delivering growth - Ultra Electronics · 2015-05-12 · 2005 2004 Growth Revenue (£m) 342.4 310.7 +10% Operating proﬁt (£m)1 51.1 43.3 +18% Proﬁt before taxation (£m)2 47.4

Ultra Electronics Holdings plc Annual Report and Accounts 2005

responding to change

delivering growth

ULTRA ELECTRONICS IS A GROUP OF SPECIALISTBUSINESSES OFFERING A THROUGH-LIFE PRODUCT AND SERVICE PORTFOLIO THAT INCLUDES SYSTEMS,SUB-SYSTEMS, PRODUCTS AND COMPONENTS FORDEFENCE, SECURITY, AEROSPACE AND TRANSPORTAPPLICATIONS WORLDWIDE.

ULTRA, WHICH EMPLOYS 3,000 PEOPLE IN THE UK ANDNORTH AMERICA, FOCUSES ON HIGH INTEGRITY SENSING,CONTROL, COMMUNICATION AND DISPLAY SYSTEMSWITH AN EMPHASIS ON INTEGRATED INFORMATIONTECHNOLOGY SOLUTIONS. THE GROUP CONCENTRATESON OBTAINING COMPETITIVE ADVANTAGE THROUGHTECHNOLOGICAL EDGE AND BY HAVING A LEADINGPOSITION IN NICHE MARKETS.

ULTRA’S PRODUCTS AND SERVICES ARE USED INAIRCRAFT, SHIPS, SUBMARINES, ARMOURED VEHICLES,SURVEILLANCE AND COMMUNICATION SYSTEMS,AIRPORTS AND TRANSPORT SYSTEMS AROUND THEWORLD. INCREASINGLY, ULTRA UNDERTAKESSPECIALIST SYSTEM AND SUB-SYSTEM INTEGRATIONUSING THE COMBINED EXPERTISE OF THE GROUPBUSINESSES AND BY TEAMING WITH WORLD-CLASSINTERNATIONAL PARTNERS.

THE QUEEN‘S AWARD FOR ENTERPRISE 2003

FOR HiPPAG

AT PRECISION AIR SYSTEMS


delivering growth

Financial Highlights 01

Ultra Electronics at a Glance 02

Chairman’s Overview 03

Operating and Financial Review 04

Corporate Responsibility 26

Board of Directors 30

Executives and Advisors 32

Directors’ report 33

Corporate governance 35

Remuneration report 39

Independent auditors’ report – Group 45

Consolidated income statement 46

Consolidated balance sheet 47

Consolidated cash flow statement 48

Consolidated statement of recognised income and expense 48

Notes to accounts – Group 49

Statement of accounting policies in respect of the Group’s consolidated financial statements 70

Independent auditors’ report – Company 74

Company balance sheet 76

Notes to accounts – Company 77

Statement of accounting policies for the Company accounts 81

Shareholder analysis 83

Five Year Review 84

Explanation of transition to IFRS 85

2005 2004 Growth

Revenue (£m) 342.4 310.7 +10%

Operating profit (£m)1 51.1 43.3 +18%

Profit before taxation (£m)2 47.4 40.1 +18%

Earnings per share2 50.7p 43.7p +16%

Operating profit margin1 14.9% 13.9%

Employees (average number) 2,880 2,678

Financial Highlights

1Before amortisation of intangibles arising on acquisition.IFRS profit from operations £47.8m (2004: £43.3m).

2Before amortisation of intangibles arising on acquisitionand loss on derivative financial instruments. IFRS profitbefore tax £40.7m (2004: £40.1m). Basic EPS 43.9p(2004: 43.7p).

Ultra Electronics Holdings plc 01

£342.4mRevenue

01

£239

.5m

02

£260

.4m

03

£284

.4m

04

£310

.7m

05

£342

.4m

50.7pEarnings per share2

01

30.5

p

02

33.2

p

03

38.2

p

04

43.7

p

05

50.7

p

£47.4mProfit before taxation2

01

£27.

1m

02

£29.

9m03

£34.

4m

04

£40.

1m

05

£47.

4m

£500.7mOrder book

01

£315

.0m

02

£348

.0m

03

£375

.0m

04

£395

.4m

05

£500

.7m

Ultra Electronics at a Glance

02 Ultra Electronics Holdings plc

ULTRA ELECTRONICS SPECIALISES IN THE DESIGN, MANUFACTURE AND SUPPORT OFELECTRONIC AND ELECTROMECHANICAL SYSTEMS, SUB-SYSTEMS, PRODUCTS AND SERVICESFOR AIRCRAFT, SHIPS, SUBMARINES, ARMOURED VEHICLES, SURVEILLANCE ANDCOMMUNICATION SYSTEMS, AIRPORTS AND TRANSPORT SYSTEMS. IT IS ORGANISED INTOTHREE DIVISIONS: AIRCRAFT & VEHICLE SYSTEMS, INFORMATION & POWER SYSTEMS ANDTACTICAL & SONAR SYSTEMS.

Tactical & Sonar Systems

£140.7m(2004: £120.4m)

£17.1m(2004: £13.4m)

Aircraft & Vehicle Systems

Revenue £84.4m(2004: £76.6m)

Profit1 £15.9m(2004: £14.9m)

Information & Power Systems

£117.3m(2004: £113.7m)

£18.1m(2004: £15.0m)

AUDIOPACK�

Rugged voice communications equipment for personnelwearing protective clothing, masks and breathing apparatusin harsh and hazardous environments.

DNE TECHNOLOGIES �

Military network communications equipment for voice,data and video information. High-speed protocol convertersand modems.

FLIGHTLINE SYSTEMS �

Sonobuoy telemetry receivers for maritime patrol aircraft andhelicopters. Aircraft cockpit indicators. Mechanical gyroscopes.Specialist military test equipment.

MARITIME SYSTEMS�

Active source and passive sonobuoys, bathythermal buoysand expendable submarine communication buoys. Towedarray sonars. High power sonar transducers.

OCEAN SYSTEMS�

Underwater acoustic countermeasures and systems. Torpedodefence systems. Torpedo sonar. Active and passive transducertechnologies. Submarine communication systems.

SONAR & COMMUNICATION SYSTEMS�

Active and passive sonobuoys. Sonobuoy receivers andacoustic processors for maritime patrol aircraft andhelicopters. Ship sonar systems. Torpedo defence systemsand countermeasures. Mine disposal systems. Submarinecommunication systems. Data link communication systems.Airborne targeting pods. Cryptographic equipment.

TACTICAL COMMUNICATION SYSTEMS�

High capacity line-of-sight radios, electronic counter-countermeasure radios, multiplexers, and turn-key tacticalcommunication systems.

UNDERSEA SENSOR SYSTEMS INC�

Active and passive sonobuoys. Multi-static acoustic systems.Advanced autonomous sensor systems for coastal surveillance.

ADVANCED TACTICAL SYSTEMS�

Battlespace IT solutions. Software based data fusion anddisplay systems for applications in military command, control,communications, computers, intelligence, surveillance andreconnaissance (C4ISR) systems.

AIRPORT SYSTEMS�

IT applications, managed services and systems integrationfor airlines and airports: common use check-in and boarding(UltraCUSE), local departure control (UltraSEATS), aircraftweight and balance management systems; passenger-bagmatching (UltraTrak); airport operational database (UltraDB),integration message broker (UltraIB), flight informationdisplay (UltraFIDS), airport resource management(UltraResource); plant and utilities remote control andmonitoring (UltraControl).

COMMAND & CONTROL SYSTEMS�

Optical and infra-red surveillance and tracking systems.Battlespace IT solutions. Geographical informationmanagement systems. Combat management systems.Multifunction command and control console systems. Navaldata processing and distribution systems. Weapon interfaceelectronics. High integrity electronic control systems fornuclear reactors.

EMS�

Specialised power supplies and demagnetising systems forthe electromagnetic silencing of naval vessels. Transformerrectifier units.

MANUFACTURING & CARD SYSTEMS�

High integrity contract electronic manufacturing services. TheMagicard range of identity card printers.

PMES �

Power control, conversion and distribution equipment fornaval and other demanding environments. Transit system DC power sub-stations and rectification equipment. Multi-influence measurement and control systems for themanagement of complex signatures of naval vessels. Magnetic and electric field sensors.

SML TECHNOLOGIES �

Radar surveillance, navigation and safety systems foroffshore platforms and maritime vessels, coastal and bordersurveillance and protection systems.

CONTROLS�

Airframe de-icing and crack detection systems. Civil andmilitary aircraft cabin quietening systems using active noiseand vibration control technology. Landing gear control andproximity sensing systems. Propeller balancing systems.

DATEL �

High integrity systems including safety critical software.Internet-based secure collaborative working environments andresilient, secure communication networks. Health monitoringand asset availability solutions for military vehicles.

ELECTRICS �

Data management and vision control systems for armouredvehicles. Specialised control handles, high integrity switchesand indicators. Lighting systems. Ruggedised cable harnesses.

MEASUREMENT SYSTEMS INC�

Haptic devices: displacement and force joysticks, hand gripcontrols, trackballs, encoders and simulation equipment.Cockpit equipment.

PRECISION AIR SYSTEMS �

High Pressure Pure Air Generators (HiPPAG) for coolingthermal imagers and infra-red sensors, and for pneumaticejection of aircraft munitions.

� Businesses in the United Kingdom� Businesses in North America

Divisional sales

Aircraft & Vehicle Systems £84.4m

Information & Power Systems £117.3m

Tactical & Sonar Systems £140.7m

1before amortisation of intangibles arising on acquisition. 2before amortisation of intangibles arising on acquisition and loss on derivative financial instruments. 3cash generated by operations, less net capital expenditure, R&D and LTIP share purchases. 4cash generated by operations, less net capital expenditure, R&D and LTIPshare purchases as % of profit from operations before amortisation of intangibles arising on acquisition. 5bank overdrafts and loans less cash and cash equivalents.

Ultra made excellent progress in 2005,achieving high growth in revenue and profits.The Group’s performance was helped by itsbattlespace IT, airport IT systems and torpedocountermeasures activities. Contributionswere made by the acquisitions completed in2004 and the two further acquisitions madeduring 2005, which strengthened Ultra’sposition in the civil aerospace and homelandsecurity markets. Important contracts weresecured during 2005, including positions onnew programmes, that will support furthergrowth of the Group.

Sales at £342.4m grew 10% with the Tactical& Sonar Systems division showing the strongestgrowth. Operating profit1 at £51.1m increasedby 18% over the previous year. This wasdespite the £5.2m negative impact of weakerhedged exchange rates for US$ sales made byUltra’s businesses in the UK and Canada.Earnings per share2 at 50.7p increased by 16% reflecting a slightly higher effective taxrate for 2005 than in the prior year. The Boardwill be recommending a final dividend of10.7p per share, making a total for the year of 15.9p, a 15% increase over 2004.

Ultra has achieved its track record of successthrough its strategy of achieving organicgrowth by securing niche positions on long-term platforms and programmes.Growth has also been aided by acquisitionsthat either augmented Ultra’s existing nichesor added new related niches. The key toachieving this growth is Ultra’s investmentstrategy. In 2005 the Group invested a totalof £61.2m in acquisitions, research anddevelopment, capital expenditure and newbusiness development. The investmentcontributed directly to the winning of newcontracts that drove the year-end order bookto the record level of £500.7m.

The company’s net debt5 increased throughthe year by just £10.2m to £34.3m afterfunding the significant level of investment in2005. Cash conversion continued to bestrong in 2005 through management’scontinuing focus on cash generation. The

conversion of operating profit1 to operatingcash flow3 in the year was 105%. Over thelast five years the Group’s average cashconversion4 has been 114%, reflecting thehigh quality of Ultra’s earnings.

The acquisitions of Horizon Aerospace andAudiopack Technologies Inc. were completedin the year. Horizon, now fully integrated intoUltra’s Flightline Systems business, supplies abroad range of cockpit instruments formilitary and civil aircraft. Audiopackstrengthens Ultra’s communications capabilitywithin the military and homeland securitymarkets and is also part of the Group’sTactical & Sonar Systems division.

In Ultra’s main defence markets worldwide,budgets continue to rise. Within thesebudgets, expenditure is increasing onbattlespace IT systems and equipment toprovide better situational awareness, quickercommand and control and the synchronisationof military effects with much improvedaccuracy. Funds are being spent on equippingmodern armed forces to allow the rapiddeployment of light, mobile troops and toenable the exploitation of superior intelligenceof the military situation through the use ofbattlespace IT. Ultra has pursued a strategythat has positioned the Group to benefit fromthese trends and constantly seeks opportunitiesto offer new products and services to meetsuch customer requirements.

In civil markets, aerospace remains buoyantand healthy demand continues, both for salesof original equipment and for aftermarketsupport equipment. Development programmesfor new aircraft types provide Ultra withopportunities to win positions for itsinnovative solutions. The growth in passengerair travel is strong, increasing demand for newinfrastructure including airport IT systems.

The planned Board changes that werediscussed in Ultra’s 2004 Annual Reportcame into effect at the Group’s AGM lastApril. I succeeded Peter Macfarlane asChairman, upon his retirement, relinquishing

the Chief Executive’s role to Douglas Casterwho has been an Executive Director of Ultrasince 1993 and who was appointed ChiefOperating Officer in 2004. Peter served asChairman for ten years; on behalf of theBoard I thank Peter for his leadership andwish him a long and happy retirement.

Ultra’s performance in 2005 built on its longtrack record of continuous progress and theGroup enters 2006 with a strong balancesheet and a record order book. Ultra has theheadroom to make further acquisitions thatwill enhance and complement the Group’srange of niche activities, and to invest torespond to market demands. The order bookhas increased significantly in the year andprovides Ultra with its customary level ofvisibility for 2006 earnings. It reflects theGroup’s strong positions on existing platformsas well as its success in winning positions onnew programmes. Gaining positions on newplatforms and programmes has driven thegrowth of Ultra. It is still true, however, thatno single programme contributes more than5% of sales in a year, thereby underpinningthe resilience of the Group’s performance.

