Half Yearly Report

Embargoed until 0700 3 August 2015

Ultra Electronics Holdings plc

("Ultra" or "the Group")

Interim Results for the six months to 30 June 2015

FINANCIAL HIGHLIGHTS

· First half performance in line with our expectations

· Underlying operating margin(1) of 15.2%

· US & UK government market activity subdued, reflected in order intake in first half of £310m, giving a book to bill ratio of 0.93

· Investment to support future growth maintained

o 5.7% of revenue reinvested in R&D

o Announcement of acquisition of EPD for US$265m

· New initiatives launched in period

o Standardisation and Shared Services programme to create enduring savings of £20m pa

o New segment structure reinforces market facing organisation

· Interim dividend of 13.8p, an increase of 4.5%

· Performance will be more heavily weighted to second half as previously indicated

Rakesh Sharma, Chief Executive, commented:

"The Group's first half performance is in line with our expectations and reflects a generally lower level of activity across most parts of our government related business and the expected pause in normal business given the UK and US election cycles. The uncertainty surrounding the next US fiscal budget and the potential of a Continuing Resolution in relation to Government appropriations has continued to dampen US defence revenues. Further, recent challenges to the Patriot Act are impacting revenues from our US Sotech business and, as previously advised, working capital movements and the impact of the Oman contract termination are reducing cash conversion.

The full year performance is weighted to the second half of the year and is expected to remain in line with previous guidance of a stable 2015 performance. We enter the second half with a full-year order cover of 83%, consistent with the previous year. We continue to focus our efforts on securing further long-term contracts by offering the competitive, niche capability solutions required by customers, driven through our redefined market segment approach. Investment in leading edge technology, identifying strategic acquisitions and creating sound international partnerships remain integral to our approach. Internally, we have started our standardisation initiatives to optimise efficiencies in our businesses and processes. The Board acknowledges the short-term headwinds but judges that the actions being taken should enable the Group to achieve an improved performance from 2016."

(1) before Oman contract termination and liquidation related costs, amortisation of intangibles arising on acquisitions, impairment of goodwill and adjustments to deferred consideration net of acquisition related costs. IFRS operating profit was £17.6m (2014: £48.0m). See Note 4 for reconciliation.

(2) before Oman contract termination and liquidation related costs, amortisation of intangibles arising on acquisitions, impairment of goodwill, fair value movements on derivatives, unwinding of discount on provisions, defined benefit pension interest charges and adjustments to contingent consideration net of acquisition related costs and, in the case of underlying earnings per share, before related taxation. Basic EPS 11.9p (2014: 53.3p). See Note 10 for reconciliation.

* see notes on page 2

INTERIM MANAGEMENT REPORT

FINANCIAL RESULTS

For reporting in the former divisional format please see the appendix on page 30.

* see notes below:

underlying operating profit before Oman contract termination and liquidation related costs, amortisation of intangibles arising on acquisition, impairment of goodwill and adjustments to contingent consideration net of acquisition related costs.

organic growth (of revenue or profit) is the annual rate of increase in revenue or profit that was achieved, assuming that acquisitions made during the prior year were only included for the same proportion of the current year at constant currencies.

underlying operating margin is the underlying operating profit as a percentage of revenue.

finance charges exclude fair value movements on derivatives, defined benefit pension interest charges and discount on provisions.

underlying profit before tax before Oman contract termination and liquidation related costs, amortisation of intangibles arising on acquisition, impairment of goodwill, fair value movements on derivatives, unwinding of discount on provisions, defined benefit pension interest charges and adjustments to contingent consideration net of acquisition related costs. IFRS profit before tax was £14.8m (2014: £45.8m).

underlying tax is the tax charge on underlying profit before tax. The underlying tax rate is underlying tax expressed as a percentage of underlying profit before tax.

underlying operating cash flow is cash generated by operations and dividends from associates, less net capital expenditure, R&D and LTIP share purchases.

operating cash conversion is underlying operating cash flow as a percentage of underlying operating profit.

EBITDA is the statutory profit before tax for the rolling 12 months ended 30 June before finance costs, investment revenue, amortisation and depreciation, excluding impairments of goodwill, Oman contract termination and liquidation related costs and adjustments to contingent consideration net of acquisition related costs.

net debt comprises loans and overdrafts less cash and cash equivalents.

bank interest cover is the ratio of underlying operating profit to finance costs associated with borrowings.

