Defence firm BAE Systems (BA.) gained 2.2% to 473.6p as it nudged up earnings guidance for 2020.
While full year guidance for sales and cash flow was maintained, the company said it expected underlying earnings per share to be slightly higher than previously guided thanks to a better operational performance and an expected lower tax rate.
The company confirmed an interim dividend of 9.4p would be paid on 30 November and also said it had order intake expectations ahead of original pre-Covid planning for the year.
In the US, the group expects its business to continue growing under the incoming Biden administration. Its order book has expanded organically and through two acquisitions made earlier this year.
These deals, a $1.9bn acquisition of a military GPS system (Military Global Position System or MGP for short) from US firm Collins Aerospace and a $275m purchase of Raytheon’s Airborne Tactical Radios division, also boosted BAE’s footprint in areas of priority for defence spending, namely weapon systems and defence electronics.
US BUDGET ALREADY INKED
The two-year budget deal enacted in the US in 2019 established a defense spending level of around $740 billion for the 2021 fiscal year.
As lawmakers continue to work on authorisation and appropriations bills, Congress passed a Continuing Resolution to provide funding through 11 December, with the CARES Act also extended through the same period.
In the UK, the Government has recently re-stated its commitment to meeting the NATO target of spending of at least 2% of GDP on defence while its Integrated Foreign Policy, Defence and Security Review is ongoing.
The company sees 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.
The group 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 modest.
