Growing revenues give rise to optimism for defence supplier
Defence supplier Ultra has been buoyed by improved full year revenues following good performances across its main divisions.
The group, which has operations in Birmingham and Staffordshire, is also hopeful that the change in the US administration will also be a positive one for its main markets.
For the year ended December 2016, the group has reported revenues of £785.8m, an increase of 8.2% – or £59.5m – on the prior year (2015: £726.3m). Prior year acquisitions contributed 5.8% to the increase, although these were offset slightly by an organic decline of 4.1% arising from delayed export opportunities, including an Indian torpedo defence contract and the completion of its End Cryptographic Unit Replacement Programme (ECU RP).
The group said the weakening of sterling during the year meant there was a positive impact of 7.5% from the translation of overseas revenues.
Underlying operating profit was £131.1m (2015: £120.0m), an increase of 9.3%. Underlying pre-tax profit was £120.1m (2015: £112.4m), after net financing charges of £11.0m (2015: £7.6m). The latter reflected a full year of interest charges on an acquisition-related debt.
Order intake for the year was £778.3m, a 22% increase over £638.1m achieved in 2015. After adjusting for foreign exchange, acquisitions and disposals, the underlying increase was 10.4%.
Looking ahead, it said: “Against the backdrop of continuing regional tensions and conflicts, the US Presidential Election has provided a further impetus to the defence sector, with global defence revenue growth forecast to reach 3% in 2017 (Source: Deloitte Aerospace & Defence), reversing a multi-year decline.
“While the current Continuing Resolution and budget negotiations will delay spending into the second half of 2017, there are now strong indications of an increase in the US defence budget in excess of current budgetary controls.”
In the UK, it said Brexit continued to cause uncertainty in currency markets. However, it said that with just 7% of group revenue resulting from exports from the UK to Europe, Ultra was largely sheltered from the direct impacts of the exit from the EU.
Commenting on performance, Ultra chief executive, Rakesh Sharma, said: “2016 was a better year for Ultra. Our focus on the execution and delivery of the goals we had set for ourselves has resulted in a positive momentum, enabling us to report good progress against our KPIs.
“Market analysis suggests a return to growth in the global defence sector, fuelled by expected higher defence spending under the new US Administration and increasing global tensions. However, the current six-month Continuing Resolution to US Federal funding will mean that some contract awards will move into the second half of 2017.”
He said the group’s commercial aerospace sector would benefit from increased revenues as it moved into the production phase on a number of contracts during the year.