Current market conditions, coupled withUltra’s proven ability to win new businessand to execute contracts effectively, give theBoard confidence in the continuing progressof the Group in 2006.

Finally I would like to thank all Ultraemployees for their hard work and continuingcommitment, which have made such importantcontributions to the success of the Group.

Julian Blogh Chairman


IMPORTANT CONTRACTSWERE SECURED DURING2005, INCLUDING POSITIONS ON NEWPROGRAMMES, THAT WILLSUPPORT FURTHER GROWTH OF THE GROUP.

Chairman's Overview



ULTRA AND ITS MARKETENVIRONMENTUltra Electronics is a group of specialistbusinesses offering a through-life productand service portfolio that includes systems,sub-systems, products and components fordefence, security, aerospace and transportapplications worldwide. Ultra’s products andservices are used on aircraft, ships,submarines, armoured vehicles, surveillanceand communication systems, airports andtransport systems around the world.

In Ultra’s main defence markets worldwide,budgets continue to rise. Within thesebudgets, expenditure is increasing onbattlespace IT systems and equipment toprovide better situational awareness, quickercommand and control and the synchronisationof military effects with much improvedaccuracy. Funds are being spent on equippingmodern armed forces to allow the rapiddeployment of light, mobile troops and toenable the exploitation of superior intelligenceof the military situation through the use ofbattlespace IT. Ultra has pursued a strategythat has positioned the Group to benefit fromthese trends and constantly seeksopportunities to offer new products andservices to meet such customer requirements.

The recent UK Government Defence IndustrialStrategy document confirmed that a futurepriority for the MoD will be to upgradeexisting platforms with smarter capabilitiesthrough the integration of enhanced electronicsolutions. The report also confirmed the MoD’sreliance on the private sector for innovativesolutions and through-life support. The MoD isopen to solutions from overseas suppliers butwill require technology transfer to the UK inorder to maintain operational sovereignty forits armed forces. Consequently, Ultra’s marketposition, together with its expertise ininternational teaming, positions the Group tocontinue to play a significant role in fulfillingthe MoD’s objectives.

In the US, the recently published QuadrennialDefense Review (“QDR”) emphasises theneed to combat the asymmetric terroristthreat. Additionally, the QDR supports thesimultaneous maintenance of a US,worldwide capability to wage a major conflictagainst a near-peer opponent. As aconsequence, there will be a continuing focusof expenditure on battlespace IT solutions,especially advanced surveillance andcommand and control systems. The US willpursue dominance in the air, land andmaritime domains through the continueddevelopment of smart capability.

The perceived terrorist threat to individuals and to economically importantassets, together with the need to protectborders and coastlines from illegalimmigrants and smugglers, are driving anincrease in global demand for surveillanceand enforcement systems.

In civil markets, aerospace remains buoyantwith Airbus and Boeing increasing build ratesdriving healthy demand for both sales oforiginal equipment and equipment foraftermarket support. Developmentprogrammes for new aircraft types provideUltra with opportunities to win positions forits innovative solutions. The growth inpassenger air travel is strong, increasingdemand for new infrastructure includingairport IT systems.

IN ULTRA’S MAIN DEFENCEMARKETS WORLDWIDE,BUDGETS CONTINUE TO RISE.WITHIN THESE BUDGETS,EXPENDITURE IS INCREASINGON BATTLESPACE IT SYSTEMSAND EQUIPMENT TO PROVIDEBETTER SITUATIONALAWARENESS, QUICKERCOMMAND AND CONTROLAND THE SYNCHRONISATIONOF MILITARY EFFECTS WITHMUCH IMPROVED ACCURACY.

+18%Operating profit1

Margin improvement driven byincreased volume, effective executionof development programmes and acontinuing focus on cost control

+10%RevenueReflecting increased sales ofbattlespace IT, airport IT andtorpedo countermeasure systems

a long-term strategy

Operating and Financial Review


This Operating and Financial Reviewcontains certain forward-lookinginformation and statements in relationto Ultra’s operations, economicperformance and financial conditionswhich cannot be objectively verified andshould be treated with caution. Thesestatements are made by Ultra in goodfaith, based on the information availableto it at the time of the approval of thisreport and, although Ultra believes thatthe expectations reflected in suchforward-looking statements arereasonable, they should not be reliedupon and no assurance can be given byUltra that such expectations will proveto be correct. Accordingly, results coulddiffer materially from those set out inthe forward-looking statements as aresult of, among other factors, changesin the economic, market andcompetitive conditions underlying suchforward-looking information.


ULTRA’S OBJECTIVE ANDSTRATEGIES FOR ACHIEVINGTHE OBJECTIVEThe Board’s prime objective is to outperformthe market in terms of annual increases inshareholder value by delivering aboveaverage annual increases in earnings, and bycommunicating effectively with shareholdersand the financial community generally.

Ultra’s strategies to achieve this objective are summarised in the following eight-pointstatement. Ultra’s core strategies are:

1. To concentrate on aerospace and defence

2. To be a niche player where the Grouphas competitive advantage throughtechnology or market position

3. To offer a through-life product andservice portfolio that includes systems,sub-systems, products and components

4. To grow both organically and byacquisition

5. To have an efficient organisation withcommitted and competent people

6. To be an excellent and strategicsupplier to our customers

7. To gain competitive advantage byinternal and external teaming

8. To meet our commitments

Ultra believes that sustainable success isderived from a focus on positioning itsproducts and services on a broad range ofmajor international platforms andprogrammes. Such successful positioning isachieved by ensuring that Ultra’s offerings aredifferentiated from those of the competitionin a manner that the customer values. Focusis sustained on creating and maintaining thisdifferentiation in the future and oncontinuing to provide innovative solutions tosatisfy customer requirements.

Underpinning Ultra’s continuing success is itsinvestment strategy. Ultra has a demonstratedexpertise in identifying investmentopportunities that deliver growth, eitherwithin existing businesses or by acquiringbusinesses which complement and broadenthe Group’s portfolio of products and services.During 2005, Ultra invested a total of £61.2m(2004: £43.5m) on acquisitions, research anddevelopment, capital expenditure and newbusiness development. This investmentcontributed directly to the new contracts wonin the year and also supports the Group’slong-term positioning for future business.

To ensure that this investment strategy remainsaffordable, Ultra focuses on delivering a highquality of earnings from its operations.Evidence of this quality is the consistentlystrong cash generation that the Group hasachieved. The cash generated from operationsis then available to fund acquisitions – Ultraseeks to maintain a broad balance betweenorganic and acquisition growth. Sinceformation, all of Ultra’s acquisitions have beenfunded by free cash flow and so the level ofnet debt has remained relatively constant.

The Group’s acquisition strategy is summarisedas being the pursuit of bolt-on acquisitions that:

• are defence or aerospace based

• are in a growth market sector

• augment a current niche or

• add a new, related niche or

• widen Ultra’s geographic reach

The ideal size of acquisitions is currentlyabout £25m to £50m and so “organisationtransforming” acquisitions are unlikely. TheGroup will seek to maintain a robustportfolio of niche activities. In short, theacquisition strategy that has served Ultrawell to date will be continued.

ULTRA’S 2005 RESULTSUltra made excellent progress in 2005,achieving high growth in revenue andoperating profit 1. The Group’s performancewas helped by its battlespace IT, airport ITsystems and torpedo countermeasuresactivities. Contributions were made by theacquisitions completed in 2004 and thefurther two acquisitions made during 2005,which strengthened Ultra’s position in thecivil aerospace and homeland securitymarkets. Important contracts were securedduring 2005 including positions on newprogrammes that will support further growthof the Group.

Group resultsRevenue increased to £342.4m, a rise of10% over the prior year, of which 6% wasorganic growth. In addition to theinvestments noted above, strong sales oftactical data link systems to the US armedforces, increased deliveries of battlespace IT equipment for military vehicles, airport ITsystems and torpedo countermeasurescontributed to the Group’s performance.

There was a further increase in the Group’soperating margin1 from 13.9% in 2004 to14.9%, driven mainly by a combination of a rise in volume, effective execution ofdevelopment programmes and a continuingfocus on cost control. Operating profit1 rose by 18% to £51.1m (2004: £43.3m), whileprofit before tax2 increased by 18% to£47.4m (2004: £40.1m). This was despite a£5.2m negative impact of weaker hedgedexchange rates for US dollar sales made byUltra’s businesses in the UK and Canada.

The effective tax rate for the Groupincreased to 27.7% (2004: 27.2%), duemainly to a higher proportion of Ultra’sprofits being generated in North America,where marginal tax rates are higher. Thisresulted in earnings per share2 growth of16% to 50.7p (2004: 43.7p).

continued on page 7

PERFORMANCE WAS BOOSTEDBY RECENT INVESTMENTS TOENHANCE THE GROUP’SBATTLESPACE IT, AIRPORT ITSYSTEMS AND TORPEDOCOUNTERMEASURESCAPABILITIES.



105%Cash conversion4

Demonstrating Ultra’s consistentlyhigh quality of earnings

THE BOARD’S PRIME OBJECTIVE IS TO OUTPERFORM THEMARKET IN TERMS OF ANNUAL INCREASES IN SHAREHOLDERVALUE BY DELIVERING ABOVE AVERAGE ANNUAL INCREASES IN EARNINGS, AND BY COMMUNICATING EFFECTIVELY WITHSHAREHOLDERS AND THE FINANCIAL COMMUNITY GENERALLY.

18%Total annual shareholder returnUltra has delivered an averageannual total shareholder return of18% since flotation in 1996

19 timesInterest coverBank interest cost was covered 19 times by operating profit1



Key performance indicatorsThe indicators shown above have been identified by theDirectors as giving the best overall indication of theGroup’s long-term success. Revenue growth gives aquantified indication of the rate at which the Group’sbusiness activity is expanding. A satisfactory profitgrowth trend confirms that additional revenue is beinggained without profit margins being compromised. It alsoindicates that the additional contribution to profits fromnew acquisitions is greater than the financing costsincurred as a result of taking on additional debt to fundthose acquisitions. Order book visibility, based uponexpected sales during the year to come, gives the Board

confidence as to the achievement of future growthforecasts. A key objective of the Board is to increaseearnings per share2 at a faster rate than other similarquoted companies in the UK. If successful this shouldensure that investors will continue to hold Ultra’s shares,rather than those of its peers. Achievement of thisobjective is the key measure that is used for determiningawards under the Executive Directors’ Long Term IncentivePlan scheme. The Directors aim to manage the business sothat it continues to generate high levels of cash, which canthen be reinvested in the business in the form ofacquisitions. The Board uses operating cash conversionas a simple yet reliable measure of cash generation, which

represents the major element of the Group’s short-termincentive bonus scheme. Whilst free cash will continue tofund Ultra’s expansion by acquisition, it is important toensure that the balance sheet remains sufficiently strongand that the cost of carrying additional debt does notbecome too high. Interest cover is a reliable indicator ofbalance sheet strength. Finally it remains the overridingobjective of the Board to provide shareholders with a long-term return on their investment in Ultra that exceedsthat which would be achieved by other potential equityinvestments that present a similar risk profile. Totalshareholder return is a suitable measure, as compared to the overall population of FTSE 250 companies.


Key performance indicators

1

2

3

4

5

6

7

Performance indicator

Revenue growth

Profit growth

Order book visibility

Growth in earnings per share over a three year period

Cash conversion

Interest cover

Relative total shareholder return

Definition

Growth in total Group revenue compared toprior year.

Growth in Group profit before tax2, comparedto prior year.

Order cover for next financial year aspercentage of market consensus salesforecast for the year.

Growth in earnings per share2, calculatedover a rolling three year period.

Cash generated by operations, less netpurchases of property, plant, equipment andLTIP shares, less expenditure on productdevelopment, expressed as percentage ofoperating profit1.

The ratio of operating profit1 to financing costsassociated with bank borrowings.

Total shareholder return (capital growth plusdividends paid, assuming dividends reinvested)over a rolling three year period compared tothe FTSE 250 index.

2005 result

10%

18%

62% cover for 2006 on consensus sales of £379m

45%

105%

19 times

+2% per annum

Group results (continued from page 5)

Operating cash flow3 was again excellent at£53.8m (2004: £46.9m). The conversion ofoperating profit1 to operating cash flow3 was105%, emphasising Ultra’s high quality ofearnings. This brings the Group’s average cashconversion over the last five years to 114%.Net debt5 at the year-end increased by just£10.2m to £34.3m (2004: £24.1m), afterfunding an investment of £61.2m in the year.Of this, a total of £36.6m after expenses wasspent on acquisitions, with £24.6m (2004:£20.7m) spent on research and development,capital expenditure and new businessdevelopment. This £24.6m investment ofUltra’s funds was supplemented by customer-funded product development activity. In 2005,this amounted to £60.6m (2004: £54.9m) andso, in total, over 20% of Ultra’s activity is newproduct development.

At the end of 2005 the Group’s order bookwas valued at the record level of £500.7m,an increase of 27% over the position at thesame time last year. This impressive orderbook achievement maintains historic levelsof firm order cover for the coming year andreflects Ultra's success in winning substantialpositions on new programmes.

2005 ACQUISITIONSIn 2005, the Group made two acquisitions,Horizon Aerospace in March and AudiopackTechnologies in July. The total cashconsideration for acquisitions was £36.6mincluding expenses, financed using Ultra’sbanking facilities.

