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Preliminary Results for the year ending 31 December 2007
Dr Julian Blogh Chairman Douglas Caster Chief Executive David Jeffcoat Finance Director
Ultra Electronics Preliminary Results 2007
2007 Overview
Ultra Electronics Preliminary Results 2007
* before amortisation of intangibles arising on acquisition and profit/loss on financial instruments
Sales £m
20062005 2007
PBT* £m
20062005 2007
EPS* pence
20062005 2007
342.4377.0
412.9
54.9
47.4
50.7
58.4
61.1
65.4
• Another good year– revenue up 10%– PBT* up 11%– EPS* up 12%– DPS up 15%
• Margins maintained – investment to underpin medium-term growth– continuing currency impact
• 83% cash conversion• Four acquisitions made in 2007• Strong balance sheet• Order book of £621m provides good visibility
Ultra Electronics Preliminary Results 2007
Financial Review
Ultra Electronics Preliminary Results 2007
Profit & Loss
Ultra Electronics Preliminary Results 2007
£m 2007 2006 Growth
Revenue 412.9 377.0 +10%
Operating profit* 62.9 57.5 +9%
Operating margin* 15.2% 15.3% -
Profit before tax** 61.1 54.9 +11%
Earnings per share** 65.4p 58.4p +12%
Dividend per share 21.2p 18.5p +15%
* before amortisation of intangibles arising on acquisition** before amortisation of intangibles arising on acquisition and profit/loss on fair value movements on derivatives
Ultra Electronics Preliminary Results 2007
Revenue
Ultra Electronics Preliminary Results 2007
Civilequipment16%(2006: 15%)
Civil aircraftequipment9%(2006: 9%)
Defenceequipment12% (2006: 13%)
Military aircraftequipment10%(2006: 10%)
Battlespace IT32% (2006: 29%)
Sonar21%(2006: 24%)
UK42%(2006: 40%)
Mainland Europe10%(2006: 9%)
North America42%(2006: 43%)
ROW6%(2006: 8%)
SectorDestination
Ultra Electronics Preliminary Results 2007
Ultra Electronics Preliminary Results 2007
Profit Progression
2006 OP* £57.5m
Currency translation -£2.2m
Currency transaction -£1.7m
Higher R&D costs -£5.7m
Organic growth +£6.3m
Improved margins +£6.4m
Acquisitions +£2.3m
2007 OP* £62.9m
* before amortisation of intangibles arising on acquisition
Ultra Electronics Preliminary Results 2007
Ultra Electronics Preliminary Results 2007
Currency Effects
US$ into C$ -4% -£0.9mUS$ into £ -2% -£0.8m -8% -£2.0mC$ into £ -3% -£0.2m
Revenue translation impact -£16.1m (-4%)
Profit impact
Total profit impact -£3.9m (-6%)
Transaction TranslationN/A
N/A
US$38m @1.13 US$68
m @1.82
Ultra Electronics Preliminary Results 2007
Ultra Electronics Preliminary Results 2007
New Business Development Expenditure
Ultra funded £30.2m
(2006: £22.9m)
Balance sheet
P&L
Capitalised development
costs£8.4m
(2006: £5.2m)
R&D capitalised£4.1m
(2006: £3.8m)
Development costs amortised
£0.9m(2006: £2.2m)
P&L charge£27.0m
(2006: £21.3m)
R&D expensed£26.1m
(2006: £19.1m)
Customer funded £74.8m
(2006: £69.4m)
Cash£105.0m
(2006: £92.3m)
Ultra Electronics Preliminary Results 2007
Cash Flow
Ultra Electronics Preliminary Results 2007
* before amortisation of intangibles arising on acquisition
£m 2007 2006
Operating profit* 62.9 57.5
Capital expenditure less depreciation (2.8) 0.8
Net capitalised development costs (3.9) (2.0)
Working capital (6.0) 0.3
Other 2.0 (0.1)
Operating cash flow 52.2 56.5
Cash conversion
83%
98%
Net debt at year-end
14.2
7.2
Ultra Electronics Preliminary Results 2007
Operational Review
Ultra Electronics Preliminary Results 2007AIRCRAFT & VEHICLE SYSTEMS
Aircraft & Vehicle Systems OVERVIEW
24% of Group sales
26% of Group OP
Financial results
Revenue £100.0m +6% Profit £16.1m +22% Order book £181.6m +3%
Market trends• Buoyant civil aerospace market sector
– large backlogs and strong aftermarket
• Continuing military aircraft build commitment
– air superiority, ground attack and mobility
