Defence growth to resurface

It is appropriate to describe the H117 results from Ultra Electronics as flat. Revenues, operating profit, profit before tax and EPS growth (all on an underlying basis) varied by less than 0.5% when compared to the prior year. The company still anticipates a bigger skew in organic growth to H2 than in previous years. There is further fine-tuning to our EPS estimates, which we have lowered by 1%. The dilution from the placing in July depresses EPS until the reinvestment in Sparton completes, which is expected at the start of FY18. The subsequent uplift should coincide with higher organic growth following the improved momentum in H217.