Preliminary Results Announcement 2025

BAE SYSTEMS PLC

18 February 2026

 

Preliminary Results Announcement 2025

BAE Systems plc

Charles Woodburn, Chief Executive, said: "Our results highlight another year of strong operational and financial performance, thanks to the outstanding dedication of our employees. In a new era of defence spending, driven by escalating security challenges, we're well positioned to provide both the advanced conventional systems and disruptive technologies needed to protect the nations we serve now and into the future. With a record order backlog and continuing investment in our business to enhance agility, efficiency and capacity, we're confident in our ability to keep delivering growth over the coming years."

Financial highlights

Financial performance measures as defined by Group1	Year ended 31 December 2025	Year ended 31 December 2024	Variance2
Sales	£30,662m	£28,335m	+10	%
Underlying earnings before interest and tax (EBIT)	£3,322m	£3,015m	+12	%
Underlying earnings per share (EPS)	75.2p	68.5p	+12	%
Free cash flow	£2,158m	£2,505m	£(347)m
Order intake	£36.8bn	£33.7bn	£3.1bn
Order backlog	£83.6bn	£77.8bn	£5.8bn
Financial performance measures as derived from IFRS	Year ended 31 December 2025	Year ended 31 December 2024	Variance2
Revenue	£28,336m	£26,312m	+8	%
Operating profit	£2,925m	£2,685m	+9	%
EPS - basic	68.8p	64.9p	+6	%
Net cash flow from operating activities	£3,432m	£3,925m	£(493)m
Order book	£63.1bn	£60.4bn	£2.7bn
Dividend per share	36.3p	33.0p	+10	%

As defined by Group

-         Sales increased 10%² to a record £30.7bn, with growth in all of our sectors. Organic growth was 9%².

-         Underlying EBIT increased by 12%² with a 20bps increase in return on sales from 10.6% to 10.8%.

-         Underlying EPS increased by 12%².

-         Free cash flow was strong at £2,158m. Significant customer advances were received late in the year, capital expenditure remained close to record levels at c.£1bn and research and development (R&D) spend increased.

-         Our order backlog grew by £5.8bn to a record £83.6bn. Order intake was strong at £36.8bn, with all sectors performing well, reflecting the continued relevance of our diverse geographic footprint and multi-domain capabilities.

As derived from IFRS

-         The growth in revenue of 8% reflects the same strong operational performance in sales across the portfolio, but excludes the impact of our equity accounted investments.

-         Operating profit was up 9% as the growth in underlying EBIT was offset by additional costs from the amortisation of acquired intangibles, reflecting the significant acquisitions in the prior year which included Ball Aerospace.

-         Basic EPS was up 6%.

-         Net cash flow from operating activities reflected movements on customer advances and working capital commitments.

1.         We monitor the underlying financial performance of the Group using alternative performance measures (APMs). These measures are not defined in International Financial Reporting Standards (IFRS) and therefore are considered to be non-GAAP (Generally Accepted Accounting Principles) measures. The relevant IFRS measures are presented where appropriate. The purposes and definitions of non-GAAP measures are provided in the Alternative performance measures section on page 40.

2.         Growth rates for sales, underlying EBIT and underlying EPS are on a constant currency basis (i.e. calculated by translating the results from entities in functional currencies other than pounds sterling for the year ended 31 December 2024 to pounds sterling at the average exchange rate of such currencies for the year ended 31 December 2025). The comparatives have not been restated. All other growth rates and year-on-year movements are on a reported currency basis.

Delivering for our customers

Our continued focus on operational performance and contracting discipline enables our consistent delivery of critical capabilities and technologies for our customers worldwide. During the year, we secured £36.8bn of orders and made good progress executing on our long-term major programmes. Highlights included:

-         The UK Government announced an agreement with Türkiye to acquire 20 Typhoon aircraft, along with an associated weapons package. The deal is anticipated to be worth £4.6bn to BAE Systems and will sustain Typhoon production in the years to come, helping to sustain 20,000 jobs across the UK.

-         We delivered the final two Typhoon aircraft to Qatar during the year, bringing the Qatari Emiri Air Force fleet total to 24.

-         Launching Edgewing, a joint venture with our international industry partners in Italy and Japan on the Global Combat Air Programme (GCAP). Edgewing will be accountable for the design and development of the next-generation combat aircraft under the programme.

-         Norway selected our Type 26 frigate for its future warship procurement programme. The £10bn Government-to-Government agreement paves the way for the UK's largest ever warship export deal by value.

-         We played a critical role in preparing Royal Navy ships for the UK Carrier Strike Group 2025 and the Royal Navy selected our all-electric Malloy T-150 uncrewed air systems (UAS) to transport vital supplies between the ships for the first time during its deployment to the Indo-Pacific.

-         We secured a $1.2bn (£0.9bn) contract to provide the US Space Force with space-based missile tracking capabilities as the prime contractor to design and build a constellation of satellites.

-         Our Armored Multi-Purpose Vehicle (AMPV) programme celebrated its 500^th delivery milestone during the year and is executing under full-rate production toward meeting the US Army's plan to field nearly 3,000 AMPVs in its Armored Brigade Combat Teams.

-         We marked key combat vehicle milestones with the first CV9030 MkIV infantry fighting vehicle unveiled for the Czech Republic and the first three BvS10 vehicles presented to Sweden, Germany and the UK.

-         Her Royal Highness The Princess of Wales officially named HMS Glasgow, the first of eight Type 26 frigates we are building for the Royal Navy. Final outfitting continues on HMS Glasgow and HMS Cardiff at our Scotstoun yard, whilst HMS Belfast, HMS Birmingham and HMS Sheffield are progressing at our Govan site.

-         We laid the keel of HMS Dreadnought, the first of four Dreadnought Class submarines we are constructing for the Royal Navy, at our Barrow-in-Furness shipyard in the UK.

Investing in tomorrow

Alongside strong operational delivery, we continue to invest in our people, R&D and capital expenditure. Highlights included:

-         We officially opened the Janet Harvey Hall at our Govan site in Glasgow, UK. The hall has capacity for two Type 26 frigates to be constructed side-by-side, with HMS Belfast and HMS Birmingham currently under construction in the hall.

-         Her Royal Highness The Princess Royal officially opened our Applied Shipbuilding Academy in Glasgow, UK. The £12m facility comprises a multi-purpose flexible learning hub and provides a high quality, hands-on training environment.

-         In the UK, Secretary of State for Defence, John Healey, opened our Sheffield facility where we will initially deliver M777 howitzers, with plans to evolve to develop and produce a range of combat systems to support the Government's ambitions to revitalise UK artillery capacity.

-         We opened a new shiplift and land-level repair complex at our Jacksonville, Florida, shipyard. The $250m (£190m) investment significantly enhances the capabilities of the complex and increases its capacity to maintain and repair US Navy vessels and commercial ships.

-         We continued to invest in our manufacturing site in Louisville, Kentucky, and shipyard in Jacksonville, Florida to ensure we have the capability and capacity to build and support the US Navy, and its maritime partners, in the future build of submarines and surface ship maintenance.

-         During the year, we recruited over 2,500 early careers employees across our key markets and we have a record 6,800 apprentices, graduates and undergraduates in training across our UK businesses.

Capital deployment

-         The Board has recommended a final dividend of 22.8p, taking the total dividend for 2025 to 36.3p - an increase of 10% on last year. Subject to shareholder approval, the final dividend will be paid on 4 June 2026 to shareholders on the share register on 24 April 2026.

-         During the year, the Company repurchased 30m shares under our share buyback programme, at a cost of £502m. Combined with dividends, the Group returned £1,529m to shareholders in the year ended 31 December 2025.

Group guidance¹ for 2026

Guidance is provided on the basis of an exchange rate of $1.32:£1, which is in line with the actual 2025 exchange rate.

Results

Year ended 31 December 2026

Guidance

Year ended 31 December 2025

Sales	Increase by 7% to 9%	£30,662m
Underlying EBIT	Increase by 9% to 11%	£3,322m
Underlying EPS	Increase by 9% to 11%	75.2p
Free cash flow	>£1.3bn	£2.2bn

Three-year cumulative free cash flow guidance	Guidance
Cumulative free cash flow 2024-2026	In excess of £6.0bn (previously in excess of £5.5bn)
Cumulative free cash flow 2025-2027	In excess of £5.5bn
Cumulative free cash flow 2026-2028	In excess of £6.0bn

-         Underlying net finance costs c.£370m

-         Effective tax rate c.22%

-         Non-controlling interests c.£80m

Sensitivity to foreign exchange rates: the Group operates in a number of currencies, the most significant of which is the US dollar. As a guide, 
a 5 cent movement in the £/$ exchange rate will impact sales by c.£500m, underlying EBIT by c.£70m and underlying EPS by c.1.4p.

1.         While the Group is subject to geopolitical and other uncertainties, the following guidance is provided on current expected operational performance. The guidance is based on the measures used to monitor the underlying financial performance of the Group.

For further information please contact:

Investor Relations	Media Relations
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Analyst and investor presentation

A presentation, for analysts and investors, of the Group's Results for 2025 will be available at 9.30am GMT today (18 February 2026) on the investor website, followed by a live Q&A.

Details can be found on investors.baesystems.com, together with the presentation slides and a copy of this report. A recording of the webcast will be available for replay later in the day.

About BAE Systems

We are supporting our customers so that they can stay ahead of evolving threats across land, sea, air, cyber and space. We are a workforce of 111,400¹ highly skilled people in more than 40 countries. Working with our customers and local partners, we develop, engineer, manufacture and support products and systems that deliver military capability, protect national security and keep critical information and infrastructure secure.

1.         As at 31 December 2025 and including share of equity accounted investments.

Shareholder information

Registered office

6 Carlton Gardens 
London 
SW1Y 5AD 
United Kingdom

Registered in England and Wales, No. 01470151

Cautionary statement:

All statements other than statements of historical fact included in this document, including, without limitation, those regarding the financial condition, results, operations and businesses of BAE Systems plc and its strategy, plans and objectives and the markets and economies in which it operates, are forward-looking statements. Such forward-looking statements, which reflect management's assumptions made on the basis of information available to it at this time, appear in a number of places throughout this document and include statements regarding the intentions, beliefs or current expectations of BAE Systems plc concerning, among other things, its results in relation to operations, financial condition, liquidity, prospects, growth, commitments and targets (including environmental, social and governance commitments and targets and the methodologies it uses to assess its progress in relation to these), strategies and the industry in which it operates. Forward-looking statements can be identified by the use of forward-looking terminology such as "believes", "expects", "may", "intends", "will", "will continue", "should", "would be", "seeks", "anticipates" or similar expressions or the negative thereof or other variations thereof or comparable terminology. Forward-looking statements can be made in writing but may also be made verbally by directors, officers, and employees of BAE Systems plc (including during presentations) in connection with this document. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future.

Forward-looking statements are not guarantees of future performance and the actual results of operations, financial condition and liquidity of BAE Systems plc, the development of the industry in which it operates and the ability of BAE Systems plc to meet its commitments and targets may differ materially from those made in or suggested by the forward-looking statements contained in this document. In addition, even if results of operations, financial condition and liquidity of BAE Systems plc, the development of the industry in which it operates and/or performance against commitments and targets are consistent with the forward-looking statements contained in this document, those results, developments or performance may not be indicative of results, developments or performance in subsequent periods.

These forward-looking statements speak only as of the date of this document. Subject to the requirements of the Disclosure Guidance and Transparency Rules, the Market Abuse Regulation or applicable law, BAE Systems plc explicitly disclaims any intention or obligation or undertaking publicly to release the result of any revisions to any forward-looking statements in this document that may occur due to any change in its expectations or to reflect events or circumstances after the date of it. All subsequent written and oral forward-looking statements attributable to either BAE Systems plc or to persons acting on its behalf are expressly qualified in their entirety by the cautionary statements referred to herein and contained elsewhere in this document.

BAE Systems plc and its directors accept no liability to third parties in respect of this document save as would arise under English law. Accordingly, any liability to a person who has demonstrated reliance on any untrue or misleading statement or omission shall be determined in accordance with Schedule 10A of the Financial Services and Markets Act 2000. It should be noted that Schedule 10A and Section 463 of the Companies Act 2006 contain limits on the liability of the directors of BAE Systems plc so that their liability is solely to BAE Systems plc.

Preliminary results statement

Overview

Around the world, threats to national security continue to grow. This is driving governments to increase defence spending, as they seek to ensure armed forces are equipped to protect their nations and deter future aggression.

For decades, governments have placed trust in us to deliver their defence and security capabilities. By focusing on operational excellence, innovation and developing our people, we have consistently delivered cutting-edge technologies, helping our customers stay ahead of evolving threats across land, sea, air, cyber and space.

This approach helped us achieve another year of strong operational and financial performance in 2025. Our highly relevant portfolio means we are well positioned to continue supporting our customers.

Higher defence spending commitments across NATO are leading to increased demand across most of our markets and domains. So, we are investing in our business to ensure we have the capacity and capability to meet our customers' evolving needs.

Our achievements in 2025 are a testament to the dedication of our people, whose focus on protecting those who protect us remains at the core of everything we do.

Delivering for our customers

We design, build and maintain cutting-edge defence and security capabilities for our customers.

Our relentless focus on operational excellence supports consistent delivery on critical long-term programmes like submarines, frigates, combat aircraft, combat vehicles and electronic warfare systems, which form the backbone of our customers' defence capabilities.

Notable achievements this year include the keel laying of HMS Dreadnought and supporting the Royal Navy's Carrier Strike Group deployment, as well as delivery of the final two Typhoon aircraft to the Qatar Emiri Air Force and the 500^th AMPV to the US Army.

We made good progress on key strategic international collaborations. Together with our industry partners in Italy and Japan, we launched our new joint venture, Edgewing, to design and develop next-generation combat aircraft under GCAP. Working alongside ASC Pty Ltd, we also started initial mobilisation activities to support the delivery of the SSN-AUKUS fleet of conventionally armed, nuclear-powered submarines for the Royal Australian Navy.

Our financial performance

We delivered a strong financial performance, exceeding the upgraded guidance we gave at the half year across our underlying EBIT, underlying EPS and free cash flow targets. Sales came in at the higher end of our guidance range.

On a constant currency basis, we grew sales by 10%, while increasing underlying EBIT by 12%, generating a return on sales of 10.8%. We delivered £2,158m of free cash flow, taking our three-year cumulative free cash flow to more than £7bn, comfortably ahead of our three-year guidance of £6bn for the period from 2023 to 2025.

It was a very active year for discussions with customers to address their evolving defence needs. Order intake momentum was positive, with £36.8bn of work secured, lifting our order backlog to £83.6bn. This reflects strong demand for the portfolio of cutting-edge technologies and services we offer and enhances the forward visibility of our business.

We ended 2025 with a strong balance sheet, with net debt (excluding lease liabilities) falling 22% to £3,844m, which equates to 0.9x underlying EBITDA.

We continue to invest in our business to support organic growth and capacity expansion for key programmes. Our strong financial position allows us to implement all parts of our capital allocation policy.

