Half-year Report

Embargoed until 0700 7 August 2017

Ultra Electronics Holdings plc

("Ultra" or "the Group")

Interim Results for the six months to 30 June 2017

FINANCIAL HIGHLIGHTS

· Half year results in line with management expectations

· Cash conversion at 53%: remain on track for full year performance of around 80%

· Net debt to EBITDA of 1.78x (H1 2016: 2.29x)

· Operating margin in line with prior period, at 15.7%

· Organic growth in order intake of 1.5% with book to bill of 1.07

· Conditional Merger Agreement to acquire Sparton Corp signed in early July

Rakesh Sharma, Chief Executive, commented:

"As previously indicated, 2017 will be more heavily weighted to the second half than normal and this is reflected in these interim results. Market conditions remain largely unchanged since our preliminary announcement in March. The US Federal budget was not approved until May and this, together with the recent UK General Election, has affected the progress of some contract awards. Nevertheless, following the strong order intake in the final part of the period, which has continued through July, we are pleased with our current order position.

Ultra enters the second half of the year with an order cover of 82% (2016: 84%). We anticipate the momentum in contract awards to continue as the year progresses. Furthermore, some additional export opportunities, such as the recently announced Indian defence systems contract, are edging closer to being secured. Our S3 initiative continues to drive efficiencies and investment in a further three ERP systems is to be implemented in 2017/18. The through-cycle cash conversion guidance is unchanged at above 85%. Based on the same £/US$ assumptions made in March ($1.30), the Board remains confident of making further progress in 2017 and our expectations for the full year remain unchanged."

(1) before Oman contract termination related costs, amortisation of intangibles arising on acquisitions, impairment charges, the S3 programme and adjustments to contingent consideration net of acquisition and disposal related costs. IFRS operating profit was £25.4m (2016: £38.8m). See Note 4 for reconciliation.

(2) before Oman contract termination related costs, amortisation of intangibles arising on acquisitions, impairment charges, the S3 programme, fair value movements on derivatives, unwinding of discount on provisions, defined benefit pension curtailment gain and interest charges and adjustments to contingent consideration net of acquisition and disposal related costs and, in the case of underlying earnings per share, before related taxation. Basic EPS 37.6p (2016: 38.4p). See Note 10 for reconciliation.

INTERIM MANAGEMENT REPORT

FINANCIAL RESULTS

* see notes below:

underlying operating profit before Oman contract termination related costs, amortisation of intangibles arising on acquisition, impairment charges, the S3 programme and adjustments to contingent consideration net of acquisition & disposal related costs.

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 related costs, amortisation of intangibles arising on acquisition, impairment charges, the S3 programme, fair value movements on derivatives, unwinding of discount on provisions, defined benefit pension curtailment gain & interest charges and adjustments to contingent consideration net of acquisition & disposal related costs. IFRS profit before tax was £30.9m (2016: £32.6m).

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, acquisition & disposal related payments, S3 programme payments, Oman performance bond payment, R&D and LTIP share purchases.

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

EBITDA is the underlying operating profit for the rolling 12 months ended 30 June, before depreciation charges and before amortisation arising on internally generated intangible assets and on other, non-acquisition, intangible assets. The figure is adjusted to remove the EBITDA generated by businesses up to the date of their disposal.

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.

The order book increased 2.8% to £807.8m (2016: £785.7m) and also showed an improvement from the 31 December 2016 position of £799.3m. The order book increase compared to June 2016, included 1.8% organic growth and a foreign exchange benefit of 1.0%. Compared to the order book at the end of December 2016, overall growth of 1.1% included organic growth of 3.9% offset by a foreign exchange reduction of 2.8%.

Order intake increased 7.4% to £390.3m and was particularly strong in the last two months of the half year, resulting in a pleasing book to bill ratio for the period of 1.07 (2016: 1.0). Foreign exchange accounted for 8.7% of the increase; disposals reduced growth by 2.8% and underlying order intake increased by 1.5%. Order book cover for the remainder of 2017 remains broadly the same as last year at 82% (2016: 84%).

