Dave Seaton told The Times that Armor's training facility in the south of Baghdad had not been fully utilised last year as US funding for the training of Iraqi security forces had slowed and Iraq did not have the money.

"There’s a bit of a hiatus as to where funding for the sort of training we provide is coming from," he said.

But Mr Seaton said that the group, which is chaired by Sir Malcolm Rifkind, the Conservative MP and former Foreign Secretary, had managed to temper the decline in its Iraqi training business by improving performance in its other divisions, such as protective security.

ArmorGroup has 1,500 protection officers in Iraq, making it the biggest private security firm in the war-torn country.

"The protective security business in Iraq, particularly in Afghanistan, Nigeria and Latin America have all out-performed original expectations," Mr Seaton said.

"We are actually very marginally below expectations. You’re talking about a couple of hundred thousand pounds."

Mr Seaton said Iraq accounted for 50 per cent of ArmorGroup's revenues, down from 60 per cent in 2005, but said growth there had remained fairly constant.

"Iraq is still an important part of the business," he said. "Between 2005 and 2006, it's toned down in percentage terms despite increasing in dollar terms."

He added there had been strong growth in Afghanistan and Nigeria in particular, which he expected to continue in 2007.

In November, the group, which operates in 38 countries, announced it had won a $30 million contract to provide security services to the UK Government in Kabul and other areas of Afghanistan.

In its interim results in September, ArmorGroup reported that pre-tax profits fell to $3.7 million from $4.7 million because of weak training revenues in Iraq and increased competition in its private security market.

As well as private security, the group’s other core divisions are security training and mine clearing services.

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