25th Feb 2008 07:00
Ultra Electronics Holdings PLC25 February 2008 Embargoed until 0700 25 February 2008 Ultra Electronics Holdings plc ("Ultra" or "the Group") Preliminary Audited Results for the Year Ended 31 December 2007 FINANCIAL HIGHLIGHTS Year ended Year ended Change 31 December 2007 31 December 2006Revenue £412.9m £377.0m +10%Headline operating profit(1) £62.9m £57.5m +9%Headline profit before tax(2) £61.1m £54.9m +11%Headline earnings per share(2) 65.4p 58.4p +12%Dividend per share - final 14.5p 12.6p +15%- total 21.2p 18.5p +15% (1) before amortisation of intangibles arising on acquisition. IFRS profit from operations £59.0m (2006: £53.9m). See Note 2 for reconciliation. (2) before amortisation of intangibles arising on acquisition and profit on fair value movements on derivatives. IFRS profit before tax £56.6m (2006: £55.0m). Basic EPS 60.9p (2006: 58.8p). See Note 2 for reconciliation. • Good Group performance underpinned by broad mix of activities • Operating margin* maintained above 15% despite currency impact and high new product development costs • Investment continues in new programmes to underpin medium-term growth • Good operating cash* conversion of 83% • Four acquisitions completed in the year, broadening the Group's portfolio • Strong balance sheet gives headroom for further acquisitions • Order book increased to £621m, providing good earnings visibility • Recommended total dividend per share increased 15%, maintaining dividend cover at about three times Douglas Caster, Chief Executive, commented:"Ultra has again demonstrated good growth in revenue and profits. At constantcurrencies, the growth in revenue was over 13% and the increase in profit beforetax* was 18%. Ultra has a wide spread of activities in the defence and civilsectors, a strong order book and a reputation for delivering customersatisfaction through the successful execution of contracts. The fouracquisitions made in 2007 broaden the portfolio of niche products and servicesthat the Group provides to its customers. Combined, these factors provide Ultrawith an excellent basis for further progress and give the Board confidence inthe Group's prospects for 2008." FINANCIAL RESULTS Year ended Year ended Growth 31 December 2007 31 December 2006 £m £mOrder book- Aircraft & Vehicle Systems 181.6 176.9 +2.7%- Information & Power Systems 133.6 110.2 +21.2%- Tactical & Sonar Systems 305.8 296.5 +3.1%Total order book 621.0 583.6 +6.4% Revenue- Aircraft & Vehicle Systems 100.0 93.9 +6.5%- Information & Power Systems 126.6 120.5 +5.1%- Tactical & Sonar Systems 186.3 162.6 +14.6%Total revenue 412.9 377.0 +9.5% Organic growth +6.5% Operating profit*- Aircraft & Vehicle Systems 16.1 13.2 +22.0%- Information & Power Systems 19.6 19.3 +1.6%- Tactical & Sonar Systems 27.2 25.0 +8.8%Total operating profit* 62.9 57.5 +9.4% Operating margin*- Aircraft & Vehicle Systems 16.1% 14.1%- Information & Power Systems 15.5% 16.0%- Tactical & Sonar Systems 14.6% 15.4%Total operating margin* 15.2% 15.3% Interest (1.8) (2.6) -30.8% Profit before tax* 61.1 54.9 +11.3% Operating cash flow* 52.2 56.5Cash conversion* 83% 98%Net debt* at year-end 14.2 7.2Bank interest cover 29.2x 21.6xEarnings per share* 65.4p 58.4p +12.0% FootnoteThroughout this document, the terms headline operating profit, headline profitbefore tax and headline earnings per share have the same meaning as, and areused interchangeably with, operating profit*, profit before tax* and earningsper share* respectively.headline operating profit, operating profit* and operating margin* are beforeamortisation of intangibles arising on acquisition.headline profit before tax and earnings per share* are before amortisation ofintangibles arising on acquisition and fair value movement on derivatives.operating cash flow* is cash generated by operations, less net capitalexpenditure, R&D and LTIP share purchases.cash conversion* is cash generated by operations, less net capital expenditure,R&D and LTIP share purchases as % of profit from operations before amortisationof intangibles arising on acquisition.net debt* comprises bank overdrafts and loans less cash and cash equivalents. The resilience of Ultra's performance in 2007 reflected the Group's broadportfolio and spread of niche market positions. Ultra made good progress in theyear, achieving a strong underlying rate of revenue and profit growth. Marginswere maintained despite the continuing currency headwind and further investmentin systems for new platforms that will support further growth of the Group.While most of the growth achieved was organic, last year's acquisitions,Polyflex and Winfrith, were included for a full year. There were alsocontributions from the four acquisitions made in 2007, two of which wereacquired so late in the year that they only made a small impact. Revenue was 9.5% higher at £412.9m (2006: £377.0m) • of this revenue growth, 6.5% was organic • at constant exchange rates, revenue growth was 13.4% Operating profit* increased 9% to £62.9m (2006: £57.5m) • operating margin* was maintained above 15% • at constant exchange rates, operating profit* growth was 16.0% Operating cash conversion* was 83%. The Group continues to invest cash in theBoeing 787 and Airbus A400M aircraft programmes which will contribute to futuregrowth. There was a total