AEROSPACE and defence group BAE Systems yesterday announced an 18 per cent rise in profits.

The company, which employs 450 people in the region after taking over tank maker Alvis Vickers earlier this year, said the group was now firmly focused on expansion.

BAE said it had overcome uncertainty brought about by Ministry of Defence (MoD) budget cuts to post profits of £392m.

Vickers, a Tyneside institution since 1847, became part of the Alvis group in September 2002, when it was bought for £16m.

It joined BAE after Alvis was bought by the group for £355m in June this year.

Union leaders at the time expressed fears that the takeover might lead to job cuts and sought assurances from the company.

BAE spokesman Richard Coltart said the group's latest results were good news for the Tyneside operation.

Mr Coltart said: "We see tremendous potential in our land defence business in the North-East. There is no suggestion of job losses and right now, if anything, we are looking at expansion."

BAE's programmes operation includes Eurofighter Typhoon aircraft, Nimrod aircraft upgrades and Astute submarines.

The group said the Nimrod and Astute programmes were on track and production deliveries of the first phase of Typhoon jets were well under way, with 21 aircraft in service at the end of June.

BAE said a review of its naval systems business, which has two shipbuilding yards on the River Clyde, in Scotland, and a submarine yard at Barrow-in-Furness, in Cumbria, was continuing.

Chief executive Mike Turner said the division was not expected to contribute to shareholder value in the short-term.

He said the MoD and other government departments had expressed a desire to formulate a national naval strategy to support military shipbuilding in the UK.

A strategy would help determine whether the business was better off staying with BAE or being sold, Mr Turner said.

''They now have to lay the egg,'' he said.