While the defense industry has been unable to sustain revenue growth, profitability has been growing. Sustaining an upwards trajectory for profit margins will require scale, the ability to integrate and incorporate new capabilities and the capacity to disrupt the competitive landscape through emerging technologies and by attacking adjacent markets.
Strategy Analytics Defense Industry Performance Profiles 2005-2015 Excel data and associated defense dashboard analysis brings together strategic analysis and commentary on the world’s major defense companies, using publicly available investor financials to detail revenue, income/loss and profitability, spending on R&D and assets for a total of nineteen companies. The snapshot of companies is designed to cover the broad spectrum of tier one and tier two companies and provides a representative, yet comprehensive picture of defense industry performance for calendar years 2005 to 2015.
A snapshot of the defense industry shows revenues peaking in 2008, and while the decline was reversed in 2010, the defense industry has been unable to sustain an upwards trajectory with 2015 revenues dropping 3% year-on-year, mirroring a decline in global defense spending (see the associated analysis on global defense spending trends presented in the Global Defense Spending Outlook 2015-2025 report and associated Global Defence Budget Expenditure Forecast: 2015 - 2025 data model that looks at 93 countries). There is better news in terms of profitability, with the overall numbers showing a sustained growth in year-on-year profitability from 2011 onwards.
Boeing and Airbus have consistently led the group of companies considered in this analysis, by virtue of a strong mix of commercial and defense revenues driven by the airplane platforms of the respective companies. United Technologies is consistently in third position, and similarly to Boeing and Airbus, operates business areas that straddle the commercial and defense aviation sector. The companies considered can be grouped into three broad revenue segments.
Technology remains the differentiator for future global conflict scenarios and this will lead to an emphasis on improving platform and system capabilities in conjunction. Broader trends that dictate an emphasis on border and maritime surveillance, a renewed focus on electronic warfare capabilities, and the implementation of cyber defense into standard TTPs will provide sustainable opportunities over the next ten years.
Sustaining an upwards trajectory for profit margins will require scale, the ability to integrate and incorporate new capabilities and the capacity to disrupt the competitive landscape through emerging technologies and by attacking adjacent markets.