Britain’s biggest defense contractor BAE Systems expects to benefit from increased government spending on defense as geopolitical tensions mount after Russia’s invasion of Ukraine.
The FTSE 100 group said the “uncertain global environment” and “complex threats” facing the world would boost its business this year.
It added that its business would also be helped by the need for governments to drive a “domestic economic prosperity agenda after the coronavirus pandemic”.
The group’s share price rose 5 per cent to 632.10p by early afternoon, bucking the trend in the wider market, after it made the comments and reported a 13 per cent jump in 2021 earnings as well as a 6 per cent increase in its dividend.
BAE counts the US, the UK and Saudi Arabia among its main defense customers. The company’s 85,000 employees build everything from F-35 fighter jets to nuclear submarines and combat vehicles.
Charles Woodburn, BAE chief executive, said the company was already reaping the benefits of increased spending on defense by European nations over the past few years, citing recent orders from Germany for Eurofighter Typhoon aircraft and increased sales from its Swedish Hagglunds combat vehicle business.
“We have already been seeing some of that [increase]”He said.
Woodburn said he was “disappointed that diplomatic efforts” to resolve the conflict over Ukraine had failed, adding that the company was “watching events very carefully at this point”. However, he stressed that BAE did not expect to see any material impact on itself or its suppliers.
BAE reported sales of £ 21.3bn for the year to end December 2021, a 5 per cent rise. Underlying earnings before interest and tax rose 13 per cent on a constant currency basis to £ 2.2bn, ahead of analyst expectations.
The company also reported strong cash flow of £ 1.86bn.
Woodburn said the company would consider using the group’s strong balance sheet for more bolt-on acquisitions, in areas including electronic systems, space and electrification.
BAE last year struck a deal to acquire US-based Bohemia Interactive Simulations that creates realistic battlefield simulations to help train a military personnel for war.
It also launched a joint venture with Eve, a vertical take-off and landing aircraft maker that was spun out of Embraer, the Brazilian regional jet company.
“We are on the look out for strong additions to the portfolio but we are disciplined buyers,” said Woodburn.
Woodburn, chief executive of BAE since July 2017, declined to comment on whether he would be interested in being considered as a potential successor to Warren East, CEO at Rolls-Royce.
The UK aero-engine group announced on Thursday that East would be leaving the company by the end of the year.
Woodburn, who was given a lucrative share package in 2020 after an attempt by mining group Rio Tinto to poach him, said: “I am very busy where I am and enjoying my job.”
BAE is in the process of recruiting a new chair to replace Sir Roger Carr, who is due to step down from the board at next year’s annual meeting.
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