Horizon, now fully integrated into Ultra’sFlightline Systems business in Rochester, New York, USA, supplies and supports abroad range of cockpit instruments formilitary and civil aircraft. The range includesmechanical, electro-mechanical, digital andanalogue-digital instruments. These productsare used on many aircraft including Boeing’s737 and 777 and complement Flightline’sexisting range of specialist sonobuoy receivers

and electro-mechanical gyroscopes. FlightlineSystems is part of Ultra’s Tactical & SonarSystems division.

Audiopack strengthens Ultra’s communicationscapability within the military and homelandsecurity markets and is now also part of theTactical & Sonar Systems division. Based inCleveland, Ohio, USA, Audiopack’s mainactivity is developing and manufacturingrugged voice communications equipment forpersonnel wearing protective clothing, gasmasks and breathing apparatus. The productsare supplied mainly to the military andhomeland security sectors together with ‘firstresponders’ such as the fire, medical andpolice services. These customers demandrobust products of the highest quality toprovide reliable communications betweenteam members operating in harsh andhazardous environments. Ultra will be able tooffer elements of its battlespace IT productrange to this market sector for command andcontrol purposes.

DIVISIONAL REVIEWAIRCRAFT & VEHICLE SYSTEMSAIRCRAFT & VEHICLE SYSTEMS COMPRISESFIVE BUSINESSES IN THE UK AND US THATSUPPLY ADVANCED TECHNOLOGYPRODUCTS AND SOFTWARE FOR MILITARYAIRCRAFT, LAND VEHICLES AND FOR CIVIL AEROSPACE MARKETS.

Revenue in the division increased by 10% to £84.4m (2004: £76.6m). Operating profit1

grew by 7% to £15.9m (2004: £14.9m),giving an operating margin1 of 18.9% (2004: 19.4%).

The continued buoyancy of the civilaerospace market drove sales growth ofUltra’s cabin quietening equipment for theBombardier Q Series of turboprop aircraftand landing gear control computers forAirbus aircraft. The development activity onthe door and landing gear proximity sensingand wing ice protection systems for theBoeing 787 aircraft progressed to plan, with

the increased investment funded by Ultraimpacting margins slightly in the division. Salesof these systems should commence in 2007ahead of the 787 entering service in 2008.

An important achievement in the year was theselection of Ultra to supply equipment for theAirbus A400M military transport aircraft. Ultrasecured the contract to supply a noisecancellation system for the aircraft’s main cargobay to reduce the propeller-induced noise to anacceptable level within the latest health andsafety requirements. Ultra’s scope of supply onthe aircraft also includes proximity sensors andassociated electronics, which sense the positionof the landing gear and the landing gear doorsto ensure correct operation, together with theprovision of ruggedised wiring harnesses forthe landing gear. This major new programmefor Ultra contributed significantly to the orderbook growth in 2005. At the end of the year,Airbus had orders for 192 aircraft, which is dueto enter service in 2009.

Sales of Ultra’s HiPPAG missile coolingcompressor for the US Navy’s F/A-18 E/F SuperHornet aircraft rose in 2005 but the rate ofproduction for the Eurofighter Typhoon aircraftwas reduced in order to realign HiPPAGdeliveries to the aircraft programme. Followinga number of successful trials in the US ofBoeing’s Small Diameter Bomb system, Ultrawas awarded the first low-rate initialproduction contracts for this munitionsejection variant of HiPPAG. The lead aircraftfor this programme is the F-15 Eagle to whichthe Small Diameter Bomb system will beretrofitted. The development of HiPPAG for itsmunitions ejection role on the F-35 Joint StrikeFighter aircraft also proceeded satisfactorily.

In the UK, deliveries of cockpit controls,indicators and landing gear controlequipment for the first tranche of theEurofighter Typhoon continued on scheduleduring 2005 and additional orders for thisequipment were secured for the secondtranche of 236 aircraft, for which the deliveryperiod extends out to 2012.

AT THE END OF 2005 THE GROUP’S ORDER BOOK WAS VALUED AT THE RECORD LEVEL OF £500.7 MILLION, ANINCREASE OF 27% OVER THE POSITION AT THE SAME TIME LAST YEAR.

£61.2mInvestmentUltra invested £61.2m in 2005 inacquisitions, research anddevelopment, capital expenditureand on new business development



Investing for growth

Share issues £1.4m Capex £7.2m

Acquisitions £36.6m

R&D £17.4m Extra debt £10.2m

Cash for investing £61.2m

Dividend £9.6m

Currency £3.6m

Interest £2.6m

Tax £13.0m

£49.6m


>500Air Defense Systems IntegratorUltra has over 500 ADSIs inoperational use

Production deliveries commenced to BAESystems of the indirect vision and vetronicssystems for the British Army’s Engineer TankSystem and crew controls equipment for theTerrier combat engineering vehicle, making asignificant contribution to the division’sgrowth. A future priority for the UK’s armedforces will be the enhancement of militarycapability through technology insertion toexisting platforms as outlined in the MoD’srecent Defence Industrial Strategy. Inanticipation of this, Ultra teamed with CTAI,a joint venture between BAE Systems andGIAT, to position for a competition toupgrade the turret of the British Army’sWarrior armoured fighting vehicle.

INFORMATION & POWER SYSTEMSINFORMATION & POWER SYSTEMS CONSISTSOF SEVEN BUSINESSES THAT SUPPLYINFORMATION MANAGEMENT AND POWERPRODUCTS FOR DEFENCE, COMMERCIALAND AIRPORT APPLICATIONS WORLDWIDE.

Revenue in the division increased by 3% to£117.3m (2004: £113.7m). Operating profit1

increased by 20% to £18.1m (2004: £15.0m).The operating margin1 was 15.4% an increasefrom 13.2% in the prior year.

Revenue growth in the division was impactedby the decline of the trackside rail powersupply activity for the UK’s Network Rail thatpeaked in 2004. However, this reduction wasmore than compensated for by the growth inbattlespace IT equipment and the continuedsuccess of Ultra’s ADSI data link processor andsituational awareness system in the US.Development contracts were secured to adaptthe ADSI to be part of a monitoring andcontrol element of tactical data link networksfor the US Air Force and to provide a commondata link processor for all four services of theUS armed forces. These are multi-yearprogrammes at the heart of US battlespace IT capabilities and theycontributed considerably to the growth of the division. The continuing peace-keepingoperations in Iraq have also driven strongdemand for ADSI systems to provide

situational awareness and airspacemanagement capabilities vital to the US Armyunits deployed in the theatre of operations.

Ultra’s airport IT systems business achieved anexcellent performance which also contributedto the growth of the division. There wasincreased activity on the IT infrastructure ofBAA’s new Terminal 5 at London Heathrowairport as the project transitioned from designto implementation. In September, Ultrasecured the contract to supply IT integrationservices to Shanghai Pudong internationalairport. This built on Ultra’s success atTerminal 5 and capitalised on Ultra’s marketposition in China gained through theacquisition of Videcom in 2004. Shanghai willbe a world class reference site for Ultra in therapidly-growing Asia-Pacific airport market.

Ultra’s dominance of airline baggagereconciliation systems, to ensure thatunaccompanied bags are not inadvertentlyloaded onto aircraft, continued with the on-time commissioning of the system thatserves all of the international airports in NewZealand. Ultra's managed baggagereconciliation services, provided at Heathrow, inAustralia and in the US, continued to operatesuccessfully and are providing the expectedrevenue growth and return on investment.

The highest priority planned procurementprogramme for the British Army is the FutureRapid Effects System (FRES) comprising afamily of medium-weight armoured vehiclesto cover a wide range of combat and supportroles. FRES will incorporate a significantamount of battlespace IT so that it is able toconnect to and cooperate with other militarysystems. By teaming with Lockheed Martin,one of the two competing lead contractors,Ultra has secured a sub-contract relating tothe electronic architecture technologydemonstrator programme. This work willdefine and prototype the team’s proposedbattlespace IT infrastructure for FRES. It isstrategically important early positioning forthe eventual development and productionphases. The in-service date for FRES is

expected to be early in the next decade withproduction continuing into the late 2020s.

Development activity for the replacementcontrol system for the nuclear reactorspowering the Royal Navy’s submarinesprogressed satisfactorily to plan and thecomplex central control consoles for theAstute submarine were also delivered. Acontract was secured to upgrade and supportthe equipment that enables the control andfiring of weapons from the torpedo tubes ofthe Royal Navy’s Trafalgar and Vanguard Classsubmarines. The installation of this equipment,which was originally developed for the AstuteClass submarine, will achieve a common fitacross the fleet and much reduced through-lifesupport costs for the UK MoD.

TACTICAL & SONAR SYSTEMSTACTICAL & SONAR SYSTEMS, WITH THEADDITION OF AUDIOPACK AND THEINTEGRATION OF HORIZON INTO FLIGHTLINESYSTEMS, COMPRISES EIGHT BUSINESSES INTHE UK AND NORTH AMERICA THAT SUPPLYCOMMUNICATIONS AND UNDERWATEREQUIPMENT TO HOMELAND SECURITY ANDMILITARY USERS WORLDWIDE.

Revenue in the division increased to £140.7mfrom £120.4m in 2004, a rise of 17% ofwhich 7% was organic. Operating profit1

increased 28% to £17.1m (2004: £13.4m)giving an operating margin1 of 12.2%, anincrease from 11.1% in the prior year.

The new variant of the US Navy’s passivesonobuoy was successfully introduced in thesecond half of 2005, providing improvedperformance at reduced cost. Overall,however, the level of sonobuoy sales wasbroadly unchanged for the third year in a row.In both the US and UK, funded developmentproceeded on the next generation ofsonobuoy systems that will improve the abilityto detect small, extremely quiet, diesel-electricsubmarines able to operate in shallow, coastalwaters. Ultra’s dominance of the sonobuoyexport market continued with sales to France,Australia, Canada, Taiwan and Korea.

ULTRA’S DOMINANCE OF AIRLINE BAGGAGE RECONCILIATIONSYSTEMS, TO ENSURE THAT UNACCOMPANIED BAGS ARE NOTINADVERTENTLY LOADED ONTO AIRCRAFT, CONTINUED WITHTHE ON-TIME COMMISSIONING OF THE SYSTEM THAT SERVESALL OF THE INTERNATIONAL AIRPORTS IN NEW ZEALAND.

30%Battlespace ITSales of battlespace IT equipmentrepresented more than 30% ofGroup revenue for the first time

42%North America42% of Ultra’s revenue came fromthe North American market in 2005




Significant orders for Ultra’s specialistsonobuoy telemetry receivers were wonduring the year, securing long-term positionson a number of new anti-submarine warfareaircraft programmes. For fixed wing aircraftthese included the Boeing P-8A aircraft beingdeveloped to replace the US Navy’s ageing P-3 Orions, which has a potential for up to150 aircraft, and the Turkish Navy’s ATR-72ASW programme. In addition, the latesthelicopter versions of Ultra’s sonobuoy receiverwere selected for the Cyclone maritimehelicopter programme in Canada and the MH-60R Seahawk in the US.

Sales in the division were boosted by the on-time delivery of a further six ship-sets ofthe Group’s Surface Ship Torpedo Defencesystem to the Royal Navy, with three of thesesystems installed on ships and at sea by theyear-end. In the US, the torpedo defencetechnology demonstrator programme securedin 2004 made excellent progress andsuccessful trials have now been conductedagainst real weapons. The Group alsobenefited from increased sales of submarine-launched torpedo countermeasures, both forthe US Navy and international customers.During the year, development of the bowsonar for the Royal Navy’s Type 45 destroyermade satisfactory progress and the first systemwas nearing completion by the year-end.

The Group was awarded a contract for theRoyal Navy’s mine disposal programme,teamed with Atlas Electronik in Germany. Thesystem is an adaptation of an existing designthat Ultra will supply and then support fromwithin the UK.

Sales of battlespace IT equipment once againcontributed to the growth of this division,with particular success achieved ininternational markets. Ultra made furtherdeliveries of high capacity radios to the USArmy’s communications infrastructureprogramme and for its Patriot missiledefence system. A new jam-resistant radiowith improved data transmission capacitywas developed for the South Korean armed

forces and initial production deliveries weremade in the second half of the year. Radioswere supplied to the Canadian armed forcesfor use during their deployment inAfghanistan for peace-keeping duties.

Following several years of investment andmarket positioning, during which Ultradesigned what is planned to be the NATOstandard for radio control links for unmannedair vehicles (UAVs), Ultra won a contract tosupply such equipment for the British Army’sWatchkeeper UAV programme. This is anothernew niche for Ultra which, with its associatedencryption equipment, is anticipated tocontribute to the growth of the Group.

SECTORAL ANALYSIS OFULTRA’S RESULTSMarket sector analysisThe Group has seen its battlespace IT activitiesgrow in importance during the past few yearsand sales of this equipment represented morethan 30% of total revenue for the first time.While the products of both Audiopack andDNE are in this sector, strong growth in salesof ADSI systems to the US armed forces wasthe main reason for this excellent performance.Ultra’s dependence upon its sonobuoyproducts continues to decline and it wasencouraging to see new product niches drivinga strong increase in sales of sonar equipment,up by 17% in the year. Notable growth wasachieved by Sonar & Communication Systems,where shipments of surface ship torpedodefence systems ramped up during the year. Inaddition Ocean Systems received more fundingunder its torpedo defence demonstratorcontract with the US Navy. While the value ofsales of equipment for military aircraftincreased slightly, it reduced in 2005 from11% to 10% of Group revenue. Lowershipments of equipment for the EurofighterTyphoon programme, in response to thecustomer’s demands, inhibited the growth inthis sector. Ultra’s focus on the defence sectorstrengthened during the year, driven by theacquisitions, and this area represented 78% of

the Group’s activities, 2% higher than in 2004.Sales to civil markets accounted for the 22%balance of Ultra’s business (2004: 23%). Herethe main feature was strong demand for civilaircraft equipment, both for Airbus new buildand also in the after-market. Sales in this areaincreased by 16% in absolute terms and were9% of total revenue, up by 1% from 2004.Other civil sales declined from a 15% to a13% share, with the reduced demand fortransit power equipment being the key reason.

