BAE Systems raises full year outlook on Saudi hope

British arms maker BAE Systems said on Thursday said it expects full-year earnings to be higher than previously estimated, in a hint that it was closer to a deal with Saudi Arabia.

BAE said it was expecting "double-digit growth in underlying earnings per share" in 2013 after previously saying it was on course for a more modest gain.

The change in outlook comes despite the company also announcing that profit after tax slipped by 1.9 percent to ??411 million ($623 million, 469 million euros) in the six months to June 30 compared with the first half of 2012.

BAE and Saudi Arabia signed a ??4.5-billion deal in 2007 to supply 72 Eurofighter Typhoon jets to Riyadh. But the contract, known as the Salam programme, has faced obstacles over the cost.

The company said on Thursday that its outlook "assumes the satisfactory conclusion to Salam pricing negotiations this year".

BAE added in a statement: "With constraints in many of the group's principal markets, cost reduction continues to be a focus for BAE Systems, to protect margin, enhance competitive advantage and deliver greater affordability for customers.

"Despite these pressures, focused investment in research and technology, and business development continue as a priority."

BAE, hit by government cutbacks to military spending, is looking to push on after the collapse of last year's planned mega-merger with European aviation giant EADS.