Revenue in the period was £366.4m (2016: £366.6m). The disposal of the ID business in August 2016 impacted revenue by 2.7%. Revenue decreased organically by 6.7% due to the delay in the award of a number of contracts and the higher level of engineering activity compared to the prior year. These factors were offset by exchange rate movements which improved revenue by 9.3%.

Underlying operating profit* was £57.6m (2016: £57.7m). Profit decreased organically by 5.4% principally due to the expected lower margin engineering revenue and there was a 2.8% impact on profit from the disposal of the ID business. Foreign exchange, arising from translating overseas subsidiaries' results, contributed 8.0%. The resulting underlying operating margin* was 15.7% (2016: 15.7%).

Underlying profit before tax* was £52.3m (2016: £52.4m), after net financing charges* of £5.3m (2016: £5.3m).

The Group's underlying tax* rate in the period was 21.5% (2016: 22.0%) and the increase in underlying earnings per share was 0.3% to 58.3p (2016: 58.1p).

Reported (IFRS) profit before tax was £30.9m (2016: £32.6m) and reflected the combined effects of the elements detailed below:

Operating cash conversion* in the period was 53% (2016: 67%) with operating cash flow* of £30.5m (2016: £38.5m). At the end of the period Ultra had net debt* of £260.4m (1 July 2016: £325.4m).

The Group's S3 programme remains on track. S3 savings of £5.6m (2016: £2.3m) were realised in the period whilst costs on the programme increased to £3.0m (2016: £2.8m). £1.3m of these costs (2016: £1.1m) related to setting up our GBS capabilities in Rochester, New York and Wimborne, Dorset.

The Group's balance sheet remains strong, with net debt/EBITDA* ratio of 1.78x and net interest payable on borrowings covered around 11 times by underlying operating profit*. Subsequent to the period end a share placing was undertaken to part-fund the Sparton acquisition. This raised net proceeds of £133.9m.

Acquisition and disposal related costs include Sparton Corp acquisition expenses over the six month period and 3 Phoenix staff retention payments which were put in place at the time of acquisition of that business. There was a £2.4m charge for legal fees relating to the Ithra contract and a £1.6m charge for impairment of an intangible asset.

The proposed interim dividend is 14.6p, an increase of 2.8%, with the interim dividend being covered 4.0 times (2016: 4.1 times) by underlying earnings per share. The dividend will be paid on 21 September 2017 to shareholders on the register at 1 September 2017.

INVESTMENT

Total R&D in the period was £76.6m (2016: £68.6m) of which company funded investment was 4.5% of revenue at £16.6m (2016: £15.5m). Of this, £0.6m of investment was capitalised on specific long-term programmes. The Group's three divisions are at different stages of the investment cycle and this is reflected in the total figure. Depending on the type of engineering contracts awarded, some require Ultra to fund the development phase while others attract customer funding and this will vary as our Divisions progress through the investment cycle. While the Group has a good level of engineering projects, a number of these in the immediate future will be customer funded and therefore it is expected that company funded R&D as a percentage of revenue, will decrease by the end of 2017.

On 7 July 2017, Ultra announced that it had entered into a conditional merger agreement to acquire Sparton Corporation ("Sparton"), its 50/50 partner in the long-standing ERAPSCO joint venture, which develops, manufactures and supports all current US sonobuoys supplied to the US DoD. The proposed acquisition values Sparton's total equity at approximately $234.8m (£180.6m) and as part of the acquisition, Ultra will repay Sparton's debt at completion. The Group also completed a placing of new ordinary shares representing approximately 9.9% of Ultra's existing issued share capital to raise net proceeds of £133.9m to part fund the acquisition. Completion of the deal to acquire Sparton is expected by 1 January 2018.

