Bumper order book boosts BAE shares

BAE Systems reported a record order backlog alongside its full year results for 2023. The company said orders had hit a record level of £69.8 billion, thanks to the firm landing deals worth £37.7 billion last year.

The defence contractor was awarded a number of major contracts in 2023, including multiple orders for its combat vehicle business Hägglunds and the SSN-AUKUS submarine, the new nuclear model set to replace the existing fleet in the British and Australian Royal Navies in the coming years.

BAE: Record order book

As part of the AUKUS pact between Australia, the UK and the US, funding of £3.95 billion was secured from the UK Ministry of Defence for the next phase of the UK's submarine programme. BAE also landed £2.4 billion of orders for the Dreadnought submarine, with three boats currently under construction.

Total revenues rose 9% to £25.3 billion (from £23.3 billion in 2022), while underlying earnings before interest, tax and depreciation and amortisation (EBITDA) increased by 9% to £2.7 billion.

In addition, BAE won a contract with the Czech Republic for its 246 CV90 MkIV infantry fighting vehicle and another with the Polish military for upgrading its PILICA+ Air Defence programme. The company increased the total dividend by 11.1% to 30p, with a final dividend of 18.5p.

"Our performance, combined with our global footprint and record order intake, means we're well-positioned for sustained growth in the coming years,” chief executive Charles Woodburn told investors. “We'll keep driving the business forward, investing in new technologies, facilities and our people. This will help us deliver on our order backlog and help ensure our government customers stay ahead in an uncertain world."

The AMPV combat vehicle is also now in full production, while BAE also won a 10-year contract to continue operating the US Army Ammunition Plant in Holston, Tennessee. Meanwhile, the company is working with Mitsubishi in Japan and Leonardo in Italy on the next generation stealth fighter under the Global Combat Air Programme with Italy, Japan and the UK.

BAE buys US firm Ball Aerospace

BAE has snapped up Ball Aerospace, a provider of spacecraft and antenna systems based in Colorado, for £4.4 billion. The deal for the company, which works with the US military, boosts its satellite design and build capabilities. The company paid part cash and debt for the US firm.

Meanwhile, BAE is continuing its share buyback programme, with £1.2 billion returned to shareholders under the 2022 scheme and a further £1.5 billion approved in August.

The shares are up 38% this year to 1243p but continue to be worth watching, given the ongoing political turmoil in the Middle East, Ukraine and South China Sea.

Past performance is not a guide to future performance.