Revenue in the period declined 2.7% to £331.7m (2014: £341.0m), reflecting a generally lower level of activity across most parts of government related business. Revenue decreased organically by 11.9%, primarily owing to the difficult US defence market, and the decline also included the 4.1% impact of the early termination of the Oman contract. Exchange rate movements increased revenue by 4.1%, while acquisitions contributed over 5%.

Underlying operating profit* was £50.4m (2014: £53.0m). Profit decreased organically by 11.5%, offset by a 2.5% contribution from acquisitions and 4.1% contribution from foreign exchange. The resulting underlying operating margin* was 15.2% (2014: 15.5%).

Underlying profit before tax* decreased to £47.4m (2014: £50.5m), after net financing charges* of £3.0m (2014: £2.5m).

The Group's underlying tax* rate in the period was 22.8% (2014: 23.8%) and the decrease in underlying earnings per share was 5.8% to 52.2p (2014: 55.4p).

Reported (IFRS) profit before tax was £14.8m (2014: £45.8m) and reflected the combined effects of the elements detailed below:

Operating cash conversion* was 31% (2014: 80%) with the operating cash flow* of £15.8m (2014: £42.4m) reflecting the expected Oman impact and other working capital movements. It is anticipated that cash conversion will improve towards more normal levels during the second half of the year. At the end of the period Ultra had net debt* of £149.9m (2014: £137.8m). The Group's balance sheet remains strong, with net debt/EBITDA* of 1.15x and net interest payable on borrowings covered around 17 times by underlying operating profit*.

Subsequent to the period end, Ultra's £100m revolving credit facility was amended to match the favourable interest pricing of our £200m facility, and was extended to expire in August 2019.

The deemed disposal of Ithra results in a non-cash, non-underlying IFRS accounting charge. It arises from the liquidation of the Ithra contract vehicle following the termination of the Oman contract.

The proposed interim dividend is 13.8p, an increase of 4.5%, with the dividend being covered 3.8 times (2014: 4.2 times) by underlying earnings per share. If approved, the dividend will be paid on 25 September 2015 to shareholders on the register on 28 August 2015.

The order book at the end of the period was £762.1m (2014: £876.8m). Excluding the removal of £92.5m of orders relating to the Oman Airport IT contract and the impact of exchange, the underlying reduction is 4%. New orders came from a range of market segments, providing a book to bill ratio for the period of 0.93. Order book cover for 2015 remains strong at 83%.

* see notes on page 2

Ultra continues to invest in new product and business development, sustaining spending at its customary high levels. Internal investment in the period was 5.7% of revenue at £18.8m (2014: £19.8m). Of this, £1.5m of investment was capitalised on specific long term programmes.

OPERATIONAL REVIEW

The three new divisions each comprise the following businesses:

Aerospace & Infrastructure

Revenue in Aerospace & Infrastructure decreased by 12% to £86.1m (2014: £98.2m) and underlying operating profit decreased by 15% to £12.9m (2014: £15.2m). The order book decreased by 31% to £243.1m (2014: £353.8m) largely reflecting the removal of the Oman Airport IT order.

The £12m reduction in revenue from the same period in the prior year primarily reflects the termination of the Oman contract. The general lower level of activity in government spending was reflected in a reduction in aftermarket sales and the timing of JSF controller deliveries. Further, pressures being experienced by EDF across the UK reactor fleet impacted revenue in our UK nuclear business. Against this, there were revenue contributions from the acquisitions of ICE Corporation and Lab Impex Systems in the prior year.

Following the securing of a number of new orders to develop products for the commercial aerospace sector, R&D investment increased in the period. However, there was a contribution from acquisitions and margin was also impacted by the termination of the Oman contract, on which no profit was recognised in the prior year. As a result the divisional margin was 15.0% (2014: 15.5%).

Highlights of activities in the period that will contribute to the division's future performance include:

· Development contracts for the landing gear control unit and nose steering wheel system on the MA700 aircraft

· An award to complete an IT upgrade at Orange County Airport, USA

· Completion of a fully self-sufficient test facility for supplying neutron flux detectors

Communications & Security

Revenue in Communications & Security increased by 5% to £103.2m (2014: £98.4m). Underlying operating profit increased by 6% to £14.2m (2014: £13.4m). The divisional margin was 13.8% (2014: 13.6%). The order book at the end of the period was reduced by 18% to £194.4m (2014: £236.6m).

