Final Results

Embargoed until 0700 2 March 2015

Ultra Electronics Holdings plc

("Ultra" or "the Group")

Preliminary Results for the Year Ended 31 December 2014

FINANCIAL HIGHLIGHTS

· Excluding the effect of the early termination of the Oman Airport IT contract, 2014 results are broadly in line with the prior year

· Underlying order intake* is up by 21% to £760.0m

· Underlying earnings performance is in line with expectations

· Underlying operating margin(1) of 16.5% slightly higher than normal range

· Cash conversion up at 70%

· Investment to support future growth maintained

- over 5% of revenue reinvested by Ultra in new products and business development

- acquisition spend of £107.5m on four specialist businesses

· Strong balance sheet provides firepower to fund further acquisitions

· Refinancing preserves investment capacity at advantageous rates

Rakesh Sharma, Chief Executive, commented:

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.

Performance for 2015 will benefit from acquisitions made in 2014 and from foreign exchange translation at current rates. However, set against the current market backdrop of uncertainty over the timing and feasibility of proposed US DoD budgets, together with election activity in both the US and UK, overall Ultra expects 2015 performance to be broadly stable. We will continue to balance investment for future growth with focus on efficiencies and managing our costs to support profitability.

Looking further ahead our optimism improves as market growth drivers present revenue opportunities for our businesses and the expected pace of order book execution ticks up as a result of recent contract awards. Further growth is expected as the Group identifies and completes acquisitions. Internally, following on from our cost management actions, we are launching a group-wide initiative to standardise our systems and some of our processes. This will enable us to go beyond individual businesses efficiencies, whilst retaining Ultra's critical success factors of autonomy and agility. The Board acknowledges the short-term headwinds but judges that the actions being taken should enable the Group to achieve an improved performance from 2016.

(1) before Oman Airport IT contract termination costs, amortisation of intangibles arising on acquisitions, impairment of goodwill and adjustments to deferred consideration net of acquisition related costs. IFRS operating profit was £39.5m (2013: £57.4m). See Note 2 for reconciliation.

(2) before Oman Airport IT contract termination costs, amortisation of intangibles arising on acquisitions, impairment of goodwill, 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 and, in the case of underlying earnings per share, before related taxation. Basic EPS 29.8p (2013: 54.8p). See Note 2 for reconciliation.

(3) the Oman results include revenue of £11.7m (2013: £41.7m), operating profit of £nil (2013: £4.2m) and exceptional non-underlying termination costs of £46.9m (2013:£nil)

FINANCIAL RESULTS

† During 2014 the Command & Controls business moved from the Group's Information & Power Systems division into the Tactical & Sonar Systems division and the AMI and MSI businesses moved from the Aircraft & Vehicle Systems division into the Information & Power Systems division and Tactical & Sonar Systems division respectively. The prior year segmental analysis has been restated to reflect these changes.

* see notes below

underlying operating profit before Oman Airport IT contract termination costs, amortisation of intangibles arising on acquisition, impairment of goodwill and adjustments to deferred consideration net of acquisition related costs. IFRS operating profit was £39.5m (2013: £57.4m). 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 Airport IT contract termination costs, amortisation of intangibles arising on acquisition, impairment of goodwill, 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 29.8p (2013: 54.8p). See Note 2 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.

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 Airport IT contract termination costs, finance costs, investment revenue, amortisation and depreciation, excluding adjustments to deferred consideration net of acquisition related costs.

net debt comprises loans and overdrafts 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 2014 was £787.3m compared to £781.2m in the prior year, despite a £96.9m reduction relating to the removal of the Oman contract from the 2014 order book. Excluding Oman, order intake of £760.0m in the period (2013: £630.0m) 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%.

Revenue for 2014 was £713.7m (2013: £745.2m). The organic revenue decline at constant currencies was 10.5% of which 4% or £30m related to the Oman Airport IT contract. Following termination of the contract on 9 February 2015, the total revenue recognised from the contract is £114m, as reported for the half year to 30 June 2014. Had the Oman revenue been excluded from both 2013 and 2014, revenue would have been in line at just over £700m. The four acquisitions made in the period, together with the impact of 2013 acquisitions increased revenue by 9%; however foreign exchange reduced revenue by 3%.

In the year, Ultra maintained its internal investment in the development of new capabilities and products at 5.8% of revenue or £41.2m (2013: £43.3m).