Investing in tomorrow

Investing in our people, technologies and facilities is essential to ensure we maintain the agility needed to anticipate and address the evolving threats our government customers face. We grew our global workforce by 4,000, including more than 2,500 early careers employees in our key markets to sustain our talent pipeline.

We increased our self-funded R&D to £407m and continue to collaborate with partners and academia to drive innovation that will keep our customers ahead of evolving threats. Key areas of focus include technologies like electronic warfare, uncrewed systems, counter drone systems, laser-guided weapons, synthetic training, electrification applications and space solutions. Highlights include developing a low-cost, drone-based strike capability using precision-guided munitions in just four months and deploying the same platform to transport vital supplies between UK carrier strike group ships, demonstrating its versatility.

After record capital expenditure in 2024, we maintained our high levels of investment and spent around £1.0bn in the year to improve our systems and facilities to enhance efficiency and capacity to meet the elevated global demand. Notable investments included our new shiplift and land-level repair complex at our shipyard in Jacksonville, Florida, our new ship build assembly hall in Glasgow and a new artillery factory in Sheffield, all of which became operational in the year.

We recognise there is always more that can be done and we are continuing to focus on boosting production capacity, while driving productivity improvements and cost efficiencies, to ensure we deliver for our customers now and into the future.

Our capital distribution

Our disciplined approach to capital allocation, underpinned by the Group's strong performance and positive outlook, has enabled us to continue delivering returns to shareholders. After investments in our people, technologies and capital expenditure, we returned £1,529m to shareholders during the year. The Board has proposed a final dividend of 22.8p, subject to shareholder approval at the 2026 Annual General Meeting (AGM), bringing the total dividend for 2025 to 36.3p - an increase of 10% over the prior year.

Our market differentiation

Our business has a unique combination of highly innovative capabilities, a diverse geographic footprint and a multi-domain portfolio. We believe our advanced technologies, deep domain expertise and global reach position us as an industry leader, enabling us to support customers 
in addressing the heightened threat environment today and into the future. This breadth remains a core strength and a differentiator for our business.

Looking ahead, our key growth drivers are spread across major markets and include multi-national endeavours, such as GCAP and AUKUS, which highlight the scale, global reach and longevity of our operations. Combined with our focus on faster-paced disruptive technologies and the seamless integration of these systems, we are well positioned for growth for many years to come.

Responsible business

We support our government customers in their primary responsibility to keep citizens safe, while contributing to the economic and social development of the communities where we operate.

Our people are central to everything we do, making it essential that we attract and retain top talent to meet our customers' needs and support our long-term growth. We invest in the development of our people's skills at every stage of their careers and relentlessly focus on their safety, health and wellbeing.

Across all our operations, maintaining the highest standards of conduct is at the core of how we do business, enabling us to operate in a highly regulated environment with strict regulations and applicable trade controls.

Summary investment case

We focus on careful long-term management and governance of our business to deliver value for all our stakeholders. We have a strong track record of delivering financial returns for investors. We are poised for long-term growth in sales and profitability based on robust end markets, our operating model and the strategic actions we are taking, presenting a compelling investment case for current and prospective investors. This is supported by our seven key advantages:

-          We provide customers with world-class defence products and capabilities across multiple markets.

-         We undertake multi-decade programmes with long-term embedded value. Our contract order backlog provides a high level of sales visibility, driven by multi-year programmes.

-         We have a growing global opportunity pipeline. Our diverse geographic footprint supports us in pursuing excellent opportunities across all sectors as countries around the world face up to the multi-faceted threat environment.

-         We foster a high-performance innovative culture and consistently invest in R&D to build on existing world-leading capabilities and generate new innovative and disruptive technologies.

-         We have an intense focus on operational excellence, with strong, consistent programme performance. We are focused on creating value 
for our investors and customers.

-         Sustainability is embedded in our business. It forms part of our strategic framework and underpins our purpose.

-         We operate a value-enhancing operating model, undertaking our core business activities with clear, consistent and careful capital allocation.

Group financial review

Group income statement

	Underlying - as defined by the Group1					Statutory - as derived from IFRS
	2025		2024			2025		2024
	£m		£m			£m		£m
Sales/Revenue	30,662		28,335			28,336		26,312
Underlying EBIT/Operating profit	3,322		3,015			2,925		2,685
Finance income	81		117			135		135
Finance costs	(465)		(513)			(488)		(488)
Net finance costs	(384)		(396)			(353)		(353)
Profit before tax	2,938		2,619			2,572		2,332
Tax expense	(596)		(469)			(421)		(291)
Profit for the year2	2,342		2,150			2,151		2,041
Return on Sales/Revenue	10.8	%	10.6	%		10.3	%	10.2	%

Reconciliation of underlying EBIT to operating profit

	2025		2024
	£m		£m
Underlying EBIT	3,322		3,015
Adjusting items	40		23
Amortisation of programme, customer-related and other intangible assets, and impairment of equity accounted investments and intangible assets	(414	)	(344	)
Net finance income and tax of equity accounted investments	(23	)	(9	)
Operating profit	2,925		2,685

As defined by the Group

Sales for the year were £30.7bn (2024 £28.3bn) representing growth, on a constant currency basis, of 10% (2024 14%). On an organic basis sales grew by 9% on a constant currency basis.

Electronic Systems recorded sales of £7.5bn (2024 £7.2bn), equating to growth of 8% (2024 35%) on a constant currency basis, which included the full 12-month benefit of our Space & Mission Systems (SMS) business and reflects increased demand in the Electronic Combat and Countermeasure & Electromagnetic Attack solutions businesses.

Platforms & Services posted sales of £5.0bn (2024 £4.4bn), with growth of 17% (2024 15%) on a constant currency basis, as the sector works to deliver on the recent increased demand for combat vehicles both in the US, through our Combat Mission Systems business which was up 15%, and in Europe, through our Hägglunds and Bofors businesses where growth was 32%.

Our Air sector recorded sales of £9.3bn (2024 £8.5bn), representing growth of 9% (2024 7%) on a constant currency basis. We continued to see increased activities on the design and development of our Future Combat Air Programme, as well as 17% growth in MBDA, through the year.

Maritime recorded sales of £6.8bn (2024 £6.2bn), with growth of 11% (2024 12%) on a constant currency basis, with increased activities across the sector. Construction has continued across major programmes including Dreadnought, Type 26 and Hunter Class frigates, and design work for SSN-AUKUS is progressing.

Sales in the Cyber & Intelligence sector were £2.4bn (2024 £2.4bn), an increase of 2% (2024 6%) on a constant currency basis, predominantly from counter-UAS sales.

Underlying EBIT was up 12% (2024 14%), on a constant currency basis, to £3,322m (2024 £3,015m), resulting in an increased return on sales for the year of 10.8% (2024 10.6%). On an organic basis underlying EBIT grew 11% on a constant currency basis.

Our Electronic Systems sector grew underlying EBIT to £1,162m (2024 £1,071m), an increase of 12% (2024 25%) on a constant currency basis, and generated a return on sales of 15.4% (2024 14.9%). The growth in underlying EBIT benefitted both from an increase in sales and a full 12-month contribution from SMS.

Platforms & Services reported underlying EBIT of £576m (2024 £448m), an increase of 30% (2024 29%) on a constant currency basis, with return on sales increasing to 11.4% (2024 10.2%). The growth reflected the demand for combat vehicles in the US and Europe as production ramped up across Bradley, CV90 and AMPV.

Our Air sector reported underlying EBIT of £1,108m (2024 £1,007m), an increase of 10% (2024 7%) on a constant currency basis, maintaining a strong return on sales of 11.9% (2024 11.8%), which reflected good operational performance.

Maritime reported underlying EBIT of £457m (2024 £474m), a decrease of 3% (2024 increase of 12%) on a constant currency basis. The return on sales of 6.7% (2024 7.7%) reflected the early-stage maturity of the portfolio with several first-in-class programmes trading at relatively low margins as we invest in additional capacity and capability both within our shipyards and the supply chain to support programme delivery.

Finally, Cyber & Intelligence reported underlying EBIT of £223m (2024 £199m), with a return on sales of 9.3% (2024 8.3%), with a full-year contribution from Kirintec.

Adjusting items totalled a net gain of £40m (2024 £23m). During the year, the Group realised a net profit of £51m for pension-related gains, largely in relation to a review of US pension arrangements (£58m), and a £12m profit on the disposal of a portion of our remaining shareholding in Air Astana. This was partially offset by £22m of integration-related costs, primarily in relation to SMS, and £1m of costs related to historic transactions. The prior year gain reflected a net profit of £94m on a number of non-core businesses disposals and a settlement gain of £13m on a US pension buyout, offset by £72m of acquisition and integration-related costs and £12m of other costs related to historic transactions.

As derived from IFRS

Revenue was £28.3bn (2024 £26.3bn), with growth during the year of 8% (2024 14%) on a reported currency basis, which reflected the same drivers behind the increase in sales, excluding the impact of MBDA and our other equity accounted investments.

Operating profit increased 9% (2024 4%) to £2,925m (2024 £2,685m) on a reported currency basis. On an operating sector basis, this reflected the same drivers as underlying EBIT, however, operating profit was impacted by additional costs from the amortisation of acquired intangibles and impairment of equity accounted investments and intangibles, which increased by £70m to £414m in 2025 (2024 £344m), primarily due to the impact of a full 12-months amortisation of intangibles acquired with SMS.

1.         The definition and purpose of all performance measures defined by the Group is provided in the Alternative performance measures section on page 40.

2.         On a Group basis, £89m (2024 £85m) of profit for the year is attributable to non-controlling interests, with £2,253m (2024 £2,065m) attributable to equity shareholders. On an IFRS basis, £89m (2024 £85m) of profit for the year is attributable to non-controlling interests, with £2,062m (2024 £1,956m) attributable to equity shareholders.

Earnings per share (EPS)

As defined by the Group1	2025	2024
Underlying earnings for the year attributable to equity shareholders	£2,253m	£2,065m
Underlying EPS	75.2p	68.5p
As derived from IFRS	2025	2024
Profit for the year attributable to equity shareholders	£2,062m	£1,956m
Basic EPS	68.8p	64.9p

As defined by the Group

Underlying EPS increased to 75.2p (2024 68.5p), 12% on a constant currency basis, largely driven by the improved underlying profit for the year, with detailed movements set out in the table below.

As derived from IFRS

Basic EPS increased 6% to 68.8p (2024 64.9p) with the gain in underlying EBIT being offset by the amortisation of programme, customer-related and other intangible assets, and impairment of equity accounted investments and intangible assets, as well as an increase in the Group's effective tax rate.

Movement in underlying EPS

	2025		2024
	pence		pence
As at 1 January	68.5		63.2
Foreign exchange	(1.1	)	(1.0	)
Underlying EBIT (excluding impact of M&A activity)	9.3		5.7
Impact of M&A activity	-		0.6
Underlying net finance costs (excluding impact of M&A activity)	0.1		(1.4	)
Tax	(1.9	)	1.0
Share repurchases	0.3		0.4
As at 31 December	75.2		68.5

Orders

As defined by the Group1	2025		2024
	£bn		£bn
Order intake	36.8		33.7
Order backlog	83.6		77.8
As derived from IFRS	2025		2024
	£bn		£bn
Order book2	63.1		60.4

As defined by the Group

Order intake was £36.8bn, which has lifted order backlog to a record of £83.6bn. Our book to bill ratio was 1.2 and reflected the continued relevance of our diverse geographic footprint and multi-domain capabilities, with all operating sectors recording strong order intake for the year.

Details of awards in the year are covered in the segmental reviews on pages 13 to 21, with significant orders in the year including:

-         In Electronic Systems, the £8.7bn of order intake featured c.£2bn from SMS, including orders for missile warning and tracking systems for the US Space Force.

-         In Platforms & Services, the £6.2bn of order intake featured strong contract awards for our US combat vehicle programmes of c.£2bn, as well as continued European orders in our Bofors and Hägglunds businesses.

-         The Air sector recorded orders totalling £14.6bn. The agreement with Türkiye, to acquire 20 Typhoon aircraft and weapons, amounted to £4.6bn alongside increased orders in US Programmes and Future Combat Air Systems. Our share of orders through MBDA was in excess of £4bn.

-         The Maritime sector recognised orders of £5.0bn predominantly for the Submarines business, as well as the next major phase of Canada's River Class destroyer programme and Australia's Hobart Class combat system upgrade.

1.         The definition and purpose of all performance measures defined by the Group is provided in the Alternative performance measures section on page 40.

2.         Order book represents the transaction price allocated to unsatisfied and partially satisfied performance obligations as defined by IFRS 15 Revenue from Contracts with Customers.

Net debt (excluding lease liabilities)

Components of net debt1	2025		2024
	£m		£m
Cash and cash equivalents	3,438		3,378
Debt-related derivative financial instruments (net)	3		89
Loans - non-current	(7,190	)	(7,713	)
Loans - current	(95	)	(699	)
Net debt (excluding lease liabilities)	(3,844	)	(4,945	)

Cash and cash equivalents of £3,438m (2024 £3,378m) are held primarily for management of working capital as well as the repayment of debt securities, pension funding when required and committed shareholder returns.

The Group's net debt (excluding lease liabilities) at 31 December 2025 was £3,844m (2024 £4,945m), a net decrease of £1,101m (2024 increase of £3,923m) from the position at the start of the year, with detailed movements set out in the table below.

Other movements comprised foreign exchange on the Group's US dollar-denominated cash and borrowings, offset by their associated derivatives, and dividends paid to non-controlling interests.

Movement in net debt (excluding lease liabilities)

	2025		2024
	£m		£m
As at 1 January	(4,945	)	(1,022	)
Operating business cash flow	2,787		3,093
Interest and tax	(629	)	(588	)
Shareholder returns	(1,529	)	(1,492	)
Business transactions and other	472		(4,936	)
As at 31 December	(3,844	)	(4,945	)

1.         The definition and purpose of all performance measures defined by the Group is provided in the Alternative performance measures section on page 40.

Balance sheet

	2025		2024
	£m		£m
Goodwill	12,732		13,297
Other intangible assets	2,513		2,965
Property, plant and equipment, right-of-use assets and investment property	6,835		6,636
Equity accounted investments and other investments	822		906
Working capital	(6,499	)	(6,386	)
Lease liabilities net of finance lease receivables	(1,742	)	(1,817	)
Group's share of net IAS 19 post-employment benefits surplus	844		768
Net tax assets	285		422
Net other financial liabilities	(9	)	(69	)
Net debt (excluding lease liabilities)	(3,844	)	(4,945	)
Net assets	11,937		11,777

Goodwill of £12.7bn (2024 £13.3bn) was a decrease of £0.6bn on the prior year, driven by foreign exchange translation of the Group's US dollar-denominated goodwill.

Other intangible assets of £2.5bn (2024 £3.0bn) was a decrease of £0.5bn on the prior year, driven by amortisation of acquired intangibles of £0.3bn, predominantly due to the assets acquired from Ball Aerospace in 2024, combined with foreign exchange movements.