company-funded cash investment of £30.2m (2006:£22.9m) on new product and business development, of which £4.1m was capitalised(2006: £3.8m) as an intangible asset. The profit impact of the fair value movement on derivatives and the amortisationof intangibles arising on acquisition was a charge of £4.5m compared to a gainof £0.1m in 2006. Foreign exchange rate movements continued to impact adversely the Group'sprofitability with the further weakening of the US dollar having the greatesteffect. More than half of Ultra's sales are denominated either in US or Canadiandollars and these currencies weakened, on average, against sterling by 8% and 3%respectively in the year. The result was a negative translation impact onrevenue of 4%. The effect on operating profit* was a reduction of 3%, equivalentto £2.2m. Ultra's policy is to hedge forward its foreign currency tradingexposure in order to reduce uncertainty - the typical forward cover is 18-24months for US dollar-denominated sales in the UK and Canada. The hedged ratesalso weakened during the period, with an overall adverse transaction impact onoperating profit* of £1.7m. Operating profit* at constant currencies wouldtherefore have been £3.9m higher in total, representing growth of 16%. Net interest payable was 31% lower at £1.8m (2006: £2.6m) due mainly to lowerborrowings through the year. All Ultra's acquisitions except Criticom andTelemus closed so late in the year that the effect on interest payable wassmall. Headline profit before tax was £61.1m (2006: £54.9m), an increase of 11%. Therewas a reduction in the Group's effective tax rate from 28.0% to 27.1% in theyear, reflecting the tax benefits of recent acquisitions in the USA and anassociated increase in borrowings in that country. Profit after tax rose by 4.1%to £41.2m (2006: £39.6m) and earnings per share* increased 12.0% to 65.4p (2006:58.4p). Net debt* at the end of the year was £14.2m compared to £7.2m at the end of2006. The Group's balance sheet remains strong, with net interest payable onborrowings covered approximately 29 times by operating profit*. The proposed final dividend is 14.5p, bringing the total dividend for the yearto 21.2p (2006: 18.5p). This represents an annual increase of 15%, with thedividend being covered 3.1 times by earnings per share*. If approved, thedividend will be paid on 6 May 2008 to shareholders on the register on 11 April2008. The order book at the end of the year was £621m, an increase of 6.4% over thevalue at the same time last year and an increase of 24.0% over the last twoyears. The order book, at its closing level, maintains historic levels of firmorder cover for the coming year and so provides the Group's customary level offorward visibility. Acquisitions Ultra made four acquisitions in 2007; Criticom, Telemus, Atkins and BCF Designs.They have enhanced the Group's portfolio of offerings and they all have thestrong positions in growing niche markets that are typical of Ultra businesses.The total cash consideration for these acquisitions was £31.0m includingexpenses, financed largely using Ultra's cash resources. The combined revenue ofthe four acquisitions on a full-year basis for 2007 would have been about £21m. • Criticom, based in Maryland, US, designs, supplies and supports custom secure and non-secure video conferencing solutions. It is part of the Tactical & Sonar Systems division. • Telemus, based in Ontario, Canada, provides specialist electronic warfare and surveillance equipment. It is now part of Ultra's Tactical Communication Systems business, also within the Group's Tactical & Sonar Systems division. • Atkins is a business that specialises in the supply of software solutions for emergency planning, command & control, crisis & incident management and computer based training & briefing. It is now part of the Datel business in the Group's Aircraft & Vehicle Systems division. • BCF Designs specialises in the design and production of electronic testing solutions for military and civil aircraft systems. It is now part of Ultra's Electrics business which is also in the Aircraft & Vehicle Systems division. OPERATIONAL REVIEW Aircraft & Vehicle Systems Revenue in Aircraft & Vehicle Systems increased by 6% to £100.0m compared to£93.9m in 2006 and operating profit* increased 22% to £16.1m (2006: £13.2m).These results include a contribution from Atkins and BCF Designs, both acquiredlate in the year. The division's order book at the end of the period was £181.6m(2006: £176.9m). Revenue growth continued to be driven by the buoyant civil aerospace market andby customer-funded development programmes. In addition to sales of landing gearcomputers and noise cancellation systems for civil aircraft, the divisionbenefited from good sales of specialist equipment for military aircraftprogrammes, especially the HiPPAG airborne compressor. There was continuingdemand for systems and equipment that help improve the mobility andsurvivability of armoured vehicles being used in expeditionary operationsincluding hand controls for vehicle-mounted, remotely controlled weapon stationsin the US. In spite of adverse currency effects and continuing investment in new aircraftsystems, operating profit* growth for the division reflected increased sales ofHiPPAG, the benefit of having integrated