Final Results

Embargoed until 0700 29 February 2016

Ultra Electronics Holdings plc

("Ultra" or "the Group")

Preliminary Results for the Year Ended 31 December 2015

FINANCIAL HIGHLIGHTS

· Full year performance in line with expectations

· Underlying operating margin of 16.5%

· Cash conversion better than expected at 68% and year-end net debt of £296m

· Investment to support future growth

- R&D maintained within normal range

- $258m Herley acquisition - integration on schedule and performing well

· Standardisation and Shared Services programme on track

· Final dividend of 32.3p, an increase of 3.9%

Rakesh Sharma, Chief Executive, commented:

"2015 was a significant year for the Group, in which it completed its largest acquisition, introduced a new market segment structure and launched a Standardisation and Shared Services (S3) programme, whilst continuing to face difficult market conditions. Ultra's full-year performance was in line with market expectations and reflected, as anticipated, a generally lower level of activity across most parts of our government related business. By year-end a comprehensive UK Strategic Defence & Security Review and a two-year US budget agreement had signalled some welcome stability although how this plays out remains uncertain.

Looking ahead, well-publicised macro factors continue to threaten governments' future funding. We expect US government defence expenditure to increase in a presidential election year, but these higher levels of spending will take time to benefit the mid-tier defence industry. For Ultra, most of the delayed orders from 2015 are expected to be secured in the first half of 2016 and we continue to have a number of secure long-term platform positions. In addition we will see a full year benefit from the Herley acquisition. Ultra's Board has considered the market conditions and business challenges and judges that the Group can make satisfactory progress in 2016."

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FINANCIAL RESULTS

* see notes below

† During the year the Group amended its internal organisation to better reflect the markets that the Group addresses so that business groupings better reflect its capabilities, evolving product offerings and market facing segments. As a result of this change the Group re-assessed its reporting segments under IFRS 8. Previously results were reported as Aircraft & Vehicle Systems, Information & Power Systems and Tactical & Sonar Systems, they are now reported as Aerospace & Infrastructure, Communications & Security and Maritime & Land. Prior year comparatives have been restated as indicated.underlying operating profit before Oman contract termination and liquidation costs, the S3 programme, amortisation of intangibles arising on acquisition, impairment charges and adjustments to deferred consideration net of acquisition related costs. IFRS operating profit was £66.4m (2014: £39.5m). See Note 2 for reconciliation.

organic growth (of revenue or profit) is the annual rate of increase in revenue or profit that was achieved, assuming that acquisitions made during the prior year were only included for the same proportion of the current year at constant currencies.

underlying operating margin is the underlying operating profit as a percentage of revenue.

finance charges exclude fair value movements on derivatives, defined benefit pension interest charges and discount on provisions.

underlying profit before tax before Oman contract termination and liquidation costs, the S3 programme, amortisation of intangibles arising on acquisition, impairment charges, fair value movements on derivatives, unwinding of discount on provisions, defined benefit pension interest charges and adjustments to deferred consideration net of acquisition related costs. Basic EPS 35.7p (2014: 29.8p). See Note 8 for reconciliation.

underlying tax is the tax charge on underlying profit before tax. The underlying tax rate is underlying tax expressed as a percentage of underlying profit before tax.

underlying operating cash flow is cash generated by operations and dividends from associates, less net capital expenditure, R&D and LTIP share purchases and excluding cash outflows from the S3 programme and acquisition related payments.

operating cash conversion is underlying operating cash flow as a percentage of underlying operating profit.

EBITDA is the statutory profit before tax for the 12 months ended 31 December before Oman contract termination and liquidation costs, finance costs, investment revenue, amortisation and depreciation, excluding adjustments to deferred consideration net of acquisition related costs.

net debt comprises borrowings, less cash and cash equivalents.

bank interest cover is the ratio of underlying operating profit to finance costs associated with borrowings.

underlying order intake excludes the removal of the Oman order book in 2014 and includes orders from acquisitions since acquisition date.

underlying order book growth excludes the impact of foreign exchange, the Oman IT Airport contract and the order book arising on acquisition.

