In a week that is clearly going to be dominated by full year 2020 results announcements it is pleasing to report that another highly significant specialist UK based company whose primary activities are based around design and manufacturing of highly specialist maritime engineering, intelligence and communications, critical detection and control products has, despite the unavoidable impact of C-19, continued to perform very well through a very difficult year.
Known as an important company name by most of us who engage around defence and security, although I may not have written on Ultra Electronics before suffice to say that although this is a company that has not only preferred to somewhat low profile and keep itself to itself it is also one that, within the confines of defence, aerospace, maritime, security, communications equipment internationally and also of being one that provides bespoke application-engineering solutions for customers own mission critical situations, no slouch in the important international markets that it serves.
As a major supplier to the MOD and other important government defence organisations such as the US Dept of Defense, the future for Ultra Electronics continues to look excellent.
With close to 5,000 employees based in the UK, US, Canada, Australia and Middle East and being one that engages in a number of classified areas such as cryptographic solutions, perhaps it is not that surprising that Ultra has long taken a somewhat low-profile approach. But that should not hide the fact that this is a very important and successful company and one that in my view has a great future.
London based and founded by Teddy Rosen as a manufacturer of high-quality headphones and loudspeakers under the name Edward E. Rosen & Co in 1920, the name was changed to Ultra Electrics in 1925.
During the 1930’s the company launched a range of radio receivers and later, during the second world-war, it was manufacturing a range of aircraft component for military aircraft. In the post war years Ultra started manufacturing domestic televisions sets but in 1961 and the Ultra business activities having by then been split into two divisions – consumers domestic products and electronics – the consumer division was sold to Thorn Electrical Industries. This led to current Ultra Electronics business being formally established.
However, fifteen years later in 1977, Ultra Electronics was acquired by the Dowty Group and fifteen years after that in 1992 and I have to say with great regret on my part, Dowty Group was itself to be acquired only to be subsequently wrecked and broken up by TI Group, then under the misguided and dangerous leadership of Chris Lewinton.
Thankfully in the case of Ultra however, TI Group dispose of virtually all of the Electronics Systems Division that Sir George Dowty had put together over many years to a management buy-out team led by Dr. Julian Blogh – this led to the formation of the second Ultra Electronics Ltd in 1993. Ultra Electronics Holdings PLC was floated on the London Stock Exchange in 1996.
It is interesting to conjecture here what might have occurred had Dowty chosen to go through with its planned ‘merger’ with Smiths Industries in the late 1980’s – a situation that I personally recall silently collapsed at the 99th hour shortly before the planned announcement date. Sadly, I rather suspect that as potentially being part of Smiths/Dowty aerospace division, had that merger been pursued to a final outcome, this would now be a part of GE who rather unfortunately and shall we say ‘pushed into’ for reasons that I will not go into here, acquired Smiths superb aerospace/aviation electronics business activities in 2007.
On the basis that the Smiths/Dowty merger fell through at the very last minute, we can at least be satisfied that what survives of Dowty Electronics and including Ultra Electronics back then, is within the Ultra Electronics plc today still to be considered as UK owned sovereign manufacturing capability.
As to FY2020 results themselves and looking to the future – Ultra says that it has started the current year with a record order book and that defence spending remained robust in its core ‘five-eyes’ markets. The company ended the year with an increased order book valued at £1.1bn and reported that order intake has continued to be strong in the first quarter of this year.
For the FY2020 year and helped by disposal of two none-core businesses, underlying pre-tax profits rose 8.7% to £114.5m and underlying operating profits increased by 7% to £126m. Importantly, margins also improved and on the back of excellent free cash flow of £99m Ultra’s net debt declined 45% to just £86m. A final dividend of 41.5p per share was declared.
FY2020 momentum was led by 12 per cent growth in the maritime division – this amidst stronger demand for sonar related products and sonobuoys – this more than offsetting some apparent weakness in ‘critical detection and control’ business and in which area of expertise Ultra said that commercial aerospace related orders had declined by close to a fifth.
CEO Simon Pryce said in the accompanying end year statement to shareholders that “We made good strategic progress and achieved our third consecutive year of strong organic growth and made good progress on our ONE Ultra transformation and, as a result, we delivered or exceeded most of our stakeholder objectives. These would have been excellent outcomes in any year, but that set against a background of pandemic-driven disruption and turmoil, it was an exceptional performance”.
CHW (London – 9th March 2021)
Howard Wheeldon FRAeS
Wheeldon Strategic Advisory Ltd,
M: +44 7710 779785