Defence contractor Ultra Electronics (ULE) has seen ‘good’ order book development so far in the second half as the FTSE 250 company confirmed that it continued to trade in line with expectations.
‘The ongoing strategic evolution is progressing and there remains good long term opportunities and growth potential for Ultra,’ the company said in a brief trading statement on Wednesday.
‘Our major markets are growing and our strong technology base is positioning us well on existing and potential future programs’, the update read, bolstering investor confidence and lifting the share price by close on 3% to £20.14.
That values Ultra Electronics at just shy of £1.43bn, making it the UK’s fifth largest defence firm behind market leader BAE Systems (BA.), valued at more than £18bn.
Ultra supplies a broad range of niche technologies and capabilities, including anti-submarine warfare and cyber security systems, the types of equipment that are likely to remain a high-priority for government spending, believe analysts.
ORDER BOOK ENCOURAGEMENT
Ultra’s order book rose above the £1bn mark for the first time since 2011 at the half year stage in June. On Friday, Ultra’s Ocean Systems business won a potential $100.9m contract to design, develop, test and integrate a radar software management platform intended for the US Navy's new and in-service submarines.
‘We believe that at a divisional level, trading is in line with expectations and we are optimistic that cash conversion might be slightly better than we anticipated, related to the working capital normalisation taking place this year’, said analysts at Numis Securities.
Numis is forecasting Ultra to deliver £104.1m of pre-tax profit for the full year to 31 December 2019, £824m revenue. The analysts estimate pre-tax profit to grow to more than £115m by 2021.
NEW STRATEGY
Ultra will host a capital markets day in London on 23 January 2020 to provide a further insight on the ‘Focus; Fix; Grow’ initiatives it is pursuing, with an update on corporate strategy and its growth ambitions.
The strategic rethink was put in place by chief executive Simon Pryce after taking the top job in June 2018. This was a response the Ultra being too fragmented, and Pryce is now trying to pursue a more integrated business strategy.
Preliminary results for the year ending 31 December 2019 will be released on 10 March 2020.