Polyflex in 2006 and higher sales ofspecialist hand controls. Highlights of the division's performance in the year that will underpincontinuing growth in future years included: • delivery of flightworthy wing ice protection equipment for Boeing's new 787 aircraft together with systems for use in the avionics validation and integration rigs. Ultra's system also successfully completed a challenging set of tests that constitute a major milestone in the airworthiness qualification process for the equipment. • delivery of a functioning ice protection system meeting an interim design standard for the Pratt & Whitney F-135 engine on the new F-35 Joint Strike Fighter aircraft. Ultra was also selected in the year to adapt this system to provide ice protection for the lift fan that is required for the short take-off, vertical landing variant of the aircraft. Separately, Ultra's airborne HiPPAG compressor passed the necessary stringent environmental qualification tests for its role in the weapons ejection systems of the Joint Strike Fighter. • successful entry into service of Ultra's innovative vision system for the British Army's new Mastiff armoured vehicle delivered to Afghanistan and Iraq in response to an urgent operational requirement. Ultra's equipment allows improved usage of the vehicles in day and night operations. Information & Power Systems Revenue in Information & Power Systems grew by 5% to £126.6m compared to £120.5min the previous year. Operating profit* was £19.6m (2006: £19.3m). The orderbook at the end of the year had increased by 21% to £133.6m (2006: £110.2m)reflecting increased demand for Ultra's specialist power control equipment forboth defence and transit system applications. Revenue continued to benefit from strong growth in airport IT systems andincreased demand for a range of command & control systems including specialistborder and harbour surveillance. As predicted, sales in 2007 of Ultra's highermargin ADSI systems reduced to a more normal level following the exceptionallystrong demand in 2006 driven by operations in Afghanistan and Iraq. Revenue alsobenefited from sales of specialist electrical power equipment, including highintegrity 'rod control' systems that manage the activity levels of Rolls-Roycesubmarine nuclear reactors. Operating profit* grew broadly in line with the revenues of the division, withthe growth achieved by most businesses being offset by the lower level of profitfrom ADSI system sales. In particular, sales of specialist power equipment andstrong demand for identity card printers helped this profit growth. The Group'scontinuing focus on cost control contributed to the operational performance ofseveral businesses. Features of the division's performance in the year that will underpin continuingfuture growth included: • increased development activity for Rolls-Royce on a replacement high integrity control and instrumentation system for submarine nuclear reactors. In the year, initial contract cover for the production phase of the programme was received. • selection by VT Shipbuilding to supply an integrated combat and surveillance system for three armed 90m ships with sophisticated radar and electro-optical target tracking and fire control capabilities for the Trinidad & Tobago government. This is Ultra's first contract for a modular system that addresses the growing market for advanced offshore patrol vessels of this class. • significant contract awards for Ultra's innovative transit system trackside power solutions. These included an initial contract to supply equipment for London's overground train network which is being upgraded in time for the 2012 Olympics. Tactical & Sonar Systems Revenue in Tactical & Sonar Systems increased by 15% to £186.3m (2006: £162.6m)and operating profit* rose 9% to £27.2m (2006: £25.0m). These results includethe contributions from Criticom and Telemus, both acquired mid-year. The closingorder book of £305.8m (2006: £296.5m) reflected strong demand from the US Armyfor tactical radio systems. Revenue growth was driven by further sales of airborne targeting pods for UKTornado aircraft and strong demand for battlespace IT products, notably tacticalradios and network interfacing equipment for the US DoD. In both instances, theneed to improve the capability of armed forces in current operations focusedcustomer demand. Revenue also benefited from initial work on a technologydemonstration for a new 'loitering munition' to provide precision attackcapability at long range for the British Army. Delivery of Ultra's new sea minedisposal systems to the Royal Navy partially compensated for the reduction insales of torpedo defence systems as that programme transitioned to its supportphase during 2007. The operating margin* reduced following the completion, in 2006, of theproduction phase of the UK torpedo defence system contract. Investment continuedin 2007 in redesigning Ultra's complete range of firefighter voicecommunications products to ensure compliance with updated national standardsthat became effective late in the year. Operating profit* benefited fromimproved margins on sales of US sonobuoys and from increased sales ofbattlespace IT equipment, especially a new, higher capacity tactical radio forthe US Army. Growth in future years will be underpinned