OPERATIONAL REVIEW

Aerospace & Infrastructure

Revenue in Aerospace & Infrastructure increased by 3.2% to £96.0m (2016: £93.0m) and underlying operating profit increased by 5.9% to £16.1m (2016: £15.2m). The order book was unchanged at £255.8m (2016: £255.4m).

Aerospace & Infrastructure revenues benefitted from the increased activity on a number of land vehicle programmes as well as foreign exchange. The continued improvement in the operational performance at our contract manufacturing business, part of NCS, improved the profitability of this division.

This division benefited most from the currency translational impacts arising from the continued weakening of sterling against the US dollar, resulting in a divisional margin of 16.8% (2016: 16.3%).

Highlights of activities in the period that will contribute to the division's future performance include:

· Delivery of the first NuScale reactor module protection suite with US regulatory approval. The suite is worth £60m to the Group over the life of the programme.

· Ultra has won the supply of the HiPPAG stores management solution for the Saab Gripen NG aircraft. This is the first time a dual purpose HiPPAG system has been fielded, capable of providing stores ejection and seeker head cooling from the same unit. First production contracts are expected towards the end of 2017 at £7m.

· Boeing has awarded Ultra a contract to supply the first HiPPAG system for sonobuoy ejection in New Zealand.

· The FAA approved the certification plan for the innovative WheelTug system, for which Ultra is providing the electronic control. This programme is potentially worth £70m.

Communications & Security

Revenues in Communications & Security division decreased to £109.8m (2016: £119.8m) and underlying operating profit reduced to £13.0m (2016: £15.8m). When excluding the ID business, revenues in the division were flat year on year at £109.8m and underlying operating profit reduced by 8.5% to £13.0m (2016: £14.2m). The order book at the end of the period increased by 7.2% to £234.5m (2016: £218.8m).

This division had a greater level of development programmes in the period when compared to 2016, which lowered revenues and margins in the period. The division was also impacted by the Continuing Resolution which moved revenues out of the first half. The ECU RP programme largely concluded in 2016, which had improved margins in the prior period. The divisional margin was 11.8% (2016: 13.2%).

Encouragingly, strong order intake across the division, notably at CIS, resulted in a 7.2% improvement in the order book.

Highlights of activities in the period that will contribute to the division's future performance include:

· Ultra has won a contract for the Singapore EW programme initially valued at £8m with discussions underway for potential future opportunities.

· The receipt of multiple orders worth $11.6m for integrated ballistics equipment and systems expanding the Group's geographic range of customers.

· An initial order received worth $1.5m for ARA-63 Carrier Landing System contract with production and delivery to commence in H2 2017.

· Ultra has won an $18m integrated security system contract.

Maritime & Land

Revenue in Maritime & Land increased by 4.4% to £160.6m (2016: £153.8m). The division's underlying operating profit increased by 6.7% to £28.5m (2016: £26.7m). The order book increased by 1.9% to £317.5m (2016: £311.5m).

Increased demand for both US domestic and international sonobuoys continued over the six month period. Elsewhere in the division, revenues were impacted by the Continuing Resolution and the end of the Fatahillah ship refurbishment contract in 2016.

Margins improved to 17.7% (2016: 17.4%) due to the release of risk reserves as an international sonar programme came to an end.

Highlights of activities in the period that will contribute to the division's future performance include:

· Ultra received a FY17 order of $36m to supply SSQ-53G sonobuoys to US Navy ASW platforms. In addition, orders of $15.9m were received for sonobuoys to international customers.

· A $10m order to provide submarine launched torpedo countermeasures to the UK Royal Navy.

· A £6m initial order to commence design development and qualification of the RN Dreadnought SSBN Electric Cruise Propulsion system.

· Ultra delivered UltraLynx soldier systems to the US Army for evaluation within the Nett Warrior programme through an initial contract of $1m. In addition, Ultra successfully participated in a major UK warfighting exercise with its UltraLynx system to support the future UK dismounted soldier systems programme.

