Half-year Financial Report

BAE SYSTEMS PLC

30 July 2026

Half-yearly Report 2026

-         Sales increased 9%², with all sectors contributing growth in the period.

-         Underlying EBIT was up 11%², increasing the Group's return on sales for the period to 10.8% (2025 10.6%).

-         Underlying EPS increased 13%² to 38.9p, after accounting for the Group's underlying net finance costs and tax.

-         Free cash inflow of £1,791m reflected a high level of customer advances. No material advances were received in the comparative period.

-         Order intake of £16.4bn remained high across all sectors and we closed the period with a record order backlog of £84.0bn.

-         The reported growth in revenue of 8%² reflected the same strong operational performance across the portfolio excluding the impact of our equity accounted investments.

-         Operating profit increased 13%² as the Group incurred lower costs in relation to amortisation of acquired intangibles and adjusting items which are excluded from Underlying EBIT.

-         Basic EPS was up 6%² to 34.1p after accounting for the Group's net finance costs and tax, with both higher finance costs and effective tax rate contributing to the reduction in growth compared to operating profit.

-         Net cash flow from operating activities is also inclusive of movements in customer advances in the period, as well as timing of other working capital requirements.

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 38.

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 period ended 30 June 2025 to pounds sterling at the average exchange rate of such currencies for the period ended 30 June 2026). The comparatives have not been restated. All other growth rates and year-on-year movements are on a reported currency basis.

-         Securing a contract from the UK Government to provide the Republic of Türkiye with training, support equipment and services to its 20 Typhoon aircraft ordered in October 2025. Manufacturing is already underway in the UK and across the Eurofighter partner nations, with first delivery scheduled for 2030.

-         Successful APKWS® precision weapon test firing from a Eurofighter Typhoon, demonstrating an effective, affordable counter-drone solution. In rapid collaboration with the UK Royal Air Force (RAF), the system was moved from testing to operational deployment in the Middle East in under two months, significantly enhancing the RAF's ability to counter emerging threats in the region.

-         Unveiling Brontanax™ at the Farnborough International Airshow in July, which will be the UK's first uncrewed autonomous Collaborative Combat Aircraft (CCA). The first-of-its class CCA, designed and built by engineers at our Warton site in the UK, is intended to provide electronic warfare and precision strike capabilities against airborne and ground targets.

-         Edgewing secured its first international contracts for the Global Combat Air Programme (GCAP) with a combined value in excess of £5bn. This will enable completion of the advanced concept and assessment phase of the programme, together with further joint detailed design and development.

-         Signing a landmark seven-year framework agreement with the US Department of War (DoW) to quadruple production and accelerate delivery of the infrared seeker for the Terminal High Altitude Area Defense (THAAD) interceptor missile in support of the DoW's Acquisition Transformation Strategy.

-         Securing an additional award for M109A7 Paladin Self-Propelled Howitzer sets valued at $535m (£398m), building on the multi-year US Army contracts awarded in 2025 and providing advanced firepower and manoeuvrability to enable artillery units to rapidly deploy and engage targets with precision.

-         Receiving a contract valued at over $200m (£149m) for ARCHER artillery systems and securing a $180m (£134m) contract for TRIDON Mk2 anti-aircraft and counter-UAS systems, both produced by our Bofors business in Sweden.

-         Completing the Preliminary Design Review for the $1.2bn (£0.9bn) Epoch 2 missile warning and tracking satellite programme less than nine months from the US Space Force contract award, whilst also receiving incremental funding of $373m (£277m) in the first half.

-         Supporting the A$2.5bn (£1.3bn) export agreement of Australia's High Frequency Surveillance capability system to establish an Arctic Over the Horizon Radar (A-OTHR) in Canada. The agreement, which is effective from 1 July 2026, will be Australia's largest ever defence export.

-         Securing a new £5.9bn contract to fund critical work to progress the UK's Dreadnought Class nuclear deterrent submarines, which the Secretary of State for Defence will announce at our Barrow-in-Furness site in July.

-         We continued to develop our drone and counter-drone portfolio to deliver additional frontline capabilities for our customers. The British Army and Royal Navy trialled our one-way effector, Nyan, and we plan to conduct initial trials of our BAE Systems Anti Threat System, using smart software, electronic warfare and kinetic measures to tackle drone threats in August.