as a result of the following eventsin 2007: • the award of a contract relating to the supply of upgraded secure communications systems for the UK's Tornado GR4 aircraft fleet. There is potential for a through-life support contract for this equipment and for exports to other users of the Tornado aircraft. • the receipt of a contract from the MoD to demonstrate a new submarine hunting system known as 'multi-static active' which will greatly improve the ability to detect stealthy, small but highly capable submarines. Ultra is also involved in programmes to improve anti-submarine warfare capabilities in the US. • the award of an initial production contract by the US DoD for the KG-40AR cryptographic system which provides encryption for tactical data links used by NATO forces. Further production phases are planned for the KG-40AR, a modern replacement for an obsolete system of which many are still in service. PROSPECTS Ultra applies its exceptionally broad range of differentiated technologies to anincreasing list of international platforms and programmes and this givesresilience to the Group's overall performance. Ultra operates at all levels inthe supply chain, selling to governments and to most major defence and aerospaceprime contractors. The Group is structured to allow it to operate in a flexible,agile, customer-led manner and Ultra's businesses are encouraged constantly topursue product and process innovation and to provide differentiated products,services and solutions to meet customer needs. In defence markets, budgets continue to be focused on the provision of smartsystems that will enhance the capability for persistent surveillance, rapididentification of targets, precision attack, mobility, communications andinteroperability between different forces. Existing platforms must be upgradedto provide these capabilities, often on an urgent basis, in addition todesigning them into new programmes. Ultra's ability to innovate, combined withits proven track record of teaming to access complementary technologies andcapabilities, enables the Group to deliver best-of-breed system solutions, fornew build as well as retrofit requirements. In Ultra's traditional underwaterbattlespace activities, including anti-submarine warfare, there is evidence ofincreasing investment in platforms that will increase the usage of Ultra'sspecialist products. The current high levels of activity in Iraq and Afghanistan may reduce in themedium-term. While Ultra has benefited in some of its niche areas from theseoperations, the diversion of funds from other activities has had an offsettingadverse impact elsewhere in the Group. Overall, it is felt that the impact ofthe potential reduction in current activities would not be material to theGroup. The growth in demand for civil aircraft is strongest in those areas of the worldwhere rapid population growth is combined with rising disposable incomes andcompetitive pressures are increasing the demand for new, fuel-efficientaircraft. This growth in air travel also encourages further investment inenhanced airport infrastructure. Ultra is well positioned to benefit from thedemand in both of these market sectors. There are some exciting opportunities in other civil markets. Investment isincreasing in the UK rail transit system infrastructure, driven partly by the2012 London Olympic Games. Around the world, continuing security concerns areresulting in further expenditure on surveillance solutions and access controlsystems. In the UK the need to reduce carbon emissions and the strategic need tomaintain independent energy supplies are causing higher investment in civilnuclear power generation, a market in which Ultra has a niche capability in thesupply of high integrity control systems. This includes both the refurbishmentand life extension of existing installations and the supply of new powerstations. Within Ultra's overall order book valued at £621m, firm order coverage for thenext twelve months' trading for the Group has been maintained at its traditionallevel of over 60%, thereby giving good visibility of future earnings. Investment to drive future growth remains a key element of Ultra's strategy,whether internally in new products or externally in acquisitions. The Group willcontinue to pursue opportunities to invest in long-term programmes. While Ultramade a number of acquisitions during 2007, its strong balance sheet can supportthe purchase of further businesses that would enhance the Group's portfolio.Target companies are actively being sought that have a proven track record andcan be acquired at value-enhancing prices. In summary, Ultra's strong positioning, broad spread of activities, investmentin growth markets and track record for delivery and service continue to give theBoard confidence in the Group's prospects for 2008. - Ends - Enquiries:Ultra Electronics Holdings plc 020 8813 4321Douglas Caster, Chief Executive www.ultra-electronics.comDavid Jeffcoat, Group Finance Director Weber Shandwick Financial 020 7067 0700Susan Ellis/Louise Robson Ultra Electronics Holdings plc Preliminary Audited Results for the Year Ended 31 December 2007 Consolidated Income Statement 2007 2006 Note £000 £000 Continuing operationsRevenue 1 412,890 377,040Cost of sales (300,380) (274,466) --------- ---------Gross