More than two years have passed since Russia’s invasion of Ukraine and there are scant signs of an early end to that brutal war.
The world seems more dangerous than it has in decades, with tensions rising in almost every corner of the globe.
Troubling as this may be, it puts national security at the heart of government thinking, both here and overseas. Defence spending is up and the need for well-trained, well-equipped armed services is widely acknowledged.
Jet power: BAE Systems supplies airborne early warning systems
BAE Systems is one of the largest and best-known defence companies in the world, employing around 100,000 people to design, build and maintain sophisticated kit to arm military personnel, provide surveillance and keep citizens safe.
The company makes fighter jets, armoured vehicles, submarines, frigates and drones, alongside a range of high-end electronic equipment to throw the enemy off track, ensure weapon accuracy and monitor activity from afar.
BAE is a key player in the AUKUS agreement between the UK, US and Australia and in the Global Combat Air Programme, a joint project from Britain, Japan and Italy.
The group has a substantial business in America and it is behind significant developments in cybersecurity, intelligence and even surveillance from space, helping armed forces to monitor what other countries are up to on land and sea.
At home, BAE is a key supplier to the Ministry of Defence, across ships, submarines, planes and electronic security.
The group has also developed three academies, in Barrow-in-Furness, Cumbria, Samlesbury, near Blackburn and Glasgow, training school-leaver apprentices and current staff to acquire the skills required to build next-generation kit.
Recent results suggest the group is doing a good job. Half-year sales rose by 13 per cent to £13.4 billion, profits climbed by 13 per cent to £1.4 billion and the dividend was 8 per cent ahead at 12.4p, with brokers looking for a full-year payout of 32p.
The outlook is promising, too. Chief executive Charles Woodburn has upgraded guidance for 2024, expecting higher sales and profits than previously, and the company has amassed orders of more than £74 billion stretching out for the next decade and beyond.
Dividends should continue to increase, with 34.3p pencilled in for 2025, rising to almost 38p the following year. The company is buying back its own shares, too, which tends to increase earnings and dividends over the long term.
Midas verdict: Midas recommended BAE Systems in February 2022, just as Russian tanks were rolling into Ukraine. Then the shares were £6.52. They have almost doubled since then as sales have grown and sentiment towards defence firms has become increasingly positive. Investors who bought in 2022 may wish to bank some profits but they should hold on to most of their shares as further gains are likely.
Traded on: Main market Ticker: BA. Contact: baesystems.com
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