Underlying operating profit* was £118.1m (2013: £121.7m). Acquisition growth contributed 7.8% which was offset by a negative foreign exchange impact of 2.2% and an organic decline of 8.6%. The Group's businesses maintained their focus on restructuring their cost bases which sustained an underlying operating margin of 16.5% (2013: 16.3%). There was no underlying profit recognised on the Oman contract in 2014. As announced in the RNS on 25 February 2015, an exceptional non-underlying charge of £47m relating to the contract termination has been recognised in the 2014 reported operating profit, comprising a bad debt provision of £37m and other termination provisions of £10m.

Underlying profit before tax* was £112.0m (2013: £116.8m), after net financing charges* of £6.1m (2013: £4.9m).

The Group's underlying tax rate* in the year was 23.2% (2013: 24.3%) and underlying earnings per share was 123.1p (2013: 127.1p).

Reported (IFRS) profit before tax was £21.5m (2013: £49.3m) and reflected the combined effects of the elements detailed below:

The Group's balance sheet remains strong, with net debt/EBITDA of 1.0x and net interest payable on borrowings covered around 20 times by underlying operating profit. Operating cash flow* in the year was £83.1m (2013: £79.0m), leading to a cash conversion of 70% (2013: 65%). Ultra had net debt* at the end of the year of £129.5m compared to £42.2m at the end of 2013. Net cash expenditure on acquisitions in the year was £107.5m (2013: £24.7m) including retention payments in respect of acquisitions.

During the period, Ultra's £90m revolving credit facility was replaced with a new £200m facility which expires in 2019, with significantly improved interest terms.

The proposed final dividend is 31.1p, bringing the total dividend for the year to 44.3p (2013: 42.2p). This represents an annual increase of 5.0%, with the dividend being covered 2.8 times (2013: 3.0 times) by underlying earnings per share. If approved, the dividend will be paid on 6 May 2015 to shareholders on the register on 10 April 2015.

INVESTING FOR GROWTH

Ultra continued its programme of investment to position for long-term growth, with total spending in 2014 of £148.7m (2013: £68.0m), comprising £107.5m (2013: £24.7m) on acquisitions and £41.2m (2013: £43.3m) on new capabilities. In addition, customer-funding for new product development was £115.9m (2013: £87.1m).

Ultra made four acquisitions in the period:

· February 2014 - 3 Phoenix Inc (3Pi), based in the US is a leading supplier of specialist sonar, radar intelligence, surveillance and reconnaissance products and solutions. 3Pi forms part of Ultra's Tactical & Sonar Systems division where there are many internal and external synergies. Since the acquisition it has won over $21m in US Navy contracts.

· May 2014 - Forensic Technology (FT), headquartered in Canada, provides automated firearm ballistics identification and forensic analysis to law enforcement agencies in over 65 countries. FT is part of Ultra's Tactical & Sonar Systems division.

· May 2014 - ICE Corporation Inc (ICE), located in the US, designs, develops, manufactures and supports aerospace products including; motor control electronics, electrothermal ice protection controllers, pneumatic valve controls and engine control interface units. ICE is part of the Controls business within Ultra's Aircraft & Vehicle Systems division but will continue to operate from its own facilities.

· June 2014 - Lab Impex Systems Ltd (LIS), located in the UK and US, develops and supplies radiation measurement solutions and services within the nuclear industry. LIS is part of Ultra's Nuclear Control Systems business within Ultra's Information & Power division.

OPERATIONAL REVIEW

Aircraft & Vehicle Systems

· Revenue was in line with last year at £140.3m (2013: £140.9m†)

· Underlying operating profit was down by 29.3% to £24.6m (2013:£34.8m†)

· Order book reduced by 2.2% to £160.2m (2013: £163.8m†)

Revenues from the division's aerospace businesses increased with further sales of specialist ice protection systems, and from the Airbus A400M cargo handling system. However 2013's comparisons include the award and delivery of an £8m Urgent Operational Requirement for EW radios at higher than average margins and there were lower sales in the year of accessories and spares.

Following the securing of a number of new orders to develop products for the aerospace sector, the divisional profit has been impacted by increased R&D investment and lower margins in the engineering phases of certain projects including Embraer KC390 and MRJ. This was partially offset by the impact of overhead savings. The acquisitions of Varisys, during the first half of 2013 and ICE Corporation during the first half of 2014, provided a positive contribution to both revenue and profits whilst foreign exchange partially offset this. The resulting divisional margin was 17.5% (2013: 24.7%).

