Ultra
Annual Report and Accounts 2021
The smart people
behind the smart
people.
Ultra Annual Report
and Accounts 2021
Every day, all over the globe, people are
working to make the world safer and more
secure.
Ultra is supporting those people
and what they do.
Our Company purpose to ‘Innovate today for a safer tomorrow’
lies at the heart of Ultra’s value proposition and everything we
do. Innovation is what enables us to develop outstanding solutions
to the complex problems our customers share with us, and deliver
the technologies that help create a safer tomorrow.
We deliver this purpose through innovation in our technologies
and our openness to searching for new ways to deliver outstanding
solutions to our customers’ most complex problems in defence,
security, critical detection and control environments. It’s by providing
them with the insight, technology and services they need to perform
at their best that we help them make the world a safer place, tackling
some of the biggest challenges our society faces.
Customer % of total 2021 sales
DoD
28%
MoD
7%
Lockheed Martin
6%
BAE Systems
4%
Northrop Grumman
3%
Pratt & Whitney
3%
Boeing
2%
Australian DoD
2%
US Bureau of Alcohol, Tobacco,
Firearms and Explosives
2%
General Dynamics
2%
Thales
2%
Raytheon
1%
Indian MoD
1%
Airbus
1%
Who we work with – our top
10 customers
We work directly with the US Department of
Defense and UK Ministry of Defence and with the
world’s major prime contractors. Direct defence
sales to the US DoD and UK MoD accounted for
35% of our revenue in 2021 (2020: 30%).
Indirect sales to the DoD and MoD accounted
for an additional 25%. We have high visibility of
future revenues with 78% opening order cover
(2020: 71%). Typically, our defence contracts will
progress through a development stage, then
low-rate initial production, sometimes followed
by full-rate production and aftermarket sales.
Our top 10 contracts accounted for 22%
(2020: 21%) of our 2021 revenue and our
top 10 platforms accounted for 17% of
revenue (2020: 18%).
Our vision
A leading partner delivering outstanding solutions
to customers’ most complex problems in defence,
security, critical detection and control.
What we do
Ultra is a trusted partner in the key elements
of mission-critical and intelligent systems.
We
design
high-integrity sensors that operate
in harsh environments to
detect
discrete data
points in a sea of noise. Our cutting-edge
processing capabilities will then
distil
these data
points into relevant, often mission-critical parcels
of information. We use secure, encrypted forms
of proprietary communication to
direct
the parcels
of information between the data source to users at
central locations and operators at the tactical edge
where our suite of competencies will help identify
the most appropriate response to
deploy
.
Revenue by market
2021
2020
70%
68%
9%
8%
Commercial & other
21%
24%
Our 2024 goals
As part of our Focus; Fix; Grow transformation
stakeholder groups.
We sought feedback from each group before we
embarked on our transformation. This feedback
formed the basis of our strategy and 2024
stakeholder goals:
See more on
p12-14
Employees
Create a dynamic, inclusive and inspiring work environment
that attracts, develops and retains the best diverse talent pool.
Customers
Partner
with customers, delivering innovative solutions
that create ‘win-win’ outcomes for all parties.
Suppliers
Develop Group-wide partners with like-minded values that
provide best-value solutions, technical innovation and support
mutual success, fairness and respect.
Communities
Conduct business in an ethical, safe and sustainable way,
acting as a positive force and making an active contribution
to our communities.
Investors
Deliver outstanding through-cycle value for shareholders,
Where we operate
+
in maritime, communications and intelligence
domains. This gives us access to the largest
addressable defence budgets in the world.
+
We also supply into other defence markets
where we can apply modular solutions and
into other selected, highly regulated and harsh
environment detection and control markets.
Revenue by geography
2021
2020
North America
63%
64%
UK
19%
18%
Mainland Europe
7%
8%
4%
4%
Rest of the World
7%
6%
Our markets
Ultra operates mainly as a Tier 3 (sub-system)
and occasionally a Tier 2 systems provider, in
the Maritime, C4ISR/EW (Command, Control,
Communications, Computers (C4) Intelligence,
Surveillance and Reconnaissance (ISR)/Electronic
Warfare (EW)), military and commercial aerospace,
nuclear and industrial sensors markets.
We use both research and development to
technological solutions to our customers’
most complex problems.
Revenue by market
2021
2020
Maritime
46%
46%
C4ISR-EW
28%
28%
Critical detection
and control markets
26%
26%
DELIVERING FOR ALL OUR STAKEHOLDERS
Ultra
Annual Report
and Accounts 2021
1
Strategic report
Governance
Financial statements
Strategic report
00
Who we are
04
Our Business Units
07
Strategic review
12
Working with our stakeholders (s172)
16
Our business model
18
Key performance indicators
20
Our target markets
21
Strategic Business Unit review
24
A Positive Force
42
Principal Risks & Uncertainties
48
Financial review
Governance
51
Our Executive Team
52
Our Board
54
Corporate governance report
54
Chairman’s governance report
66
Nomination Committee report
67
Audit Committee report
72
Directors’ remuneration report
74
Annual Report on Directors’ Remuneration
86
Directors’ report
Financial statements
89
Independent auditor’s report
98
Consolidated income statement
99
Consolidated statement of comprehensive
income
100
Consolidated balance sheet
101
102
Consolidated statement of changes in equity
103
Notes to accounts – Group
147
Company balance sheet
148
Company statement of changes in equity
149
Notes to accounts – Company
Shareholder information
157
Glossary
158
Five-year review
160
Business addresses
Contents
Another year of progress
and delivery
Acquisition of Ultra
Ultra
Annual Report
and Accounts 2021
2
a consistent year-on-year basis, additional non-
statutory performance indicators are quoted
throughout the strategic report. These adjusted
measures are referred to as ‘underlying’ and
‘organic’ and are reconciled to statutory measures
in
note 2
145-146. Also see glossary on p157.
ONE ULTRA, DELIVERING
Agile player in growing markets
+
Market growth driven by reality
of near-peer activity and threats
+
Fourth year of organic revenue
growth, despite Covid-19
Focus driving order book
and pipeline
+
ONE Ultra strategy delivering
+
Strong technology base driving
record order book and sales
pipeline
+
Improved research and
development alignment
in support of strategy
Growth and transformation
driving improving stakeholder
outcomes
+
Transformation delivering
ahead of plan
+
Continuous improvement
+
improvement being delivered
Continuing ONE Ultra momentum
+
Accelerated technology
investment aligned with long-
term customer priorities
+
Additional growth accelerators
supporting innovation
+
Excellent future visibility and
strong balance sheet to
accelerate strategy
RECOMMENDED OFFER
FROM ADVENT / COBHAM
In July 2021, Ultra received an unsolicited
approach and a number of subsequent
Limited (a wholly owned indirect subsidiary
of Cobham Group Holdings Limited,
ultimately owned by Advent International).
On 16 August 2021, the Board of Directors
of Ultra and Cobham Ultra Acquisitions
Limited announced that they had reached
agreement on the terms and conditions of
a recommended all-cash acquisition of the
entire issued, and to be issued, ordinary
share capital of Ultra. Under the terms
of the proposed acquisition, each Ultra
shareholder will be entitled to receive
£35.00, plus entitlement to an interim
cash dividend of 16.2 pence per share
which was paid in September 2021.
In October 2021, 99.86% of Ultra’s voting
shareholders voted in favour of the
transaction. Completion of the acquisition
is conditional on, among other things,
certain foreign investment and antitrust
approvals, including approval by HM
Government. All such approvals, other than
HM Government’s, have now been received.
On 13 January 2022, the Competition
and Markets Authority delivered its
Phase 1 Report to the Secretary of State
for Business, Energy and Industrial Strategy.
Since then, both Ultra and Advent/Cobham
have been engaging constructively with
HM Government, including the Ministry of
Defence, with a view to ensuring that the UK’s
national interests are appropriately protected
as part of the recommended transaction.
The Board no longer expects completion
of the transaction in Q1 2022. Ultra will
update the market on any news as soon
as possible. The Ultra Board remains
committed to working with Advent/Cobham
and other relevant stakeholders to deliver
a successful closing of the acquisition.
DIVIDEND STATUS
^ The Board has a progressive dividend
policy with a through-cycle target of circa two
times normalised cash and earnings cover.
However, in view of the terms and conditions
set out in the announcement dated 16
August 2021 (relating to the recommended
cash acquisition of Ultra by Advent/Cobham),
the interim dividend of 16.2p per share, paid
on 17 September 2021, will be the only 2021
to shareholders while the acquisition
remains pending.
Forward-looking statement
This Annual Report contains certain forward-looking
statements with respect to the operations, strategy,
of the Group. By their nature, these statements involve
uncertainty and are based on assumptions and involve
risks, uncertainties and other factors that could cause
from those anticipated. The forward-looking statements
of preparation of this Annual Report and, other
than in accordance with its legal and regulatory obligations,
the Company undertakes no obligation to update these
forward-looking statements. Nothing in this Annual Report
Financial highlights
Ultra
Annual Report
and Accounts 2021
3
Strategic report
Governance
Financial statements
Order book
£1.3bn
+22.2%
(2020: £1.1bn) Organic: +22.0%
Revenue
£850.7m
-1.1%
(2020: £859.8m) Organic: +4.2%
Statutory operating prot
£105.9m
-0.4%
(2020: £106.3m)
Underlying operating prot*
£129.6m
+2.8%
(2020: £126.1m) Organic: +8.0%
Statutory basic earnings per share
93.8p
-20.5%
(2020: 118.0p)
Underlying earnings per share*
135.7p
+3.9%
(2020: 130.6p)
Statutory cash generated by operations
£134.2m
-6.0%
(2020: £142.6m)
Underlying operating cash ow*
£111.5m
-4.0%
(2020: £116.1m)
Underlying operating cash conversion*
86%
(2020: 92%)
Total dividend per share^
16.2p
-71.5%
(2020: 56.9p)
“2021 was another year of strategic, operational
year of robust organic revenue growth. This was
achieved despite pandemic-driven operational
currency headwinds.
creating new opportunities, and we enter 2022 with
another record £1.3bn order book. We continue to
deliver organic growth ahead of our core markets
and our Focus; Fix; Grow transformation is driving
and delivering better outcomes for all of our
stakeholders. Our continuous improvement focus is
uncovering additional improvement opportunities.
ability to deliver excellent value for all its stakeholders.
This is recognised and is part of the rationale behind
Advent/Cobham’s interest in Ultra.
The Board remains committed to working with
Advent/Cobham and HM Government to deliver
a successful closing of the acquisition.”
Simon Pryce
Chief Executive
FOCUS
FIX
GROW
ONE ULTR A
Ultra
Annual Report
and Accounts 2021
4
Ultra at a glance
Our Business Units
Maritime
What we do
We deliver leading multi-mission
navies.
Our market-leading mission systems
deliver dominance in the maritime
domain. Our broad portfolio of
across the allied navies worldwide.
We develop advanced specialist
the modern maritime and underwater
battlespace. These provide critical
operational advantages to our defence
customers across surface, sub-surface
and unmanned platforms.
Core capabilities
Sonobuoy Systems
We are world leaders in the
manufacture and supply of
sonobuoys and anti-submarine
warfare (ASW) processing. Our
range of multi-static active (MSA)
acoustics use patterns of active
source and passive receive
sonobuoys and advanced signal
processing techniques to enhance
submarine detection probability
and increase area coverage.
Sonar Systems
Our underwater warfare systems
overcome the unique challenges
of the undersea environment. Our
solutions span: integrated hull and
variable depth sonar systems for
manned and unmanned platforms;
torpedo defence systems;
deployable underwater sensors;
and electronic warfare systems.
Naval Systems and Sensors
Our systems and sub-systems are
designed to protect allied navies
from emerging threats and ensure
a critical operational advantage.
We provide acoustic and sonar
systems, torpedo defence and
radar sensor solutions.
Signature Management and Power
We are proven turnkey system
developers of traditional
degaussing, advanced degaussing
and high temperature degaussing
systems and power conversion
solutions for naval applications.
Degaussing is the neutralisation
encircling it with a conductor
carrying electric currents. We
provide a range of proven, high-
performance solutions for surface
and sub-surface applications
a mission-critical advantage for
2022 addressable market
2022 total addressable market
£1.35bn
5-year market CAGR (2021–2026)
+2–4% p.a.
Revenue
£395.4m
(2020: £391.8m)
Organic revenue growth
+6.3%
Statutory operating prot
£58.3m
(2020: £55.9m)
Underlying operating prot
£59.4m
(2020: £58.6m)
Underlying operating margin*
15.0%
(2020: 15.0%)
46%
of Group
revenue
Ultra
Annual Report
and Accounts 2021
5
Strategic report
Governance
Financial statements
Intelligence & Communications
What we do
We deliver the intelligence that
informs decision-making in the most
challenging environments through
mission-critical, multi-domain
communications, command and control,
cyber security and electronic warfare.
Our innovative solutions provide
information advantage through the
intelligent application of integrated
technologies, combined with through-
life support service, ensuring that those
operating in high-threat environments
have the intelligence they need to carry
Core capabilities
Communications
Our tactical communications include
multi-domain solutions that are
protected from the threat of data
compromise or jamming. High-
capacity tactical radio and advanced
waveforms enable accurate timeline
exchange of voice, video and data
for military and government
customers worldwide.
Command, Control and
Intelligence (C2I)
Proven Command and Control (C2)
technologies deliver information
advantage in near real-time,
allowing quick and informed
decisions based on an accurate
picture of the situation on the
ground. Ultra delivers information
advantage across the operating
environment, enhanced by the
intelligence (AI), machine learning
(ML) and cross-domain intelligence
capabilities.
Cyber
We deliver advanced, high-grade
cryptography, key management
and security solutions that provide
the highest level of protection
against intrusion. Ultra’s capabilities
deliver information assurance with
ground-breaking technological
solutions.
Specialist Radio Frequency
We support improved threat
as improved enemy engagement
through the execution of complex
and critical operations at all levels
of the command structure. Our
products are key enablers for a
variety of advanced systems,
including radar warning, surface
ship situational awareness and
digital electronics warfare systems.
2022 addressable market
2022 total addressable market
£3.5bn
5-year market CAGR (2021–2026)
+3–5% p.a.
Revenue
£241.3m
(2020: £241.0m)
Organic revenue growth
+5.5%
Statutory operating prot
£30.9m
(2020: £23.7m)
Underlying operating prot
£37.9m
(2020: £33.5m)
Underlying operating margin*
15.7%
(2020: 13.9%)
28%
of Group
revenue
Ultra
Annual Report
and Accounts 2021
6
Precision Control Systems (PCS)
Forensic Technology
Energy
We design and supply high-integrity mission-
and safety-critical products and systems for the
most challenging situations, mainly in military
and commercial aerospace.
Our manned and unmanned vehicle systems
and equipment improve vehicle reliability and
performance, while reducing the burden on
operators and maintainers.
Core capabilities
A trusted supplier for mission- and safety-critical
hardware and software solutions in highly
regulated markets, providing systems and
products for use in harsh environments and
where high reliability is crucial.
Application-engineered mission and safety-critical
electronic systems in:
+
Data and power management
+
Position sensing and control
+
Stores ejection and management
+
Highly regulated industries
+
We are the world leader in the design and supply
of highly sophisticated optical imagery systems,
together with database management and
data analytics software with our core focus
on preventing and solving gun crime for
enforcement agencies around the world.
Core capabilities
+
Intellectual property in specialised algorithms
that digitally compare the microscopic markings
+
Experts in big data comparison and machine
learning algorithms
+
+
Almost 30 years of automated ballistic
installed base of systems
+
Global leaders in the provision of innovative
technology that generates timely and
to law enforcement agencies
+
Capable of delivering full turnkey solutions
+
A trusted and strategic partner for criminal
justice agencies around the world in helping
with the prevention and solving of gun crime
We design, manufacture, supply and support
safety sensors and systems in nuclear and
selected industrial applications worldwide.
As a global leader in highly regulated markets,
including nuclear, oil and gas and space, we
develop sensors, instrumentation and control
systems for harsh environments and mission-
critical applications.
Core capabilities
+
and control technologies
+
nuclear plants
+
Experts in safety-critical design, reactor
physics and materials science
+
Installed base in the UK Advanced Gas-cooled
+
Strategic instrumentation and control partner
of NuScale for their small modular reactor (SMR)
Critical Detection & Control
2022 addressable markets
PCS:
£604m
(2020: £579m)
Forensic Technology:
£252m
(2020: £219m)
Energy:
£870m
(2020: £1,188m)
5-year market CAGR (2021–2026)
2–4% p.a.
Revenue
£214.0m
(2020: £227.0m)
Organic revenue growth
-0.8%
Statutory operating prot
£29.7m
(2020: £30.0m)
Underlying operating prot
£32.3m
(2020: £34.0m)
Underlying operating margin
15.1%
(2020: 15.0%)
26%
of Group
revenue
Ultra at a glance
Our Business Units
continued
Ultra
Annual Report
and Accounts 2021
7
Strategic report
Governance
Financial statements
Strategic review
Performance update
We saw strong order intake on existing
programmes including:
+
ORION radio orders worth $140m from
the US Marines, US Army and US Navy
+
US Sonobuoy orders of $118m under
the ERAPSCO 5-year Indefinite-delivery/
indefinite-quantity (IDIQ) contract
+
£31m UK MoD Sonobuoy order; and
+
$23m award for MK54 lightweight
torpedo array kits.
We also delivered good new programme
wins including:
+
£65m Cyber award for the UK MoD
+
£60m order from the Indian Navy for
Integrated Anti-Submarine Warfare
Defence Systems
+
A CAD $24m Forensic Technology contract
covering multiple states in Brazil, and very
strong order intake from existing customers
renewing or extending service contracts
+
Production award of over $30m on the
Next Generation Surface Search Radar
programme
+
Contracts to provide integrated Command
and Control systems for Tunisia and
Romania collectively worth $14m
Another year of progress and delivery
capability and innovative solutions.
Revenue declined 1.1% as a result of stronger
Pound Sterling against the US Dollar, but on an
organic basis revenue grew 4.2% to £850.7m
(2020: £859.8m). Both the Maritime and
Intelligence & Communications Strategic Business
Units delivered organic revenue growth
significantly above their markets, at 6.3% and
5.5% growth respectively, despite pandemic-
related productivity and supply chain disruption
which led to some sales slipping out of the last
quarter into 2022, with chip shortages particularly
impacting our sonobuoy Business Unit. In Critical
Detection & Control, solid sales into military
aerospace, excellent sales into the ballistic
identification markets and some recovery
in business jets largely offset the continued
pandemic-related weakness in commercial
aerospace, and revenue remained largely
flat organically for the year at £214.0m
(2020: £227.0m).
Underlying operating profit increased
organically by 8.0% to £129.6m (2020: £126.1m)
with underlying operating margins improving
to 15.2% (2020: 14.7%), supported by improved
delivery of transformation benefits, good
operational performance particularly in
Intelligence & Communications and Critical
Detection & Control, a favourable product mix
and a £4m one-off licence of non-core IP. These
were partly offset by operational challenges
on some Maritime contracts, inefficiency caused
by tight supply chains, increased investment
into research and development (R&D), and £1.5m
of expensed cloud-based system implementation
costs which would have been capitalised under
our previous accounting policy. Underlying
earnings per share (EPS) increased 3.9% to
135.7p per share.
Group statutory operating profit decreased
by 0.4% to £105.9m against a backdrop of a
strengthening Pound Sterling. Statutory profit
before tax decreased by 20.3% to £82.7m (2020:
£103.7m), due to a one-off loss on disposal of two
small loss-making non-core businesses, the
professional fees incurred in relation to the
proposed acquisition of the Group, a provision
reflecting progress towards resolving a legacy
legal matter and the net loss relating to the mark
to market of foreign exchange hedges. Statutory
EPS decreased by 20.5% to 93.8p per share.
