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A question of timing for Ultra

Contract delays have constricted first-half revenue at the defence contractor
August 8, 2017

Ultra Electronics (ULE) books well over half of its sales in non-sterling currencies, yet reported revenue at the half-year mark flatlined from a year earlier. The defence contractor’s top line was constricted by delays to the US budget and to the Royal Navy’s Dreadnought ballistic submarine programme.

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There was also the impact of the disposal of its ID cards business to private equity firm LDC last August, which contributed to a 6.7 per cent decline in organic revenue, much of which was attributable to the communications and security division. Financial performance wasn’t helped by the termination of an IT contract at Oman airport, but even if you exclude the associated costs, underlying pre-tax profit still fell back slightly to £52.3m.  

The Trump administration’s battle to get the US defence budget through Congress has delayed expected contracts, while the UK general election didn’t help matters, either. As a result, the group said the normal second-half bias would be more pronounced this year; a point borne out by gathering demand in the final months of the half, which meant the order book was up 2.8 per cent from the year-end to £808m.

Edison expects adjusted profit of £120.4m for the December year-end, leading to EPS of 128p, against £120.1m and 135p in 2016.

ULTRA ELECTRONICS (ULE)  
ORD PRICE:1,965pMARKET VALUE:£1.53bn
TOUCH:1,962-1,965p12-MONTH HIGH:2,245pLOW: 1,650p
DIVIDEND YIELD:2.5%PE RATIO:24
NET ASSET VALUE:473p*NET DEBT:71%
Half-year toTurnover   Pre-taxEarnings perDividend
30 Jun (£m) profit (£m)share (p) per share (p)
201636732.638.414.2
201736630.937.614.6
% change-0.1-5-2+3
Ex-div:31 Aug   
Payment:21 Sep   
*Includes intangible assets of £563m, or 724p a share