Ultra Electronics Airport Systems News - July 11, 2009

Ultra acquires Australian business

Ultra announces the acquisition of Avalon Systems Pty Ltd (‘Avalon’), based in Adelaide, South Australia.

Avalon specialises in the field of Electronic Warfare (EW), undertaking the design and manufacture of EW sub-systems and providing engineering consultancy services and through-life support. Its business is for the Australian Defence Force (‘ADF’), either directly through contracts with the Commonwealth of Australia or indirectly as a subcontractor to prime contractors to the ADF. Avalon currently has contracts to supply equipment to all three services, Army, Navy and Air Force, as well as to the Defence Science & Technology Organisation (DSTO).

Ultra will pay a cash consideration on a debt and cash fee basis of A$16.5m. Since its foundation in 1995, Avalon has traded profitably with sales in the year to 30 June 2009 of about A$13m with an EBIT margin that will ensure that Avalon is accretive to Ultra’s earnings. The acquisition will be financed using Ultra’s existing banking facilities.

Avalon is based at Mawson Lakes Technology Park in Adelaide. The business employs 22 people, of which 19 are professionals with tertiary qualifications in systems, electronics and computer engineering. Ultra is acquiring Avalon from its three directors and their respective partners. These founding directors will remain with the business under Ultra.

Ultra announced in November 2008 its receipt of a contract worth over £34m for the supply of three integrated sonar systems for the Air Warfare Destroyers (AWDs), which will be built in Adelaide. Ultra has committed to execute 50% of its contract value in Australia and the Group’s team in Australia working on the design, build and support of the sonar systems will be based at the Avalon site. To allow for the planned expansion of Ultra’s presence in Adelaide, the Group is also purchasing the plot of land adjacent to Avalon.

Ultra will exploit Avalon’s differentiated technologies outside Australia. Avalon will also serve as a base from which Ultra will address not only the domestic Australian defence and security market but also other fast growing markets in the Asia Pacific area.

Avalon will be the main trading entity of Ultra Electronics Australia Pty, the Managing Director of which is Doug Burd. He has twenty years experience with Ultra, is a sonar specialist and, before relocating to Adelaide, was President of Ultra’s Maritime Systems business in Canada. Ultra Electronics Australia Pty is part of the Group’s Tactical & Sonar Systems division.

Douglas Caster, Chief Executive of Ultra, commented:

“I am pleased to bring Avalon into the Group as Ultra’s first acquisition in Australia. It supports the Group’s growth strategy by positioning Ultra in the Asia Pacific region. Avalon is a high quality business with significant potential for further development in its own right. It also provides the support infrastructure for Ultra’s sonar team working on the integrated solution for the AWDs.”