Ultra may take legal action following cancellation of lucrative contract

DEFENCE sector supplier Ultra Electronics is considering taking legal action against Oman Airport’s owner following the sudden cancellation of a contract.

Following the announcement on January 23 that Ithra, Ultra’s JV company with the Oman Investment Corporation, had received a notice of termination of its Oman Airport IT contract, the contract was formally terminated on February 9.

In a statement today to the London Stock Exchange, Ultra – which has operations in Birmingham and Staffordshire – said: “Ithra is co-operating with the employer (the Omani Ministry of Transport and Communication) and the engineer (Hill International) to effect a formal handover of the contract to what has been termed a ‘completion contractor’, after which a settlement account will be produced by the employer.
 
“The substantive reasons given in the notice of termination are related to Ithra not meeting contractual milestones and Ithra’s assessment is that the termination is unjustified, wrongful and unlawful.

“Ultra is in discussions with its legal and claims advisers regarding the termination of the contract and recovery of Ithra’s costs and claims.”

Ultra said an exceptional, non-underlying, provision will be recognised in the year to December 2014 in respect of the contract. The provision, which totals £47m, includes the write off of contract balances, together with provision for all known liabilities.
 
Cumulative revenue recognised from the contract is £114m, with 2014 revenue limited to £12m recognised in the six months to June 2014.
 
Ultra says it has also reviewed its activities in the Middle East and while it continues to do business there and see good opportunities in the region, there may be some short-term impact.

As a result, it has decided to take a non-cash impairment of the outstanding goodwill on the Al Shaheen joint venture in the UAE totalling £7.4m.

Ultra is a minority shareholder in Al Shaheen, the JV partner being Emirates Advanced Investments (EAI).

Close