BAE Systems PLC on Wednesday raised free cash flow guidance after reporting slightly better-than expected annual results, although shares eased after a strong recent run.
Pretax profit edged up 0.3% to just over £2.33 billion. Pretax profit in 2023 came in at just under £2.33 billion. Revenue rose 14% to £26.31 billion in 2024, from £23.08 billion in 2023.
On an underlying basis, revenue was up 14% at £28.34 billion from £25.28 billion, while pretax profit was 6.0% higher at £2.62 billion from £2.47 billion. Underlying earnings before interest and tax climbed 14% to £3.02 billion from £2.68 billion.
Underlying sales and underlying Ebit were narrowly higher than Visible Alpha consensus of £28.11 billion and £3.00 billion respectively.
In response, shares fell 1.8% to 1,313.00 pence each in London on Wednesday morning. They are up 8.5% over the past week, reflecting hopes of increased government spending in the defence sector.
Revenue and earnings growth reflected ‘strong programme performance’ across all sectors and the benefit of M&A activities in the year, including the acquisition of Ball Aerospace in February, BAE said.
Chief Executive Charles Woodburn said the results ‘continue our track record of strong top-line and earnings growth, free cash flow and orders.’
By division, Electronic Systems sales jumped 35% to £7.2 billion from £5.5 billion, Platforms & Services sales grew 15% to £4.4 billion from £3.9 billion, Maritime sales rose 12% to £6.2 billion from £5.5 billion and Cyber & Intelligence sales sector increased 4.3% to £2.4 billion from £2.3 billion.
Free cash flow eased to £2.51 billion in 2024 from £2.59 billion, around £900 million ahead of Visible Alpha consensus.
Order intake fell to £33.7 billion from £37.7 billion, but the order backlog rose to a record £77.8 billion from £69.8 billion.
BAE upped its annual dividend by 10% to 33.0 pence per share from 30.0p. It lifted its final dividend by 11% to 20.6p from 18.5p.
‘Our strong financial performance gives us the strategic flexibility to invest in the business to support its long-term strength and expected growth, whilst maintaining focused and disciplined capital allocation,’ BAE Systems commented.
For 2025, BAE Systems expects sales growth of 7% to 9%, underlying Ebit and underlying growth of 8% to 10%.
The firm raised its three-year cumulative free cash flow guidance for 2023 to 2025 to in excess of £6.0 billion from over £5.0 billion before. For 2024 to 2026, it increased to in excess of £5.5 billion from in excess of £5.0 billion before. For 2025 to 2027, it projects cumulative free cash flow of over £5.5 billion.
‘Based on the exceptional visibility of our record order backlog and sustainability of our value-compounding business model, we remain confident in the positive momentum of our business into the future,’ said CEO Woodburn.
BAE said its Intelligence & Security business maintains a strong pipeline of qualified business opportunities.
‘While there have been some delays in procurement decisions from the US Department of Defense, we are seeing an increase in demand driven by persistent global security challenges. The US defence services market remains fiercely competitive and can change quickly based on US government priorities. Our Intelligence Solutions business has identified cyber security as a key focus area for business growth and we continue to pursue opportunities in the Intelligence Community, federal/civilian agencies and the US Department of Defense,’ it added.
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