-         We completed the acquisition of Aston Harald Mekaniska Verkstad AB, a Swedish provider of precision machined, large, complex structures for aerospace, defence and commercial products, helping to enhance security of supply to our Bofors artillery business as it ramps up production capacity and delivery capability.

-         We remain committed to ramping up our production capacity at our Hägglunds facility in Sweden and are on track to invest more than $300m (£223m) over a five-year period. Investments include building a new logistics centre and integration and inspection facility, as we continue to accelerate production to meet the rising demand for combat vehicles across Europe.

-         We opened a new facility in Utah, US, which will serve as an extension of our presence in the area supporting Intercontinental Ballistic Missile sustainment and modernisation efforts, providing a state-of-the-art workspace for engineering, digital transformation and mission operations teams.

-         We completed our 150,000 sq-ft expansion of our state-of-the-art Endicott campus in New York and announced a further $135m (£100m) investment for facility enhancements in Austin, Texas, and Hudson, New Hampshire, to boost our precision-guided munitions production capacity.

-         We made good progress towards our target to recruit more than 1,100 apprentices and around 1,200 graduates and undergraduates in the UK by the end of 2026.

-         We launched a new technology incubator programme, Launchpad, which aims to move defence technologies beyond prototype development by funding early-stage ventures or spinning them out into independent businesses. During the period, we created a start-up business focused on ultrasound technology enabling wireless transmission of data and power through solid barriers and committed €50m (£43m) to venture capital funds backing European defence-tech start-ups.

-         In the first six months of the year, we returned £933m to shareholders through dividends and our share buyback programme, a 10% increase compared to the £849m returned in the first half of 2025.

-         The Board has declared an interim dividend of 15.0p in respect of the first six months of the year, which will be paid on 2 December 2026.

-         Underlying net finance costs c.£340m (previously c.£370m)

-         Effective tax rate c.22%

-         Non-controlling interests c.£80m

1.         Whilst the Group is subject to geopolitical and other uncertainties, the Group 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. Reconciliations from these measures to the financial performance measures defined in IFRS are provided in the Alternative performance measures section on page 38.

1.         As at 30 June 2026 and including share of equity accounted investments.

1.         The purpose and definition of all performance measures defined by the Group are provided in the Alternative performance measures section on page 38.

2.         On a Group basis, £34m (2025 £42m) of profit for the period is attributable to non-controlling interests, with £1,163m (2025 £1,041m) attributable to equity shareholders. On an IFRS basis, £34m (2025 £42m) of profit for the period is attributable to non-controlling interests, with £1,020m (2025 £969m) attributable to equity shareholders.

3.         Calculated by translating the results from entities in functional currencies other than pounds sterling for the period ended 30 June 2025 to pounds sterling at the average exchange rate of such currencies for the period ended 30 June 2026. The comparatives have not been restated.

-         In Electronic Systems, the £4.8bn of order intake included £1.6bn of orders in SMS featuring incremental funding of $0.4bn (£0.3bn) under the $1.2bn (£0.9bn) Epoch 2 missile warning and tracking satellite programme, additional funding of nearly $0.5bn (£0.4bn) on a restricted national space programme and further accelerated funding across classified programmes. The remaining order intake arose from funding on core, established programmes across the remainder of the sector.

-         In Platforms & Services, the £2.1bn of order intake primarily arose from awards secured in the US Combat Mission Systems business, although Bofors secured awards of £0.3bn from Sweden for both ARCHER artillery systems and TRIDON Mk2 anti-aircraft and counter-UAS systems as part of the country's initiative focused on territorial air defence.

-         Our Air sector recorded £6.8bn of order intake for the period including c.£2bn in MBDA, c.£2.5bn to provide training and support equipment and services for the Republic of Türkiye's recently ordered Eurofighter Typhoon aircraft and c.£1bn of orders for F-35.

-         The Maritime sector recorded £1.5bn of orders related to incremental funding mainly within the Submarine and Australian businesses.

-         Cyber & Intelligence contributed £1.4bn in orders across the half year which included multiple re-competes in our US-based Intelligence & Security business.

1.         The purpose and definition of all performance measures defined by the Group are provided in the Alternative performance measures section on page 38.

