Defence contractor Ultra Electronics (ULE) raised the bar against a potential bid from rival Cobham with a stronger than expected performance in the first half and a new record order intake. Shares were flat at £23.60.
In an unscheduled trading update, the firm said it was sharing its interim results early ‘to provide shareholders with details of our stronger than anticipated first half performance and excellent strategic progress’.
UPGRADES SURELY DUE
The firm didn’t upgrade its full year forecasts, but on an organic basis revenues were up more than expected by 4.7% to £404.5 million and operating profits were up 25.4% to £62.2 million.
Demand in Ultra’s core defence and critical detection markets has remained ‘robust’, with a total sales pipeline of £12 billion, while the order book jumped 14.3% on a like-for-like basis to a record £1.27 billion.
Meanwhile the firm’s self-help transformation programme is delivering cost-saving benefits ahead of plan, with chief executive Simon Pryce hinting at more upside.
‘Our transformation programme is already delivering ahead of plan and we are now more confident in our improvement potential with a better payback than originally anticipated.
‘This should allow us to accelerate top-line growth and gain market share through additional investment in research & development, improved operational delivery and by further optimising our cost base.’
CONFUSION OVER COBHAM APPROACH
Ultra shareholders will welcome the update while they wait for Cobham to decide whether or not it is actually going to bid for the company. On 25 June, Cobham announced it was ‘considering a possible combination with Ultra with a view to creating a global defence electronics champion’.
Cobham, which is owned by private equity firm Advent, said ‘a number of structures are under consideration to effect such a combination, including a contribution of Cobham into Ultra in exchange for new Ultra shares or a possible offer for Ultra by Cobham’.
Under the Takeover Code it has until 23 July to announce whether or not it intends to make a formal offer for Ultra, although that deadline could be extended.
