The plan from BAE, which builds combat ships, submarines and fighter jets, to increase returns for investors stands out at a time when many companies have suspended their dividends to conserve cash and ride out the impact of COVID-19.
Defence has been one of the few sectors largely unaffected by the coronavirus pandemic, with governments sticking to military and security commitments, and in some cases raising them. BAE’s main customers are the U.S., UK and Saudi Arabia.
For the full-year, BAE said it expected underlying earnings per share to grow by 3% to 5% over last year’s result, despite the strengthening of the pound against the dollar and even if the higher exchange rate continues, representing an improvement on previous forecasts.
BAE Systems said that it derived confidence from ongoing projects, as its facilities delivered over 900 electronic warfare systems to the F-35 fighter jet programme, and automation improvements helped it ramp up production of combat vehicles.
For the half-year ended June 30, BAE said it would pay an interim dividend of 9.9 pence per share as well as commence a 12-month share buyback programme. Underlying earnings per share rose 25% to 21.9 pence in the period, it said.
($1 = 0.7177 pounds)
(Reporting by Sarah Young; Editing by Kate Holton)
Chief Executive Charles Woodburn said the company’s good operational performance underlined its confidence in its guidance for top line growth and margin expansion this year, and its three-year cash targets.
“Strategically, our geographically diverse portfolio is aligned to growing defence budget areas; we’re ramping up investment in self-funded R&D aligned to customer focus areas and we’re leveraging our leading capabilities in evolving markets to ensure we’re increasingly well placed to deliver for all our stakeholders,” he said.
BAE said there was positive momentum in its Platforms & Services (US) unit and combat vehicle production across multiple platforms continued to ramp up and was on track to meet agreed delivery schedules.
U.S. ship repair was improving following COVID-19 and other disruptions last year, it said, and Applied Intelligence had a good start to the year with an improved performance.
BAE has forecast a year of top-line growth, with sales expected to grow by 5% to 7% when the impact of currency exchange is excluded, and underlying earnings to increase in excess of 10% excluding currency.
Free cash flow for 2021 is anticipated to be in excess of 1 billion pounds ($1.4 billion), with a three-year target for 2021 to 2023 in excess of 4 billion pounds, it said in March.
($1 = 0.7047 pounds)
(Reporting by James Davey and Paul Sandle; Editing by Kate Holton)