2023 half year results
Charles Woodburn, Chief Executive
We’ve delivered a strong financial performance in the first half of the year, thanks to the outstanding efforts of our employees. Our global footprint, deep customer relationships and leading technologies enable us to effectively support the national security requirements and multi-domain ambitions of our government customers in an increasingly uncertain world. With a record order backlog and good operational performance, we’re well positioned to continue delivering sustained growth in the coming years, giving us confidence to continue investing in new technologies, facilities, highly-skilled jobs and in our local communities. Charles Woodburn, Chief Executive
Financial performance measures as defined by the Group
  Six months ended
30 June
 Six months ended
30 June
Year ended
31 December
Sales £12,018m £10,581m £23,256m
Underlying EBIT £1,258m £1,112m £2,479m
Underlying earnings per share 29.6p 24.5p 55.5p
Free cash flow £1,070m £123m £1,950m
Net debt (excluding lease liabilities) £(1,833)m £(3,135)m £(2,023)m
Order intake £21.1bn £18.0bn £37.1bn
Order backlog £66.2bn £52.7bn £58.9bn
Financial performance measures derived from IFRS
  Six months ended
30 June
Six months ended
30 June
Year ended
31 December
Revenue £10,997m £9,739m £21,258m
Operating profit £1,233m £1,028m £2,384m
Basic earnings per share 31.8p 19.6p 51.1p
Dividend per share 11.5p 10.4p 27.0p
Net cash flow from operating activities £1,484m £493m £2,839m
Group’s share of net post-employment benefits surplus £638m £940m £646m
Order book £55.3bn £42.5bn £48.9bn
Financial highlights
Financial performance measures as defined by the Group
  • Order intake of £21.1bn, resulting in a record order backlog of £66.2bn.
  • Sales increased by 11% to £12.0bn.
  • Underlying EBIT up 10% to £1.3bn.
  • Underlying earnings per share increased by 17% to 29.6p.
  • Free cash flow of £1.1bn.
Financial performance measures as derived from IFRS
  • Revenue increased by 13% to £11.0bn
  • Operating profit up 20% to £1.2bn.
  • Basic earnings per share up 62%3 to 31.8p.
  • Net cash flow from operating activities of £1.5bn.
Capital distributions
  • The directors have declared an interim dividend of 11.5p per share in respect of the half year ended 30 June 2023. This represents an increase of 11% compared to the interim dividend declared in respect of the half year ended 30 June 2022. This will be paid on 30 November 2023 in line with our usual dividend timetable.
  • Commenced third tranche of £1.5bn share buyback programme on 1 June 2023. As at 30 June 2023, the Company had repurchased 123.5m shares under this programme in aggregate at a total price, including transaction fees, of £1.0bn, with 40.5m shares repurchased since 1 January 2023 at a total price, including transaction fees, of £0.4bn.
  • The directors have also approved a further share buyback programme of up to £1.5bn. This further programme is expected to roll-on after completion of the current buyback programme and complete within three years of its commencement.
Strategic progress
During the first half of the year, we have continued to deliver against our strategic priorities to: drive operational excellence; continuously improve competitiveness and efficiency; and advance and further leverage our technology. Examples of this in the period include:
  • On 13 March, as part of the AUKUS trilateral programme between Australia, the United Kingdom and the United States, it was announced that BAE Systems will play a key role in helping Australia to acquire its first nuclear powered submarines. The three nations will deliver a trilaterally-developed submarine, based on the UK’s next-generation design, incorporating technology from all three nations. Australia and the UK will operate SSN-AUKUS as their submarines of the future, with construction expected to begin this decade.
  • BAE Systems has received new investment from the Ministry of Defence to boost technologies for the UK’s future combat aircraft. The contract extension, worth £0.7bn, will build on the innovative 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.
  • BAE Systems and Heart Aerospace, a Swedish electric airplane maker, announced a collaboration to define the battery system for Heart’s ES-30 regional electric airplane. The battery will be the first-of-its-kind to be integrated into an electric conventional take-off and landing (eCTOL) regional aircraft, allowing it to efficiently operate with zero emissions and low noise. 
  • BAE Systems and Microsoft have signed a strategic agreement aiming to support faster and easier development, deployment and management of digital defence capabilities for our customers. 
