BAE says it is confident of good growth this year

The firm, which is facing allegations of corruption in several key markets, saw pre-tax profits rise to �859m in 2006 from �557m the year before.

BAE has denied wrongdoing, but remains under scrutiny, despite the Serious Fraud Office dropping a probe into a huge arms deal with Saudi Arabia.

The firm said its results were driven by an "excellent" US performance.

Under scrutiny

It has a number of lucrative contracts with the US Department of Defense, including the repair of combat vehicles and the supply of anti-missile warning systems.

Profits from its US Land & Armaments division rose from �42m to �168m over the period.

BAE said its business continued to be boosted by military operations in Iraq and Afghanistan but that, in the longer term, it could be affected by growing pressure on defence budgets.

These are very good results and the company is set fair Howard Wheeldon, Defence analyst at BGC Partners 'Crunch time' ahead for UK military

Total sales last year rose by 9% to �13.7bn, while the firm's results were boosted by the sale of its 20% stake in EADS, the owner of Airbus.

The firm made no further comment on investigations by the Serious Fraud Office into its business activities in a host of countries.

The SFO is investigating corruption allegations against the firm in South Africa, Tanzania, Romania and the Czech Republic while it is assisting with other enquiries launched by authorities in Chile and Qatar. Many of these investigations have now been going for three years.

Saudi opportunities

The SFO prompted widespread criticism in December, when it dropped its long-running investigation into alleged corruption surrounding the al-Yamamah arms deal with Saudi Arabia in the early 1990s, in which BAE was a major player.

Officials said it was not in the public interest to continue the investigation, citing the potential threat to national security from its impact on UK-Saudi relations.

Opposition parties and groups such as the Organisation for Economic Co-operation and Development said this sent the wrong message about global anti-corruption efforts.

Saudi Arabia represented a major "growth opportunity" for the business, BAE said.

Under the terms of a 2005 agreement between the UK and Saudi governments, it is helping to train Saudi personnel and develop the country's defence capacity.

It is also working to finalise a major deal to supply 72 Typhoon aircraft to the Saudi air force.

Howard Wheeldon, an analyst with BGC Partners, said he believed the firm's relationship with Saudi Arabia was "back on course" and he expected the Typhoon deal to be signed and sealed by this summer.

"These are very good results and the company is set fair not only in the year ahead but for several years," he said.