2.         Including share of equity accounted investments.

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

1.         The purpose and definition of all performance measures defined by the Group are provided in the Alternative performance measures section on page 38.

1.         The purpose and definition of all performance measures defined by the Group are provided in the Alternative performance measures section on page 38.

1.         The purpose and definition of all performance measures defined by the Group are provided in the Alternative performance measures section on page 38.

As derived from IFRS
Six months ended 30 June 2026	Revenue		Operating profit/(loss)		Return on revenue		Net cash flow from operating activities			Order book
	£m		£m		%		£m			£bn
Electronic Systems	3,873		429		11.1	%	682			10.2
Platforms & Services	2,718		326		12.0	%	165			13.8
Air	3,831		570		14.9	%	1,488			19.2
Maritime	3,275		201		6.1	%	67			18.9
Cyber & Intelligence	1,194		96		8.0	%	67			1.6
HQ3	33		(118	)	-		(100	)		-
Deduct: Intra-group	(309	)	-		-		-			(1.0	)
Deduct: Tax4	-		-		-		(126	)		-
Total	14,615		1,504		10.3	%	2,243			62.7

1.         The purpose and definition of all performance measures defined by the Group are provided in the Alternative performance measures section on page 38.

2.         At a Group level, the key cash flow metric is free cash flow (see the Alternative performance measures section on page 38). In the six month period to 30 June 2026, free cash flow was an inflow of £1,791m (2025 outflow of £368m).

3.         HQ comprises the Group's head office activities.

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

-         Sales increased by 11%³ in the period driven by growth of 29% in the SMS business and demand across key electronic warfare and precision-guided munition programmes, as well as in commercial avionics.

-         The increase in underlying EBIT of 15%³ reflected a return on sales of 15.5% with improved returns across the sector.

-         Order intake for the period of £4.8bn included £1.6bn from SMS featuring incremental funding under the $1.2bn (£0.9bn) Epoch 2 missile warning and tracking satellite programme and additional funding across multiple restricted space programmes. For further details see section below.

1.         Including share of equity accounted investments.

2.         The purpose and definition of all performance measures defined by the Group are provided in the Alternative performance measures section on page 38.

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.

-         The F-35 Lightning II programme has delivered 190 Block 4 electronic warfare suites to Lockheed Martin and the first Block 4 Drop 11 F-35 aircraft was sold by Lockheed Martin in March.

-         Our APKWS® programme continues to execute production under an Indefinite Delivery, Indefinite Quantity contract, marking the delivery of our 100,000^th APKWS® laser-guidance kit to provide US armed forces and allies with precision munitions to counter a range of threats. One recent example is the successful integration of APKWS® on Eurofighter Typhoon aircraft for counter-drone applications.

-         We marked the completion of the 150,000 sq-ft state-of-the-art expansion of our Endicott, New York campus to support our innovative work in airborne and ground electrification through development of high-voltage energy storage systems. We also announced a further $135m (£100m) investment for facility enhancements in Austin, Texas, and Hudson, New Hampshire, to boost our precision-guided munitions production and strengthen the US defence industrial base.

-         Our SMS team introduced multiple products in the period. Our Ascent™ spacecraft now augments our Elevation™ line of adaptable, high-performing spacecraft products designed to meet mission requirements and support space superiority and exploration.

-         We also introduced Silver Link™, our new line of adaptable antennas to support air dominance programmes and deliver airborne-assured communications. Our Silver Link™ portfolio of conformal antennas can rapidly advance from prototype design to cost-effective integration across a wide range of platforms to meet customer requirements.

-         We delivered our SMS sensor subassembly and sensor system controller components for the Next Generation Overhead Persistent Infrared Polar programme to the US Space Force to provide advanced missile warning, technical intelligence and battlespace characterisation mission capabilities.

-         We are preparing to support multiple launches later this year: NASA's launch of the Nancy Grace Roman Space Telescope, equipped with our Wide Field Instrument Opto-Mechanical Assembly, and the upcoming US Space Force's Weather System Follow-on-Microwave (WSF-M) satellite. As the mission prime for WSF-M, we built the spacecraft bus and microwave imager and our team continues to perform mission operations to support critical space-based, time-sensitive data to enhance the safety and success of military mission planning and global operations.