Property, plant and equipment, right-of‑use assets and investment property was £6.8bn (2024 £6.6bn), an increase of £0.2bn as significant investment in both facilities and expansion of capacity across the Group was offset by the impact of depreciation and foreign exchange.

Equity accounted investments and other investments was £822m (2024 £906m) as the Group's share of profit from its equity accounted investments of £219m was more than offset by dividends received in the year of £304m.

The Group's share of the net IAS 19 post-employment benefits surplus was £0.8bn (2024 £0.8bn), net of a 25% (2024 25%) withholding tax of £0.4bn (2024 £0.4bn). Details of the Group's post-employment benefit schemes are provided in note 6.

Cash flow

As defined by Group1	2025		2024
	£m		£m
Free cash flow	2,158		2,505
Operating business cash flow	2,787		3,093
As derived from IFRS	2025		2024
	£m		£m
Net cash flow from operating activities	3,432		3,925
Net cash flow from investing activities	(541	)	(5,269	)
Net cash flow from financing activities	(2,774	)	695
Net increase/(decrease) in cash and cash equivalents	117		(649	)
Cash and cash equivalents at 1 January	3,378		4,067
Effect of foreign exchange rate changes on cash and cash equivalents	(57	)	(40	)
Cash and cash equivalents at 31 December	3,438		3,378

As defined by the Group

Free cash flow of £2,158m (2024 £2,505m) reflected higher than anticipated customer advances towards the end of the year together with good operational cash conversion.

Operating business cash flow of £2,787m (2024 £3,093m) was a decrease of £306m (2024 £125m). Although the Group received significant net customer advances, these were lower than the prior year. The net customer advances were offset by a high level of capital expenditure of £957m (2024 £987m) as we invested in our facilities to increase capacity and efficiency across the Group.

As derived from IFRS

Net cash flow from operating activities was £3,432m (2024 £3,925m), a decrease of £493m (2024 £165m) primarily resulting from lower net customer advances received during the year.

Net cash flow from investing activities was an outflow of £541m (2024 £5,269m). Capital expenditure remained high in the year at £957m (2024 £987m) as we continued to invest in our facilities across the Group. This was offset by dividends from our equity accounted investments, interest and cash proceeds on the partial disposal of our shareholding in Air Astana. The prior year reflected significant M&A investment across a number of acquisitions, including Ball Aerospace, which accounted for a net cash outflow of £4.8bn, as well as capital expenditure of £1.0bn. This was offset by cash proceeds of £194m from non-core business disposals.

Net cash flow from financing activities was an outflow of £2,774m (2024 inflow of £695m), a decrease of £3,469m (2024 increase of £2,883m). Cash returns to shareholders, through dividend and share repurchases amounted to £1,529m (2024 £1,492m). Although dividends increased to £1,027m (2024 £937m), the value of share repurchases was lower at £502m (2024 £555m). During 2025, we repurchased 30m shares under the 2023 share buyback programme (2024 43m shares under the 2022 and 2023 share buyback programmes). The Group repaid debt finance of £562m, compared to a net cash inflow from debt finance of £3,139m in the prior year.

Exchange rates

	Average				Year end
	2025		2024		2025		2024
£/$	1.319		1.278		1.345		1.253
£/€	1.167		1.181		1.145		1.210
£/A$	2.045		1.938		2.017		2.023

1.         The definition and purpose of all performance measures defined by the Group is provided in the Alternative performance measures section on page 40.

Segmental review

	As defined by the Group1
Year ended 31 December 2025	Sales		Underlying EBIT		Return on sales		Operating business cash flow		Order intake		Order backlog
	£m		£m		%		£m		£bn		£bn
Electronic Systems	7,528		1,162		15.4	%	1,337		8.7		13.6
Platforms & Services	5,039		576		11.4	%	166		6.2		15.0
Air	9,299		1,108		11.9	%	904		14.6		32.6
Maritime	6,797		457		6.7	%	373		5.0		21.3
Cyber & Intelligence	2,397		223		9.3	%	59		2.7		2.1
HQ2	232		(204	)	-		(52	)	0.2		-
Deduct Intra-group	(630	)	-		-		-		(0.6	)	(1.0	)
Total	30,662		3,322		10.8	%	2,7873		36.8		83.6

	As derived from IFRS
Year ended 31 December 2025	Revenue		Operating profit		Return on revenue		Net cash flow from operating activities			Order book
	£m		£m		%		£m			£bn
Electronic Systems	7,507		863		11.5	%	1,571			9.1
Platforms & Services	5,021		576		11.5	%	392			14.6
Air	7,372		1,078		14.6	%	873			18.5
Maritime	6,579		431		6.6	%	673			20.5
Cyber & Intelligence	2,397		182		7.6	%	115			1.4
HQ2	52		(205	)	-		4			-
Deduct Intra-group	(592	)	-		-		-			(1.0	)
Deduct Tax4	-		-		-		(196	)		-
Total	28,336		2,925		10.3	%	3,432			63.1

1.         The definition and purpose of all performance measures defined by the Group is provided in the Alternative performance measures section on page 40.

2.         HQ comprises the Group's head office activities, together with a 17% interest in Air Astana up to the date of disposal of a portion of the shareholding. The remaining 7% share is no longer equity accounted by the Group.

3.         At a Group level, the key cash flow metric is free cash flow (see Alternative performance measures on page 40). In 2025, free cash flow was £2,158m (2024 £2,505m).

4.         Tax is managed on a Group-wide basis.

Segmental performance: Electronic Systems

Electronic Systems, with 22,400¹ employees, comprises our US- and UK-based Electronic Systems business and our US-based Space & Mission Systems business.

Financial performance

Financial performance measures defined by Group2

Financial performance measures derived from IFRS

2025

2024

Variance3

2025

2024

Variance3

Sales

£7,528m

£7,189m

+8

%

Revenue

£7,507m

£7,186m

+4

%

Underlying EBIT

£1,162m

£1,071m

+12

%

Operating profit

£863m

£708m

+22

%

Return on sales

15.4

%

14.9

%

+50 bps

Return on revenue

11.5

%

9.9

%

+160 bps

Operating business cash flow

£1,337m

£801m

£536m

Cash flow from operating activities

£1,571m

£1,044m

£527m

Order intake

£8.7bn

£7.3bn

£1.4bn

Order backlog

£13.6bn

£12.7bn

£0.9bn

Order book

£9.1bn

£8.6bn

£0.5bn

-         The Electronic Systems sector booked orders of £8.7bn, featuring c.£2bn from our SMS business including missile warning and tracking satellite systems for the US Space Force.

-         Sales increased by 8%, benefitting from a full year of SMS sales, alongside increased demand across the sector.

-         Growth in underlying EBIT of 12% reflected an increased return on sales of 15.4%, including a strong contribution from SMS.

-         Operating cash flow was £1,337m, reflecting strong operational cash conversion and cash advances from customers.

1.         Including share of equity accounted investments.

2.         The definition and purpose of all performance measures defined by the Group are provided in the Alternative performance measures section on page 40.

3.         Growth rates for sales and underlying EBIT are on a constant currency basis. All other growth rates and year-on-year movements are on a reported currency basis.

Operational performance

Demand was strong across our Electronic Systems customer base in 2025 as evidenced by our order intake. We supported customers on key electronic warfare and precision-guided munition programmes, while pursuing and maturing innovative capabilities. In commercial avionics, airline traffic continues to grow globally, resulting in stronger demand for our OEM products and aftermarket services.

Our SMS business is delivering strong programme performance centred on customer relationships and growth, particularly in military space. Core defence programmes remain aligned with US Government priorities and we are leveraging our proven capabilities in tactical space systems in response to increasing demand.

Key operational points for the year

-         Our SMS team supported the launch of NASA's Carruthers Geocorona Observatory and NOAA's Space Weather Follow On L-1 spacecraft. We leveraged commercial best practices to design and build both satellites and are supporting mission operations to study and monitor space weather.

-         We celebrated the launch of NASA's SPHEREx Observatory, equipped with the BAE Systems-built spacecraft bus, telescope and RAD750® single-board computer, subsequently seeing "first light" images from the mission.

-         We introduced our new Elevation^TM spacecraft product line, featuring common system components and defined configurations for enhanced affordability and rapid deployment. The Trek bus variant was selected to support our recent contract to build the next-generation Resilient Missile Warning & Tracking (RMWT) satellite system.

-         The US Space Force formally accepted the Weather System Follow-on-Microwave satellite into operations. As the mission prime, we built the spacecraft bus and microwave imager and are performing mission operations supporting critical, time-sensitive data to enhance weather forecasting for military operations.

-         The Air Force Research Laboratory awarded our SMS team the FORGE-IT contract to continue development and deployment of the Battlefield Assisted Trauma Distributed Operations Kit to enhance time-sensitive medical care on the battlefield.

-         Our EA-37B programme team is executing contracts, including for international support, valued at more than $1.45bn (£1.1bn). Under Baseline 3, we are focused on cross-decking the prime mission equipment and have delivered five aircraft for formal testing and training. Future baselines are in development to evolve the electro-magnetic attack capability.

-         Our Eagle Passive Active Warning Survivability System was successfully fielded, with two F-15Es delivered to RAF Lakenheath in the UK, and we are under contract for full-rate production.

-         The F-35 Lightning II programme delivered approximately 180 electronic warfare suites to Lockheed Martin, including 100 of the Block 4 configuration.

-         We delivered the 1,000^th infrared seeker to Lockheed Martin for integration on the Terminal High Altitude Area Defense (THAAD) interceptor missile. In response to increased demand, the THAAD 2-Color Infrared Seeker development programme is underway to field next-generation capabilities to defeat evolving threats.

-         The AN/ARC-231A Multi-mode Aviation Radio Set has completed initial installation and is operationally ready for use on select US Army rotary-wing aircraft. This milestone marks a major step forward in equipping warfighters with an advanced, secure and fast-operating communications solution to inform key decisions in the field.

Strategic and order highlights

-         Our SMS team secured a $1.2bn (£0.9bn) US Space Systems Command contract for the RMWT - Medium Earth Orbit Epoch 2 programme to build the next-generation RMWT satellite system. As the mission prime, we will develop and integrate multiple satellite buses and payloads and provide ground command, control and mission operation capabilities.

-         We are building the spacecraft bus for NOAA's upcoming Space Weather Next L1 Series mission under a $230m (£174m) contract to continue providing valuable data to NOAA's Space Weather Prediction Center.

-         Under the FORGE C2 contract, worth $151m (£114m), we are developing a next-generation ground system for US Space Force missile-warning satellites.

-         We secured a $322m (£244m) order for Advanced Precision Kill Weapon System (APKWS®) laser-guidance kits under the follow-on, five-year $1.7bn (£1.3bn) Indefinite Delivery, Indefinite Quantity contract awarded in August. We continue to demonstrate APKWS counter-UAS capability, recently in conjunction with the Group's Malloy platforms.

-         We secured a low rate initial production contract from the US Navy to produce three units of the Advanced Survivability Pods for P-8 Poseidon aircraft.

-         The Common Missile Warning System programme is executing on $250m (£190m) of foreign military sales contracts, with a further $138m (£105m) received in December.

-         The Long-Range Anti-Ship Missile programme continues production deliveries for Lots 7 and 8 and has been awarded a $360m (£273m) contract for the large lot procurement effort, which includes the C1 baseline configuration.

-         We secured a $129m (£98m) follow-on production order from Data Link Solutions, our joint venture with Collins Aerospace, Inc., under its US Navy contract to deliver the Multifunctional Information Distribution System Joint Tactical Radio System on production Lot 14.

Looking forward

-         Our Electronic Systems sector remains positioned for growth in the medium term through its diverse portfolio of defence and commercial products and innovative capabilities for US and international customers.

-         Over the long term, we are poised to benefit from our technology strengths spanning precision weaponry, space resilience, hyper-velocity projectiles, autonomous platforms and the development of multi-domain capabilities. We are also expanding our engineering and manufacturing capacity to grow our position in the emerging market for energy storage and power management solutions to support aircraft electrification.

-         In SMS, we continue to drive growth by expanding product lines from spacecraft and payloads to ground systems. We are collaborating across segments to identify and deliver combined capabilities to address customers' mission needs and capture new and adjacent opportunities, such as those of the US Golden Dome missile defence initiative.

Segmental performance: Platforms & Services

Platforms & Services, with 12,100¹ employees and operations in the US, Sweden and the UK, manufactures and upgrades combat vehicles, weapons and munitions, and delivers services and sustainment activities, including US naval ship repair and the management and operation of two government-owned, contractor-operated ammunition plants.

Financial performance

Financial performance measures defined by Group2

Financial performance measures derived from IFRS

2025

2024

Variance3

2025

2024

Variance3

Sales

£5,039m

£4,390m

+17

%

Revenue

£5,021m

£4,344m

+16

%

Underlying EBIT

£576m

£448m

+30

%

Operating profit

£576m

£456m

+26

%

Return on sales

11.4

%

10.2

%

+120 bps

Return on revenue

11.5

%

10.5

%

+100 bps

Operating business cash flow

£166m

£732m

£(566)m

Cash flow from operating activities

£392m

£976m

£(584)m

Order intake

£6.2bn

£7.4bn

£(1.2)bn

Order backlog

£15.0bn

£14.3bn

£0.7bn

Order book

£14.6bn

£13.6bn

£1.0bn

-         Order intake of £6.2bn included significant orders in Europe for our Hägglunds and Bofors businesses and c.£2bn of US combat vehicle orders. The segment closed the year with order backlog of £15.0bn, which has resulted from the significant demand in Europe for both CV90 and BVS10 over the last few years.

-         Sales recorded the highest growth across the Group in the year, at 17%, with European growth from Hägglunds and Bofors at 32%, while the US combat vehicle business grew 15%.

-         Underlying EBIT grew 30% which reflected an increased return on sales of 11.4% as production volumes increased.

-         The reduction in operating business cash flow reflected the timing of customer advances, with those received in the prior year unwinding into the supply chain.

1.         Including share of equity accounted investments.

2.         The definition and purpose of all performance measures defined by the Group are provided in the Alternative performance measures section on page 40.

3.         Growth rates for sales and underlying EBIT are on a constant currency basis. All other growth rates and year-on-year movements are on a reported currency basis.

Operational performance

With a strong order backlog across our diverse portfolio of innovative products and services, we remain dedicated to delivering on our customer commitments, driving operational excellence and investing in infrastructure to maintain a solid foundation for sustained growth. We continue to scale our Combat Mission Systems and Maritime Solutions (formerly US Ship Repair) divisions to support the US maritime industrial base, enhancing our manufacturing capabilities by upgrading welding, machining and heavy-lift capacity to support submarine construction and component fabrication.

We marked multiple milestones to expand our production capacity, spanning facilities in Sheffield, UK; Jacksonville, Florida; Minneapolis, Minnesota; and across our Swedish sites. Our Hägglunds business continues to ramp up efforts to meet customer expectations and transition
current programmes from development to delivery in line with agreed schedules.

Key operational points for the year

-         Our AMPV programme celebrated its 500^th delivery milestone during the year and is executing under full-rate production toward meeting the US Army's plan to field approximately 3,000 AMPVs in its Armored Brigade Combat Team formations.

