British defence titans boosted by global tensions
Britain’s defence titans are benefiting heavily from the volatility sweeping the geopolitical stage, with profits on the rise, full-year outlooks cemented and blockbuster contracts in the pipeline.
London-listed defence engineer Babcock today posted a underlying operating profit of £121.7m for the six-months ended to the end of September, compared to £115.3m a year earlier. Meanwhile revenue rose from £2.12bn to £2.14bn.
While its contract backlog was slightly less than a year ago, Babcock has secured £9.9bn in forward orders and kept its future guidance firmly in place while many businesses in the UK nudge them lower amid the economic downturn.
The company is also in discussions with five countries in three continents for warships. Shares in the defence firm rose more than six per cent to 309p a share by mid-afternoon.
In a statement, Babcock CEO David Lockwood said: “Whilst there is still more to be done, the significant contracts won this year underpin our confidence in our potential to deliver sustained growth and capture margin upside over the medium term.
“We are operating in a macro economic and geopolitical environment that remains volatile. We are focused on effectively addressing the challenges our business faces, most notably inflationary pressures, whilst also ensuring we maximise the increased opportunity set we are seeing in a market backdrop that is supportive for defence.”
Growing budgets
Defence budgets in Europe and the US are only expected to grow over the next five years, according to onlookers.
Broker Jefferies wrote in a note last week: “Regarding defence spending outlook… the commitment to defence in its major markets remains robust.”
Avon Protection, which makes protection gear for the military, police and fire fighters, has also managed to shrink its losses in the year to the start of October, as the defence sector is flooded with public sector cash.
The British company reported today that it has wound down losses to $2.1m (£1.7m), from nearly $30m (£25.2m) a year ago.
Significant growth in the UK market had boosted Avon’s revenue, which swelled 8.6 per cent to $263.5m (£221.7m) in the year to the start of October.
Russia’s invasion of Ukraine and rising geopolitical tensions worldwide have loosened the defence sector purse strings of governments across the globe.
Just last week, the UK’s new chancellor Jeremy Hunt promised to keep annual defence spending at two per cent of GDP, despite issuing a range of cuts.
BAE Systems, one of the largest defence companies in the UK, last week revealed it had secured £10bn worth of orders in the second half of this year alone.
The London-listed defence firm, which builds military-grade jets, submarines and satellites, also kept its guidance in place.
The invasion of Ukraine has government customers looking to act upon “elevated threat” levels, chief executive Charles Woodburn said at the time.
The defence giant also secured £4.2bn from the British government for five war ships, Type 26 frigates for the Royal Navy, prime minister Rishi Sunak announced today.