US and UK politics delay orders at defence firm Ultra Electronics

POLITICAL red tape has pushed back orders, according to Ultra Electronics, but the defence and technology group said rising geopolitical tensions meant its biggest markets looked secure.

The FTSE 250 business said revenue in the six months to the end of June was flat at £366.4m, with pre-tax profit down 5.2pc at £30.9m.

Although about 60pc of Ultra’s revenues are in dollars, the top line did not get a boost from foreign exchange as the disposal of a business and slower orders held back performance.

The company, which produces systems for missiles, communications equipment and sonar gear, said presi- dent Donald Trump’s battle to get his defence budget approved, and the UK election, had created delays in orders, meaning contracts have been pushed into the second half of the year.

However, the strength of demand in the final months of the first half of the year – which helped push the order book 2.8pc higher to £807.8m – gave the company confidence to lift the dividend by 2.8pc to 14.6p.

Rakesh Sharma, its chief executive, added: “The US federal budget was not approved until May and this, together with the recent UK general election, has affected the progress of some contract awards. However, the logjam has now broken and we are taking strong orders.”

Growth is expected to be low single digits for the full year, but Mr Sharma pointed out that an engineering phase, as products were developed, meant that there was about an 18-month lag before increased military spending started to flow through to Ultra’s balance sheet. Ultra said that it was confident of the prospects for its underwater warfare and maritime units, which between them accounted for a third of the group’s revenue in the half-year.

Electronic warfare, such as jamming enemy signals, and commercial aerospace, where Ultra has several niche strengths, are seen as the two other big growth areas.

The group confirmed in July that it would make a £180m purchase of US engineering business Sparton, which it already partners with to make sonar buoys for the US military, and ran a £133m placing to help fund the deal.

Mr Sharma said he was “maybe” open to further acquisitions – potentially from troubled peer Cobham, which has signalled it could sell off divisions as it looks to focus on its core business. However, he was keen to stress he was “no deal junkie”.

Despite the company’s upbeat message, the shares closed down 3.7pc at £19.93 yesterday.