BAE Systems has maintained its market update for the rest of the year, citing high demand for its services and a strong pipeline of opportunities.

The company issued an update of its previous guidance outlined in its interim results which is said was underpinned by good operational performance.

Chief Executive Charles Woodburn said: “We’re evolving our business to be well positioned for growth over the medium term alongside a focus on longer-term value drivers as we ramp up investment in advanced technologies and progress our sustainability agenda. Our continued good operational performance underlines our confidence in the full year guidance for top line growth and margin expansion as well as our three-year cashflow target.

“Demand for our capabilities remains high and we have a strong pipeline of opportunities across our broad geographic portfolio that will enable our skilled, global workforce to deliver capabilities which will support our customers in responding to the evolving threat environment.”

“Pipeline of opportunities remains strong”

The statement outlined a backlog and programme positions which supported medium term growth. It added “our pipeline of opportunities remains strong with continued demand for our capabilities.” It also noted a number of strategically important contract awards across BAE’s business sectors.

Across Electronic Systems, key wins across its business areas were marked by the Limited Interim Missile Warning System and F-35 electronic warfare system readiness awards. Key milestones in technology advances ranged from unveiling the world’s smallest M-Code military GPS receiver, to receiving a DARPA contract to advance autonomy software for multi-domain mission planning. The sector will continue to progress technologies that will enable lighter weight, cost-competitive energy storage solutions for hybrid engines in aircraft.

Within the company’s Air sector, production grew as a result of production moving towards full rate levels on F-35 rear fuselage assemblies in line with long term planning assumptions of 150+ sets per annum, higher Typhoon production revenues with the first Qatari jets well into final assembly, higher Typhoon upgrade and support activity and further expansion of BAE’s Australian business.

Positive defence spending outlook

The company recorded a positive defence spending outlook in its key markets adding that many of the countries in which the company operates within, including the US, had published plans to increase their spending to counter evolving threat environments. Within the UK, the Defence Command Paper renewed commitments to BAE’s major long-term programmes in complex warship, submarine and combat aircraft design and build, allowing for long-term investment in key sovereign capabilities, as well as strong support for cyber. The statement added that the opportunity pipeline was positive with domestic, export and collaboration opportunities identified, and the company now had the capabilities to support UK customers with their space ambitions, furthered by the company’s acquisition of In-Space Missions in September.

BAE said its portfolio was also well positioned to benefit from increased defence spending in Asia Pacific through its Australia business. The recent AUKUS announcement was also noted as being strategically significant. Within Europe, BAE noted that nations including Germany and France continued to increase defence budgets to address the threat environment and move towards their 2 per cent of GDP NATO commitments. The statement added that BAE remained “well placed through our positions on the Eurofighter Typhoon, our shareholding in MBDA and our BAE Systems Hagglunds land business based in Sweden, and we are pursuing a number of significant opportunities in the region.”

The company added that defence and security would also remain a priority in the Middle East with the renewal of certain existing long-term support contracts in line with expectations.

The 2021 interim dividend of 9.9 pence per share will be paid on 30 November 2021. BAE Systems will announce its financial results for the year ending 31 December 2021 on 24 February 2022.

Covid uncertainties remain but supply chain pressures mitigated

The guidance added that uncertainties arising from the COVID-19 pandemic remained but progress had continued in combatting the virus under vaccination programmes in the company’s major markets. The statement added that BAE had also continued to effectively mitigate and manage supply chain pressures having avoided any material impacts on our performance to date. It added: “In many cases, we benefit from long-term programme positions and incumbencies with more stable forward visibility for long-lead items allowing us to continue to actively manage supplier lead times against demand requirements.”

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