Trading Statement - Nov. 2017

10 NOVEMBER 2017

Ultra, the international defence, security, transport and energy group, issues a Trading Statement ahead of its year end on 31 December 2017.

Current trading and outlook
The majority of the Group’s markets have been satisfactory, however the UK market has been difficult and has become increasingly so in the second half. There are mounting pressures in the funding of UK defence programmes and this has resulted in the UK MoD pausing, cancelling or delaying numerous programmes. Within the last few weeks a number of our UK orders budgeted for 2017 have been affected. Consequently, the Group now expects full year total revenue to be around £770m and organic revenue to show a decline of about 4%. 

In addition to the margin impact of the reduced revenue, the win by Herley of additional modules on the SEWIP programme has necessitated an increased investment requirement this year.  Based on an average 2017 US$/UK exchange rate of 1.285, underlying operating profit for the full year is expected to be approximately £120m. The Ithra legal costs are expected to be £8m for the full year and will be treated as non-underlying in nature.

Cash conversion is expected to be around 80%, with medium term cash conversion of between 80% and 85%.
The Board would currently be minded to recommend a final dividend of 35.0p per share and will finalise the dividend when it announces the full year results on 5 March 2018. 

Order Book
The Group has made good progress in the period in order intake, primarily reflecting an improving position in the US, the Group’s largest market. At the end of October, the order book for delivery in 2018 at constant currencies was over 20% higher than at the same date last year. This positions the Group well for entering 2018.

Key orders won in the second half that will help underpin 2018 revenues include:

  • Electric Propulsion system £37m
  • US Navy cyber security $16m
  • Airport Systems baggage management system £9m
  • HiPPAG stores contract $16m
  • ERAPSCO IDIQ one year option, potential of $220m for 50/50 JV with Sparton

IFRS 15 Revenue recognition
A detailed project has been undertaken to determine the impact of IFRS 15 had it been applied in 2016. The project has determined that 2016 consolidated group revenue would have been £1.6m higher at £787.4m and 2016 underlying operating profit would have been £0.2m lower at £130.9m if IFRS 15 had been applied. The Group will continue to analyse and assess the potential impact until the transition date and provide any further update as necessary.

Credit Facility
In early November the Group successfully refinanced its current revolving credit facilities into a new £300m facility, with improved terms, provided by a syndicate of six international banks. The facility has a committed maturity of five years to November 2022, and may be extended to a maximum of seven years.

Preliminary Results date
Ultra's results announcement for the year ending 31 December 2017 is scheduled for 5 March 2018.

The Group has also released an announcement today about a Directorate change.

Douglas Caster, Executive Chairman
+44 20 8813 4300

Amitabh Sharma, Group Finance Director
Susan McErlain, Corporate Affairs Director
+44 7836 522 722 MHP

James White
+44 20 3128 8756 

The person responsible for arranging the release of this announcement on behalf of the company is Amitabh Sharma, Group Finance Director.