- Defence, transport and energy contractor Ultra Electronics downgraded is first-half profit guidance due to cost overruns at its Herley defence and aerospace unit in the US.

Expectations for the company full-year operating profit, on a constant currency basis, had been cut by £4m-£6m, the company said.

Herley continued to be hurt by cost overruns on development contracts, which were partly customer driven. Some recovery, however, was expected in the second half, Ultra said.

Otherwise, the company said the majority of its operations had better-than-anticipated order intake and were expected to deliver half-year revenue and operating performances broadly in line with management expectations.

The order book at the end of May was worth a 'strong' £972m, with opening order cover for the second half expected to be higher than in recent years.

'The overall market background for Ultra is more positive, reflecting in particular the improving US defence market,' the company said.

As previously guided, its cash performance would be more heavily weighted to the second half. For the full year, current expectations were for cash conversion of 70-75%, due to increased working capital requirements given the higher order book and revenue.

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