BAE Systems (LON:BA) expects a reduction in sales this year due to a reduction in activity in the UK businesses following the strategic defence and security review by the UK government.
Shares in the company dropped 3.6% on the update, making BAE the heaviest faller in the FTSE 100.
The defence and aerospace systems manufacturer reported its 2010 results today, which showed that headline sales were up 1.8% year on year and underlying earnings per share climbed 1.7% to 40.8 pence.
Underlying EBITDA (earnings before interest, taxes, depreciation and amortisation) climbed 0.8% to £2.2 billion after a charge of £100 million taken in respect of the terminated Trinidad and Tobago ship contract.
Profit for the year amounted to £1.03 billion, compared to a £61 million loss in 2009.
BAE said it would mitigate the impact of lower activity by improving return on sales through reducing costs and improving efficiency.
The total dividend has increased by 9.4% to 17.5 pence.