BAE Systems PLC

Overview Key strengths Key risks Well-established position as one of the world?s largest defense contractors, with an international presence serving some of the largest militaries. Inherent project execution risks and price competition, particularly in the U.S., although volatility in adjusted EBITDA margins remains low. Order book of £58 billion as of December 2023 (more than double 2023 revenues), which shows stability in revenue and profitability--likely benefitting from robust sector conditions. Sizable and regular shareholder distributions, with continued dividends and an ongoing share buyback program, which started in 2022. Diversified platform exposure across air, land, and sea programs, cyber and intelligence, as well as space through the recent integration of Ball Aerospace.Limited program concentration: no program exceeds 10% of the group?s

...BAE Systems PLC (BAE)'s (###+/Stable/A-2) order book is growing as defense spend is increasing globally. Conflicts and threats persist and are rising, as the Russia-Ukraine and the Israel-Hamas wars continue, and the geopolitical tensions between China and Taiwan mean nations such as the U.S. and NATO allies continue to increase defense spend as a proportion of their GDP to secure themselves against further potential conflicts. Governments have recognized the importance of being part of long-term, multi-year programs to preserve sovereign security, leading to record order books. At the end of 2023, BAE's order book stood at ú58 billion, more than double its 2023 revenues of ú23.1 billion, which grew by 8.6% compared with 2022. This order book supports strong revenue visibility over the medium term. Revenue growth in 2023 was mainly driven by the Maritime division (up 20.3%), including accelerated funding on the Dreadnought class submarines and increased activity in building global combat...

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