UPDATE: Ultra Electronics Ups Dividend As Orders Rise

2nd Aug 2010 11:30

(Adds executive and analyst comment and detail.) By Jason Douglas Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Defense electronics company Ultra Electronics Holdings PLC (ULE.LN) Monday raised its dividend 10% and said it is confident about its prospects because governments are spending a higher proportion of tight defense budgets kitting out their armed forces with sophisticated electronics and tackling threats like cyber-terrorism. Ultra said its order book was 8% higher on year at June 30 at GBP832 million and orders are still coming in. Douglas Caster, Chief Executive, told reporters U.S. President Barack Obama has requested lawmakers back a proposed 3% increase in defense spending as well as additional funds to fight the wars in Afghanistan and Iraq. "The focus of expenditure is on improving information superiority, command and control, unmanned sensors and systems, communications and cyber-warfare. These are all areas where Ultra has strong market positions," Ultra said. Caster added areas like these represent a market worth roughly $180 billion, leaving Ultra with plenty of room to grow. In the U.K., which represents just 12% of Ultra's revenue, cuts to defense budgets mean existing armaments like submarines and warships will more likely be upgraded with new electronics rather than replaced. Caster said Ultra is also benefiting from rising spending on defense in the Middle East, Turkey and Australia. Analysts at Investec said Ultra is one of the few defense companies they are confident can sustain growth. At 1023 GMT, shares in Ultra were 12 pence or 0.7% higher at 1,626 pence, underperforming a 1.6% higher FTSE 250 index. Greenford, England-based Ultra reported a pretax profit of GBP35.7 million for the six months to June 30, compared with a profit of GBP62.9 million a year earlier. Revenue increased 7.8% to GBP350.9 million. Higher revenue from the company's information and power systems unit and its tactical and sonar systems business offset lower revenue at its aircraft and vehicle systems division. Earnings were weighed down by amortization charges following an acquisition. The previous year's earnings including GBP48.4 million of gains from derivatives. Excluding these and some other items, pretax profit increased 18% to GBP47.6 million from GBP40.2 million a year earlier, Ultra said. Caster told reporters Ultra is on the hunt for acquisitions to boost earnings. It is seeking companies with niche technologies and would ideally spend between $50 million and $70 million on a deal, he said. -By Jason Douglas, Dow Jones Newswires; 44-20-7842-9272; [email protected] (MORE TO FOLLOW) Dow Jones Newswires August 02, 2010 06:30 ET (10:30 GMT)