BAE pension deficit jumps 30 percent

LONDON (Reuters) - BAE Systems said its main pension deficit had ballooned some 30 percent to over 3 billion pounds during the first half, sending the defence giant's shares down 5 percent.

BAE (BAES.L) insisted the rise, which it put down to bond and inflation volatility, would have no impact on the group in the near term as it is just two years into a 20 year deficit recovery programme.

But the news overshadowed a sharp rise in interim earnings to nearly 1 billion pounds, in line with forecasts, while the firm also said it expected good growth for the full year.

BAE shares were down 3.9 percent to 314.75 pence by 9:08 a.m., valuing the firm at just over 11 billion pounds.

"It's down to the pension deficit ... the mix of the results are a bit different to what was expected -- very strong UK programmes but international margins are down," said Nick Cunningham, an analyst at Evolution.

BAE, which generates over half its sales from the United States, said underlying earnings before interest, tax and amortisation (EBITA) came in at 979 million pounds for the first half, up from 820 million a year ago.

Operating profit slumped to 500 million pounds from 789 million, which the group put down to exceptional items including the writedown of goodwill related to a recent acquisition.

The half-year dividend was raised to 6.4 pence from 5.8p.

Britain will launch a major review of its defence projects next year, but BAE received a boost from the United States earlier this year when the country proposed more funding for the F-35 joint strike fighter jet -- partly built in the UK.

BAE was also helped earlier in the week when the nations behind the mammoth Eurofighter Typhoon project agreed to sign a contract confirming the next wave of aircraft.

"The Typhoon and Joint Strike-Fighter (J-SF) will be the main drivers for growth in the medium term," Chief Executive Ian King told reporters.

He added he did not see the UK review as a threat due to long term contracts.

The company said Eurofighter would add 2 billion pounds to its order intake. The half-year order book was up at 45 billion pounds, from 41.1 billion this time last year.

(Reporting by John Bowker; editing by John Stonestreet)