Geographic analysisUltra continues to increase its presence inNorth America and 2005 was the first yearfor which this market was the Group’s mostsignificant, accounting for 42% of totalrevenue (2004: 35%). This change wascaused partly by acquisitions, with DNEcontributing for the entire year and theadditional benefit of two further USacquisitions during the year, HorizonAerospace and Audiopack. However the keyfeature of Ultra’s strong North Americanresults was record sales of ADSI systems.The significance of the UK market for Ultradeclined in the year and domestic salesrepresented 39% of Group revenue in theyear, down from 42% in 2004. Lower salesof railway transit power equipment was themain reason, although it was encouragingto see above-average growth coming fromElectrics, driven by strong sales ofequipment for armoured fighting vehicles,and Airport Systems, where activityincreased at London Heathrow’s newTerminal 5. Ultra’s largest business, Sonar &Communication Systems also reported salesgrowth of more than 10%. Exports tocontinental Europe accounted for 11% ofGroup revenue, in line with the previousyear. The most marked reduction was seenin sales to the rest of the world, whichdeclined from 12% to 8% of revenue. Thiswas due mainly to lower sales of sonobuoysand torpedo countermeasures to Australia,where two large orders were fulfilled during2004, and to the timing of shipments ofmilitary radios to South Korea.

A KEY FEATURE OF ULTRA’S STRONG NORTH AMERICANRESULTS WAS AN EXCELLENT PERFORMANCE BY ADVANCEDTACTICAL SYSTEMS, WHERE SHIPMENTS OF ADSI SYSTEMS TO THE US ARMED FORCES REACHED RECORD LEVELS.




Sonar 26% (2004: 24%)

Civil equipment 13% (2004: 15%)

Civil aircraft equipment 9% (2004: 8%)

Defence equipment 12% (2004: 13%)

Military aircraft equipment 10% (2004: 11%)

Battlespace IT 30% (2004: 29%)

North America 42% (2004: 35%)

Europe 11% (2004: 11%)

UK 39% (2004: 42%)

RoW 8% (2004: 12%)

Sales by sector Sales by destination

ULTRA’S FUTURE OUTLOOKMarket trendsWhilst budgets have risen over recent years inUltra’s main defence markets, in both the USand UK the continuing costs of peace-keepingoperations is putting strain on these defencebudgets. The recently published USDepartment of Defense Quadrennial DefenseReview generally maintained support for thecurrent US defence equipment programmes.However the affordability of the impliedprocurement plans was not addressed by thereview. As a consequence it is possible thatsome US equipment programmes will bedeferred, curtailed or cut altogether at somefuture date. In the UK, the Defence IndustrialStrategy, published in December 2005, also indicated the degree of strain in thepresent budgets.

One of Ultra’s strengths, however, is theGroup’s position on many major internationalprogrammes and platforms. As a result ofthis broad spread of activity, no singleprogramme generates more than 5% ofUltra’s revenue in any single yearunderpinning the resilience of the Group’sperformance. It is considered unlikely thatsufficient programmes would be cut severelyor curtailed simultaneously to cause a majorreduction in Ultra’s level of business.

Within the US and UK defence budgets,expenditure continues to be focused onimproving the use of intelligence, onenhancing the ability rapidly to deploy forcesand in providing increased protection forpersonnel. Ultra has pursued a strategy thathas positioned the Group to benefit fromthese trends and constantly seeksopportunities to offer new products andservices to meet such customer requirements.

There is some evidence that the decline inone of Ultra’s traditional market sectors, thatof Anti-Submarine Warfare (ASW), hasbottomed out. The US has committed tobuying over 100 P-8A ASW fixed wingaircraft and is also procuring over 240 ASW

helicopters. The Canadian government isprocuring 28 ASW helicopters. In Europe, theNH-90 ASW helicopter will shortly enterservice as will the long-delayed Nimrod MRA4aircraft. In the short-term, Ultra is supplyingequipment for each of these programmes. Inthe longer-term, the entry into service ofthese platforms might be expected to increasethe annual consumption and thereforedemand for sonobuoys, the acoustic sensorsthat are used to detect submarines and forwhich Ultra is the world-leading supplier.

The perceived terrorist threat to individuals andto economically important assets, togetherwith the need to protect borders and coastlinesfrom illegal immigrants and smugglers, aredriving an increase in global demand forsurveillance and enforcement systems. Thisis a market sector in which Ultra providesinnovative and cost-effective solutions.

Worldwide, there is a move to increase theunmanned element of fighting forces. By sodoing the cost per platform is reduced, as isthe risk to personnel from enemy action. ForUltra, this will reduce demand for specialistHuman-Machine Interface (HMI) equipmentused in cockpits, for example. Anticipatingthis, Ultra has positioned its HMI equipmentfor use on the base stations that are used tocontrol the unmanned vehicles.

Ultra’s customers aspire to stable orreducing prices for the goods and servicesthat they procure. This inevitably leads tocost pressures to which the Group mustrespond. Ultra has a long track record ofproduct innovation to reduce costs whilstdelivering improved performance andachieving operational efficiencies by workingmore intelligently. More recently Ultra hasmade significant progress in sourcingproduction in low cost economies where thisis appropriate, given the nature of theproducts that the Group provides. Theanticipated cost reductions have beenachieved, thereby helping to protect andimprove the Group’s operating margins.

ONE OF ULTRA’S STRENGTHS IS THE GROUP’S POSITION ONMANY MAJOR INTERNATIONAL PROGRAMMES ANDPLATFORMS. AS A RESULT OF THIS BROAD SPREAD OFACTIVITY, NO SINGLE PROGRAMME GENERATES MORE THAN5% OF ULTRA’S REVENUE IN ANY SINGLE YEAR, UNDERPINNINGTHE RESILIENCE OF THE GROUP’S PERFORMANCE.

>100The US Navy has committed toprocuring more than 100 new Anti-Submarine Warfare aircraft,each of which will be fitted withUltra equipment




Management of risks and uncertaintiesULTRA’S CONFIDENCE IN ITS ABILITY TOCONTINUE TO DELIVER GROWTH ISUNDERPINNED BY A NUMBER OF KEYFACTORS. THE GROUP HAS A TRACKRECORD OF YEAR-ON-YEAR SUCCESSDESPITE SIGNIFICANT VOLATILITY INFOREIGN EXCHANGE RATES AND WHILSTEXPERIENCING FULL MARKET CYCLES INBOTH THE CIVIL AEROSPACE AND DEFENCESECTORS. THESE RISKS WILL CONTINUE TOBE MITIGATED THROUGH ROBUST BUSINESSSTRATEGIES. FURTHER, ULTRA HAS ACCESSTO ADEQUATE FINANCIAL AND HUMANRESOURCES TO IMPLEMENT ITS STRATEGYFOR THE FORESEEABLE FUTURE.

Approximately 80% of Ultra’s revenue is fromthe defence sector. A risk would therefore bea significant worldwide reduction in defenceexpenditure. The overall size of the defencebudgets relative to Ultra’s annual revenueprovides sufficient headroom for the Group’sgrowth to continue. Ultra’s constant focushas been on ensuring that its businessesoperate in a large number of growing nichemarkets where the Group can create andmaintain sustainable competitive advantage.This specialisation and diversity give someprotection from budget variations and soprovide robustness to Ultra’s performance.

Ultra’s financial performance has not beensignificantly affected by the current alliedoperations in Afghanistan and Iraq. It ispossible that these operations might be scaledback in the next few years. Since Ultra did notbenefit materially from the start of theseoperations, it is anticipated that a withdrawalwould not harm the Group’s trading position.Indeed, it might well be an overall benefit tothe Group as it may alleviate some of thecurrent pressures on defence budgets.

The international spread of Ultra’s activitiesprovides resilience to its performance. TheGroup now sells its products and services inover 30 countries worldwide and this hasbroadened the customer base. Ultra also

has a transatlantic capability, with 10 of its20 businesses located in North America. Assuch, it operates as a domestic agent in bothmarkets and can exploit its innovativesolutions on both sides of the Atlantic.

Ultra is represented on a significant range of major international programmes andplatforms. As a result, no single programmerepresents more than 5% of Ultra’s revenuein any single year. The cancellation orcurtailment of any single programme isunlikely therefore to have a material adverseimpact on the Group.

Ultra supplies to all elements of the armedforces, i.e. the army, navy, air force andmarines, together with first responders suchas medical staff and firefighters. Thiscustomer spread provides an element of riskmitigation. In addition, Ultra operates in anumber of different and distinct marketsectors, including battlespace IT, sonar andequipment for military air, land and seaplatforms. Again, this mitigates the risk ofdecline in any one market sector materiallyaffecting Ultra’s overall performance.

Ultra has significant business in the civilsector and this provides useful diversification,often providing an alternative market inwhich to exploit complementary skills andtechnologies. Within the civil market, Ultraoperates in the aerospace, transport andcommercial security sectors. This spread givesfurther resilience to Ultra’s performance.

The Group’s largest exposure to the adverseeffects of exchange rate volatility is to theUK£:US$ impact. Whilst Ultra has a naturalhedge from its geographic split of businesses,the Group has also responded by sourcing ahigher proportion of the cost of dollar-denominated products in dollar zones. This isin addition to the Group’s usual currencyhedging arrangements described later.

The industries in which the Group operatescontinue to experience restructuring, whichsometimes results in Ultra’s customers

themselves becoming more verticallyintegrated. This may increase the incidence of the Group’s customers having capabilitiesthat overlap with Ultra’s. The threat that thisotherwise might pose is offset by Ultra’sstrategy of operating in specific market nicheswhere it has some sustainable differentiation.

Outlook for UltraThe record order book of £501m representsa significant increase in the year andprovides Ultra with its customary level ofvisibility of earnings. It reflects the Group’sstrong positions on existing platforms as wellas its success in winning positions on newprogrammes. Importantly, the Group started2006 with firm order cover for 62% ofprojected revenue, a similar level of visibilityto previous years.

In Ultra’s main defence markets worldwide,budgets continue to rise and the recentemphasis on security and surveillanceactivities continues. The continuingbuoyancy of the civil aerospace market notonly drives increasing levels of productionequipment but also benefits importantaftermarket spares and repairs revenues.The strong growth in air passenger travelwill drive demand for new infrastructureincluding airport IT.

Ultra enters 2006 with a strong balancesheet and the headroom, not only to makefurther acquisitions that will enhance andcomplement the Group’s range of nicheactivities, but also to continue to invest innew product development to meet marketdemands. Current market conditions,coupled with Ultra’s proven ability to winnew business and to execute contractseffectively, give the Board confidence in thecontinuing progress of the Group in 2006.

30International successUltra sells its products and services inmore than 30 countries worldwide

15%Increased dividendThe Directors are recommending a total dividend increase of 15% to 15.9p

62%High visibility of earningsUltra started 2006 with firm ordercover for 62% of projected revenue




114%Five year cash conversion4

The Group has achieved an averageoperating cash conversion of 114%over the last five years

FINANCIAL POSITIONOperating cash flow3

Ultra maintained its record of strong cashgeneration during the year, with operatingcash flow, after capital expenditure and LTIPshare purchases, of £53.8m (2004: £46.9m),equivalent to an operating profit1 to cashconversion ratio of 105%. Ultra continues tofocus upon maintaining working capital at alow level without jeopardising the viability ofthe business. At the end of 2005, Ultra hadnet current liabilities, excluding cash andbank borrowings, of £18.8m (2004: £10.4m).The main driver for this position was anincrease of £7.1m in payables, excluding theeffect of acquisitions. Creditor daysoutstanding at year-end were 51, a similarlevel to 2004. Inventories rose by £1.6m andreceivables by £1.3m, reflecting the overallgrowth in revenue. There was a £7.3m netcash investment in property, plant andequipment during the year compared to adepreciation charge of £6.1m. Within thistotal the only significant capital investmentwas in New Zealand. Here new baggagereconciliation systems have been installed atthe country’s six international airports, withexpenditure during the year of £1.6m. Inaddition £0.6m was spent on buying Ultrashares for the Long-Term Incentive Plan. Thiswas lower than the previous year’s £1.1mbecause shares not awarded during 2004were used during 2005.

Acquisitions and intangible assetsUltra made two acquisitions during the year.Horizon Aerospace was acquired in March fora total cost including expenses of £2.4m, ofwhich £1.3m has been treated as goodwill.Audiopack Technologies Inc was acquired inJuly through a share purchase transaction for£33.9m, including expenses. Of the totalconsideration £4.1m has been treated asgoodwill and a further £27.7m as intangibleassets. In both cases the goodwill has beencapitalised and, under International FinancialReporting Standards, will remain on thebalance sheet at the acquired value,

assuming no future impairment charge.Intangible assets of Audiopack will beamortised over a ten-year period. Following areview during the year of the fair value ofassets acquired with Videcom International Ltdin July 2004, a reduction of £0.2m was madeto the goodwill associated with that business.Capitalised investments of £2.9m were madein new product development and otherintangible assets with long-term commercialvalue during the year.

Interest and profit before taxationFinancing costs, excluding losses on financialinstruments, grew by £0.9m to £4.3m for theyear. One reason was a £0.5m rise in interestcharges resulting from an increase in bankborrowings to fund acquisitions. This increasewas partly offset by a reduction in theeffective cost of debt following the maturity inApril 2005 of the fixed interest rate hedgingcontract to which Ultra committed in 2000.Interest costs on bank debts, includingamortised fees, amounted to £3.3m overall,compared to £2.8m in 2004. The 2005 costwas covered 18.6 times by operating profit1. Inaddition, financing costs included a notionalcharge of £0.9m (2004: £0.5m) representingthe amortisation of the UK defined benefitpension fund deficit.