-         We are also building the spacecraft bus for the National Oceanic and Atmospheric Administration's (NOAA) upcoming Space Weather Next L1 Series mission under a $230m (£171m) contract to continue providing valuable data to NOAA's Space Weather Prediction Center.

-         Our SMS team received $373m (£277m) in incremental funding and completed the Preliminary Design Review for the $1.2bn (£0.9bn) US Space Force Space Systems Command Resilient Missile Warning & Tracking - Medium Earth Orbit Epoch 2 missile warning and tracking programme. This milestone was achieved less than nine months from contract award and establishes the technical foundation for the satellite and ground command and control systems for the multi-satellite constellation.

-         We signed an agreement to build high-resolution imaging satellite space vehicles for Vantor, a leading provider of unified spatial intelligence from space to ground. SMS will build 20 cm-class Vantor Vantage™ imaging satellites for use with national defence, commercial and intelligence programmes.

-         We entered into a Heads of Agreement with the Office of the Secretary of War to set the framework for quadrupling production and accelerating delivery on the THAAD programme over the next seven years.

-         We secured a contract from Boeing to deliver high-performance AN/ALQ-250 Eagle Passive Active Warning Survivability Systems for the Republic of Korea Air Force (ROKAF) F-15K Slam Eagle fighter jets. The advanced electronic warfare systems will provide critical situational awareness and self-defence capabilities, enabling ROKAF F-15K pilots to operate effectively in contested environments.

-         We were selected as a contractor by the Defense Microelectronics Activity for the 10-year Advanced Technology Support Program V, which supports a faster and lower-cost contracting path for awarding government programme pursuits.

-         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 leverage synergies across sectors and identify areas where our businesses can partner to pursue and capture new and adjacent revenue opportunities for the US Intelligence Community, DoW and civilian space agencies. We are well positioned for future opportunities and to support growth based on demand for our apertures, spacecraft, components for critical munitions and our capabilities that align to the US Golden Dome missile defence architecture.

-         Sales increased by 12%³ as Bofors and Hägglunds delivered growth of nearly 30% off the back of demand for combat vehicles in Europe, while our Combat Mission Systems business continued deliveries under its core programmes to the US military.

-         Underlying EBIT grew 11%³, in line with sales. Return on sales remained steady at 11.9%.

-         Operating business cash flow saw an inflow of £80m in the period which resulted from the timing of working capital, an increase from the comparative period, which reflected outflows of customer advances to our supply chain.

-         Order intake of £2.1bn in the period primarily related to awards in the US Combat Mission Systems business as detailed below.

1.         Including share of equity accounted investments.

2.         The purpose and definition of all performance measures defined by the Group are provided in the Alternative performance measures section on page 38.

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.

-         In Sweden, our Hägglunds business is expanding its facilities and infrastructure to meet customer orders, in line with agreed schedules. Multiple years of investments totalling more than $300m (£223m) are supporting our ongoing ramp to include new assembly and welding lines, test and verification capability, as well as new office space.

-         The CV9035 MkIV for the Armed Forces of the Slovak Republic was unveiled during a ceremonial rollout at our Hägglunds site and the team is progressing the assembly of the first of type vehicles and preparations for in-country production.

-         On the Czech Republic programme, worth $2.2bn (£1.6bn), preparations are underway for the serial delivery production and in-country manufacturing of 246 CV90 vehicles across seven variants.

-         Turning to lifecycle support, the CV90 midlife upgrade programmes in Sweden, Switzerland and the Netherlands continue to progress deliveries, while our work under the Finland contract for its CV90 upgrades is nearing completion.

-         Production continues under the three-nation agreement to deliver BvS10 Articulated All-Terrain Vehicles to Sweden, Germany and the UK. In parallel, we are pursuing additional opportunities for BvS10 in Europe. Beowulf deliveries are also ongoing to the US under the Cold Weather All-Terrain Vehicle programme.

-         Our Bofors business is experiencing strong demand from Sweden and other international customers with initiatives underway to adapt operations to significantly increase production capacity for ARCHER and TRIDON Mk2 systems, as well as 3P medium-calibre ammunition.

