"It’s not budget cuts that are the problem, it's the uncertainty. We want them to happen," says Ultra Electronics' (ULE) chief executive Rakesh Sharma. A reluctance to spend in Ultra's core UK and US markets cut organic revenue by 4 per cent in 2012 and kept underlying operating profit flat at £122m.
Ultra's reliance on the military for 56 per cent of sales showed up clearly in the Aircraft & Vehicle Systems division, where revenues fell 12 per cent - though margins improved and profits were broadly stable at £30.8m. Meanwhile, a shrinking US army halved sales of radios at the Tactical & Sonar unit, pushing profits 23 per cent lower.
On a more positive note, demand from the US Navy in the Pacific is only likely to grow and big spenders in the Middle East and India are also working with Ultra. Sales to the rest of the world jumped a fifth to £111m. Indeed, the Chinese love Ultra’s nuclear reactor sensors and airport IT and security, transport and energy now account for 44 per cent of group sales. Increasing R&D spend to 6.5 per cent of sales should also help Ultra stay ahead of the competition.
House broker JP Morgan expects adjusted EPS of 128.2p in 2013 (from 124.5p last year).
ULTRA ELECTRONICS HOLDINGS (ULE) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,699p | MARKET VALUE: | £1.18bn | |
| TOUCH: | 1,698-1,700p | 12-MONTH HIGH: | 1,787p | LOW: 1,420p |
| DIVIDEND YIELD: | 2.4% | PE RATIO: | 19 | |
| NET ASSET VALUE | 452p* | NET DEBT: | 14% | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 515 | -2.90 | 2.6 | 26.0 |
| 2009 | 651 | 108 | 115 | 31.2 |
| 2010 | 710 | 91.3 | 96.8 | 34.6 |
| 2011 | 732 | 91.2 | 96.2 | 38.5 |
| 2012 | 761 | 82.8 | 91.5 | 40.0 |
| % change | +4 | -9 | -5 | +4 |
Ex-div: 10 Apr Payment: 3 May *Includes intangible assets of £431m, or 621p per share | ||||