The growth in financing costs meant that theheadline profit before tax2 improved by 18%to £47.4m (2004: £40.1m). Amortisation ofintangibles arising on acquisition amountedto £3.3m in the year. A loss of £3.4m wasreported on financial instruments and thiswas caused by a 12% strengthening in theUS dollar against sterling during the year.The Group’s UK and Canadian businesseshedge forward their US dollar denominatedsales revenues, typically over an eighteen-month period, and the stronger dollar hadthe effect of reducing the nominal value ofthese financial instruments at the year-endclosing exchange rates. It should beemphasised that this notional reported“loss” will never be realised; it is simply atiming effect. The real worth of the hedging

contracts to the Group is to fix the value inlocal currency of foreign currency salesreceipts in the future, thus reducing theuncertainty that would otherwise exist as totheir realisable value. Under the transitionalarrangements for the implementation ofInternational Financial Reporting Standardsthis item was not separately reported in theprevious year. Statutory profit before tax was£40.7m (2004: £40.1m).

Earnings per share2 and dividendsThe effective Group tax rate rose slightly to27.7% (2004: 27.2%) due to a higherproportion of Ultra’s profits being generatedin the US, where marginal tax rates arehigher. Earnings per share2, rose by 16% to50.7p (2004: 43.7p). The Directors areproposing a final dividend of 10.7p, bringingthe total dividend to 15.9p (2004: 13.8p), anincrease of 15%. This continues to reflectthe Group’s policy of maintaining a dividendthat is covered about three times by earningsper share2.

FinancingUltra generated £38.1m of free cash flowbefore dividends and acquisitions during 2005(2004: £36.0m). After dividend payments of£9.6m, this left £28.5m available to help fundthe acquisition expenditure of £36.6m. Thebalance came from the Group’s bankingfacilities and, as a result of this and certaincurrency effects, net debt5 increased by£10.2m during the year to close at £34.3m(2004: £24.1m). The balance sheet remainsvery strong and Ultra has substantialheadroom on its banking facilities to makefurther acquisitions.

Ultra’s existing operations and newacquisitions are funded by a combination ofretained cash and medium-term bankborrowings. During November 2005 theGroup renewed the banking facility that isprovided by a small syndicate led by TheRoyal Bank of Scotland. The new facility,which provides up to £120m of revolvingcredit over a five-year period, is denominatedin sterling, US dollars and Canadian dollars

THE DIRECTORS ARE PROPOSING A FINAL DIVIDEND OF 10.7P,BRINGING THE TOTAL DIVIDEND TO 15.9P (2004: 13.8P), ANINCREASE OF 15%. DIVIDEND COVER WILL THEREFORE BEMAINTAINED AT ABOUT THREE TIMES.

£38.1mFree cash flowUltra generated £38.1m of free cashin 2005




and is used for balance sheet and operationalneeds. Both the sterling and US dollarelements fund day-to-day working capitalrequirements and the US and Canadian dollarborrowings also represent natural hedgesagainst assets denominated in thosecurrencies. A further overdraft of £10m isalso available for funding short-term workingcapital requirements.

Financial risk management Interest ratesAn interest rate hedge, denominated insterling, which had been in place for fiveyears, matured during 2005. A significantportion of the Group’s current borrowingshas been incurred to fund recentacquisitions in North America and istherefore denominated in US and Canadiandollars. With the objective of reducing therisk that is associated with debt at floatinginterest rates, new three-year interest ratehedging contracts were entered into inDecember. These cover $40m of US dollarborrowings, reducing to $20m over twoyears, and $30m of Canadian dollar debt.These amounts compare to gross debts ofUS $58.5m and Canadian $42.4m that werein place at the end of 2005. The remaining£36.4m of gross debt was at floatinginterest rates. The effective overall annualinterest rate for the total gross debt of£74.7m at year-end was 4.8%.

Foreign currencyUltra’s reported financial results areinfluenced by movements in exchange ratesand the overall impact is a combination ofcurrency translation and currency transactioneffects. The biggest sensitivities are to the USand Canadian dollars.

The average dollar exchange rates used in theyear to translate the sales and operatingprofits of Ultra’s US and Canadian subsidiariesinto sterling strengthened by 3% and 9%respectively compared to 2004. For theGroup as a whole, currency translationeffects increased sales by £5.7m or 2% andoperating profit1 by £1.0m or 2%.

Some of Ultra’s businesses in the UK andCanada also make sales in foreigncurrencies, mainly US dollars. When the USdollar weakens against local currencies thismeans that operating profit1 is subject to anegative currency transaction effect. This ispartly relieved by sourcing materials in USdollars, thus reducing the overall netexposure to currency fluctuations. TheGroup policy is to hedge the net exposureon orders in hand using forward foreignexchange contracts, typically extending 18to 24 months. Exposure to other currenciesis hedged as it arises on specific contracts.Based upon the combined net exposure ofabout US $80m last year, operating profit1

in 2005 would have been £5.2m or 10%higher had the overall hedged rate remainedunchanged from the previous year. Ultra’seffective US$:UK£ rate for 2006, based uponthe forward contracts currently in place, isexpected to be approximately $1.77,compared to $1.73 in 2005.

PensionsUltra offers company-funded retirementbenefits to all its employees. In the UK moststaff still participate in the Ultra ElectronicsLimited defined benefit scheme, which wasclosed to new entrants in 2003. There was anet IAS 19 deficit after tax of £31.3m on thescheme at the end of 2005, compared to£27.1m in 2004. Although the value of thescheme assets increased by £22.4m duringthe year, this was less than the increase of£28.4m in the liabilities. The main reason forthis growth was a lower discount rate forfuture liabilities, due to the current low yieldon gilts. Its investment strategy is focusedupon equities, which represent 87% of thescheme assets. This reflects the fact that thescheme is relatively immature, with just 17%of the members already retired, and remainsstrongly cash positive.

The scheme has a statement of investmentprinciples. This includes a statement onsocially responsible investment which isdelegated to the investment managers.

Pension management and governance isundertaken by pension trustees on behalf ofthe members. The pension trustees includecompany-nominated and employee-electedrepresentatives. Ultra supports the trustees ina number of ways including training to the“Trustee Certificate of Essential PensionsKnowledge” standard which isindependently assessed by the PensionsManagement Institute.

Employees at Tactical CommunicationSystems in Canada also participate in adefined benefit scheme. There was anIAS 19 deficit of £1.3m on this scheme atthe end of 2005 compared to £1.0m in2004. This will be eliminated over thefollowing ten years by increasing companycontributions by an amount that has beenagreed with the scheme actuaries and theCanadian regulatory agencies.

All staff that have joined Ultra in the UKsince the defined benefit scheme was closed in 2003 have been invited to becomemembers of the Ultra Electronics GroupPersonal Pension Plan. Under the terms ofthis defined contribution scheme, companycontributions are supplemented bycontributions from the employees.

In the US, Ultra offers a defined contribution401(k) retirement benefit plan to full-timeemployees. Under this plan, Ultra providesparticipating and contributing employeeswith matching contributions, subject to planand US Internal Revenue Service rules. DNEtransferred its assets into the Ultra plan in2005. Audiopack, which became part ofUltra during 2005, will also consolidate itscurrent plan into the Ultra scheme during2006. Wells Fargo provides administrationand is also a directed trustee of the plan.

ULTRA MAINTAINED ITS RECORD OF STRONG CASHGENERATION DURING THE YEAR, WITH OPERATING CASHFLOW, AFTER CAPITAL EXPENDITURE AND LTIP SHAREPURCHASES, OF £53.8M (2004: £46.9M).



£120mFundingUltra’s new banking facility providesup to £120m of revolving credit

+16%Earnings per share2

Ultra’s earnings per share2 increasedby 16% to 50.7p




battlespace IT for military advantage

Ultra’s ADSI systems drive the displays at airoperations centres

Ultra supplies high-capacitytactical radio systems

30%Battlespace IT equipmentSales of battlespace IT equipmentand systems accounted for over30% of Ultra's 2005 revenue

In conflicts, the side that manages real-timebattlespace intelligence most effectively toachieve information superiority has a decisiveedge. Ultra is constantly investing in thedevelopment of new battlespace IT productsthat will help deliver that military advantage.Ultra’s Air Defense Systems Integrator (ADSI)product provides a world-leading capabilityfor processing information from tactical datalinks, intelligence feeds and radar data inmany different formats. This information istranslated into an unambiguous, coherentpicture of the tactical situation that is used bythe combatants around the battlespace. Thelatest version of ADSI contains significantadditional features and functionality. Manyexisting users – and Ultra has over 500 ADSIsin operational use – have opted to upgradeto the new version. The flexibility of the ADSIproduct helped position Ultra to be NorthropGrumman’s partner in the development oftwo new integrated battlespace IT solutions.Ultra’s work on these programmes willcontinue for some time to come. The USArmy is also procuring ADSIs to be the heartof new deployable airspace management

cells for air defence. The compact nature ofADSI helps fit the complete capability intowheeled armoured vehicles, therebymaximising mobility.

A key element of military tacticalcommunication systems is the wide areanetwork for voice and data transmissionbetween various command levels in landforces. Ultra’s advanced microwave trunkradios serve as the backbone of moderntactical line-of-sight networks. They providehigh-capacity telecommunication services tointerlink battlefield command posts andcombat forces. These networks must be ableto handle ever-increasing volumes ofinformation, including voice, data, email andreal-time video transmissions. Ultra isupgrading the high capacity radio systemsfor both the US Patriot air-defence missilesystems and those used for the US Army’sbattlefield backbone communicationsinfrastructure. In a parallel move, Ultra hasalso developed a higher-capacity version ofthe secure, frequency-hopping radio used bythe army of South Korea.

To be tactically useful, communications mustbe secure. Ultra has a world-leadingcryptographic capability and has achievedexport sales of such equipment to the US,Canada, Sweden and Germany. Secure datalinks are also vital in controlling unmannedaerial vehicles and for transferring time-criticalinformation to ground stations. Ultra isdeveloping this equipment for the UKWatchkeeper programme.

Data must be shared across multiplebattlespace IT networks, including legacysystems. Ultra provides voice and datamultiplexers, multi-service accessconcentrators and communication switches,and protocol converters used by all branchesof the US armed forces. Ultra has recentlydemonstrated the ability to providebandwidth efficient communications withinan Internet Protocol network whilemaintaining the high quality of servicedemanded by military commanders.


Ultra’s ADSI systems provide a deployable airdefence capability

Ultra provides key elements of modern militarycommunication networks

Ultra is providing the securedata links for the UKWatchkeeper UAV programme

The Polish Navy is achievingNATO compatibility by usingUltra equipment

ULTRA IS DEVELOPING EQUIPMENT TO MANAGE REAL-TIMEINFORMATION FLOWS EFFECTIVELY AND TO DELIVER MILITARYADVANTAGE THROUGH HAVING INFORMATION SUPERIORITY.

Ultra is upgrading the high-capacity radios for the Patriot air defence missile system

Solving IP convergence congestion


Information & Power Systems and Tactical & Sonar Systems

Ultra is equipping moderncommand and control centres

Ultra provides advancedcommunication equipment for firefighters and other first responders

SixTorpedo defence systemsIn 2005, Ultra sold six torpedodefence systems to the Royal Navyand three were at sea by theyear-end

TwentyLong-term supportUltra's new weapons interfacingelectronics for the Royal Navy willbe supported for 20 years


Digitisation of the battlespace is a dominanttheme in defence expenditure. Moderncommand and control systems must meet theneed for interoperability, not only with otherservices but also with allies and coalitionpartners. Modern designs must also provideintegrated solutions – the link between thecommand and the weapons’ fire controlfunctions must be seamless. Ultra’s high-integrity, low-latency naval data distributionsystems help make this so. Integrated combatsystems must be highly cost effective if theyare to penetrate the growing market forminor warships and offshore patrol vesselsthat are required by the world’s navies. Ultrahas demonstrated its ability to provide verycompetitive combat systems for this marketsector. These integrate radar and electro-optic surveillance, command and control andweapon fire control functions together withnavigation, communication and platformmanagement in one cohesive, modulardesign of integrated bridge. Much use ismade of commercial computing equipmentand the system design contains industry-standard interfaces to ensure that the systemcan easily be upgraded and maintained forthe life of the platform.

Ultra has won a contract to supply andsupport new weapon interfacing electronicsfor the Royal Navy’s existing submarines. Thissystem, originally developed for the newAstute class submarines, manages theweapons – the Spearfish heavyweighttorpedo and the Tomahawk land attackcruise missile – while they are still in thesubmarine launch tubes, providing powerand monitoring their condition. Theequipment manages the upload of targetdata prior to weapon launch and controlsand monitors the launch sequence. The Ultrasolution will maximise the commonality ofequipment across all Royal Navy submarines.It uses off-the-shelf technology to facilitatethe management of obsolescence issues forthe next 20 years.

With the acquisition of Audiopack in July2005, Ultra provides a broad range of ruggedvoice communications equipment forpersonnel wearing protective clothing, masksand breathing apparatus in harsh andhazardous environments. This equipment isused in the military and homeland securitysectors and by ‘first responders’ such as thefire, medical and police services. Reliablecommunications between team members is

vital when operating in dangerousenvironments. The Ultra equipment can alsoprovide the user with visual informationabout the condition of the breathingapparatus, including the amount of air left inthe tanks, to maximise the safety ofoperations. Synergistically, Ultra can also offersolutions to provide enhanced command andcontrol information, including the location ofusers at an incident, using proven technologyalready developed within the Group.


