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Defence contractor Ultra Electronics has said that uncertainty and cutbacks in the defence sector will hit it profits for the year. In addition, the Finance Director has decided to move on. In a trading updatem the FTSE-250 company said: "Against a backdrop of adverse market conditions in the defence sector, largely driven by political discord over US deficit management, the board expects the group's performance in the year to be sustained around 2011 levels." It added: "In segments where high demand has fallen, such as tactical radios for the US Army, the group has acted swiftly to reduce its cost base, with restructuring costs also impacting 2012 profits." The company explained that in both the US and UK defence markets the start of new programmes are being delayed, and contract officers are unwilling to commit more than incremental funding from approved programmes, resulting in reduced orders. Consensus estimates for the full year ending December 31st were for pre-tax profits of £108m on turnover of £802m. If it comes in near 2011 leaves, this would mean a significant reduction, as 2011 generated pre-tax profits of £91m on turnover of £731m.
Any one know why the price is gyrating so wildly?
Ultra Electronics, the defence, security, transport and energy company, has won a contract from the Ministry of Defence to supply a sensor management and situational awareness system. The £14m contract will be executed by the Surveillance Systems business unit within Ultra's ommand & Control Systems division. The programme is scheduled to be completed by the end of 2014.
Ultra acquires specialist US electronic component company In June, Ultra announced that it had agreed to acquire the power conversion business operated by RFI Corporation ("RFI"), a wholly-owned subsidiary of DGT Holdings Corp. (OTCBB:DGTC) ("DGT"), for a cash consideration of $12.5m (subject to a potential working capital adjustment). The transaction was subject to the approval of at least two-thirds of the outstanding shares of common stock of DGT. Ultra now announces that DGT's shareholders have approved the deal and the transaction has been closed. RFI is an established manufacturer of proprietary, high-voltage, power conversion subsystems including electronic filters, high voltage capacitors, pulse modulators, transformers and inductors, and a variety of other products designed for industrial, medical, military and other commercial applications. It is located on Long Island, New York, USA, close to Ultra's EMS Development Corp., part of the Group's Information & Power Systems division, and will be integrated into the EMS business in 2012.
Rakesh Sharma, Chief Executive of Ultra, commented: "I am pleased that we have acquired RFI. It has strong market and technical synergies with EMS with which it will be combined to the benefit of both businesses."
http://www.investegate.co.uk/Article.aspx?id=201208170700042128K
Defence and security firm Ultra Electronics Holdings (ULE) has been granted approval to acquire power conversion business RFI Corporation for a cash consideration of 12.5 million dollars (8.0 million pounds). The purchase will increase its presence in the US and will be integrated into the company's EMS business where it is expected to provide cost saving synergies and expand the product range. Shares in Ultra Electronics climbed by 76p to 1,592p.
Valuation: Current rating depressed for Ultra The rating of 11.5x CY12 EPS places Ultra at its lowest rating since flotation in 1996. This reflects a subdued outlook for defence due to uncertainty in the US in the lead up to the presidential election and potential sequestration. Our sum-of-the-parts fair value of 1,616p suggests some 10% upside; however, in the longer term we anticipate EPS growth to return to more normal levels of 10%+ and a subsequent re-rating to occur. If we apply a through-cycle rating of 14.9x, this yields a fair value of 1,860p
Defence-focused technology firm Ultra Electronics said sales to UK and US nuclear submarine programmes helped boost profits in the first half. Underlying pre-tax profit rose 5% to £54.5m, pushing earnings per share up 6% to 58.1p. Revenue was up 8% to £370.2m and the company declared an interim dividend of 12.2p, a 4% increase on the year before. Ultra was boosted by revenues of £155.2m - a 35% jump - at its Information & Power Systems division. This was underpinned by sales of electrical power management and specialist control equipment for both UK and US nuclear submarine programmes, the company said. This offset an 11% drop in revenues at its Aircraft & Vehicle Systems arm and a poor performance from the Tactical & Sonar Systems division, which it put down to reduced US demand for tactical radios. Chief Executive Rakesh Sharma said the results reflected a steady performance in difficult conditions within Ultra's core defence markets. "In the US, the forthcoming presidential election and the threat of sequestration combine to fuel funding uncertainties that will probably continue into 2013," he said. "In the UK, the prolonged effort to balance the defence budget has led to uncertainty in the procurement process, with contract officers unwilling to commit funds and delaying programmes."
PROSPECTS The Board remains confident in the Group's strategies which are constantly to broaden Ultra's portfolio of products and services that are positioned on a large number of international platforms and programmes in the defence, security, transport and energy markets. Further, the Group looks to broaden its customer base with sales outside the UK now representing over 70% of Group revenue, while growing sales in the security and cyber, transport and energy markets account for about 45%. Ultra continues to be cash generative and has the balance sheet strength to maintain its investment, both in acquisitions and internally, in market sectors where customers will prioritise and protect expenditure. While recognising slower end markets and lower than normal visibility in the defence sector, the Group has a resilient business model and this underpins the Board's confidence of continued progress in 2012 and beyond.