Ultra again delivered excellent cash generation
with underlying operating cash conversion at
86% (2020: 92%), ahead of our expectations,
driven by good collection and advance
payments. Cash conversion was lower than
at the middle of 2021 due to the expected
unwind of a large early customer payment,
as flagged in our interim update. Statutory
cash generated by operations was £134.2m
(2020: £142.6m). We ended the year with
when excluding lease liabilities. Since the year
end, Ultra completed the sale of some legacy,
niche, safety-critical product lines realising
net cash proceeds of £35m.
Ultra’s long-term return on invested capital
(ROIC) increased to 21.2% (2020: 20.0%).
Excluding the impact of goodwill and acquired
intangibles, ROIC was 66.1% (2020: 62.3%),
reflecting the ability of Ultra’s business model
to generate good returns on capital while
growing organically.
Ultra
Annual Report
and Accounts 2021
8
ONE Ultra strategy delivering
As our industry trends towards modular, scalable
and interoperable solutions, our ONE Ultra focus
and collaboration is already driving increased
opportunity, our record and growing order book
and accelerated top line growth. Combining our
capabilities at the point of design to become a
multi-domain integrated sub-systems provider
gives us the potential to provide significantly
greater content on many more platforms.
We possess significant multi-mission, multi-
platform and multi-domain integration expertise
across a range of scalable solutions, including
ADSI, ORION, REAP communication pods, RAIN,
Athena and interoperable crypto. Our targeted
investment strategy has already seen Maritime
radars connected to I&C Situational Awareness
Platforms, and Air Defense Systems Integrator
(ADSI) connected to our tactical optical and
infrared sensors.
Our improved collaboration and focus is enabling
us to bid more effectively into the next-generation
radar and Anti-Submarine Warfare (ASW) spaces,
by combining capabilities from a number of our
Operating Business Units to provide technology-
leading and cost-effective solutions. This is already
leading to new business – for example, our recent
£60m Indian Integrated Anti-Submarine Warfare
Defence System contract award. We are also
partnering more effectively with third parties and
government research agencies to provide leading-
edge solutions, such as developing a multi-static
capability to support the future needs of
unmanned ASW operations.
Focus is also driving more effective and targeted
technology investment. For example, we are
developing common Ultra solutions to interrogate
the big and complex data that our sensors and
sub-systems produce to generate actionable,
operationally relevant information. By applying
a standard approach to technologies, such as
artificial intelligence and machine learning,
we are developing solutions to give operators
exactly the insights they need, when they
need them, in a much-reduced timeframe
and at substantially lower cost.
Strategic review
continued
1 2
An agile player in
growing markets
Focus driving orderbook
and pipeline
Strategic update
Market growth driven by reality of near-peer
activity and threats
The tragedy unfolding in Ukraine demonstrates
the vital role that the defence industry plays in
maintaining stability and sustainability in society.
At Ultra we believe that the solutions we provide
are key to protecting the environmental, social
and governance standards that those societies
demand and we are increasingly focused on
providing them in as sustainable a way as possible.
The increase in the size and sophistication of
near-peer capabilities is evident, and amplifies
the need for allied defence investments in the
‘five-eyes’ nations, and across NATO. For example,
as Russia and China deploy advanced submarines,
investment into anti-submarine warfare by the
‘five-eyes’ nations is expected to increase at over
5% per annum over the next five years.
Near-peer activity is also driving greater
cooperation and alignment across the ‘five-eyes’
nations, of which the recent AUKUS security pact
between the United States, the United Kingdom
and Australia is a prominent example. Ultra is very
well placed to take advantage of the opportunities
from the increased threat environment and
increased collaboration it creates, which is
likely to further enhance Ultra’s opportunities
for growth in the medium to long term.
Multi-domain operations with increased
connectivity, interoperability and
interchangeability are of primary importance to
the battlespace of tomorrow, with investment
expected to grow more than 7% per annum in
the USA and UK over the next five years. Critical
programmes, such as the US Joint All-Domain
Command and Control (JADC2) initiative and the
UK’s Multi-Domain Integration (MDI) programme,
seek to formalise this future common operating
picture as well as integrate allied capabilities
across the ‘five-eyes’ nations and NATO.
From land, sea and air to cyber and
electromagnetic domains, Ultra’s technology and
capability is well situated to support key elements
of many of these vital programmes. Ultra’s leading
command and control, cyber and communications
technologies, as well as our investments in
artificial intelligence and machine learning
solutions, in particular position Ultra to meet
growing demand for secure interconnectivity
and multi-domain cognitive solutions.
Outside of defence, the drive for low-carbon
energy and domestic energy security provides
a supportive market for Ultra’s nuclear business,
while rising gun crime increases the need for
ballistic identification solutions. The outlook for
military aerospace and recovery of commercial
aerospace also both remain strong given
expected procurements in new aircraft,
upgrading ageing fleets and the development
of indigenous platforms.
Outperforming: fourth consecutive year
of robust organic revenue growth, despite
Covid-19
2021 marks the fourth year of robust organic
revenue growth for Ultra, having grown
organically by 18% since 2018.
The total Maritime market grew by 3% and
Intelligence & Communications market by 3.5%
in 2021. Over the next five years, we expect a
favourable market backdrop with compound
annual growth rates of 2–5% in our core markets
of Maritime, Intelligence & Communications
and Critical Detection & Control. Increasing
spend is forecast to be directed towards core
Ultra segments; anti-submarine products and
intelligent networking communications which
enhance capabilities of existing defence assets.
FOCUS
FIX
GROW
Ultra
Annual Report
and Accounts 2021
9
Strategic report
Governance
Financial statements
Strong technology base driving record
order book and sales pipeline
The strength of our technology base is driving
our record order book of £1.3bn, up 22.2% vs
2020. Our total sales pipeline has also grown
significantly to £13.5bn (2020: £11.4bn), based
on all identified opportunities which we anticipate
bidding on and have greater than 50% confidence
of winning over the next nine years. In addition,
our total IDIQ contract value is £1.1bn, which
measures the expected ‘call-off’ and exercise
of existing IDIQ contracts.
Many of our capabilities are core to military
modernisation efforts. An example is our
ORION radio system. Ultra has been the primary
US defence upper-tier radio supplier for over
50 years, providing the backbone of tactical
communications, a critical area for the move
to greater battlespace connectivity. We are now
supplying our fifth-generation high-capacity line
of sight radio system to the US Army, US Marines
Corps, Missile Defence agencies, US Navy and
Special Forces and we are already developing
the next-generation capability. Ultra is also well
positioned to provide both improved intelligence
to existing platforms and additional connectivity
across the battlespace to the air defence tier as
the developer of the Air Defence Systems
Integrator (ADSI).
Improved research and development strategy
alignment in support of strategy
We are increasingly acting as a strategic adviser
on the specification and design of mission-led
solutions and increasing our engagement with
research customers such as DARPA and DSTL.
The ongoing execution of our transformation
agenda continues to free up capacity to support
increased investment in R&D. During 2021 we
invested an additional £3.1m in internally funded
R&D, an organic increase of 10.3% over 2020.
This takes our total customer and internally
funded R&D to c.£900m since 2016.
Our key strategic investments into R&D during
2021 were:
+
Development of artificial intelligence and
machine learning capabilities to target key
strategic developments e.g. embedding edge
processing and intelligence in our deployed
sensors, building ‘Course of Action’ generators
in our battlespace management offerings and
providing enhanced AI/ML algorithms for our
submarine detection systems
+
Investment in next-generation radio and satellite
communication technologies and cognitive
networking capabilities, incorporating adaptive
techniques, such as autonomous waveform
orchestration and adaption, to support resilience
in contested and congested environments
+
Next-generation of Ultra sonobuoys, enabling
Ultra to meet its customers’ needs once the
ERPASCO joint venture ends
+
Small SWaP microwave assembly building blocks
to support future electronic warfare and radar
applications
+
Design of an automated and modular
containerised ASW deployment solution for
manned and unmanned vessels, including
future Unmanned Surface Vehicles (USVs)
+
Wearable soldier technology with enhanced
communications and sensor capability to
provide live real-time feedback of biometric
and situational data, rotocraft health
monitoring and advanced controllers
+
Key upgrades to the IBIS (Integrated Ballistic
Identification System) platform, including
improved 3D resolution, traceable calibration,
speed and weight improvements, and
development of an automated triage
solution for crime scene deployment
3
Growth and transformation
driving improving stakeholder
outcomes
Transformation delivering ahead of plan,
increased confidence
We continued to invest in our Focus; Fix; Grow
transformation programme improving Ultra’s
core processes to drive improved outcomes
for stakeholders. Our 2021 actions delivered
marginally ahead of our plans and contributed
to margin improvements across the Group.
In 2021 Ultra incurred £8.1m of operational
expenditure and spent £5.1m of capital
expenditure on transformation-related activities.
Key investments included implementing new best
of breed financial consolidation, HR and customer
relationship management processes and tools,
consolidating four manufacturing sites to two
and developing standard enterprise support
processes. We have continued to improve
programme governance and financial modelling
and continue to have confidence in delivering the
medium-term benefits and the investment cost
as set out in our interim results announcement.
A brief summary of progress during the year
is shown overleaf.
Continuous improvement driving
additional benefits
Our focus on embedding ‘The Ultra Way’ (Ultra’s
approach to continuous improvement) across
our business continues at pace and has delivered
new benefits during 2021. In the first half of the
year, we launched the Ultra Improvement Group,
a dedicated team to deliver Ultra Way activities
and train colleagues in the skills required to
run continuous improvement processes
independently.
The Ultra Improvement Group has driven a
strong cadence of continuous improvement
activity, running 19 major sprints during 2021.
The Ultra Way approaches developed by the
Ultra Improvement Group are increasingly
well embedded across the Group, with
numerous teams also holding local continuous
improvement activities during the year. Benefits
from continuous improvement in 2021 were
£3.3m, driven primarily by Ultra PCS through
inventory optimisation.
Ultra
Annual Report
and Accounts 2021
10
Strategic review
continued
FOCUS
FIX
GROW
3
Growth and transformation
driving improving stakeholder
outcomes
WORKSTREAM
GOALS
Operating
Model
+
Improved customer alignment
+
Better functional support
We embedded the new Strategic Business Unit (SBU) and Operating Business Unit (OBU)
structure on 1 January 2021, centralised IT along functional lines and moved to a category-led
procurement model.
Site Excellence
+
Improved and optimised
working environment
+
Increased sustainability
+
Better working practices
We successfully consolidated two operations activities in Naval Systems in North America
and made excellent progress upgrading our Cheltenham facility in the UK, which will enable
the consolidation of two of our PCS facilities into Cheltenham.
In addition, our Forensic Technology business moved into a much improved facility in Montreal
and both our Communications and Sonar businesses in Canada started projects to upgrade
their facilities in preparation for anticipated growth. Finally, we have now agreed the lease for
our new I&C UK site in Maidenhead, with an expected move completion date of Q4 2023.
Operational
and Functional
Excellence
+
Improved utilisation, efficiency,
productivity and delivery
+
Better collaboration to improve
customer outcomes
We made excellent progress standardising our HR, financial consolidation and sales processes
with a view to both improving their effectiveness and productivity. As a result, 2021 saw the
launch of our new ‘MyHR’, Finance and Customer Relationship Management platforms. Our
approach to project management is increasingly mature, and our Business Units are now
supported by a harmonised global process template with coverage across the majority
of our main functions.
Procurement
+
More reliable supply chain
+
Better scale benefits
+
Transparent data and standard
procurement processes
The Procurement team made good progress developing a new operating model that
enables Ultra to leverage its procurement spend, improving capability to drive savings
across key procurement categories, with 2021 cost savings and avoidance targets exceeded.
We have appointed a team of Global Category Managers in line with the updated operating
model, and a new procurement leadership team has been formed, consisting of senior
members from each SBU, to help accelerate procurement benefits in 2022.
ONE Ultra
Culture
+
Investing in people
+
Leadership and talent to
support ONE Ultra strategy
We increased investment in Group-wide leadership training and diversity and inclusion
initiatives for our people, to help them develop more robust and ambitious strategies
while leading change and creating a continuous improvement culture and capability.
This is already having tangible benefits, with more robust strategies and execution plans,
improved change management, factory and functional processes. We have also launched
improved systems and a culture to support the rich funnel of improvement ideas coming
from our teams and a programme to build continuous improvement capability and
expertise in the organisation.
Technology
Enablement
+
More efficient IT infrastructure
+
Improved collaboration
+
Standard processes supported
by standard applications
Our Microsoft 365 suite of products is now well embedded across the organisation and the
rollout of our ‘UNet’ continues to progress well, providing our sites with efficient and best-
practice networking solutions that allow secure information exchange.
We have also finalised the design and implementation of a new innovation management
platform designed to provide a space to propose, collaborate on and track new product
improvement and R&D concepts.
The Transformation Project Management Office completed the redesign of our ChangePoint
portfolio management system, which is used to oversee, manage and execute delivery
of our transformation projects. The new implementation provides our transformation
community with real-time monitoring of project status, alongside robust stakeholder
reporting capabilities.
Ultra
Annual Report
and Accounts 2021
11
Strategic report
Governance
Financial statements
Accelerated technology investment aligned
to long-term customer priorities
With Ultra solutions already playing a key role in
the gathering and dissemination of information
across multiple domains, and with an increasingly
interconnected ecosystem of solutions, we are
well positioned to help customers better leverage
this abundance of data to make faster, smarter
decisions in mission-critical scenarios. Today, our
technology investments are focused on ensuring
that Ultra is an increasingly vital partner in the
shift to a cognitive and integrated battlespace.
2021 marked the first full year of operation for
Ultra Labs, our advanced concepts and emerging
technologies group. Ultra Labs’ mission is to
accelerate innovation and development in areas
of key strategic growth by leveraging disruptive
and advanced technologies. It provides a rapid
insertion capability to Ultra’s considerable
engineering portfolio by nurturing a culture of
innovation and driving development through
demonstration. Ultra Labs complements and
extends our OBU’s key offerings by providing
specialist AI/ML, software and materials
science personnel and by providing support
for entrepreneurship and the acquisition of
customer R&D from strategic sources. Ultra Labs
activities focus around three major initiatives:
+
Cognitive Integrated Battlespace:
Integrating
and augmenting our market-leading solutions
with hybrid, cloud native, advanced AI/ML to
develop enhanced solutions that reduce
operator cognitive burden, process big and
complex multi-domain data to gain operationally
relevant insights, and prevent tactical surprise.
+
Cognitive Integrated ASW:
Integrating Ultra’s
existing ASW systems to deliver a single
multi-sensor, multi-domain and multi-platform
ASW force demonstrator, enabling manned
and unmanned systems to work in concert to
provide our customers with a mosaic of
deployable ASW capability.
+
Modularised development platform: Rapid
development of multi-application modular
solutions:
a shared environment for collaborative
software development, creating modular,
interoperable and reusable IP. Leverages a
common Ultra UI/UX and integrating a multitude
of internal and external data sources to underpin
applications such as advanced geospatial
anomaly detection, correlation and fusion
engines, and next-generation analytics
platforms.
Additional growth accelerators
supporting innovation
2021 also saw the launch of a number of new
growth accelerators, designed to enhance Ultra’s
ability to respond quickly and efficiently to
emerging customer needs, and to proactively
identify future needs.
Our new Ultra Fellows programme was launched
in Q4 2021 and has brought together eight of our
most experienced and respected technical leaders
to form a strategic working group operating
across the whole of Ultra. As renowned experts
in their respective fields, the Ultra Fellows are
now working together to provide new, holistic
perspectives on all levels of our technology
strategy. They will offer mentorship and guidance
to our internal technical community, while
cementing Ultra as a thought leader in multi-
mission, multi-domain solutions externally.
Our Ultra Software Factory was also launched
during the year and is a dedicated software
engineering function designed to help our
Business Units deliver secure, best-in-class
software for our most mission-critical solutions.
It will improve our ability to deliver quality
software on a favourable cost basis by deploying
a centrally managed team of developers working
virtually across our home markets. The initiative
will also facilitate offshoring for development,
testing and evaluation that will improve cost
competitiveness and free up expert internal
resources for high-priority work.
Excellent visibility and strong balance sheet
to accelerate strategy
In 2021 Ultra’s order cover is 78% (2020: 71%)
demonstrating our confidence of good growth
in 2022.
Ultra’s defence platform lifecycles provide
further long-term visibility as programmes move
from design, manufacturing, production and
aftermarket which can last anywhere between
5 and 30 years. Once a programme is won, this
typically results in strong revenue generation
for the whole platform life due to the custom-
designed solutions and Ultra’s long-term
reputation for excellence.
In addition to this excellent visibility, our positive
transformation progress increases our ability to
add value to potential future acquisitions. We take
a disciplined and robust value-based approach
to any potential acquisitions. Opportunities
are only considered where we can accelerate
strategy delivery and create additional value for
stakeholders through enhanced growth and
operational synergies. We now have the right base
and the value discipline together with significant
financial capacity from our unlevered balance
sheet to supplement our organic growth and
a good pipeline of opportunity.
Operational and financial
improvement delivered
Our Focus; Fix; Grow transformation plan is
not only delivering financial benefits. In 2020,
we consulted our stakeholder groups and defined
what extraordinary performance through our
ONE Ultra strategy would look like. As a result,
we created key performance indicators with
specific targets that we use to manage our
business and ensure delivery.
Despite the pandemic-related challenges we
have faced in the last couple of years, we continue
to work towards our 2024 stakeholder goals
with key 2021 measures showing good
improvements including:
+
On-time delivery increased to 85.2%
(2020: 82.8%)
+
Labour productivity increased in 8 out of 11
of our Business Units
+
Average Net Promoter Score across the
Group marked as ‘Great’ or ‘Excellent’
+
Reduced carbon emissions by per £m of
revenue by 24% vs 2019
+
Number of open roles filled by internal
candidates up 107%
+
Reduced our single-use plastic consumption
by more than 75,000 items
+
Increased our Group community support fund
to more than £500,000 in the past two years
4
Continuing ONE Ultra
momentum
Ultra
Annual Report
and Accounts 2021
12
Working with our stakeholders (s172)
Stakeholder engagement
2024 Goal:
Create a dynamic, inclusive
and inspiring work environment that
attracts, develops and retains the best
diverse talent pool.
Key performance measures
+
68% engagement score – a good result taking
account of Covid-19 pressures and the Advent
transaction causing uncertainty (2020: 75.5%)
+
170 roles filled by internal candidates (2020: 82)
+
16.6% Group voluntary turnover (2020:
below 10%)
Stakeholder feedback
Employee feedback from our engagement
survey focused on:
+
Improved manager relationships, teamwork
and collaboration and understanding of
Ultra’s strategy
+
Increased pride of working for Ultra and
feeling that we make a difference
+
Decline in number of employees intending
to stay with Ultra in the next 12 months
2021 progress
+
Improving our succession planning and talent
pipeline with leadership, middle manager
and women in leadership training and
development courses
+
Building on our compelling reward and
recognition programme for all employees, with
our new Reward book and relaunch of our
employee share schemes
+
New Diversity, Equity and Inclusion Policy
launched and Uniquely Ultra diversity employee
focus group
+
New working from home and wellbeing policies
and programmes plus new culture recognition
awards
+
Transforming our business with new global
HR systems launched
+
Held 19 major Ultra Way continuous
improvement ‘sprints’
How Ultra engaged / responded to feedback
+
UltraView engagement survey including action
plan follow-up feedback sessions offered to all
employees
+
Leadership conferences
+
Weekly newsletter, Ultranet sharing platform,
Ultra TV, monthly town hall meetings and packs
+
Leadership training programmes
+
Board and Executive Team site visits
+
Ethics Committee site visits
+
Strategic Business Unit roadshows
+
Ultra Way continuous improvement sprints
+
Annual Anti-Bribery and Corruption training
Employees
In accordance with the reporting requirements of
the UK Corporate Governance Code 2018 and the
Companies (Miscellaneous Reporting) Regulations
2018 for a separately identifiable section 172
(s172) statement, this section shows how the
Directors have performed their duty under s172
of the Companies Act 2006 to promote the success
of the Company, having regard to the long-term
consequences and the interests of all Ultra’s
stakeholders when making their decisions. Details
of how we have engaged with our stakeholders,
addressing our long-term goals for each, are set
out on pages 12 to 14. On pages 14 and 15 we set
out the principal decisions taken by the Board in
2021, show how these contribute to the success
of Ultra and describe how stakeholders were
considered, as well as the likely consequences
of those decisions over the longer term.
