Bright outlook for BAE with profits up and spending on US defence to grow

● Profits jump 13 per cent with analyst praise for outgoing chief executive King

Defence giant BAE Systems has reported rising full-year profitsforlastyearandexpects the election of Donald Trump to further boost its performance in 2017. It also confirmed that its chief executive is set to retire in the summer.

The firm, which has more than 3,000 staff in Scotland including about 2,600 in Glasgow at its Naval Ships business, said underlying earnings rose 13 per cent to £1.9 billion as it reaped the benefit of its weaponry and aircraft being used in war-torn Syria and Yemen.

Revenue grew 6 per cent to £17.8bn as the company pointed to continued demand in the Middle East for protection against “national threats”.

It also said it would be helped byincreaseddefencespending in America over the coming 12 months, stating that “there are signs of a return to growth in defence budgets, with the new administration expected to further increase defence and security spending”.

President Trump has pledged to raise defence spending by $500bn (£406bn) to $1 trillion, which would raise demand for the defence and armament sector.

BAE said chief executive Ian King, who took over in September 2008, will retire in the summer, with chief operating officer Charles Woodburn set to replace him.

King described 2016 as “a good year for BAE Systems. Our strategy is well-defined; we have a large order backlog, long-term programme positions, strong programme execution and a well-balanced portfolio. With an improved outlook for defence budgets in a number of our markets, we are well-placed to continue to generate attractive returns for shareholders”.

Andy Chambers, analyst at Edison Investment Research, said King leaves BAE “in a healthy condition”.

He added: “During his almost nine years at the helm he has guided BAE through one of the sharpest contractions in western world defence spending seen over the last 50 years, and the company is now positioned to benefit from the resumption of growth.” Chambers also said shareholders “should be grateful” to King, with the group’s share price having more than doubled from the lows in 2011.

Equity analyst George Salmon of Hargreaves Lansdown also took a positive stance, stating that, while sterling’s weakness gave revenues a £1bn boost, there are many reasons to cheer investors.

“New order intake looks particularly strong and with Donald Trump hinting he could well increase the US defence budget, brighter times could be ahead.”