AEROSPACE and defence company BAE Systems pledged to continue building up its US presence despite a failed attempt to snap up rival TRW.

BAE emerged as a contender for the US group in June, when it was holding talks about buying TRW's defence business.

But it was pipped to the post by US firm Northrop Grumman, which is taking over the whole business, including automotive car parts plants in Peterlee, County Durham, employing 500 staff, in a £5.1bn deal.

The company, rocked by the fallout from September 11, posted figures for the six months to June 30.

Sales fell from £6.29bn to £5.70bn, while pre-tax profits tumbled from £171m to £41m on higher interest charges.

After the terror attacks, BAE cut thousands of jobs as demand from the commercial aviation sector fell, but it has continued to focus on its defence operations.

Chief executive Mike Turner said the business had performed well in the first half and was well-placed to benefit from increased def-ence budgets. It had been disappointed about TRW, but was not prepared to overpay.

He said: "In Europe, we're number one in defence syst-ems. We clearly aren't numb-er one in the US and the US is the number one defence market.

"We're looking for more acquisitions and mergers. We're talking to everybody because it's important for us to grow."

BAE operates the Royal Ordnance factory in Birtley, near Gateshead. In April, it announced that the work-force would be halved from 300 to 150 by natural wastage and voluntary redundancies.

Chief executive Mike Turner said the business had performed well in the first half and was well-placed to benefit from increased defence budgets.

He said the group had been disappointed about TRW, but had not been prepared to overpay.

Mr Turner added: "In Europe, we're number one in defence systems. We clearly aren't number one in the US and the US is the number one defence market.

"We're looking for more acquisitions and mergers. We're talking to everybody because it's important for us to grow."