June 27, 2018 / 8:09 AM / 22 days ago

UPDATE 1-Ultra Electronics warns on FY profit, sees recovery in Herley unit

(Adds industry background, shares, details on outlook)

June 27 (Reuters) - British defence contractor Ultra Electronics Holdings Plc expects full-year operating profit to drop as much as 6 million pounds ($7.9 million) and said its Herley business is being hurt by additional costs on development contracts.

Ultra shares fell as much as 7.7 percent in early trading on the London Stock Exchange, making the stock the top percentage loser on the UK mid-cap index.

The company said it expects full-year operating profit to fall between 4 million pounds and 6 million pounds, on a constant currency basis.

Ultra's Herley business, which designs and makes electronic assemblies and systems for the aerospace and defence markets, is expected to recover in the second half of the year, the company said.

Ultra said most of its operations had better-than-expected orders in the first half, and were expected to have revenue and operating performances broadly in line with management expectations.

The company's order book stood at 972 million pounds at the end of May.

Ultra also said that the overall market was more positive, reflecting an improving U.S. defence market.

Defence contractors have been looking to benefit from higher spending by the United States under President Donald Trump, who has called for a bigger and stronger military.

Rival defence equipment maker Chemring Group Plc said last week it was targeting contracts worth around $2 billion in the United States after nearly five years of relatively low demand. ($1 = 0.7568 pounds) (Reporting by Ismail Shakil and Sangameswaran S in Bengaluru; Editing by Amrutha Gayathri)

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