MARKET ENVIRONMENT

Aerospace (18% of 2017 H1 Group revenue) - In the large civil aircraft market, Airbus and Boeing have combined order backlogs of more than 12,000 aircraft and as these orders are executed Ultra will see further revenue growth. This, along with the continuing increase in passenger demand will help support future growth. The regional aircraft market has a number of new entrants including the MRJ from Mitsubishi Aircraft Corporation on which Ultra has a significant shipset value. Military aircraft will be dominated by the F-35 JSF programme and by medium size military transports where the Group is already established on these programmes. The military rotorcraft market is less buoyant has been in decline, however the recently announced five-year production contract awarded to Sikorsky to build Black Hawk helicopters for US Army is welcome. There are also opportunities for Ultra especially for the new Health Usage Monitoring System product line.

Infrastructure (4% of 2017 H1 Group revenue) - Passenger demand continues to drive growth within the aviation industry creating significant opportunities for more airport integrated systems and data management driving wider infrastructure demand. The UK rail improvement programme is now primarily AC with DC opportunities focused around specific regional sectors. As the infrastructure sector embraces a digital transformation, traditional offerings are becoming increasingly commoditised with value being generated from rapid innovation and smart technology.

Nuclear (7% of 2017 H1 Group revenue) - As the first generation of nuclear power plants in the western world reach the end of their operational lives, demand for reactor upgrades, life extensions and support is increasing. Funding challenges continue for new-builds with new construction programmes now dominated by China and increasingly India. Ultra's specialist sensors are qualified for most major global reactor designs and Ultra's partnership with Nuscale on Small Modular Reactor (SMR) development continues to open up new international interest. Increased global terror threats have increased the market potential for Ultra's radiation monitoring suite of products.

Communications (16% of 2017 H1 Group revenue) - Globally the communications market is subject to radical technology development and Ultra is well placed with the provision of broadband communications (radios, satcom), data links, telemetry and information assurance; all of which are increasingly required. In the UK and US, defence encryption programmes are balancing high-security against more commercial solutions at lower security levels. Tactical communications and data link demand is evident in a number of national programmes but funding and timing remain problematic. Light, mobile, high-bandwidth, low power, software-defined radios offering IP-solutions and comprehensive tactical data link systems remain attractive. Ultra's ability to work closely with customers to provide the most resilient systems that helps defeat the cyber threat to data and infrastructure that is increasing at both Government and commercial levels.

C2ISR (19% of 2017 H1 Group revenue) - Increased global threat levels are driving demand for ISTAR, particularly systems suitable for unmanned platforms. There is a significant interest in border surveillance for long and remote land and maritime borders as well as for the protection of fixed critical infrastructures and utilities. Command & Control (C2) solutions must securely interface with an exponentially increasing amount of sensors and communication systems to compete effectively.

Underwater Warfare (26% of 2017 H1 Group revenue) - The growing undersea threat environment, particularly from Russia, China, North Korea, and Iran, is driving increased investment by allied navies in advanced Anti-Submarine Warfare (ASW) capabilities. New frigate procurement programmes in the US, Canada, UK, and Australia are underway and include extensive sonar requirements. In addition, the airborne ASW market continues to expand as the Poseidon P-8 maritime patrol aircraft is being adopted by more nations driving increases in international sonobuoy acquisition. Furthermore, other nations are looking to upgrade their current ASW assets or add an ASW capability to an existing platform.

Maritime (8% of 2017 H1 Group revenue) - Long-term submarine programmes in the US and UK provide the Group with a robust revenue platform. However ship programmes with these core customers are more vulnerable to funding pressures. Replacement frigate programmes in Australia and Canada as well as export through Spanish and Turkish shipyards provide opportunities for growth. Small ship refits and capability upgrades in overseas markets complement our more established markets in the US and UK.

