In view of the seemingly relentless spree of terrorist outrages, it seems poor taste to highlight the commercial benefits that are accruing from the heightened focus on national security across the globe. But we are where we are. And defence groups like Britain's BAE Systems (BA.) have a key role to play. Operating profits were up 11 per cent to £776m at the half-year mark as orders picked up from government agencies in the UK, the US, Saudi Arabia and Australia. Management reiterated full-year guidance, albeit with underlying earnings per share 5-10 per cent higher than last year thanks to an anticipated trading bias towards the second half.
Chief executive Ian King played down the prospect of any material near-term trading impact arising from June's Brexit vote, while highlighting "encouraging signs of a return to growth in defence budgets" in the crucial US market. It’s also conceivable that some of Uncle Sam's partners in NATO may finally be forced to comply with their pre-existing defence budget commitments in the event of a Trump administration come November - time will tell. Closer to home, BAE recently inked a 10-year partnership arrangement with the UK's Ministry of Defence, expected to be worth £2.1bn, to support its Typhoon fighter plane fleet.
Prior to these figures, JP Morgan gave adjusted profits of £1.85bn for the December year-end, leading to EPS of 39.7p, against £1.68bn and 40.2p in 2015.
| BAE SYSTEMS (BA.) | ||||
|---|---|---|---|---|
| ORD PRICE: | 542p | MARKET VALUE: | £17.2bn | |
| TOUCH: | 542p-543p | 12-MONTH HIGH: | 548p | LOW: 419p |
| DIVIDEND YIELD: | 3.9% | PE RATIO: | 18 | |
| NET ASSET VALUE: | 81p* | NET DEBT: | 79% | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 8.00 | 508 | 12.3 | 8.4 |
| 2016 | 8.28 | 528 | 12.9 | 8.6 |
| % change | +3 | +4 | +5 | +2 |
Ex-div: 20 Oct Payment: 30 Nov *Includes intangible assets of £10.7bn, or 337p a share | ||||
