BAE Systems PLC (LSE:BA.) reported better profits than it had predicted for 2023 and with a record level of orders said it expects growth to accelerate this year.
Sales for the past year came in at £25.3 billion, up 9% on the previous year and ahead of the FTSE 100-listed group's guidance of £23.3 billion.
Growth came from all sectors, led by 9% for the Electronic Systems arm, which provides governments with electronic warfare tools, surveillance and communications; and 8% growth for the Air sector, which includes work with missile group MBDA and the Tempest future combat fighter jet programme, where activity more than doubled last year.
Underlying profit (EBIT) also rose 9%, to £2.7 billion, which also was ahead of earlier indications for 6-8% growth, with underlying earnings per share jumping 14% to 63.2p.
The board recommended a final dividend of 18.5p, bringing the total dividend in respect of 2023 to 30p, an 11% increase on the year before.
Cash levels closed at £4.1 billion and net debt was £1 billion, which the comany said puts it in a good position to pay down the financing associated with the Ball Aerospace acquisition, which was completed earlier this month.
Order intake increased by £0.6 billion to £37.7 billion, which chief executive Charles Woodburn said was a record level and “means we're well-positioned for sustained growth in the coming years”.
For 2024, BAE guided for sales to increase 10-12%, EBIT by 11-13% and EPS 6-8%, with free cash flow easing to a minimum of £1.3 billion from £2.6 billion last year.
The company said most of its government customers have either announced budget increases or are planning increased spending to address the "elevated threat environment", adding that commitment to defence spending in its major markets "remains robust" despite global economic and fiscal pressures.
Shares in the defence contractor fell more than 3%, having more than doubled since early 2022 when the war started in Ukraine.
Analysts at UBS said they believe EPS guidance "is weak due to Ball Aerospace integration costs, which we have not fully considered, and an increase in the expected tax rate to 21%".