The order book at the end of 2015 was £753.8m compared to £787.3m in the prior year. Acquisitions, primarily Herley, contributed 7.3% and there was a foreign exchange benefit of 0.9%. This was offset by an underlying order book decline of 12.5%. This reflected the delay into 2016 of over £100m of orders, most of which are expected to be secured in the first half of the year. These include the UK sonobuoy partnering and India torpedo defence orders.

The revenue of £726.3m represented an increase of 1.8% or £12.6m on the prior year (2014: £713.7m). A 5.9% increase reflecting the impact of acquisitions, together with a 4.0% benefit from the positive impact of foreign exchange on overseas revenues was partially offset by an organic decline of 8.1%. 2.1% (or £14.9m) of the decline related to the Oman Airport IT contract which was terminated in February 2015.

Ultra continues to invest in research and development to support future opportunities; this investment, at £36.0m (2014: £41.2m), represented 5.0% of group turnover.

Underlying operating profit* was £120.0m (2014: £118.1m). Acquisition growth contributed 4.9% and foreign exchange 1.9%, which was partially offset by an organic decline of 5.2%. The Group's businesses maintained their focus on restructuring their cost bases which sustained an underlying operating margin of 16.5% (2014: 16.5%).

The integration of Herley is on schedule with $1m of the acquisition case synergies already actioned and a further $0.5m planned. In addition, Herley's future is improved by its selection for a substantial number of the major US Ship Electronic Warfare Improvement Programme (SEWIP) modules, securing significant revenue opportunities over many years.

The Group's S3 programme is on track with the UK Shared Service Centre to be set up in Wimborne, Dorset during the first half of the year. £3m of savings have been identified for delivery in 2016 which will start to cover the programme costs.

Underlying profit before tax* was £112.4m (2014: £112.0m), after net financing charges* of £7.6m (2014: £6.1m).

The Group's underlying tax rate* in the year was 22.8% (2014: 23.2%) and underlying earnings per share was 123.9p (2014: 123.1p).

Reported (IFRS) profit before tax was £34.8m (2014: £21.5m) and reflected the combined effects of the elements detailed below:

During the first half of the year, the deemed disposal of Ithra resulted in a non-cash, non-underlying IFRS accounting charge. It arises from the liquidation of the Ithra contract vehicle following the termination of the Oman Airport IT contract. In the prior year an exceptional non-underlying charge of £46.9m relating to the termination of the contract was recognised in profit before tax. 2015 profit before tax also includes a £2.7m charge reflecting the sale of Ultra's minority shareholding in the Al Shaheen joint venture, following a review of our activities in the Middle East, and a £5.7m charge to impair an intangible fixed asset impacted by amendments to the US Patriot Act. The prior year included the impairment of the acquired goodwill relating to Al Shaheen.

The £9.4m of acquisition related costs primarily reflected costs incurred on the acquisition of Herley during the year. In the prior year, acquisition costs were flattered by the release of an £8.4m provision relating to the GigaSat earn out agreement for which the 2014 target was not met.

The start-up costs of the S3 programme include onerous lease costs relating to facility consolidations.

The Group's balance sheet remains resilient, with net debt/EBITDA of 2.2x and net interest payable on borrowings covered around 15.9 times by underlying operating profit. Operating cash flow* in the year was £81.3m (2014: £83.1m) reflecting the expected Oman impact and other working capital movements, leading to a cash conversion of 68% (2014: 70%). Excluding the impact of Oman, cash conversion would have been 77%. Ultra had net debt* at the end of the year of £295.6m compared to £129.5m at the end of 2014 reflecting the impact of the Herley acquisition. Net cash expenditure on acquisitions in the year was £179.1m (2014: £107.5m) including retention payments in respect of acquisitions.