The change in the order book reflects increased orders for commercial aerospace products and services, 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:

· Selection by Airbus to design, develop, supply and support an electrical ground door opening system (eGDO) for its new A350 family of aircraft. The programme value is expected to be in excess of £60m.

· Award from Airbus for a series of high integrity, safety critical modules on the Airbus A400M transport aircraft. The Ultra Network Interface Module (NIM) is an innovative system that will support increased capability whilst reducing the loading and unloading time of the A400M.

· Contract award from Gulfstream to provide the landing gear control computer, the steering control computer and the electric main entry door control computer on the newly announced G500 and G600 aircraft. Based on forecast sales of these aircraft, revenue is anticipated to be in excess of £45m over a multi-year contract.

Information & Power Systems

· Revenue fell by 26.3% to £204.0m (2013: £276.8m†)

· Underlying operating profit reduced by 21.7% to £29.2m (2013: £37.3m†)

· Order book reduced by 36.1% to £175.9m (2013: £275.3m†)

Sales from the Oman Airport IT programme during the first half of the year were down reflecting the prolongation of the overall contract. Following notice of the termination of the programme we have taken a prudent approach in the year, recognising only £12m revenue in the first half of the year, and no profit. In 2013, the division's results included £42m of revenue and £4m underlying operating profit from Oman. 

This division is the one most impacted by delays in the US defence and security contract placement process with reduced demand for both high margin law enforcement and security products, particularly legal intercept, and also communication systems.

There was also a reduction in revenue from our rail power management business recognising the maturity of the commuter power market as the focus in the UK moves on to high speed rail. Our nuclear business in the UK was impacted by reductions in reactor control and instrumentation revenue following the Heysham reactor partial shutdown and the extended decision making process on Hinckley Point C. This was partially offset by increased revenues from nuclear temperature sensors in the US and also from sales into the Virginia Class submarine programme.

Although the acquisition of Lab Impex Systems contributed to the divisional revenues and profits, this was offset by the negative effect of foreign exchange across the division.

Profits declined in the division as a result of these factors. However the cost savings implemented during the period and the reduction in the dilutive effect of the Oman Airport IT contract resulted in a slightly increased divisional margin of 14.3%.

The order book change reflected the removal of the Oman Airport IT contract, but benefited from a major contract award from EDF Energy and the acquisition of Lab Impex Systems.

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

· Continuing Ultra's strategic relationship with EDF, a contract for £13m was awarded for the supply and support of specialist instrumentation for use in the current UK nuclear power stations.

· Award of a multi-year contract, totalling over US$21m, from General Dynamics Electric Boat Corporation for the production of naval computer controlled power supply systems, with deliveries over the next five years.

· Contract award worth £8.4 million for the provision of main-static converters for Royal Navy submarines.

Tactical & Sonar Systems

· Revenue in Tactical & Sonar Systems increased by 12.8% to £369.4m (2013: £327.5m†)

· Underlying operating profit increased by 29.6% to £64.3m (2013: £49.6m†)

· Order book increased by 31.9% to £451.2m (2013: £342.1m†)

Revenue from US and international Anti-Submarine Warfare (ASW) was strong, and there was an increase in sales on the Fatahillah corvette upgrade programme and other international command and control programmes. This increase was partially offset by reduced sales of Litening Pods, and fewer radios spares sales together with the impact of US budget uncertainty and contract delays. The two larger acquisitions made in 2014, 3 Phoenix and Forensic Technology have been integrated into this division.

Profit rose by 29.6% reflecting increased volume and margins on sonobuoys together with savings from the prior year restructuring at Ultra's TCS radio business. Further benefit was derived from overhead cost savings across the division.

The acquisitions also made a significant contribution to profit, although this was partially offset by the impact of foreign exchange translation. As a result divisional margin rose to 17.4%.

The order book increase included the first year's order from the IDIQ sonobuoy award from the US Navy, as well as the Litening Pod CLS extension. This was supplemented by the acquisitions of 3 Phoenix and Forensic Technologies and by the effect of foreign exchange.

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

· A contract extension of £64.4m for the in-service support of the UK MoD's Litening Pods.

· The award of a £27m contract for the Royal Navy's Sonar 2050 Technology Refresh (S2050TR) Programme for the Royal Navy's eight Type-23 frigates.

