The wider defence industry has seen governments reduce spending on arms in the
wake of financial crisis, but Mr King said this trend may now be ending, at
least in the US.

“We believe US budgets are now relatively stable, with some early indications
of a modest improvement in 2016,” the chief executive said.

Earlier this year President Barack Obama proposed an 8pc increase to the US
defence budget, but analysts expect the final increase to be closer to 2pc
to 3pc.

BAE is building the Royal Navy’s fleet Astute-class attack submarines and is
heavily involved in the construction of the new Queen Elizabeth class
carriers, as well as a major partner in the F-35B fighters that will fly
from them, and is positive about the outlook for 2015.

The company said it expected earnings this year to be “marginally higher” with
growth in its work in the commercial sector offsetting “small reductions” in
defence. Earlier this year BAE announced it had won a contract with Boeing
to provide the provide electronics for the flight controls of the new 777X
airliner.

Other major contract wins during the year included a deal with the US Army
worth up to $1.2bn (£780m) to develop and begin production of a new armoured
personnel vehicle to replace its Vietnam-era M113s, and a £365m agreement to
help deliver an advanced new radar for the Typhoon jet that will boost the
aircraft’s export prospects.

The company is increasingly looking to expand its presence in the growing
cyber sector, and during the year acquired US-based SilverSky for $232.5m in
a deal that will help it establish itself in the sector America and boost
the company’s footprint in the commercial sector. Mr King said cyber was an
area of focus for BAE, with the division’s sales growing by 37pc this year,
building on the 60pc increase recorded the year before.

The company won £10bn or orders from the UK and US over the year, taking its
order backlog to £40.5bn, a figure which Mr King said provides good,
long-term visibility for the company.

BAE raised its full-year shareholder payout by 2pc to 20.5p a share, and said
it returned £925m to investors during the year through dividends and its
share buyback scheme.

However, the City reacted badly to the results, with the shares falling 2pc in
early trading.