We last heard from BAE Systems (BA.) at the end of June, when the defence engineering giant guided that revenue for the first six months of 2020 would be stable year-on-year, but profits would come in 15 per cent lower. This is down to the Covid-19 pandemic disrupting cost recoveries in the second quarter as well as reduced sales of its higher margin commercial equipment.
The current crisis has hit BAE’s shares hard and they are still down 30 per cent from their pre-pandemic levels. While the group is pointing to a stronger second half as it returns to “full operational tempo”, the outlook is far from reassured. With Dominic Cummings placing the UK defence budget in his sights and the upcoming US election, BAE could fall victim to efforts to streamline military spending.
When the group’s half year results are released on 30 July, we’ll be looking out for what happens to the dividend. The final 13.8p payout declared for 2019 was deferred back in April and there has been no word yet on whether this, or an interim dividend, will still be paid.
Last IC view: Hold, 655p, 20 Feb 2020