-         At the same time, our Bofors team is enhancing its supplier base and insourcing critical components and materials. Aligned to these initiatives, the team completed the acquisition of Aston Harald Mekaniska Verkstad AB to strengthen our production capacity and capability in the European defence market and enhance our supply security in connection to ARCHER, TRIDON Mk2, Combat Vehicle 9040, and 40 Mk4 and 57 Mk3 naval gun deliveries for Sweden and partner nations.

-         Our Weapon Systems UK facility is now fully operational, with production activities underway and M777 major structures progressing through the manufacturing route.

-         In the US, our Combat Mission Systems team is focused on deliveries across its franchise vehicle programmes - Armored Multi-Purpose Vehicles (AMPV), M109 Paladins, Bradleys and Amphibious Combat Vehicles (ACVs) - with ongoing efforts aimed at accelerating delivery timelines. We invested in the prototyping and delivery of two AMPV 30 vehicles to the US Army's Transformation in Contact (TiC) unit at Fort Hood in May and TiC Gunnery testing began in June.

-         We continue to support the US maritime industrial base, enhancing our manufacturing capabilities by upgrading welding, machining and heavy-lift capacity to support construction and component fabrication work for Virginia- and Columbia-class submarines.

-         Building on the multi-year US Army contracts awarded in 2025, totalling more than $973m (£723m) for M109A7 Paladin Self-Propelled Howitzer sets, our Combat Mission Systems team secured an additional award in the first half valued at $535m (£398m) to continue production of M109A7 sets. This is a key capability in the Army's Armored Brigade Combat Team formation that provides advanced firepower and manoeuvrability, enabling artillery units to rapidly deploy and engage targets with precision.

-         Our Combat Mission Systems business was also awarded a $146m (£109m) undefinitised contract to begin manufacturing M776 cannons at our Louisville, Kentucky, facility for the US Army's M777 Towed 155mm Howitzer. We have invested more than $60m (£45m) in the facility and our workforce in recent years to expand manufacturing capabilities at the site to pursue growth opportunities and strengthen the US defence industrial base.

-         Maritime Solutions Norfolk secured a US Navy contract worth over $200m (£149m) to maintain and upgrade the USS Iwo Jima shipboard systems to accommodate Joint Strike Fighter flight operations, marking a second consecutive award for an amphibious assault ship and reflecting the Navy's confidence in the team.

-         Building on 2025 awards, Bofors received a contract valued at over $200m (£149m) for ARCHER artillery systems from the Swedish Government in March. In April, the team secured a $180m (£134m) contract for TRIDON Mk2 anti-aircraft and counter-UAS systems as part of Sweden's initiative for a new territorial air defence.

-         We continue to shape our business to deliver on strong demand from US and international customers for production and sustainment of combat systems. We are seeing ongoing strong and growing international interest in our M109A7, M88 and Mk45 systems due to their proven capabilities and abilities to address emerging mission challenges.

-         In our maritime businesses, we are focused on sustaining our naval gun and missile launch positions, as well as US Navy ship repair, modernisation and growing submarine fabrication activities. Our Maritime Solutions team is closely monitoring Middle East operations and working with the US Navy to anticipate any potential impacts to previously expected awards.

-         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.

-         Sales increased by 11%³. Typhoon production increased in the period, driven by progress on both major units for core European customers and the commencement of manufacturing for the Türkiye order awarded in 2025. FCAS also saw growth in the ongoing design and development phase of the programme.

-         Underlying EBIT increased 16%³ driven by an increased return on sales of 11.9% reflecting strong operational performance and risk retirements in the period.

-         Operating business cash flow was £1,574m with material cash advances received in the period, including in MBDA.

-         Order intake of £6.8bn featured c.£2.5bn to provide training and support equipment and services for Türkiye's recently ordered Eurofighter Typhoon aircraft alongside other awards, as detailed below.

1.         Including share of equity accounted investments.

2.         The purpose and definition of all performance measures defined by the Group are provided in the Alternative performance measures section on page 38.

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.

-         In the Kingdom of Saudi Arabia, we continue to deliver services under the five-year Saudi British Defence Co-operation and Salam programmes, including our support to the Royal Saudi Air Force's Tornado and Typhoon fleets and the Royal Saudi Naval Force's minehunter vessels.

-         In the UK, we continue to deliver Typhoon major units in support of core European customer orders, with six deliveries completed in the first half, bringing the total deliveries on the latest production contracts to 27.

