flow from operating
activities by reporting segment
Operating business cash flow Deduct: Add back: Net cash flow from operating activities
Dividends received from equity accounted investments Net capital expenditure, lease principal amounts and financial investment
Six months ended 30 June 2025 Six months ended 30 June 2024 Six months ended 30 June 2025 Six months ended 30 June 2024 Six months ended 30 June 2025 Six months ended 30 June 2024 Six months ended 30 June 2025 Six months ended 30 June 2024
£m £m £m £m £m £m £m £m
Electronic Systems 298 184 (5) (6) 81 86 374 264
Platforms & Services (252) (13) - - 106 96 (146) 83
Air 214 724 (276) (135) 99 108 37 697
Maritime (150) (247) (6) (4) 148 160 (8) (91)
Cyber & Intelligence (23) 16 - - 35 24 12 40
HQ (95) (190) - - 34 34 (61) (156)
(8) 474 (287) (145) 503 508 208 837
Tax paid net of research and development expenditure credits received (134) (80)
Net cash flow from operating activities 74 757
Add back:
Net capital expenditure, lease principal amounts and financial investment
Net cash flow from operating activities
Six months ended 30 June 2025
Six months ended 30 June 2024
Six months ended 30 June 2025
Six months ended 30 June 2024
Six months ended 30 June 2025
Six months ended 30 June 2024
Six months ended 30 June 2025
Six months ended 30 June 2024
£m
£m
£m
£m
£m
£m
£m
£m
Electronic Systems
298
184
(5)
(6)
81
86
374
264
Platforms & Services
(252)
(13)
-
-
106
96
(146)
83
Air
214
724
(276)
(135)
99
108
37
697
Maritime
(150)
(247)
(6)
(4)
148
160
(8)
(91)
Cyber & Intelligence
(23)
16
-
-
35
24
12
40
HQ
(95)
(190)
-
-
34
34
(61)
(156)
(8)
474
(287)
(145)
503
508
208
837
Tax paid net of research and development expenditure credits received
(134)
(80)
Net cash flow from operating activities
74
757
Net debt (excluding lease liabilities)
Purpose
Allows management to monitor indebtedness of the Group, to ensure the Group's
capital structure is appropriate and capital allocation policy decisions are
suitably informed.
Definition
Cash and cash equivalents, less loans (including debt-related derivative
financial instruments). Net debt does not include lease liabilities.
Components of net debt (excluding lease liabilities) 30 June 2025 31 December 2024
£m £m
Cash and cash equivalents 2,153 3,378
Debt-related derivative financial instruments (net) (25) 89
Loans - non-current (7,053) (7,713)
Loans - current (641) (699)
Net debt (excluding lease liabilities) (5,566) (4,945)
3,378
Debt-related derivative financial instruments (net)
(25)
89
Loans - non-current
(7,053)
(7,713)
Loans - current
(641)
(699)
Net debt (excluding lease liabilities)
(5,566)
(4,945)
Order intake
Purpose
Allows management to monitor the order intake of the Group together with its
equity accounted investments, providing insight into future periods' sales
performance.
Definition
Funded orders received from customers including the Group's share of order
intake of equity accounted investments.
Six months ended 30 June 2025 Six months ended 30 June 2024
£bn £bn
Order intake 13.2 15.1
15.1
Order backlog
Purpose
Supports future years' sales performance of the Group together with its equity
accounted investments.
Definition
Funded and unfunded unexecuted customer orders including the Group's share of
order backlog of equity accounted investments. Unfunded orders include the
elements of US multi-year contracts for which funding has not been authorised
by the customer.
Reconciliation of order backlog, as defined by the Group, to order book(1) 30 June 2025 31 December 2024
£bn £bn
Order backlog, as defined by the Group 75.4 77.8
Deduct:
Unfunded order backlog (5.4) (5.3)
Share of order backlog of equity accounted investments (17.4) (16.6)
Add back: Order backlog in respect of orders from equity accounted investments 4.4 4.5
Order book(1) 57.0 60.4
77.8
Deduct:
Unfunded order backlog
(5.4)
(5.3)
Share of order backlog of equity accounted investments
(17.4)
(16.6)
Add back: Order backlog in respect of orders from equity accounted investments
4.4
4.5
Order book(1)
57.0
60.4
1. Order book represents the transaction price allocated to
unsatisfied and partially satisfied performance obligations as defined by IFRS
15 Revenue from Contracts with Customers.
Cautionary statement:
All statements other than statements of historical fact included in this
document, including, without limitation, those regarding the financial
condition, results, operations and businesses of BAE Systems plc and its
strategy, plans and objectives and the markets and economies in which it
operates, are forward-looking statements. Such forward-looking statements,
which reflect management's assumptions made on the basis of information
available to it at this time, appear in a number of places throughout this
document and include statements regarding the intentions, beliefs or current
expectations of BAE Systems plc concerning, amongst other things, its results
in relation to operations, financial condition, liquidity, prospects, growth,
commitments and targets (including environmental, social and governance
commitments and targets), strategies and the industry in which it operates.
Forward-looking statements can be identified by the use of forward-looking
terminology such as "believes", "expects", "may", "intends", "will", "will
continue", "should", "would be", "seeks", "anticipates" or similar expressions
or the negative thereof or other variations thereof or comparable terminology.
By their nature, forward-looking statements involve risks and uncertainties
because they relate to events and depend on circumstances that may or may not
occur in the future.
Forward-looking statements are not guarantees of future performance and the
actual results of operations, financial condition and liquidity of BAE Systems
plc, the development of the industry in which it operates and the ability of
BAE Systems plc to meet its commitments and targets may differ materially from
those made in or suggested by the forward-looking statements contained in this
document. In addition, even if results of operations, financial condition and
liquidity of BAE Systems plc, the development of the industry in which it
operates and/or performance against commitments and targets are consistent
with the forward-looking statements contained in this document, those results,
developments or performance may not be indicative of results, developments or
performance in subsequent periods.
These forward-looking statements speak only as of the date of this document.
Subject to the requirements of the Disclosure Guidance and Transparency Rules,
the Market Abuse Regulation or applicable law, BAE Systems plc explicitly
disclaims any intention or obligation or undertaking publicly to release the
result of any revisions to any forward-looking statements in this document
that may occur due to any change in its expectations or to reflect events or
circumstances after the date of it. All subsequent written and oral
forward-looking statements attributable to either BAE Systems plc or to
persons acting on its behalf are expressly qualified in their entirety by the
cautionary statements referred to herein and contained elsewhere in this
document.
BAE Systems plc and its directors accept no liability to third parties in
respect of this document save as would arise under English law. Accordingly,
any liability to a person who has demonstrated reliance on any untrue or
misleading statement or omission shall be determined in accordance with
Schedule 10A of the Financial Services and Markets Act 2000. It should be
noted that Schedule 10A and Section 463 of the Companies Act 2006 contain
limits on the liability of the directors of BAE Systems plc so that their
liability is solely to BAE Systems plc.
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