-         We directed R&D efforts into developing a series of AMPV capability kits to advance future combat innovations, including counter-UAS detection and targeting, ground autonomy and uncrewed turrets.

-         We partnered with the US Army to advance our capabilities through successful tests of the Scorpio-XR extended range projectile that more than doubled the precision range of existing cannon artillery munitions.

-         Our Hägglunds team marked key milestones with the first CV9030 MkIV infantry fighting vehicle unveiled for the Czech Republic and the first three BvS10 vehicles presented to Sweden, Germany and the UK.

-         We announced a license agreement with Wojskowe Zakłady Motoryzacyjne SA for in-country fleet support of Poland's M88A2s and signed a Memorandum of Understanding with Champion Auto to pursue sustainment opportunities in Taiwan. We also continued to deliver Bradleys to Croatia and M88A2s to Poland.

-         We renamed our Maritime Solutions business to reflect its broader mission to serve a wide range of military and commercial customers. Our Jacksonville, Florida, shipyard continued fabrication work for Virginia- and Columbia-class submarines and Arleigh Burke-class destroyers. Our Jacksonville team commenced operations in June of its new shiplift and land-level repair facility that expanded capacity beyond its existing operational drydock and increased support of submarine construction.

-         Our Ordnance Systems Inc. team continues to progress the new Nitrocellulose Facility at the Radford Army Ammunition Plant. The endurance run was successfully completed.

-         In the UK, we opened our Sheffield facility where we will initially deliver M777 howitzers, with plans to evolve to develop and produce a range of combat systems to support the UK Government's ambitions to revitalise and sustain UK artillery capacity.

Strategic and order highlights

-         Our Bofors business signed a framework agreement with Latvia to supply 18 ARCHER Mobile Howitzers and Sweden procured another 18 ARCHERs as part of a military support package.

-         Our Bofors business secured its first order from Sweden for TRIDON Mk2 systems, a highly adaptable, cost-effective solution designed to provide rapid counter-UAS capabilities that are currently operational in Europe.

-         Our Hägglunds business won a $450m (£341m) contract to deliver 44 additional CV90MkIIIC vehicles to Denmark.

-         Our Combat Mission Systems team secured a number of orders across its vehicle portfolio, including contracts for more than $360m (£273m) from the US Marine Corps for Amphibious Combat Vehicles (ACVs), two long-lead awards worth approximately $550m (£417m) to produce additional AMPVs, and a $396m (£300m) contract from the US Army to produce additional upgraded Bradley A4 vehicles.

-         We also received two multi-year contracts from the US Army totalling more than $973m (£738m) for M109A7 Paladin Self-Propelled Howitzer sets.

-         Across our US shipyards, we won approximately $1.0bn (£0.8bn) in US Navy contracts featuring awards for the USS Somerset, USS Oak Hill, USS Forrest Sherman and USS The Sullivans.

Looking forward

-         We continue to shape our business to deliver on increased demand from US and international customers for production and sustainment of combat vehicles and artillery systems. The AMPV, M109A7, M88, Bradley and ACVs in our US vehicle portfolio are gaining increased international interest due to their proven capabilities.

-         In our maritime businesses, we are focused on sustaining our naval gun, missile launch and submarine positions, as well as US Navy ship repair, modernisation and growing fabrication activities.

-         Across our Swedish businesses, we continue to build a growing pipeline of opportunities for the CV90, BvS10 and Beowulf from Hägglunds, as well as for artillery, naval and air defence systems and munitions from Bofors.

Segmental performance: Air

Air, with 30,600¹ employees, comprises our UK‑based aircraft build and support activities for European and international markets, US programmes, development of our Future Combat Air System and FalconWorks^®, alongside our business in the Kingdom of Saudi Arabia and interests in our joint ventures: Edgewing, Eurofighter and MBDA.

Financial performance

Financial performance measures defined by Group2

Financial performance measures derived from IFRS

2025

2024

Variance3

2025

2024

Variance3

Sales

£9,299m

£8,519m

+9

%

Revenue

£7,372m

£6,880m

+7

%

Underlying EBIT

£1,108m

£1,007m

+10

%

Operating profit

£1,078m

£1,009m

+7

%

Return on sales

11.9

%

11.8

%

+10 bps

Return on revenue

14.6

%

14.7

%

-10 bps

Operating business cash flow

£904m

£1,243m

£(339)m

Cash flow from operating activities

£873m

£1,359m

£(486)m

Order intake

£14.6bn

£8.3bn

£6.3bn

Order backlog

£32.6bn

£26.8bn

£5.8bn

Order book

£18.5bn

£15.6bn

£2.9bn

-         The Air sector had a strong year with good growth in sales and underlying EBIT, high order intake and a material step up in our order backlog.

-         Sales increased by 9%, mainly driven by our Future Combat Air System programme, MBDA and European & International Markets, which flowed through to underlying EBIT,generating a return on sales of 11.9%.

-         Operating cash flow was £904m. The lower level compared to 2024 reflected advance payments in the prior year, which were flowed to our supply chain in 2025.

-         Order intake was £14.6bn, a 76% increase, which reflected high demand for our capabilities and services. This increased our order backlog by 22% to £32.6bn.

1.         Including share of equity accounted investments.

2.         The definition and purpose of all performance measures defined by the Group are provided in the Alternative performance measures section on page 40.

3.         Growth rates for sales and underlying EBIT are on a constant currency basis. All other growth rates and year-on-year movements are on a reported currency basis.

Operational performance

We continue to work with our UK and international customers to support their existing platforms and provide new enhanced capabilities. Deliveries of Typhoon aircraft to Qatar were completed in the year, alongside support to the in-service fleet. Our US Programmes business remains focused on delivery execution across all production lines. Our Future Combat Air Systems and FalconWorks® organisations continue to invest in our people, facilities and cutting-edge technologies to deliver disruptive capabilities to our customers.

Key operational points for the year

-         We delivered the final two Typhoon aircraft to Qatar during the year, bringing the Qatari Emiri Air Force fleet total to 24. We also continue to deliver Typhoon major units in support of core European customer orders, with 13 completed during the year.

-         Our US Programmes business completed 153 AFTs in 2025. The current Production Lots 18/19 support the continuation of production deliveries at Samlesbury, UK, through to 2027.

-         The Royal Navy selected our all-electric Malloy T-150 UAS to transport vital supplies between UK Carrier Strike Group ships for the first time during their deployment to the Indo-Pacific.

-         We continue to progress construction of the UK's Flying Combat Air Demonstrator, which will test next-generation skills, tools, processes and techniques needed to underpin GCAP and the entry into service of the core aircraft platform, which will be called Tempest in the UK. In July, alongside our industry partners and the Ministry of Defence, we revealed the design as the aircraft reached a major milestone, with two-thirds of its structural weight in manufacturing.

Strategic and order highlights

-         In October, the Republic of Türkiye and the UK Government signed a c.£5.4bn agreement which included the purchase of 20 Typhoon aircraft along with an associated weapons package. We will be the prime contractor and will manufacture major airframe components, undertake final assembly of the aircraft and lead the weapons integration. We continue to work with the two governments to secure a contract for future support of the aircraft.

-         We also secured further European Typhoon major units orders for Germany (20) and Italy (8), totalling c.£0.8bn.

-         We were awarded a contract for the full production of the new European Common Radar System Mk2 advanced radar for the Royal Air Force's Typhoon aircraft from the UK Ministry of Defence worth £454m.

-         We launched Edgewing, a joint venture with our international partners, Leonardo (Italy) and JAIEC (Japan), on GCAP. The new company, based in Reading, UK, will be accountable for the design and development of the next-generation combat aircraft and will remain the design authority for the life of the product, which is expected to go out beyond 2070.

-         Concept and assessment work on GCAP continues with our international industry partners in all three nations under their respective national contracts. We received a further £1.0bn of funding on the UK assessment phase contract in the first half of the year.

-         We created BAE Systems Arabian Industries Ltd by merging two of our existing portfolio companies, enhancing our visibility and participation within the military industry sector while creating further opportunity; in accordance with our long-term strategy to support the Kingdom of Saudi Arabia.

-         MBDA continued to secure significant orders through 2025, including further production orders with the French Air Force, Italian Air Force and Army, German Armed Forces and the UK Royal Navy for ASTER 15 & 30 Block 1 missile; Indian Navy Rafale weapon package order for the METEOR Beyond Visual Range Air-to-Air Missile (BVRAAM), MICA, SCALP and EXOCET AM39; and a South Korean production order for the METEOR BVRAAM, which will enable the Air Force to benefit from a common stockpile for both KF-21 and F-35. The Lancaster House 2.0 Declaration at the 37th Franco-British Summit in July 2025 saw both the UK and French Armed Forces confirm their continued support for Future Cruise/Anti-Ship Weapon development, now re-named as STRATUS Low Observable & Rapid Strike.

Looking forward

-         GCAP is a strategically important partnership that will not only drive innovation and technological advancement but also promote significant economic activity in the UK, Japan and Italy, with the aim of securing the future of their respective combat air industries for decades.

-         We will continue to focus on ensuring that Typhoon major units and support deliverables are made in line with customer expectations. Future Typhoon production and support sales are underpinned by existing contracts. We continue to pursue future sales of Typhoon.

-         We expect to sustain production of the rear fuselage assemblies for the F-35 at current levels of approximately 150 aft fuselages per year. Negotiations continue with Lockheed Martin to secure the full value of Lots 20-22, which will continue production to 2030.

-         In the Kingdom of Saudi Arabia, the In-Kingdom Industrial Participation programme continues to make good progress consistent with our long-term strategy, while supporting the Kingdom's National Transformation Plan and Vision 2030. This includes a further package of industrialisation agreed in 2025 on our Saudi British Defence Co-operation Programme. We expect our Saudi in-Kingdom support business to remain stable, underpinned by long-standing contracts, while we continue to address the Kingdom's current and future combat air requirements.

-         MBDA is well placed to benefit from increased defence spending in Europe and internationally and is investing in critical resources accordingly. The business has a strong order backlog, and development programmes continue to enhance the long-term capabilities of the business in air, land, sea and space domains.

Segmental performance: Maritime

Maritime, with 31,900¹ employees, comprises our UK‑based maritime and land activities, including ship build and support activities, major submarine build programmes, as well as our Australian business and interest in our RBSL joint venture.

Financial performance

Financial performance measures defined by Group2

Financial performance measures derived from IFRS

2025

2024

Variance3

2025

2024

Variance3

Sales

£6,797m

£6,187m

+11

%

Revenue

£6,579m

£6,002m

+10

%

Underlying EBIT

£457m

£474m

-3

%

Operating profit

£431m

£465m

-7

%

Return on sales

6.7

%

7.7

%

-100 bps

Return on revenue

6.6

%

7.7

%

-110 bps

Operating business cash flow

£373m

£436m

£(63)m

Cash flow from operating activities

£673m

£734m

£(61)m

Order intake

£5.0bn

£8.7bn

£(3.7)bn

Order backlog

£21.3bn

£23.2bn

£(1.9)bn

Order book

£20.5bn

£22.3bn

£(1.8)bn

-         Order intake of £5.0bn included increased funding for our Submarines business as well as the next major phase of Canada's River Class destroyer programme. The prior year included £4.6bn for Batch 1 of the Hunter Class frigates which are now under construction.

-         The Maritime segment recorded double-digit sales growth of 11% as construction continued across major programmes including Dreadnought, Type 26 and Hunter Class frigates, and design work for SSN-AUKUS.

-         The lower return on sales of 6.7% reflects the early stage maturity of the Maritime portfolio with several first-in-class programmes trading at relatively low margins as we invest in in additional capacity and capability both within our shipyards and the supply chain to support programme delivery.

1.         Including share of equity accounted investments.

2.         The definition and purpose of all performance measures defined by the Group are provided in the Alternative performance measures section on page 40.

3.         Growth rates for sales and underlying EBIT are on a constant currency basis. All other growth rates and year-on-year movements are on a reported currency basis.

Operational performance

Our major Maritime platforms continue to progress through their long-term programmes. With five of the seven Astute Class submarines delivered to the Royal Navy, work continues on the remaining two boats and on the construction on the four Dreadnought Class submarines. We also continue to deliver in accordance with our SSN-AUKUS contracts. Construction of the initial five UK Type 26 frigates continues, and more than half of the units on the first Australian Hunter Class frigate are in production. We also continue to deliver on customer requirements in both munitions and services.

Key operational points for the year

-         In September, His Majesty King Charles III commissioned the sixth Astute Class submarine, Agamemnon, into service with the Royal Navy. Agamemnon continues to progress through its in-water phase, while we also continue construction on the final vessel in the class.

-         We continue to make progress on the four Dreadnought Class submarines, with advancing levels of construction underway on the first three boats. In September, we cut steel on Boat 4 at our site in Barrow-in-Furness, UK, and commenced early stage construction activities.

-         We are progressing the Type 26 frigate programme of eight ships for the Royal Navy. Investment in additional capacity and capability continues both within our shipyards and the supply chain to support programme delivery. Focus remains on the achievement of key milestones in advance of sea trials for the first of class.

-         During the year, Her Royal Highness The Princess of Wales officially named HMS Glasgow at a ceremony in the UK. HMS Glasgow and HMS Cardiff, the first two ships in class, are docked at our Scotstoun shipyard and are progressing through final outfit. HMS Belfast and HMS Birmingham are both under construction in our new Janet Harvey Hall. Units for the fifth ship are also being constructed at our shipyard in Govan.

-         October 2025 marked the first full year of RECODE, an eight-year availability support programme signed in 2024. RECODE continues to adapt to the changing operational needs of the Royal Navy, achieving 99% combat systems equipment availability across the fleet against a target of 95%. Modernisation of our Combat Management System is using new development principles to deliver capability into operation quickly.

-         In Australia, construction of the Hunter Class frigate is progressing with 45 of the 78 units of the first ship in production.

-         Significant upgrade work is underway at our Osborne shipyard on the first Air Warfare destroyer, HMAS Hobart. HMAS Parramatta, the final Anzac Class frigate, undergoing the Midlife Capability Assurance Programme, is in the final stages of production and commissioning, with full handover to the Royal Australian Navy scheduled in 2026.

-         The upgrade programme for the Royal Australian Air Force's Hawk aircraft is approaching conclusion with installation of 32 of the 33 engines completed.

-         Over the past 12 months, our teams based at Portsmouth Naval Base continued to work side by side with the Royal Navy to support the nation's defence ambitions at home and abroad. From the Carriers, the Type 23 frigates and Type 45 destroyers, to the batch 1 offshore patrol vessels and the Hunt Class mine countermeasure ships - we continue to service and maintain the critical assets that keep the UK safe.

-         Our teams ensured HMS Prince of Wales and HMS Dauntless were prepared and ready to deploy as part of the Royal Navy's UK Carrier Strike Group in April.

-         In RBSL, vehicle deliveries continue under the Boxer programme, with 15 UK-built vehicles to date. On the Challenger 3 programme, focus remains on design maturity to facilitate the transition to full production. A total of six prototype tanks have been delivered with another two in build.