During the period, Ultra's £100m revolving credit facility was amended to match the favourable interest pricing of our £200m facility, and was extended to expire in August 2019. A $225m term loan, which also expires in August 2019 was put in place at the time of the Herley acquisition. The covenants match the revolving credit facilities.

During 2015 a consultation took place with the members on a proposal to close the Group's UK Defined Benefit pension scheme to future accrual from 5 April 2016. Following the end of the consultation and discussion with the Trustee, it was announced to members on 1 February 2016 that the Company had agreed with the Trustee the terms under which the scheme is to be closed and that the proposed closure would go ahead.

The proposed final dividend is 32.3p, bringing the total dividend for the year to 46.1p (2014: 44.3p). This represents an annual increase of 4.1%, with the dividend being covered 2.7 times (2014: 2.8 times) by underlying earnings per share. If approved, the dividend will be paid on 5 May 2016 to shareholders on the register at 8 April 2016.

INVESTING FOR GROWTH

Ultra continued its programme of investment to position for long-term growth, with total spending in 2015 of £215.1m (2014: £148.7m), comprising £179.1m (2014: £107.5m) on acquisitions and £36.0m (2014: £41.2m) on new capabilities. In addition, customer-funding for new product development was £110.6m (2014: £115.9m).

Ultra made two acquisitions in the period:

· August 2015 - Herley is a leading designer and producer of RF and microwave integrated systems and subsystems for use in EW, radar, communication, missile, flight test and simulation applications. The company, headquartered in Massachusetts, US, employs 433 people across four offices in the US and UK. Ultra Electronics Herley is in the Communications & Security division.

· October 2015 - Furnace Parts is a developer and supplier of thermocouple-based temperature sensors for high performance and demanding applications in the nuclear and process control sectors. The acquisition will extend Ultra's specialist temperature sensing capabilities in both US and international markets. Furnace Parts has been integrated into NSPI in Round Rock, Texas.

OPERATIONAL REVIEW

Aerospace & Infrastructure

· Revenue fell by 2.7% to £193.2m (2014: £198.6m†)

· Underlying operating profit was down by 3.0% to £28.7m (2014: £29.6m†)

· Order book increased by 4.9% to £265.4m (2014: £252.9m†)

Excluding the impact of Oman, the divisional revenue increased by 3.4% compared to 2014, as the prior year included £11.7m of sales from the Oman Airport IT programme, whereas no revenue was recognised in 2015.

The division saw an increase in Aerospace sales, in particular on the Mitsubishi Regional Jet (MRJ) and the Joint Strike Fighter (JSF) programmes, and in revenues from Airport Systems including the Orange County contract in the US. Revenue from vehicle programmes, including the Warrior, Scout and Middle East NIMR also increased. As well as the impact of the Oman contract, revenue from the A400M Network Interface Module (NIM) was lower reflecting contract phasing.

Following the securing of a number of new orders to develop products for the aerospace sector, the division's margins have been impacted by increased R&D investment and lower margins during the engineering phases of projects. There were also restructuring costs at the CEMS business. This was partially offset by higher margins as vehicle programmes entered the production phase. The acquisitions of Ice Corporation in 2014 and Furnace Parts in 2015 provided a positive contribution to both revenue and profits as did the impact of foreign exchange. The resulting divisional margin was 14.9% (2014: 14.9%). 

The change in the order book reflects increased orders for aerospace products and services, partially offset by the trading of the Lockheed Martin Warrior contract.

Highlights of activities in the period that will underpin the division's future performance included:

· Awarded development contracts by the Xi'an Aircraft Corporation of China for the landing gear control unit and nose steering wheel system on the new MA700 twin-engine, medium-range turboprop airliner.

· A strategic partnership with NuScale to develop a suite of reactor and plant instrumentation and control systems to support deployment of their Small Modular Reactor (SMR) fleet worldwide. Part payment for this contract includes an equity stake in NuScale.

