LONDON (AP) -- Defense contractor BAE Systems said Thursday that net profit rose by 18 percent in 2011 as cost cuts helped offset a squeeze on military budgets which cut deeply into sales.
Net profit of 1.24 billion pounds ($1.94 billion) was up from 1.05 billion pounds in 2010 as operating costs fell 14 percent. BAE has cut 22,000 jobs in the last three years, reducing its work force to 80,000 worldwide.
Sales were down 14 percent to 19.15 billion pounds as the group said defense spending fell in its largest markets, the United States and Britain.
Investors disappointed with the results sent BAE Systems shares down 4.2 percent to 319 pence in early trading on the London Stock Exchange.
Analysts at Investec Securities said the results were broadly in line with market expectations except in the Electronic Systems division, where results were materially lower.
Sales in Electronic Systems were down 11 percent to 2.65 billion pounds. BAE said the division was affected by delays in contract awards and the disruption caused by flooding at its plant in Johnson City, New York in September.
The company said its order book shrank by 8 percent to 36 billion pounds and it expects little growth in sales this year. However, the company forecast modest growth in earnings "assuming a satisfactory conclusion" to negotiations in Saudi Arabia on assembly of 48 Typhoon aircraft and creating a maintenance facility in the kingdom.
It raised the total dividend by 7.4 percent to 18.8 pence per share.
Through a series of disposals and acquisitions, BAE has been investing in building up its position in cyber and intelligence activity, which now accounts for 7 percent of its business.
Recent acquisitions include Intelligence Services Group, a U.S. government contractor, and Norkom Group PLC which combats financial crime, and stratsec.net Pty Ltd., an information security company with offices in Australia, Malaysia and Singapore.
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