Strategic and order highlights

-         The Canadian Government announced that it will work with Australia to establish an Arctic Over The Horizon Radar capability. As the enterprise partner for Australia's over the horizon radar system, JORN, we will support the Government in this important agreement.

-         The initial mobilisation phase of the SSN-AUKUS programme in Australia has commenced to support the future build of the SSN-AUKUS fleet of conventionally armed, nuclear-powered submarines for the Royal Australian Navy.

-         We signed a contract with Canada's Irving Shipbuilding Inc., marking the start of the next major phase on the River Class destroyer programme. The ship is based on the Type 26 platform with specified design changes to meet the Royal Canadian Navy's requirements. Under this new contract, we will provide support and consultancy services throughout the build phase.

-         We signed a new strategic partnership with PGZ to establish a new ammunitions factory in Poland to produce 155mm artillery ammunition. This is aimed at increasing the nation's production of ammunition.

Looking forward

-         Our Submarines business is executing across three long-term programmes: Astute; Dreadnought; and SSNA. Our focus remains on strengthening our workforce, supply chain and infrastructure to provide the capability, capacity and resilience required to deliver these long-term programmes.

-         Preparations to start construction of the sixth Type 26 frigate, HMS Newcastle, are well underway with long-lead equipment items already in progress.

-         In Australia, we are a key partner to the Commonwealth in the delivery of its National Defence Strategy, which seeks a strategy of denial and an integrated, focused force. AUKUS nuclear-powered submarines, an enhanced lethality surface fleet, strategic surveillance and long-range strike are prioritised in the Integrated Investment Plan which supports this.

-         We will continue to work alongside ASC Pty Ltd to deliver initial mobilisation activities to support Australia's SSN-AUKUS submarines programme.

Segmental performance: Cyber & Intelligence

Cyber & Intelligence, with 10,500¹ employees, comprises our US‑based Intelligence & Security business and UK‑headquartered Digital Intelligence business and covers the Group's cyber security activities for national security, central government and government enterprises.

Financial performance

Financial performance measures defined by Group2

Financial performance measures derived from IFRS

2025

2024

Variance3

2025

2024

Variance3

Sales

£2,397m

£2,411m

+2

%

Revenue

£2,397m

£2,411m

-1

%

Underlying EBIT

£223m

£199m

+15

%

Operating profit

£182m

£182m

-

%

Return on sales

9.3

%

8.3

%

+100 bps

Return on revenue

7.6

%

7.5

%

+10 bps

Operating business cash flow

£59m

£139m

£(80)m

Cash flow from operating activities

£115m

£194m

£(79)m

Order intake

£2.7bn

£2.4bn

£0.3bn

Order backlog

£2.1bn

£1.8bn

£0.3bn

Order book

£1.4bn

£1.3bn

£0.1bn

-         The Cyber & Intelligence segment recorded £2.7bn of new orders.

-         Sales grew by 2%³, predominantly related to counter-UAS sales in our Digital Intelligence business following the acquisition of Kirintec in the prior year.

-         Underlying EBIT of £223m reflected an increased return on sales of 9.3%.

1.         Including share of equity accounted investments.

2.         The definition and purpose of all performance measures defined by the Group are provided in the Alternative performance measures section on page 40.

3.         Growth rates for sales and underlying EBIT are on a constant currency basis. All other growth rates and year-on-year movements are on a reported currency basis.

Operational performance

Our US-based Intelligence & Security business delivered solid performance amid shifting US Government priorities, an increasingly competitive defence technology landscape, as well as furloughs on some programmes due to the US Government shutdown. Despite these headwinds, we continued to align closely with evolving customer requirements and national security priorities to drive faster, more cost-effective and resilient outcomes for our customers.

In our UK-based Digital Intelligence business, we continue to work collaboratively to collect, connect and understand complex data for governments, nation states, armed forces and commercial businesses in both the UK and international markets.

Key operational points for the year

-         Our Intelligence & Security business brought together Bohemia Interactive Simulations, TerraSim and Pitch Technologies to launch BAE Systems OneArc, a commercial defence technology business focused on delivering synthetic environments to transform modern battlespace simulation.

-         We are using OneArc's VBS4 platform to develop an AI-enabled embedded training capability for the Bradley Fighting Vehicle that integrates virtual and real-world systems to improve readiness, reduce costs and advance the US armed forces' digital modernisation goals.

-         Our Intelligence & Security business also launched its Velhawk zero-trust cyber security solution to provide customers cyber resilience, accelerated cyber response and optimised working efficiency.

-         We continue to expand our presence on the Instrumentation Range Support Program, providing support to dozens of ranges for the US Army, Navy, Air Force, Space Force, Department of Energy, NASA and various international ranges.

-         In our Digital Intelligence business, we achieved the successful launch of our first low earth orbit satellite cluster, Azalea, at the end of November. This capability will provide defence, national security and civil sectors with sovereign space-based intelligence, surveillance and reconnaissance to enhance decision-making around today's threats.

-         In our National Security & Government division, we focused on mobilising new frameworks secured in 2024. Our Defence division continues to progress campaigns for key programmes and secured an important international order for assessment of core C4 capability for a sovereign client.

-         Following the acquisition of Kirintec in 2024, we continued to identify opportunities to exploit our electronic warfare and counter-UAS products alongside other complementary capabilities within our Digital Intelligence business and the wider Group. Kirintec specialises in cyber and electromagnetic activities, counter-improvised explosive devices and counter-UAS products for military customers.

Strategic and order highlights

-         Our Air and Space Force Solutions business was awarded a $238m (£180m) Systems Engineering and Evaluation, Systems Analysis Worldwide VIII contract, continuing our 28-year legacy on the programme.

-         Our Integrated Defense Solutions team grew the Strategic Systems Program by more than 20% year-on-year in support of the submarine nuclear deterrence mission. The team was selected to provide weapon systems engineering and integration services for the nuclear armed Sea-Launched Cruise Missile programme and completed weapon system integration activities on the Columbia and Dreadnought submarine construction programmes.

Looking forward

-         Our Intelligence & Security business maintains a pipeline of qualified business opportunities aligned to current US Government priorities.

-         We seek to accelerate growth by using AI, automation and autonomy to modernise offerings in digital labour, counter-UAS and UAS, decision advantage and platform digitisation.

-         In our UK Digital Intelligence business, we continue to progress our transformation roadmap to ensure we are well placed to take advantage of more favourable conditions in the medium to long term resulting from anticipated increases in defence spending across our existing and target markets. We are continuing to drive operational efficiencies through system integration and the simplified organisational structure embedded at the beginning of the year.

-         In our UK Digital Intelligence business, investment in our product portfolio continues with good progress made on developing cross-domain products for the US and other international markets, low earth orbit satellites and multi-domain network solutions for the defence market.

-         Through Kirintec, we will continue to identify opportunities for our counter-UAS products and complimentary capabilities for military customers.

Consolidated income statement

for the year ended 31 December

£m

		2025					2024
	Note	£m		Total

	£m		Total £m
Continuing operations
Revenue	2			28,336					26,312
Operating costs				(25,838	)				(24,106	)
Other income				233					266
Share of results of equity accounted investments				194					213
Operating profit	2			2,925					2,685
Finance income		135					135
Finance costs		(488	)				(488	)
Net finance costs	3			(353	)				(353	)
Profit before tax				2,572					2,332
Tax expense	4			(421	)				(291	)
Profit for the year				2,151					2,041
Attributable to:
Equity shareholders				2,062					1,956
Non-controlling interests				89					85
				2,151					2,041
Earnings per share	5
Basic earnings per share				68.8p					64.9p
Diluted earnings per share				68.0p					64.1p

Consolidated statement of comprehensive income

for the year ended 31 December

	2025							2024
	Other reserves		Retained earnings		Total			Other reserves		Retained earnings		Total
	£m		£m		£m			£m		£m		£m
Profit for the year	-		2,151		2,151			-		2,041		2,041
Other comprehensive income
Items that will not be reclassified to the income statement:
Consolidated:
Remeasurements on post-employment benefit schemes	-		(7	)	(7	)		-		414		414
Remeasurements on other investments	-		12		12			-		-		-
Tax on items that will not be reclassified to the income statement	-		(28	)	(28	)		-		(25	)	(25	)
Share of the other comprehensive (expense)/income of associates and joint ventures accounted for using the equity method (net of tax)	-		(3	)	(3	)		-		15		15
Items that may be reclassified to the income statement:
Consolidated:
Currency translation on foreign currency net investments	(608	)	-		(608	)		4		-		4
Reclassification of cumulative currency translation reserve on divestment of interest in equity accounted investments and other business disposals	21		-		21			3		-		3
Fair value gain/(loss) arising on hedging instruments during the year	44		-		44			(36	)	-		(36	)
Cumulative fair value loss on hedging instruments reclassified to the income statement	11		-		11			69		-		69
Tax on items that may be reclassified to the income statement	(6	)	-		(6	)		(7	)	-		(7	)
Share of the other comprehensive (expense)/income of associates and joint ventures accounted for using the equity method (net of tax)	(6	)	-		(6	)		4		-		4
Total other comprehensive (expense)/income for the year (net of tax)	(544	)	(26	)	(570	)		37		404		441
Total comprehensive (expense)/income for the year	(544	)	2,125		1,581			37		2,445		2,482
Attributable to:
Equity shareholders	(536	)	2,038		1,502			38		2,357		2,395
Non-controlling interests	(8	)	87		79			(1	)	88		87
	(544	)	2,125		1,581			37		2,445		2,482

Consolidated statement of changes in equity

for the year ended 31 December

	Attributable to equity holders of BAE Systems plc
	Issued share capital		Share premium		Other reserves		Retained earnings		Total		Non-controlling interests		Total equity
	£m		£m		£m		£m		£m		£m		£m
At 1 January 2024	81		1,253		6,403		2,822		10,559		164		10,723
Profit for the year	-		-		-		1,956		1,956		85		2,041
Total other comprehensive income for the year	-		-		38		401		439		2		441
Total comprehensive income for the year	-		-		38		2,357		2,395		87		2,482
Share-based payments (inclusive of tax)	-		-		-		145		145		-		145
Cumulative fair value loss on hedging instruments transferred to the balance sheet	-		-		5		-		5		-		5
Ordinary share dividends	-		-		-		(937	)	(937	)	(90	)	(1,027	)
Purchase of own shares	(1	)	-		1		(551	)	(551	)	-		(551	)
At 31 December 2024	80		1,253		6,447		3,836		11,616		161		11,777
Profit for the year	-		-		-		2,062		2,062		89		2,151
Total other comprehensive expense for the year	-		-		(536	)	(24	)	(560	)	(10	)	(570	)
Total comprehensive (expense)/income for the year	-		-		(536	)	2,038		1,502		79		1,581
Share-based payments (inclusive of tax)	-		-		-		226		226		-		226
Cumulative fair value gain on hedging instruments transferred to the balance sheet	-		-		(31	)	-		(31	)	-		(31	)
Ordinary share dividends	-		-		-		(1,027	)	(1,027	)	(87	)	(1,114	)
Purchase of own shares	(1	)	-		1		(502	)	(502	)	-		(502	)
At 31 December 2025	79		1,253		5,881		4,571		11,784		153		11,937

Consolidated balance sheet

as at 31 December

	Note	2025		2024
		£m		£m
Non-current assets
Goodwill		12,732		13,297
Other intangible assets		2,513		2,965
Property, plant and equipment		5,160		4,843
Right-of-use assets		1,638		1,755
Investment property		37		38
Equity accounted investments		698		823
Other investments		124		83
Contract receivables		117		108
Other receivables		859		626
Post-employment benefit surpluses	6	1,250		1,271
Other financial assets		232		265
Deferred tax assets		172		315
		25,532		26,389
Current assets
Inventories		1,384		1,324
Contract receivables		3,834		3,749
Trade and other receivables		3,125		2,914
Current tax		183		176
Other financial assets		183		212
Cash and cash equivalents		3,438		3,378
		12,147		11,753
Total assets		37,679		38,142
Non-current liabilities
Loans		(7,190	)	(7,713	)
Lease liabilities		(1,513	)	(1,658	)
Contract liabilities		(1,746	)	(1,720	)
Other payables		(1,921	)	(1,859	)
Post-employment benefit obligations	6	(406	)	(503	)
Other financial liabilities		(248	)	(193	)
Deferred tax liabilities		(26	)	(14	)
Provisions		(389	)	(363	)
		(13,439	)	(14,023	)
Current liabilities
Loans		(95	)	(699	)
Lease liabilities		(253	)	(183	)
Contract liabilities		(4,820	)	(4,504	)
Trade and other payables		(6,686	)	(6,383	)
Other financial liabilities		(173	)	(264	)
Current tax		(44	)	(55	)
Provisions		(232	)	(254	)
		(12,303	)	(12,342	)
Total liabilities		(25,742	)	(26,365	)
Net assets		11,937		11,777
Capital and reserves
Issued share capital		79		80
Share premium		1,253		1,253
Other reserves		5,881		6,447
Retained earnings		4,571		3,836
Total equity attributable to equity holders of BAE Systems plc		11,784		11,616
Non-controlling interests		153		161
Total equity		11,937		11,777

Approved by the Board of directors of BAE Systems plc on 17 February 2026 and signed on its behalf by:

C N Woodburn	B M Greve
Chief Executive	Chief Financial Officer

Consolidated cash flow statement

for the year ended 31 December

	Note	2025		2024
		£m		£m
Profit for the year		2,151		2,041
Tax expense	4	421		291
Adjustment in respect of research and development expenditure credits		(59	)	(45	)
Share of results of equity accounted investments		(194	)	(213	)
Net finance costs	3	353		353
Depreciation, amortisation and impairment		1,173		1,097
Net loss on disposal of property, plant and equipment, and investment property		-		6
Gain in respect of divestment of interests in equity accounted investments and other business disposals	11	(12	)	(94	)
Cost of equity-settled employee share schemes		174		144
Movement in provisions		16		24
Difference between pension funding contributions paid and the pension charge		(50	)	(249	)
(Increase)/decrease in working capital:
Inventories		(110	)	(144	)
Trade, contract and other receivables		(723	)	(121	)
Trade and other payables, and contract liabilities		488		1,010
Tax paid net of research and development expenditure credits received		(196	)	(175	)
Net cash flow from operating activities		3,432		3,925
Dividends received from equity accounted investments		299		158
Interest received		79		130
Principal element of finance lease receipts		6		12
Purchase of property, plant and equipment, and investment property		(920	)	(990	)
Purchase of intangible assets		(183	)	(173	)
Purchase of other investments		(2	)	-
Proceeds from funding related to assets		122		153
Equity accounted investment funding		(1	)	-
Proceeds from sale of property, plant and equipment, investment property and intangible assets		25		23
Purchase of subsidiary undertakings, net of cash and cash equivalents acquired	10	(8	)	(4,776	)
Cash flow in respect of divestment of interests in equity accounted investments and other business disposals	11	42		194
Net cash flow from investing activities		(541	)	(5,269	)
Interest paid		(512	)	(543	)
Equity dividends paid	7	(1,027	)	(937	)
Purchase of own shares		(502	)	(555	)
Dividends paid to non-controlling interests		(86	)	(89	)
Principal element of lease payments		(187	)	(190	)
Cash inflow from derivative financial instruments (excluding cash flow hedges)		419		136
Cash outflow from derivative financial instruments (excluding cash flow hedges)		(317	)	(266	)
Cash inflow from bond finance		-		3,753
Cash outflow from repayment of bond finance		(562	)	(626	)
Cash inflow from draw-down of bridge loan facility		-		3,180
Cash outflow from repayment of bridge loan facility		-		(3,168	)
Net cash flow from financing activities		(2,774	)	695
Net increase/(decrease) in cash and cash equivalents		117		(649	)
Cash and cash equivalents at 1 January		3,378		4,067
Effect of foreign exchange rate changes on cash and cash equivalents		(57	)	(40	)
Cash and cash equivalents at 31 December		3,438		3,378

Notes to the accounts

1. Preparation of the Condensed consolidated financial statements

Basis of preparation and statement of compliance

The Consolidated financial statements of BAE Systems plc for the year ended 31 December 2025, which were approved by the Board of directors on 17 February 2026, have been prepared on a going concern basis and in accordance with UK-adopted international accounting standards and the Companies Act 2006.

