Spain's Indra keeps 2026 targets on increased defence spending

By Gemma Guasch and Mireia Merino

July 23 (Reuters) - Spanish firm Indra held on to its full-year targets on Thursday after strong growth in its defence business boosted first-half revenue and operating profit, with the continent hiking military spending in the wake of the Russia-Ukraine war and U.S. pressure on NATO.

Shares were up 5.3% at 10:33 GMT.

Indra, partly state-run, has benefited from NATO member Spain pledging to lift defence spending to 2% of gross domestic product, with the European Union projected to spend €454 billion in 2026 after hitting €418 billion last year.

"This is not a temporary spending cycle," CEO Josep Maria Recasens said, as the defence and technology company reiterated a 2026 record revenue outlook of more than €7 billion.

The firm's first-half defence revenue more than doubled year-on-year to €973 million ($1.1 billion), driven by higher contributions from the Eurofighter fighter aircraft programme, military modernisation projects and armoured vehicle work.

It overrode a 15% decline in revenue from the FCAS future fighter jet programme, which was dropped after disagreements between Germany and France.

Net profit rose 2% to €219 million, while free cash flow jumped to €1.49 billion from €65 million.

UBS had previously flagged defence revenue as a key test of the company's growth strategy.

Morgan Stanley said the defence division revenue could grow to €5.2 billion by 2030 to become its biggest business, as Spanish defence equipment spending nearly doubles.

NEW STRATEGIC PLAN AWAITED

The company underwent a leadership shake-up with the exit of its chairman following a failed merger with remote weapon systems maker EM&E in March due to a conflict of interest, and Recasens' appointment in May.

Since the chairman's exit, the company's stock has been highly volatile, outpacing the European defence index.

Investors are expecting a new strategic plan to guide the company’s targets, which have been postponed a few times, now expected before the year-end, CFO Miguel Forteza said in June.

On Thursday, CEO Recasens asked for "patience" and said they will announce a date for the next capital markets day "as soon as possible".

($1 = 0.8752 euros)

(Reporting by Gemma Guasch and Mireia Merino; Editing by Mrigank Dhaniwala and Harikrishnan Nair)