BAE Systems says profits boosted by defence demand

BAE Systems, the British maker of military equipment, posted a modest increase in first-half profits Thursday on the back of rebounding demand from governments worldwide.

Net profits rose almost five percent to £408 million ($536 million, 487 million euros) in the six months to the end of June, compared with £390 million a year earlier, BAE said in a results statement.

"Despite economic and political uncertainties, governments in our major markets continue to prioritise national security, with strong demand for our capabilities," said chief executive Ian King.

"In the United States, we are seeing encouraging signs of a return to growth in defence budgets and improved prospects for our core franchises.

"In the UK, the result of the EU referendum will lead to a period of uncertainty, but we do not anticipate any material near-term trading impact on our business."

The maker of Astute submarines and Eurofighter warplanes is gaining new orders as mounting tensions between its main government clients in NATO and China and Russia prompt a reversal of military-budget cuts that followed the 2008 global recession.

BAE is also seeking customers in new countries and more revenue from outside the defence area through acquisitions in recent years to bolster its cyber-security business.

The company will meanwhile win an earnings boost after Britain's parliament gave the green light last week to replace the ageing submarines that carry the nation's nuclear arsenal.

British lawmakers approved the construction of four new submarines to carry the Trident missile system and their nuclear warheads.

An order that the company's Italian partner in Eurofighter, Leonardo-Finmeccanica SpA, signed in April to supply 28 of the jets to Kuwait, will provide £1 billion worth of work for BAE, it added on Thursday.

Deliveries of the model, which BAE markets as the Typhoon, continued to the UK and Saudi Arabia, while the first five Hawk trainer aircraft for Saudi Arabia under a 2012 contract were handed over in the first half, BAE said.

"Our business benefits from a large order backlog, with established positions on long-term programmes in the US, UK, Saudi Arabia and Australia," added the group.

"We are well placed to maximise opportunities, deal with the challenges and continue to generate attractive shareholder returns."

-- Bloomberg News contributed to this story --