These condensed consolidated financial statements do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006 but have been derived from the statutory accounts for the year ended 31 December 2025. These statutory accounts have been audited and will be delivered to the Registrar of Companies in accordance with Section 441 of the Companies Act 2006 in due course.

The comparative figures for the year ended 31 December 2024 are not the Group's statutory accounts for that financial year. Those statutory accounts have been reported upon by the Group's auditor and delivered to the Registrar of Companies. The reports of the auditor in relation to the statutory accounts for the years ended 31 December 2025 and 31 December 2024 are unmodified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without modifying its report and did not contain statements under Section 498(2) or (3) of the Companies Act 2006.

The Consolidated financial statements are presented in pounds sterling and, unless stated otherwise, rounded to the nearest million. They have been prepared under the historical cost convention, as modified by the revaluation of certain financial assets and financial liabilities (including derivative financial instruments).

Changes in accounting policies

The following standards, interpretations and amendments to existing standards have been issued but were not mandatory for accounting periods beginning on 1 January 2025. These either have been, or are expected to be, endorsed by the UK Endorsement Board and are not expected to have a material impact on the Group:

-         Amendments to IFRS 9 and IFRS 7: Amendments to the Classification and Measurement of Financial Instruments, effective from 1 January 2026;

-         Amendments to IFRS 9 and IFRS 7: Contracts Referencing Nature-dependent Electricity, effective from 1 January 2026;

-         Annual Improvements to IFRS Accounting Standards - Volume 11, effective from 1 January 2026; and

-         IFRS 19 Subsidiaries without Public Accountability: Disclosures, effective from 1 January 2027.

The following new standard has been endorsed by the UK Endorsement Board and is expected to have a material impact to the presentation of the Consolidated financial statements:

-         IFRS 18 Presentation and Disclosure in Financial Statements, effective from 1 January 2027. This is a presentational standard and the Group is working through the impact, with the main changes to the Group expected to be the requirement to disaggregate information reported in the Consolidated income statement and the reporting of Management-defined Performance Measures in the notes to the Consolidated financial statements.

Key sources of estimation uncertainty

The application of the Group's accounting policies requires the use of estimates. In response to the potential impact of risks and uncertainties, the Group undertakes risk assessments and scenario planning in order to be able to respond to potential rapid changes in circumstances. The Group considers a range of estimates and assumptions in the application of its accounting policies and management's assessment of the carrying value of assets and liabilities. In the event that these estimates or assumptions prove to be inaccurate, there may be an adjustment to the carrying values of assets and liabilities within the next year. Areas of the Group's financial statements which could be materially impacted may include, but are not limited to:

Revenue and profit recognition

The Group accounts for revenue in accordance with IFRS 15 Revenue from Contracts with Customers. For most of the Group's contracts, revenue and associated margin are recognised progressively over time as costs are incurred, and as risks have been mitigated or retired.

The ultimate profitability of contracts is based on estimates of revenue and costs, including allowances for technical and other risks which are reliant on the knowledge and experience of the Group's project managers, engineers, and finance and commercial professionals. Material changes in these estimates could affect the profitability of individual contracts. Revenue and cost estimates are reviewed and updated at least quarterly, or more frequently as determined by events or circumstances.

The long-term nature of many of the Group's contracts means that judgements are made in estimating future costs on a contract, as well as when risks will be mitigated or retired. The Group continues to work closely and collaboratively with its key customers to deliver effectively on its contracts and commitments. However, the volume, scale, complexity and long-term nature of its programmes mean that potential sensitivities would be wide-ranging and not practicable to calculate. Owing to the potential future impact of current uncertainties, the Group's estimates and assumptions related to revenue recognition could be impacted by issues such as reduced productivity as a result of operational disruption, production delays and increased costs as a result of disruption to the supply chain, changing working practices to move towards our decarbonisation ambitions or, where there is uncertainty as to the recovery from customers, of programme costs incurred.

Revenue and profit is recognised only to the extent that it is highly probable that there will not be a reversal of revenue in the future. Therefore, in any given reporting year, the Group would expect to recognise an amount of revenue that did not meet the highly probable threshold at the end of the previous reporting year, but subsequently became highly probable in the current reporting year. Accordingly, the Group has recognised £0.2bn (2024 £0.2bn) of revenue in respect of performance obligations satisfied or partially satisfied in previous years. This continues to provide an approximation of the potential revenue sensitivity arising as a result of management's estimates and assumptions for variable consideration, future costs, and technical and other risks; however, it may not reflect the full potential impact on the contract receivables and contract liabilities balances.

Post-employment benefit obligations

A number of actuarial assumptions are made in assessing the value of post-employment benefit obligations, including the discount rate, inflation rate and mortality assumptions. For each of the actuarial assumptions used, there is a wide range of possible values and management estimates a point within that range that most appropriately reflects the Group's circumstances.

If estimates relating to these actuarial assumptions are no longer valid, or change due to changing economic and social conditions, then the potential obligations due under these schemes could change significantly.

Discount and inflation rates could change significantly as a result of a prolonged economic downturn, monetary policy decisions and interventions or other macroeconomic issues. Estimates made with regard to mortality projections may also change based on medical and epidemiological developments.

Similarly, the values of many assets are subject to estimates and assumptions, in particular those which are held in unquoted pooled investment vehicles. The associated fair value of these unquoted pooled investments is estimated with consideration of the most recently available valuations provided by the investment or fund managers. These valuations inherently incorporate a number of assumptions on the underlying investments. The overall level of estimation uncertainty in valuing these assets could therefore give rise to a material change in valuation within the next 12 months.

Furthermore, estimates are required around the Group's ability to access its defined benefit surpluses, and on what basis, which then determines the associated rate of tax to apply. Depending on the outcome, judgement is then required to determine the presentation of any tax payable in recovering a surplus.

Critical judgements made in applying accounting policies

In the course of preparing the Consolidated financial statements and when applying its accounting policies, the Group has been required to make judgements with regard to the actions required to enable the business to continue to meet customers' requirements in an operating environment still dominated by global economic uncertainties. No critical judgements have been made in the process of applying the Group's accounting policies, other than those involving estimates, that have had a significant effect on the amounts recognised in the Consolidated financial statements.

Impact of climate on the Consolidated financial statements

In preparing the Consolidated financial statements management has considered the potential impact of climate change, both in the context of the disclosures included in the Strategic report, and the impact of climate-related risks and opportunities and the Group's decarbonisation ambitions and activities on the Group's financial results.

As a responsible defence business, sustainability is embedded in our strategic framework, with one of the Group's long-term objectives to advance and integrate our ESG agenda. The products and services we provide are complex, diverse and developed over extended periods of time. Sustainability and the impact of our operations is considered in the planning and ongoing production of our products and services, including incorporation of the impact of the Group's decarbonisation ambitions and activities. These are embedded in our financial reporting, forecasting and governance processes.

Estimates and judgement are required in determining how the Group will pursue its decarbonisation ambitions. These, as well as mitigating actions required from the detailed review of climate risks and opportunities, have been factored into the current and future plans of the Group through the Integrated Business Plan (IBP). The IBP is the Group's annual long-term strategy review and five-year plan for each segment, including the investment case to decarbonise.

The more immediate financial impacts of climate-related risks, and the actions being taken to address them, are reflected in the financial results of the Group for the year. These are not considered to have had a material impact.

2. Segmental analysis and revenue recognition

The Group has five sectors which, together with HQ, make up its six reporting segments as defined by IFRS 8 Operating Segments.

-         Electronic Systems comprises the US- and UK-based electronics solutions business and the US-based SMS business, which have been aggregated together due to the similarities of the services offered. Together the teams deliver electronic warfare systems, navigation systems, electro-optical sensors, military and commercial avionics, precision guided solutions and communications systems, as well as space electronics, spacecraft, and ground and tactical systems.

-         Platforms & Services, with operations in the US, Sweden and UK, manufactures and upgrades combat vehicles, weapons and munitions, 
and delivers services and sustainment activities, including naval ship repair, and the management and operation of two government-owned contractor-operated ammunition plants.

-         Air comprises the Group's UK‑based aircraft build and support activities for European and international markets, US programmes, development of our Future Combat Air System and FalconWorks®, alongside our business in the Kingdom of Saudi Arabia and interests in our joint ventures: Edgewing, Eurofighter and MBDA.

-         Maritime comprises our UK‑based maritime and land activities, including ship build and support activities, major submarine build programmes, as well as our Australian business and interest in our RBSL joint venture.

-         Cyber & Intelligence comprises the US-based Intelligence & Security business and UK-headquartered Digital Intelligence business, which have been aggregated together due to the similarities of the services offered. Together, they cover the Group's cyber security activities for national security, central government and government enterprises.

-         HQ comprises the Group's head office and UK-based shared services activities.

The Board (the chief operating decision maker as defined by IFRS 8 Operating Segments) monitors the results of these reporting segments to assess performance and make decisions about the allocation of resources. Segmental performance is evaluated based on key performance indicators - sales¹ and underlying EBIT². Net finance costs and tax expense are managed on a Group basis.

Revenue and sales¹ by reporting segment

	Revenue					Deduct: Sales to equity accounted investments					Add back: Share of sales by equity accounted investments					Sales1
	2025		2024			2025		2024			2025		2024			2025		2024
	£m		£m			£m		£m			£m		£m			£m		£m
Electronic Systems	7,507		7,186			(251	)	(258	)		272		261			7,528		7,189
Platforms & Services	5,021		4,344			-		-			18		46			5,039		4,390
Air	7,372		6,880			(1,574	)	(1,413	)		3,501		3,052			9,299		8,519
Maritime	6,579		6,002			(5	)	(6	)		223		191			6,797		6,187
Cyber & Intelligence	2,397		2,411			-		-			-		-			2,397		2,411
HQ	52		24			-		-			180		179			232		203
	28,928		26,847			(1,830	)	(1,677	)		4,194		3,729			31,292		28,899
Intra-group revenue/sales1	(592	)	(535	)		(38	)	(29	)		-		-			(630	)	(564	)
	28,336		26,312			(1,868	)	(1,706	)		4,194		3,729			30,662		28,335

	Revenue from external customers					Intra-group revenue
	2025		2024			2025		2024
	£m		£m			£m		£m
Electronic Systems	7,310		6,988			197		198
Platforms & Services	4,948		4,288			73		56
Air	7,318		6,840			54		40
Maritime	6,507		5,915			72		87
Cyber & Intelligence	2,245		2,271			152		140
HQ	8		10			44		14
	28,336		26,312			592		535

Revenue and sales¹ by customer location

	Revenue					Sales1
	2025		2024			2025		2024
	£m		£m			£m		£m
UK	7,876		7,039			8,349		7,439
Europe (excluding UK)	2,221		1,733			3,634		2,842
US	13,145		12,559			13,157		12,536
Canada	227		189			227		189
Kingdom of Saudi Arabia	2,838		2,892			2,843		2,962
Qatar	252		259			332		468
Australia	1,287		1,158			1,293		1,170
Asia and Pacific (excluding Australia)	358		354			499		455
Other	132		129			328		274
	28,336		26,312			30,662		28,335

Operating profit/(loss) by reporting segment

	Operating profit/(loss)					Finance and tax expense/(income) of equity accounted investments					Amortisation of programme, customer-related and other intangible assets, and impairment of equity accounted investments and intangible assets					Adjusting Items					Underlying EBIT2
	2025		2024			2025		2024			2025		2024			2025		2024			2025		2024
	£m		£m			£m		£m			£m		£m			£m		£m			£m		£m
Electronic Systems	863		708			-		-			337		307			(38	)	56			1,162		1,071
Platforms & Services	576		456			-		9			-		-			-		(17	)		576		448
Air	1,078		1,009			14		(14	)		16		10			-		2			1,108		1,007
Maritime	431		465			4		4			22		5			-		-			457		474
Cyber & Intelligence	182		182			-		-			39		22			2		(5	)		223		199
HQ	(205	)	(135	)		5		10			-		-			(4	)	(59	)		(204	)	(184	)
	2,925		2,685			23		9			414		344			(40	)	(23	)		3,322		3,015
Net finance costs	(353	)	(353	)
Profit before tax	2,572		2,332
Tax expense	(421	)	(291	)
Profit for the year	2,151		2,041

1.         Sales is an alternative performance measure defined in the Alternative performance measures section on page 40. Sales includes revenue from the Group's subsidiaries as well as the Group's share of revenue of equity accounted investments, recognising the strategic importance in its industry of its equity accounted investments. It is presented here as our internal measure of segmental performance and to provide additional information on performance to the user.

2.         Underlying EBIT is an alternative performance measure defined in the Alternative performance measures section on page 40. It provides a measure of operating profitability, excluding one-off events or adjusting items that are not considered to be part of the ongoing operational transactions of the business, to enable management to monitor the performance of recurring operations over time, and which is comparable across the Group. It is presented here as our internal measure of segmental performance and to provide additional information on performance to the user.

3. Net finance costs

	2025		2024
	£m		£m
Interest income on cash and other financial instruments	80		116
Interest income on finance lease receivables	1		1
Net interest income on post-employment benefit obligations	54		18
Finance income	135		135
Interest expense on loans and other financial instruments	(425	)	(482	)
Facility fees	(4	)	(4	)
Interest expense on lease liabilities	(79	)	(73	)
Net present value expenses on provisions and other payables	(15	)	(13	)
Gain/(loss) on remeasurement of financial instruments at fair value through profit or loss1,2	45		(6	)
Foreign exchange (losses)/gains2,3	(10	)	90
Finance costs	(488	)	(488	)
Net finance costs	(353	)	(353	)

1.         Comprises gains and losses on derivative financial instruments, principally held to manage the Group's exposure to interest rate fluctuations on current and anticipated external borrowings and exchange rate fluctuations on balances with the Group's subsidiaries and equity accounted investments.

