Rolls-Royce (RR.) & BAE: 2 defence stocks to benefit from Aukus agreement

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Rolls-Royce (RR.) & BAE: 2 defence stocks to benefit from Aukus agreement

 Rolls-Royce (RR.) & BAE: 2 defence stocks to benefit from Aukus agreement
Image source: Pop Tika, Shutterstock.com

Highlights 

  • The UK, US and Australia entered into an Aukus agreement to build nuclear-powered submarines.
  • The agreement led to Australia abandoning a £48 billion contract with France for 12 diesel-electric submarines.
  • BAE Systems would be engaged in building attack and Dreadnought submarines powered by reactors supplied by Rolls-Royce.

On Thursday, the UK, US and Australia entered into an Aukus agreement to build nuclear-powered submarines. The collaboration will include sharing of highly-classified information to aid Australia to develop eight such vessels. The move was a part of their strategy to counter the growing military prowess of China. The agreement also led to Australia abandoning a £48 billion contract with France for 12 diesel-electric submarines to replace its old Collins vessels.

The deal is expected to present huge opportunities for defence companies operating in the US and UK, as Australia would rely heavily on the two nations for the latest and most advanced submarine and nuclear technology after cancelling its French deal.

Among the UK-based suppliers, BAE Systems is building the nuclear-powered attack submarines - Astute class and Dreadnought submarines to replace the old Trident nuclear missiles. Both these submarine models will be powered by reactors from Rolls-Royce.

Rolls-Royce (RR.) & BAE Systems (BA.): Revenue and Profit for H1 2021

(Data source: Company release)

Here we take a look at the stock performance of Rolls-Royce, and BAE Systems post the announcement.

Rolls-Royce Holdings Plc (LON: RR.)

Rolls-Royce Holdings is a UK-based aerospace and defence firm. Recently, Rolls-Royce inked an agreement with Equitix Investment Management Limited to sell its 23.1% shareholding in AirTanker Holdings Limited for £189 million. The shares of Rolls-Royce closed at GBX 109.06, up by 3.37% on Thursday, 16 September 2021. The market cap of the company stands at £8,827.81 million.

For H1 2021, Rolls-Royce revenues stood at £5,159 million compared to £5,673 million in the same period in 2020. Its pre-tax profit for the period was £114 million compared to the loss of £5,213 million in H1 2020.

The shares of Rolls-Royce Holdings have returned 65.22% to shareholders in the last one year.

BAE Systems Plc (LON: BA.)

BAE Systems is a UK-based security and aerospace company. The shares of BAE Systems closed at GBX 554.20, up by 0.95 on Thursday, 16 September 2021. The market cap of the company stands at £17,619.51 million. The shares of BAE Systems returned 5.60% to shareholders in the last one year.

BAE System recorded revenue of £9,339 million for the half-year ended 30 June 2021 compared to £9,180 million for H1 2020. Its operating profit increased by 61% year-on-year to £1,303 million. The company’s order book was £35.5 billion as of 30 June 2021 compared to £36.3 billion as of 31 December 2020.

The company’s board announced a dividend payout of 9.9 pence per share to shareholders for H1 2021.

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