-         We successfully completed test firing of the APKWS® low-cost, precision weapon from a Eurofighter Typhoon and, following this, supported the RAF move from testing to operational deployment in the Middle East in under two months, significantly enhancing the RAF's ability to counter emerging threats in the region, including drones.

-         On F-35, 68 aft fuselages were completed in the period to 30 June. The current Production Lots 18/19 support the continuation of production deliveries at Samlesbury, UK, through to 2027.

-         We continue to progress on the Combat Air Demonstrator, which is designed to accelerate the development of advanced aerospace technologies, mature engineering approaches and reduce technical risk for future combat air capabilities such as GCAP.

-         Through FalconWorks®, we continue to invest in emerging and disruptive technologies internally and via a range of collaborations across industry and academia, including the development of uncrewed systems and autonomous capability. During the period, the British Army and Royal Navy trialled our one-way effector, Nyan, which is designed to provide precision strike capability for use in both maritime and land operations and is part of our expanding portfolio of uncrewed air systems.

-         In March, the Republic of Türkiye and the UK Government signed a support contract associated with the Typhoon aircraft and weapons package awarded in 2025. As the prime contractor, we were awarded a c.£2.5bn contract to provide spares and repairs, training, technical support and other associated activity.

-         We continued to secure orders of c.£1.0bn in support of Typhoon capability enhancement, F-35 production for Lots 20-22 and F-35 aircraft armament equipment orders in support of production.

-         MBDA won significant orders in the first half of 2026, including Teseo E and further Aster missiles for the Italian Forces, Aster and VL MICA based Air Defence systems for Denmark, Air-Sol Nucleaire de 4eme Generation hypersonic nuclear missile development contract for the Rafale F5 multirole fighter and Mistral 3 missiles for multiple European nations.

-         Edgewing secured its first international contracts for GCAP. Following the award of an initial international contract in April, which provided £0.7bn of funding, a second international contract worth £4.6bn was awarded in July. This will enable completion of the advanced concept and assessment phase of the programme, and further joint detailed design and development.

-         Alongside this, we secured further contract extensions from the UK Ministry of Defence to progress the concept and development stage of next-generation combat air technologies for FCAS.

-         In July, we unveiled Brontanax™ at the Farnborough International Airshow which will be the UK's first uncrewed autonomous CCA intended to provide electronic warfare and precision strike capabilities against airborne and ground targets.

-         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 to come. In July, we welcomed Canada as the first observer nation to the programme.

-         We are working with the UK Ministry of Defence to agree the successor contract for the current Typhoon support agreement, which concludes at the end of 2026.

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

-         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. 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. The current five-year cycle of our Saudi British Defence Co-operation Programme completes at the end of 2026 and the bid work for the renewal, which will run from 2027 to 2031, is underway.

-         Our FalconWorks® organisation will continue to pursue organic and inorganic investment opportunities which enhance our capabilities, access to technologies and industrial resilience.

-         Looking forward, MBDA is well placed to benefit from increased defence spending in Europe and internationally, and continues to invest, alongside its customers, in products, infrastructure, industrial capabilities, digitalisation and supply chain. The business has a strong order backlog and development programmes continue to enhance the long-term capabilities of the business in the air, land, sea and space domains.

-         Sales grew by 4%³ predominantly driven by increased activities in our Australian business and in Submarines, with construction of all four boats of the Dreadnought Class submarine programme underway.

-         Underlying EBIT fell by 7%³, generating a return on sales of 6.1% for the period, which reflected the early-stage maturity of several first-in-class programmes which are trading at relatively low margins within the sector.

-         The Maritime sector recorded £1.5bn of order intake related to incremental funding mainly within the Submarine and Australian businesses.

1.         Including share of equity accounted investments.

2.         The purpose and definition of all performance measures defined by the Group are provided in the Alternative performance measures section on page 38.

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.

-         With five of the seven Astute Class submarines delivered to the Royal Navy, work continues on the remaining two boats. Agamemnon continues to progress through its in-water phase, while we also continue construction on Achilles, the final vessel in the class.

-         We continue to make progress on the four Dreadnought Class submarines, with advancing levels of construction underway across all four boats.