2.         The net gain or loss on remeasurement of financial instruments at fair value through profit or loss and the net gain or loss on foreign exchange are presented within finance costs as the gains and losses relate to the same underlying transactions.

3.         Foreign exchange (losses)/gains reflects exchange rate movements on US dollar-denominated borrowings and balances with the Group's subsidiaries and equity accounted investments.

4. Tax expense

The following table reconciles the theoretical income tax expense, using the UK corporation tax rate, to the reported tax expense. The reconciling items represent, besides the impact of tax rate differentials and changes, non-taxable benefits or non-deductible expenses arising from differences between the local tax base and the reported financial statements.

	2025		2024
	£m		£m
Profit before tax	2,572		2,332

UK corporation tax rate

25.0

%

25.0

%

Expected income tax expense	(643	)	(583	)
Effect of tax rates in foreign jurisdictions, including US state taxes	(1	)	3
Expenses not tax effected	(16	)	(12	)
Income not subject to tax	122		162
Research and development tax credits	29		38
Adjustments in respect of prior years	31		72
Adjustments in respect of equity accounted investments	52		55
Tax rate adjustment	-		-
Other	5		(26	)
Tax expense	(421	)	(291	)

5. Earnings per share

Movement in shares for the purpose of calculating earnings per share	Ordinary shares		Treasury shares		Contingently returnable shares held in trust		Outstanding shares for purpose of earnings per share			Weighted average share movement in the year
	millions		millions		millions		millions			millions
At 1 January 2024	3,239		(204	)	(20	)	3,015
Ordinary shares repurchased in the year	(44	)	-		-		(44	)		(20	)
Net shares issued in the year	-		20		5		25			18
At 31 December 2024	3,195		(184	)	(15	)	2,996
Ordinary shares repurchased in the year	(29	)	-		-		(29	)		(15	)
Net shares issued in the year	-		19		2		21			16
At 31 December 2025	3,166		(165	)	(13	)	2,988
							2025			2024
							Number of shares			Number of shares
							millions			millions
Outstanding shares for purpose of earnings per share at 1 January							2,996			3,015
Average ordinary shares repurchased in the year							(15	)		(20	)
Average ordinary shares issued in the year (net)							16			18
Weighted average shares for the purpose of calculating basic earnings per share at 31 December							2,997			3,013
Incremental ordinary shares in respect of employee share schemes							34			40
Weighted average shares for the purpose of calculating diluted earnings per share at 31 December							3,031			3,053
							2025			2024
Profit for the year attributable to equity shareholders (£m)							2,062			1,956
Basic earnings per share (pence)							68.8			64.9
Diluted earnings per share (pence)							68.0			64.1

6. Post-employment benefits

Introduction

The majority of the UK and US defined benefit pension schemes are funded by the Group's subsidiaries and equity accounted investments. The individual pension schemes' funding requirements are based on actuarial measurement frameworks set out in their funding policies.

The funding valuations are performed by professionally qualified independent actuaries and include assumptions which differ from the actuarial assumptions used for IAS 19 accounting purposes shown below. The purpose of the funding valuations is to design funding plans which ensure that the schemes have sufficient funds available to meet future benefit payments.

UK valuations

Funding valuations of the Group's UK defined benefit pension schemes are performed at least every three years. The most recent triennial funding valuation for the Main Scheme was carried out as at 31 March 2024. This valuation was concluded and signed off on 6 February 2025.

The results of the most recent triennial valuation for the Main Scheme are shown below. This valuation was agreed with the Trustees and certified by the Scheme Actuary after consultation with the Pensions Regulator in the UK.

	Main Scheme as at 31 March 2024
	£bn
Market value of assets	19.2
Present value of liabilities	(18.4	)
Funding surplus	0.8
Percentage of accrued benefits covered by the assets at the valuation date	104 %

The other UK schemes were also in surplus at their most recent triennial valuations.

US valuations

The Group's US pension schemes are valued annually, with the latest valuations performed as at 1 January 2025. The actuarial present value of accumulated plan benefits is determined by an independent actuary and uses actuarial assumptions to adjust the accumulated plan benefits earned by participants to reflect the time value of money and the probability of payment between the valuation date and the expected date 
of payment.

Contributions

Under the terms of the trust deeds of the UK schemes, the Group is required to have a funding plan determined at the conclusion of the triennial funding valuations. Equity accounted investments make regular contributions to the schemes in which they participate in line with the schedule of contributions.

Contributions in 2026 to the Group's pension schemes are expected to be approximately £90m, at a lower level than 2025, primarily reflecting the impact of updated market conditions on the cost of benefit accrual.

IAS 19 accounting

Principal actuarial assumptions

The assumptions used are estimates chosen from a range of possible actuarial assumptions which, due to the long-term nature of the obligation covered, may not necessarily occur in practice.

	UK				US
	2025	2024	2023		2025	2024	2023
Financial assumptions
Discount rate - past service (%)	5.5	5.5	4.5		5.2	5.5	4.8
Discount rate - future service (%)	5.8	5.6	4.6		5.2	5.5	4.8
Discount rate - US Healthcare schemes (%)	n/a	n/a	n/a		5.2	5.5	4.8
Retail Prices Index (RPI) inflation (%)	2.5	2.9	2.8		n/a	n/a	n/a
Rate of increase in salaries (%)	2.5	2.9	2.8		2.8	2.8	n/a
Rate of increase in deferred pensions (CPI/RPI) (%)	2.0/2.5	2.3/2.9	2.1/2.8		n/a	n/a	n/a
Rate of increase in pensions in payment (%)	1.6 - 3.5	1.7 - 3.6	1.6 - 3.6		n/a	n/a	n/a
Demographic assumptions
Life expectancy of a male currently aged 65 (years)	86 - 89	85 - 88	85 - 89		88	88	88
Life expectancy of a female currently aged 65 (years)	88 - 91	88 - 91	88 - 89		89	89	89
Life expectancy of a male currently aged 45 (years)	87 - 90	86 - 89	86 - 89		87	87	87
Life expectancy of a female currently aged 45 (years)	89 - 92	89 - 92	89 - 90		89	89	89

Life expectancy

For its UK pension schemes, the Group has used the Self-Administered Pension Schemes S3 mortality tables based on year of birth (as published by the Institute and Faculty of Actuaries) for both pensioner and non-pensioner members, in conjunction with the results of an investigation into the actual mortality experience of scheme members and information on the demographic profile of the scheme's membership.

In addition, to allow for future improvements in longevity, the Continuous Mortality Investigation 2024 tables (published by the Institute and Faculty of Actuaries) have been used (in 2024, the 2023 version of the tables were used), with an assumed long-term rate of improvement of 1.0% per annum (2024 1.0%), an initial rate adjustment parameter ('A') of 0.2% (2024 0.2%), with both the age-period and cohort convergence periods equal to the core values, except increased to 20 years from ages 80 to 100, and then tapering down to nil by age 120.

For the majority of the US schemes, the mortality tables used at 31 December 2025 are a blend of the fully generational PRI-2012 White Collar table and the PRI-2012 Blue Collar table, both projected using November 2025 Aon Endemic Projection Scale MP-2021.

Amounts recognised on the balance sheet

	UK defined benefit pension schemes		US and other pension schemes		US healthcare schemes		Kingdom of Saudi Arabia end of service benefit		Total
	£m		£m		£m		£m		£m
Post-employment benefit surpluses	1,214		3		33		-		1,250
Post-employment benefit obligations	(89	)	(122	)	-		(195	)	(406	)
At 31 December 2025	1,125		(119	)	33		(195	)	844

Summary of movements in post-employment benefit obligations

	UK defined benefit pension schemes		US and other pension schemes		US healthcare schemes		Kingdom of Saudi Arabia end of service benefit		Total
	£m		£m		£m		£m		£m
Surplus/(deficit) at 1 January 2025	1,105		(230	)	71		(178	)	768
Actual return on assets excluding amounts included in net finance costs	(424	)	147		3		-		(274	)
Decrease/(increase) in liabilities due to changes in financial assumptions	384		(57	)	(3	)	(5	)	319
Increase in liabilities due to changes in demographic assumptions	(118	)	(1	)	-		-		(119	)
Experience gains/(losses)	53		(3	)	1		(2	)	49
Contributions in excess of/(below) service cost	44		(27	)	(2	)	(10	)	5
Past service (cost)/credit - plan amendments	(7	)	58		-		-		51
Transfer to employee benefit trust1	-		-		(34	)	-		(34	)
Net interest income/(expense)	92		(10	)	3		(9	)	76
Foreign exchange adjustments	-		4		(6	)	9		7
Movement in withholding tax on surpluses	(4	)	-		-		-		(4	)
Surplus/(deficit) at 31 December 2025	1,125		(119	)	33		(195	)	844

1.         Healthcare plan assets utilised to provide medical benefits for active members.

Curtailment gain

In August 2025, the SMS pension scheme was modified to align with industry and other US schemes. The amendment resulted in a one-off gain of £58m which has been recognised in the Consolidated income statement.

Surplus recognition

A number of schemes are in an accounting surplus position. The surpluses have been recognised on the basis that the future economic benefits are unconditionally available to the Group, which is assumed to be via a refund. The UK surplus has been recognised net of withholding tax of 25% 31 December 2025 (2024 25%) based on the enacted legislation at that date. This tax would be levied prior to the future refunding of any surplus, and therefore the surplus has been presented on a net basis as this is not deemed to be an income tax of the Group.

7. Capital distributions

Equity dividends

	2025		2024
	£m		£m
Final 20.6p dividend per ordinary share paid in the year (2024 18.5p)	622		562
Interim 13.5p dividend per ordinary share paid in the year (2024 12.4p)	405		375
	1,027		937

After the balance sheet date, the directors proposed a final dividend of 22.8p per ordinary share. The dividend proposed amounts to approximately £684m, although the final payment is likely to be lower as a result of the impact of share repurchases. Subject to shareholder approval, the dividend will be paid on 4 June 2026 to shareholders registered on 24 April 2026. The provisional ex-dividend date is 23 April 2026. The payment of this dividend will not have any tax expense consequences for the Group.

Purchase of own shares

In July 2022, the directors approved a share buyback programme of up to £1.5bn (the 2022 share buyback programme). The 2022 share buyback programme was completed on 24 July 2024. In total, 163,907,003 ordinary shares were repurchased under the 2022 share buyback programme for a total cost (including transaction costs) of £1,508m.

In August 2023, the directors approved a further share buyback programme of up to £1.5bn (the 2023 share buyback programme). The 2023 share buyback programme commenced on 25 July 2024. The 2023 share buyback programme is expected to complete within three years of 
its commencement.

In the year ended 31 December 2024, 22,220,182 ordinary shares were repurchased under the 2022 share buyback programme for a total 
cost (including transaction costs) of £287m. A further 20,901,154 ordinary shares were repurchased under the 2023 share buyback programme at a total cost (including transaction costs) of £264m.

In the year ended 31 December 2025, 29,595,214 ordinary shares were repurchased under the 2023 share buyback programme at a total cost (including transaction costs) of £502m.

All ordinary shares acquired have been subsequently cancelled, with the nominal value of ordinary shares cancelled deducted from share capital against the capital redemption reserve.

As part of the 2022 and 2023 buyback programmes, it was agreed that should a better alternative use for the Company's cash reserves be identified, the share buyback programmes would be ceased and the money instead used for the alternative purpose. Therefore, when the Company issued a mandate to the brokers to purchase shares on its behalf, the mandate was structured such that it could be revoked at any point. As such, no financial liability has been recognised for shares not yet purchased under the programmes at 31 December.

8. Fair value measurement

Fair value of financial instruments

Certain of the Group's financial instruments are held at fair value.

The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the balance sheet date.

The fair values of financial instruments held at fair value have been determined based on available market information at the balance sheet date, and the valuation methodologies listed below:

-         the fair values of forward foreign exchange contracts are calculated by discounting the contracted forward values and translating at the appropriate balance sheet rates;

-         the fair values of both interest rate and cross-currency swaps are calculated by discounting expected future principal and interest cash flows and translating at the appropriate balance sheet rates; and

-         the fair values of money market funds are calculated by multiplying the net asset value per share by the investment held at the balance sheet date.

The derivative fair values are based on reputable third-party forecast data, and then adjusted for credit risk, including the Group's own credit 
risk, and market risk.

Due to the variability of the valuation factors, the fair values presented at 31 December may not be indicative of the amounts the Group will realise in the future.

Fair value hierarchy

The fair value measurement hierarchy is as follows:

-         Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities;

-         Level 2 - Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) 
or indirectly (i.e. derived from prices); and

-         Level 3 - Inputs for the asset or liability that are not based on observable market data (i.e. unobservable inputs).

All of the financial assets and liabilities measured at fair value are classified as level 2 using the fair value hierarchy, except for money market funds, which are classified as level 1; other investments, which are at a combination of level 1 and level 3; and the contingent consideration liability, which is measured at level 3. The fair value of the contingent consideration has been valued based on the discounted expected cash flows. The total value of investments classified as level 3 is immaterial. There were no transfers between levels during the period. Alternative valuation techniques would not materially change the valuations presented.

Financial assets and liabilities in the Group's Consolidated balance sheet are either held at fair value or at amortised cost. With the exception of loans, the carrying value of financial instruments measured at amortised cost approximates their fair value. For the bonds included within loans, the fair value of loans presented in the table above is derived from market prices as of 31 December, classified as level 1 using the fair value hierarchy. The fair value of the private placement included within loans has been valued based on the interest yield on an equivalent observable bond, applied to the private placement cash flows, and has been classified as level 2 using the fair value hierarchy.

Carrying amounts and fair values of certain financial instruments

	2025					2024
	Carrying amount		Fair value			Carrying amount		Fair value
	£m		£m			£m		£m
Financial instruments measured at fair value:
Non-current
Other investments at fair value through other comprehensive income	124		124			83		83
Other financial assets	232		232			265		265
Contingent consideration arising from business combinations	(40	)	(40	)		(65	)	(65	)
Other financial liabilities	(248	)	(248	)		(193	)	(193	)
Current
Other financial assets	183		183			212		212
Money market funds	1,169		1,169			1,227		1,227
Contingent consideration arising from business combinations	(18	)	(18	)		(6	)	(6	)
Other financial liabilities	(173	)	(173	)		(264	)	(264	)
Financial instruments not measured at fair value:
Non-current
Loans	(7,190	)	(6,991	)		(7,713	)	(7,261	)
Current
Loans	(95	)	(95	)		(699	)	(695	)

9. Related party transactions

The Group has a related party relationship with its equity accounted investments and pension schemes. Transactions with related parties occur in the normal course of business, are priced on an arm's-length basis and settled on normal trade terms. The more significant transactions are disclosed below:

	Year ended 31 December 2025		Year ended 31 December 2024
	£m		£m
Sales to related parties	1,868		1,706
Purchases from related parties	439		512
Management recharges	3		3
	31 December 2025		31 December 2024
	£m		£m
Amounts owed by related parties	96		54
Amounts owed to related parties1	2,414		2,192

1.         At 31 December 2025, £2,193m (2024 £1,975m) was owed by BAE Systems plc and £221m (2024 £217m) by other Group subsidiaries.

