Defence giant BAE Systems has hailed progress on its vast new shipbuilding hall in Scotland as it posted a trading update that showed £10 billion of new orders in four months.
The company said it remains on track for a surge in annual earnings as countries increase military spending amid the conflict in Gaza and Russia's war on Ukraine.
The group said it has recorded around £10bn of orders since the end of June, taking its total for the year so far to more than £30bn.
It upped its earnings guidance in August after orders soared following Russia's invasion of Ukraine last year, forecasting that underlying earnings would grow by 6% to 8%, earnings per share would jump by 10% to 12% in 2023 and that sales would rise by between 5% and 7%.
Since then, war has erupted following Hamas's unprecedented October 7 attack into Israel from the Gaza Strip. Israel has responded with air strikes on Gaza and the conflict has threatened stability across the Middle East.
INSIGHT: Defence giant books £10 billion worth of orders
It added that it has good visibility over future sales, because these are typically long-cycle orders, with payments spread over several years.
Key contracts secured in the second half of the year so far include £3.9b of funding for the next phase of the Aukus submarine programme between Australia, Britain and the United States.
BAE said: "This phase includes the detailed design of the submarine and long-lead procurement for the build phase over the coming decades.
"The award also paves the way for significant infrastructure expansion at our Barrow site together with investment in critical skills and the supply chain to support the wider submarine enterprise."
WATCH: Creating colossus that will ‘transform shipbuilding in Glasgow’
BAE Systems said the high order flow "reflects continued customer confidence in our ability to deliver important capabilities at a time of heightening geopolitical risk".
The firm said that developments so far this year include "plans advanced for expanding UK submarines facilities, progressing on a new shipbuilding facility in Glasgow and new investment in munitions manufacturing capacity".
It has also increased its UK apprentice intake in its air and maritime sectors.
The update comes after BAE Systems recently signed a $5.6bn (£4.6bn) deal to buy Ball Aerospace, a company which supplies parts to the James Webb telescope and US fighter jets.
READ MORE: HMS Glasgow moved onto barge for sea launch
Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said: “Given the elevated threat environment, demand for BAE’s products and services has remained strong with around £10bn of order intakes since the half-year mark.
“That takes the year-to-date figure up to around £30bn, and because these are typically long-cycle orders, with payments spread over several years, it gives BAE multi-year revenue visibility. That’s given management the confidence to reiterate all recently upgraded full-year guidance, which is something of a novelty for most businesses in the current uncertain environment."
He said the Ball Aerospace acquisition "looks like a good fit".
“Ball Aerospace provides mission-critical space systems and defence technologies across air, land and sea – complementing BAE’s suite of products nicely. The acquisition should add around $2.2bn (£1.8bn) in revenue to BAE's top line, before growing at a compound rate of around 10% annually over the next five years," Chiekrie said. "And given the similarities between the two businesses, there's clear scope to streamline operations, cut costs and boost profit margins."
Charles Woodburn, BAE Systems chief executive, said: “Trading has been in line with the upgraded guidance we issued at the time of our 2023 half-year results. We are delivering another year of good sales and earnings growth, together with strong cash flow generation.
"Order flow on new and existing programmes, renewals on incumbent positions and progress with our opportunity pipeline remains strong. These underpin our confidence and visibility for good top line growth in the coming years, and we continue to reinforce our value compounding model with a sharp focus on operational performance and disciplined capital allocation."
Shares in BAE Systems closed marginally up, 4.5p, or 0.41%, at 1,108p.
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