Ultra is providing power and control equipment for all of the Royal Navy’s submarines

ULTRA IS SUPPLYING AND SUPPORTING THE EQUIPMENT THATCONTROLS THE WEAPONS LAUNCH FROM ALL OF THE ROYALNAVY’S SUBMARINES, INCLUDING THE NEW ASTUTE CLASS.

expertise in depth

Ultra supplied new powerequipment for the US Navy’ssubmarine Dolphin

Modern battlespace ITequipment must survive inharsh environments

Ultra has developed weaponinterfacing equipment for thenew Astute submarines

The British Army’s highest priority plannedprocurement programme is the Future RapidEffects System (“FRES”) family of armouredvehicles. FRES will provide the UK land forceswith the capability to conduct rapidintervention, war fighting and a diverse rangeof other roles. It will comprise a range ofnetwork-enabled, medium-weight armouredvehicles designed for rapid deployment by airworldwide. Ultra is part of the team led byLockheed Martin UK which is one of twoteams selected to undertake work on theinitial design, assessment and integration of a potential electronic architecture for thevehicles. Ultra positioned itself for selectionto the team by successfully demonstrating anability to provide significant sub-systems formodern armoured vehicles.

For the British Army’s Engineer Tank Systemprogramme, Ultra has developed two majorsub-systems: the indirect vision system andthe vetronics system. These are to be fitted to the 33 Trojan obstacle-clearing vehiclesand the 33 Titan bridge-layers being suppliedby BAE Systems. The vision system comprisescameras, video management electronics and

displays and provides situational awareness toall crew members when operating underarmour. The vetronics system provides smartmanagement of electrical power usage andconstant power health monitoring. Ultra alsoprovides a range of cameras and crewcontrols for the British Army’s Terrierarmoured vehicles. In modern conflicts, thecrews must be provided with sufficient allround vision to allow the vehicle to completeits full range of tasks while the hatches areclosed to give protection against enemyaction. Ultra’s success in developing thesesystems has positioned it to supply similarsub-systems for the potential upgrade of theBritish Army Warrior armoured vehicle. TheUK MoD is planning to extend the life andupgrade the capability of up to 450 Warriorsincluding a new turret to enhance lethality. Inpreparation for the turret competition, Ultrahas teamed with CTAI, a joint venturebetween BAE Systems and GIAT, the Frenchmanufacturer of armoured vehicles. CTAI hasdeveloped an innovative gun and associatedammunition and Ultra is supplying a numberof different crew controls and electronic unitsas part of the overall system.

In addition to making a significantcontribution to the operational capability ofnew armoured vehicles, Ultra is alsoinnovating to improve the availability of thecurrent fleet of vehicles. Ultra hasdemonstrated its ability not only to collecthealth and usage data from vehicles but alsoto turn this into useful fleet managementinformation and to present it to theappropriate decision makers. This includesthe use of Ultra’s ‘Syntaxis’ collaborativeworking environment to provide secure dataexchange and transmission and also to hostthird party software tools used for dataanalysis and decision-making.


Aircraft & Vehicle Systems and Information & Power Systems

33 Trojan obstacle-clearing vehicles are being supplied to the British Army by BAE Systems

Ultra supplies advancedelectronic control systems for armoured vehicles

Ultra is providing the indirectvision system and thevetronics system for theEngineer Tank System

battlespace IT in armoured vehicles

FRESUltra is undertaking the initialdesign and integration of apotential electronic architecturefor the advanced FRES network-enabled armoured vehicles


78%Strong defenceThe defence sector is responsiblefor 78% of the Group’s revenue

Ultra is developing visionequipment and crew controlsfor Terrier

Armoured vehicle electronics must survive in harsh environments

The British Army’s Warrior vehicles will requireupgraded electronics

ULTRA HAS DEVELOPED TWO MAJOR BATTLESPACE IT SUB-SYSTEMS FOR THE BRITISH ARMY'S NEW ENGINEER TANK SYSTEM VEHICLES.



ULTRA LEADS INTERNATIONAL TEAMS PROVIDING THE ROYAL NAVY WITH LOW-RISK UNDERWATER BATTLESPACEDEFENCE CAPABILITIES. NEW SYSTEMS ARE AT SEA WITH THE ROYAL NAVY.

Development of the bow sonar for the Type 45 destroyer madesatisfactory progress

Ultra won its UK minedisposal system contract after an extensive set ofcompetitive trials

17%Increasing salesUltra’s sales of sonar equipmentrose by 17% in 2005, driven bysuccesses in new product niches

Ultra has a particular expertise in teamingwith partners to provide its customers withthe ‘best of breed’ solutions for theirrequirements at low risk. Typically, thisteaming is with international partners andUltra will manage the transfer of technologyinto the customer’s country to provide andsupport a sovereign operational capability forthat nation. In 2005, Ultra was awarded acontract to supply the Royal Navy with anadvanced capability for the destruction ofsea mines using a UK variant of the provenSEAFOX system designed by Atlas Elektronikof Germany. The system comprisesexpendable, remotely-operated underwatervehicles with on-board guidance andnavigation equipment. This links to thecontrol station on the host ship and thevehicle is manoeuvred to the sea mine whichis then neutralised using an explosivewarhead. Ultra will modify the existingSEAFOX design to meet the UK requirementand will manufacture the systems in the UKand then provide a ten-year support andupgrade capability. Ultra’s contract from theMoD was won after an extensive series ofcompetitive trials culminating in liveexplosive trials against a variety of sea mines.

During 2005 Ultra made excellent progresson its US Navy technology demonstratorcontract for an advanced torpedo defencesystem to protect its surface fleet. Successfultrials have now been conducted against realweapons. The development work for the USNavy is able to take full advantage of Ultra’swork on the Royal Navy surface ship torpedodefence contract. Ultra has specialistunderwater battlespace businesses in boththe UK and US and so is able to exploit itsinnovative technologies in both markets. Forthe Royal Navy torpedo defence programme,Ultra delivered on time a further six ship-setsof equipment and three systems were onships and at sea by the end of the year.

During 2005, development of the bow sonarfor the Royal Navy’s new Type 45 destroyermade satisfactory progress. For thisprogramme, Ultra is teamed with the USsonar and combat system specialist EDOCorporation. By the year-end, the firstsystem was nearing completion.

One of the great advantages of a submarineis its stealth – by staying submerged forextended periods, a submarine can avoiddetection and so pose a considerable threat

to hostile forces. In order to use a submarineas a tactical asset, however, it must be ableto share information about the widerbattlespace. A way must therefore be foundto allow a submarine to communicate abovesurface whilst operating freely at depth.Ultra, with its partners Strachan & Henshawand QinetiQ, is developing a systemincorporating a recoverable buoy thatprovides a satellite communication capability.Ultra, as system integrator, will undertakesystems engineering, design and integration.The team will manufacture the equipment,which includes outboard equipment todeploy, retrieve, capture and stow the buoy,together with satellite communications andother antennas. Within the Ultra team eachcompany contributes its specialist skills andexperience to optimise the final solution forthe customer.


Ultra is developing a stealthycommunication system forsubmarines incorporating arecoverable buoy that providesa satellite interface capability

defending the fleet

Ultra supplied six torpedodefence systems to the Royal Navy in 2005

Ultra specialises in underwaterbattlespace equipment

Ultra is developing a stealthy communicationsystem for submarines


16%Buoyant civil aerospaceUltra’s sales of equipment for civilaircraft rose by 16% in 2005


Ultra is supplying the wing ice protection system and proximity sensor interface electronics for the Boeing 787 aircraft

Ultra’s active noise andvibration control system will be fitted to the A400M aircraft

Each Eurofighter aircraft has many Ultra systems and products fitted

leading edge technologyTHE DESIGN OF THE WING ICE PROTECTION SYSTEM, FORWHICH ULTRA IS THE SYSTEM INTEGRATOR, IS CRITICAL TO THE OPTIMISATION OF THE OPERATING EFFICIENCY OF THEBOEING 787 AIRCRAFT.

Ultra maintains a constant focus onpositioning its innovative solutions on long-term programmes and platforms. In theaerospace sector, typical project lifecycles canexceed fifty years. Ultra has been successful inpositioning its unique products, services andsystems on a number of key new programmes.

Ultra is developing the wing ice protectionsystem and, with Goodrich of the US, thedoor and landing gear proximity sensingsystem for the new Boeing 787 “Dreamliner”aircraft. In 2005, these programmes madegood progress. Ultra is the system integratorfor the wing ice protection system whichprovides electro-thermal heating to theleading edge slats of the 787 wing. Thedesign of the system is critical to theoptimisation of the operating efficiency ofthe aircraft as it avoids the use of bleed airfrom the engines, which adversely impactsfuel efficiency. The 787 aircraft is scheduledto enter service in 2008.

An important achievement in 2005 was Ultra’sselection to supply its active noise cancellationsystem for the main cargo bay of the newAirbus A400M turboprop military transport

aircraft. Ultra’s innovative system willsubstantially reduce noise inside the aircraftand will protect troops from the noise of thepowerful propellers. The system is based onactive noise cancellation technology whichUltra has developed over more than 20 yearsand which is in operational service on morethan 800 turboprop aircraft.

Ultra is also supplying the landing gearcontrol system proximity sensors, harnessesand associated interface electronics for theA400M aircraft. These components are usedmainly in the landing gear extension andretraction system to sense the position of thelanding gear and landing gear doors. Ultra ispartnered with Goodrich for the supply ofthis equipment. Airbus has an order book of192 A400M aircraft with first deliveriesplanned for 2009.

Ultra is providing its innovative and highlyreliable HiPPAG airborne compressor for theUS Small Diameter Bomb (SDB) programme inthe US. The SDB system, for which the primecontractor is Boeing, is the latest low costprecision-strike weapon for deployment onfighters, bombers and unmanned combat air

vehicles, for which it is estimated that theUSAF will procure at least 2,000 carriages.HiPPAG provides the pneumatic energy sourcewhich enables the controlled ejection of thesmart, individually targeted bombs, four ofwhich are suspended from each carriage.

Successful firing trials have demonstrated the exceptional precision of the SDBsystem. A bomb flew more than 55 milesfrom an altitude of 30,000 feet, hittingwithin 34 inches of its planned impact point.SDB is initially to be deployed on USAF F-15E aircraft in 2006. To support this, Ultrawas awarded in 2005 a contract to cover the Low Rate Initial Production (LRIP) phaseof the programme.


Ultra’s HiPPAG is fitted to the F-35 JSF aircraft

Ultra quietens Bombardier'sQ-series aircraft

Ultra constantly upgrades the electronic systems of theTornado aircraft

Customers worldwide rely on Ultra’s advanced,integrated IT solutions to support the efficientand safe operation of complex modernairports. With rising passenger numbers, manyairports are investing in new or upgradedfacilities to cater for the increased throughput.In 2005, Ultra’s airport IT business continuedits recent record of strong growth.

The prestigious new Terminal 5 at LondonHeathrow airport is taking shape. As IT systemintegrator for the whole project, Ultra’s activitylevels are rising as the project transitions fromdesign to implementation. As integrator, Ultrais demonstrating its broad spread of domainknowledge in airport IT systems by integratingthe many diverse functions that will contributeto the successful operation of Terminal 5.Ultra’s success at Heathrow helped secure thecontract to supply IT integration services for theexpansion at Shanghai’s Pudong internationalairport. This is a rapidly growing airport – asecond terminal is being constructed, a secondrunway already having been opened in 2005.Shanghai Pudong will act as a world classreference site to support Ultra’s continuingpenetration of the Asia-Pacific region, theworld’s fastest growing airport market.

Ultra is the world’s leading provider of airlinebaggage reconciliation systems. These ensurethat unaccompanied bags are not inadvertentlyloaded onto aircraft and also enhance theefficiency of the departure process. The Grouphas invested in the infrastructure to provide abaggage reconciliation and tracking service toairports, airlines and ground handling agents.Ultra is now providing this service at Heathrowand in New Zealand and the US. Theseinstalled systems consistently meet the requiredavailability and reliability levels and processmillions of items of baggage each year.

At facilities such as airports, schools andsimilarly sensitive areas, access control is vitalto minimise any risk to security. Ultra’sMagicard range of ID card printers is usedextensively as part of access control systems.In 2005, the Magicard range of printers wasextended to offer additional features whilecontinuing to offer as standard Ultra’sunique holographic anti-counterfeitingtechnology. The new printers allow smallerorganisations to afford an access controlsolution using customised ID badges for allauthorised personnel.



ULTRA’S ADVANCED, INTEGRATED IT SOLUTIONS SUPPORT THEEFFICIENT AND SAFE OPERATION OF THE MOST PRESTIGIOUSMODERN AIRPORTS WORLDWIDE.

Ultra’s integrated IT solutions support busyairports worldwide

Ultra provides baggagemanagement at all of New Zealand’s international airports

25 millionUltra’s baggage reconciliation andmatching system at LondonHeathrow airport processed over25 million bags in 2005


Ultra will supply airport IT integration services at Shanghai Pudong international airport

integrated airport IT worldwide

22%Sales of systems, equipment,products and services for civilmarkets account for 22% of Ultra’s revenue

Ultra is selling advancedairport IT solutions all roundthe world

Ultra is the IT systemsintegrator for the new fifth terminal at London’sHeathrow airport


Corporate Responsibility

ULTRA BELIEVES THAT IT SHOULD AT ALLTIMES BE A RESPONSIBLE CORPORATECITIZEN. AS SUCH THE GROUP COMPLIESWITH ALL APPLICABLE LEGISLATION IN THEAREAS OF TRADING, EMPLOYMENT, HEALTHAND SAFETY AND THE ENVIRONMENT.ULTRA FURTHER BELIEVES THAT, IN ORDERTO ACHIEVE SUPERIOR BUSINESSPERFORMANCE, THE GROUP MUST, INCERTAIN AREAS, EXCEED THE MINIMUMSTANDARDS REQUIRED BY LAW. ULTRA’SPOLICIES RELATING TO ITS CORPORATERESPONSIBILITY ARE GENERALLYESTABLISHED BY THE BOARD WITHINDIVIDUAL BUSINESSES TAKING A MAJORROLE IN THEIR IMPLEMENTATION.