ONE Ultra strategy:
pages 7-11
Transformation investment:
pages 9-10
Supporting our people:
pages 32-37
Workforce engagement:
page 64
Stakeholder goals:
pages 12-14
Protecting our planet:
pages 26-31
Transform our business:
pages 9-10
Ethics Committee:
page 60
Audit Committee report:
pages 67-71
Stakeholder goals:
pages 12-14
Further information on how s172 has
been applied by the Board can be found
as follows:
The likely consequences of any decision
in the long term
The interests of the Company’s employees
The need to foster the Company’s business
relationships with suppliers, customers
and others
The impact of the Company’s operations
on the community and environment
The desirability of the Company maintaining
a reputation for high standards of business
conduct
The need to act fairly between members
of the Company
Board engagement
Direct
+
The Board review all ‘speak up’ whistleblowing
reports made and follow up actions
+
Board members met with employees at various
site visits throughout 2021
+
Our CEO and CFO held several townhall visits
with Q&A
+
‘Ask the CEO’ emails
+
Geeta Gopalan and Victoria Hull joined multiple
diversity initiatives throughout the year
Indirect
+
Received and discussed results of Ultra’s
employee engagement survey and in particular
employee retention during the proposed
acquisition of Ultra
+
Received and discussed feedback from our
independent Ethics Committee
+
Our Board of Directors oversees our
programme to prevent bribery and corruption
and receives regular updates on compliance
with annual training
See
page 64
for more information
on workforce engagement
Ultra
Annual Report
and Accounts 2021
13
Strategic report
Governance
Financial statements
2024 Goal:
To partner with customers,
delivering innovative solutions that create
‘win–win’ outcomes for all parties.
Key performance measures
+
Average Net Promoter Score (NPS) of 52 across
Ultra, marked as ‘Great’ or ‘Excellent’ (2020: not
measured); benchmarking data shows that we
are well above the 75th percentile in our markets
+
Total Group market share (based on organic
revenue and 2021 total addressable market in
each SBU) remained flat at 14% (2020: 14%)
+
On-time delivery increased to 85.2%
(2020: 82.8%)
+
Solutions Vitality Index (the percentage of
revenue driven by solutions developed in the
last five years): 15.0% (2020: not measured)
+
Labour productivity improved in 8 out of 11
OBUs versus 2020
Stakeholder feedback
+
Good communications and customer service
+
Room for improvement on lead times of
solutions
2021 progress
+
Launched our new customer feedback tool
to monitor customer satisfaction with two
customer surveys during the year
How Ultra engages
+
Ongoing customer relationship management
to ensure our customers’ needs are met
+
Central SBU engagement with key influencer
relationships
+
Standardised customer feedback process
undertaken twice per year
Board engagement
Direct
+
Our CEO engages with key customers
directly and returns feedback to the Board
Indirect
+
Received feedback from Ultra’s first customer
survey and discussed how to improve lead times
across Ultra
+
Received customer feedback during
presentation by SBU/OBU senior
management teams
2024 Goal:
Develop Group-wide partners
with like-minded values that provide
best-value solutions, technical innovation
and support mutual success, fairness
and respect.
Key performance measures
+
First year of procurement savings through
ONE Ultra strategy
+
Total cost of procurement (direct and indirect
procurement costs) reduced versus 2020
2021 progress
+
Through our ONE Ultra strategy and joined
up approach to suppliers we have reduced
procurement costs over the year
+
Late supplier deliveries were also reduced due to
this joined up approach to supplier relationships
How Ultra engages
+
Ongoing supplier relationship management
through our procurement teams, including
roll-out of Group-wide Supplier Code of Conduct
+
Creating a dialogue with our key suppliers
– sharing our vision for procurement
transformation and listening to our
suppliers’ feedback
+
Taking a global view of strategic categories
which allows us to collaborate with suppliers
across businesses and countries
Board engagement
Indirect
+
Reviewed supplier practices, including the
approval of a revised Modern Slavery and
Human Trafficking Global Policy and approval
of Ultra’s first Supplier Code of Conduct
+
Continued review of supplier needs in
response to Covid-19, and the Ultra risk
profile monitored by the CRO
Direct
+
Continued review of procurement
transformation business case as Group-wide
approach to category management and
supplier, and their supply chain partnerships
2024 Goal:
To conduct business in an
ethical, safe and sustainable way, acting
as a positive force and making an active
contribution to our communities.
Key performance measures
+
Reduced 2021 carbon emissions by 21.7%
vs 2019 (Scope 1 and 2 only)
+
Increased our Group community fund to over
£500,000 in the past two years
+
More than 2,000 hours of community giving
in 2021
+
Reduced our use of single-use plastic by
more than 75,000 items
Stakeholder feedback
+
Ultra support for local communities through
our ‘Giving back fund’ and ‘Giving back days’
and community impact
2021 progress
+
Improved our reporting of near-miss health and
safety reports to increase four times so we have
better data and information on areas we need
to improve
+
ONE Ultra Packaging Policy alongside Single Use
Plastics Policy launched in 2020 and expanded
on in 2021
+
ONE Ultra Forces Charter was recognised by
the Ministry of Defence in 2021 when Ultra
was awarded a gold award for being an
Armed Forces employer
How Ultra engages
+
£200,000 annual Matched funding scheme
+
Two ‘Giving back days’ per employee each
year to volunteer in their local community
+
Group CSR Committee – with 17 members
across all our businesses and locations who
manage central funds and allocations
+
Significant veterans’ and Armed Forces charities
engagement – for example, we became a
corporate sponsor of Pups4Patriots who rescue
qualified shelter dogs and train them to offer
the best possible assistance to veterans with
Post-Traumatic Stress (PTS) and Traumatic
Brain Injury (TBI)
Board engagement
Direct
+
Received a presentation from our CSR
Committee Chair on progress of CSR initiatives,
and discussed and approved sustainability
measures and goals for 2022 and 2024
Customers
Communities
Suppliers
Ultra
Annual Report
and Accounts 2021
14
Principal board decisions
Working with our stakeholders (s172)
continued
On 16 August 2021, we announced that we had
reached agreement with the Board of Cobham
Ultra Acquisitions Limited, a wholly owned
indirect subsidiary of Cobham Group Holdings
Limited (“Cobham”) on the terms and conditions
of a recommended all-cash acquisition of the
entire issued, and to be issued, ordinary share
capital of Ultra by Cobham (the “Acquisition”).
Under the terms of the proposed Acquisition,
each Ultra shareholder will be entitled to
receive £35.00 per share (“Offer Price”). The
Offer Price represented a 63.1% uplift to the
mid-market closing share price of £21.56 as at
24 June 2021, being the last business day before
the commencement of the offer period.
In reaching this decision, the Board
considered the implications of the Acquisition
for each stakeholder group, in particular
our employees, customers, suppliers,
communities and our investors. The Board
took into account Advent/Cobham’s statements
and commitments to Ultra’s workforce –
for example, commitments around no site
closures – and only recommended the offer
once consultation with the pension trustees
was complete. The Board also agreed non-
financial terms and commitments in a
Cooperation Agreement which provides
undertakings to protect the interests of
Ultra’s key stakeholders, including the UK
Government, that would apply immediately
following completion of the Acquisition.
Having been advised by the Company’s
financial advisers that the terms of the
Acquisition were considered to be fair and
reasonable, the Board recommended the
Acquisition to shareholders via a court-
sanctioned scheme of arrangement (the
“Scheme”). The Scheme was overwhelmingly
approved by the Company’s shareholders in
October 2021 and now awaits final Government
approval. The Ultra Board is committed to
working with Advent/Cobham and other
relevant stakeholders towards satisfaction of
the outstanding conditions of the acquisition.
Further information regarding the terms of
the Acquisition can be found in the Rule 2.7
Announcement and Cooperation Agreement,
both dated 16 August 2021, and in the Scheme
Document dated 8 September 2021, which are
available to download on our website
www.ultra.group.
Offer from Advent
2024 Goal:
Deliver outstanding through-
cycle value for shareholders, through
Key performance measures
+
Improved ROIC to 21.2% (2020: 20.0%)
+
Improved order book growth to +22%
(2020: +5.9%)
+
Organic sales growth was 4.2%
+
Improved working capital turns to 12.3x
Stakeholder feedback
+
Proposed acquisition of Ultra which 99.86%
of shareholders voted for
+
Feedback regarding Ultra’s progress towards
meeting the Hampton-Alexander target of
33% of women on the Board
2021 progress
+
Core markets continuing to grow, driven
by increasing near-peer threats
+
Fourth consecutive year of robust organic
revenue growth
+
Operational and financial improvement
delivered for all stakeholders
How Ultra engages
+
Significant shareholder engagement around
the acquisition of Ultra in addition to normal
practice IR activities including:
+
Results roadshows and investor meetings
with CEO, CFO and Investor Relations
+
Annual General Meeting
+
Investor calls and briefings
Board engagement
Direct
+
Private and institutional investor meetings
organised with Directors as requested
+
Investor presentations by the CEO and
CFO following annual results, with meetings
organised upon request after the recommended
offer from Advent was announced
+
Engagement with shareholders regarding
Ultra’s commitment to meeting the Hampton-
Alexander targets (put on hold during the
acquisition related offer period)
Investors
Ultra
Annual Report
and Accounts 2021
15
Strategic report
Governance
Financial statements
Sustainability plan
The Board recognises that the way we do
business is as important as what we do.
Sustainability is embedded in our core business
goals which are measured though our KPIs and
therefore are directly linked with targets for
remuneration and reward across our leadership
teams. We have made substantial progress
across all our four Positive Force pillars in 2021:
+
Protecting our planet and society
+
Supporting our people
+
Giving back
+
Doing the right thing
The Board has played a particularly active role
in supporting our Diversity, Equity and Inclusion
agenda with Board members taking part in
Employee round-table discussions on gender
balance, personal experiences of being in a
leadership role from a minority background
and women’s leadership.
The Board also supported and endorsed the
extra work which has been completed during
the year to establish a journey for Ultra to
become net zero and increased environmental
disclosure in our annual Sustainability Report,
they received regular updates on progress from
Ultra’s CSR Committee Chair and provided input
and guidance at each stage.
Long-term implications:
The Board is aware
that Ultra’s CSR goals are key to our future
success and has placed significant emphasis
on how Ultra can continually improve our
impact on our local communities, environment
and employees. Through our sustainability
plan explained on pages 24-41 and in our
separate Sustainability Report which can be
found on www.ultra.group, employees now have
the ability to give back to their local communities
through Ultra’s giving back framework, support
the environment through Ultra Health, Safety
and Environment initiatives, and take part in
regular health, wellbeing and diversity
improvements through employee resource
groups.
Protecting
our planet
and society
(Environment
+ defence)
Supporting
our people
(Employees,
customers,
supply chain)
Giving
back
(Charity and
community)
Doing the
right thing
(Governance)
Ultra
Annual Report
and Accounts 2021
16
Our business model
How we create value for our stakeholders
Detect
Distil
Direct
Deploy
Design
What we do
We are a trusted partner in the key elements
of mission-critical and intelligent systems.
We design high-integrity sensors that operate in
harsh environments to detect discrete data points
in a sea of noise. Our cutting-edge processing
capabilities will then distil these data points into
relevant, often mission-critical parcels of information.
We use secure, encrypted forms of proprietary
communication to direct the parcels of information
between the data source to users at central locations
and operators at the tactical edge where our suite of
competencies will help identify the most appropriate
response to deploy.
Our purpose
Our Company purpose to ‘Innovate today for a safer
tomorrow’ lies at the heart of Ultra’s value proposition
and everything we do. Innovation is what enables
us to develop outstanding solutions to the complex
problems our customers share with us, and deliver
the technologies that help create a safer tomorrow.
We deliver this purpose through innovation in our
technologies and our openness to searching for
new ways to deliver outstanding solutions to our
customers’ most complex problems in defence,
security, critical detection and control environments.
By providing them with the insight, technology and
services they need to perform at their best, we help
them make the world a safer place, tackling some
of the biggest challenges the world is facing.
Ultra
Annual Report
and Accounts 2021
17
Strategic report
Governance
Financial statements
Our value proposition
What makes us different
+
An agile player in growing markets with
opportunities for share gain
+
Sustainable technology and cost advantage
+
We work in the priority growth areas of
defence spend
+
Capabilities to address areas of future
customer focus:
–
Maritime, near-peer threats, particularly ASW
–
Multi-domain, real-time, on-demand, secure
information delivery in a contested environment
–
Delivering greater functionality and capability
in a continually reducing size, weight and
power envelope
–
Leading software, data processing and
algorithm capability
–
Robust business model with good visibility
from long-term contracts and a lag to US
defence outlays
+
Asset-light and well diversified
Ultra’s strategy and goals are based around
Employees
Customers
Suppliers
Communities
Investors
For each group Ultra has a value-creation goal and
yearly targets to align the organisation behind our
multi-stakeholder value-generation goals.
Who we work with
We work directly with the US DoD and UK MoD
and with the world’s major prime contractors.
Direct defence sales to the US DoD and UK MoD
accounted for 35% of our revenue in 2021.
Indirect sales to the DoD and MoD accounted
for an additional 25%. We have high visibility of
future revenues with 78% opening order cover
for 2022. Typically, our defence contracts will
progress through a development stage, then
low-rate initial production, sometimes followed
by full-rate production and aftermarket sales.
Where we operate
+
‘Five-eyes’ defence (USA, UK, Canada,
communications and intelligence domains
+
Other defence markets where we can apply
modular solutions
+
Other selected, highly regulated and harsh
environment detection and control markets
Working with our stakeholders
pages 12-14
Ultra
Annual Report
and Accounts 2021
18
FINANCIAL
Key performance indicators
How we measure our success
+
We are actively overseeing performance of
our Operating Business Units, with improving
operational oversight driving operational
performance.
+
Each Strategic Business Unit reports a monthly
balanced scorecard to the Executive Team
for review. These include KPIs against our
2024 goals, aimed at improving performance
for employees, customers, suppliers,
communities and investors.
+
Our first resource allocation priority is
reinvestment into innovation through
technology, people and capabilities to
ensure that we meet our purpose of
innovating for a safer tomorrow.
Organic and underlying measures are defined on
pages 145 and 146. See note 2 for reconciliations
to equivalent statutory measures.
Organic
order book
growth
Organic
revenue
growth
Through-
cycle cash
conversion
ROIC
Organic
underlying
operating
profit
growth
What is it and how are we doing?
KPI
Associated risks
(Principal risks in bold)
Associated
stakeholder goal
Relevance to Executive
Remuneration
Organic order book growth compared with the prior year
was +22.0%.
Organic revenue growth compared with the prior year was
+4.2% (2020: +5.2%).
Underlying operating cash conversion is a simple yet reliable
measure of cash generation, which represents the major
element of the Group’s short-term incentive bonus scheme.
A revised and simplified ROIC measure was established in
2019. This is calculated as underlying operating profit as a
percentage of invested capital (average of opening and
closing balance sheets). Invested capital is defined as net
assets of the Group, excluding net debt and lease liability,
pension obligations, tax and derivatives. This allows ROIC
to be calculated on the operating assets of the business
within the control of management.
Governance,
Compliance
& Controls
Governance,
Compliance
& Controls
Governance,
Compliance
& Controls
Supply Chain
Risk
Supply Chain
Risk
Supply Chain
Risk
Bid and
Contract Risk
Bid and
Contract Risk
Programme
Risk
Programme
Risk
Programme
Risk
Programme
Risk
Geo-political
Risk
Defence Sector
Cycle Risk
Investors
Investors
Investors
Investors
Investors
17
18
19
20
21
10.7%
5.2%
16.8%
5.8%
22.0%
18
19
20
21
20.0%
17.8%
16.2%
21.2%
17
18
19
20
21
6.8%
2.2%
-3.3%
5.2%
4.2%
17
18
19
20
21
2.9%
-4.3%
-7.2%
6.2%
8.0%
17
18
19
20
21
73%
79%
97%
93%
86%
Deliver outstanding,
through-cycle value for
shareholders through
effective execution of
Ultra’s strategy.
Deliver outstanding,
through-cycle value for
shareholders through
effective execution of
Ultra’s strategy.
Deliver outstanding,
through-cycle value for
shareholders through
effective execution of
Ultra’s strategy.
Deliver outstanding,
through-cycle value for
shareholders through
effective execution of
Ultra’s strategy.
Deliver outstanding,
through-cycle value for
shareholders through
effective execution of
Ultra’s strategy.
Strategic objectives
criteria
Long-Term Incentive
Plan criteria
Average working capital
Turn in annual bonus
Long-Term Incentive
Plan criteria
Long-Term Incentive Plan
and annual bonus criteria
Recruitment
and Retention
Risk
Recruitment
and Retention
Risk
Ultra
Annual Report
and Accounts 2021
19
Strategic report
Governance
Financial statements
OPERATIONAL
Employee
Engagement
On-time
delivery
Health and
Safety/near
miss reports
Solution
vitality
index
What is it and how are we doing?
KPI
Associated risks
(Principal risks in bold)
Relevance to
Executive Remuneration
The results of our employee engagement survey
Percentage of production contracts delivered on time from
the Group
The number of reportable accidents per 1,000 employees
Total revenue of new solutions over the last five years
versus overall Group revenue. This is a measure of our
ability to deliver new solutions and invest in the right places
which deliver growth. This replaces our Internal R&D KPI
Governance,
Compliance
& Controls
Supply Chain
Risk
Environmental
Risk
Health and
Safety Risk
Programme
Risk
Programme
Risk
Programme
Risk
Recruitment and
Retention Risk
Recruitment and
Retention Risk
Recruitment and
Retention Risk
19
20
21
75.5%
70.0%
67.7%
19
20
21
15.60
18.19
13.80
19
20
21
82.8%
76.2%
85.2%
17
18
19
20
21
0.5%
0.7%
0.6%
0.4%
21
Not previously measured
15%
Market
share
Reducing
emissions
Market share of our addressable markets. Our core focus is
on the Maritime and Intelligence & Communications markets.
Our addressable market share (measured using organic
revenue in the year)
+
Maritime: 30.4% (2020: 31.1%)
+
Intelligence & Communications 7.3% (2020: 7.5%)
+
Critical Detection & Control: 13.1% (2020:14.0%)
Reducing Scope 1 to 3 greenhouse gas (GHG) emissions
relative to 2019 baseline (Scope 1 and 2 only) for tCO
2
e/£m
of revenue.
Our target for 2021 was to reduce tCO
2
e/£m by 10% vs 2019,
and we delivered a reduction of 24% vs 2019.
Bid and Contract
Risk
Associated
stakeholder goal
Employees
Customers
Customers
Customers
Communities
Communities
Create a dynamic, inclusive
and inspiring work
environment that attracts,
develops and retains the best
Partner with customers as
preferred suppliers delivering
innovative solutions that
create ‘win–win’ outcomes
for all parties
Partner with customers as
preferred suppliers delivering
innovative solutions that
create ‘win–win’ outcomes
for all parties
Partner with customers as
preferred suppliers delivering
innovative solutions that
create ‘win-win’ outcomes
for all parties
To conduct business in an
ethical, safe and sustainable
way, acting as a positive force
and making an active
contribution to our
communities
To conduct business in an
ethical, safe and sustainable
way, acting as a positive force
and making an active
contribution to our
communities
Strategic objectives
criteria
Strategic objectives
criteria
Strategic objectives
criteria
Strategic objectives
criteria
Strategic objectives
criteria
Strategic objectives
criteria
Ultra
Annual Report
and Accounts 2021
20
Our target markets
Maritime
Five-year expected market CAGR 2–4%
Anti-submarine warfare is adapting to meet the
challenges of increased near-peer threats and
their sophisticated kinetic weapons that are
capable of being launched from sea. This is
driving demand from allied forces for anti-
submarine expendables, warfare systems
and surface/sub-surface system infrastructure.
