Oman Airport feud dents full year performance for Ultra
DEFENCE supplier Ultra’s early cancellation of an important Middle Eastern contract has impacted severely on its full year results.
In its annual results, the company said its order book at the end of 2014 was £787.3m compared to £781.2m in the prior year – this was despite a £96.9m reduction relating to the removal of the contract at Oman Airport.
Glossing over the early termination of the airport scheme, the company said order intake of £760 for the year (2013: £630m) had led to underlying order book growth of 7.2% with additional growth from acquisitions of 6.7% and a foreign exchange benefit of 1.1%.
However, the full year results clearly show the impact of the Oman loss. Revenue declined 4.2% to £713.7m (2013: £745.2m). International Financial Reporting Standards pre-tax profit shows a fall of 56.4% to £21.5m (2013: £49.3m), while underlying pre-tax profit was down 4.1% at £112m (2013: £116.8m).
Ultra, which has operations in Birmingham and Staffordshire, announced last month (February) that it was considering taking legal action against Oman Airport’s owner following the sudden cancellation of the contract.
The problems dates back to January when Ultra announced that Ithra, its JV company with the Oman Investment Corporation, had received a notice of termination of its Oman Airport IT contract. The agreement was formally terminated on February 9.
Ultra said Ithra was 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 was termed a ‘completion contractor’. It said that after this a settlement account would be agreed by the employer.
It said the substantive reasons given in the notice of termination were related to Ithra not meeting contractual milestones. Ithra’s assessment was that the termination was unjustified.
Ultra is in discussions with its legal and claims advisers regarding the termination of the contract and recovery of Ithra’s costs and claims.
Rakesh Sharma, Ultra chief executive, said: “In 2014 group order intake increased significantly, reflecting demand across our market segments for Ultra’s specialist capabilities. Market conditions, specifically government spending pressures in the US and UK, continued to frustrate revenues in 2014, although excluding Oman the second half performance showed an improvement on the first half.
“Within the group, good progress has been made in implementing market facing initiatives whilst continuing prudent cost management. The events that culminated in the early termination of our Oman Airport IT contract provided an unwelcome distraction, although this will allow us to bring to a head what is a unique and increasingly difficult commercial contract. The group intends to vigorously pursue all options towards a satisfactory settlement.”