· Selection by the Cessna Aircraft Company to provide a Power Transfer Control Unit for its new Hemisphere business jet.

Communications & Security

· Revenue increased by 6.6% to £239.3m (2014: £224.4m†)

· Underlying operating profit increased by 9.2% to £40.4m (2014: £37.0m†)

· Order book reduced by 0.4% to £213.7m (2014: £214.5m†)

Communications & Security saw the benefit of the acquisition of Herley in 2015 together with the prior year acquisition of Forensic Technology. Against this the division was impacted by the repeal of the US Patriot Act which significantly reduced domestic legal intercept revenues in the SoTech business. This was partially offset by an increase in revenue from security and surveillance products, and from the ECU RP programme, and a positive impact from foreign exchange.

There were higher margins as the ECU RP programme completed its production phases and Herley improved the mix. This more than offset the impact of both the loss of high margin revenue and associated restructuring costs in the SoTech business and took divisional margin to 16.9%.

The order book reflected significant trading of the ECU RP Crypto contract and the reduction in US contract placement over the last twelve months, partially offset by the addition of the Herley order book value.

Features of the division's performance in the year that will underpin future performance included:

· Orders worth over $30m for the protection of US Navy bases in the Washington, Southwest and Hawaii regions.

· Award of a contract for Phase 1 of the US Reprogrammable Single Chip Universal Encryptor (RESCUE) / KOV-21A replacement programmes. This is the development phase of a long-awaited and much larger US software-programmable crypto opportunity.

· Selection by Inmarsat as a technology partner to develop micro satellite terminals for both government and commercial customers.

Maritime & Land

· Revenue increased by 1.1% to £293.8m (2014: £290.7m†)

· Underlying operating profit decreased by 1.2% to £50.9m (2014: £51.5m†)

· Order book decreased by 14.1% to £274.7m (2014: £319.9m†)

In Maritime & Land there was an increase in revenue from US and international sonobuoys and from the Sonar 2050 programme for the UK MOD. This was offset by the impact of funding delays on the Torpedo Warning System in the US and by a reduction in rail power management revenue. The acquisition of 3 Phoenix in the prior year contributed to divisional revenues, as did foreign exchange.

Margins at 17.3% (2014: 17.7%) reflected the release of some contract risk reserve in the prior year comparative, and the product mix within the Group's sonobuoy businesses.

The order book declined as a result of the trading of major contracts, including Fatahillah and UK sonobuoy partnering. There was also a delay into 2016 of some large orders including the 2017 UK sonobuoy partnering contract extension and India torpedo defence contract.

Features of the division's performance in the year that will underpin future performance included:

· Award of £18m contract, by Rolls-Royce, for the design and development of reactor control and cooling systems for Royal Navy submarines. 

· A $25m contract award for the procurement of engineering services for development, integration, testing, and logistic support of the Torpedo Warning System.

· Partnering with Mahindra Group in India to address significant opportunities in Underwater Warfare equipment for the Indian Navy and high-capacity radios for the Indian Army.

MARKET ENVIRONMENT

Increases in global instability, security threat and conflict levels were reflected in the comprehensive and robustly funded 2015 UK Strategic Defence & Security Review and a welcome 2-year budget deal in the US, bringing much-needed stability to both national defence programmes. Funding pressures remain within these ambitious programmes but priorities reflect Ultra's areas of strength, including submarine build, ISTAR1 and Communications. More widely, border security, infrastructure protection and cyber-security solutions attract strong interest, tempered by funding pressure from reduced oil revenues and macro-economic worries. Ultra will maintain its focus on securing further long-term contracts by offering the competitive, niche capability solutions required by customers. Investment in leading edge technology, identifying strategic acquisitions and creating sound international partnerships remain integral in our approach.