This relates both to new and existing capability
where Ultra is well represented. For example,
submarine hunting patrol aircraft like the P-8
where an additional 100+ aircraft are likely to be
procured over the next ten years. This is driving
significant growth in Ultra’s core market
with US DoD sonar outlays likely to exceed
6% CAGR to 2025.
As Ultra’s customers seek to develop and
adopt a more integrated and distributed sensor
framework approach to undersea surveillance
and ASW, Ultra also has a unique position as
a leader in underwater expendables, sonar
systems, sub-systems, surface radar markets
and supportive mission technology, all of which
will be needed to provide this architecture
of tomorrow.
Finally, the recent establishment of the
AUKUS treaty and development of a multi-
domain architecture under ‘Project Overmatch’
(the US Navy’s contribution to the Pentagon’s
Joint All Domain Command and Control effort)
demonstrate the increasing importance of both
joint interoperability and interchangeability
within and across allied forces. Ultra is well
positioned to support this as a provider of
multi-sensor, multi-platform anti-submarine
warfare capability connecting all underwater
sensors in development of a common operating
picture. From adaptive, unmanned platforms
to hull mounted and expendable sensors, Ultra
is creating the infrastructure to optimise size,
weight and power while supporting sensing,
connectivity and decision support applications.
Intelligence &
Communications
Five-year expected market CAGR 3–5%
Across the ‘five-eyes’ nations, national security
forces are moving to counter threats from
near-peer adversaries by reshaping defence
architectures to support multi-domain
operations. Ultra’s customers are focused on
joint, all domain operations which will largely
refresh command and control infrastructures to
create a single common operating picture that
enables real-time decision-making across forces
and domains. As the future battlespace shifts to
a more contested environment, solutions
that provide near-instantaneous situational
awareness and secure, resilient communications
to the war fighter are more critical. This change
will drive solutions that work across land, sea
and air platforms as well as new intelligence
aids that support rapid decision-making.
As the next generation of the integrated
battlespace is constructed, decision support
mechanisms will be required to enable the
war fighter from the command centre to the
tactical edge. Ultra’s core competencies and
investments in communications systems
such as tactical radios, command and control
systems and encryption capabilities give it a
highly competitive position to integrate solutions
across platforms and forces. In addition, Ultra’s
investments in advanced analytics and AI/ML
applications for intelligence processing provide
innovative decision support capabilities for the
integrated battlespace.
Critical Detection
& Control
Five-year expected market CAGR 2–4%
Aerospace market trends
Despite the impact of Covid-19, which
significantly impacted the commercial aerospace
industry, PCS’s positions on military platforms
such as the F-35 and the Eurofighter Typhoon
have helped mitigate the current trough in
the commercial aerospace market, which is
expected to recover with a 14.5% CAGR over
the next five years. The outlook for commercial
and military aerospace remains strong given
expected procurements in new aircraft,
upgrading ageing fleets and the development
of indigenous platforms. Ultra’s innovative and
high-integrity control technologies are ideally
suited to the growing need for highly reliable,
mission- and safety-critical sensing and aircraft
control systems in an increasingly electric and
data-driven operating environment.
Forensic Technology market trends
Solving gun crime and providing investigative
leads spanning local, municipal, national and
international networks requires effective
and fast solutions. The latest innovations in
3D, quantum microscopy are unlocking the
potential for objective methods to assist expert
conclusions in court on the potential match
between firearms and bullets. Ultra’s Forensic
Technology business remains the market leader
in helping its customers develop preventative
gun crime strategies which not only enable them
to respond more quickly to incidents but also
increase their lead generation abilities. The
provision of forensic technology intelligence
remains at the forefront of building these
strategies. In conjunction, Ultra is developing
artificial intelligence, machine learning and
cloud-based technologies which are expected
to be gradually introduced to the market to
improve reliability, speed and results.
Energy market trends
Although Covid-19 has negatively impacted
the nuclear energy sector in 2020 and early
2021, global demand is expected to recover
and continue to increase in the medium and
long term. Coupled with a growing need to
decarbonise power generation and ensure
domestic energy security, this is creating
increased investment need in the civil nuclear
power market. Ultra provides critical safety
systems and sensor capabilities to nuclear
facilities around the world to support that
investment, safeguarding nuclear workers
and the public. Ultra is also positioned at the
forefront of emerging technologies being
developed for increased efficiency and
decreased cost of nuclear power generation,
such as advanced reactor technologies.
Ultra
Annual Report
and Accounts 2021
21
Strategic report
Governance
Financial statements
Performance summary
Maritime’s order book grew
organically 26.3% to £683.6m
(2020: £539.6m), growing
significantly faster than our
addressable maritime market which
grew c.3% between 2020 and 2021.
We saw strong order intake for
torpedo defence systems from India,
sonar technology for the Canadian
Surface Combatant, torpedo nose
arrays and orders for Next
Generation Surface Search Radar
(NGSSR) for the US Navy.
Revenue grew 6.3% organically, with
increasing sales particularly of Next
Generation Surface Search Radar
and torpedo nose arrays. Demand
throughout the year was strong,
but sales growth was negatively
impacted by supply chain
interruption and extending lead
times, which were particularly
disruptive in the last quarter.
Underlying operating profit grew
8.6% organically to £59.4m (2020:
£58.6m). Maritime’s underlying
operating margin improved to 15.0%,
supported by improved operational
gearing in our growing Naval
Systems business, transformation
benefits and £4m of profit from a
one-off IP licence, all partly offset by
H1 programme issues, a recurrence
of pandemic-related supply chain
interruptions in Q4 and £2.7m of
extra organic investment into
internal R&D, primarily to support
development of the next generation
of Ultra sonobuoys. Statutory
operating profit grew by 4.3%
to £58.3m (2020: £55.9m) and
statutory operating margin
improved to 14.7% (2020: 14.3%).
Maritime
Our market-leading mission systems and application
engineering solutions deliver dominance in the maritime
domain. Our broad portfolio of capabilities is operational
onnavaleetsacrosstheUSA,UKandalliednavies
worldwide. We continue to develop advanced specialist
systemstodeliverdefensivewarghtingedgein
the modern maritime and underwater battlespace.
These provide critical operational advantages to
our‘ve-eyes’defencecustomersacrosssurface,
sub-surface and unmanned platforms.
Strategic Business Unit review
46%
of Group
revenue
FINANCIAL RESULTS
£m
2021
2020
2020 for
organic
measure
Growth
Organic
growth %
Order book
683.6
539.6 541.1 +26.7 +26.3
Revenue
395.4
391.8 372.0 +0.9 +6.3
Underlying operating profit
59.4
58.6 54.7 +1.4 +8.6
Underlying operating margin
15.0%
15.0% 14.7%
Statutory operating profit
58.3
55.9 +4.3
Statutory operating margin
14.7%
14.3%
ORDER BOOK
+
Sonar Systems
continues to see strong
demand with key strategic orders won in
2021, including the Indian Navy Integrated
Anti-Submarine Warfare Defence Suite worth
c.£60m and continued orders under the
Canadian Surface Combatant programme.
+
Sonobuoy Systems
was awarded c.£90m
of orders under the ERAPSCO 5-year
Sonobuoy IDIQ as well as an important
continuation contract worth c.£30m for
sonobuoys to the UK MoD.
+
Naval Systems and Sensors
saw strong
orders on the Next Generation Surface
Search Radar production programme
for the US Navy, important new orders
under the US Navy NIXIE programme to
deliver electro-acoustic towed torpedo
countermeasure systems and continued
strong orders for countermeasure arrays.
+
Signature Management and Power
saw
continued demand for replacement SMAP
products on the UK Vanguard and US
Virginia class nuclear powered submarines
in addition to the key strategic award on
the UK Submersible Ship Nuclear (Maritime
Underwater Future Capability). Strong
demand continues for our Human Machine
Interface (HMI) capabilities, including a
major award on US Army Bradley IFV, which
enables control interface systems for the
next-generation platforms.
Ultra
Annual Report
and Accounts 2021
22
Intelligence &
Communications
We are experts in mission-critical, multi-domain
intelligence, communications, command and control,
cyber security and electronic warfare solutions. Our
innovative solutions deliver information advantage
globally through the intelligent application of
integrated technology.
ORDER BOOK
The division won a number of key contracts
during the year, and the order book grew
organically by 35.4%. The larger orders
won in the year include:
+
Communications
Orders in 2021 were £140m with major
contract wins including key orders from the
US Marines Core, US Army Net Mod and US
Navy ATCS contract. The OBU significantly
diversified its customer base in 2021.
+
C2 & intelligence
Continues to expand its presence in
the situational awareness space with
ongoing sustainment awards for its ADSI
from the USAF and other key customers
internationally with a number of awards
including an award from the Taiwan Navy.
We were also awarded multiple contracts
to provide integrated command and
control systems for Tunisia and Romania
collectively worth $14m and $9m for
development of Marine Air Defence
Integrated System (MADIS) for Ground
Based Air Defence (GBAD) future
weapons system.
+
Specialist RF
Continues to have a strong position on
key US DoD programmes providing key
telemetry, tactical and electronic warfare
components to our prime partners with
ongoing awards for programme of record.
In addition, we were awarded a contract
for EWST (Electronic Warfare Simulation
Technology) with Airbus for Germany
Defence forces in the amount of £5m.
+
Cyber
Won £83m in orders with major contract
wins including the UK MoD contract.
28%
of Group
revenue
FINANCIAL RESULTS
£m
2021
2020
2020 for
organic
measure
Growth
Organic
growth %
Order book
323.0
237.1 238.6 +36.2 +35.4
Revenue
241.3
241.0 228.7 +0.1 +5.5
Underlying operating profit
37.9
33.5 31.4 +13.1 +20.7
Underlying operating margin
15.7%
13.9% 13.7%
Statutory operating profit
30.9
23.7 +30.4
Statutory operating margin
12.8%
9.8%
Strategic Business Unit review
continued
Performance summary
Intelligence & Communications order
book grew organically 35.4% to
£323.0m (2020: £238.6m) primarily
due to strong orders for ORION
radios,ourUKcyberandcommand
and control solutions. The larger
orders won in the year include:
+
ORION radio orders worth $140m
from the US Marines, US Army
and US Navy
+
Ongoing sustainment awards for
ADSI from the USAF and other
key international customers
+
Contracts to provide integrated
Command and Control systems for
Tunisia and Romania collectively
worth $14m and $9.1m for
development of Marine Air Defence
Integrated System (MADIS) for
Ground Based Air Defence (GBAD)
future weapons system
+
Our Cyber business won £83m in
orders with major contract wins
includingwiththeUKMoD
Revenue grew organically by 5.5%
to £241.3m (2020: £241.0m), largely
driven by excellent sales of ORION
radios and improved demand for
our Cyber solutions.
Underlying operating profit grew
organically by 20.7% in the year to
£37.9m (2020: £33.5m) as a result
of revenue growth and a much-
improved underlying operating
margin of 15.7%, an organic increase
of 2.0 percentage points. Operating
margin improved as a result of
favourable product mix and
operational gearing with excellent
operational performance across the
Business Unit, particularly in our
Cyber business. Statutory operating
profit grew by 30.4% to £30.9m
(2020: £23.7m) and statutory
operating margin improved to
12.8% (2020: 9.8%).
Ultra
Annual Report
and Accounts 2021
23
Strategic report
Governance
Financial statements
Performance summary
The order book in Critical Detection
& Control grew organically by 2.5%,
with strong orders in our Precision
Controls business for military
aircraft, particularly the F-35, and
for ballistic identification products.
KeyordersinForensicTechnology
included a new contract win in Brazil
and continued good orders from the
US Bureau of Alcohol, Tobacco,
Firearms and Explosives.
Organic revenue declined slightly by
0.8% to £214.0m (2020: £227.0m), a
good performance in light of the full
year’s impact of weak commercial
aerospace demand, particularly
given PCS’s position on 787 aircraft.
This decline was mostly offset by
Forensic Technology growing
organically 18.2% and improved
sales in our Energy business from
a low 2020 base.
Underlying operating profit
decreased organically by 4.7% to
£32.3m (2020: £34.0m). Underlying
operating margins decreased to
15.1% vs 15.7% in 2020, mainly due to:
+
Adverse mix and a one-off increase
in inventory provision, both
primarily relating to the decline
in commercial aerospace sales
compared to the prior year; and
+
Partially offset by improved gross
and net margins in Forensic
Technology due to improved
operational gearing on higher
revenue and good progress in PCS
improving productivity through
continuous improvement.
Statutory operating profit declined
by 1.0% to £29.7m (2020: £30.0m)
and statutory operating margin
improved to 13.9% (2020: 13.2%).
The programme to consolidate
ourtwoUKPCSfacilitiesintoone
state-of-the-art location in
Cheltenham is progressing well,
with the building works complete
and the transfer of product expected
to complete in the first half of 2022.
Critical Detection
& Control
Precision Control Systems (PCS) designs and supplies
market-leading safety and mission-critical solutions,
primarily to the military and commercial aerospace markets.
Forensic Technology is the world leader in ballistic
identicationandforensicanalysissolutions.
Energy designs and supplies safety-critical sensors
and systems, and selected products for nuclear and
industrial applications.
ORDER BOOK
PCS
Saw continued good top-up orders for the
F-35 programme across HiPPAG, Engine
Ice Protection System (EIPS), EIPS Harnesses
and newly introduced high pressure dynamic
interconnects. In addition, strong Typhoon
platform orders driven by the Quadriga
programme (Germany) and initial funding
for new development activities on the
A330 and A400M platforms.
Forensic Technology
Received an order from the US Bureau of
Alcohol, Tobacco, Firearms and Explosives
for additional IBIS products and SafeGuard
services to be delivered in 2021 and 2022, as
well as multiple new orders from customers
in Thailand, the Netherlands, Chile and
Uganda for IBIS products and SafeGuard
services. In particular, Ultra FT won a $24m
order from Brazil to deliver 37 new IBIS sites.
Contract extensions were also received from
the South African Police Service (SAPS) and
customers in Canada, UK, Australia and
Hong Kong.
Energy
Won a substantial new programme with
Costain supporting Atomic Weapons
Establishment for project MENSA Health
Physics System. Ultra Energy also won
initial contracts for design consultancy with
Kairos Power and USNC (Ultra Safe Nuclear
Corporation) positioning us in the emerging
Advanced Reactor market. Work has also
started with Blue Origin further establishing
Ultra in the rocket engines market.
FINANCIAL RESULTS
£m
2021
2020
2020 for
organic
measure
Growth
Organic
growth %
Order book
294.3
287.5 287.0 +2.4 +2.5
Revenue
214.0
227.0 215.8 -5.7 -0.8
Underlying operating profit
32.3
34.0 33.9 -5.0 -4.7
Underlying operating margin
15.1%
15.0% 15.7%
Statutory operating profit
29.7
30.0 -1.0
Statutory operating margin
13.9%
13.2%
26%
of Group
revenue
Ultra
Annual Report
and Accounts 2021
24
A Positive Force
Our commitment to a sustainable future
A
Positive
Force
OUR VISION
Our commitment to a sustainable future –
enabling us to conduct our business in an ethical,
safe and sustainable way. Ensuring we: protect
our planet and society, support our people
and contribute positively to the communities
in which we operate.
WHAT DOES ‘A POSITIVE FORCE’ MEAN TO OUR ULTRA STAKEHOLDERS?
Employees
A Positive Force inspires and supports our employees allowing them
to engage in CSR initiatives and increase Ultra’s social responsibility.
Customers
A Positive Force helps demonstrate to our customers that we aim to
deliver products and services in an ethical, safe and sustainable way.
Communities
A Positive Force engages with our communities, striving to operate
in a sustainable manner, minimising our environmental impact, and
shows that we are an active positive contributor to our communities.
Suppliers
A Positive Force represents what it means to work with us, our
expectations regarding social responsibility, and that we want
to source from a responsible and sustainable supply chain.
Investors
A Positive Force communicates Ultra’s commitment to being
a sustainable business to deliver value to shareholders long term.
Introduction: A Positive Force
26 Protecting our planet and society
32 Supporting our people
38 Giving back
39 Doing the right thing
Ultra
Annual Report
and Accounts 2021
25
Strategic report
Governance
Financial statements
Protecting
our planet
and society
(Environment
+ defence)
Supporting
our people
(Employees,
customers,
supply chain)
Giving
back
(Charity and
community)
Doing the
right thing
(Governance)
Protecting our planet includes
both reducing our environmental
footprint but also protecting the
societies and world that we live in.
The increase of near-peer threats
is amplifying the need for allied
defence investments in the
‘five-eyes’ nations and Ultra is a key
part in creating the technologies
that keep us all safe. Within the
environmental space we have
focused on our global alignment
to ISO 14001 Environment and
ISO 50001 Energy Management
Systems, waste reduction and
carbon reduction plans, with Ultra’s
commitment to and upcoming
signature of the United Nations
As part of our Supporting our
people pillar, Ultra was awarded the
highest level of employer
recognition, the UK Armed Forces
Covenant Employer Recognition
Scheme Gold Award. Together
with continued engagement
with veterans’ charities we have
established a Veterans Committee.
This further connects Veterans
and Reservists across the Group,
creating a global community and
aligns well with our ‘Uniquely
Ultra’ diversity equity and inclusion
workstream. To strengthen these
activities, we are exploring
opportunities to further engage
with our customers’ navies
through two-way secondment
opportunities.
In 2021, considerable progress
has been made through our
Giving back activities. Community
volunteering applications have
grown despite Covid-19 being
prevalent in most of our regions,
with a total of more than 2,000
hours contributed across all
territories in 2021. Where possible,
the team orientated events
centred around our four pillars
and included environmental
clean-ups, local charity fundraising
and education outreach. In 2021,
Ultra contributed £312,000 via
a combination of employee
fundraising, Match Funding,
and local business donations.
In the last two years this amounts
to more than £500,000 to
charitable causes (including
the Ultra 2020 Covid-19 fund).
Corporate Governance is at the
heart of everything we do – so
in 2021 we included our Positive
Force fourth pillar – Doing the
right thing.
Our additional focus in this area
demonstrates that it is not only
important what we do, but also
how we do it, in line with our
ASPIRE values. We actively welcome
advancements in governance and
recognise its increasing importance
in meeting with our obligations.
We receive regular corporate
governance updates from our
Company Secretarial team so to
ensure adherence to, and active
promotion of, all aspects of our
Code of Conduct, throughout
our workforce and supply chain.
We are actively promoting our
fourth pillar as an integral part
of our Positive Force framework.
The below commentary provides a summary
of Ultra’s ESG activities in 2021. For more detail
please read our 2021 Sustainability Report
on www.ultra.group
At Ultra we partner with our customers, applying
technology and innovation, to allow them to
solve mission-critical problems that protect the
societies in which we live, and make the world
a safer place. This is why we exist – to innovate
today for a safer tomorrow.
Despite the global challenges of the past few
years, we have not lost sight or pace in our
ESG ambitions which focus on four key pillars.
This year we have incorporated Governance,
‘Doing the right thing’ as our fourth critical pillar.
An important step in affirming that the way in
which we do business is as important as what
we do.
Sustainability is embedded in our core business
goals which are measured though our KPIs –
and therefore are directly linked with targets
for remuneration and reward across
our leadership teams.
A POSITIVE FORCE
p26
p32 p38 p39
Ultra
Annual Report
and Accounts 2021
26
A Positive Force
continued
Protecting our society
We live in an ever-changing, unpredictable,
interconnected and risky world. Unfortunately, this
can be seen by recent geo-political events such as
Russia’s invasion of Ukraine which demonstrates
defence technologies are needed to preserve
peace and democracy.
To protect our society in a sustainable way, our
customers are seeking solutions to a constantly
increasing range of problems that the rapidly
expanding and evolving threat environment
is creating.
These defence technologies help governments:
+
Protect their societies from violent invasion
and loss of freedom
+
Preserve democracy, tolerance and peace
+
Create, sustain and protect critical
infrastructures
+
Create and protect systems which support
societies and protect culture
+
Secure space and protect national borders
for people and places to evolve
+
Protect society by finding and prosecuting
perpetrators of gun crime.