· Order worth $166m awarded to Ultra's joint venture, ERAPSCO, for the manufacture of the full range of sonobuoys for the US Navy.

MARKET ENVIRONMENT

Defence (56% of Group revenue)

In Ultra's core defence markets in the UK and the US future spending plans continue to favour maritime, air and special forces programmes. This is predominantly owing to a change in emphasis towards force presence and air surveillance as opposed to the long, land focused campaigns we have experienced. Government fiscal pressures continue to add to uncertainty in defence programming and, together with reduced customer funded research, leads to a greater emphasis on legacy equipment upgrades and phased contract awards.

In the US, the President's FY2016 baseline defence budget submission of $534bn exceeds limits set under the Budget Control Act (sequestration) by $35bn. A Republican controlled Congress now has the difficult task of balancing a reluctance to raise taxes with the recognition of the increased number of threats (from Russia, ISIL, Ebola and rising China) and gradual erosion of US technical superiority. Intelligence, surveillance and reconnaissance (ISR) continue to be prioritised, along with systems that project power and counter maritime area-denial/anti-access systems.

In the UK, expected fiscal pressures following a general election will place further pressure on defence spending, threatening planned modest growth in equipment procurement. Such cost pressures are already evident in the delivery of major programmes, as primes pass funding challenges down the supply chain. The MOD's major programmes budget remains in balance but any new programmes, such as addressing the increasingly visible maritime patrol aircraft capability gap, will require significant funding cuts in other areas of defence.

In the Middle East regional security, terrorism threats and border security concerns are driving a strong growth in defence and security spending of 4% annually but sharply reduced oil revenues may moderate future spending. The Indian defence market has benefited from the recent change in government, allowing greater access by high technology foreign providers to this large and growing market. Turkey has become more problematic as an export market as it develops an indigenous capability, reflected in a 23% increase in its own defence exports. Australia remains focused on its strategic relationship with the US. Competition in this area will mainly be at the prime contractor level with US interoperability a key requirement.

Security & Cyber (25% of Group revenue)

Security and intelligence budgets are increasing, particularly in nations that face terrorism, border control issues, internal threats and IT infrastructure dependencies. The Group's specialist portfolio approach and ability to partner to deliver a tailored solution is well regarded in this sector. Border security and critical national infrastructure protection opportunities are increasing in regions such as the Middle East and Central America. The demand for communications intelligence remains high but is tempered by continuing Snowden leaks and political sensitivities. Cyber protection remains a fragmented and difficult market but an area of growing expenditure in core markets and those with ambitions for "safe city" status.

Transport & Energy (19% of Group revenue)

While prolonged low oil prices may moderate demand for new-build aircraft, record order books will help to cushion any short term impact. Fierce competition for passenger revenue will see an increase in fleet size through extension of legacy aircraft and a continued focus on systems that reduce operating costs. The Group's portfolio of aerospace control capabilities is well positioned to exploit this market. The airport infrastructure and IT sectors are becoming highly competitive with a focus on tailored solutions over individual products. Rail investment remains a significant growth area, both for nation building and legacy infrastructure upgrade. While reduced oil prices will impact on nuclear investment, the sector remains an important component of many national balanced energy strategies, with opportunities in both life extension and new build programmes. 

RISKS AND UNCERTAINTIES

A number of potential risks and uncertainties exist which could have a material impact on the Group's performance in 2015 and beyond and which could cause actual results to differ materially from expected and historical levels. The directors do not consider that the principal risks (listed below) and uncertainties have changed substantially since the publication of the Group's Annual Report for 2013. An explanation of the risks detailed below, and the robust business strategies that Ultra uses to manage and mitigate those risks and uncertainties, can be found in the annual report which is available for download at www.ultra-electronics.com/investors. 

In the defence sector, which contributes around 56% of Ultra's revenue, there is continuing pressure on US and UK defence budgets which is likely to be compounded by forthcoming elections. In the US, there is concern over the timing and feasibility of the proposed US DoD budget, which exceeds the Budget Control Act. It is anticipated that this will increase the time taken to agree and allocate funding to programmes and hence for it to flow down into contract action. 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 judgments and assumptions are unchanged, that appropriate mitigations are in place and that emerging risks are captured. Key risks identified by the Board include:

· Cyber-attack

· Changing market environment

· Execution of major contracts

· Pensions

· Business Control (e.g. US Proxy Board)

· Currency fluctuations

· Major geopolitical crisis

· Sustaining product differentiation

· Material legal /regulatory breach

· Staff retention

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

PERFORMANCE & PROSPECTS

Performance for 2015 will benefit from acquisitions made in 2014 and from foreign exchange translation at current rates. However, set against the current market backdrop of uncertainty over the timing and feasibility of proposed US DoD budgets, together with election activity in both the US and UK, overall Ultra expects 2015 performance to be broadly stable. We will continue to balance investment for future growth with focus on efficiencies and managing our costs to support profitability.

