Specialist firm Ultra Electronics yesterday posted a 13 per cent rise in first-half underlying operating profit and expressed confidence in its prospects for the year.

Strong demand for airliners and defence equipment are helping Ultra, which is developing a wing ice-protection system for the Boeing 787 airliner due in 2008 and makes command and control equipment used by the US Army. Profit before interest and taxes as well as amortisation arising from acquisitions rose to £25.3 million from £22.3 million, Ultra said in a statement to the Stock Exchange.

Underlying profit before tax rose 15 per cent to £23.8 million on revenues up 14 per cent at £180.7 million. Shares closed down 14p at 1009p. Its order book grew 36 per cent to over £550 million across three divisions - tactical and sonar systems, information and power systems, and aircraft and vehicle systems.

Ultra, which has a major facility at Rugeley in Staffordshire, said it would raise its interim dividend to 5.9 pence from 5.2p.

"With a strong balance sheet driven by high quality of earnings over the last few years, Ultra has the capacity to continue its strategy of acquiring, at appropriate prices, complementary businesses that strengthen its market niches. These factors give the board confidence in the group's prospects for 2006," chief executive Douglas Caster said in the statement.

Ultra shares were up 0.6 per cent at 1,029.5 pence following the statement. "At 16.5 times 2007 earnings, Ultra is at a 19 per cent sector premium. It has always traded at a premium and this is justified given its record of highly consistent above-average growth," said Numis Securities analyst Clive ForestierWalker in a research note.

"However, the price has been boosted by bid rumours (Finmeccanica) which we think unlikely and therefore we do not expect much price reaction today," he said, retaining his "hold" rating and price target of 1,120p.

Ultra earlier this month denied that Italy's Finmeccanica planned a takeover of the firm, a position which Mr Caster said had not changed.

"No one from Finmeccanica has spoken to me," he added.