At Ultra, we believe that this is the very definition
of sustainability and what we partner with
customers to deliver. Together with strong ethics,
values and high levels of oversight and regulation,
defence is therefore a key element in enabling the
free world.
Carbon reduction (Race to Zero)
Ultra has made an internal commitment to
become a net-zero organisation. We are now
working to define the detailed ONE Ultra carbon
reduction plan to achieve this. Once outlined,
during 2022.
Since 2020 we have made progress on:
+
Measurement and reporting of carbon
emissions Scope 3, see page 27
+
Quarterly environmental news bulletins across
the Group reporting plans, and progress
+
Embedding the ONE Ultra approach of Avoid,
Reduce, Reuse, Recycle and Offset
+
Meeting all reduction targets for waste and
single-use plastics
+
Alignment and certification to ISO 14001 and
ISO 50001
+
Reducing our site footprint across our regions –
by 21,000 sq ft since 2019
Encouraging employees in the workplace
to reduce carbon emissions
Initiatives include but are not limited to:
+
Switching off lights when not needed and/or
installing light activating motion sensors
+
Switching off equipment, including PCs and
laptops, when not in use
+
Print only when necessary
+
Elimination of paper copies of documentation
on our shop floors
+
Avoid, Reduce, Reuse and Recycle wherever
possible to eliminate waste
+
Working with our customers and suppliers
to identify ways to reduce the environmental
impact
+
Selecting sustainable materials as part of our
product and building design and build process
+
Environmentally friendly transportation: car
shares, electric cars, public transport, biking
+
Sustainable equipment refurbishment or
replacement, look for energy-efficient and
clean energy options
Climate Change, Energy
and Emissions
Our Environmental Strategy
During our second full year of our ONE Ultra
approach, we have focused on limiting the
adverse impact of our business on the
environment by:
+
Introducing common measures across
Ultra to start to certify all our businesses
to global Environmental and Energy
Management Standards
+
Updating and implementing our Environmental
Policies which aim to reduce our impact on the
environment – continuing with a ONE Ultra
Packaging Policy
+
Reducing our waste and carbon emissions
through sharing and implementing ongoing
environmental initiatives across our businesses
Our environmental policy
Ultra’s established environmental policy
addresses compliance with environmental
legislation, conformity with standards for waste
disposal and noise, the economical use of
materials and the establishment of appropriate
environmental performance standards. Progress
is monitored through annual reporting. Each
site plans and manages compliance with
environmental requirements and the processes
for the storage, handling and disposal of
hazardous or pollutant materials are reviewed
on a continuous basis. Ultra is moving towards
a global ISO 14001 certification unifying our
environmental management system across
our businesses.
In 2021, Ultra has continued the process of
aligning our businesses worldwide to the ISO
50001 Energy Management standard, an
international standard recognising organisations
that enhance their energy performance by
implementing an energy management system
(EnMS) based on a model of continuous
improvement. This activity will further support the
reduction of Ultra’s energy use, ability to identify
new ways to reduce emissions through our whole
supply chain and associated cost. The
organisation will advance to global certification
across every business in 2023.
2021 emissions
Greenhouse Gas Emissions
In 2021 Ultra’s measured GHG emissions totalled
12,974 tonnes of CO
2
(tCO
2
e) which, relative to
revenue, equates to 15.3 tCO
2
e per £m of revenue:
+
Scope 1 (direct fuel consumption and business
vehicles) – 1,855 tCO
2
e (14.3%)
+
Scope 2 (electrical power consumption) – 9,901
tCO
2
e (76.3%)
+
Scope 3 (grey fleet business miles and business
air travel elements) – 1,217 tCO
2
e (9.4%)
This has resulted in a reduction to 11,756 tCO
2
e
in 2021 vs 15,010 tCO
2
e in 2019 on a comparable
basis, i.e. Scope 1 and 2 only; Scope 3 not
measured in 2019 (2020 not comparable due
Protecting
our planet
and society
(Environment
+ defence)
Ultra
Annual Report
and Accounts 2021
27
Strategic report
Governance
Financial statements
SECR AND ESOS COMPLIANCE
The Group falls into the Streamlined Energy
and Carbon Reporting (SECR) framework, as
well as the Energy Savings Opportunity Scheme
(ESOS). ESOS phase 2 was completed in 2019
with phase 3 due by December 2023.
We have reported all emission sources under
the Companies Act 2006 (Strategic Report and
Director’s Reports) Regulations 2013 as
required. The Group can report figures below,
calculated based on the GHG Protocol
Corporate Standard using emissions factors
from UK government-produced conversion
2021 factor guidance. Reporting corresponds
with our financial year and reflects emissions
from the leased, owned and controlled assets
for which the Group is responsible.
The Group maintain Scope one (1), two (2) and
three (3) emissions, which are generated from
our offices, manufacturing sites and business
owned or controlled vehicles, respectively. We
also generate Scope 3 emissions from vehicles
covered under “grey fleet” (personal cars used
for business purposes), and for the first time,
we have now included air travel.
We have calculated and reported our
emissions in line with the GHG Protocol
Corporate Accounting and Reporting
Standard (revised edition).
The reporting period is the financial year 2021,
the same as that covered by the Annual Report
and Financial Statements. The boundaries of
the GHG inventory are defined using the
operational control approach. In general, the
emissions reported are the same as those
which would be reported based on a financial
control boundary. Emissions for previous years
are retrospectively adjusted as and when more
accurate data is provided.
Recorded energy consumption during the
financial year was 43,479,318 kWh (43,479.3
MWh), equating to 12,974 tCO
2
e, with a
geographical consumption split of 26% UK,
65% USA and 9% in the rest of the world.
The following table provides 2021 and prior
year comparative data, noting that Scope 3
emissions, which in 2020 only included grey
fleet, were expanded in 2021 to also include
air travel:
Year
Scope 1
tCO
2
e
Scope 2
tCO
2
e
Scope 3
tCO
2
e
Total
emissions
tCO
2
e
tCO
2
e per
£m revenue
2020
1,922 11,389 98 13,409 15.6
2021
1,855 9,901 1,217 12,974 15.3
management system (EnMS). Ultra UK sites have
achieved ISO 14001 certification. Alignment
across our North America and Australia regions
has been completed with certification planned for
2022. We recognise that most of the GHG Scope 1
and 2 is contributed by energy usage. Real-time
data will enable us to realise efficiencies in
reduction of energy consumption.
An environmental management system (EnMS)
toolkit has been developed and will be launched
across the organisation in 2022. This will allow all
Ultra’s UK businesses to align with ISO 50001 as a
first step, with certification undertaken by year
end. Implementation and alignment across our
North America and Australian regions will be
ongoing during 2022.
ALL ULTRA BUSINESSES
0
5,000
10,000
15,000
20,000
25,000
202120202019201820172016
METRIC:
t
CO
e
/£M REVENUE
0
5
10
15
20
25
30
202120202019201820172016
t
CO
e
Scope 2 Scope 3Scope 1
76%
14%
9%
to Covid-19). Relative to revenue, this resulted in
13.8tCO
2
e/£m revenue in 2021 vs 18.2tCO
2
e/£m
revenue in 2019, a reduction of 24% against the
target of 10%.
Figure 3 shows measured GHG emissions by
Scope for 2021. GHG Figures 1 and 2 show
combined Scope 1 and 2 emissions compared
with prior years for tCO
2
e and emissions relative
to revenue (Scope 3 data not available for prior
years). The declining trend in emissions from 2018
onwards reflects action to reduce emissions and
activity changes resulting from Covid-19 in 2020
(and to a lesser degree 2021).
Safety, Health, Environment specific standards
Ultra has developed a global single environmental
Ultra
Annual Report
and Accounts 2021
28
A Positive Force
Protecting our planet
continued
Energy efficiency measures undertaken 2021
The Group has been actively engaged in measures
to reduce its energy and emissions, throughout
2020 and the current reporting period, as follows:
+
Moving our facilities to energy agreements
sourced from clean energy when they expire
+
Replacing old halogen, T8 and inefficient lamps
with low-energy LEDs
+
Investing in PIR (Passive Infrared) detectors
connected to office lighting
+
Replacing ageing office equipment with
energy-efficient products
+
Expanding video conferencing and online
meetings (as opposed to face-to-face meetings)
+
Replacing older, inefficient boilers, along with
older electricity water heaters
+
Revising our remote-working policies to enable
employees to have a more flexible approach
to their working day, while meeting our
business needs
+
Investing in improvements to our employee
connectivity and facilities which has
demonstrably improved our teams’ effectiveness
+
A new company car policy to encourage lowering
emissions
+
Encouraging the move to hybrid and electric
vehicles by instigating the associated
infrastructure
+
Revised travel policies to refocus our team on
essential travel only
+
Formalised guidelines addressing environment
and sustainability in building refurbishments/
relocations
Ultra is committed to the Science Based Targets
Initiative framework and has summarised
our progress towards the Taskforce on Climate-
related Financial Disclosures, as shown in the
sustainability governance section on page 29
of this report.
Pollution, waste, biodiversity
and habitat
Prevention of pollution
The markets in which we operate are increasingly
focused on sustainability and reduction of
pollution. This is particularly evident in our
Energy business which makes critical sensors and
systems for nuclear power generation. We make
every effort, where possible, to reduce adverse
environmental impacts. Prevention of pollution
at Ultra includes using resources and materials
more efficiently, material and energy substitution,
as well as reusing, recovering and recycling as
much scrap and waste material as we can. We
set ourselves measurable targets for the focus
areas of decarbonisation, circular economy and
transformation of the workforce. This ensures
an effective operationalisation of sustainability,
with clear responsibilities and processes. These
activities are further reinforced by initiatives
such as our single-use plastics reduction initiative
and the creation of a ONE Ultra Packaging Policy.
Protection of the environment, biodiversity and
restoration of natural habitats
Ultra recognises the importance of protection of
the environment, of biodiversity, and the need for
conservation and restoration of natural habitats.
Ultra strives to not only limit our business impact
on the environment but also support maintaining
biodiversity.
In 2021, Ultra actively supported maintaining
biodiversity by:
+
Continuing our Avoid, Reduce, Reuse, Recycle
initiative across all our sites to reduce the
amount of waste we contribute to landfill sites
+
Supporting local animal organisations to help
preserve endangered species in our community
spaces through protection and development of
protected habitats – for example, the Kangaroo
Pouch Animal Orphanage
+
Supporting biodiversity partnerships local to
our businesses – for example, employee
volunteering at local Wildlife Trust parklands
Ultra launched our ONE Ultra Single Use
Plastics Policy in 2020.
Single-use plastic 2021 progress
+
21 single-use plastic initiatives and
improvements made globally
+
More than 36,000 face masks recycled
+
Ultra has committed to eliminating
single-use plastic cutlery, plates, straws
and cups by the end of 2022
+
Reduced our plastic consumption by
over 75,000 items
+
More than £10,000 saved on purchasing
plastic cups, cutlery and bottles every year
going forward
+
Several Ultra sites have moved vending
machines over to biodegradable cups,
resulting in a reduction of 46,000
single-use plastic cups being used
Our technology and products
Our technology, products and
the environment
We are immensely proud of the work we do to
protect military personnel, who risk their lives
to protect us. Through our technology we keep
societies safe, make the jobs that our military
personnel do less risky and ensure that we are
protecting our nations. Technology is at the
heart of Ultra’s mission to ‘innovate today for
a safer tomorrow’.
In every market where we operate, Ultra’s work
is about using our know-how and ingenuity
to protect and defend what matters. We know
that technology and harnessing technological
innovation is key to supporting sustainable
development. We are investing in our engineering
teams across the Group, providing targeted
training in sustainability in design, and we are
always looking for new projects that support
sustainable development. From a sustainability
perspective, often, our projects require us to
upgrade systems or keep existing complex
systems operational for decades without having
a significant impact on our customers’ operations.
This approach typically saves time and money, and
has a lesser impact on the use of the world’s raw
materials and production of waste.
Sustainable resources – our products
Opportunities to improve product differentiation
through improved energy efficiency outcomes are
a key part of our systems design partnering with
customers and end users. Our ‘A Positive Force’
sustainability plan will seek to crystallise a wider
opportunity to differentiate ourselves more widely
within our sector, through living our values and
embedding environment and sustainability
factors into how we do business to meet the
needs of our communities as one of our five
key stakeholder groups.
Environmental considerations are made
throughout a product’s lifecycle, from concept
through to disposal. All Ultra businesses ensure
that their practices and processes consider the
environment – but we recognise that there is more
to do in our industry. Ultra expects all suppliers to
fully comply with applicable laws and adhere to
internationally recognised environmental, social
and corporate governance standards. Adopting
procedures and practices to minimise any
negative impacts on the environment, we work
with suppliers to reduce the impact of our
products and to take account of environmental
factors in the materials and components used.
Controls are in place at sites to drive efficiency and
minimise waste, which is disposed of appropriately
using specialist contractors where necessary.
Those of our businesses that require use of
hazardous substances, e.g. radioactive sources, as
part of standard operations do so in line with local
and government legislation and security aspects,
which is monitored closely by compliance audits,
executed by regulatory bodies.
Ultra
Annual Report
and Accounts 2021
29
Strategic report
Governance
Financial statements
Compliance with TCFD requirements
We comply with the FCA’s Listing Rule 9.8.6R(8)
and with the TCFD’s Recommendations and
Recommended Disclosures as outlined in the
narrative below, with the exception of the
following specific disclosures:
Strategy 2b:
The organisations’ disclosures should
reflect a holistic picture of the interdependencies
among the factors that affect their ability to create
value over time. Organisations should describe the
impact of climate-related issues on their financial
performance (e.g. revenues, costs) and financial
position (e.g. assets, liabilities). If climate-related
scenarios were used to inform the organisation’s
strategy and financial planning, such scenarios
should be described.
Our climate risk assessment in 2021 ratified our
recognition and assessment of five core climate
risks for Ultra as identified below. Further work
is now needed with expert advice and widened
scenario testing to fully assess and disclose
the financial implications, especially in relation
to power and utilities costs, and the potential
costs of implementing our climate strategy
and net-zero plan. These pieces of work are
planned to start in H1 2022.
Strategy 2c:
Organisations should describe how
resilient their strategies are to climate-related risks
and opportunities, taking into consideration a
transition to a low-carbon economy consistent with
a 2°C or lower scenario and, where relevant to the
organisation, scenarios consistent with increased
physical climate-related risks.
In 2021 risk assessment work was undertaken
which identified a potential exposure in the
medium term of some of our operational sites
to increased and more extreme weather events.
In order to finalise our site resilience strategies
for this risk, we will work with our site risk
engineering and insurance partner in 2022 and
2023 to develop a site-by-site exposure and
control requirement plan based on a range
of climate change consequence scenarios. This
will enable full assessment and disclosure of the
resilience of our strategy in relation to this risk.
Metrics and Targets 4b:
Organisations
shouldprovide their Scope 1 and Scope 2
GHGemissions independent of a materiality
assessment, and, if appropriate, Scope 3
GHGemissions and the related risks.
While Ultra fully discloses Scope 1 and 2
emissions, we are in the process of expanding
our capability to fully disclose Scope 3 emissions.
Building on our Scope 3 disclosure of grey fleet
and air travel emissions for 2021, work is being
undertaken through 2022 to fully define
Scope 3 metrics appropriate to Ultra and to
implement mechanisms necessary to monitor
and disclose them.
Metrics and Targets 4c:
Organisations should
describe their key climate-related targets such
asthose related to GHG emissions, water usage,
energy usage, etc. Organisations disclosing
medium-term or long-term targets should
alsodisclose associated interim targets in
aggregate or by business line, where available.
In 2021 Ultra made an internal commitment
to become a net-zero organisation and is now
working to define the detailed ONE Ultra carbon
reduction plan to achieve this. We will not be
able to set hard long-term GHG emissions
targets, or the associated interim targets,
until this work and work to expand our Scope 3
metrics coverage completes during 2022. In the
meantime, we have set a year-on-year 10% GHG
reduction-relative-to-revenue target for 2022,
for Scope 1 and 2 and the elements of Scope 3
we are currently able to measure.
Governance
Progress to date:
The Ultra Board has overall
responsibility for how we identify and manage
climate-related risks, delegated to the CSR
(Corporate Social Responsibility) Committee
which oversees our climate change strategy,
programme and goals. The Board considers
climate-related risks as part of its wider strategic
risk review which is also taken into account in
determination of risk appetite. In addition the
Chair of our CSR Committee presented on
CSR strategy, progamme and goals during the
year, with a cadence of future presentations
twice a year.
The risk framework is linked to the financial
statements testing with scenario and sensitivity
testing of relevant principal risks in support
of the viability and going concern statements
approved by the Audit Committee. While climate
risks are assessed as increasing, they do not yet
feature as a principal risk for the Group; however,
they will be included in this analysis if they are
assessed as a principal risk in the future.
The Group Executive Committee manages
our climate ambition and reduction targets and
has oversight of compliance and performance
against Ultra’s climate objectives through the
business performance reporting process and
reports from the CSR Committee (three times
in 2021).
The Group Chief Risk Officer and central Health
Safety and Environment team work closely with
the CSR Committee and support the businesses
in identifying and managing climate-related risks
and opportunities at Business Unit level.
page 42
TCFD COMPLIANCE
Ultra
Annual Report
and Accounts 2021
30
A Positive Force
Protecting our planet
continued
Strategy
Assessment of climate change risk has been
undertaken looking at the short term (1–2 years),
medium term (3–5 years) and long term (6 years
plus), with the timeframes identified in each
of the risks outlined below. The process of risk
identification is summarised under the risk
management section below.
Progress to date:
Although recognised as an
emergent and increasing risk in the medium to
long term, our risk assessments indicate that
climate change is not yet a principal risk due to
the nature of our sector, markets and operational
footprint, but an area of opportunity to mature
our climate and CSR agenda against a backdrop
of a low emissions/intensity business. The
following key climate change risks/opportunities,
specific to Ultra have been identified:
+
Risk:
Stakeholder climate change and ESG
strategies have a reduced business and
investment appetite for businesses perceived
as immature in management of impacts of
climate change or insufficiently committed to
stopping/reversing global warming (Medium
level risk for the short to long term). Mitigating
factors/strategies:
+
Development of CSR and ESG strategy under
recently established CSR Committee including
a net zero emissions aim to be launched
in 2022
+
Customer climate and ESG focus currently
low but expected to increase progressively
post COP26
+
Supply chain – currently ESG immature –
new Code of Conduct for suppliers launched
Q1 2022
+
Employees/Communities adopting a high ESG
and climate focus, which aligns with launch
of Ultra’s new values and CSR strategy
+
Risk:
Extreme weather events due to climate
change threaten business continuity at our
operating sites (Low risk in the short term
rising to Medium in the medium term if
we fail to invest in resilience). Mitigating
factors/strategies:
+
Expert risk engineering analysis indicates only
three minor sites in potential flood risk areas
(taking into account an estimated 1–2 metre
sea level rise from up to 2 degrees of global
warming); no sites in earthquake zones;
but some sites subject to potential storm
exposure midwest and eastern USA
+
Low business interruption impact due
to low intensity of core ops and long-
term business model
+
Effective business continuity planning proven
in operations through Covid-19
+
Networks/ infrastructure – Ultra has lower
risk profile due to operations’ geography,
long-term business model and proven
remote working capability
+
Supply chain – low volume business model
with limited logistics challenges with proven
business interruption management through
Covid-19
+
Risk:
Costs of power/utility supplies increase
due to climate change regulatory actions
(Low risk for medium to long term). Mitigating
factors/strategies:
+
Low intensity operations with light electronics
assembly profile for power and utilities
consumption
+
ONE Ultra strategy to crystalise efficiencies
in footprint and operations/power usage
+
Risk:
Increased costs of implementing Ultra’s
climate strategy or new “taxation” on Ultra own
residual emissions/activities (Low risk for the
medium to long term). Mitigating factors/
strategies:
+
Low emission profile – low intensity operations
+
Ultra currently early in our CSR/ESG strategic
focus, but new emergent strategies under
CSR Committee will embed from 2022
+
Climate positive business in Energy nuclear
contribution
+
Opportunity to mandate climate/CSR factors
for supply chain in new Supplier Code of
Conduct
+
Risk:
Climate change consequences increase
Geo-political disruption/uncertainty (Low risk/
potential opportunity in the long term).
Mitigating factors/strategies:
+
Ultra footprint and business model mitigates
potential protectionism risks
+
Risk of general economic downturn offset
by prioritisation of deterrence and defence
in geo-politically unstable times
+
Opportunity:
One of Ultra’s five Strategic
Business Units sensors and controls used
in the safe operation of nuclear power
generation. This is recognised as an
opportunity for possible future market growth
as nuclear energy plays a part in the transition
away from fossil fuel generation, as well as a
factor that may contribute positively to offset
unavoidable residual CO
2
emissions as part
of Ultra’s net zero aspiration.
The work we have undertaken on climate
change strategy represents partial
compliance with TCFD, having identified
that we will need further review with expert
advice to fully articulate and implement
our plans for achieving net zero, and
to widen our scenario testing. These pieces
of work are planned to start in H1 2022.
page 26
Risk management
Risk assessment approach:
Ultra’s general risk management framework,
embedded into the strategic planning process
as outlined in the risk management section of
the Annual Report and Accounts, requires our
Business Units to assess risk in relation to the
delivery of their proposed strategy and
objectives. Consideration of climate risks forms
part of the risk considerations for this process.
From the outputs of this process, businesses’
perceptions of climate risk were focused on this
as one of several drivers of business interruption
risk through natural catastrophe impact on sites.
+
At corporate/functional level, Ultra refreshed its
climate-focused risk review, taking into account
the recognition of business interruption risk
from Business Units. In 2021 this review
included consideration of direct impacts from
a sea level rise of 1 to 2 metres generated by
global warming of up to 2 degrees. None of our
major sites would be at direct risk from sea level
rise, with three minor sites potentially at risk of
flooding from other extreme weather factors.
This process generated the full list of climate-
related risks identified above and substantiated
the overall assessment of climate change as an
increasing emergent risk, but not a principal
risk for Ultra in the short term.
+
As reported in the risk section on pages 42-46,
the Executive Team and the Board undertake an
annual exercise to set the risk appetite against
our principal risks. While climate change is not
yet a principal risk, the Board and Executive
Team’s appetite for all regulatory and
stakeholder compliance risks in 2021 (which
would include climate change) has been set
at “Low”. Low Risk Appetite is defined as “The
company takes caution and often accepts as
little risk as possible”, with the risk management
criteria being “Risk response actions are taken
even though prevention costs are greater than
expected incident costs”.
Risk management and assurance approach:
+
Businesses report progress against in-year
objectives (this would include reports by the
Energy SBU against future climate-related
business opportunities), incidents and changes
in their risk environment as an embedded
element of their business performance review
process. No climate-related incidents or issues
were emergent for 2021 from Business Units.
TCFD COMPLIANCE
continued
Ultra
Annual Report
and Accounts 2021
31
Strategic report
Governance
Financial statements
+
Among other environmental targets, a key
performance indicator for a 10% reduction
in like-for-like greenhouse gas emissions for
2021 (compared with 2019 as a pre-Covid-19
comparator). While businesses responded to
this objective and report on actions to the CSR
Committee, current manual processes only
allow for annual monitoring of the full GHG
performance indicator. Ultra is implementing a
new Health, Safety and Environment software
solution in H1 2022 which will enable a degree
of automation and in-year monitoring from
the end of 2022.
+
The CRO has worked closely with CSR
Committee and team in developing our CSR
strategy and frameworks for its delivery, which
incorporates climate change and emissions
considerations and which is reported in full
in our ESG report.
+
The approach to management of the external
stakeholder climate risk identified above is
addressed at corporate level through
collaboration between the CRO, CSR, Customer
and Investor Relations teams. Recognition of
this as a Medium level risk, together with
the opportunities for improvement and
competitive differentiation in the future led to
the establishment of the CSR Committee and
the businesses commitment to a CSR strategy
incorporating climate objectives.
+
Focusing on business interruption from
extreme natural and weather events related to
climate change, our near-term increasing risk,
Ultra engaged in 2021 with a new site insurance
partner across our global footprint on a
two-year basis, where risk engineering
expertise to address business interruption risks
was a key selection criteria. Having had a review
of business interruption risk resilience in 2021,
recognising increased. As part of the site survey
process undertaken by our risk engineering
partner, we will specifically incorporate climate
change impact factors into assessment of site
resilience. Where risk engineering reports
recommend investment to manage climate-
related risks such as flooding and extreme
weather, a business case will be prepared
for allocation of capital funds as part of our
capital expenditure approval processes.
While complying with the baseline TCFD
requirements on risk management, we will
be improving our risk information year on year
through use of risk engineering partners as
identified above as part of a process of
continuous improvement in this area.
page 42
Metrics and targets
Metrics
Recognising Ultra’s current climate risk
profile, metrics are focused on near-term
risks/opportunities:
+
Measurement of CO
2
emissions (stakeholder/
compliance risks). For 2021 and before, Ultra
has at minimum complied with regulatory
emissions reporting requirements, including
SECR, UK ESOS and TCFD, which includes all
Scope 1 and 2 emissions and, from 2020,
defined elements of Scope 3 emissions. In
2021 Scope 3 emissions in relation to business
air travel have been added to ‘grey fleet’
(personal cars used for business purposes)
in our coverage of Scope 3. We will continue
to expand our Scope 3 emissions reporting
coverage in line with regulatory requirements
and to support our monitoring of progress
against the aspiration to achieve net zero.
+
We monitor delivery of management actions
against site risk engineering reports which may
in the future include actions to mitigate
climate-driven business interruption risks
including investment in site protections.
+
We support and monitor ESG assessments/
ratings of Ultra by specialist ESG index
rankings as an indicator of stakeholder
climate risk perceptions.
+
We use standard business metrics relating
to cost, revenue, profit etc, to assess and
monitor business opportunities including
future opportunities in our energy business
driven by the transition away from fossil fuels
in power generation.
Targets
+
For 2021, we set a GHG emissions reduction
target of 10% relative to revenue against
reported emissions in 2019 (2020 was
discounted as unrepresentative due to
Covid-19). The actual reduction of like-for-like
emissions reductions achieved in 2021 was
4.4 tCO
2
e, delivering a reduction relative to
revenue from 18.2 tCO
2
e/£m revenue in 2019 to
13.8 tCO
2
e/£m revenue in 2021, or a reduction
of 24% against the 10% target (Scope 1 and 2
only as Scope 3 was not reported in 2019). 2021
represented a year of full operations at sites
but with some residual home working due to
Covid-19. For 2022, we have set a further 10%
reduction target relative to revenue against
2021 emissions.
+
During 2021, Ultra has set an aspirational goal
of achieving net zero emissions. In support
of this, Ultra has engaged specialists ERM to
conduct an independent gap analysis and
climate strategy review in H1 2022, which is the
first step to preparing a detailed milestone plan
for achievement of net zero, with a broader
target framework and KPIs to replace our
current relative annual 10% reduction targets.
We consider we are currently partially compliant
with the metrics and targets requirements of
TCFD, with further work identified for 2022 to
2023, to enable us to expand our monitoring and
reporting coverage of Scope 3 emissions (beyond
the grey fleet and air travel implemented so far),
and to develop hard targets to replace our
current year-on-year reduction targets.
pages 26-28
Ultra
Annual Report
and Accounts 2021
32
Supporting
our people
(Employees,
customers,
supply chain)
Build the talent pipeline
Having the right talent at Ultra is critical to
our success. We have continued to invest in our
internal talent acquisition (TA) team and expanded
globally in the USA, Canada and UK regions to
support additional recruitment needs, which
has led to excellent outcomes in 2021:
+
776 offers accepted
+
82% of offers extended are accepted
+
Reduced UK agency spend by £431,922
+
Added our Forensic Technology and
Communications Operating Business
Units into our TA model
The TA team created and facilitated a Manager
Fundamental training called ‘The War for Hiring
and Retaining Talent: What You Need to Know to
Compete’ for all managers at Ultra, as well as
trainings for interviewing and partnering with the
TA team.
We also invested in a recruitment campaign which
encourages employees to promote our open
positions on social media to attract the right
talent. This resulted in additional Glassdoor
reviews, an improved presence on LinkedIn
and additional referrals for our open positions.
Additionally, we launched a new Global Referral
Programme that rewards our employees for
successfully referring people to Ultra and allows
them the option to donate their referral payment
to a local charity.
Developing our people
Within Ultra, we have superb leaders who are
technically and operationally excellent. However,
we also understand the challenging environment
that all global companies are now operating in
post the global pandemic. Couple this with the
transformation agenda that we have over the
next few years, and the ask of our leaders going
forward will be much greater. For this reason, we
have spent the past year focusing on developing
our leaders across the organisation, as well as
seeking out talented colleagues who we believe
are our future.
In 2021, we continued our investment in
and further developed several key initiatives
to develop our diverse leadership team,
which include:
+
Improving our operating model, which launched
in January 2021. Specifically, within the Maritime
and Intelligence & Communications Strategic
Business Units (SBUs), we created four
Operating Business Units (OBUs) in each SBU.
40% of leadership roles within these new OBUs
were filled with individuals who were new. This
has strengthened our leadership and created
more bench strength for Ultra.
+
Launching our Ultra ‘STAR’ leadership model,
which focuses on four key areas: Self, Thought,
Achieving through others, and Delivering
Results, which are underpinned by leadership
competencies. This framework has been
used in designing a leadership development
programme but has also been used in:
1. Assessing our current leaders
2. Competency-based interviews for all
leadership roles
3. Internal promotion and hiring into
leadership roles
4. Our 360-feedback process which has been
designed and will be launched in 2022
+
In 2021, we partnered with Duke Corporate
Education to design an 18-month leadership
development programme for four different
cohorts. Approximately 120 leaders, from top
executives to new and emerging leaders, have
taken part in the Duke/Ultra Star programme
to date. In 2021, the four cohorts have
completed several modules covering topics such
as leadership purpose, coaching, strategy,
innovation, presence, art of perception
and resilience. The programme is expected
to complete for these first 120 participants
in April 2022.
+
In 2020, we created the Manager Fundamentals
programme, and a community on our Group
intranet. Based on feedback gathered through
focus groups, we improved the programme in
2021 by introducing live virtual sessions led by
leaders across Ultra. Our kick-off sessions were
co-led by our Chief Executive, Simon Pryce, and
our Chief Financial Officer, Jos Sclater. Our focus
in 2021 was on our transformation and the
critical role our managers play in supporting
that work, recruiting and retention, and
change management. A total of 17 sessions
were offered in 2021 with an average
attendance of 74 managers per session.
+
Creating a mentor programme with a
comprehensive toolkit. This is currently
being trialled with our Strategies for Success
development programme and our Programme
Management group. It will be launched to the
wider organisation in 2022.
+
In October 2020, we launched LinkedIn Learning
across the organisation, enabling us to deliver
more e-learning content to our employees,
leaders and development groups. To date we
have had nearly 60% of our employees activate
their licences and they have completed
approximately 3,000 courses.
+
To help build a stronger pipeline of diverse
talent, and to unlock the potential of women
in Ultra, we partnered with an external
organisation to create a programme called
Strategies for Success (S4S). Our core focus
is to shift the diversity in our senior leadership
and meet our 2024 stakeholder goal of having
“40% of all leadership roles filled with a
diverse candidate”.
A Positive Force
continued
Ultra
Annual Report
and Accounts 2021
33
Strategic report
Governance
Financial statements
Drives
high performance
behaviours
and reinforces
our company values
Career orientated
supporting
breadth and depth of experiences
Delivers
consistent & fair
reward, supported by robust
policies and practices
Transparent
, simple to
understand and in compliance
with all applicable laws and
regulations
Competitive to attract, retain
and recognise
the talent we need
to drive business performance
Incentivises and rewards
short-
and long-term
performance
that generates value for our
stakeholders
Compelling reward and recognition
In Q2 2021, we relaunched the Ultra Sharesave
schemes, this time including our Australia group,
which resulted in more participation from
employees. We were pleased to see that
participation doubled in the UK and Canada.
We were able to smoothly transition all employees
to this new platform and assisted them with
getting adjusted to using a new administrator.
In 2021 we continued to improve our performance
management process. To help drive the cultural
change desired across the organisation all senior
leaders’ and managers’ performance was
assessed against both strategic objectives (the
‘WHAT’) as well as the degree to which they have
worked in line with our ASPIRE values (the ‘HOW’).
We have run our mid year and end of year
processes through the myHR platform enabling
greater analytics and governance.
With increased mobility across Ultra due
to the OneUltra focus, we appointed a new
global mobility provider which will support
our ability to recruit and relocate prospective
and current employees, and for potential
graduate rotation programmes.
We also improved reward and recognition
communications through our many internal
communication channels and various training
courses which were held to inform employees
of our new annual pay review process and bonus
processes. We also held senior leader reward
workshops to improve education and awareness
for end of year discussions and the myHR launch.
We also successfully delivered our recruitment
and retention award programme for critical
employees.
Finally, we created and launched a reward book
to explain our reward philosophy and provide
more information on reward at Ultra, helping
with understanding and sharing the different
components of what we do, why we do it and
how we do it.
Succeed through
Diversity and Inclusion
For more information on our progress with
Diversity, Equity and Inclusion in 2021, please
visit our 2021 Diversity, Equity & Inclusion
report on www.ultra.group
Uniquely Ultra:
In January 2020, we expanded upon our Diversity,
Equity and Inclusion (DEI) plan. This was created
by the Uniquely Ultra team and underpins all
that we do.
Uniquely Ultra is guided in three core beliefs:
‘Be You. Be Open. Be Ultra.’ Our approach
is grounded in evidence-based design of
recruitment, opportunity and progression. New
systems, processes, people and measures have
enabled us to gather more knowledge in order
to make data informed, smart interventions
that will help us move the dial on a number
of aspects of this agenda including pay equity.
Be You – We believe you get better ideas and
better outcomes when people can be themselves
at work. When they feel able to act and speak
naturally, knowing their colleagues have got
their back.
Be Open – We want Ultra to be famous as a place
where diverse talent thrives. We are not there yet,
but we will be if we are open and respectful with
each other and if we keep measuring and
improving what we do.
Be Ultra – We believe the most successful teams
are the ones that combine as many different
strengths, ideas and perspectives as possible
– all working towards the same goal.
Our Diversity strategy is split into three
strategic pillars:
Having a conversation (human moments):
Creating an environment where people can speak
up with ideas, questions, concerns and even
mistakes is vital to leveraging the benefits of
diversity, because it can help make inclusion a
reality. Promoting awareness and understanding
through open dialogue in safe spaces will be a
continuous building block of our strategy.
Adapting our business around our people
(human applications):
Ultra has begun a journey of critically
examining and improving our culture, norms
and approaches with a Diversity, Equity and
Inclusion lens.
Ultra
Annual Report
and Accounts 2021
34
EXECUTIVE TEAM GENDER BALANCE
SENIOR MANAGEMENT GENDER BALANCE
*
Gender representation (% male/female)
Results
Gender pay gap
Mean
Gender bonus gap
Mean
Median
Median
6
male
35
male
1
female
12
female
14.7%
2021
29.9%
2021
20.4%
2021
21.7%
2020
22.8%
2020
77. 2%
2020
42.2%
2020
27.9%
2020
22.9%
2021
24.2%
2020
A Positive Force
Supporting our people
continued
ULTRA DEI INDEX SCORE
5
4
3
2
1
0
Achievement Level
Responsible Sourcing
Vision
Leadership
Foundation
Internal
Bridging
External
Structure
Recruitment
Advancement
Compensation
Benefits & Flexibility
Assessment
Communications
Learning
Sustainability
Community
Services & Products
Marketing
Actual 2021
2020
77.0%
2021
23.0%
2021
Our new Diversity, Equity and Inclusion Policy
commits Ultra to:
+
Encourage equity, diversity and inclusion in the
workplace
+
Create a working environment free of bullying,
harassment, victimisation and unlawful
discrimination, protect the dignity and respect
for all, and where individual differences and
the contributions of all staff are recognised
and valued
+
Train managers and all other employees about
their rights and responsibilities under the Equity,
Diversity and Inclusion Policy
+
Take seriously complaints of bullying,
harassment, victimisation and unlawful
discrimination made by fellow employees,
customers, suppliers, visitors, the public and any
others during the organisation’s work activities
+
Take decisions concerning staff based on merit
+
Review employment practices and procedures
when necessary to ensure fairness and update
them to consider changes in the law
+
Monitor the make-up of the workforce with
information such as age, ethnic background,
and sexual orientation. Assess how the Equity,
Diversity and Inclusion Policy, and any
supporting action plans, are working in practice,
reviewing them annually, and considering and
taking action to address any issues.
Who we are and how we’re doing
(individual humans):
We selected the Global Diversity and Inclusion
Benchmark (GDIB) as a powerful enabler of
strategic conversations and an effective planning
tool to help us deliver our diversity, equity and
inclusion objectives. You can find this information
in Figure 4.
Ultra
Annual Report
and Accounts 2021
35
Strategic report
Governance
Financial statements
Gender analysis
Ultra employed 4,253 people at the end
of December 2021. In the UK, our female
representation remains steady at around 23%.
Globally, we are improving with 28.6% of our
colleagues women. In comparison with the UK
defence industry and engineering sector as
a whole, Ultra has a slightly better proportion
of women working with us.
We have seen further small improvements in
the gender balance across the lower and upper
quartiles of our UK business. This reflects more
women joining or being promoted into our
leadership teams and an increase in female talent
in the early career phase. Ultra’s middle quartiles
are very similar to last year. We believe the root
causes are:
+
Reflecting the deep expertise some of our work
requires, Ultra has a 10% higher proportion of
over 50s employees than the national average.
tend to have a larger pay gap.
+
Caring for dependents is disproportionally
undertaken by women and this has increased
due to Covid-19. Consequently, employment
changes are also likely to have an effect as
households move towards having greater caring
responsibilities, often from the mid-30s upwards.
As a result, this has historically had an impact on
the number of women progressing into higher
paid jobs to the upper quartile.
+
Ultra is an engineering business. The number
of women in engineering careers is slowly rising
+
A major proportion (~45%) of the women in Ultra
have operations (manufacturing related) roles.
We recognise that transferring to higher paid
roles available within the business often requires
additional qualifications (normally a degree).
Balancing a full-time job, dependent care and
adding qualification study is a significant
undertaking. We are committed to identifying
actions to enable progression from these roles
into other roles in the organisation.
Create a winning culture
Employee engagement
We received participation from 74% of our
employee population (3,296) in our 2021
engagement survey. We are pleased to see that
our overall company favourability has increased
from 59.2% in 2019 to 61.6%. The highest
favourability was shown in the categories
of ‘Manager Relationships’, ‘Teamwork and
Collaboration’, and ‘Understanding the strategy
of my business’.
The overall engagement index for Ultra was 67.7%;
this was a 2.3 percentage point decrease on the
2019 survey and a 7.8 percentage point decrease
on the 2020 pulse survey.
This was driven by:
+
Progress in employees feeling proud to work for
Ultra with a +1.3pts score versus the main survey
in 2019
+
A small decline in work giving our employees a
feeling of personal accomplishment (-0.9pts) and
employees recommending Ultra as a good place
to work (-0.2pts)
A large decline of -10.1 pts in employees intending
to stay with Ultra for the next 12 months. This is
clearly disappointing, although it reflects global
trends post the pandemic and uncertainty around
the acquisition of Ultra.
Our ONE Ultra business transformation
began in 2018. In that time, we have seen
an encouraging decline in the Ultra gender
pay gap.
+
Our mean gender pay gap for 2021
is 14.7%. A positive improvement of
7 percentage points on 2020 and
a 10.8 percentage points reduction
on our 2018 baseline.
+
Our median gender pay gap is 7.8
percentage points lower than our
baseline year and a 1.3 percentage
point improvement on 2020.
+
Our mean gender bonus pay gap has
closed significantly from 2018 by 14.4
percentage points. Year on year the gap
has reduced 12.3 percentage points.
+
Similarly, the Ultra median bonus pay gap
has dropped from 48.8% to 20.4% since
our benchmark in 2018.
+
In 2020, this gap was 27.9%; in 2021
this gap fell by 7.5 percentage points
to 20.4%.
Flexible working
We are committed to creating a culture that allows
our colleagues to reach their potential, within an
inclusive and supportive environment. In the
particularly challenging environment of Covid-19,
our focus on providing a Covid-19-safe work
environment for our people has been a vital
pre-requisite to continuing operations throughout
2020 as a critical defence and energy industries
supplier. Beyond the basic principles of following
the advice and regulatory requirements in the
local jurisdictions of our sites, we have modified
shop floor workplaces, shared areas, catering
arrangements and shift patterns to implement
effective social distancing at sites and have
optimised remote homeworking for our people
wherever appropriate. Experience from managing
Covid-19 in health and safety terms will be taken
forward to underpin the health and wellbeing of
people through the tail end of the pandemic, and
in terms of health and safety support for a more
flexible approach to balance between home and
site working, where that has benefits for our
business and people
Living our values
Throughout the year we encourage our
employees to recognise those who are living our
values and celebrate each other. We received an
incredible 926 employee nominations from peers
for great work done across Ultra in 2021. In
December 2021, we held our first ever ASPIRE
recognition awards designed to elevate the
awareness of our values and celebrate employees
who go the extra mile for our customers, embed
continuous improvement practices, create a great
culture within Ultra, and achieve outstanding
results for our projects and communities. Of the
26 finalists, 7 winners were selected to win a
business grant, personal cash reward and an
Ultra trophy.
Ultra
Annual Report
and Accounts 2021
36
A Positive Force
Supporting our people
continued
Throughout the Covid-19 pandemic,
communication with all employees has been
more important than ever before. We increased
communication through multiple channels to stay
connected with colleagues at home and in our
facilities by regularly communicating changes
through TVs located on our production floors, in
weekly newsletters, and on our intranet (UltraNet),
and providing support during unclear times. For
example, communicating the changes of the US
Covid-19 Vaccination Mandate which impacted
a substantial portion of our employees and
Business Units. As we learned of government
updates, we turned them into practical
workable solutions and guided our
leadership teams through them.
Risk assessments were required to be submitted
for approval for all business travel to ensure the
safety of all employees.
We adapted to operating through online meetings
and trainings to continue development of leaders,
managers and high-potential employees.
Continuous improvement
A new Ultra Improvement Group was launched
and is rolling out our ‘Ultra Way’ methodology
across Ultra.
The Ultra Way utilises a special set of tools and
skills from decades of international best practices,
as well as the wealth of expertise and experience
across Ultra. At its core is a focus on our
customers, a belief in everyone’s ideas, teamwork
and the support of leadership, and how everyone
at Ultra can think about improving everything we
do, every day.
ONE Safety initiative; Think Safe, Act Safe,
Be Ultra Safe
Safety is central to the responsible delivery of
our systems and products. We are committed
to maintaining the highest standards. To
strengthen this, Ultra’s Safety Committee was
established in 2020 and comprises a diverse
group of representatives from across the
business, demonstrating our commitment
to uphold safety above all else, improve
collaboration, share ideas and best practice
and embed safety throughout the Group.
The Committee made great progress in 2021,
establishing a cohesive approach to continuous
improvement, safer workplaces and to align
globally under Ultra’s ONE Safety initiatives.
Local HSE representatives have been operating
at business level to improve alignment,
communication and engagement with greater
employee involvement, supporting positive
change and enabling us to meet our safety goals
and targets. All joiners now attend health and
safety training during the onboarding process and
employees attend training at least every two
years, or more frequently depending on their role.
We expect the Ultra workforce to only start work
when all required safety measures are in place
and to intervene when anything appears unsafe,
or conditions change. We investigate incidents
and aim to learn from them, sharing findings
to improve safety performance across our
organisation and our industry.
Ultra seeks to continually improve on employee
engagement in this area, empowering the
workforce to speak up about hazards in our
workplace, encouraging safety suggestions
and input via improved interventions
delivered through monthly safety talks and:
+
Toolbox talks
+
Intranet and UTV (Ultra TV)
+
Guide packs
+
ONE Ultra Safety resources
+
Safety walls
A ONE Ultra Safety Culture initiative was launched
by the Committee in January 2021. In support of
our ASPIRE values, the mission is to develop a
culture of safety within Ultra that is inclusive,
innovative, accountable, engaged and drives
its people, systems and product.
Ultra’s goal is to be the safest workplace possible:
+
Create a strong safety culture
+
A responsibility for us all
+
Everyone is involved
+
Focus on environmental and energy initiatives
Currently all UK businesses have adopted and are
operating to a single global safety management
system proved compliant with ISO 45001. The
management system has been modified for global
compliance purposes and North America and
Australian businesses will adopt and operate to it
through 2022 for ISO certifications in 2022 to 23.
In response to the Covid-19 pandemic, we took
additional steps to make workplaces safe for our
workforce and contractors. Ultra embedded
Covid-19 guiding principles to facilitate greater
social distancing, cleaning of workstations and
working from home where possible. Structural
changes included replacing door release buttons
with sensors, installing Perspex screens and
repurposing meeting rooms to accommodate
breaks and lunches aligned with social distancing
requirements. Continuous improvement of sites
at a local level has been established through risk
assessments and employee engagement.
Recognising technical talent
We now recognise the deep technical talent within
Ultra with the launch of the Ultra Fellows at the
end of 2021. Eight Ultra Fellows were selected
globally across the business. These Ultra Fellows
will support and inspire the development of
technical talent and skill within the business and
our communities and will share their knowledge
and expertise both internally and externally
through work such as mentoring and STEM
engagement activities.
Health and wellbeing
Mental health and wellbeing
Across many of our sites, we have mental health
first aiders or Health, Security and Wellness
committees which are there to encourage people
to talk more freely about mental health. We also
offer employee assistance programmes to
all employees, which provide access to advice
and counselling 24/7. We aim to promote early
intervention to enable quicker recovery, reduce
stigma and create a positive culture.
Initiatives such as wellbeing biscuit briefings,
activities aligned to calendar events (World Mental
Health Day), and charitable team events have all
contributed to raising the importance of wellbeing
and mental health. Weekly newsletters provide
additional support with efforts made to link to
the science behind our physiological responses.
We moved quickly in the first few months of 2020
to protect the health of our employees, including
requiring or encouraging office-based staff to
work from home, depending on the advice of
local authorities. Our information technology (IT)
teams ensured that thousands of people could
work from home each day. Employees working
from home took a health-based risk assessment
as part of our home-working ergonomics
programme. This gave them advice and, where
appropriate, support in the provision of office
and IT equipment.
Ultra updated business continuity plans and
supporting guidance to ensure that the safety
and health of our workers at facilities remained
a priority. These plans included robust cleaning
programmes, health screening, social distancing,
and providing additional personal protective
equipment in accordance with local guidelines.
We also strengthened our approach to mental
health. We provided resources to address the
challenges of remote working and to support
employees. We set up local Health and Wellbeing
programmes and awareness campaigns to
encourage employees to pay attention to their
physical and mental wellbeing, and to support
them as they did so.
Ultra
Annual Report
and Accounts 2021
37
Strategic report
Governance
Financial statements
0
5
10
15
20
25
30
35
20212020201920182017
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
Reportable incident rate/
100 employees
Reportable
incidents
Personal Safety Performance – 2021
accident data
In 2021, Ultra had 19 externally reportable
incidents compared with 21 in 2020. Figure 5
shows our number of reportable incidents
per 1,000 employees has reduced to 0.4%
in 2021 (2020: 0.5%).
As a result of our management of the
Covid-19 pandemic, we had fewer employees
on site compared with other years. However,
those able to work from home were typically from
the more benign office environments compared
with operations workstations. In addition to
overseeing our Covid-19 controls, our HSE
teams also progressed the roll-out of our ONE
Ultra HSE programmes and this is reflected
in the downward trend in accidents.
Transform our business
In 2021, our first ever global Human Resources
Information System (HRIS), Workday, internally
branded as ‘myHR’, went live within our HR
function in February and the rest of the business
in April. Since we launched the system, there
have been over 20,000 successful transactions
completed. We successfully launched our annual
performance review and compensation process
in the system which will be completed during
Q1 of 2022.
We implemented a new HR Governance structure
overseeing all our processes and the myHR
platform to ensure that we are maintaining
consistency with our processes and have the
right people owning the processes. We have four
global process owners who cover the four major
functions within HR (Talent Management, Talent
Acquisition, Reward, and core HR) and manage
the processes within the system and outside of
the system. We held several training sessions for
employees, managers and HR teams to prepare
them to effectively utilise this new system and
improve the efficiency of these new processes.
An HR Shared Service team was created with
a team focusing on the maintenance and
development of myHR and two teams providing
HR transactional support to the Operating
Business Units who utilise the system.
We also ran our first global HR Continuous
Improvement ’sprint’ on Ultra’s onboarding
process in Q4 2021, which identified several new
opportunities to improve how we onboard new
employees across our Group. We are confident
this will improve the onboarding experience for
our new hires and hiring managers and improve
employee engagement and retention.
Ultra
Annual Report
and Accounts 2021
38
A Positive Force
continued
Giving
back
(Charity and
community)
Giving back framework
In 2021, Ultra launched our first ever ‘Giving back’
framework. Every employee now has available up
to two days per year to support activities within
their local communities.
Team applications have continued to grow in Q4
2021 despite Covid-19 being prevalent in most
of our regions with more than 2,000 hours
contributed across the globe.
Donations and funding
Our matched fund of £200,000 was launched
in June 2021. The aim of the fund was for Ultra
to match the local fundraising and/or support
local business teams worldwide to encourage
local activity.
Ultra’s fundraising activities were slower in the
first half of the year due to Covid-19 lockdowns
but picked up strongly in H2. The full £200,000
fund was donated to worthy causes that were
important to our people in 2021.
In addition to this, £70,000 was raised by teams
and more than £30,000 was donated by our
businesses locally.
Our Covid-19 fund from 2020 contributed
£130,000 and further donations/support in STEM
has resulted in Ultra donating over £500,000
to charitable activities in the last two years.
Corporate charity partnership
Ultra’s charitable coverage is aligned with Ultra
ASPIRE values and key initiatives including but not
limited to: Diversity and Inclusion, Armed Forces
levelling up and wellbeing.
STEM framework
In 2021, a STEM working group was formed
which includes representatives from across our
businesses’ including the technical community,
HR, CSR Committee and Uniquely Ultra. The
goal of our ONE Ultra STEM framework has been
to develop a consistent global standard to be
leveraged for shared resources, materials,
best practice and collaborative working. The
framework can also be flexed for use in any
local Business Unit to meet local needs and
better align with business campaigns.
The new ONE Ultra STEM framework is due to
be launched in 2022 with ambassadors trained
across Ultra.
ONE Ultra Forces Charter
Significant veterans’ charities engagement
has continued throughout 2021.
A highlight of our work in this area was Ultra being
formally awarded the UK Armed Forces Covenant
Employer Recognition Scheme Gold Award, the
highest level of employer recognition.
Progress has been made with our Veterans
Committee network which is growing in
membership with more than 20 volunteers across
the business offering their support to help drive
our Forces Charter initiatives. To read our Forces
Charter, please visit www.ultra.group.
Ultra is also a corporate supporter for American
Humane’s Pups4Patriots programme through
donation of funds previously planned for trade
show ‘giveaways’. Following a pilot, this model of
donations will be rolled out across all businesses
for major defence shows.
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Strategic report
Governance
Financial statements
Employee training
We have a zero-tolerance approach to bribery and
corruption anywhere in the world. We will walk
away from any business that we can’t win fairly
or legally. Our success is built on the trust of our
customers, employees, investors and the general
public. We know the best way to gain and maintain
this trust is to demonstrate that we act ethically
and with integrity in all of our business practices.
We updated our anti-bribery and corruption
manual and policy in 2020, which is consistent with
the UK Bribery Act, and the US Foreign Corrupt
Practices Act, and any breaches can lead to
dismissal or termination of contract. The policy
guides our employees about what constitutes a
bribe and prohibits giving or receiving any
excessive or improper gifts and hospitality.
Our Board of Directors oversees our programme
to prevent bribery. They are supported by our
Group Company Secretary, who has primary
and day-to-day responsibility for implementing
the policy and for monitoring its use and
effectiveness. Every year we launch Group-wide
anti-corruption and bribery training. In the
training we provide several challenging scenarios
to help our people know what to do if they were
to come across issues such as bribery, fraud
and conflict of interest. We strive to create an
environment in which our people feel included
and confident to ‘speak up’ and so provide a
number of routes for them to seek help or
raise concerns.
The training included a clear stance on non-
retaliation against someone who raises a concern
in good faith.
To date, this training and refresher training has
been completed by 99% of our organisation,
with refresher training due to complete within
the whole organisation by March 2022. New
employees are required to complete the
training as part of their induction process.
Every two years we undertake global employee
training on our Ultra Code of Conduct, which sets
the standards we expect all our employees and
everyone who represents Ultra to adhere to. It
also sets the standards everyone dealing with
Ultra can expect us to demonstrate. It is a guide
to doing the right thing, helping us to operate our
business responsibly, make ethical decisions and
maintain our reputation. Alongside the Code of
Conduct, Ultra provided mandatory training and
certification for employees through our Learning
Management System.
We are pleased to report that there have been
no incidents of unethical behaviour or failure to
comply with regulations by Ultra employees
in 2021.
We are also pleased to see an increase in support,
awareness and feedback about our new Speak
Up whistleblower channel for employees to ask
questions or report concerns they think may be
a violation of our ASPIRE values and Code of
Conduct. Speak Up is an entirely independent,
anonymous and confidential reporting channel
that is available 24 hours a day, seven days a week.
Data privacy
2021 has been a pivotal year for data privacy
with the launch of Global Data Privacy training.
Supporting key transformation initiatives,
including the implementation of the HRIS,
changes to Covid-19 workplace protocols, and
updating key internal policies, ensure that Ultra
continues to fulfil obligations set out in data
privacy law. All joiners now attend data privacy
training during the onboarding process and
employees attend training every two years,
or more frequently depending on their role.
We believe that privacy can only be sustainable
when it is intentionally woven into everyday
operations and Ultra’s Group Data Protection
Officer oversees data privacy activity across Ultra
working with business teams to promote this
privacy by design ethos. A network of Privacy
Champions in Operating Business Units
provides daily support.
Internal policy documents applying to Ultra
operations globally are reviewed annually with
recent updates to the Data Protection Policy
and Employee Privacy Notices. As a National
Cybersecurity Alliance Data Privacy Day Champion,
Ultra is proud to publicise its commitment to
privacy sustainability and empowering
employees to respect privacy, safeguard
data and enable trust.
Ultra takes a proactive approach to building
secure data management systems, operating
information security policies designed to prevent
pollution of our digital solutions. As technology
continues to improve, Ultra seeks to implement
energy-saving initiatives such as centralising key
IT services, extending the life of IT equipment
and investing in cloud computing to reduce
power consumption.
Doing the
right thing
(Governance)
Adopting uncompromising access control,
multiple layers of security, clear roles and
responsibilities, transparent data privacy regimes,
and routine risk assessment and mitigation,
Ultra holds ISO 27001 accreditation for identified
information security management systems
operated within our Business Units in accordance
with scope requirements.
Regular security audits and assessments take
place across Ultra’s IT networks led by information
security and data privacy subject matter experts
to ensure Ultra practices are not just compliant
but are responsible and sustainable.
Ultra’s current Privacy Notice can be found by
accessing www.ultra.group.
Information security
Ultra has its own in-house developed Cyber
security business called CORVID. As a unified Ultra
team, Corporate Security, Group Data Protection
Officer, Information Technology (IT) and CORVID
work together to ensure that all Ultra information
is protected to the highest standards. Compliance
with the diverse security and regulatory data
protection requirements from around the world
default to the most stringent requirements
and standards.
CORVID was developed in 2013 to safeguard
Ultra’s military, aerospace and critical
infrastructure data, as well as that of its customers
and supply chain. Ultra identified that traditional
cyber defences were unable to combat the
evolving complexity of cyber threats – CORVID
was created to provide a more comprehensive
solution to the cyber problem.
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A Positive Force
Doing the right thing
continued
The protection CORVID offered to solve Ultra’s
cyber challenges was so successful that the
decision was taken to make the services available
commercially. We’ve been leveraging our
technologies, capabilities and people to deliver
industry-leading cyber protection for ourselves
and our customers from the start.
We’re based in Cheltenham and that’s not a
coincidence. As a fast-growing hub for cyber
security in the UK, the talent and opportunities
here are unrivalled.
Ultra’s Cybersecurity team continuously works on
network hardening, auditing, patch management
and access control across diverse networks to
meet National Institute of Standards and
Technology (NIST) 800-171 standards.
Vulnerability scanning is performed on a routine
basis and then reviewed jointly with Security,
IT and CORVID. The reviews identify gaps and
vulnerabilities requiring mitigation reducing our
attack surface. Internal audits are also performed
routinely for compliance and insider threat
monitoring.
All joiners are provided security training during
the onboarding process and all employees attend
training annually. Privileged users on the network
are provided a more in-depth training focused
on their specific role in the protection of
Ultra information.
Information assurance
Ultra operates in both public and private sector
markets globally. We understand these markets
and the comprehensive legislative and regulatory
security conditions and requirements that
they demand.
Our security subject matter experts work closely
with government agencies, the defence sector
and industry clients carrying out risk assessment,
treatment, and residual risk management
activities to ensure that the information systems
and technology we operate and supply, have the
appropriate security controls.
We ensure that the systems and technology we
deliver are secure by default and are protected
in accordance with the relevant policy. In addition
to this, where required, we ensure that they
are accredited to national standards by the
appropriate accreditation body.
Ultra holds ISO 27001 accreditation for
identified information security management
systems operated within our Business Units,
demonstrating compliance with scope
requirements. Ultra has a comprehensive
Group information security governance
framework in place. This framework is based
around comprehensive, and ongoing, risk
assessment. Two key inputs, threat, and
vulnerability, are discussed in the section below.
Ultra has its own in-house security team that
delivers preventative and detective security
controls across all Ultra businesses. The team
has developed a comprehensive threat-hunting
framework, designed to keep pace with the
techniques used by malicious cyber actors.
When the system raises alerts, Incident Response
Analysts follow precise play books to ensure
business impact is kept to a minimum. This system
and the procedures are subject to annual review
and accreditation by the internationally
recognised CREST organisation.
The team also carries out monthly vulnerability
scans of the Ultra internal and external IT estate.
The results of those scans are made available to
the individual businesses through a dedicated
portal. The team also has regular meetings with
all businesses to discuss their cyber posture.
Ultra has also developed a sophisticated and
intelligence-fuelled system to provide email
protection service. All emails that reach the
user’s inbox are clearly colour-coded alerting
of any potential issues.
Our CSR Committee
The CSR Committee is chaired by Rikki Douglas, VP
Business Development, Ultra Sonar Systems, and
is supported by Ultra’s newly appointed Director
of Corporate Social Responsibility. The Committee
comprises representatives from across the
business and develops strategy recommendations
on sustainability for the Executive Team to review
and incorporate into Group strategy. For example,
our CSR Committee is leading Ultra’s journey to
net zero and how this can be achieved, in addition
to our global Giving back days and STEM
frameworks.
Our Executive Team is responsible for assessing
our environmental and social risks and
opportunities, including those relating to climate
change, prior to sending it to the Board for
review and monitoring progress through our
risk management process, overseen by our
Chief Risk Officer.
Ethics Committee
An entirely independent Committee currently
made up of two independent individuals, Major
General (Retired) Tim Cross CBE and Simon Lowe,
who have vast combined experience within the
fields of ethics, culture and governance.
