BAE Systems profits rise as contracts pay out

Harry Lye 20 February 2020 (Last Updated February 20th, 2020 13:36)

BAE Systems has seen profits rise to £1.89bn in 2019, with revenues rising to £18.3bn – a nearly £2bn increase on 2018.

BAE Systems profits rise as contracts pay out
Credit: BAE Systems.

BAE Systems has seen profits rise to £1.89bn in 2019, with revenues rising to £18.3bn – a nearly £2bn increase on 2018.

According to the company’s full-year 2019 results, sales across the group saw a 7% increase to £20.1bn as several programmes reached milestones over the last year.

In 2019, BAE’s contracts with Qatar to provide Typhoon and Hawk aircraft met contractual milestones and the company agreed to accelerate deliveries of the fighter. It also cited work on the Lockheed Martin F-35 programme and price negotiations as key operational and strategic points for the business. In 2019, BAE delivered 142 rear fuselage assemblies with a view to being full-rate production on 2020.

BAE Systems Chief Executive Charles Woodburn said: “2019 has been a year of significant progress for BAE Systems. We delivered a good set of financial results in line with guidance, growing sales and earnings, with improved operational performance and increased investment in the business to underpin our growth outlook.

The company also noted some maritime projects in its results, with the acceptance of the Aircraft Carrier HMS Prince of Wales into the Royal Navy achieved in December 2019, the acceptance of four River Class Offshore Patrol Vessels and programme completion set for 2020 seen as positives.

In 2019, the company began construction on the second of the UK’s Type 26 frigates and received £1.4bn for the programme to build new Dreadnought-Class submarines.

Woodburn added: “Strategically we took a number of actions to strengthen the portfolio and the pensions agreement announced today is good for all stakeholders. These will help to accelerate our strategy and further our growth outlook.

“We have a large order backlog and remain focused on strong programme performance to deliver a sustainable business model with enhanced financial performance.”

A presentation delivered by Woodburn and BAE Systems Chairman Sir Roger Carr showed that the company had a £45bn order backlog stretching through until nearly 2030, including programmes for the F-35, Typhoon, Dreadnought and Astute submarines, and US vehicles programmes such as the Bradley Infantry Fighting Vehicle and Armoured Multi-Purpose Vehicle (AMPV).

Going into 2020, BAE Systems said that it expects to continue to grow, predicting that earnings per share will increase mid-single digits percentages. However, the company cautioned that geopolitical uncertainties may affect this prediction.

However, in the company’s finances was a near £2bn pension deficit that BAE plans to fill over the next few years. As of October 2019, the pension deficit sat at £1.9bn with a new recovery plan in place aiming to fill the gap. In 2020 BAE plans to contribute £1.24bn to the pension fund, followed by £250m in 2021.

Of the company’s markets, the US was the most lucrative in 2019, making up 43% of sales, compared with 22% of the group’s sales being made in the UK. By activity, 39% of sales constituted Military & Technical Services and Support, with 34% of sales going on platforms. Electronic Systems was the company’s third-biggest sales activity at 22%.