BAE, which is involved in making Eurofighter Typhoon jets and aircraft carriers for the Royal Navy, said underlying pre-tax earnings before interest and amortisation (EBITA) fell to £1.68bn from £1.7bn a year ago.
It blamed the fall in EBITA on a previously announced Typhoon production slowdown and Australian shipyard impairment and rationalisation charges.
The company's order backlog also dropped to £36.8bn from £40.5bn a year ago.
But sales rose to £17.9bn from £16.6bn and operating profit increased to £1.5bn from £1.3bn last time. Pre-tax profit advanced to £1.09bn from £882mln beforehand.
Underlying earnings per share lifted to 40.2p from 38p previously and the company increased its total dividend per share by 2% to 20.9p.
The group forecast underlying earnings per share in 2016 would increase by between 5% and 10% against the adjusted underlying earnings per share of 36.6p in 2015.
Shares in the company rose 10.2p, or 2%, to 509.5p in the first hour of trading in London.
Chief executive Ian King said pointed out that its cyber security and commercial electronics businesses, which it is hoping will provide a major source of future growth, were continuing to expand.
King added: "The group is well placed to continue to generate attractive returns for shareholders as defence budgets recover."