10. Acquisitions

Businesses acquired during 2025

There were no material acquisitions during the year.

Businesses acquired during 2024

Ball Aerospace

On 16 February 2024, the Group acquired 100% of the share capital of Ball Aerospace (now Space & Mission Systems) for consideration of $5.5bn (£4.4bn). The net assets acquired, including intangible assets identified, were valued at £2,845m resulting in goodwill of £1,507m.

Kirintec

On 3 September 2024, the Group acquired 100% of the share capital of Kirintec Ltd for total consideration of £282m, including £30m of contingent consideration. The net assets acquired, including intangible assets identified, were provisionally valued at £161m resulting in provisional goodwill of £121m. The purchase price allocation for the acquisition was finalised within the current year with no significant changes. The final goodwill arising on acquisition was valued at £122m.

Other acquisitions

On 31 January 2024, the Group acquired 100% of the share capital of Malloy Aeronautics Ltd and, on 2 May 2024, the Group acquired 100% 
of the share capital of Callen-Lenz Associates Ltd. Total consideration was £292m including £61m of contingent consideration. The net assets acquired, including intangible assets identified, were valued at £108m resulting in goodwill of £184m at 31 December 2024. Since the 31 December 2024, the Group has adjusted the net assets acquired with Callen-Lenz Associates Ltd by £16m, which has resulted in an increase to goodwill. Total goodwill of £200m has been recognised in respect of these acquisitions.

11. Disposals

Business disposals during 2025

There were no business disposals in 2025.

Disposal of interests in equity accounted investments during 2025

Air Astana

On 17 December 2025, the Group disposed of a portion of its 17% interest in Air Astana leaving the group with a 7% shareholding at 31 December 2025. The Group received cash proceeds of £38m and realised a profit on disposal of £12m, after accounting for the carrying value of the investment, disposal costs and currency reserve reclassifications. Following the reduction in the shareholding, the Group is no longer equity accounting for the remaining investment in Air Astana which is held within other investments, at fair value through other comprehensive income, at 31 December 2025.

Innovaero

On 11 December 2025, the Group disposed of its 51% shareholding in Innovaero Pty Ltd, previously reported in the Maritime segment. 
The Group received cash proceeds of £4m, there was no profit or loss on the disposal.

Business disposals during 2024

On 31 October 2024, the Group completed the sale of BAE Systems Imaging Solutions Inc., previously reported within the Electronic Systems segment and, on 31 December 2024, the Group completed the sale of its forge facilities and related services which formed the Anniston business within the Platforms & Services segment. Total net cash proceeds from the disposals were £8m and, after accounting for disposal costs and cumulative currency translation, the loss on the disposals before tax totalled £4m.

Disposal of interests in equity accounted investments during 2024

Air Astana

On 9 February 2024, Air Astana launched a joint initial public offering (IPO). As a result of the IPO, the total shareholding held by BAE Systems 
in Air Astana reduced from 49% to 17%. The Group received cash proceeds of £166m and realised a profit on the disposal of £75m, after accounting for the carrying value of the investment and currency reserve reclassifications.

FNSS

On 10 December 2024, the Group sold its 49% shareholding in FNSS Savunma Sistemleri A.S,. FNSS was included in the Platforms & Services segment. The Group received cash proceeds of £20m and realised a profit on the disposal of £23m, after accounting for currency reserve reclassifications.

12. Contingent liabilities

The Group believes that the likelihood of any significant liability arising in respect of its guarantees and performance bond arrangements, and legal actions and claims not already provided for, is remote.

13. Events after the reporting period

There were no events after the reporting period which would materially impact the balances reported in this Report.

Alternative performance measures

We monitor the underlying financial performance of the Group using APMs. These measures are not defined in IFRS and, therefore, are considered to be non-GAAP (Generally Accepted Accounting Principles) measures. Accordingly, the relevant IFRS measures are also presented where appropriate.

The Group uses these APMs as a mechanism to support year-on-year business performance and cash generation comparisons, and to enhance management's planning and decision-making on the allocation of resources. The APMs are also used to provide information in line with the expectations of investors, and when setting guidance on expected future business performance. The Group presents these measures to the users to enhance their understanding of how the business has performed within the year, and does not consider them to be more important than, or superior to, their equivalent IFRS measures. As each APM is defined by the Group, they may not be directly comparable with equivalently named measures in other companies.

Purpose, definitions, breakdowns and reconciliations to the relevant statutory measure, where appropriate, are included below.

Sales

Purpose

Enables management to monitor the revenue of both the Group's own subsidiaries as well as recognising the strategic importance in its industry of its equity accounted investments, to ensure programme performance is understood and in line with expectations.

Definition

Revenue plus the Group's share of revenue of equity accounted investments, excluding subsidiaries' revenue from equity accounted investments.

Reconciliation of sales to revenue

	2025		2024
	£m		£m
Sales	30,662		28,335
Deduct: Group's share of revenue of equity accounted investments	(4,194	)	(3,729	)
Add: Subsidiaries' revenue from equity accounted investments	1,868		1,706
Revenue	28,336		26,312

Underlying EBIT

Purpose

Provides a measure of operating profitability, excluding one-off events or adjusting items that are not considered to be part of the ongoing operational transactions of the business, to enable management to monitor the performance of recurring operations over time, and which is comparable across the Group.

Definition

Operating profit excluding amortisation of programme, customer-related and other intangible assets, impairment of equity accounted investments and intangible assets, net finance costs and tax expense of equity accounted investments (EBIT) and adjusting items. The exclusion of amortisation of acquisition-related intangible assets is to allow consistent comparability internally and externally between our businesses, regardless of whether they have been grown organically or via acquisition.

Reconciliation of underlying EBIT to operating profit

	2025		2024
	£m		£m
Underlying EBIT	3,322		3,015
Adjusting items	40		23
Amortisation of programme, customer-related and other intangible assets, and impairment of equity accounted investments and intangible assets	(414	)	(344	)
Net finance income of equity accounted investments	60		59
Tax expense of equity accounted investments	(83	)	(68	)
Operating profit	2,925		2,685

Return on sales

Purpose

Provides a measure of operating profitability, excluding one-off events, to enable management to monitor the performance of recurring operations over time, and which is comparable across the Group.

Definition

Underlying EBIT as a percentage of sales. Also referred to as margin.

	2025		2024
	£m		£m
Sales	30,662		28,335
Underlying EBIT	3,322		3,015
Return on sales	10.8	%	10.6	%

Underlying earnings per share (EPS)

Purpose

Provides a measure of the Group's underlying performance, which enables management to compare the profitability of the Group's recurring operations over time.

Definition

Profit for the year attributable to shareholders, excluding post-tax impact of amortisation of programme, customer-related and other intangible assets, impairment of equity accounted investments and intangible assets, non-cash finance movements on pensions and financial derivatives, and adjusting items attributable to shareholders, being underlying earnings, divided by number of shares as defined for Basic EPS in accordance with IAS 33 Earnings per Share.

Reconciliation of underlying earnings to profit attributable to equity shareholders

	2025		2024
	£m		£m
Underlying earnings for the year attributable to equity shareholders	2,253		2,065
Adjustments:
Adjusting items	40		23
Amortisation of programme, customer-related and other intangible assets, and impairment of equity accounted investments and intangible assets	(414	)	(344	)
Net interest income on post-employment benefit obligations	57		20
Fair value and foreign exchange adjustments on financial instruments and investments	34		82
Tax impact of adjustments	92		110
Profit for the year attributable to equity shareholders	2,062		1,956

Reconciliation of underlying EBIT to underlying earnings

	2025		2024
	£m		£m
Underlying EBIT	3,322		3,015
Group and equity accounted investments' underlying net finance costs (see reconciliation on page 42)	(384	)	(396	)
Underlying tax expense (see reconciliation on page 43)	(596	)	(469	)
Underlying profit for the year	2,342		2,150
Deduct: Non-controlling interests	(89	)	(85	)
Underlying earnings for the year attributable to equity shareholders	2,253		2,065
Weighted average number of ordinary shares used in calculating basic EPS	2,997		3,013
Underlying EPS - basic	75.2p		68.5p
Weighted average number of ordinary shares used in calculating diluted EPS	3,031		3,053
Underlying EPS - diluted	74.3p		67.6p

Adjusting items

Purpose

To adjust items of financial performance from the reported underlying results which have been determined by management as being material by their size or incidence and not relevant to an understanding of the Group's underlying business performance.

Definition

Adjusting items include profit or loss on business transactions, the impact of substantively enacted tax rate changes, and costs incurred which are one-off in nature, for example non-routine costs or income relating to post-retirement benefit schemes, and other items which management has determined as not being relevant to an understanding of the Group's underlying business performance.

	2025		2024
	£m		£m
Net profit on business disposals	12		94
Net gain related to plan amendments / settlements on pension schemes	51		13
Acquisition and integration-related costs	(22	)	(72	)
Other	(1	)	(12	)
Adjusting items	40		23

Underlying net finance costs

Purpose

Provides a measure of net finance costs associated with the operational borrowings of the Group that is comparable over time.

Definition

Net finance costs for the Group and its share of equity accounted investments, excluding net interest income/expense on post-employment benefit obligations and fair value and foreign exchange adjustments on financial instruments.

	2025		2024
	£m		£m
Net finance costs - Group	(353	)	(353	)
Deduct:
Net interest income on post-employment benefit obligations	(54	)	(18	)
Fair value and foreign exchange adjustments on financial instruments	(35	)	(84	)
Underlying net finance costs - Group	(442	)	(455	)
Net finance income - equity accounted investments	60		59
(Deduct)/add back:
Net interest income on post-employment benefit obligations	(3	)	(2	)
Fair value and foreign exchange adjustments on financial instruments	1		2
Underlying net finance income - equity accounted investments	58		59
Total of Group and equity accounted investments' underlying net finance costs	(384	)	(396	)

Underlying effective tax rate

Purpose

Provides a measure of tax expense for the Group, excluding one-off items, that is comparable over time.

Definition

Tax expense for the Group and its share of equity accounted investments, excluding any one-off tax benefit/expense related to adjusting items and other items excluded from underlying EBIT, as a percentage of underlying profit before tax.

Calculation of the underlying effective tax rate

	2025		2024
	£m		£m
Underlying EBIT (see reconciliation on page 41)	3,322		3,015
Group and equity accounted investments' underlying net finance costs (see reconciliation on page 42)	(384	)	(396	)
Underlying profit before tax	2,938		2,619
Group tax expense	(421	)	(291	)
Tax expense of equity accounted investments	(83	)	(68	)
Exclude:
Tax effect of taxable adjusting items	10		(33	)
Tax effect of other items excluded from underlying profit	(102	)	(77	)
Underlying tax expense	(596	)	(469	)

Underlying effective tax rate

20

%

18

%

Free cash flow

Purpose

Provides a measure of cash generated by the Group's operations after servicing debt and tax obligations, available for use in line with the Group's capital allocation policy.

Definition

Net cash flow from operating activities, including dividends received from equity accounted investments, interest paid, net of interest received, net capital expenditure and financial investments, and principal elements of lease payments and receipts.

Reconciliation from free cash flow to net cash flow from operating activities

	2025		2024
	£m		£m
Free cash flow	2,158		2,505
Add back:
Interest paid, net of interest received	433		413
Net capital expenditure and financial investment	959		987
Principal element of lease payments and receipts	181		178
Deduct:
Dividends received from equity accounted investments	(299	)	(158	)
Net cash flow from operating activities	3,432		3,925

Operating business cash flow

Purpose

Provides a measure of cash generated by the Group's operations, which is comparable across the Group, to service debt and meet tax obligations, and in turn available for use in line with the Group's capital allocation policy.

Definition

Net cash flow from operating activities excluding tax paid net of research and development expenditure credits received and including net capital expenditure (net of proceeds from funding of assets) and lease principal amounts, financial investment and dividends from equity accounted investments.

Reconciliation from operating business cash flow to net cash flow from operating activities

	2025		2024
	£m		£m
Operating business cash flow	2,787		3,093
Add back:
Net capital expenditure and financial investment	959		987
Principal element of lease payments and receipts	181		178
Deduct:
Dividends received from equity accounted investments	(299	)	(158	)
Tax paid net of research and development expenditure credits received	(196	)	(175	)
Net cash flow from operating activities	3,432		3,925

Reconciliation of operating business cash flow to net cash flow from operating activities by reporting segment

	Operating business cash flow				Deduct: Dividends received from equity accounted investments				Add back: Net capital expenditure, lease principal amounts and financial investment				Net cash flow from operating activities
	2025		2024		2025		2024		2025		2024		2025		2024
	£m		£m		£m		£m		£m		£m		£m		£m
Electronic Systems	1,337		801		(11	)	(11	)	245		254		1,571		1,044
Platforms & Services	166		732		-		(1	)	226		245		392		976
Air	904		1,243		(278	)	(138	)	247		254		873		1,359
Maritime	373		436		(10	)	(8	)	310		306		673		734
Cyber & Intelligence	59		139		-		-		56		55		115		194
HQ	(52	)	(258	)	-		-		56		51		4		(207	)
	2,787		3,093		(299	)	(158	)	1,140		1,165		3,628		4,100
Tax paid net of research and development expenditure credits received													(196	)	(175	)
Net cash flow from operating activities													3,432		3,925

Net debt (excluding lease liabilities)

Purpose

Allows management to monitor indebtedness of the Group, to ensure the Group's capital structure is appropriate and capital allocation policy decisions are suitably informed.

Definition

Cash and cash equivalents, less loans (including debt-related derivative financial instruments). Net debt does not include lease liabilities.

Components of net debt (excluding lease liabilities)

	2025		2024
	£m		£m
Cash and cash equivalents	3,438		3,378
Debt-related derivative financial instruments (net)	3		89
Loans - non-current	(7,190	)	(7,713	)
Loans - current	(95	)	(699	)
Net debt (excluding lease liabilities)	(3,844	)	(4,945	)

Order intake

Purpose

Allows management to monitor the order intake of the Group together with its equity accounted investments, providing insight into future years' sales performance.

Definition

Funded orders received from customers including the Group's share of order intake of equity accounted investments.

	2025		2024
	£bn		£bn
Order intake	36.8		33.7

Order backlog

Purpose

Supports future years' sales performance of the Group together with its equity accounted investments.

Definition

Funded and unfunded unexecuted customer orders including the Group's share of order backlog of equity accounted investments. Unfunded orders include the elements of US multi-year contracts for which funding has not been authorised by the customer.

Reconciliation of order backlog, as defined by the Group, to order book¹

	2025		2024
	£bn		£bn
Order backlog, as defined by the Group	83.6		77.8
Deduct:
Unfunded order backlog	(5.6	)	(5.3	)
Share of order backlog of equity accounted investments	(20.5	)	(16.6	)
Add back: Order backlog in respect of orders from equity accounted investments	5.6		4.5
Order book1	63.1		60.4

1.         Order book represents the transaction price allocated to unsatisfied and partially satisfied performance obligations as defined by IFRS 15 Revenue from Contracts with Customers.

 

END