Aerospace (18% of 2015 Group revenue, 2014: 17%) - After several years of revenue expansion, large civil aircraft sector growth has plateaued but with record order book levels and strong passenger travel demand (85% growth since 9/11); attention now falls on the ability of the supply chain to meet increased production rates and on the potential for competition from COMAC2. The regional aircraft market is crowded and orders here will be hard won. Military aircraft will be dominated by the F-35 JSF programme and by medium-size military transports, on which the Group is well established. The military rotorcraft market is declining but opportunities exist for specific capabilities such as HUMS3 and rotary ice protection.

Infrastructure (4% of 2015 Group revenue, 2014: 7%) - High passenger demand is driving airport investment but passenger processing is becoming increasingly commoditised and passenger self-management more common. Major capital projects in the Middle East, Asia and South America are driven by strong regional growth and competition for hub status. UK national rail investment has now switched from DC to major AC upgrades but opportunities continue in Underground and Metro upgrades.

Nuclear (6% of 2015 Group revenue, 2014: 8%) - Lower hydrocarbon costs has slowed new build but there are now 70 reactors under construction and investment plans in place to secure future low-carbon power generation. Life extension demand in a highly regulated market ensures barriers to entry are high. 

Communications (14% of 2015 Group revenue, 2014: 14%) - Military communications is forecast to grow at over 7% CAGR despite land force consolidation post long deployed operations. Growth drivers include reduced size, weight & power, interoperability and wide-bandwidth secure data access. Encryption programmes in the US and UK are resetting around software programmable solutions that Ultra understands well. Increased security programmes require robust, secure communications networks. Commercial communications sees a growing demand for machine-to-machine solutions to enable new smart initiatives.

C2ISR4 (23% of 2015 Group revenue, 2014: 23%) - Regional tensions and challenges are driving demand for the ability to operate forces under the threat of a range of anti-access/area denial (AAAD) systems. This provides strong opportunities in ISTAR1 and electronic warfare equipment. The border security market is projected to grow from $4.5bn today to $8bn by 2024 reflecting the impacts of regional conflict, security threats and migration. Increased security demands are also driving the interest in protection of fixed critical infrastructures and utilities. This degree of complexity benefits providers of robust integrated Command & Control (C2) solutions that can overlay existing sensors and systems.

Underwater Warfare (24% of 2015 Group revenue, 2014: 21%) - Global investment in modern, quiet conventional submarines and a resurgent Russian submarine capability are fuelling an increased demand for advanced Anti-Submarine Warfare (ASW) capabilities, including sonobuoys, torpedo defence and countermeasures, integrated wide-area search capabilities, airborne ASW and shallow water systems for smaller vessels.

Maritime (6% of 2015 Group revenue, 2014: 7%) - In the US and UK, significant submarine and ambitious ship-building programmes will provide good opportunities for the Group's electrical power management and signature control offerings but also bring affordability pressures. These pressures will favour upgrade of legacy platforms and smaller ship solutions that match Ultra's strengths.

Land (5% of 2015 Group revenue, 2014: 3%) - Core markets are seeing consolidation and upgrading of armoured fighting vehicles (AFVs) post long land operations. Elsewhere, investment in AFVs serves power projection and internal security needs. The Group's strength in AFV electrical architecture is now being utilised to meet the merging demand for soldier-worn power management systems.

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4 Command & Control, Intelligence Surveillance & Reconnaissance

RISKS AND UNCERTAINTIES

A number of potential risks and uncertainties exist which could have a material impact on the Group's performance in 2016 and beyond and which could cause actual results to differ materially from expected and historical levels. During the year the Board has reviewed its approach to risk management resulting in the principal risks listed below. An explanation of these risks and the robust business strategies that Ultra uses to manage and mitigate risks and uncertainties can be found in the annual report which is available for download at www.ultra-electronics.com/investors/annual-reports.aspx. 

In the defence sector, which contributes around 61% of Ultra's revenue, there is continuing budget pressures in heavily committed procurement programmes in the US and UK. Further cost saving and efficiency will need to be sought. Nevertheless, the overall size of defence budgets worldwide, relative to the Group's revenue, provides sufficient headroom to support Ultra's continuing growth.

