Surging military spending boosts London-listed defence sales

Two London-listed manufacturing contractors are reaping the benefits of a surge in defence spending as the period of geopolitical turmoil boosts sales across the sector.

FTSE AIM-listed firm Gooch & Housego’s saw its profits before tax surge by nearly 16 per cent in the first half of the financial year, up to £3.3bn, driven by an uptick in demand for defence and aerospace products.

The firm said revenue related to aerospace and defence sales shot up by 51.7 per cent to £35.6m compared to £23.5m the year prior, “reflecting strong demand, enhanced capabilities and benefits from recent acquisitions.” 

Gooch & Housego said demand “remains strong” across its defence and aerospace arm due to allies upping spending to “prioritise” defence capabilities. 

Charlie Peppiatt, chief executive of Gooch & Housego said “record demand from US and European Aerospace and Defence sectors firmly supports our path to achieving mid-teens returns over the medium term.” 

The firm said it has seen increased demand especially for its infrared lens systems and optical assemblies which are used in drone and aircraft manufacturing. 

FTSE 250-listed defence contractor Chemring Group also said sales have climbed, reporting revenue to be up by 7 per cent as the firm invests heavily in defence to meet an increase in demand.

However, the defence contractor’s underlying operating profit dropped due to its hefty investment in defence manufacturing, particularly its technology division which specialises in systems for defence, aerospace, and national security.

“Against a backdrop of geopolitical instability, a shift towards high‑intensity deterrence and higher defence and national security spending, we continue to invest in the capabilities and capacity our customers need most,” Chemring Group chief executive, Michael Ord said.

Sector-wide defence spend surge

This follows a sector-wide uptick in spending on defence products following the Iran war and strong performance across the board for firms. 

FTSE 100 constituent Babcock International made it onto the top-tier share index’s leaderboard in May after sharing plans to return £200m to investors via a share buyback, alongside a 10 per cent rise in annual revenue of £5.3bn.