CUSTOMERSBusiness ethicsUltra requires that the Group’s employeescomply with the spirit and principles of lawsand standards of conduct of the countries inwhich it does business as well as behavingethically and with fairness. Directors andemployees are required to avoid personalconflicts of interest regarding companybusiness and are bound by strict rules oninsider dealing and insider information.

IN ADDITION, ALL BUSINESSES ARE STRICTLY REQUIRED TO COMPLY FULLY WITH THERELEVANT NATIONAL EXPORT CONTROLREGULATIONS. THEY ARE ALSO REQUIRED TOCONDUCT THEIR BUSINESS IN STRICTACCORDANCE WITH COMPETITION ANDANTI-TRUST LAWS.

Ultra supports and respects the protectionof internationally proclaimed human rightsin the countries in which it operates. Ultradoes not make any political donations.

Customer relationshipsUltra promotes good working relationshipswith all its customers with a specialemphasis on meeting commitments. TheGroup receives direct feedback onrelationships from customers such as BAESystems, where Ultra is a member of the

Major Equipment Supply Programme (MESP),and from the UK MoD Supplier RelationsGroup. Across the range of Ultra businesses,other customer relationships are alsoregularly recognised through feedback andaward processes.

For example, in 2005 ATS received two awardsfrom Lockheed Martin for achieving a suppliertotal performance rating of 99%. Also during2005, DNE again received “Best Value GoldMedallist” recognition from the DefenseSupply Center Richmond, Virginia; FlightlineSystems received a letter of appreciation fromLockheed Martin for outstanding supportwhile Sonar & Communication Systemsreceived a letter of commendation from theUK DPA for the RTOF programme.

EMPLOYEESTHE PERFORMANCE OF ULTRA ISFUNDAMENTALLY DRIVEN BY THECONTRIBUTIONS MADE BY THE GROUP’SEMPLOYEES. ULTRA’S SUCCESS ININNOVATING TO MEET CUSTOMER NEEDS ISFOUNDED IN THE BROAD RANGE OF SKILLSAND CAPABILITIES OF THE STAFF EMPLOYEDBY ULTRA. ALL MANAGERS IN ULTRA,SUPPORTED BY HR PROFESSIONALS, WORKTOWARDS THE AIM OF DELIVERING ANEFFICIENT ORGANISATION WITH COMPETENTAND COMMITTED PEOPLE TO MEET THEGROUP’S BUSINESS COMMITMENTS.

In order to ensure that Group businessescan recruit, retain, motivate and develop theright staff, Ultra pursues a range ofinitiatives, which are described below.

Employment practicesUltra believes that superior businessperformance can only be achieved throughhaving committed and efficient people.Achieving this high quality requires Ultra torecruit widely and with no bias ordiscrimination. It is therefore the policy ofUltra to be an equal opportunities employerand to oppose all forms of unlawful orunfair discrimination on the grounds of sex,

ULTRA BELIEVES THAT ITSHOULD AT ALL TIMES BE A RESPONSIBLE CORPORATECITIZEN AND THAT THISCONTRIBUTES TO ULTRA’SLONG-TERM SUPERIORBUSINESS PERFORMANCE.ULTRA’S POLICIES RELATINGTO ITS CORPORATERESPONSIBILITY AREESTABLISHED BY THE BOARDWITH INDIVIDUALBUSINESSES TAKINGRESPONSIBILITY FOR THEIR IMPLEMENTATION.

2 yearsEach Ultra business isindependently audited every 2 years for Health, Safety andEnvironmental compliance

8%The number of Ultra peopleincreased by 8% during 2005

Ultra is a responsible citizen

100%ContributionAll Ultra employees contribute tothe continuing success of the Group


Corporate Responsibility (continued)

race, nationality, disability, sexual orientation,age, marital status, religion or politicalbelief. In addition, the Group is aresponsible employer, seeking to achieve aculture of fairness to employees and ofbeing a good place both to work anddevelop a career. Employees and applicantsare treated equally and fairly in respect ofrecruitment, remuneration, training,promotion and career development.

Most UK businesses are accredited to theInvestors In People (IIP) standard and areregularly audited. During 2005 Datel was re-assessed against the updated version ofthe IIP standard and was one of the firstbusinesses in the UK to be successfullyrecognised against all the new indicators.

IN COMPLYING WITH THE PUBLIC INTERESTDISCLOSURE ACT 1998 IN THE UK, THEGROUP HAS ESTABLISHED A PROCEDUREENABLING EMPLOYEES TO BRING MATTERSTO THE ATTENTION OF AN APPROPRIATEMANAGER OUTSIDE THEIR OWN BUSINESSIN THE EVENT THAT THEY DO NOT FEELABLE TO APPROACH THEIR LOCAL LINEMANAGEMENT. THIS PROCEDURE WASREVIEWED DURING 2005. A SIMILARSYSTEM OF THIRD PARTY HOTLINES HASALSO BEEN ESTABLISHED AT US ANDCANADIAN BUSINESSES.

Development and trainingThe Group actively supports and invests intraining and development linked to businessneeds. Each business is responsible foridentifying the training needs of itsemployees and managing its own trainingbudget. This typically takes place throughindividual employee performance anddevelopment reviews, which are held atleast annually. Specific training programmesare provided for individuals as necessary.Additionally, training programmes onmanagement processes and techniques arerun at Group level along with workshops onUltra’s successful competitive strategy andstrategic selling processes.

Most Ultra businesses offer scholarship andtuition reimbursement programmes. Ultrahas also sponsored undergraduate studentsand supported other development activitiesincluding work placement and workshadowing during 2005. Within the US andCanada many businesses support formal co-op programmes with respected universities;during 2005 Audiopack was recognised byCase Western University for 3 years ofoutstanding co-op sponsorship and hasexpanded its programme to two additionaluniversities. Some UK businesses runapprenticeship programmes. Links with localuniversities and other academic institutionsare encouraged. For example, TCS inMontreal sponsors a chair at a localuniversity. Also during 2005, Ultra providedsponsorship of undergraduate students,work experience placements as well as directgraduate recruitment.

BenefitsUltra offers competitive and comprehensivebenefits to all employees, which are regularlyreviewed. The Group believes in rewardingits employees well for good performance.

All US and Canadian employees are offeredmedical plans and many offer specific wellnessprogrammes such as smoking cessation.

IN THE UK EMPLOYEES CAN PARTICIPATE INTHE “ULTRASELECT” FLEXIBLE BENEFITSPLAN. THIS WAS FIRST LAUNCHED IN 2000AND IN 2005 APPROXIMATELY TWO-THIRDSOF ELIGIBLE UK EMPLOYEES PARTICIPATED.AS PART OF THE SCHEME UK EMPLOYEESARE ELIGIBLE TO PARTICIPATE IN THEGOVERNMENT’S HOME COMPUTINGINITIATIVE. ULTRA OFFERS A TAX-EXEMPTHIRE SCHEME FOR COMPUTER EQUIPMENTFOR EMPLOYEES TO USE AT HOME. THEPROGRAMME WAS LAUNCHED IN 2004 ASPART OF THE “ULTRASELECT” FLEXIBLEBENEFITS PACKAGE AND OFFERED AGAINDURING 2005. A COMPUTER PURCHASEPLAN IS ALSO OFFERED AT ONE BUSINESS IN NORTH AMERICA.

ULTRA RECOGNISES IT ISIMPORTANT, BOTH FOR ITSEMPLOYEES AND THECOMMUNITIES IN WHICH ITOPERATES, THAT EFFECTIVEMEASURES ARE IN PLACE TO ENSURE THAT THE GROUP MINIMISES THEENVIRONMENTAL IMPACT OF ITS ACTIVITIES.

THE PERFORMANCE OF ULTRA IS FUNDAMENTALLY DRIVEN BYTHE CONTRIBUTIONS MADE BY THE GROUP’S EMPLOYEES.

6 monthsUltraNews is published every 6 months and provides valuablenews and information for allemployees

Retirement benefitsUltra offers retirement benefits to employeesin the UK, US and Canada. Further detailsare provided elsewhere in this document.

Employee consultationGaining the commitment of the workforce isfacilitated by effective communication andconsultation. This takes a number of formssuch as the bi-annual Group magazine“UltraNews”, company-wide strategy andperformance presentations, birthday andcommunication lunches, all-hands meetingsand “YOURviews” employee surveys. The“YOURviews” employee survey provides localmanagement teams with feedback and anopportunity to benchmark across the Group.The process is typically conducted every oneto two years; during 2005 the survey tookplace in 11 businesses and showed high levelsof employee satisfaction and engagement.

In the United Kingdom more formalinformation and consultation practices wereintroduced during 2005, following successfulpilot testing in 2004.

Succession planningAn annual organisation and succession planis produced by the Managing Director orPresident of each business and is used toidentify the development actions foremployees with high potential. It alsoreviews the performance of the businessmanagement teams, defines the localannual training plan and any plannedorganisation changes.

Health and safetyA healthy and committed workforce isnecessary to achieve better business results.Accordingly Ultra places great emphasis onmaintaining high standards of health andsafety. All Ultra businesses are required tohave a written local policy, to have thenecessary resources to implement the policy,to provide adequate information, instructionand training for employees and to implementmonitoring of health and safety standards.

THE CHIEF EXECUTIVE HAS BEEN APPOINTEDAS THE MAIN BOARD MEMBER WITHOVERALL HEALTH AND SAFETYRESPONSIBILITY. THE MANAGINGDIRECTORS AND PRESIDENTS OF THEOPERATING BUSINESSES ARE RESPONSIBLEFOR THE IMPLEMENTATION OF THE POLICY.

Bi-annual audits by independent, external,qualified assessors covering health andsafety matters are conducted, most recentlyin 2005. All UK and US businesses improvedtheir health and safety performance on alike-for-like basis in comparison with the2003 audit. Overall results, which take intoaccount the newer businesses that wereaudited for the first time in the US, alsoimproved. Both TCS and Maritime Systemswere audited in 2005 to a new Canadian-specific audit framework; both businesseshad very good overall results and met therequired standard. Previous audits and theresulting follow-up process have provedeffective in reaching and maintaining highstandards across all sites.

Each business is required to submit aseparate annual report on health and safetyissues. The results of the audits and annualreports from each business are reviewed bythe Board annually.

Health and safety of employees, visitors andthe local community alike is taken veryseriously by the Group and the individualbusinesses. Ultra’s commitment to healthand safety was exemplified during 2005when PMES received a RoSPA SilverOccupational Health & Safety Award inrecognition of a very high standard of healthand safety at work over three years.

SUPPLIERSSupplier and other partner relationshipsContracts with suppliers are placed followinga fair, competitive tendering process on anarms-length basis or through formal teamingagreements. Such relationships engender a

BI-ANNUAL AUDITS BY INDEPENDENT, EXTERNAL, QUALIFIEDASSESSORS COVERING HEALTH AND SAFETY MATTERS ARECONDUCTED, MOST RECENTLY IN 2005. ALL UK AND USBUSINESSES IMPROVED THEIR HEALTH AND SAFETYPERFORMANCE ON A LIKE-FOR-LIKE BASIS IN COMPARISONWITH THE 2003 AUDIT.



top: Ultra helped fund thedegree studies of GeorgeGraham from Ocean Systems

bottom: The team at PMESreceived a health and safetyaward in 2005

cooperative culture which helps withproblem solving and helps to accommodatechanges to requirements where these occur.Gain-share arrangements are also enteredinto where appropriate and provide benefitsfor both Ultra and its suppliers and partners.Conflicts of interest are avoided at all times.During 2005, Airport Systems received the‘Innovative Solutions Award’ from supplierIonix for the most innovative use of itsSCADA product in the building systemsintegration of the new fifth terminal atLondon Heathrow airport.

Supplier payment policyOperating businesses are responsible foragreeing the terms and conditions underwhich they conduct business transactions withtheir suppliers. It is Group policy thatpayments to suppliers are made in accordancewith those terms, provided that the supplier isalso complying with all relevant terms andconditions. The Group’s actual paymentperformance at the end of 2005 is describedin the Directors’ report.

COMMUNITYULTRA RECOGNISES THE IMPORTANCE OFBEING A RESPONSIBLE PARTNER IN THECOMMUNITIES IN WHICH IT OPERATES AND IN WHICH ITS EMPLOYEES LIVE. THEGROUP HAS A POSITIVE ATTITUDE TOENVIRONMENTAL ISSUES AND IS PLEASED TOSUPPORT SELECTED CHARITIES AND MAINTAINLINKS WITH THE LOCAL COMMUNITIES.

EnvironmentUltra recognises it is important, both for itsemployees and the communities in which itoperates, that effective measures are inplace to ensure that the Group minimisesthe environmental impact of its activities.

Ultra has a formal environmental policy thataddresses compliance with environmentallegislation, conformity with standards for air,waste disposal and noise, the economicaluse of materials and the establishment of

appropriate environmental performancestandards. Progress is monitored throughannual reporting and a bi-annual auditprocess. The Chief Executive has beenappointed as the main Board member withoverall environmental responsibility. TheManaging Directors and Presidents of theoperating businesses are responsible for theimplementation of the policy.