Revenues benefited from the acquisition of Forensic Technology in the prior year, an increase in revenue from the ECU RP programme which is now in its production phase and an increase in security and surveillance sales. There was also a positive contribution from foreign exchange. The general slowdown in our US defence procurement, together with the loss of domestic revenues from our Sotech business largely offset these positive movements.

The reduction in the high-margin Sotech revenue, together with restructuring costs to address its market challenges, was offset by an increase in margin in our ECU RP programme as well as the benefits of prior year restructuring.

The order book decline reflected the reduction in US contract placement over the last twelve months and the trading of the ECU RP Crypto contract.

Highlights of activities in the period that will contribute to the division's future performance include:

· Continued support for Air Defense Systems Integrator (ADSI) software resulting in orders of $15m in June

· Recurring maintenance contracts from the Bureau of Alcohol, Tobacco, Firearms and Explosives for our law enforcement products

· Contract award for test equipment for an Ethiopian digital television service worth £6m

Maritime & Land

Revenue in Maritime & Land decreased slightly to £142.4m (2014: £144.4m). The division's underlying operating profit decreased by 5% to £23.3m (2014: £24.4m). The order book increased by 13% to £324.6m (2014: £286.4m).

This division continues to benefit from the 'pivot to the Pacific', with increased sales from our Australian and US maritime businesses. There was also a contribution from the prior year acquisition of 3 Phoenix as well as foreign exchange. Against this was the general impact of the lower level of activity on our defence businesses, together with a reduction in revenue owing to the phasing of milestones on the Fatahillah programme.

Margins at 16.4% (2014: 16.9%) were impacted by the release of some contract risk reserve in the prior year comparative, and the product mix within our sonobuoy businesses.

Highlights of activities in the period that will contribute to the division's future performance include:

· Award of an £18m contract from the MoD to supply sonobuoys for the Royal Navy's Merlin Maritime Patrol Helicopter

· Successful, collaborative partnership with Rolls Royce resulting in an £18m contract relating to the design and development of reactor control and cooling systems for Royal Navy submarines

· Contract worth AUD$11m from the Royal Australian Navy for Countermeasures

MARKET ENVIRONMENT

In the US, as elsewhere, there is growing recognition that the global security environment is as uncertain and unpredictable as at any time since the Cold War. Defence and security forces must expect to respond to numerous demands over several theatres simultaneously. While budget pressures and uncertainties remain, spending to preserve military advantage, deliver ISTAR¹ and support multiple, medium-scale access and intervention operations will receive priority. Otherwise resource will be applied to life extension and upgrade of existing equipment, as well as more comprehensive solutions. Increased global insecurity will improve demand for border security, critical infrastructure protection and cyber-security solutions, especially in vulnerable regions.

Aerospace (19% of 2015 H1 Group revenue) - In the large civil aircraft market record backlogs at Airbus and Boeing will generate Ultra revenue growth through developed positions on aircraft now delivering to market. Future development will see some consolidation of supply and increased competition from COMAC². The regional aircraft market is crowded and orders here will show more modest growth. Military aircraft will be dominated by the F-35 JSF programme and by medium size military transports, on which the Group is well established. The military rotorcraft market is declining but opportunities exist for specific capabilities such as HUMS³ and ice protection.

Infrastructure (3% of 2015 H1 Group revenue) - As airport passenger processing becomes increasingly commoditised and passenger self-management more common, there is a greater focus and demand for integrated systems and database management that covers the whole airport enterprise. DC rail substation and transformer upgrades in the UK offer Ultra opportunities but these electrification programmes are likely to be delayed.

Nuclear (6% of 2015 H1 Group revenue) - While funding difficulties have slowed the new-build, nuclear power plant programme in the West, Ultra's specialist sensors and design capability is well-positioned in this market and on the strong China build programme (56% of new construction). Life extension and extension of legacy safety justification of plants also plays well to the Group's nuclear capability strengths. Barriers to entry in this highly regulated market are high.

Communications (14% of 2015 H1 Group revenue) - In the UK and US the defence encryption markets have stalled with greater reliance on commercial solutions and fewer platforms. Opportunities remain in remote and automatic key-management. Tactical communications and data link demand is suppressed as UK and US land forces consolidate but export markets remain attractive for light, mobile, high-bandwidth, software-defined radios and tactical data link systems.

