Ultra Electronics charts steadier course

A ramp up in US defence spending proved hugely beneficial to the group. North America is Ultra’s largest source of turnover by destination – at £503m, it accounted for 61 per cent of overall revenues in 2019, and climbed 14 per cent on the prior year.

Chief executive Simon Pryce said that incentive schemes at the group prior to his tenure encouraged executives to take a look at cash management only twice a year, for the purposes of reporting results to the market. At the start of 2019, management introduced an ‘average working capital turn’ metric, which compares Ultra’s working capital management against gross revenue over a 12-month period. Despite Ultra’s working capital rising £17m, the average working capital turn measure improved by 12 per cent to a multiple of 7.3 times revenue. The group benefited from a jump in contract-specific advance payments and some of Ultra’s suppliers paid earlier than expected (“not at our request, because they wanted to,” according to Mr Pryce).

Mr Pryce declined to comment on an ongoing Serious Fraud Office (SFO) investigation into the conduct of business in Algeria by Ultra, its subsidiaries, employees and associated persons.

Broker Investec forecasts full-year 2020 pre-tax profits of £110m and earnings per share of 124p, rising to £117m and 132p in 2021.