BAE Systems: "Stong" results posted ahead of AGM - opportunity as NATO members ramp up defence spending

The defence giant, which employs 22,400 across its sites in Samlesbury, Warton and Barrow-in-Furness, issued a trading statement this morning, stating that “in 2025 we expect good growth in revenue and EBIT (Earnings Before Interest and Taxes) as well as solid cash generation.”

The company’s full year 2025 expectations are unchanged from the preliminary results announcement in February, which forecast:

· Sales +7% to +9% (2024: £28.3bn)

· Underlying EBIT +8% to +10% (2024: £3.0bn)

· Underlying EPS +8% to +10% (2024: 68.5p)

· Free cash flow (FCF) in 2025 >£1.1bn

Charles Woodburn, BAE Systems Chief Executive, said: "We've had a strong start to 2025 and are maintaining our guidance for the full year. During this time where the defence and security landscape is rapidly evolving, we are focused on delivering our long-term programme commitments to our customers, while investing in our business to boost capacity, drive efficiencies and shape our portfolio to support future growth.”

The statement goes on to comment upon opportunities posed by global unrest. It says: “The regions in which we operate are poised for higher defence spending. We expect this to provide a robust set of further opportunities across all our sectors.

“In response to the increased global security challenges, a number of European NATO members have announced significant increases in their defence budgets. We have a strong, established position in Europe and our range of products and services aligns well to the capability requirements of these nations. These include combat aircraft, combat vehicles, air defence, missile systems, artillery, munitions, drones, electronic warfare and sensor technology.

“The UK Government has stated its commitment to increase defence spending to 2.5 per cent of GDP from 2027. It has also identified defence as one of eight growth-driving sectors in its upcoming industrial strategy. We are actively engaged with the Government on its ongoing Strategic Defence Review and Defence Industrial Strategy, which will make recommendations on the nation's future defence plan in the coming months.

USA and tariffs

“In the US, a Continuing Resolution was passed in March to provide funding through the end of fiscal year 2025. The new administration has said it intends to provide the country with unmatched military strength for years to come, a plan that calls for increased spending and a reprioritisation of where it is spent. Our portfolio is well-aligned with the key priorities of US and international defence and intelligence customers, including our capabilities in combat vehicles, electronic warfare programmes, precision guidance and missile defence systems, as well as space electronics, instruments and spacecraft. As we observe evolving tariff policy, we note that the vast majority of equipment we deliver to our US customers is produced in our US operations with a largely domestic supply chain. As such, we do not expect to be materially impacted by the US tariffs, as they are currently proposed.

Asia and the Middle East

“Our key markets in Asia-Pacific and the Middle East are also expected to see higher defence spending, and we will continue to support our government customers in these regions with leading products and services.”