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Ultra Electronics blows fuse

Even its diversification strategy has failed to protect Ultra Electronics from western military cutbacks
November 19, 2012

Ultra Electronics (ULE) keeps its armoury well-stocked with an enviable range of niche operations, but defence contractors are in retreat. Orders are harder to come by in both the UK and America, Ultra warns, and full-year results are likely to be no better than last year's, which implies that organic sales are down.

IC TIP: Hold at 1494p

It's unlikely that the situation will improve soon since the threat of massive spending cuts and tax hikes in the US will become reality early next year. Analysts at Deutsche Bank have cut EPS forecasts for this year by 4 per cent and by 5 per cent for 2013. Ultra makes a lot of its money from the fast-growing cyber security market and from supplying airport IT systems, parts for new lightweight commercial jets, and nuclear sensors. These generate around 45 per cent of sales and should keep growing.