• Focus on improved armoured vehicles– new build and upgrades
• Satisfactory progress on five A400M development programmes
• Increased sales of HiPPAG airborne compressor
Business highlights• Investment in Boeing 787 systems continues
– flight-worthy equipment delivered
• Continuing development of JSF engine ice protection system
– selected for lift fan
Ultra Electronics Preliminary Results 2007AIRCRAFT & VEHICLE SYSTEMS
Atkins• Software for crisis and incident management
• Differentiated through ease of use• Sells to MoD and emergency services• Key element of harbour and border protection
• Bolt-in to Datel business
Aircraft & Vehicle SystemsACQUISITIONS
AIRCRAFT & VEHICLE SYSTEMS
BCF Designs• Aircraft electronic test equipment
– fuel quantity– data buses
• US Navy contract driving growth• Broad defence and commercial customer base
• Bolt-in to Electrics business
Ultra Electronics Preliminary Results 2007
Aircraft & Vehicle SystemsADVANCED SYSTEMS FOR ARMOURED VEHICLES
AIRCRAFT & VEHICLE SYSTEMSUltra Electronics Preliminary Results
2007
Indirect vision Electrical power management
Advanced remote control of weapons
Control panels
Ultra Electronics Preliminary Results 2007AIRCRAFT & VEHICLE SYSTEMS
Aircraft & Vehicle Systems SELECTED OPPORTUNITIES
• Engine inlet ice protection
• Ice protection– engine intake and lift fan
• HiPPAG for weapons ejection
• Indirect vision system• Electrical power management• HUMS capability
£25m+2009FRES armoured vehicle electronics
• Vessel control and monitoring
£20m2008/10Astute submarine platform management
• Electrical power management• Indirect vision system• Crew controls
£15m+2008Armoured vehicle electronic upgrades
• Wing ice protection system• Proximity sensor electronics
$5m/$50m+
2008Boeing 787 production
$200m+2008Joint Strike Fighter
• HiPPAG for weapons ejection
$10m+ pa
2008HiPPAG for USAF multi-purpose bomb rack
ProductsEstimatedUltra value
Estimated date
Programme
Ultra Electronics Preliminary Results 2007
Information & Power Systems OVERVIEW
INFORMATION & POWER SYSTEMSUltra Electronics Preliminary Results
2007
31% of Group sales
31% of Group OP
Financial results
Revenue £126.6m +5%Profit £19.6m +2%Order book £133.6m +21%
Market trends• Battlespace IT demand is strong
• Increasing demand for power equipment– naval, transit and nuclear
• Continuing investment in airport IT systems
Business highlights• Contract for combat system for Trinidad & Tobago vessels
• Strong demand for trackside power equipment
• Production commitment for submarine nuclear reactor control and instrumentation
• Airport IT system contracts around the world
Ultra Electronics Preliminary Results 2007
Information & Power Systems ADVANCED AIRPORT IT SYSTEMS
INFORMATION & POWER SYSTEMSUltra Electronics Preliminary Results
2007
London Heathrow T5
Shanghai Pudong
Dublin
• Heathrow T5 success– excellent reference site
• International successes – IT integration– airport management– passenger processing– information processing– baggage processing
Cape Town
Ultra Electronics Preliminary Results 2007
Information & Power Systems SELECTED OPPORTUNITIES
INFORMATION & POWER SYSTEMSUltra Electronics Preliminary Results
2007
• IT integration• Passenger, information and baggage processing
£20m+ p.a.2008+Airport IT system upgrades and extensions
• Power equipment• Signature management• Reactor control equipment
£20m2008Astute boat 4
• Power equipment• Signature management• Electro-optic sensors
£15m+2008UK aircraft carriers
• Trackside power equipment
£20m2008/2011Olympics transport infrastructure upgrade
• Surveys of existing systems• Outline designs• Nucleonic sensors and cables
£20m+2008/9Civil nuclear equipment upgrades
• Naval nuclear reactor control system
£20m2008/9Rolls-Royce RC&I production
ProductsEstimatedUltra value
