Lockheed Martin F-35 takes off
Analysts at Shore Capital have said there will be ‘more upgrades to come’/Image source: Adobe
  • Revenue rises by 13% to £11 billion
  • EBIT guidance raised by 200 bps to 6% to 8%
  • New £1.5 billion share buyback programme

Shares in BAE Systems (BA.), one of the world’s leading defence firms, gained over 5% to 985p in early morning trading as the company reported a positive set of first half results lifted by the ongoing crisis in Ukraine and a ‘strong order intake.’

Underlying earnings before interest taxation (EBIT) for the six months ending 30 June 2023 increased to £1.25 billion from £1.11 billion in the same six-month year ago period giving a steady return on sales of 10.5%.

Sales in the first half increased by £1.4 billion to £12 billion compared to £10.6 billion in the same six-month year ago period, an increase of 11% on a constant currency basis.


The defence firm also announced a share buyback scheme equivalent to around 5% of its market cap.

‘This is not an insignificant amount and clearly demonstrates management’s confidence in the growth and cash generation prospects of the group. It also suggests that large M&A (mergers and acquisitions) is likely off the table – in the recent months BAE was rumoured to be in the running for Ball Aerospace – a positive in our view, given how expensive such a deal would likely have ended up being’, commented Quilter Cheviot analyst Jarek Pominkiewicz.

BAE Systems full year results lifted by Middle East and Ukraine conflicts

Share buybacks amounted to £376 million in the first half of 2023, reflecting repurchases under the £1.5 billion share buyback programme that started in July 2022.

The 2021 share buyback programme for £500 million was completed in February 2022, of which £130 million was spent in the comparative period to 30 June 2022.

In total, £884 million has been returned to shareholders through share buybacks and dividends in the period.


Chief executive Charles Woodburn remains confident of delivering ‘sustained growth in the coming years’ giving the firm ‘confidence to continue investing in new technologies, facilities and highly-skilled jobs in local communities’.

The group has made impressive progress in the first half of the year on the back of the Australia-UK-US trilateral programme announced on 13 March, with BAE Systems playing a key role in helping Australia commission its first nuclear power submarines.

BAE Systems also received support from the Ministry of Defence to boost technologies for the UK’s future combat aircraft, with a contract extension worth £700 million to ‘build on the science, research and engineering already completed under the first phase of the contract delivered by UK Tempest partners BAE Systems, Leonardo UK,  MBDA UK and Rolls-Royce (RR.)’.

As a result of this confidence, the firm raised its outlook for 2023 with sales growth seen increasing by 200 basis points (bps) to 5% to 7% reflecting ‘the accelerated spend profile on the Dreadnought programme and good demand and operational performances across all sectors’, while underlying EBIT (earnings before interest and tax) guidance is increased by 200 bps to 6% to 8% reflecting the sales profile and ‘good operational performance’.


Shore Capital analyst Jamie Murray said he expects more upgrades to come, adding 'These results are a vote of confidence for the group and supports our view that BAE Systems deserves to retain its position as the premium option across our UK defence coverage.

'The shares have fallen circa 10% from recent highs in late April; we think this is due to the US debt ceiling saga and the failed Wagner mutiny, both of which are now in the rear-view mirror’, added Murray



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Issue Date: 02 Aug 2023