Looking further ahead our optimism improves as market growth drivers present revenue opportunities for our businesses and the expected pace of order book execution ticks up as a result of recent contract awards. Further growth is expected as the Group identifies and completes acquisitions. Internally, following on from our cost management actions, we are launching a group-wide initiative to standardise our systems and some of our processes. This will enable us to go beyond individual businesses efficiencies, whilst retaining Ultra's critical success factors of autonomy and agility. The Board acknowledges the short-term headwinds but judges that the actions being taken should enable the Group to achieve an improved performance from 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 2014 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, the major market sectors in which Ultra operates are:

Defence: Ultra supplies advanced electronic and electrical systems and equipment to coalition defence forces around the world. The Group innovates to provide battle-winning, specialist capabilities that are tailored to the customer's need and environment. Ultra has world-class capabilities in sonar systems, command & control, platform electrics, surveillance systems and network communications solutions.

Security: Ultra provides highly differentiated systems and capabilities to the broad security, intelligence and cyber market. Ultra has highly specialised capabilities in secure communications, networks and cryptographic equipment, key management systems and surveillance systems and intelligence gathering systems.

Transport: Ultra provides specialist software, systems and equipment for use in mass passenger transport systems. This includes high integrity real-time controls for civil aircraft, advanced IT solutions for modern airports and trackside power equipment for transit rail systems.

Energy: Ultra has a range of safety critical sensors and controls used in existing and new build nuclear reactors. The Group has innovative portable energy sources powered by readily available propane gas.

Ultra Electronics Holdings plc

Results for the Year Ended 31 December 2014

Consolidated Income Statement

Ultra Electronics Holdings plc

Results for the Year Ended 31 December 2014

Consolidated Statement of Comprehensive Income

Ultra Electronics Holdings plc

Results for the Year Ended 31 December 2014

Consolidated Balance Sheet

Ultra Electronics Holdings plc

Results for the Year Ended 31 December 2014

Consolidated Cash Flow Statement

Ultra Electronics Holdings plc

Results for the Year Ended 31 December 2014

Consolidated Statement of Changes in Equity

Ultra Electronics Holdings plc

Results for the Year Ended 31 December 2014

Notes

1. Segment information

(a) Revenue by segment

(b) Profit by segment

† A provision of £8,364,000 (2013: £9,363,000) was released relating to the GigaSat earn-out agreement for which the targets were not met. GigaSat is in the Tactical & Sonar Systems division.

1. Segment information (continued)

* During 2014 the Command & Control business was moved from the Group's Information & Power Systems division into the Tactical & Sonar Systems division and the AMI and MSI businesses moved from the Aircraft & Vehicle Systems division into the Information & Power Systems division and Tactical & Sonar Systems division respectively. The prior year segmental analysis has been restated to reflect this change.

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

The 2014 depreciation and amortisation expense includes £32,202,000 of amortisation charges (2013: £31,967,000) and £10,827,000 of property, plant and equipment depreciation charges (2013: £11,365,000). 

(d) Total assets by segment

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

(e) Total liabilities by segment

Unallocated liabilities represent derivatives at fair value, tax payables, 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 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 are presented separately.

• The amortisation of intangible assets arising on acquisitions and impairment of goodwill 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. Investment revenue

4. Finance costs

5. Tax

The 2014 proposed final dividend of 31.1p per share is proposed to be paid on 6 May 2015 to shareholders on the register at 10 April 2015. It was approved by the Board after 31 December 2014 and has not been included as a liability as at 31 December 2014.

7. Earnings per share

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

is based on the following data:

8. Goodwill

Other changes in 2014 relate to a deferred consideration release relating to a 2006 acquisition and a fair value adjustment relating to a 2013 acquisition.

Goodwill acquired in a business combination is allocated, at acquisition, to the Cash-Generating Units (CGUs) that are expected to benefit from that business combination. These consist of the Group's operating businesses. Goodwill has been allocated to CGUs as set out below: