After a good second half and having addressed a number of legacy issues, we delivered an encouraging set of results in 2018.
While there is much work to be done in the next phase of Ultra’s development, we now have a solid platform from which to grow and deliver against our goal of creating long-term, sustainable value for all our stakeholders.
Ultra enters the current year well-positioned in strong markets with significant exposure to US defence spending. We have won good positions on a number of major new programmes, our order book is strong, improvement actions have commenced and we are focused on delivery.
Significant additional potential exists in Ultra through focusing the Group on where we add value, improving core processes and better leveraging the Group’s combined strengths and capabilities. We anticipate that 2019 will be a year of good underlying progress and we look forward to an exciting future with confidence.
Ultra achieved some notable successes in 2018 on new and existing programmes including multiple contracts on
the F-35 Joint Strike Fighter programme, further awards from the US Army for data links and tactical radios and a
range of large orders in the underwater warfare segment from the UK MoD, Royal Canadian Navy and the US Navy.
Only the firm element of these wins is reflected in our order book which grew strongly and at the end of 2018 was almost 10% higher than in 2017 at £983.9m (2017: £897.4m).
Revenues of £766.7m (2017: £775.4m) represented a welcome return to organic growth for the first time since 2011 with organic sales up 2.2% compared to a 3.3% decline in 2017. This growth reflected better conditions in defence markets, especially in the US, increases in our US and international sonobuoy revenues and demand for our radio and Air Defense Systems Integrator (ADSI)® products by the US military.
Underlying operating profit before tax declined 6.2% to £112.7m (2017: 120.1m), largely reflecting the £6.3m impact of previously disclosed development contract cost overruns at our Herley business, which led to a decline in operating margin to 14.7%.
Cash generated by operations was £102.4m (2017: £97.4m), reflecting increases in working capital. Underlying operating cash flow (1) was £89.3m (2017: £116.5m) resulting in underlying operating cash conversion of 79% (2017: 97%).
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