Operational highlights
  • On 24 May, the Czech Republic awarded BAE Systems Hägglunds a contract to produce 246 CV90 MkIV infantry fighting vehicles in seven different variants. The contract is valued at £1.8bn. The CV90s will be developed and delivered through an industrial partnership with Czech industry to meet the requirements of the Czech Ministry of Defence and the intention of maintaining national sovereignty for the Czech Republic.
  • In Electronic Systems, our newest state-of-the-art facilities, which were recently opened in: Manchester, New Hampshire; Cedar Rapids, Iowa; and Austin, Texas, are now providing world-class work environments that support innovation, production and teamwork, which will help us to continue to deliver cutting-edge technology to our customers.
  • Our Combat Mission Systems business, within our Platforms & Services sector, once again received the James S. Cogswell Outstanding Industrial Security Achievement Award from the Defense Counterintelligence and Security Agency (DCSA) for two of its facilities. This award has a rigorous selection process with only 19 facilities receiving the award from around 13,000 cleared facilities.
  • In our Air sector, activity on our Qatar Typhoon and Hawk programmes continued. Four further Typhoon deliveries took place in the period, with a total of 12 aircraft now in service with the Qatar Emiri Air Force.
  • MBDA has been contracted by the Polish Armament Agency to supply Launchers and Common Anti-Air Module Missiles (CAMM) for Poland’s PILICA+ Air Defence upgrade programme. The contract is the largest European short-range Air Defence acquisition programme in NATO.
  • In Maritime, the fifth Astute class submarine, HMS Anson, left our Submarines site in Barrow-in-Furness during February to begin sea trials with the Royal Navy. The steel cut ceremony for the fourth of eight Type 26 frigates, HMS Birmingham, took place in April. 
This is a strong set of half-year results delivering good sales and earnings growth, and giving us confidence to increase our year-end guidance for sales, underlying EBIT, underlying earnings per share and free cash flow. The record order backlog and continued good operational performance gives us more visibility and confidence in our three financial priorities - sales growth, margin expansion and high sustained cash conversion, operating under a disciplined capital allocation policy. Brad Greve, Group Finance Director
2023 Upgraded Group guidance 
While the Group is subject to geopolitical and other uncertainties, the following upgraded guidance is provided on current expected operational performance.
The guidance is based on the measures used to monitor the underlying financial performance of the Group. Reconciliations from these measures to the financial performance measures defined.
Sales guidance is increased by 200 bps to 5% to 7%, reflecting the accelerated spend profile on the Dreadnought programme and good demand and operational performance across all sectors.
Underlying EBIT guidance is increased by 200 bps to 6% to 8%, reflecting the sales profile and good operational performance.
Underlying earnings per share guidance is increased by 500 bps to 10% to 12%, reflecting higher profit, higher interest income and a reduction in the expected tax rate to 19%.
Cash generation for the first half of the year was strong, driven by advance payments, and is expected to be maintained through the year and we are therefore increasing our in-year free cash guide by £600m to >£1.8bn.
Our three-year cumulative free cash flow guidance has been upgraded, as shown in the table below.
Group guidance
Guidance is provided on the basis of an exchange rate of $1.24:£1, which is in line with the actual 2022 exchange rate, and therefore guidance is the same for both reported and constant exchange rates.
Year ended 31 December 2023     Updated Guidance     Previous Guidance Year ended 31 December 2022 Results
Sales Increase by 5% to 7% Increase by 3% to 5% £23,256m
Underlying EBIT Increase by 6% to 8% Increase by 4% to 6% £2,479m
Underlying earnings per share Increase by 10% to 12% Increase by 5% to 7% 55.5p
Free cash flow > £1.8bn > £1.2bn £1,950m
Cumulative free cash flow guidance Updated Guidance Previous Guidance  
Cumulative free cash flow 2023-2025 £4.5bn to £5.5bn £4bn to £5bn  
Cumulative free cash flow 2022-2024 In excess of £5.0bn In excess of £4.5bn  
Cumulative free cash flow 2021-2023 In excess of £5.5bn In excess of £5.0bn  
•    Underlying finance costs c.£220m
•    Effective tax rate c.19%
•    Non-controlling interests c.£80m
Sensitivity to foreign exchange rates: the Group operates in a number of currencies, the most significant of which is the US dollar. As a guide, a 5 cent movement in the £/$ exchange rate will impact sales by c.£400m, underlying EBIT by c.£55m and underlying earnings per share by c.1p.

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