Ultra Electronics highlights revenue growth and better margins as trading continues as expected desp

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Ultra Electronics Holdings PLC (LON:ULE) has highlighted revenue growth and better than expected margins as trading continued “as expected” despite the ongoing coronavirus pandemic.

In a trading update for the nine months to September 30, the FTSE 250 defence and security firm said its order intake “remains strong” alongside good revenue growth and that its operating margins were slightly better than forecast due to lower indirect costs related to the pandemic, although these are expected to normalise in 2021 alongside further investment in the business.

The group’s facilities also remained open and productive with no significant disruption to demand or operational performance.

Meanwhile, the company said its cash conversion had “benefited strongly” from strong advance payments and reduced capital expenditure due to pandemic-related deferral of site investments.

Ultra also said its Focus; Fix; Grow programme is “progressing well” and it saw opportunities to accelerate the pace of its transformation investment in 2021.

“Whilst we expect the challenging conditions in commercial aerospace to continue into 2021, our core defence markets are robust, and we remain confident in Ultra’s ability to deliver exceptional value for all our stakeholders”, the firm concluded.

In a note on Monday, analysts at Peel Hunt reiterated their ‘buy’ rating and 2,400p target price on the company, saying there was “potential for decent margin progression in the medium term”.

“The balance sheet is robust and the new management team is well underway with the process of long-term cultural change, with positive effects already coming through”, the broker added.

Shares in Ultra Electronics rose 0.8% to 2,072p in early trading.

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