Ultra battles government head winds in US and UK

Ultra Electronics, the high-tech defence firm, says it will continue to be able to grow profits, albeit in a difficult environment for military procurement.

In its interim management statement, Ultra says the political situation in the US, which is currently operating under a so-called "continuing resolution", is making life difficult.

Essentially, the US Congress can't agree with President Obama on how much he should be spending, so to make sure the lights stay on, they agree to fund essential services through a continuing resolution; unfortunately such a resolution does not cover the high-tech products that Ultra sells.

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Some of those products, however, are straight out of a Tom Clancy novel, including "battlefield visualisation" software and torpedo "countermeasure systems" for submarines.

The market situation in the UK is not much better than the US. Government changes to defence procurement have delayed several contract placements, Ultra says.

Despite not providing specific figures for the quarter we know that in the first half of the year pre-tax profits rose to £43.9m from £35.7m on revenues that were slightly down (£343.5m from £350.9m in 2010).

Ultra Electronics certainly believes that it can weather the current storms, stating: "While in the short term there is dislocation to defence procurement processes in the UK and US, overall the budgets addressable by Ultra, in all of its military and civil markets, will remain sufficiently large to give the Group headroom for further growth."

At 9.20am shares in Ultra Electronics were totally flat at 1,606p.

BS