The Financial Week Ahead – Standing on the front line.

Anti-submarine warfare and components on Eurofighter may be great successes for Ultra Electronics on the battlefield, but when the company’s full-years results come out next Monday, shareholders will be more interested in how Ultra has performed financially. Recent history of the Middlesex-based company has been littered with acquisitions and a drive to establish niche products, as well as dealing with tricky industry issues such as the drive for consolidation and the government’s smart procurement programme. Ultra emerged in 1992 after a management buy-out which preceded a series of acquisitions including Power Magnetics and Electronic Systems in November 1998 for £5.7m, and Advanced Programming Concepts Inc for £6m in July 1999. Buying in expertise has aided the company in its bid to serve niche markets and by the end of 1999 turnover stood at £159m. Specialising in highly sophisticated electronics, Ultra’s core product is the Sonoboy which, when dropped from aircraft into the sea, sends out sonic signals that detects submarines. The company estimates that it has captured 50-60% of the world market supplying both to the MoD and US armed forces. In addition the company’s share of 620 Eurofighters on order is estimated at around £100m. Finance director Ian Yeoman is also expected to unveil more good news. Pre-tax profits are predicted to have hit £26m, up on the last year’s £21.1m. But Ultra has to face two significant issues. Massive consolidation among big players in defence and the recent falls in share prices could have made the company an attractive target. The government’s Smart Procurement programme also means that they can no longer afford to deliver goods late. ‘Our view is that prime contractors will seek to do everything. They will still be looking to specialists like us to supply the type of equipment that goes into those platforms. ‘We have to be a very strong niche player and we have to have the right products that contractors need.’ He added: ‘When you are a plc you are always potentially a target. We haven’t failed to notice that share prices have come down recently and Ultra could be a target.’

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