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Ultra Electronics shares spike on brighter 2018 outlook

The embattled British defence contractor sees a reversal in fortunes
Ultra Electronics' advanced systems power land, sea and air forces
Ultra Electronics to get a boost from US military spending

Shares in  Ultra Electronics Holdings PLC (LON:ULE) got a big boost Thursday after the embattled British defence contractor offered brighter prospects in 2018, citing a strengthening US defence budget and growing demand for its technologies.

The maker of military electronics said that it expects modest progress in underlying revenue and operating profit at constant currencies through increased research and development (R&D) and capital expenditure investments.

READ: Ultra Electronics wins two contracts worth £25.6mln in wake of profit warning and CEO departure

Ultra shares were among the top gainers in early trading, jumping 16% to £14.45.

US president Donald Trump’s commitment to strengthen the US military budget should provide a boost to defence contractors overall as Congress works to finalise its fiscal budget.

The company also cited a strong order book and good cash generation in its update Thursday.

“The board is confident that Ultra has sustainable operating trading momentum with a significant number of recent long-term contract wins," said executive chairman Douglas Caster in a statement.

READ: Ultra Electronics shares drop as it blames US budget and UK general election for first half revenue decline

In November, the group issued a profit warning for full-year revenue amid the departure of chief executive officer Rakesh Sharma, blows that were softened by two solid contract wins in following weeks.

The recent passage of a massive tax-reform bill in the US will have a minor effect on Ultra’s 2018 effective tax rate, the company said.

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