BAE Systems - Europe's largest defence firm with major operations in the West Midlands - yesterday posted better than expected half year profits, boosted by improved results from Airbus and military projects, including the Eurofighter Typhoon warplane.
The group posted a 20.4 per cent rise in underlying earnings to £566 million, higher than the £507 million forecast by City analysts ahead of the results.
BAE said the figures reflected its work over recent years to eliminate risk and improve returns from its major programmes with the Ministry of Defence.
That area of work has proved a headache for BAE in the past, after work on Nimrod aircraft upgrades and Astute submarines faced budget wrangles with the MoD.
The programmes division, which works on major projects such as the Typhoon, improved half-year earnings to £88 million, up from the loss of £7 million posted a year earlier.
As well as the reduction of overall risk, the division benefited from the flow of deliveries on the Typhoon joint venture to the air forces of the four partner nations. They have so far accepted delivery of 52 jets and the four nations tranche two programme for a further 236 aircraft is under contract and has been launched across European industry.
BAE also said it had made significant progress in the first half of 2005 on 66 Hawk aircraft for the Indian air force and the RAF design and development contracts for Hawk, both secured in 2004.
It added that confidence in its Nimrod programme continues to grow, with production contract discussions now under way and the first and second Nimrod development aircraft continuing to make good progress.
The company's activities were also said to have performed well in North America, after the £2 billion acquisition in March of US rival United Defence Industries helped give BAE an "unrivalled transatlantic defence position".
The deal, which boosted BAE's land systems division, was hailed as a "key step" in its strategy and put the company on course to generate $8.5 billion (£4.61 billion) from the world's biggest defence market this year.
About a third of its annual profits are now expected to come from North America.
The land systems division includes Alvis operations in Telford and Coventry which were acquired last year.
Among other businesses, BAE said its 20 per cent stake in the European aircraft manufacturer Airbus continued to "perform well" with deliveries rising and the first flight of the new 550 seat A380 superjumbo taking place in April.
The company, which employs about 100,000 people and generates annual sales of about £15 billion, added that it had a record order book worth £52.5 billion, compared with £45.2 billion at the same stage a year earlier.
Sales for the six months to June 30 were £6.77 billion, against £5.96 billion last time.
There had been speculation that BAE might want to sell key European holdings to further bolster its US defence operations.
But chief executive Mike Turner told analysts there were no immediate plans to sell its stakes in Airbus or missile maker MBDA. "As for Airbus or MBDA, I do not see disposal in the short term," Mr Turner said.
Chairman Dick Olver also said the company still considered it was "underweight" in the US despite the acquisition of UDI and that it "needed to do more". However, he ruled out any quick buys, saying the group would concentrate on integrating UDI first.
"You are not going to see us making a bid for cash tomorrow morning," he said.
The interim dividend rises from 3.7p to 4p per share. Shares closed up 33/4p at 334p.