profit 112,510 102,574 Other operating income 3 5,050 1,505Distribution costs (875) (810)Administrative expenses (56,687) (46,335)Other operating expenses 4 (992) (2,987) --------- ---------Profit from operations 59,006 53,947 --------- ---------Headline operating profit 2 62,921 57,509Amortisation of intangibles arising on acquisition (3,915) (3,562)Profit from operations 59,006 53,947 --------- --------- Investment revenue 5 1,092 4,939Finance costs 6 (3,500) (3,874) --------- ---------Profit before tax 1 56,598 55,012 --------- ---------Headline profit before tax 2 61,069 54,915Amortisation of intangibles arising on acquisition (3,915) (3,562)(Loss)/profit on fair value movements on (556) 3,659derivativesProfit before tax 56,598 55,012 --------- --------- Tax 7 (15,363) (15,404) --------- ---------Profit for the year from continuing operationsattributable to equity holders of the parent 41,235 39,608 ========= ========= Earnings per ordinary share (pence)From continuing operations - Basic 9 60.9 58.8 - Diluted 9 60.5 58.3 Ultra Electronics Holdings plc Preliminary Audited Results for the Year Ended 31 December 2007 Consolidated Balance Sheet 2007 2006 Note £000 £000 Non-current assetsIntangible assets 179,254 149,758Property, plant and equipment 24,235 20,814Deferred tax assets 10,634 11,223 -------- -------- 214,123 181,795 -------- -------- Current assetsInventories 10 42,417 29,198Trade and other receivables 11 84,226 83,599Cash and cash equivalents 27,419 25,628 -------- -------- 154,062 138,425 Total assets 368,185 320,220 -------- -------- Current liabilitiesTrade and other payables 12 (118,393) (110,235)Tax liabilities (9,123) (7,387)Obligations under finance leases (25) (22)Short-term provisions 13 (10,644) (10,459) -------- -------- (138,185) (128,103) -------- -------- Non-current liabilitiesRetirement benefit obligations 14 (40,390) (35,143)Other payables 12 (830) (1,158)Deferred tax liabilities (2,619) (2,830)Obligations under finance leases (29) (48)Bank loans (41,608) (32,722)Long-term provisions 13 (2,630) (2,825) -------- -------- (88,106) (74,726) Total liabilities (226,291) (202,829) -------- -------- Net assets 141,894 117,391 ======== ======== EquityShare capital 3,394 3,378Share premium account 35,061 33,180Own shares (1,972) (2,692)Hedging and translation reserve (6,282) (4,837)Retained earnings 111,693 88,362 -------- --------Total equity 141,894 117,391 ======== ======== Ultra Electronics Holdings plc Preliminary Audited Results for the Year Ended 31 December 2007 Consolidated Cash Flow Statement Note 2007 2006 £000 £000 Net cash flow from operating activities 15 49,558 49,550 Investing activitiesInterest received 791 1,216Purchase of property, plant and equipment (8,569) (4,759)Proceeds from disposal of property, plant andequipment - 34Expenditure on product development and otherintangibles (5,489) (4,676)Acquisition of subsidiary undertakings (net of cashacquired) (31,016) (7,799) --------- -----------Net cash used in investing activities (44,283) (15,984) ========= =========== Financing activitiesIssue of share capital 1,897 1,518Purchase of Long-Term Incentive Plan shares - (513)Dividends paid (12,978) (11,102)Increase/(repayment) of borrowings 6,551 (36,315)Repayments of obligations under finance leases (16) (33) --------- -----------Net cash used in financing activities (4,546) (46,445) ========= =========== Net increase/(decrease) in cash and cash 729 (12,879)equivalentsCash and cash equivalents at beginning of year 25,628 40,193Effect of foreign exchange rate changes 1,062 (1,686) --------- -----------Cash and cash equivalents at end of year 27,419 25,628 ========= =========== Ultra Electronics Holdings plc Preliminary Audited Results for the Year Ended 31 December 2007 Consolidated Statement of Recognised Income and Expense 2007 2006 £000 £000 Exchange differences on translation of foreignoperations (1,445) (3,847)Actuarial (losses)/gains on defined benefit pensionschemes (net of related deferred tax and exchange ratemovements) (4,250) 7,827Profit on cash flow hedge 45 226Tax on items taken directly to equity (excludingpensions) (602) (1,923) ---------- -------- Net (expense)/income recognised directly in equity (6,252) 2,283Transfer to profit and loss on cash flow hedges (154) (28)Profit for the year 41,235 39,608 ---------- --------Total recognised income and expense for the year 34,829 41,863 ========== ======== Ultra Electronics Holdings plc Notes: 1. Segmental analysis (a) Revenue by division External Internal 2007 External Internal 2006 revenue revenue Total revenue revenue Total £000 £000 £000 £000 £000 £000 Aircraft &VehicleSystems 99,993 5,856 105,849 93,907 3,423 97,330Information &Power Systems 126,623 11,062 137,685 120,517 8,964 129,481Tactical &Sonar Systems 186,274 5,939 192,213 162,616 11,813 174,429Eliminations - (22,857) (22,857) - (24,200) (24,200) -------- ------- ------- ------- -------- -------Consolidatedrevenue 412,890 - 412,890 377,040 - 377,040 ======== ======= ======= ======= ======== ======= (b) Profit by division 2007 2006 £000 £000 Aircraft & Vehicle Systems 16,070 13,190Information & Power Systems 19,645 19,333Tactical & Sonar Systems 27,206 24,986 -------- -------Headline operating profit 62,921 57,509 Amortisation of intangibles arising on