("Ultra" or "the Group")

• Record levels of sales and profit

• Surface Ship Torpedo Defence, worth a potential £54m
• Type 45 Bow Sonar, worth £20m
• Systems integration for London Heathrow Terminal 5, worth up to £30m

Dr Julian Blogh, Chief Executive, commented:

"Ultra is recognised as a world class aerospace and defence company. This was reflected in the type, size and geographical spread of the contracts secured by the Group this year.

The outlook for the Group’s defence business is strong, particularly in the US, where double-digit growth in the defence budget is forecast for 2002 and 2003. With 25% of Ultra’s sales in this market, the Group stands to benefit from the expansion. Recent excellent programme wins in the UK will also contribute to Ultra’s growth and more than compensate for the civil aerospace weakness. The Group’s businesses are well positioned to benefit from any upturn in this market. With a strong order book coupled with recent contract selections, the Board is confident about prospects for growth in 2002 and beyond."

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Ultra Electronics Holdings plc (25.02.02) 020 7950 2800

Dr Julian Blogh, Chief Executive Thereafter 020 8813 4321

Susan Ellis or Susanne Walker

Ultra Electronics Holdings plc is a Group of specialist businesses designing, manufacturing and supporting electronic and electromechanical systems, sub-systems and products for international defence and aerospace markets. The Group, which employs 2,400 people in the UK and North America, focuses on high integrity sensing, control, communication and display systems with an emphasis on integrated Information Technology solutions.

The Group concentrates on obtaining a technological edge in niche markets, with many of its products and technologies being market leaders in their field. Ultra has an increasing role of supporting prime contractors by undertaking specialist system and sub-system integration using the combined expertise of the Group businesses.

Embargoed until 7.00am 25 February 2002

("Ultra" or "the Group")

2001 was another year of growth with record levels of both sales and profits, reflecting the continuing success of the Group’s strategy of developing niche technologies and of making targeted acquisitions.

Ultra is recognised as a world class aerospace and defence company and this was reflected in the type, size and geographic spread of contracts secured by the Group in 2001. These excellent results, during a difficult time for the electronics and aerospace industries, are testimony to the Group’s ability to deliver market-leading solutions to its customers.

The Group’s civil aerospace business, which accounts for 16% of Ultra’s sales, was affected by the impact of terrorism in North America through the widely reported downturn in demand for aircraft and, in particular, by the impact on the profitable spares and repairs market. However, Ultra has had notable contract successes in the defence market that have counterbalanced this effect. Success on a number of these contracts has been achieved by the strong combination of Ultra businesses working together to meet the customers’ requirements.

2001 was also a year of consolidation for Ultra as the Group digested its large acquisitions of the two previous years. These acquisitions are trading profitably and have contributed to the improvement in cash flow.

Sales increased by 5.6% in the year to a record £239.5m (2000: £226.9m). Increased demand for Battlespace IT products, continuing strong growth in HiPPAG sales and successes in the naval sector were the main drivers for this growth. However, these increases were somewhat offset by the downturn in civil aerospace activity. As this weakness is expected to continue into 2002, some restructuring of the affected businesses took place in the latter part of 2001.

Underlying organic growth was 3.2% and there was an additional contribution from the DF Group, acquired in April 2000. There were no acquisitions in 2001. Operating profit before goodwill amortisation was 4.5% higher at £31.7m (2000: £30.3m), representing an operating margin of 13.2% (2000: 13.4%). Profit before tax and amortisation of goodwill grew by 5.6% to £27.1m (2000: £25.6m). After a small increase in the effective tax rate, EPS increased to 30.1p in 2001 from 29.0p last year.

A feature of the year was the very strong cash performance of the Group. Headline operating cash flow was £39.3m, compared to £19.8m in 2000, and net debt at the year-end fell to £40.6m (2000: £55.9m). This leaves the Group well positioned, with a strengthened balance sheet, to take advantage of future acquisition opportunities as they arise.

At the year-end the Group order book was up 15% to £315m (2000: £275m), with Ultra selected for further significant defence programmes in early 2002.

The proposed final dividend is 7.0p, bringing the total dividend for the year to 10.4p (2000: 9.7p). This represents an annual increase of 7.2% and reflects the Board’s confidence in Ultra’s future prospects. The dividend is covered 2.9 times by earnings per share before amortisation. If approved, the dividend will be paid on 7 May 2002 to shareholders on the register on 2 April 2002.

Air and Land Systems continued to perform strongly during the year. Sales increased by 4.3% to £165.1m (2000: £158.3m) and operating profit before goodwill amortisation was 8.8% higher at £24.1m (2000: £22.1m), equivalent to an operating margin of 14.6% (2000: 14.0%).

Key contributors to this performance included the Group’s world-leading Anti-Submarine Warfare (ASW) products and HiPPAG, as well as a full year’s contribution from Datel Defence Ltd, acquired in April 2000.

Throughout 2001, Ultra was highly successful at working with customers to win business on new platforms and for additional equipment on existing programmes. In the year, contracts for the supply of additional components took the total value of Ultra equipment on each Eurofighter Typhoon over £200,000.

In November 2001, Ultra was selected for the Surface Ship Torpedo Defence (SSTD) system for the Royal Navy. In order to safeguard the 2004 in-service date while the MoD reassesses its operating commitments, an initial contract was received in 2001 with most of the balance to a total of £54m expected in 2002, subject to the programme being re-endorsed.

Since the year-end, the Group has also been selected to supply the bow-mounted Medium Frequency Sonar (MFS) for the Type 45 destroyer. The initial contract will be for the equipment for the first six ships, worth approximately £20m. The bow-mounted MFS will provide the Type 45 with the capability to detect submarine and mine threats.

