Solid first-half results come as no surprise to UK-based Ultra Electronics, a company that prides itself on consistency, writes Helen Massy-Beresford.

Last year’s results cemented Ultra’s place in the Aerospace Top 100, taking it up five places to 66, while group marketing director Andy Hamment predicts that organic growth – some 8% in the first half of 2005 before taking into account currency fluctuation from its US business – could be sustained in the second half. Prospects are good for the rest of the year too - the group order book totalled £407 million ($726 million) at the end of the first half.

Capitalising on July’s acquisition of US-based voice communications provider Audiopack Technologies will be an integral part of the company’s strategy this year. Audiopack fills an adjacent niche to those in which Ultra already operates. “There are synergies we think we can derive and will work on teasing them out over the next 12 to 18 months. Our initial focus will be on short-term integration, but we’ll start to see the benefits in 2006,” Hamment says.

The purchase gives Ultra further access to the key US defence market. With US business currently making up around one-third of turnover, Ultra also snapped up the cockpit instrumentation business of US firm Horizon Aerospace in March following the purchases of battlespace IT specialist DNE Systems and airport IT business Videcom in 2004.

Hamment does not rule out further acquisitions, although after the $60 million Audiopack acquisition the company may take some “breathing space”. He adds: “We have the financial strength to look at further acquisitions and about £50 million headroom. There’s no shortage of potential acquisition targets – we’re constantly looking at complementary businesses that can be acquired at earnings-enhancing prices.”

Ultra’s focus is on good positions in niche markets, Hamment says. The 20 businesses that make up the group operate in around 70 different market niches and are divided into three business units – aircraft and vehicle systems, information and power systems, and tactical and sonar systems. This diversity is a key part of Ultra’s strategy – “no single programme is worth more than 5% of sales in one year and we see this as a strength, as it mitigates the risk – we have no big exposure to any one market area”, Hamment says.

Geographically too, the company’s activities are broadly spread, with roughly £127 million in revenue coming from the UK in 2004, £109 million from the USA, £34 million from continental Europe and £40 million from the rest of the world, cutting out the risk that concentrating on just one market would entail.

Ultra designs, manufactures and supports electronic and electromechanical systems for commercial and defence aerospace programmes as well as security applications. The group says it has seen demand for electronic equipment continue to grow in the defence markets in which it operates.

Battlespace information technology – in which the group won a $13 million contract in July – mobility, smart munitions, protection and security remain the company’s key defence focus areas, while in the civil aerospace sector, which accounts for about 9% of turnover, Ultra’s sales are increasing in line with the recovery in aircraft production rates. Demand for aftermarket services and airport IT systems continues to be strong, the company says.

First-half results for the group show a 10% increase in revenues to £158.2 million compared with £143.4 million in the first half of 2004. Operating profit climbed 14% to £22.3 million.

Source: Flight International