-         We also continue to deliver our SSN-AUKUS contracts, progressing our UK design contract and the mobilisation phase of the programme in Australia to support the future build of the SSN-AUKUS submarines for the Royal Australian Navy.

-         We are progressing the eight ship Type 26 frigate programme for the Royal Navy, with five ships already under construction and a focus on commissioning key systems in preparation for first-in-class sea trials.

-         The design and build for the Canadian River Class destroyer programme with Irving Shipbuilding Inc. has continued to mature, progressing Critical Design Review, a key milestone in the design programme.

-         In Australia, construction of the Hunter Class frigate is progressing with 56 of the 78 units of the first ship for the Royal Australian Navy in production.

-         The engine upgrade programme for the Royal Australian Air Force's Hawk aircraft concluded with the installation of all 33 engines completed, delivering a more capable, cost-efficient training system for pilots.

-         We completed the F-35 South Hanger expansion at Williamtown, Australia, providing an additional four maintenance bays, taking the total to six bays supporting sustainment activity for the Royal Australian Air Force. We are now focused on the expansion of facilities at the North Hanger.

-         Our Warship Support teams stepped up once again to ensure that HMS Dragon was able to deploy in very short order when called upon due to tensions in the Middle East.

-         In RBSL, the Boxer programme continued deliveries of vehicles from the RBSL Telford manufacturing line to the UK Ministry of Defence. The Challenger 3 programme delivered a total of seven prototype tanks, with another one in build. Trials have proven Challenger 3's basic firing capability, mechanical design and structural strength.

-         The Australian and Canadian Governments signed an agreement, effective from 1 July 2026, confirming the export of JORN technology to support Canada's A-OTHR radar capability and recognised BAE Systems Australia as the industry partner to support this initiative.

-         We continue to support Royal Navy global operations through our RECODE and Naval Combat Systems Integration Support Service contracts by sustaining high combat system availability for its surface fleet.

-         We secured a contract with the UK Ministry of Defence to deliver a technologically advanced radar that is designed to mitigate the effects of radar anomalies created by wind farms, supporting the co-existence of air defence and offshore wind and enabling the UK Government to protect both national and energy security. The new radars will be installed from early 2029.

-         In July, we secured a new £5.9bn contract to fund critical work to progress the UK's Dreadnought Class next-generation nuclear deterrent submarines towards entry into service.

-         Our Submarines business is executing across three long-term programmes: Astute; Dreadnought; and SSN-AUKUS. 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 for the Royal Navy are well underway, with long-lead equipment items already in progress. Across the five ships under construction, we will continue to focus on commissioning key systems in preparation for first-in-class sea trials.

-         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. Nuclear-powered submarines, strategic surveillance and long-range strike are prioritised in the Commonwealth's Integrated Investment Plan, which supports this position.

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

-         Sales saw modest growth of 3%² in the period largely driven by our Digital Intelligence business.

-         Growth in underlying EBIT of 14%² reflected an increased return on sales of 9.0%. This was largely driven by our Digital Intelligence business with an increased contribution from Kirintec.

-         Order intake of £1.4bn included multiple re-competes in the Intelligence & Security business.

1.         The purpose and definition of all performance measures defined by the Group are provided in the Alternative performance measures section on page 38.

2.         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.

-         Our US-based Intelligence & Security business continues to perform well on core programmes, while maintaining a strong focus on new business development. The team is investing in its A3 strategy - Automation, AI and Autonomy - to strengthen our customers' missions and our own operations.

-         Our commercial defence technology business, BAE Systems OneArc, launched new products and solutions, including BattleLab™, Flowstate™ and Scenecast™, meeting strong market demand for mission rehearsal and simulating drone and counter-drone operations in synthetic environments for individual and collective training.

-         In the US, we increased our footprint in Utah, opening a new state-of-the-art workspace for engineering, digital transformation and mission operations teams supporting key national security missions.

-         Following the successful launch of our first low earth orbit satellite cluster, Azalea, in our Digital Intelligence business, we are now in the platform commissioning phase. This capability will provide sovereign space-based intelligence and reconnaissance to enhance decision making around today's threats.

-         In Digital Intelligence, our National Security & Government division is focused on expanding our core UK business and securing international growth. Our Defence division continues to progress campaigns for key programmes and is continuing to advance product investment.