In line with the Group’s strategy to focus on mobile and intelligent systems, Ultra has been selected to supply the indirect vision system and databus for the Engineer Tank System being developed by Vickers Defence Systems for the UK MoD. This system helps to ensure that the crew maintains full visual awareness at all times.

During the year, Ultra’s Weapons Systems division was identified by Lockheed Martin as the supplier of High Pressure Pure Air Generators (HiPPAGs) for the exciting F35 Joint Strike Fighter programme.

Ultra is an acknowledged market leader in a number of different market niches within airborne ASW. Most notably, Ultra is the world leader in the supply of sonobuoys, the sensors for the systems that detect and track submarines acoustically. Ultra has maintained market share in its main markets and has increased its penetration of export markets. In 2001, the Group won orders for sonobuoys from Australia, Canada, France, Italy, Germany, Greece, South Korea, Norway, Poland, Spain, UK and the USA.

The division’s order book at the year-end was £238m, up 15.5% on the year before.

Sales in Information and Sea Systems grew by 8.5% to £74.4m in 2001 (2000: £68.6m) and underlying sales growth was 5.6% after eliminating the additional contribution from Ferranti Air Systems. This return to positive growth is in line with Ultra’s previous predictions and reflects increasing activity on a range of naval contracts.

There was a reduction in operating profit before goodwill amortisation for this division, mainly due to relatively low profit margins on long-term naval programmes, reflecting the Group’s prudent accounting policy in the early stages of such contracts. In addition, Ferranti Air Systems experienced lower demand for its airport systems during the year, reflecting the current uncertainty in the civil aviation sector. As a result of these factors the divisional operating margin was lower at 10.3% (2000: 12.0%) and operating profit before goodwill amortisation was £7.6m (2000: £8.2m).

In line with Ultra’s strategy, a feature of the success of Information and Sea Systems in 2001 was the international nature of much of the business won.

Ultra secured a contract in the year to supply DCNi, the French naval organisation, with a fully integrated ship’s navigation data distribution system for a class of frigates being built for a Far Eastern navy. Ultra was also successful in the year in winning contracts with Lurssen in Germany to supply the data distribution system for six Turkish Navy minehunter vessels. Other international successes in 2001 included a contract for de-gaussing equipment for the South Korean Yang Yang minesweeper vessels and continued delivery of command system equipment for the KDX class of destroyer in Korea through BAE Systems.

This successful strategy is also reflected in Ultra’s selection in 2001 by Ericsson to supply consoles, initially for a domestic Swedish requirement and secondly for an ultimate sale to France. EADS in Germany selected Ultra to supply key elements of the combat management system for the Finnish Squadron 2000 and further work was secured on the US Virginia class of submarine.

In the UK, Ultra was successful in winning contracts for the UK Type 45 destroyer and on the UK Astute class of submarine.

Order intake remained strong and the closing order book was 13% higher at £77m.

Defence expenditure in the US is budgeted to rise by 12% in 2002, with a further similar increase planned for 2003. With 25% of Ultra’s sales in the US defence market, the Group stands to benefit from this expansion. Defence expenditure is also planned to grow in our other major markets in the coming years, with particular emphasis on electronics in command and control and highly mobile platforms, including naval vessels, light armoured vehicles and aircraft. Ultra has focused on these areas and is well placed to see this major part of its business continue to grow at its historic rate. In addition, Ultra is already securing more business in the Battlespace IT arena as a result of the increased global terrorist threat.

Major defence opportunities in the UK include:

• Surface Ship Torpedo Defence contract
• Active Search Sonobuoy System
• Control electronics for the UK’s submarine fleet.

High potential programmes in the US include HiPPAG contracts for:

• US Small Diameter Bomb programme
• F35 Joint Strike Fighter programme.

Although a smaller part of the Group, Ultra’s civil aerospace business will see an overall decline in sales and profits in 2002, following the September terrorist activity. However, opportunities in the civil field include the systems integration project for Heathrow’s Terminal 5 announced today, worth up to £30m. Ultra’s new Magicard printers are showing excellent acceptance by the market and the Group is also seeing good demand for its electrical power equipment in the light and mainline rail markets.

The medium term outlook is for good growth in defence markets and for some recovery in the civil market. The Group’s businesses are well positioned to benefit from any upturn in the aerospace market. The major new programmes won in early 2002, the exciting military and civil prospects and the strong order book combine to give the Board confidence in the prospects for growth in 2002 and beyond. With many of the contracts won representing the early stages of large, high value programmes, the Group is well positioned for the coming years.

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Ultra Electronics Holdings plc (25.02.02) 020 7950 2800

Dr Julian Blogh, Chief Executive Thereafter 020 8813 4321

Susan Ellis or Susanne Walker

Consolidated Profit and Loss Account

Consolidated statement of total recognised gains and losses

Reconciliation of operating profit to operating cash flow

1. Cash flow from operating activities is stated after capital expenditure and financial investments.
2. Headline earnings per share are calculated before goodwill amortisation and earnings dilution.

6. The consolidated financial information has been prepared on a basis consistent with the consolidated accounts for the year ended 30 December 2000.
7. The financial information set out above does not comprise the Company’s statutory accounts. Statutory accounts for the previous financial year ended 30 December 2000 have been delivered to the Registrar of Companies. The accounts for the year ended 31 December 2001 have not been delivered to the Registrar of Companies.
8. Copies of the annual report will be sent to shareholders in due course and will also be available from the Company’s registered office at 417 Bridport Road, Greenford, Middlesex, UB6 8UA.