3rd Mar 2014 11:21
LONDON (Alliance News) - Ultra Electronics Holdings PLC Monday reported a steep decline in 2013 pretax profit as it booked a GBP44.2 million writedown on its Prologic business after the unit was hit by the US budget uncertainties and October's federal government shutdown.
The electronics technology company reported a pretax profit of GBP49.3 million, down from GBP79.3 million in 2012, due to the writedown and as revenues declined to GBP745.2 million, from GBP760.8 million.
The Prologic business is a US-based unit providing secure information sharing and planning software to the US Department of Defense, the US intelligence community and federal law enforcement agencies.
"A severely constrained budget environment and reduction in placement of US service contracts, exacerbated by the federal shutdown in October, has impacted Prologic's software services business. The services element of the Prologic business has now been restructured and Prologic's products remain a critical element of Ultra's crypto capabilities," Ultra Electronics said in a statement.
Ultra Electronics is heavily exposed to the US defence sector, where spending has been hit by a reduction in federal defence spending as the country has pulled out of recent war zones like Iraq and Afghanistan. In response, the company has been cutting costs and making acquisitions to reduce its reliance on defence markets. Its other main sectors are security and cyber, and transport and energy.
Excluding the write-down, and items like interest charges on defined benefit pension schemes, the company's underlying pretax profit rose slightly to GBP116.8 million, from GBP116.5 million as cost cutting pushed its underlying operating margin up to 16.3%, from 16.0%. A decline in organic operating profit was offset by contributions from acquisitions.
Ultra Electronics said it maintained its internal investment in developing new capabilities and products at 5.8% of revenue, meaning it spent GBP43.3 million, down from GBP49.2 million in 2012.
"Market conditions in 2013 continued broadly as outlined at the beginning of the period. Non-defence markets remained healthy and the group saw pleasing progress in a number of these sectors. In the US defence market, overall uncertainty and delays rather than budget constraints impacted order placement and payment approvals," Chief Executive Rakesh Sharma said in a statement.
Looking ahead, Sharma said the company has a healthy acquisition pipeline and will continue expanding geographically.
The company expects its non-defence sectors to remain positive in 2014, while it expects improved certainty in the US defence market, and more orders in niche areas of that sector, in the second half of the year, the CEO said.
"The focus on investment and tight cost management will remain integral to our business strategy. Ultra enters 2014 with order cover levels consistent with previous years, supplemented by a noticeable shift toward more annual contract awards. Combining these factors, and recognising current currency headwinds, we are confident that the group can achieve progress in 2014," Sharma said.
Its order book at the end of 2013 was GBP781.2 million compared with GBP905.0 million a year earlier.
Currency movements boosted revenues by 0.6% and underlying operating profit by 0.5% in 2013. However, sterling has strengthened significantly in recent months against other major currencies.
Ultra Electronics raised its final dividend to 29.5 pence, from 27.8p, bringing the total dividend for 2013 to 42.2p, from 40.0p. It said the increase reflects its confidence in future prospects.
Ultra Electronics shares were down 3.5% at 1,857 pence Monday morning.
By Steve McGrath; [email protected]; @SteveMcGrath1
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