11th Nov 2020 09:33
(Alliance News) - BAE Systems PLC said Wednesday its trading in the second half has been "resilient" amid "challenging times".
For 2020, BAE said its sales and cashflow guidance remains unchanged from what it offered in its interim results at the end of July. Sales were guided then to increase by a low-single digit percentage from 2019, when BAE reported revenue of GBP18.3 billion. Cashflow was guided at GBP800 million - excluding a GBP1 billion pension payment.
Underlying earnings per share are now expected to be slightly higher than previously guided with good operational performance and an expected lower tax rate offsetting the negative foreign exchange impact. Previously, BAE guided for underlying earnings per share to fall by a mid-single digit percentage from 2019's figure of 45.8 pence.
Shares in the aerospace firm were 2.1% higher in London on Wednesday morning at 473.50 pence each.
"We have continued to deliver a resilient performance in line with our expectations for a strong second half, thanks to the outstanding efforts of our employees in these challenging times," Chief Executive Charles Woodburn said.
In the US, BAE said its US-based portfolio remains "well aligned" to customer priorities and growth areas, which it expects to continue under the next administration.
"The backlog for the US based business has continued to grow organically and through the two acquisitions made earlier this year. This backlog provides good visibility of growth in the US business," BAE added.
The two-year budget deal enacted in 2019 established a defence spending level of about USD740 billion for financial year 2021.
Turning to the UK, BAE noted the the government has recently re-stated its commitment to meeting the NATO target of spending of at least 2.0% of gross domestic product on defence.
"The government's Integrated Foreign Policy, Defence & Security Review is ongoing and the Ministry of Defence has stated it is progressing its contribution to this review by planning how best to meet tomorrow's threats," BAE said.
The firm noted it holds a "stable" outlook for its UK operations, with defence revenues centred around long-term, contracted and critical defence programmes in the Air and Maritime domains.
It also noted it has limited UK-EU trading and the majority of the UK workforce are UK nationals - so any resulting near-term Brexit impacts across the business are "likely to be limited".
Woodburn added: "From a position of strength, the actions we took in quarter two to enhance our resilience are working well as reflected in our guidance, ensuring we continue to deliver on our customer priorities, whilst keeping our employees safe. Demand for our capabilities remains high and we recognise our role not only in supporting national security, but also in contributing to the economies of the countries in which we operate."
In Australia, BAE believes the Hunter Class Frigate programme will see its business "grow significantly in the coming years".
The Australian government announcement in July to increase its 10-year investment in new and upgraded defence capabilities from AUD195 billion to AUD270 billion.
In Europe, BAE believes it is "well placed", due to its Eurofighter Typhoon, its shareholding in MBDA and the BAE Systems Hagglunds Swedish based land vehicles business.
"Demand for our capabilities remains high with order intake expectations for the group ahead of our original pre Covid planning for the year," BAE concluded.
"Our large order backlog and incumbent programme positions are expected to lead to strong and profitable top line growth with increasing cash conversion in the coming years."
By Paul McGowan; [email protected]
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