acquisition(see 1 (c)) (3,915) (3,562) -------- -------Profit from operations 59,006 53,947 Investment revenue 1,092 4,939Finance costs (3,500) (3,874) -------- -------Profit before tax 56,598 55,012 ======== ======= (c) Amortisation of intangibles arising on acquisition 2007 2006 £000 £000 Aircraft & Vehicle Systems 564 505Information & Power Systems 75 174Tactical & Sonar Systems 3,276 2,883 -------- ------- 3,915 3,562 ======== ======= Ultra Electronics Holdings plc (d) Capital expenditure, additions to intangibles, depreciation and amortisation Capital expenditure and additions to intangibles Depreciation and (excluding goodwill) amortisation 2007 2006 2007 2006 £000 £000 £000 £000 Aircraft & Vehicle Systems 4,460 4,579 1,684 3,697Information & Power Systems 4,963 2,142 2,936 2,930Tactical & Sonar Systems 4,635 2,992 6,567 5,439 --------- ---------- --------- ----------Total 14,058 9,713 11,187 12,066 ========= ========== ========= ========== The 2007 depreciation and amortisation expense includes £5,467,000 ofamortisation charges (2006: £6,536,000) and £5,720,000 of property, plant andequipment depreciation charges (2006: £5,530,000). (e) Total assets by division 2007 2006 £000 £000 Aircraft & Vehicle Systems 99,879 80,857Information & Power Systems 71,473 68,656Tactical & Sonar Systems 153,397 129,684 -------- ---------- 324,749 279,197Unallocated 43,436 41,023 -------- ----------Consolidated total assets 368,185 320,220 ======== ========== Unallocated assets represent deferred tax assets, derivatives at fair value andcash and cash equivalents. (f) Total liabilities by division 2007 2006 £000 £000 Aircraft & Vehicle Systems 30,362 36,032Information & Power Systems 45,682 40,296Tactical & Sonar Systems 53,004 46,792 -------- ---------- 129,048 123,120Unallocated 97,243 79,709 -------- ----------Consolidated total liabilities 226,291 202,829 ======== ========== Unallocated liabilities represent derivatives at fair value, tax payables,deferred tax liabilities, retirement benefit obligations and bank loans. Ultra Electronics Holdings plc (g) Revenue by destination 2007 2006 £000 £000 United Kingdom 171,729 150,645Continental Europe 43,556 35,700Canada 17,788 16,022USA 154,032 144,506Rest of world 25,785 30,167 --------- --------- 412,890 377,040 ========= ========= (h) Other information (by geographic location) Additions to property, plant & equipment and intangible assets Total assets (excluding acquisitions) 2007 2006 2007 2006 £000 £000 £000 £000 United Kingdom 168,529 146,564 9,340 6,089North America 156,220 132,633 4,718 3,624 --------- --------- --------- --------- 324,749 279,197 14,058 9,713 ========= ========= ========= ========= Ultra Electronics Holdings plc 2. Additional performance measures To present the headline profitability of the Group on a consistent basisyear-on-year, additional performance indicators have been used. These arecalculated as follows: 2007 2006 £000 £000 Profit from operations 59,006 53,947Amortisation of intangibles arising on acquisition 3,915 3,562 --------- ---------Headline operating profit 62,921 57,509 ========= ========= Profit before tax 56,598 55,012Loss/(profit) on fair value movements on derivatives 556 (3,659)Amortisation of intangibles arising on acquisition 3,915 3,562 --------- ---------Headline profit before tax 61,069 54,915 ========= ========= Cash generated by operations 66,249 66,414Purchase of property, plant and equipment (8,569) (4,759)Proceeds on disposal of property, plant and equipment - 34Expenditure on product development and other intangibles (5,489) (4,676)Purchase of Long-Term Incentive Plan shares - (513) --------- ---------Operating cash flow 52,191 56,500 ========= ========= Headline operating profit has been shown before the amortisation of intangibleassets arising on acquisitions, which relates to acquired intellectual property,customer relationships and profit in acquired order book. To maintain aconsistent presentation of financial performance over the longer term, thischarge has been excluded from headline operating profit. Headline profit beforetax and headline earnings per share are also presented before the amortisationof intangible assets arising on acquisition. IAS 39 requires the Group to 'fair value' the derivative instruments used tomanage Ultra's foreign exchange exposures. This creates volatility in thevaluation of the outstanding instruments as exchange rates move over time. Thiswill have minimal impact on profit over the full term of the instruments, butcan cause significant volatility on particular balance sheet dates. Ultra istherefore stating headline profit before tax and headline earnings per sharebefore changes in the valuation of these instruments so that the headlineoperating performance of the Group can more clearly be seen. The Group is cash generative and reinvests funds to support the continuinggrowth of the business. It seeks to use an accurate and appropriate measure ofthe funds generated internally while sustaining this growth. For this, Ultrauses operating cash flow, rather than cash generated by operations, as itspreferred indicator of cash generated and available to cover non-operatingexpenses such as tax and interest payments. The Group believes that using cashgenerated by operations, with the exclusion of net