BAE set to axe more jobs as profits go into retreat

Reporting a 7% drop in full-year profit to £2.02bn, as the US army's retreat from Iraq propelled a 14% dive in sales, BAE boss Ian King outlined a bleak vision of a world in which "affordability has become the priority for our customers".

The gloomy prognosis pushed BAE's shares down by nearly 3%, putting the company which is involved in the production of F-35 and Typhoon fighter
jets and the Astute class submarine among the FTSE 100's biggest fallers.

BAE announced 3,000 UK job losses in September and is expected to announce up to 1,500 more when a review of its shipbuilding operation is completed
that analysts forecast will lead to the closure of its Portsmouth dockyard.

However, King refused to rule out even more job cuts today, as he painted a picture of rising competition and growing austerity, especially in its key US and UK markets.

"We have to continue looking at the efficiency of our businessThe [UK]government has a limit amount of money. We need to be efficient, we need to
be agile and we can't rule anything out," King said.

"BAE Systems is operating in a difficult business environment as defence spending reduces in its largest markets, the US and UKLittle sales growth
can be expected for the group in 2012 in current market conditions," King added.

The US accounted for 47% of BAE's sales last year, while Britain made up 29%. The US military capped its military budget at last year's reduced levels for 2012, while Britain wants to cut defence spending by 8% over the next four years. BAE calculated that the Ministry of Defence's spending
review cut £500m from UK sales.

BAE increased its full-year dividend by 7.4% to 18.8p-a-share.

King refused to comment on reports that he and senior colleagues were in line for multi-million pound bonuses, despite falling sales and profits,
because a government tax rebate of about £200m will boost the company's earnings per share this year by 14.5% to 45.6p.

"I'm not going to make a comment, this is about the results. We will report on that at the end of March," King said.

King reiterated his potential willingness to drop the price after the recent disappointment of losing its attempt to become the preferred bidder
on a key £7bn deal to supply Typhoon fighter jets to India. The Indians chose France's Rafale jet, made by Dessault Aviation, but King insisted
today that a final decision has not yet been made on the deal and that he was still hopeful of winning the project.

"We're in discussions with our partners on anything we can do. If that includes the need to reduce the price, that is something we will look at."

BAE's shares fell by 9p, or 3%, to 324p this morning.