C2ISR (25% of 2015 H1 Group revenue) - The increased threat is driving demand for ISTAR, particularly unmanned and remote systems. There is a significant interest in border surveillance for long and remote land and maritime borders as well as for the protection of fixed critical infrastructures and utilities. Where legal constraints allow, Legal Intercept demand remains high against rapidly evolving commercial communications. Command & Control (C2) solutions require overlay with existing sensors and systems to compete effectively.

Underwater Warfare (25% of 2015 H1 Group revenue) - High global investment in modern, quiet conventional submarines is fuelling an increased demand for advanced Anti-Submarine Warfare (ASW) capabilities, including sonobuoys, torpedo defence and countermeasures, integrated, wide-area search capabilities, airborne ASW and shallow water systems for smaller vessels.

Maritime (5% of 2015 H1 Group revenue) - While the number of new maritime platforms is reducing and existing programmes are being stretched, long-term submarine programmes in the US and UK provide the Group with a sound revenue platform. Opportunities for small ship refits and capability upgrades in overseas markets are an increasingly attractive alternative source of orders.

¹STAR - Intelligence, Surveillance, Targeting and Reconnaissance

²Commercial Aircraft Corporation of China

³HUMS - Health Usage Monitoring Systems

Land (3% of 2015 H1 Group revenue) - Major new investments have been curtailed or cancelled as Army budgets have reduced. However, there is opportunity in upgrade and life extension programmes. The Group has developed a sound position in vehicle electrical architectures and power management, in both core and export markets.

RISKS AND UNCERTAINTIES

A number of potential risks and uncertainties exist which could have a material impact on the Group's performance in 2015 and beyond and which could cause actual results to differ materially from expected and historical levels. The directors do not consider that the principal risks and uncertainties have changed substantially since the publication of the Group's Annual Report for 2014. An explanation of the risks detailed below, and the robust business strategies that Ultra uses to manage and mitigate those risks and uncertainties, can be found in the annual report which is available for download at www.ultra-electronics.com/investors/annual-reports.aspx.

In the defence sector, which contributes around 60% of Ultra's revenue, there is continuing pressure on US and UK defence budgets. In the US, there is concern over the timing and feasibility of the proposed US DoD budget, which exceeds the Budget Control Act. It is anticipated that this will increase the time taken to agree and allocate funding to programmes and hence for it to flow down into contract action. Nevertheless, the overall size of defence budgets worldwide, relative to the Group's revenue, provides sufficient headroom to support Ultra's growth potential.

There is a risk of programme delays or cancellations but this has always been a feature of the Group's markets.

Movements in foreign currency exchange rates result in both transaction and translation effects on the Group's results. Ultra's projected net transaction exposure is mitigated by the use of forward hedging contracts. By their nature, currency translation risks cannot be mitigated.

Risks are identified, collated, assessed and managed at the most appropriate level of the business (Board, Executive or Business level). Risks are reviewed regularly to ensure judgments and assumptions are unchanged, that appropriate mitigations are in place and that emerging risks are captured. Key risks identified by the Board include:

· Cyber-attack

· Changing market environment

· Execution of major contracts

· Pensions

· Business Control (e.g. US Proxy Board)

· Currency fluctuations

· Major geopolitical crisis

· Sustaining product differentiation

· Material legal /regulatory breach

· Staff retention

CONFIRMATION OF GOING CONCERN

The Directors have considered the guidance issued by the Financial Reporting Council and hereby confirm that the Group continues to adopt the 'going concern' basis in preparing its accounts.

The Board has made appropriate enquiries to support this view, looking forward for a period of at least twelve months. Salient points taken into consideration were:

- the Group's long term record of delivering high quality profits

- the adequacy of Ultra's financing facilities

- Ultra's positions in growth sectors of its markets

- the long-term nature of Ultra's markets and contracts

- the Group's minimal exposure to trading denominated in the Euro

- the risks as discussed above

PERFORMANCE & PROSPECTS

The Group's first half performance is in line with our expectations and reflects a generally lower level of activity across most parts of our government related business and the expected pause in normal business given the UK and US election cycles. The uncertainty surrounding the next US fiscal budget and the potential of a Continuing Resolution in relation to Government appropriations has continued to dampen US defence revenues. Further, recent challenges to the Patriot Act are impacting revenues from our US Sotech business and as previously advised, working capital movements and the impact of the Oman contract termination are reducing cash conversion.

