Ultra maintains full year stance despite H1 decline
DEFENCE supplier Ultra has maintained predictions of a stable full year performance despite a 2.7% decline in first half revenues and a 6% fall in pre-tax profits over the same period.
The group, which has operations in Birmingham and Staffordshire, said the second half would hopefully be more productive although it warned of lower activity levels by the major governments – UK and US – due to election cycles.
Revenue in the period declined to £331.7m (2014: £341.0m), which it said reflected 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 Airport IT contract. Exchange rate movements increased revenue by 4.1%, while acquisitions contributed over 5%.
Underlying operating profit was £50.4m (2014: £53m). 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 pre-tax profit decreased to £47.4m (2014: £50.5m), after net financing charges of £3m (2014: £2.5m).
Revenue in its Aerospace & Infrastructure division 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 reflected 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.
The group said volatility in the nuclear sector had also put pressure on this aspect of the business.
Rakesh Sharma, Ultra chief executive, said: “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.”
He said the board acknowledged the short-term headwinds but judged that the actions it had taken would enable the group to achieve an improved performance from 2016.