-         In Kirintec, we continue to identify opportunities to exploit our electronic warfare and counter-drone products alongside other complementary capabilities within our Digital Intelligence business and the wider Group.

-         Our Intelligence & Security team continues to drive growth in high-priority national security missions. The US Navy Strategic Systems Program maintained double-digit organic growth over the same period last year, reinforcing our commitment to the submarine nuclear deterrence mission.

-         The business was also awarded multiple re-compete contracts in the first half of the year with a combined potential lifecycle value of more than $350m (£260m), with further re-competes projected to be awarded by year end.

-         Through a strategic relationship with ScaleAI, Inc. we are accelerating the development and fielding of advanced AI capabilities for high-stakes mission environments and operational platforms.

-         The US team also continues to provide lifecycle management, engineering, integration, and evaluation support for the US Air Force Integration Support Contract, ensuring the readiness, reliability and effectiveness of the Minuteman III and Sentinel Intercontinental Ballistic Missile fleet.

-         The Intelligence & Security business remains focused on maintaining a multi-billion dollar pipeline in opportunities of varying size and complexity across a range of customers.

-         Our OneArc team is on track to expand enterprise licensing agreements with key customers in the US and Europe to deliver synthetic environments to simulate the modern battlespace.

-         To align with the shifting market demand for technology-enabled, outcome-based solutions, we are strategically evolving our services portfolio and expanding our capabilities to deliver fully-integrated mission solutions.

-         In our 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.

-         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 continue to identify opportunities for our counter-drone products and complementary capabilities for military customers.

-         The condensed set of financial statements has been prepared in accordance with United Kingdom adopted International Accounting Standard 34 Interim Financial Reporting.

-         The interim management report on pages 1 to 22 includes a fair review of the information required by:

(a)      DTR 4.2.7R of the Disclosure Guidance and Transparency Rules (DTR), being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

(b)     DTR 4.2.8R of the DTR, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or the performance of the Company during that period; and any changes in the related party transactions described in the last annual report that could do so.

-         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; and

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

-         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 on disclosures, with the main changes expected to be:

(a)      the requirement to classify income and expenses included in the Consolidated income statement in one of five categories, along with the introduction of a defined mandatory subtotal for 'operating profit'. The new definition for 'operating profit' will require the Group to report the share of results from equity accounted investments outside of operating profit, within the investing category;

(b)     additional disaggregation requirements for operating income and costs. The Group intends to primarily disaggregate operating costs by function; and

(c)      the reporting of Management-defined Performance Measures in the notes to the Consolidated financial statements, which will include the Group's Underlying EBIT measure of profitability.

-         Electronic Systems comprises the US- and UK-based electronic systems 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 operations which provides aircraft build and support activities to UK, European and international markets, as well as to US programmes, alongside development of FCAS and FalconWorks®, our business in the Kingdom of Saudi Arabia and interests in our joint ventures: Edgewing, Eurofighter and MBDA.

-         Maritime comprises 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.

	Revenue from external customers					Intra-group revenue
	Six months ended 30 June 2026		Six months ended 30 June 2025			Six months ended 30 June 2026		Six months ended 30 June 2025
	£m		£m			£m		£m
Electronic Systems	3,780		3,484			93		108
Platforms & Services	2,689		2,433			29		37
Air	3,804		3,445			27		25
Maritime	3,236		3,095			39		37
Cyber & Intelligence	1,101		1,110			93		76
HQ	5		4			28		15
	14,615		13,571			309		298

1.         Sales is an alternative performance measure defined in the Alternative performance measures section on page 38. Sales includes both revenue from the Group's own subsidiaries as well as 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 38. 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.

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 gains primarily reflects exchange rate movements on US dollar-denominated borrowings and balances with the Group's subsidiaries and equity accounted investments.

-         meeting its pension obligations;

-         investing in research and technology and pursuing other organic investment opportunities;

-         paying dividends in line with the Group's policy of long-term sustainable cover of around two times underlying earnings;

-         making accelerated returns of capital to shareholders when the balance sheet allows and when the return from doing so is in excess of the Group's weighted average cost of capital; and

-         investing in value-enhancing acquisitions, where market conditions are right and where they deliver on the Group's strategy.

-         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.

-         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).

Underlying effective tax rate

22

%

20

%

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.