BAE Systems delivers stronger sales as countries increase military spending following Russian invasion of Ukraine

The FTSE 100-listed company said that many of the countries it operates in have either announced increases in defence spending, or are making plans to lift spending “to address the elevated threat environment”.

Most major defence programmes tend to be long-lasting and involve contracts trading for many years, which means the firm expects to grow in the long-term.

BAE, which builds ships, submarines and fighter jets, reported £18bn in orders secured in the first half of the year, and a further £10bn since then.

It said it is on track to have a “very strong” year of orders and expects margins to grow into the new year.

Furthermore, the recent strengthening of the dollar against the pound could propel its reported earnings by a significant amount, with sales expected to increase by 7 per cent to 9 per cent for the full year.

Charles Woodburn, BAE’s chief executive, said: “Looking forward, our large order backlog, diverse portfolio position and focus on programme performance position us well for another year of top-line growth and margin expansion in 2023.

“We see sales growth coming from all sectors and opportunities to further enhance the medium-term outlook as our customers address the elevated threat environment.”

Commenting on the results, Sophie Lund-Yates, Equity Analyst at Hargreaves Lansdown said: “There are a few things that BAE is beholden to, and one of those is government defence budgets. We’ve learned today that many of the countries the defence giant operates in are upping their defence spending in response to the more threatening geopolitical climate.

"This should feed into a sticky source of revenue for the group. New government contracts tend to be long-term in nature, giving BAE exceptional visibility over demand, which is hard to find in today’s uncertain environment.

"Since the half year the defence group has seen £10bn of order intakes and profits on a constant currency are expected to come in in-line with expectations.

“The group is still grappling with supply chain issues, especially in areas of the business that rely on microelectronics. For now, BAE is able to offset the worst of these issues, operating in a sector with high barriers to entry means margins can enjoy a certain level of protection. However, an extremely protracted bout of disruption could cause pain.

“There are of course higher risks associated with investing in defence, not least that the sector is excluded from some institutional products, which caps investor interest.”

BAE Systems employs nearly 13,000 people at sites across the UK. The BAE Systems facility at Brough, in East Yorkshire, plays a significant role in the company’s military aircraft business.

It has been the engineering centre for the BAe Hawk trainer, many hundreds of which remain in service with air forces throughout the world, as well as the UK centre for Military Aircraft Structural Testing.