Defence group embarks on £500m share buyback after strong interim results

Charles Woodburn
X The Business Desk

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Defence giant BAE Systems increased revenues and profits in the six months to June 30, it revealed today.

Turnover, as defined by IFRS, was £9.33pbn, up from £9.180bn, while pre-tax profits of 1.151bn compared with £689m the previous year. The interim dividend has been raised from 9.4p per share last year, to 9.9p.

The group operates factories in Warton and Salmesbury, near Preston, building military aircraft, and a submarine building facility in Barrow. It employs around 15,000 staff in Lancashire and Cumbria.

It said it has sustained operational momentum in the first half of the year and has delivered a strong set of results with growth in order intake, sales, underlying EBIT and free cash flow versus the same period last year, adding: “We have remained focused, continued to meet our commitments to our customers and delivered positive results across our global portfolio.

“We have continued to integrate successfully the Airborne Tactical Radios and Military Global Positioning System businesses acquired last year. Both have made a positive contribution with the favourable outlook prospects from existing capabilities alongside evolving synergy opportunities with the wider Electronic Systems portfolio.”

Strategically, it said its geographically diverse portfolio is aligned with growing defence budgets and it is leveraging its leading capabilities in evolving markets. As expected, the near-term Brexit impacts across the business have been limited.

Financial focus is on margin expansion and cash conversion over the medium term and performance in the first half has demonstrated positive progress in line with expectations in both areas.

It said it has also made good progress against its strategic priorities of operational performance, investing in technology, driving its competitiveness as well as accelerating its sustainability agenda.

Chief executive, Charles Woodburn, said: “Thanks to the outstanding efforts of our employees across the group, 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.

“We are well positioned for sustained growth in the coming years and are ramping up our investments in advanced technologies to deliver capabilities for our customers in the face of an evolving threat environment.

“Following the decisive action taken to accelerate our UK deficit pension payments in 2020, the committed investment in the business coupled with the good operational performance, we are driving enhanced cash generation.”

He added: “This enables us today to announce a five per cent increase in the interim dividend as well as initiating a new share buyback programme of up to £500m.”