There is a risk of programme delays or cancellations but this has always been a feature of the Group's markets.

Movements in foreign currency exchange rates result in both transaction and translation effects on the Group's results. Ultra's projected net transaction exposure is mitigated by the use of forward hedging contracts. By their nature, currency translation risks cannot be mitigated.

Risks are identified, collated, assessed and managed at the most appropriate level of the business (Board, Executive or Business level). Risks are reviewed regularly to ensure judgements and assumptions are unchanged, that appropriate mitigations are in place and that emerging risks are captured. Key risks identified by the Board include:

· Matching strategy to market dynamics

· Ability to win and deliver contracts

· Delivering major change programmes

· Selection and integration of acquisitions

· Protection of intellectual property and information security

· Innovation and development

· Attracting, developing and retaining the right people

· Preservation of Ultra's culture

· Effectiveness of supply chain

· Legislation and regulation compliance

· Maintaining governance and internal control

· Health, safety and the environment

· Pension management

· Treasury and tax

CONFIRMATION OF GOING CONCERN

The Directors have considered the guidance issued by the Financial Reporting Council and hereby confirm that the Group continues to adopt the 'going concern' basis in preparing its accounts.

The Board has made appropriate enquiries to support this view, looking forward for a period of at least twelve months. Salient points taken into consideration were:

- the Group's long record of delivering high quality profits

- the adequacy of Ultra's financing facilities

- Ultra's positions in growth sectors of its markets

- the long-term nature of Ultra's markets and contracts

- the Group's minimal exposure to trading denominated in the Euro

- the risks as discussed above

The Directors' long-term viability statement is included in the annual report and accounts.

PERFORMANCE & PROSPECTS

2015 was a significant year for the Group, in which it completed its largest acquisition, introduced a new market segment structure and launched a Standardisation and Shared Services (S3) programme, whilst continuing to face difficult market conditions. Ultra's full-year performance was in line with market expectations and reflected, as anticipated, a generally lower level of activity across most parts of our government related business. By year-end a comprehensive UK Strategic Defence & Security Review and a two-year US budget agreement had signalled some welcome stability although how this plays out remains uncertain.

Looking ahead, well-publicised macro factors continue to threaten governments' future funding. We expect US government defence expenditure to increase in a presidential election year, but these higher levels of spending will take time to benefit the mid-tier defence industry. For Ultra, most of the delayed orders from 2015 are expected to be secured in the first half of 2016 and we continue to have a number of secure long-term platform positions. In addition we will see a full year benefit from the Herley acquisition. Ultra's Board has considered the market conditions and business challenges and judges that the Group can make satisfactory progress in 2016.

 - End -

Enquiries:

Ultra Electronics Holdings plc 020 8813 4307

Rakesh Sharma, Chief Executive www.ultra-electronics.com

Mary Waldner, Group Finance Director

Media enquiries:

Susan McErlain, Corporate Affairs Director 07836 522722

James White, MHP Communications 020 3128 8756

NATURE OF ANNOUNCEMENT

This preliminary announcement of Ultra's audited results for the year ended 31 December 2015 does not serve as the dissemination announcement as required by Rule 6.3 of the Disclosure and Transparency Rules ('DTR'). A separate dissemination announcement will be made when the annual financial report is made public in accordance with DTR requirements.

This preliminary announcement has been prepared solely to provide additional information to enable shareholders to assess Ultra's strategies and the potential for those strategies to be fulfilled. It should not be relied upon by any other party or for any other purpose. This preliminary announcement contains certain forward-looking statements. Such statements are made by the directors in good faith based on the information available to them at the time of their approval of this report, and they should be treated with caution due to the inherent uncertainties underlying such forward-looking information. This preliminary announcement has been prepared for the Group as a whole and therefore gives greatest emphasis to those matters which are significant to Ultra when viewed as a complete entity.

