FY24 beat BAE has delivered FY adj. EPS of 68.5p (3% ahead of INVe 66.3p and consensus 66.8p) representing 8% growth, but it is FCF of £2.5bn that is materially better. FCF is almost £900m above consensus due to increased customer advances late in the year (e.g. MBDA, CV90) and good cash management. Sales +14% constant currency (+c.9% organic growth) driven by Maritime (+12%) and P&S (+15%). ROS +10.6% (5bps improvement) driven by portfolio mix – significant growth in Maritime at lower group dilutive margins (7.7%). Outlook Order intake of £33.7bn drives new record backlog of £78bn. This represents just a portion of the embedded value from incumbent positions. FY25 is set to show another strong year of growth with upside potential as seen as the start of a long cycle. Guidance for FY25 is for 8-10% EPS growth on 7-9% sales growth. We forecast FY25E adj. EPS of 74.9p (vs. consensus of 75.8p). There is no short cycle Ukraine dependence in the guidance. We do not expect consensus earnings to change much today. The 3-year FCF target has been upgraded by £0.5bn for 2024-2026 (now >£5.5bn) and by £1bn for 2023-2025 (now >£ 6bn) reflecting the strong cash position. Valuation The shares trade on a CY25E P/E of 17.8x, EV/EBITDA of 10.5x, FCF yield of 4.2% and dividend yield of 2.5%. The strength of BAE’s diverse portfolio, backlog and ongoing uptick in performance is showing through at a time when the world has become more dangerous and European defence budgets are being focused on war-fighting readiness and deterrence following a long period of underinvestment.