German order for 38 Eurofighter Typhoon jets hands British defence giant BAE Systems a £900m boost
BAE Systems is set to cash in on a German order for 38 Eurofighter Typhoon jets.
The British defence giant is in line for at least £900million after the government in Berlin placed an order worth £4.8billion.
BAE is part of the consortium behind the Eurofighter along with the Franco-German group Airbus and Leonardo of Italy.
Defence deal: BAE is in line for at least £900m after the government in Berlin placed an order worth £4.8bn for 38 Eurofighter Typhoon jets
Its Warton plant in Lancashire is likely to build the fuselages and jet tails for the planes when the order from the Luftwaffe is finalised.
The Eurofighter Typhoon is among the world’s premier fighter jets and can reach speeds of up to twice the speed of sound.
More than 660 have been ordered since they came into service in 2003 from countries including Italy, Germany, Kuwait and Italy.
The RAF has 160 Typhoons.
The German deal is another boost to BAE’s pipeline, which it describes as having a ‘large backlog’.
Around 90 per cent of BAE’s business is government defence orders, with the rest consisting of work for companies such as airlines and aerospace equipment makers.
BAE hailed the German deal as it raised its profit forecasts.
The company said that it had benefited from being able to keep its factories running during the pandemic and slightly lower tax rates than it expected.
Britain’s biggest defence group managed to finish projects such as building patrol boats despite tighter restrictions at its plants because of Covid.
Sales forecasts for 2020 have not changed, though the group flagged up that it had brought in more orders than it had been planning even before the virus hit.
Recent contracts include supplying self-propelled howitzer guns and a missile-defence system, and a deal for the repairing and maintenance of US ships.
The company’s commercial contracts, which include building parts like joysticks and flying systems and GE and Boeing as customers, have been hammered by the pandemic.
But this only makes up around 10 per cent of its business.
BAE did not give a detailed profit estimate for 2020 – only saying it would be higher than estimates put out in July, when it said earnings per share would be slightly below last year.
Chief executive Charles Woodburn said: ‘Demand for our capabilities remains high and we recognise our role not only in supporting national security, but also in contributing to the economies of the countries in which we operate.’
The company was cautious in the early weeks of the pandemic and temporarily pulled its annual dividend.
But it was later brought back and BAE has now confirmed it will pay a £302million half-year dividend later this month, in an encouraging move for savers and investors who have seen payouts plunge since Covid hit.
Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: ‘While uncertainty lingers around its commercial businesses, overall BAE’s provision of critical services to government customers means it’s in a much stronger position than many.
‘Visibility over billions of pounds worth of revenue is a very enviable asset, especially at the moment.’
Analysts also said BAE’s focus on high-tech warfare and the takeovers of two cyber businesses in the US earlier this year had put it in a strong position to gain new work over the next few years.
As well as navigating the pandemic, BAE has been making the case for the Government to give the green light to a UK-built fighter jet, called Tempest.
BAE is among the companies designing the futuristic planes, which would be able to fly unmanned and have radar that can capture ‘a city’s worth of data’ in a second.
The group believes that the project could support 20,000 jobs between 2026 and 2050, and add £25billion to the UK economy by 2050.
BAE shares rose 2.6 per cent, or 11.8p, to 475.4p. But overall its stock has fallen around 16 per cent so far this year, leaving it worth £15.3billion.