BAE Systems eyes more growth in 2021, confident on long-term

By Sarah Young

LONDON (Reuters) – British defence company BAE Systems forecast another year of growth in 2021, helped by Germany’s recent order for Typhoon jets and strong demand in its Electronic Systems unit, and was confident about its longer term outlook.

Defence has so far 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, which builds combat ships, submarines and fighter jets, said that underlying earnings per share would rise by between 3% and 5% in 2021.

Two big acquisitions it made last year in the United States, its biggest market, would boost its higher-margin Electronic Systems unit, which provides flight controls, electronic warfare and surveillance capabilities, it said.

Further in the future, BAE Systems is confident of more Typhoon orders and extra work in Britain, its second biggest market.

Chief executive Charles Woodburn said he expected additional orders from Germany for some Tornado replacements and said there were other European opportunities to go for, believed to include Switzerland and Finland.

“The outlook for Typhoon today is frankly the best I’ve seen it since I’ve been CEO of the business,” he told reporters on Thursday. He took on the top job in 2017.

BAE also expects to benefit from the UK’s biggest military spending increase since the Cold War, announced last November by the Prime Minister who named-checked BAE’s Tempest project.

“I mean obviously that again is very good news for one of our very important flagship long term programmes,” Woodburn said.

Tempest is a British-led project to build a new fighter jet alongside partner nations Italy and Sweden, which BAE hopes will eventually replace Typhoon at its production facilities.

Shares in BAE traded up 1% to 501.8 pence in early trading. The stock has lost 22% of its value over the last 12 months despite its strong performance during the pandemic.

For last year, BAE posted underlying earnings per share of 46.8 pence, a 2% rise on last year, and beating a consensus forecast of 43.7 pence.

Disruption at its factories due to COVID-19 was shortlived and strong growth elsewhere offset declines in sales to commercial aviation customers impacted by the pandemic.

In a year when many companies were left cash-strapped by COVID-19 and axed their dividends, BAE announced a dividend of 23.7 pence for 2020, higher than the 23.2 pence it paid out in respect of 2019.

(Reporting by Sarah Young; Editing by James Davey and Elaine Hardcastle)