Bi-annual external audits coveringenvironmental matters are conducted byindependent, external, qualified auditors; thelast audit was performed in 2005 in the UK,US and Canada. All UK and US businessesimproved their environmental performanceon a like-for-like basis in comparison with the2003 audit. Overall results, which take intoaccount the newer US businesses that wereaudited for the first time, also improved. BothTCS and Maritime Systems were audited in2005 to a new Canadian-specific auditframework; both businesses had very goodoverall results and met the required standard.As with health and safety the audits and theresulting follow-up process have provedeffective in reaching and maintaining highstandards of compliance across all sites. Inaddition each business is required to submitan annual report on environmental issues.

The results of the audits and annual reportsfrom each business are reviewed by theBoard annually.

Shareholders have been encouraged toreceive an electronic version of this AnnualReport and Accounts in order to reduce theconsumption of paper and theenvironmental impact of the deliveryprocess. The weight of packaging used byUK businesses is assessed and reportedannually to ensure compliance with thecurrent packaging regulations.

Charitable and community activitiesIn addition to the charitable donations madeby the Group, disclosed elsewhere in thisdocument, Ultra employees are actively

supported in their charitable fund-raisingendeavours. A large number of local andnational charities is supported.

FOR EXAMPLE, A NUMBER OF BUSINESSESSUPPORTED EMERGENCY HURRICANE RELIEFPROJECTS WITH CLOTHING AND FOODDRIVES. EMPLOYEES AT MANY NORTHAMERICAN BUSINESSES SUPPORT THE UNITEDWAY CHARITY. IN THE UK THOUSANDS OFPOUNDS HAVE BEEN RAISED THROUGH AVARIETY OF EVENTS ACTIVELY SUPPORTED BYEMPLOYEES; EIGHT EMPLOYEES FROM PMES,FOR EXAMPLE, RAISED OVER £2,000 FORTHREE LOCAL CHARITIES BY TAKING PART INA 40-MILE WALK.

As well as charitable work there is also awide variety of community-orientatedactivities. DNE has again been nominatedfor the Governor’s Prevention PartnershipCorporate Honor Roll in Connecticutthrough its participation in a mentoringprogramme at a local school. Elsewhere,Audiopack sponsored an annual river clean-up day. Fifteen employees from USSIsupported a project called “Exchange City”where 5th and 6th grade school childrentook part in an interactive simulation thatwill hopefully spur their interest to pursue acareer in engineering. In addition, manybusinesses hold annual family days.



CommunityMany Ultra businesses support local charities and provide trainingopportunities.

UltraNews is published twicea year for all employees

Customer relationships areextremely important and areactively managed

Health, Safety andEnvironmental managementis taken seriously at Ultra


Board of Directors

THE BOARD OF ULTRA COMPRISES INDIVIDUALS WITH THEBREADTH AND DEPTH OF EXPERIENCE NECESSARY TO STEERTHE CONTINUED PROGRESS OF THE GROUP.

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0801 Julian Blogh CBE PhD CEng MIEE

02 Douglas Caster BSc MIEE

03 Chris Bailey* FCA MCT

04 Ian Griffiths* BSc

05 Andrew Hamment BA FRAeS

06 Frank Hope PhD CPhys MInstP

07 David Jeffcoat BA FCMA

08 Andrew Walker* MA CEngDa


*Audit and Remuneration Committee members

01 Julian Blogh CBE PhD CEng MIEE

Chairman, age 62, has spent most of hisworking life in the electronics industry workingwith Ferranti Radar, Plessey Radar and DowtyElectronic Systems. He was Managing Directorof Sonar & Communication Systems from1987 to 1992, when he was appointedManaging Director of Dowty Avionics. He ledthe management buy-out of seven Dowtydefence and aerospace electronics businessesfrom the TI Group to form Ultra Electronicsand became Chief Executive when it begantrading in October 1993. Dr Blogh was alsoappointed Deputy Chairman in April 2004and became Chairman in April 2005.

02 Douglas Caster BSc MIEE

Chief Executive, age 52, started as a DesignEngineer with Racal in 1975, before movingto Schlumberger and then to Dowty asEngineering Director of Sonar &Communication Systems in 1988. In 1992, hebecame Managing Director of that businessand joined the Board of Ultra when it begantrading in October 1993. In 1999 he becameManaging Director of Command & ControlSystems with responsibility for Manufacturing& Card Systems, PMES, and ATS. In April2000, he was promoted to the position ofManaging Director of the Information &Power Systems division. In April 2004 he wasappointed Chief Operating Officer andbecame Chief Executive in April 2005.

03 Chris Bailey* FCA MCT

Non-Executive Director, age 59, wasappointed to the Board in January 2005. Mr Bailey retired from his role of GroupFinance Director of Aggregate Industries plcin 2004. He was the Finance Director of theprecursor companies of Aggregate Industriesfrom 1984 until its formation in 1997. He isa Fellow of the Institute of CharteredAccountants of England & Wales and is alsoa Member of the Association of CorporateTreasurers. Mr Bailey is also a Non-ExecutiveDirector of Rok property solutions plc.

04 Ian Griffiths* BSc

Non-Executive Director, age 55, wasappointed to the Board in April 2003. UntilFebruary 2006, he was a main boardexecutive director of GKN plc, where he wasGroup Managing Director GKN Automotive.Mr Griffiths was responsible for all of GKN’sautomotive activities world wide. Prior to thishe was Chief Executive of GKN Driveline andhad been a member of the GKN Drivelinesenior management team since 1990. InFebruary 2006, Mr Griffiths becameManaging Director, Royal Mail Letters.

05 Andy Hamment BA FRAeS

Group Marketing Director, age 51, started hiscareer with Hawker Siddeley before moving toSchlumberger in 1980, working inprocurement and then marketing at WestonAerospace before transferring to Solartron asAerospace Business Manager. He joinedDowty in 1988 as Managing Director of theControls business. He was appointed to hiscurrent position in July 2000 and joined theBoard at that time.

06 Frank Hope PhD CPhys MInstP

Managing Director, Information & PowerSystems, age 51, started his career withTecalemit as a design engineer working onrobotics. He spent 13 years with AvimoLimited latterly as Managing Director, havingpreviously held the positions of TechnicalDirector and Operations Director. He joinedUltra in 1994 as Managing Director of theElectrics business. Dr Hope was appointed tothe Board of Ultra in January 1999 and inApril 2000 became Managing Director ofAircraft & Vehicle Systems. He was appointedto his current position in April 2004.

07 David Jeffcoat BA FCMA

Finance Director and Company Secretary, age 55, started his career as a productionengineer in the car industry. Since qualifying as an accountant he has held senior financialpositions in several large corporationsincluding GlaxoWellcome plc, where he wasFinance Director of two subsidiaries. Beforejoining Ultra he was Group Financial Controllerof Smiths Industries plc for three years. He was appointed to the Board in July 2000.

08 Andrew Walker* MA CEng

Senior Non-Executive Director, age 54, wasappointed to the Board in June 1996. He isChairman of both the Audit andRemuneration Committees. Joining theDowty Group plc in 1978, he became anoperating board member in 1991. FollowingTI Group’s acquisition of Dowty, he becameManaging Director of John Crane PolymerEngineering. He was Chief Executive of SouthWales Electricity plc (SWALEC) from 1993 to1996, and was Chief Executive of McKechnieplc from 1997 to 2001. Mr Walker is also aNon-Executive Director of Halma plc, APIGroup plc, Manganese Bronze Holdings plc,Porvair plc, Delta plc, Fountains plc and isChairman of Bioganix Ltd.


delivering growth


Executives and Advisors

Executive Team members

Douglas Caster, Chief Executive

David Jeffcoat, Group Finance Director & Company Secretary

Andy Hamment, Group Marketing Director

Frank Hope, Managing Director, Information & Power Systems

Alan Jan-Janin, Managing Director, Aircraft & Vehicle Systems

Rakesh Sharma, Managing Director, Tactical & Sonar Systems

Keith Thomson, Group Human Resources Director

Colin Ross,Managing Director,Controls

Business MDs & PresidentsJon Adams, President, Audiopack

Bill Gill, President, DNE Technologies

Carlos Santiago, President, Flightline Systems

Doug Burd, President, Maritime Systems

Rick Kielmeyer, President, Ocean Systems

Phil Evans, Managing Director, Sonar & Communication Systems

Alan Barker, President, Tactical Communication Systems

Roland Fritts, President, UnderSea Sensor Systems Inc.

Colin Ross, Managing Director, Controls

Ross Parsell, Managing Director, Datel

Mark Doyle, Managing Director, Electrics

Ken Tasch, President, Measurement Systems Inc.

Paul Benson, Managing Director, Precision Air Systems(Andy Yates, Managing Director from May 2006)

Graeme Stacey, Managing Director, Airport Systems

John McAlonan, President, Advanced Tactical Systems

Paul Summers, Managing Director, Command & Control Systems

Jim Rowland, President, EMS

Ray Coles, Managing Director, Manufacturing & Card Systems

Andy Freer, Managing Director, PMES

Dave Cheadle,Managing Director, SML(Mike Clayton, Managing Director from January 2006)

External AuditorsDeloitte & Touche LLPHill House1 Little New Street London EC4A 3TR

Principal BankersThe Royal Bank of Scotland plc135 Bishopsgate London EC2 3UR

SolicitorsClifford Chance LLP10 Upper Bank StreetCanary WharfLondon E14 5JJ

Osborne Clarke2 Temple Back East Temple Quay Bristol BS1 6EG

Merchant BankersCitigroup Global Markets LimitedCitigroup Centre 33 Canada SquareCanary Wharf London E14 5LB

StockbrokersJPMorgan Cazenove Limited20 Moorgate London EC2R 6DA

RegistrarsLloyds TSB RegistrarsThe Causeway Worthing West Sussex BN99 6DA


Audiopack4933 Neo ParkwayGarfield HeightsOhio OH 44128-3103USATel: +1 216 332 7040 Fax: +1 216 332 7046

DNE Technologies50 Barnes Park NorthWallingfordConnecticut 06492-5912USATel: +1 203 265 7151 Fax: +1 203 265 9101

Flightline Systems7625 Omnitech PlaceVictorNew York 14564-9795USATel: +1 585 924 4000 Fax: +1 585 924 5732

Maritime Systems40 Atlantic StreetDartmouthNova Scotia B2Y4N2CanadaTel: +1 902 466 7491 Fax: +1 902 463 6098

Sonar & Communication Systems419 Bridport RoadGreenfordMiddlesex UB6 8UAEnglandTel: +44 (0) 20 8813 4567 Fax: +44 (0) 20 8813 4568

Tactical Communication Systems600 Dr Frederik Philips Boulevard Ville Saint-LaurentQuebec H4M2S9CanadaTel: +1 514 855 6363 Fax: +1 514 855 6353

Ocean Systems115 Bay State DriveBraintreeMassachusetts 02184-5203USATel: +1 781 848 3400Fax: +1 781 843 2153

UnderSea Sensor Systems Inc.4578 East Park 30 Drive Columbia CityIndiana 46725-8869USATel: +1 260 248 3500 Fax: +1 260 248 3510


Controls417 Bridport RoadGreenfordMiddlesex UB6 8UEEnglandTel: +44 (0) 20 8813 4444 Fax: +44 (0) 20 8813 4351

Datel1 Chain Caul WayAshton-on-Ribble PrestonLancashire PR2 2YLEnglandTel: +44 (0) 1772 325200 Fax: +44 (0) 1772 325201

ElectricsKingsditch LaneCheltenhamGloucestershire GL51 9PGEnglandTel: +44 (0) 1242 221166 Fax: +44 (0) 1242 221167

Measurement Systems Inc.777 Commerce DriveFairfieldConnecticut 06432USATel: +1 203 336 4590Fax: +1 203 336 5945

(from March 2006:50 Barnes Park NorthSuite 102WallingfordConnecticut 06492USATel: +1 203 949 3500Fax: +1 203 949 3598)

Precision Air SystemsAnson Business ParkCheltenham Road EastGloucester GL2 9QNEnglandTel: +44 (0) 1452 714382 Fax: +44 (0) 1452 715252


Advanced Tactical Systems 3300 Duval Road, Suite 200AustinTexas 78759USATel: +1 512 327 6795 Fax: +1 512 327 8043

Airport SystemsThe OaksCrewe RoadWythenshaweManchester M23 9SSEnglandTel: +44 (0) 161 946 3600 Fax: +44 (0) 161 946 3601

Command & Control SystemsKnaves Beech Business Centre LoudwaterHigh Wycombe Buckinghamshire HP10 9UTEnglandTel: +44 (0) 1628 530000 Fax: +44 (0) 1628 524557

EMS95 Horseblock RoadPO Box 640 YaphankNew York 11980USATel: +1 631 345 6200 Fax: +1 631 345 6216

Manufacturing & Card SystemsWaverley HouseHampshire RoadGranby EstateWeymouthDorset DT4 9XDEnglandTel: +44 (0) 1305 784738 Fax: +44 (0) 1305 777904

PMESArmitage RoadRugeleyStaffordshire WS15 1DREnglandTel: +44 (0) 1889 503300 Fax: +44 (0) 1889 572929

SML Technologies316 Botley RoadBurridgeSouthamptonHampshire SO31 1BQEnglandTel: +44 (0) 1489 557373 Fax: +44 (0) 1489 557374

PHOTOGRAPHYMain Board: Molyneux AssociatesPlatforms/end applications courtesy of: Airbus, BAA,BAE Systems, Boeing, Bombardier Aerospace, US DoD.

Business addresses

Registered Office:Ultra Electronics Holdings plc417 Bridport RoadGreenfordMiddlesex UB6 8UAEnglandTel: +44 (0) 20 8813 4321Fax: +44 (0) 20 8813 [email protected] D

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delivering growth - Ultra Electronics · 2015-05-12 · 2005 2004 Growth Revenue (£m) 342.4 310.7 +10% Operating proﬁt (£m)1 51.1 43.3 +18% Proﬁt before taxation (£m)2 47.4