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Tempest jet fighter moves a step closer with £250m funding boost

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Tempest jet
Tempest jet

Defence giant has BAE Systems has signed a £250m deal for the next stage of development of the new Tempest future fighter.

The agreement with the Ministry of Defence came as the FTSE 100 business reported a “strong” first-half performance that led it to raise the dividend by 5pc and launch a £500m share buyback.

BAE is working with leading British defence businesses including Rolls-Royce, MBDA and Leonardo on Tempest, a programme aimed at delivering the next generation of fighter for the RAF by 2035.

The latest round of funding officially moves Tempest to the concept and assessment phase, where BAE and its partners will develop digital concepts that the company said will “evaluate and shape the final design and capability requirements” of the aircraft.

In the six months to the end of June, BAE reported revenue 2pc higher at £9.3bn and pre-tax profits almost doubling to £1.2bn.

It expected full-year sales to rise by between 3pc and 5pc, although the strengthening pound could mean ending the year at the lower end of the range. It was back above $1.39 on Thursday as the dollar weakened.

BAE's major customers include the US and Saudi Arabian militaries, meaning that a stronger pound harms exports.

Despite sterling’s gains, BAE said its “strong operational performance” meant it still expected underlying profits to rise at a higher rate than previously expected.

Charles Woodburn, chief executive, said: “We have delivered a strong first-half performance which underlines our confidence in the full-year guidance for top line growth, margin expansion and three-year cash targets.”

Governments have largely maintained, or even upped, defence spending during the pandemic, boosting arms companies.

BAE highlighted strong performances from its work on the F-35 jet during the half year, saying it had now delivered 900 electronic warfare systems for the stealth jets, and production of the rear fuselages it builds for the aircraft at its factories the UK is rising towards full-rate levels.

The share buyback - BAE’s first since 2013 - will begin immediately and run for a year.

The dividend is being raised by 0.5p to 9.9p.

Shares rose almost 3pc to 577p.

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