31 Dec 2017
31 Dec 2016
|Underlying operating profit*(1)
|Underlying profit before tax*(2)
|IFRS profit before tax
|Underlying basic earnings per share(2)
|Basic earnings per share
|Dividend per share - final
|Dividend per share - total
|Net debt to EBITDA
- Results in line with revised November 2017 guidance
- Continued strong operating cash performance with cash conversion of 97% (2016: 92%)
- Robust balance sheet with net debt of £74.5m at year end (2016: £256.7m)
- Sound operating margins of 15.5% (2016: 16.7%)
- Order intake strong, with momentum late in the year; 2018 opening order cover of 62% (2017: 56%)
- Sparton merger terminated; £134m share buy-back to be implemented
Douglas Caster, Executive Chairman, commented:
“2017 was a challenging year in the Group’s core defence markets and, as previously reported, Ultra experienced delays to a number of programmes and contracts relatively late in the year. Overall this contributed to the underlying operating profit decline of 8.4%. The Group continued its focus on managing costs and efficiencies within the businesses, which enabled sound operating margins to be achieved. The Group’s cash performance was strong, with a cash conversion of 97%, and follows a similar performance in 2016. Order intake in 2017 for delivery in future years was also strong, in part reflecting the expected upturn in the defence market cycle.
Ultra entered 2018 with good visibility. The Group had an opening order book of £914m⁺, which excludes over £1.5bn of expected mid-term orders from long-term positions, and an opening order cover on expected 2018 revenues of over 62%. As previously disclosed, the Board’s expectations remain for the Group to make modest progress in underlying revenue and operating profit at constant currencies in 2018 after investing for the future through increased R&D and capital expenditure.
The proposed merger with Sparton was initiated following Sparton’s decision to put itself up for sale in April 2016. We are disappointed with the outcome of the antitrust review that has led to Sparton’s and Ultra’s decision to mutually terminate the merger process. This decision means that the relationship between Ultra and Sparton continues for now as joint venture partners through the ERAPSCO JV. Ultra has supplied the US Navy with sonobuoys since the 1940s, whether through its predecessors, ERAPSCO or other affiliates. With our world-leading technology in sonobuoys, Ultra expects to continue to serve this important customer for years to come. Through the share buy-back announced today, we intend to return the net proceeds of the previous equity raise to shareholders, whilst preserving balance sheet strength.
Ultra has extensive intellectual property, strong market positions, differentiated technologies, talented people and a strong balance sheet. The Group’s core strengths include world-leading positions in many of its specialist capabilities. It has positions on many long-term platforms and programmes, significant exposure to the strengthening US defence budget, and growing demand for advanced defence technologies. This supports the Board’s confidence in the Group’s future.”
(1) before the S3 programme, amortisation of intangibles arising on acquisitions, impairment charges, adjustments to contingent consideration net of
acquisition and disposal related costs, and the Oman contract termination related costs. IFRS operating profit was £61.5m (2016: £89.7m). See Note 2 for reconciliation.
* Under the new revenue recognition standard IFRS 15 which is applied from 1 January 2018
(2) before the S3 programme, amortisation of intangibles arising on acquisitions, impairment charges, fair value movements on derivatives, unwinding of discount on provisions, defined benefit pension curtailment gain and interest charges, adjustments to contingent consideration net of acquisition and disposal related costs, the Oman contract termination related costs and, in the case of underlying earnings per share, before related taxation. Basic EPS 66.2p (2016: 82.8p). See Note 9 for reconciliation