Further information about Ultra:

Ultra Electronics is a group of businesses which manage a portfolio of specialist capabilities, generating highly differentiated solutions and products in the defence & aerospace, security & cyber, transport and energy markets by applying electronic and software technologies in demanding and critical environments to meet customer needs.

Ultra has world-leading positions in many of its specialist capabilities and, as an independent, non-threatening partner, is able to support all of the main prime contractors in its sectors. As a result of such positioning, Ultra's systems, equipment or services are often mission or safety-critical to the successful operation of the platform to which they contribute. In turn, this mission-criticality secures Ultra's positions for the long term which underpins the superior financial performance of the Group.

Ultra offers support to its customers through the design, delivery and support phases of a programme. Ultra businesses have a high degree of operational autonomy where the local management teams are empowered to devise and implement competitive strategies that reflect their expertise in their specific niches. The Group has a small head office and executive team that provide to the individual businesses the same agile, responsive support that they provide to customers as well as formulating Ultra's overarching, corporate strategy.

Across the Group's three divisions, Ultra operates in the following eight market segments:

Ultra Electronics Holdings plc

Results for the Year Ended 31 December 2015

Consolidated Income Statement

Ultra Electronics Holdings plc

Results for the Year Ended 31 December 2015

Consolidated Statement of Comprehensive Income

Ultra Electronics Holdings plc

Results for the Year Ended 31 December 2015

Consolidated Balance Sheet

Ultra Electronics Holdings plc

Results for the Year Ended 31 December 2015

Consolidated Cash Flow Statement

Ultra Electronics Holdings plc

Results for the Year Ended 31 December 2015

Consolidated Statement of Changes in Equity

1. Segment information

During the year the Group amended its internal organisation to better reflect the markets that the Group addresses so that business groupings better reflect its capabilities, evolving product offerings and market facing segments. As a result of this change the Group has re-assessed its reporting segments under IFRS 8. Previously results were reported as Aircraft & Vehicle Systems, Information & Power Systems and Tactical & Sonar Systems, they are now reported as Aerospace & Infrastructure, Communications & Security and Maritime & Land. Prior year comparatives have been restated as indicated.

(a) Revenue by segment

(b) Profit by segment

The S3 programme is the Group's Standardisation & Shared Service Programme.

1. Segment information (continued)

(b) Profit by segment

† A provision of £8,364,000 was released in 2014 relating to the GigaSat earn-out agreement for which the final 2014 target was not met. GigaSat is in the Communications & Security division.

(c) Capital expenditure, additions to intangibles, depreciation and amortisation

The 2015 depreciation and amortisation expense includes £34,627,000 of amortisation charges (2014: £32,202,000) and £10,959,000 of property, plant and equipment depreciation charges (2014: £10,827,000). 

(d) Total assets by segment

Unallocated assets represent current and deferred tax assets, derivatives at fair value and cash and cash equivalents.

1. Segment information (continued)

(e) Total liabilities by segment

Unallocated liabilities represent derivatives at fair value, current and deferred tax liabilities, retirement benefit obligations, bank loans and loan notes.

(f) Revenue by destination

(g) Other information (by geographic location)

2. Additional non-statutory performance measures

To present the underlying trading of the Group on a consistent basis year-on-year, additional non-statutory performance indicators have been used. These are calculated as follows:

The 2015 impairment charge comprises a £2,693,000 impairment of the loan balance due from the Group's associate Al Shaheen Adventure LLC following agreement to dispose of Ultra's 49% shareholding, and comprises a £5,769,000 charge to impair an intangible fixed asset impacted by the repeal of the US Patriot Act. The 2014 impairment charge was for the impairment of the goodwill relating to the Al Shaheen CGU.