Rakesh Sharma, Chief Executive, commented: "These interim results reflect a steady performance in difficult conditions within Ultra's core defence markets. In the US, the forthcoming presidential election and the threat of sequestration combine to fuel funding uncertainties that will probably continue into 2013. In the UK, the prolonged effort to balance the defence budget has led to uncertainty in the procurement process, with contract officers unwilling to commit funds and delaying programmes. Within Ultra's non-defence markets there were good performances across the Group. Furthermore, investment has increased in new products and business development which, together with the acquisition of three companies, will underpin future growth. The Board remains confident in the Group's strategies which are constantly to broaden Ultra's portfolio of products and services that are positioned on a large number of international platforms and programmes in the defence, security, transport and energy markets. Further, the Group looks to broaden its customer base with sales outside the UK now representing over 70% of Group revenue, while growing sales in the security and cyber, transport and energy markets account for about 45%. Ultra continues to be cash generative and has the balance sheet strength to maintain its investment, both in acquisitions and internally, in market sectors where customers will prioritise and protect expenditure. While recognising slower end markets and lower than normal visibility in the defence sector, the Group has a resilient business model and this underpins the Board's confidence of continued progress in 2012 and beyond.
http://www.investegate.co.uk/Article.aspx?id=201207300700057336I
Work on the contract is due to be completed in 2017.
The contract, worth up to $49.2m, requires Ultra to supply upgraded versions of its submarine transducers that are stocked by the US Navy to support fleet requirements for new and restored units. The hull-mounted transducers use sonar to detect and localise targets.
Ultra Electronics, the technology company with interests in defence, transport and energy, has been awarded an Indefinite Delivery, Indefinite Quantity contract by the US Navy.
http://www.investegate.co.uk/Article.aspx?id=201206080700069327E
British-based Giga develops, manufactures, sells and supports fixed, mobile and transportable satellite earth stations. The company has recently received type approval to operate terminals on both the US Defense Satellite Communications System and the Wideband Global Satellite and has received contracts from the US Department of Defense. The acqusition is being financed through Ultra's existing funds and is set to become earnings enhancing in the current calander year.
Ultra Electonics, a technology company with interests in defence, transport and energy, has acquired satellite company Giga Communcations along with its associated businesses in Australia and the US. The £12.4m initial cash consideration will be followed by an additional £24.6m, subject to earnings growth over the next two years.
Barclays Capital upgrades Ultra Electronics from underweight to equal weight, target price raised from 1520p to 1840p.
Ultra Electronics: UBS maintains sell rating but raises target from 1,250p to 1,350p.
Rakesh Sharma, Chief Executive of Ultra, commented: "I am very pleased that we have been able to bring Zu into the Group as part of ProLogic. There are significant synergies between the capabilities of Zu's cyber surveillance equipment, SOTECH's systems capabilities and ProLogic's range of cryptologic solutions."
ULTRA ACQUIRES CYBER EQUIPMENT COMPANY FOR $77m Ultra announces that it has acquired Zu Industries Inc. ("Zu") for a cash consideration of $76.6m. Zu specialises in the provision of equipment for cyber surveillance systems. Based in Doral, near Miami, Florida, Zu employs over 20 staff. As part of the transaction, Ultra has also acquired the membership interests of an associated business named Bushido LLC. Systems from Zu are built primarily from two proprietary software products that operate on commercial-off-the-shelf hardware: · ISIS® - Integrated Surveillance & Intelligence System: Zu's proprietary ISIS product processes, stores, filters and retrieves large amounts of communications data, including voice, text, e-mail and metadata from mobile, fixed line and broadband networks. · VPA - Voice Print Analysis: a voice biometric technology integrated with ISIS to facilitate identification of conversations of interest based on a match of voice samples against a large database of audio files. Zu's solutions are built through the integration of proprietary products with complementary third party hardware and software including: portable collection tools; mobile devicetracking; asset tracking and spectrum control devices used to suppress radio frequencies. Bushido supplies a range of specialist satellite communications dishes and equipment. The acquisition of Zu will be financed using Ultra's existing facilities and is expected to be earnings-enhancing in 2012 before amortisation of intangibles. Zu is a bolt-in acquisition to ProLogic, within Ultra's Information & Power Systems division. ProLogic will be the route for the exploitation of Zu's capabilities in international markets.
http://www.investegate.co.uk/Article.aspx?id=201112050700193082T
Ultra Electronics has been one of the great success stories of the defence and engineering industry in recent years. Indeed, the battlefield IT provider’s market cap has risen by 50% to £1bn since the financial crisis. Western governments may cut back on new warships and fighters, but will have to upgrade and lengthen the life of existing equipment instead. That means new electronics and software systems — and Ultra showed its confidence in the future by increasing its interim dividend by 10 per cent to 11.7p a share, the Times reports.