Ultra Electronics (ULE) put in a solid performance in the first half, holding revenues and underlying profits broadly steady despite being exposed to military spending cuts in the US and Britain. Indeed, Ultra's niche operations have proven remarkably resilient to the cuts thus far, helped by more exposure to the navy than the army (where most of the cuts have been).
Granted, the order book in the Aircraft & Vehicles systems division fell by 5 per cent year on year as defence customers continue to delay orders. And the order book at the Tactical & Sonar systems division is down 11 per cent. But chief executive Rakesh Sharma says he is "happy about meeting consensus forecasts" for the current year. Broker JPMorgan Cazenove forecasts full-year pre-tax profits of £119m and adjusted EPS of 127.8p, rising slightly to £120m and 129.9p in 2014 (from £116m and 124.5p in 2012). Moreover, he is even "cautiously optimistic" about seeing minor growth in military-related contracts in 2014, noting that Ultra is in the running for a number of sizeable contracts, although their timing is uncertain.
Add in decent growth at Ultra's non-military-related businesses such as transport, airport IT, security and nuclear reactor sensors - which in total make up about 46 per cent of the group's revenues - and Ultra's future is looking bright despite ongoing uncertainty surrounding defence spending.
ULTRA ELECTRONICS (ULE) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,903p | MARKET VALUE: | £1.3bn | |
| TOUCH: | 1,902-1,903p | 12-MONTH HIGH: | 1,903p | LOW: 1,447p |
| DIVIDEND YIELD: | 2.2% | PE RATIO: | 20 | |
| NET ASSET VALUE: | 503p* | NET DEBT: | 13% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 370 | 37.8 | 40.5 | 12.2 |
| 2013 | 368 | 39.6 | 46.5 | 12.7 |
| % change | -1 | +5 | +15 | +4 |
Ex-div: 28 Aug Payment: 27 Sep *Includes intangible assets of £444m, or 638p a share | ||||