Land (2% of 2017 H1 Group revenue) - Funding issues continue in the land sector as Army budgets have reduced post Iraq and Afghanistan conflicts. Nevertheless technology is being used to improve the fighting ability of infantry vehicles and dismounted soldiers. Ultra is heavily involved in the definition of electronic architecture for armoured vehicles and has been selected as a member of the consortium of companies considered for development of the Next Generation Combat Vehicle-Prototype (NGCV-P), which will be tested by the US Army in 2023-2024. The NGCV family is planned to replace Bradley vehicles and Abrams tanks. The increase in connectivity in the battlefield is being extended to the electronic soldier and Ultra is involved in this development with its soldier-worn electrical power and data architecture capabilities.

RISKS AND UNCERTAINTIES

A number of potential risks and uncertainties exist which could have a material impact on the Group's performance in 2017 and beyond and which could cause actual results to differ materially from expected and historical levels. The Directors consider that the principal risks and uncertainties identified in the Group's Annual Report for 2016 remain valid. An explanation of those risks, and the robust business strategies that Ultra uses to manage and mitigate them, can be found in the annual report which is available for download at www.ultra-electronics.com/investors/annual-reports.aspx . In addition, certain risks relating to the acquisition of Sparton Corp were identified in the Group's announcement of the acquisition issued on 7 July 2017, which is available for download at https://www.ultra-electronics.com/investors/press-0717.aspx.

In the defence sector, which contributes around 66% of Ultra's revenue, there is continuing pressure on US and UK defence budgets. In the US, there is concern over the timing and feasibility of the proposed US DoD budget, which exceeds the Budget Control Act. This could lead to a more prolonged Continuing Resolution into FY18. 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 growth potential.

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:

· Managing organic and acquisitive growth

· Delivering major change programmes

· Attracting, developing and retaining the right people and preserving Ultra's culture

· Protection of intellectual property and information security

· Effectiveness of supply chain

· Legislation and regulation compliance

· Maintaining governance and internal control

· Health, safety and the environment

· Pension management

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-term 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

As previously indicated, 2017 will be more heavily weighted to the second half than normal and this is reflected in these interim results. Market conditions remain largely unchanged since our preliminary announcement in March. The US Federal budget was not approved until May and this, together with the recent UK General Election, has affected the progress of some contract awards. Nevertheless, following the strong order intake in the final part of the period, which has continued through July, we are pleased with our current order position.

Ultra enters the second half of the year with an order cover of 82% (2016: 84%). We anticipate the momentum in contract awards to continue as the year progresses. Furthermore, some additional export opportunities, such as the recently announced Indian defence systems contract, are edging closer to being secured. Our S3 initiative continues to drive efficiencies and investment in a further three ERP systems is to be implemented in 2017/18. The through-cycle cash conversion guidance is unchanged at above 85%. Based on the same £/US$ assumptions made in March ($1.30), the Board remains confident of making further progress in 2017 and our expectations for the full year remain unchanged.

- End -

Enquiries:

Ultra Electronics Holdings plc

Rakesh Sharma, Chief Executive 020 8813 4307

Amitabh Sharma, Group Finance Director

Susan McErlain, Corporate Affairs Director 07836 522 722

MHP Communications

James White 020 3128 8756

www.ultra-electronics.com

020 8813 4321

NATURE OF ANNOUNCEMENT

This Interim Management Report ("IMR") 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 IMR 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 IMR 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 an internationally successful defence, security, transport and energy company with a long track record of development and growth. The Ultra Group manages a portfolio of specialist capabilities generating innovative solutions to customer needs. Ultra applies electronic and software technologies in demanding and critical environments ranging from military applications, through safety-critical devices in aircraft, to nuclear controls and sensor measurement. These capabilities have seen the Ultra Group's highly-differentiated products contributing to a large number of platforms and programmes.

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

Ultra Electronics Holdings plc

Condensed Group highlights

for the half-year ended 30 June 2017

* On 7 July 2017 a total of 7,047,168 ordinary shares of 5 pence were placed representing 9.9% of Ultra's issued ordinary share capital prior to the placing. In accordance with IAS 33, earnings per share has not been restated to reflect this post balance sheet event.