expenditure in property,plant and equipment and outflows for capitalised product development and otherintangibles, would result in an understatement of the true cash cost ofsustaining a growing business. Ultra Electronics Holdings plc 3. Other operating income 2007 2006 £000 £000 Foreign exchange gains 5,050 1,505 --------- --------- 5,050 1,505 ========= ========= 4. Other operating expenses 2007 2006 £000 £000 Amortisation of development costs 949 2,234Foreign exchange losses 43 753 --------- --------- 992 2,987 ========= ========= 5. Investment revenue 2007 2006 £000 £000 Bank interest 791 1,216Fair value movement on derivatives - 3,659Retirement benefit scheme finance income 301 64 --------- --------- 1,092 4,939 ========= ========= 6. Finance costs 2007 2006 £000 £000 Amortisation of finance costs of debt 71 65Interest payable on bank loans and overdrafts 3,025 3,835Interest payable on finance leases 2 2Transfers from equity on cash flow hedges (154) (28) --------- ---------Total borrowing costs 2,944 3,874Fair value movement on derivatives 556 - --------- --------- 3,500 3,874 ========= ========= 7. Tax 2007 2006 £000 £000Current taxUnited Kingdom 7,510 7,812Overseas 7,939 5,190 --------- --------- 15,449 13,002Deferred taxUnited Kingdom (649) 1,118Overseas 563 1,284 --------- --------- (86) 2,402 --------- ---------Total 15,363 15,404 ========= ========= Ultra Electronics Holdings plc 8. Dividends 2007 2006 £000 £000 Final dividend for the year ended 31 December 2006 of12.6p (2005:10.7p) per share 8,463 7,150 Interim dividend for the year ended 31 December 2007of 6.7p (2006:5.9p) per share 4,515 3,952 --------- --------- 12,978 11,102 --------- --------- Proposed final dividend for the year ended 31 December2007 of 14.5p (2006:12.6p) per share 9,792 8,450 ========= ========= The 2007 proposed final dividend was approved by the Board after 31 December2007 and has not been included as a liability as at 31 December 2007. 9. Earnings per share 2007 2006 pence pence Basic headline (see below) 65.4 58.4Diluted headline (see below) 65.0 57.9Basic 60.9 58.8Diluted 60.5 58.3 The calculation of the basic, headline and diluted earnings per shareis based on the following data: 2007 2006 £000 £000EarningsEarnings for the purposes of earnings per share being profitfor the period from continuing operations 41,235 39,608 ========= ========= Headline earningsProfit for the period from continuing operations 41,235 39,608Loss/(profit) on fair value movements on derivatives (net oftax) 492 (2,616)Amortisation of intangibles arising on acquisition (net oftax) 2,576 2,349 --------- ---------Earnings for the purposes of headline earnings per share 44,303 39,341 ========= ========= See note 2 for an explanation of the adjustments toearnings Number of Number of shares sharesThe weighted average number of shares is given below: Number of shares used for basicearnings per share 67,714,368 67,421,160Number of shares deemed to beissued at nil considerationfollowing exercise of shareoptions 434,033 529,555 --------- ---------Number of shares used for fullydiluted earnings per share 68,148,401 67,950,715 ========= ========= Ultra Electronics Holdings plc 10. Inventories 2007 2006 £000 £000 Raw materials and consumables 26,523 18,029Work in progress 12,804 9,323Finished goods and goods for resale 3,090 1,846 --------- --------- 42,417 29,198 ========= ========= 11. Trade and other receivables 2007 2006 £000 £000 Trade receivables 52,059 52,783Provisions against receivables (527) (640) ---------- --------Net trade receivables 51,532 52,143Amounts due from contract customers 21,475 23,072Derivatives at fair value 5,383 4,172Other receivables 3,233 1,876Prepayments and accrued income 2,603 2,336 ---------- -------- 84,226 83,599 ========== ======== 12. Trade and other payables Amounts included in current liabilities 2007 2006 £000 £000 Trade payables 42,929 37,868Amounts due to contract customers 24,552 29,176Derivatives at fair value 3,503 1,627Other payables 15,178 12,830Accruals and deferred income 32,231 28,734 --------- --------- 118,393 110,235 ========= =========Amounts included in non-current liabilities: 2007 2006 £000 £000 Other payables 255 541Accruals and deferred income 575 617 --------- --------- 830 1,158 ========= ========= Ultra Electronics Holdings plc 13. Provisions Contract related Warranties provisions Total £000 £000 £000 At 1 January 2007 7,899 5,385 13,284Created 278 2,421 2,699Utilised (1,485) (1,509) (2,994)Exchange differences 87 198 285 --------- ------------ --------At 31 December 2007 6,779 6,495 13,274 ========= ============ ======== Included in currentliabilities 5,606 5,038 10,644Included in non-currentliabilities 1,173 1,457 2,630 --------- ------------ -------- 6,779 6,495 13,274 ========= ============ ======== 14. Retirement benefit schemes The amount included in the balance sheet arising from the Group's obligation inrespect of its defined benefit retirement schemes is as follows: 2007 2006 £000 £000 Fair value of scheme assets 127,636 119,675Present value of scheme liabilities (168,026) (154,818) ---------- ---------Scheme deficit (40,390) (35,143)Related deferred tax asset 11,284 10,543 ---------- ---------Net pension liability (29,106) (24,600) ========== ========= Ultra Electronics Holdings plc 15. Cash