BAE Systems, Europe's largest defence company, has raised its outlook for growth amid rising demand for armoured vehicles for land operations, including the British and US-led wars in Iraq and Afghanistan.

BAE today posted a 26 per cent rise in first half earnings before interest, tax and amortisation (EBITA) of £881 million, enhanced by a £61 million pound profit on the disposal of its US Surveillance and Attack business.

Operating profit came in at £789 million compared to the £643 million in the first half of 2007.

Sales in the period rose 12 per cent to £7.75 billion pounds.

“Building on the first half performance, the previously anticipated growth outlook for 2008 as a whole is expected to benefit further from the current high demand for armoured wheeled vehicles to meet operational requirements,” BAE said in a statement accompanying the results.

Later, Finance Director George Rose said he expected many analysts to raise their full year earnings forecasts based on the first half performance. In early trades BAE shares advanced 5p to 455p.

BAE is involved in most major US and British military projects, including the F-35 Joint Strike Fighter, but increasingly sales growth has been drviven by orders for mine-resisitant armoured vehicles for operations in Afghanistan and Iraq.

"Orders for further mine protected vehicle and other land systems contracts have enhanced the Group's outlook for 2008," the company said. "Notwithstanding budget pressures in many defence markets, BAE Systems' large order book, together with realistic planning assumptions, provide confidence in the outlook for the Group."

"The Group is benefiting from customers prioritising the provision of equipment and capability to their armed forces engaged in overseas operations. Most notably, strong growth has again been achieved in the land systems sector. The Group has successfully grown its position in that market from a business with less than $1 billion in sales in 2004 to a business with annualised sales in excess of $10 billion today. Organic growth of 28 per cent was achieved in the Land & Armaments business in the first half year."

BAE has expanded its presence in the US through the acquisition of MTC Technologies annd in Australia where it became the dominant supplier to the Australian Government through the acquisition of Tenix Defence.

Last year it bought Armor Holding, the largest maker of armor for US military Humvee vehicles.

BAE is also involved in a joint-venture group that will build two new aircraft carriers for the Royal Navy.

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