The above analysis of the Group's operating results, earnings per share and cash flows, is presented to provide readers with additional performance indicators that are prepared on a non-statutory basis. This presentation is regularly reviewed by management to identify items that are unusual and other items relevant to an understanding of the Group's performance and long-term trends with reference to their materiality and nature. This additional information is not uniformly defined by all Companies and may not be comparable with similarly titled measures and disclosures by other organisations. The non-statutory disclosures should not be viewed in isolation or as an alternative to the equivalent statutory measure. Information for separate presentation is considered as follows:

• Contract losses arising in the ordinary course of trading are not separately presented, however losses (and subsequent reversals) are separately disclosed in situations of a material dispute which are expected to lead to arbitration or legal proceedings.

• Material costs or reversals arising from a significant restructuring of the group's operations, such as the S3 programme, are presented separately.

2. Additional performance measures (continued)

• Disposals of entities or investments in associates or joint ventures, or impairments of related assets are presented separately.

• The amortisation of intangible assets arising on acquisitions and impairment of goodwill or intangible assets are presented separately.

• Other matters arising due to the Group's acquisitions such as adjustments to contingent consideration, payment of retention bonuses, acquisition costs and fair value adjustments for acquired inventory made in accordance with IFRS 13 are separately disclosed in aggregate.

• Furthermore, IAS 37 requires the Group to discount provisions using a pre-tax discount rate that reflects the current assessment of the time value of money and the risks specific to the liability, this discount unwind is presented separately when the provision relates to acquisition contingent consideration.

• Derivative instruments used to manage the Group's foreign exchange exposures are 'fair valued' in accordance with IAS 39. This creates volatility in the valuation of the outstanding instruments as exchange rates move over time. This has minimal impact on profit over the full term of the instruments, but can cause significant volatility on particular balance sheet dates, consequently the gain or loss is presented separately.

• The defined benefit pension net interest charge arising in accordance with IAS 19 is presented separately.

• The Group is cash-generative and reinvests funds to support the continuing growth of the business. It seeks to use an accurate and appropriate measure of the funds generated internally while sustaining this growth. For this, the Group uses operating cash flow, rather than cash generated by operations, as its preferred indicator of cash generated and available to cover non-operating expenses such as tax and interest payments. Management believes that using cash generated by operations, with the exclusion of net expenditure on property, plant and equipment and outflows for capitalised product development and other intangibles, would result in an under-reporting of the true cash cost of sustaining a growing business.

3. Deemed disposal of Ithra

On 4 March 2015, 'Ithra' ("Ultra Electronics in collaboration with Oman Investment Corporation LLC"), the legal entity established with the sole purpose of delivering the Oman Airport IT contract, was placed into voluntary liquidation. A liquidator was appointed and is pursuing claims against the customer on behalf of the interested parties. Ithra, upon liquidation, no longer meets the IFRS 10 criteria for consolidation as a subsidiary of the Group and is, consequently, a deemed disposal as at 4 March 2015.

During 2014 the full expected cost of the Oman contract termination of £46,878,000 was charged to the consolidated income statement and impacted the Group's profit for the year in 2014. The loss attributable to the Oman Investment Corporation ('OIC') non-controlling interest of £14,301,000 was credited to reserves as mandated by IFRS 10 para B94. Upon deemed disposal, the existing non-controlling interest of £13,751,000 is not permitted to be debited back against reserves, even though the cost has already been reflected in full on the face of the 2014 income statement, and is consequently recycled through the income statement, together with £2,696,000 of foreign exchange losses recorded in the translation reserve over the life of the entity. The net charge booked to exceptional Oman termination related costs in the 2015 income statement is as follows:

4. Investment revenue

5. Finance costs

6. Tax

The 2015 proposed final dividend of 32.3p per share is proposed to be paid on 5 May 2016 to shareholders on the register at 8 April 2016. It was approved by the Board after 31 December 2015 and has not been included as a liability as at 31 December 2015.

8. Earnings per share

The calculation of the basic, underlying and diluted earnings per share

is based on the following data:

9. Goodwill