The weak pound and the beginnings of a rebound in global defence spending boosted earnings at BAE Systems in 2016, which met its full-year profit targets despite a slow start to the year.

Underlying earnings per share, the company’s preferred measure of performance, were practically flat at 40.3p, but were 7 per cent higher when adjusted for tax provisions and exchange rates – in line with the company’s stated goal of five to 10 per cent growth.

BAE said it expects to report a further five to 10 per cent climb in earnings in 2017.

The company has suffered in recent years as governments across its key markets cut military spending, but it is set to benefit from spending hikes amid rising geopolitical tensions. BAE said today that it expects further spending increases from Donald Trump’s new administration in the US.

However, statutory profits were lower than consensus forecasts compiled by Bloomberg. Pre-tax profit climbed 5.6 per cent to £1.2bn, but earnings per share of 28.8p were below the 31.7p predicted by analysts.

Reported revenues rose 6 per cent year on year to £17.8bn. The company’s preferred sales measure, which includes its share of revenue from investments, rose to £19bn, at the top end of analyst forecasts.

The company said “almost all” of the increase was due to changes in exchange rates. BAE’s biggest market is the US, and it enjoyed a big benefit from the weaker pound when dollar earnings were translated.

The company’s share of its net pension deficit – which pension consultancy JLT Employee Benefits last month described as a “material risk” to the business – increased by more than a third, to £6.1bn.

Ian King, BAE chief executive, said:

2016 was a good year for BAE Systems. Our strategy is well defined; we have a large order backlog, long-term programme positions, strong programme execution and a well-balanced portfolio. With an improved outlook for defence budgets in a number of our markets, we are well placed to continue to generate attractive returns for shareholders.

In a widely-tipped move, the company confirmed earlier this week that chief operating officer Charles Woodburn will take over from Mr King in July.

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