REG - BAE SYSTEMS PLC - AGM Trading Statement

BAE SystemsAnnouncement

Wed 07:00

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RNS Number : 5753H  BAE SYSTEMS PLC  07 May 2025

BAE Systems - Market update

7 May 2025

BAE Systems is providing the following market update ahead of its Annual
General Meeting today.

 

Highlights:

·    Trading so far this year in line with management's expectations.

·    Full year guidance maintained.

·    Order backlog and pipeline of work on incumbent positions provide
good visibility and support long-term growth.

·    Well positioned to capture additional defence spending.

·    Investing to support growth.

 

Charles Woodburn, BAE Systems Chief Executive, said:

"We've had a strong start to 2025 and are maintaining our guidance for the
full year. During this time where the defence and security landscape is
rapidly evolving, we are focused on delivering our long-term programme
commitments to our customers, while investing in our business to boost
capacity, drive efficiencies and shape our portfolio to support future
growth."

 

Trading update

Trading so far this year is in line with management's expectations. Our
operational performance continues to be strong as we focus on consistent
delivery of critical capabilities and technologies for our customers around
the world. We are therefore maintaining our guidance for 2025.

 

Guidance

In 2025 we expect good growth in revenue and EBIT as well as solid cash
generation. Our full year 2025 guidance remains unchanged from the preliminary
results announcement published on 19 February 2025.

·    Sales
          +7% to +9% (2024: £28.3bn)

·    Underlying EBIT
+8% to +10% (2024: £3.0bn)

·    Underlying EPS
+8% to +10% (2024: 68.5p)

·    Free cash flow (FCF) in 2025
>£1.1bn

Guidance is provided on a constant currency basis using a GBP:USD exchange
rate of 1.28 for the year, which is in line with the average exchange rate in
2024. The average exchange for the year to date is 1.28 (as at 6 May) and the
current spot rate is 1.34.

As a guide to our sensitivity to foreign exchange rates, a 5 cent movement in
the GBP:USD exchange rate impacts sales by c.£525m, underlying EBIT by
c.£75m and underlying EPS by c.1.4p.

 

Order intake

Notable awards received in the year to date include:

·    Armored Multi-Purpose Vehicles - $356m award to procure long-lead
material to support a definitised full rate production contract expected in
the second half.

·    ARCHER mobile howitzers and TRIDON Mk2 systems - artillery package
approaching $300m in total including 18 ARCHERs, further TRIDON Mk2 systems
and additional artillery location radar systems.

·    Amphibious Combat Vehicles (ACV) - awarded two full-rate production
contracts from the US Marine Corps totalling more than $360m for ACV-30mm
vehicles, to include fielding support, spares and test equipment.

·    Integration Support Contract (ISC) - Intelligence & Security
received a nearly $800m contract in January to extend our ISC services to the
US Air Force with options through to July 2027.

·    Canadian River-class Destroyer - contract for next phase of Canada's
River-class destroyer programme.

·    MBDA - c£600m for various domestic and export awards.

 

Market backdrop of increased defence spending

The regions in which we operate are poised for higher defence spending. We
expect this to provide a robust set of further opportunities across all our
sectors.

 

In response to the increased global security challenges, a number of European
NATO members have announced significant increases in their defence budgets. We
have a strong, established position in Europe 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.

 

The UK Government has stated its commitment to increase defence spending to
2.5% of GDP from 2027. It has also identified defence as one of eight
growth-driving sectors in its upcoming industrial strategy. We are actively
engaged with the Government on its ongoing Strategic Defence Review and
Defence Industrial Strategy, which will make recommendations on the nation's
future defence plan in the coming months.

 

In the US, a Continuing Resolution was passed in March to provide funding
through the end of fiscal year 2025. The new administration has said it
intends to provide the country with unmatched military strength for years to
come, a plan that calls for increased spending and a reprioritisation of where
it is spent. Our portfolio is well-aligned with the key priorities of US and
international defence and intelligence customers, including our capabilities
in combat vehicles, electronic warfare programmes, precision guidance and
missile defence systems, as well as space electronics, instruments and
spacecraft.

 

As we observe evolving tariff policy, we note that the vast majority of
equipment we deliver to our US customers is produced in our US operations with
a largely domestic supply chain. As such, we do not expect to be materially
impacted by the US tariffs, as they are currently proposed.

 

Our key markets in Asia-Pacific and the Middle East are also expected to see
higher defence spending, and we will continue to support our government
customers in these regions with leading products and services.

 

Shaping our portfolio to support future growth

We continue to invest in our technologies, facilities and people to 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 research and development (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 air
systems, synthetic training, electrification applications and space solutions.

 

We are building on more than £1.0bn of capital expenditure in 2024, as we
increase capacity for the future as well as develop and modernise our systems.
This includes a new explosives filling facility in South Wales, a new
shipbuild assembly hall in Glasgow and a modern shiplift and land-level repair
complex in Florida, all of which are expected to become operational in the
summer.

 

We continue to hire and train people to enable us to deliver for our
customers. In the UK alone, we intend to recruit more than 2,400 apprentice,
undergraduate and graduate roles this year.

 

Capital distributions

The 2024 final dividend of 20.6 pence per share will be paid, subject to
shareholder approval, on 2 June 2025.

 

As at 6 May, we have completed £392m of the three-year up to £1.5bn share
buyback programme, which commenced in July 2024.

 

Half year results

BAE Systems will announce its results for the six months ending 30 June 2025
on 30 July 2025.

 

For further information please contact:

 Investors                                                           Media
 Paul Checketts                                                      Kristina Anderson

 Investor Relations Director                                         Director, Media Relations

 Telephone: +44 (0) 3300 46 6802                                     Telephone: +44 (0) 7540 628673

 Email: investors@baesystems.com (mailto:investors@baesystems.com)   Email: Kristina.anderson@baesystems.com
                                                                     (mailto:Kristina.anderson@baesystems.com)

 

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, involve known and unknown 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, performance or achievements of BAE Systems plc or the markets
and economies in which BAE Systems plc operates may differ materially from
those made in or suggested by the forward-looking statements contained in this
document. These forward-looking statements speak only as of the date of 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 contains 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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