Estimated date
Programme
Ultra Electronics Preliminary Results 2007TACTICAL & SONAR SYSTEMS
Tactical & Sonar Systems OVERVIEW
TACTICAL & SONAR SYSTEMSUltra Electronics Preliminary Results
2007
45% of Group sales
43% of Group OP
Financial results
Revenue £186.3m +15%Profit £27.2m +9%Order book £305.8m +3%
Market trends• Increasing demand for battlespace IT equipment
• Focus on upgrading capabilities of existing platforms
• Increasing focus on improving ASW and torpedo defence
Business highlights• Development contract for enhanced ASW capability • Completed development of higher capacity tactical radio
• Deliveries of sea mine disposal system to Royal Navy• Won secure communications upgrade for UK Tornado aircraft
Ultra Electronics Preliminary Results 2007TACTICAL & SONAR SYSTEMS
Tactical & Sonar SystemsACQUISITIONS
TACTICAL & SONAR SYSTEMSUltra Electronics Preliminary Results
2007
Telemus• Small, specialist business• Electronic warfare and surveillance
– growing market sector
• Bolt-in to Tactical Communication Systems
Criticom• Secure and non-secure video conferencing• Embedded US high-grade encryption devices
• Broad defence and government sector customer base
• Bolt-on to Tactical & Sonar Systems
Ultra Electronics Preliminary Results 2007TACTICAL & SONAR SYSTEMS
Ultra Electronics Preliminary Results 2007
Tactical & Sonar SystemsWORLD LEADERS IN UNDERWATER BATTLESPACE NICHES
Innovative towed arrays for submarine and torpedo detection and defence
UUV for sea mine disposal
Ship bow sonar for submarine detection and obstacle avoidance
Advanced multi-static sonobuoy systems for airborne ASW
Expendable acoustic torpedo countermeasures
Systems to communicate with submarines at speed and depth
Ultra Electronics Preliminary Results 2007TACTICAL & SONAR SYSTEMSTACTICAL & SONAR SYSTEMS
Ultra Electronics Preliminary Results 2007
Tactical & Sonar Systems SELECTED OPPORTUNITIES
• Data link equipment
• Ground control stations£50m+2009Position on UK team complex
weapons
• Sonobuoy receivers$50m2008New sonobuoy receivers for P-3 and P-8 aircraft
• High capacity tactical radio systems
$20m+2008/9High capacity tactical radios – export
• Command and control system• Surveillance equipment• Contingency planning tools
$20m2008/9Harbour surveillance and security systems
• Torpedo detection
• Countermeasure system£10m+2009/10US and export torpedo defence
systems
• Bow sonar• Towed array• Networked sonobuoys
ProductsEstimatedUltra value
Estimated date
Programme
£20m+2008Sonar system for Australian Air Warfare Destroyer
Ultra Electronics Preliminary Results 2007
Maximising Long-Term Growth DUAL FOCUS – ORGANIC and ACQUISITION
Investing in programmes, processes and facilities:
• Boeing 787: $150k per aircraft• A400M: firm contracts for 192 aircraft
- total value to Ultra: £56m
• F-35 Lightning II JSF: $120k per aircraft• New facilities for Tactical Communication Systems, Datel and PMES
Investing in acquisitions: Criteria
– defence, aerospace or nuclear– related niche (new, adjacent)– widen geographic reach– value-enhancing
Bolt-ins- Videcom- Horizon- Polyflex- Winfrith- Telemus- BCF Designs- Atkins
Bolt-ons- SML- Ocean Systems- DNE Technologies- Audiopack- Criticom
Ultra Electronics Preliminary Results 2007
Summary & Outlook
Ultra Electronics Preliminary Results 2007
Summary & Outlook
• Good performance in 2007• Favourable market conditions
– large defence budgets with focus on enhancing capabilities– buoyant civil aerospace and airport IT markets
• Broad spread of niches and programmes gives financial resilience • Strong balance sheet, capable of funding further acquisitions• £621m order book gives good visibility• Growth to continue in 2008 and beyond
Preliminary Results for the year ending 31 December 2007