The full year performance is weighted to the second half of the year and is expected to remain in line with previous guidance of a stable 2015 performance. We enter the second half with a full-year order cover of 83%, consistent with the previous year. We continue to focus our efforts on securing further long-term contracts by offering the competitive, niche capability solutions required by customers, driven through our redefined market segment approach. Investment in leading edge technology, identifying strategic acquisitions and creating sound international partnerships remain integral to our approach. Internally, we have started our standardisation initiatives to optimise efficiencies in our businesses and processes. The Board acknowledges the short-term headwinds but judges that the actions being taken should enable the Group to achieve an improved performance from 2016.

- End -

Enquiries:

Ultra Electronics Holdings plc 020 8813 4307

Rakesh Sharma, Chief Executive www.ultra-electronics.com

Mary Waldner, Group Finance Director

Media:

Susan McErlain (Ellis), Corporate Affairs Adviser 07836 522722

James White, MHP Communications 020 3128 8756

NATURE OF ANNOUNCEMENT

This Interim Management Report ("IMR") has been prepared solely to provide additional information to enable shareholders to assess Ultra's strategies and the potential for those strategies to be fulfilled. It should not be relied upon by any other party or for any other purpose.

This IMR contains certain forward-looking statements. Such statements are made by the Directors in good faith based on the information available to them at the time of their approval of this report, and they should be treated with caution due to the inherent uncertainties underlying such forward-looking information.

This IMR has been prepared for the Group as a whole and therefore gives greatest emphasis to those matters which are significant to Ultra when viewed as a complete entity.

Further information about Ultra:

Ultra Electronics is a group of businesses which manage a portfolio of specialist capabilities, generating highly differentiated solutions and products in the defence & aerospace, security & cyber, transport and energy markets by applying electronic and software technologies in demanding and critical environments to meet customer needs.

Ultra has world-leading positions in many of its specialist capabilities and, as an independent, non-threatening partner, is able to support all of the main prime contractors in its sectors. As a result of such positioning, Ultra's systems, equipment or services are often mission or safety-critical to the successful operation of the platform to which they contribute. In turn, this mission-criticality secures Ultra's positions for the long term which underpins the superior financial performance of the Group.

Ultra offers support to its customers through the design, delivery and support phases of a programme. Ultra businesses have a high degree of operational autonomy where the local management teams are empowered to devise and implement competitive strategies that reflect their expertise in their specific niches. The Group has a small head office and executive team that provide to the individual businesses the same agile, responsive support that they provide to customers as well as formulating Ultra's overarching, corporate strategy.

Across the Group's three divisions, Ultra operates in the following eight market segments:

• Aerospace

• Communications

• C2ISR

• Infrastructure

• Land

• Maritime

• Nuclear

• Underwater Warfare

Ultra Electronics Holdings plc

Financial Highlights

for the half-year ended 30 June 2015

Ultra Electronics Holdings plc

Condensed Consolidated Income Statement

for the half-year ended 30 June 2015

All results are derived from continuing operations.

Ultra Electronics Holdings plc

Condensed Consolidated Cash Flow Statement

for the half-year ended 30 June 2015

Ultra Electronics Holdings plc

Notes to the Condensed Consolidated Interim Financial Statements

for the half-year ended 30 June 2015

1. General information

The information for the year ended 31 December 2014 does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report and did not contain statements under section 498 (2) or (3) of the Companies Act 2006.

These interim Financial Statements, which were approved by the Board of Directors on 31 July 2015, have not been audited or reviewed by the Auditor.

2. Accounting policies

The annual financial statements of Ultra Electronics Holdings plc are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. The condensed consolidated financial statements included in this half-yearly financial report have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with International Accounting Standard 34 'Interim Financial Reporting' as adopted by the European Union.

The same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the Group's latest annual audited financial statements, except as described below.

The following Standards and interpretations were adopted as at 1 January 2015:

· Annual Improvements to IFRSs: 2011-2013 Cycle

The implementation of these standards has not impacted the Group's financial position or performance.

3. Segment information

3. Segment information (continued)

^ A provision of £8,364,000 was released in 2014 relating to the GigaSat earn-out agreement for which the final 2014 target was not met. GigaSat is in the Communications & Security division.

3. Segment information (continued)

Unallocated assets represent deferred tax assets, derivatives at fair value and cash and cash equivalents.