Ultra Electronics Holdings plc

Condensed Consolidated Income Statement

for the half-year ended 30 June 2017

All results are derived from continuing operations.

* On 7 July 2017 a total of 7,047,168 ordinary shares of 5 pence were placed representing 9.9% of Ultra's issued ordinary share capital prior to the placing. In accordance with IAS 33, earnings per share has not been restated to reflect this post balance sheet event

Ultra Electronics Holdings plc

Condensed Consolidated Statement of Comprehensive Income

for the half-year ended 30 June 2017

Ultra Electronics Holdings plc

Condensed Consolidated Statement of Changes in Equity

for the half-year ended 1 July 2016

Equity attributable to equity holders of the parent

Ultra Electronics Holdings plc

Condensed Consolidated Statement of Changes in Equity

for the year ended 31 December 2016

Equity attributable to equity holders of the parent

Ultra Electronics Holdings plc

Notes to the Condensed Consolidated Interim Financial Statements

for the half-year ended 30 June 2017

1. General information

The information for the year ended 31 December 2016 does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report and did not contain statements under section 498 (2) or (3) of the Companies Act 2006.

These interim financial statements, which were approved by the Board of Directors on 7 August 2017, have not been audited or reviewed by the Auditor.

2. Accounting policies

The annual financial statements of Ultra Electronics Holdings plc are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. The condensed consolidated financial statements included in this half-yearly financial report have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with International Accounting Standard 34 'Interim Financial Reporting' as adopted by the European Union.

The same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the Group's latest annual audited financial statements. The following Standards and interpretations were adopted as at 1 January 2017:

· IAS 12 Income Taxes - Amendments regarding the recognition of deferred tax assets for unrealised losses

A number of new standards and amendments to existing standards have been issued but are not yet effective and, in the case of IFRS 16 - Leases, are not yet endorsed by the EU. IFRS 15 Revenue from contracts with customers - is effective from 1 January 2018. A detailed project has been undertaken to determine the impact of IFRS 15 had it been applied in 2016. The project has assessed revenue and contract terms from across all the Group's business units and contracting types. There is no impact to the timing of the Group's cash flows nor the timing of revenue recognition on the majority of the Group's contracts. The most significant changes relative to current accounting treatments arise in the following areas:

(i) the accounting for multiple elements of long term contracts approved at different times, for example contracts involving product design, followed by subsequent production orders,

(ii) allocation of the contract price to performance obligations for long term contracts containing multiple deliverables,

(iii) the accounting for certain transactions currently treated as long term contracts that may need to be treated as sales of goods; and

(iv) the accounting for certain licences that are determined to provide separately identifiable benefit to the customer. 

Long term contract revenue: it is expected that revenue for the substantial majority of contracts that are currently recognised using contract accounting will continue to be accounted for over the life of the contract, however the method by which performance obligations are determined may change on certain contracts including identification of material rights. A small number of contracts may no longer qualify to be contract accounted and revenue will instead be recorded at the point at which control of the goods transfers to the customer.

Revenue from sale of goods: the timing of revenue recognised on the substantial majority of such contracts is not expected to be significantly affected by IFRS 15 with revenue continuing to be recognised as control of goods is passed to the customer.

The process of implementation is complex as many of the Group's businesses will need to revise current processes and systems used for monitoring contract phases and performance to collect the required information, even if this does not give rise to a material change in revenue or profit recognised. The Group will continue to analyse and assess the potential impact until the transition date, and provide any further update as necessary.

3. Segment information

3. Segment information (continued)

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

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

4. Additional performance measures

To present the underlying profitability of the Group on a consistent basis year-on-year, additional 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. See note 21 for further details.

5. Oman contract termination costs

In 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. In 2017 £2.4m of legal costs associated with the Oman Airport IT contract termination were charged to the income statement.

6. Investment revenue