flow information 2007 2006 £000 £000 Profit from operations 59,006 53,947Adjustments for:Depreciation of property, plant and equipment 5,720 5,530Amortisation of intangible assets 5,467 6,258Cost of equity settled employee share schemes 1,186 648Increase/(decrease) in post employment benefitobligation 797 (259)Loss on disposal of property, plant and equipment 31 21(Decrease)/increase in provisions (312) 2,553 --------- ---------Operating cash flow before movements in workingcapital 71,895 68,698 Increase in inventories (12,055) (3,419)Decrease/(increase) in receivables 6,116 (6,929)Increase in payables 293 8,064 --------- ---------Cash generated by operations 66,249 66,414 Income taxes paid (13,723) (13,032)Interest paid (2,968) (3,832) --------- ---------Net cash from operating activities 49,558 49,550 ========= ========= Reconciliation of net movement in cash and cash equivalents to movements in netdebt 2007 2006 £000 £000 Net increase/(decrease) in cash and cashequivalents 729 (12,879)Cash (inflow)/outflow from (increase)/decrease indebt and finance leasing (6,535) 36,348 --------- ---------Change in net debt arising from cash flows (5,806) 23,469Amortisation of finance costs of debt (71) (65)Translation differences (1,202) 3,709 --------- ---------Movement in net debt in the year (7,079) 27,113Net debt at start of year (7,164) (34,277) --------- ---------Net debt at end of year (14,243) (7,164) ========= ========= Net debt comprised the following: 2007 2006 £000 £000 Cash and cash equivalents 27,419 25,628Bank loans (41,608) (32,722)Obligations under finance leases included incurrent liabilities (25) (22)Obligations under finance leases included innon-current liabilities (29) (48) --------- --------- (14,243) (7,164) ========= ========= Cash and cash equivalents comprise cash at bank and other short-term highlyliquid investments with a maturity of three months or less. Ultra Electronics Holdings plc 16. Five year review UK GAAP IFRS restated 2003 2004 2005 2006 2007 £m £m £m £m £m RevenueAircraft & Vehicle Systems 79.9 76.6 84.4 93.9 100.0Information & Power Systems 95.5 113.7 117.3 120.5 126.6Tactical & Sonar Systems 109.0 120.4 140.7 162.6 186.3 -------- --------- ------- -------- --------Total revenue 284.4 310.7 342.4 377.0 412.9 ======== ========= ======= ======== ======== Headline operating profit(1) Aircraft & Vehicle Systems 13.9 14.9 15.9 13.2 16.1Information & Power Systems 11.0 15.0 18.1 19.3 19.6Tactical & Sonar Systems 12.6 13.4 17.1 25.0 27.2 -------- --------- ------- -------- --------Total headline operating 37.5 43.3 51.1 57.5 62.9profit(1) Headline margin(1) 13.2% 13.9% 14.9% 15.3% 15.2% -------- --------- ------- -------- -------- Profit before tax 34.4 40.1 40.7 55.0 56.6Profit after tax 20.4 29.2 29.4 39.6 41.2 -------- --------- ------- -------- -------- Operating cash flow(2) 48.3 46.9 53.8 56.5 52.2Free cash before dividends,acquisitions and financing(3) 35.7 36.0 38.1 40.9 36.3Net debt at year-end(4) (30.3) (24.1) (34.3) (7.2) (14.2) -------- --------- ------- -------- -------- Headline earnings per share (p) 38.2 43.7 50.7 58.4 65.4(5) Dividends per share (p)(6) 12.3 13.8 15.9 18.5 21.2 -------- --------- ------- -------- --------Average employee numbers 2,505 2,678 2,880 2,989 3,054 ======== ========= ======= ======== ======== Notes: 1. Before amortisation of goodwill and amortisation of intangibles arising on acquisition. 2. Cash generated by operations, less net capital expenditure, R&D and LTIP share purchases. 3. Free cash flow before dividends, acquisitions and financing has been adjusted to include the purchase of Long-Term Incentive Plan shares, which are included in financing activities. 4. Bank overdrafts and loans less cash and cash equivalents. 5. Before goodwill amortisation and amortisation of intangibles arising on acquisition and fair value movement on derivatives. 6. Represents dividends per share on a dividends declared basis. Ultra Electronics Holdings plc 17. The financial information set out above, prepared in accordance with IFRS,does not constitute the Company's statutory accounts for the years ended 31December 2007 or 2006, but is derived from those accounts. Statutory accountsfor 2006 have been delivered to the Registrar of Companies and those for 2007will be delivered following the Company's annual general meeting. The auditorshave reported on those accounts; their reports were unqualified and did notcontain statements under s237 (2) or (3) Companies Act 1985. The preliminary announcement has been prepared on the basis of the accountingpolicies as stated in the financial statements for the year ended 31 December2006. Whilst the financial information included in the preliminary announcementhas been completed in accordance with IFRS, this announcement does not itselfcontain sufficient information to comply with IFRS. The company expects topublish full financial statements that comply with IFRS on 28 March 2008 (seenote 18 below). 18. Copies of the annual report will be sent to shareholders in due course andwill also be available from the Company's registered office at 417 BridportRoad, Greenford, Middlesex, UB6 8UA. The report will also be available on theCompany's website: www.ultra-electronics.com. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
ULE.L