BAE Systems upgrades forecasts as defence orders at record

By Sarah Young

LONDON (Reuters) -Britain's biggest defence company BAE Systems upgraded its earnings guidance for 2023 to growth of 10%-12%, saying increased global uncertainty had driven military equipment orders to a record level.

Shares in the company jumped 4.9% to 979 pence at 0916 GMT. The stock has risen 19% over the last 12 months.

BAE Systems said its strong operational performance plus demand from its customers - the biggest of which in order of size are the United States, Britain, Saudi Arabia and Australia - meant its full-year results would be better than expected across the board.

Since Russia invaded Ukraine in February last year, demand for weapons, ammunition and equipment has soared as western allies support Ukraine and increase their own stocks, while in the Asia-Pacific region, growing threats are also driving defence spending.

For 2023, BAE, which makes submarines, fighter jets, combat vehicles and other kit, said earnings per share would grow 10%-12%, compared to the 5%-7% increase it had forecast in February, while it also lifted sales guidance to 5%-7% growth from 3%-5%.

Chief Executive Charles Woodburn said BAE's broad spread was key to its growth, highlighting its provision of defence across the air, sea, land, space and cyber theatres of war.

"It's that combination of a strong geographic footprint and broad spectrum of capabilities that you see come through as a strength of the portfolio," he told reporters on Wednesday.

The company was well-positioned to deliver sustained growth in the coming years, he added, with a record order backlog of 66.2 billion pounds ($84.5 billion).

Hargreaves Lansdown analyst Aarin Chiekrie said more progress was expected.

"With some of its biggest buyers, the UK, US and Europe, all expected to continue raising defence budgets over the coming years, the sky really is the limit," the analyst said.

For the first six months of the year, BAE's underlying earnings per share rose 17% to 29.6 pence, and it lifted its interim dividend by 11% to 11.5 pence per share.

The company approved a further share buyback of up to 1.5 billion pounds.

During the period, BAE won an order from the Czech Republic for 246 infantry fighting vehicles and its MBDA unit was contracted by Poland to supply missiles and launchers.

Woodburn said BAE's plan to set up a Ukrainian base to produce and repair weapons from tanks to artillery was "progressing", but he did not provide a timeline.

($1 = 0.7831 pounds)

(Reporting by Sarah Young, Editing by Paul Sandle, Kate Holton, Christian Schmollinger and Barbara Lewis)