We were looking for a third member of the
Committee, to be based in North America, to join
the Committee in 2021, but have delayed this
recruitment due to the recommended acquisition
of Ultra.
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Strategic report
Governance
Financial statements
The Committee aims to visit Ultra sites on
a rotating schedule at least four times a year
and has a formal remit to:
+
Get an independent view of how ethically
we are behaving across our businesses
+
Monitor alignment with best practice in our
business ethics and compliance procedures
+
Assess how our culture and values are
embedded throughout Ultra
+
Review Speak Up reports and challenge
the integrity and independence of our
Speak up platform
The Ethics Committee meets with a diverse
group of employees at each site visit, without
management present, and meets with
management separately. Following the visits,
an independent, unbiased and unedited report
on the perceived ethics and culture within the
business is provided to management. The
Committee challenges management where
necessary and, where applicable, provides
impartial advice on how ethical and cultural
matters could be improved.
The Committee then provides honest, objective
feedback to the full Executive Team twice a year,
and annually to the Board.
Supplier Code of Conduct
Our suppliers are critical to our ability to run our
businesses. They are involved in almost every step
of our operations – and are often key to having
a positive impact on local communities and
achieving successful business outcomes.
We are pleased to report that Ultra’s new Supplier
Code of Conduct was launched in Q1 2022. This
Global Supplier Code of Conduct applies to all
suppliers to Ultra and other partners who supply
products and services using contracts or
purchasing terms. Ultra expects all suppliers to
fully comply with applicable laws and adhere to
internationally recognised environmental, social
and corporate governance standards. We also
expect our suppliers to implement the high
standards which Ultra lives by, which cover:
+
Anti-bribery and corruption
+
Collective bargaining
+
Competitive behaviour and anti-trust
+
Conflicts of interest
+
Diversity, equity and inclusion
+
Export and import controls, sanctions and
obligations
+
Fair pay and benefits
+
Health, safety and environment
+
Lobbying and political support
+
Preventing facilitation of tax evasion
+
Responsibly sourced materials
+
Safeguarding confidential information
+
Slavery, human trafficking and labour
exploitation
+
Working with stakeholders
In support of the implementation, awareness
training will be provided to our top suppliers.
A full copy of our new Supplier Code of Conduct
can be found on www.ultra.group.
Working with our people
and suppliers
Human rights
We believe in our obligation to respect core
human rights, protect individuals against abuse of
human rights and take positive action to facilitate
enjoyment of basic human rights. This means
respecting and observing equality and human
rights legislation and introducing policies that
promote rights and freedoms for all. We value and
encourage diversity within our workforce and our
talent acquisition pipelines support increased
representation and inclusion.
Ultra has zero-tolerance of bullying, harassment
and discrimination towards workers, including all
forms of physical, verbal or psychological abuse,
and we expect our suppliers to adopt the same
stance. We work collaboratively with our suppliers
to ensure that, like our own employees and
contingent workers, theirs are protected from
bullying, harassment and discrimination and
they and their supply chain can compete fairly
and have an equal chance of success.
Modern slavery
Modern slavery is a crime and a violation of
fundamental human rights. We believe that all
employment should be freely chosen and oppose
all forms of slavery, human trafficking and labour
exploitation. Ultra has a zero-tolerance approach
to modern slavery and we comply with applicable
labour, employment and modern slavery laws.
We are committed to:
+
Acting ethically and with integrity in all business
dealings and relationships
+
Implementing and enforcing effective controls
to ensure modern slavery does not take place
anywhere in our business or our supply chains
We expect our suppliers to adopt the same stance
and set out Ultra’s expectations for compliance in
our Supplier Code of Conduct.
During 2021, we relaunched our Modern Slavery
and Human Trafficking Policy and adopted the
changes in the UK to comply with the Modern
Slavery (Amendment) Bill.
Conflict minerals
Ultra is committed to working with suppliers
who ensure the responsible sourcing of materials.
This means our suppliers must only providing
products made from materials, including
constituent minerals, that are sourced responsibly
and verified as ‘conflict free’ in accordance with
OECD guidelines. We work with suppliers who can
provide Ultra with supporting data of their supply
chain of minerals. We require all suppliers and
their supply chain to be compliant with prevailing
legislation in respect of conflict minerals as set
out in our Supplier Code of Conduct and supplier
management and qualification processes.
Collective bargaining
Ultra believes that individuals should be free to
decide whether to join a trade union or other
equivalent organisation of their choice and to
bargain collectively in support of their mutual
interests. This means we respect the individual
choice of the worker and the relevant processes
and laws for collective representation and
consultation where applicable.
Ultra
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42
Principal risks and uncertainties
We manage risk to support our ONE Ultra strategy
Principal risks and risk management
embedded into our ONE Ultra day-job processes
from the development of our strategic plan
and business objectives, through assessment
and pricing of business opportunities and
management of delivery programmes to the
management of our ONE Ultra transformation
and continuous improvement projects.
The Board has overall responsibility for ensuring
governance and internal controls. The Board
reviews risk as part of its strategy review process
and, as part of standard cadence in year, reviews
the Group’s key and emerging risks, and the
controls and indicators relied on to manage them.
The risk management framework underpins
heart of the risk review and assessment process
is embedded into Ultra’s strategic planning
framework, which takes a 10-year horizon for the
and assessment of associated risks, in the form
of changes to currently recognised risks and the
process involves facilitated risk reviews with
Business Units and functions, based on their plan
assumptions and scenarios. Emergent risks are
focus on new factors such as new operations or
markets, and also from analysis of wider changes
to the risk horizon and environment, such as
the anticipated impacts of climate change. The
overall risk framework then enables the consistent
measurement, control and reporting of risks
that can undermine the business model, future
performance, solvency or liquidity of the Group
+
The causes and drivers of a risk and
accountability for its management
+
Its potential consequences for Ultra through
analysis of the likelihood and consequences,
+
Analysis of the speed to impact of risks to aid
prioritisation, recognising that it is often the
pace with which a risk crystallises that impairs
a business’s ability to mitigate and control it
+
warning indicators in place or being funded and
implemented to manage and mitigate a risk
Day-to-day ownership of risk sits with business
and function management, under the monthly
review of the Executive Team to whom the Board
has delegated principal responsibility for risk
oversight. The Board reviews the Group’s key risks
as an integral part of the annual strategic planning
process and also undertakes a structured risk
appetite review each year facilitated by the
Risk assurance
Ultra’s management, Audit Committee and Board
receive independent assurance on our key risks
and controls through Internal Audit reviews which
are conducted by PWC as our Internal Audit
service provider. The outputs of the risk review
process are a key driver in determining the
Internal Audit plan, alongside the wider critical
control frameworks we rely upon, with the plan
approved by the Audit Committee for the coming
year. Any changes to the plan in year require
approval by the Audit Committee. Twice yearly
SBUs and global shared services, chaired by
the CFO with Internal Audit represented, to
provide additional assurance, oversight and
accountability for the management of risk and
controls. Completion of management actions
from Internal Audits and from the Control Reviews
are monitored centrally with progress reported
to the Audit Committee.
Additionally, as referenced in the Audit Committee
Report on page 67, in 2021 a programme of
control framework reviews was presented to the
key risk and controls areas, based on the ‘three
lines of defence’ principles, including programme
management and bid and contract controls and
key compliance area controls. This process is now
embedded and a prioritised programme will also
be undertaken in 2022.
Risk appetite statement
The Group’s objective to generate long-term
in Ultra’s appetite for risk, which is set by the
Board taking into account the balance between
risk and reward and our ability to manage and
control risks through our people and processes.
Ultra has a low risk appetite in situations where its
areas. Where the safety of our people may be
compromised, Ultra has zero tolerance. However,
the Group does consider taking higher risks
where the opportunity is seen to outweigh the
potential risks, provided appropriate levels of
mitigating controls are in place. The Executive
appetite in relation to Ultra’s key and principal
risks in 2021, assessing appetite as risk tolerant
risk balanced (where additional investment in
control is supported by the business case) or risk
averse (where Ultra invests to minimise the risk
threat, in areas such as compliance risks). Risk
our principal risks.
Principal risks
In line with guidance on risk reporting, we have
focused our statement on principal risks to those
that are current and/or particular to Ultra, either
through the nature of our sector or business
model, or because factors or circumstances have
elevated more generic risks in Ultra’s current
business environment. Environmental and climate
change risks have been assessed and are growing
risk areas for Ultra, but as reported in more detail
in the TCFD table on page 29, are not yet principal
risks due to market, operations and geographical
footprint. In addition to the principal risks
levels. These potential risks are often common to
listed businesses and include business
HSE risks (which are seen as a priority for
excellence) and risks associated with our legacy
reported on as principal risks in previous years.
Current uncertainty around British Government
approval of the recommended bid for Ultra by
Cobham is exacerbating short-term challenges in
principal risks below. If the deal does not proceed
because consent is withheld, this could have a
negative impact across several risks, through
prolonged uncertainty for stakeholders in the
short term, before strong business fundamentals
reassert themselves.
Key changes to principal risks from 2020 are:
+
pension scheme have diminished from being
a principal risk, with ageing and proactive
management such as increased hedging.
+
In common with many businesses as the world
moves to a post Covid-19 environment and
and disruption/ shortages has emerged as a
principal risk for Ultra.
+
Challenges in retention and recruitment,
especially of specialist engineers in local areas
a changing labour market post Covid-19 and
uncertainty for Ultra while a decision on
for Ultra is awaited.
Ultra
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Strategic report
Governance
Financial statements
cyclically depending on economic conditions,
change of government policy or political
considerations, budgetary constraints, and
changes to national and global threats.
Risk appetite:
Tolerant
Potential impact
Lower defence spending by the Group’s
major customers in a down cycle could have
a material impact on the Group’s future results
Mitigation commentary/examples
+
The Group is geographically spread across
the USA, UK and international defence markets.
+
We invest in technology to help us access high
growth segments of the market.
+
Many of our programmes are very long term,
which helps mitigate against short-term
changes in the defence cycle.
Comment, changes and outlook
Our focus is the defence markets, where we
believe we can grow at good returns on capital
in the medium and long term. We have a
degree of tolerance to defence cycle risk and
are not seeking to diversify away from the
defence market. However, we do seek to have
a diverse customer and programme base,
which provides resilience.
As mentioned above, we see growth in our
markets over the medium term, driven by
the increasing threat of near peers.
Defence Sector
Cycle Risk
Across Ultra’s businesses, a major proportion of
revenues are generated through contracts which
are long term in nature and subject to complex
terms and conditions. Contracts include
commitments relating to pricing, quality and
safety, technical and customer requirements
and product servicing.
Risk appetite:
Balanced
Potential impact
A failure to fully recognise contract risks or to
anticipate technical challenges and estimate costs
accurately at the outset of a contract can lead to
unexpected liabilities, increased outturn costs
Mitigation commentary/examples
+
New and improved business bid and contract
management processes
+
Legal reviews of contract terms and conditions
+
+
Clear delegation of authority/escalation
criteria for approvals
+
Reviews of contract performance
Comment, changes and outlook
Balanced risk appetite, with additional controls
We have continued to invest in specialist resources
in commercial and legal spheres, improving our
bid competency and ability to align new contracts
with Ultra’s risk appetite. This complements the
implementation of standardised bid and contract
policies processes and the pooling of capability
and the alignment of similar businesses under
the ONE Ultra banner.
Bid and
Contract Risk
Reducing risk
Many of the programmes entered into by Ultra
are complex, long term and subject to various
performance conditions which must be adhered
to throughout the programme. Poor management
of such programmes brings risks related to:
+
Delays in product development or launch
schedules
+
predict technical problems
+
Inability to deliver to contract terms
+
Inability to manage programme costs or
forecast accurately
Risk appetite:
Risk averse
Potential impact
result in damage to customer relationships or
cancellation of a contract, resulting in claims for
loss and reputational damage. Poor performance
against a contract could also undermine the
Group’s ability to win future contracts and could
returns than expected.
Mitigation commentary/examples
+
Embedded programme management in
businesses
+
ONE Ultra programme management policy
and procedures implemented through 2021,
replacing local diverse business approaches
+
Formal review and escalation framework
+
Review and approval of key programmes
by the Executive Team
+
‘Lessons learned’ and best practice sharing
+
Inspection of programmes by customers
Comment, changes and outlook
Risk averse appetite for failures on programme
management drives investment in strong
controls for a key business process. Controls
improvements are impacting to reduce this risk,
but this is in the context of short-term challenges
for programmes over retention and recruitment
of specialist resources.
The standardisation of programme management
policies and tools was further enhanced in
2021 with a focus on controls and oversight.
2021 brought alignment of specialist resource
Reducing risk
Programme
Risk
Ultra
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44
Principal risks and uncertainties
continued
Reducing risk
With our focus on the defence sector, geo-political
factors could lead to an unfavourable business
climate for defence spending or restrict the access
of overseas suppliers to national markets.
Risk appetite:
Balanced
Potential impact
Political change in a major end customer country
cancellation of defence programmes or reduction
in future programmes for political reasons, or
a change of supplier selection conditions on
defence contracts.
Mitigation commentary/examples
+
The Group proactively monitors the political
+
We develop and maintain strong relationships
with customers, governments and stakeholders
+
in our target market countries.
+
countries.
+
Long-term nature of defence contracts and
domain expertise.
Comment, changes and outlook
Balanced risk appetite, with additional controls
Risk is mitigated in the short to medium term
with increasing political prioritisation of defence
capability by multiple governments in the current
period of global political instability and events,
including the Russian invasion of Ukraine.
Geo-political
Risk
The ability to continuously improve and
transform our business to deliver objectives in
complex technology markets is vital for business
business as usual is a key component of Ultra’s
drive to deliver our strategy and supporting
operational improvement.
Risk appetite:
Balanced
Potential impact
Transformation programmes may not be
delivered on time or costs may increase. The
may not be realised. Under-resourcing may lead to
management distraction from business as usual.
Structural change may impact employee morale.
Mitigation commentary/examples
+
Change programme management procedures
and controls
+
Robust governance around all programmes,
including strong steering committees, standard
reporting and executive level sponsorship
+
Investment in dedicated professional
transformation resource and leadership
Comment, changes and outlook
Balanced risk appetite, with additional controls
change activity.
Programme risk decreased during 2021, as
a result of more mature programmes and
published with the mid year results.
Delivering
Change
Level risk (short term)
Increased risk
As a key partner to our customers and end
information and customer and its own intellectual
property. In circumstances where the incidence
and sophistication of cyber security crime
protection of information and Ultra’s security
and IT systems is necessary to prevent the
compromise of secure information, intellectual
property or our people’s personal data.
Risk appetite:
Risk averse
Potential impact
Reputational damage to Ultra as a highly regarded
information or IP. This could lead to loss of business
opportunities with removal of government
Regulatory action or civil/contractual penalties
could result from loss of personal data, a partner’s
Mitigation commentary/examples
+
Investment into Corvid Protect, Ultra’s in-
house specialist cyber security resource
+
Intellectual property is addressed in the bid
and contract management process and
protected through information security
policies, procedures and systems
+
Security clearance processes are in place
for all employees
+
Established physical security processes are
implemented at all sites
+
US defence business governance framework
in place using SSA and Proxy Board vehicles
+
Independent security reviews by defence
departments and customers
Comment, changes and outlook
Focus on investment in strong controls for
a key enabling capability; risk averse.
The focus of CORVID Protect as an internal
professional specialist cyber resource was
remote working capabilities throughout
work securely from home at peak lockdown
periods, despite an increased general business
cyber risk environment. Investment in and
implementation of improved, standardised
secure systems, continuing through 2022,
is a key enabler of the ONE Ultra strategy.
This will drive mitigation of the increasing
levels of risk in the global cyber environment.
Security and
Cyber Risks
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Strategic report
Governance
Financial statements
Increased risk
In common with other businesses in our
sector, the Group operates in a highly regulated
environment across multiple jurisdictions and
is subject to a range of regulatory, governance
compliance requirements. New or retrospective
compliance changes (for example in Tax) or a
failure in the framework of internal controls
could result in penalties, liabilities or
reputational damage.
Risk appetite:
Risk averse
Potential impact
events, all of which carry the potential for
reputational damage are:
+
Financial rules and standards compliance –
failure to comply in key areas such as revenue
recognition could result in adjustments that
undermine results.
+
compliance rules in a key market, such as the
penalties and or reputational damage.
+
Trade compliance – failure to comply with export
as US ITAR controls, could result in regulatory
action and penalties.
+
Bid and contract requirements for some
government and defence contracts introduce
national investment or operations constraints.
While typically very long term by nature, failure
to comply could lead eventually to regulatory
action or penalties.
+
Anti-bribery and corruption (ABC) – failure to
comply with multiple jurisdiction rules in relation
to public sector contracts directly or through
intermediaries could result in regulatory action
and penalties.
+
Tax compliance – retrospective regulatory
liabilities.
Governance, Compliance
& Internal Controls
Reducing risk
Mitigation commentary/examples
+
Corporate and business level controls
policies, procedures, training and systems
+
Internal expert corporate teams in key
functional areas
+
Built-in IT system controls
+
Controls and compliance reviews
by management and internal audit
+
Specialist advisers
Comment, changes and outlook
As an international defence supplier, investment
in strong compliance controls is key to our
standing as a responsible and reputable supplier
to governments; risk averse.
Through 2021 we have continued to invest
in professional expertise and capabilities for
guidance and oversight in our key industry
compliance areas, including trade compliance,
management and ABC. New ONE Ultra process
with strengthened and hard-wired controls,
continued to roll out in 2021 as part of our
transformation programmes.
2021 has seen continued investment in
professional roles and capabilities for guidance
and oversight in our key industry compliance
areas, including trade compliance, defence
contractor compliance and ABC. While recognising
the increasing demands of the compliance
environment, the assessment of the net risk as
our compliance controls framework. New ONE
compliance areas, with strengthened and
hard-wired controls, will continue to roll out in
2022 as part of our transformation programmes.
Specialist materials, components and power
and utilities costs increase materially and/or
shortages or outages are triggered by post
Covid-19 supply chain issues and logistics
movement capacity challenges to meet
demand as global economies recover.
Risk appetite:
Risk averse
Potential impact
Increased costs from supply chain and energy
be passed on under contractual terms, could
materials and components post Covid-19 or
from emergent sanctions in response to the
invasion of Ukraine may impair delivery
timeframes, leading to penalties.
Mitigation commentary/examples
+
Introduction of aligned ONE Ultra procurement
processes and organisation, increasing
negotiating power and improving
procurement expertise
+
Proactive management of sourcing and stock
levels of critical materials and components
+
Use of contractual terms or renegotiation
by agreement with customers
+
Supply chain analysis following events in Ukraine
indicate no direct supply chain implications
Comment, changes and outlook
Risk-averse stance supports investment in
standardisation, controls and tools to proactively
manage supply chain risks.
As for many businesses, these supply chain risks
are increasing currently as global economies and
demand rapidly recover as the challenges of two
years of Covid-19 pandemic subside. Supply
chain risks are exacerbated by the Russian attack
on Ukraine and consequent global sanctions,
contributing to our assessment of this as an
increasing risk.
Supply Chain
Ultra
Annual Report
and Accounts 2021
46
STATEMENT OF GOING CONCERN
Principal risks and uncertainties
continued
Increased risk
With our focus on the defence sector, geo-political
factors could lead to an unfavourable business
climate for defence spending or restrict the access
of overseas suppliers to national markets.
Risk appetite:
Risk averse
Potential impact
The combination of highly competitive labour
markets as economies recover from Covid-19
and uncertainty for Ultra while a decision on
clearances for the recommended acquisition of
Ultra is awaited, is driving specialist resourcing
gaps in our operations which, if enduring, could
start to impact customer programme delivery.
Mitigation commentary/examples
+
Use of the newly developed ONE Ultra
culture and values as recruiting asset
+
Embedding of specialist HR talent acquisition
function to directly address Ultra’s recruitment
priorities
+
Proactive strategies to retain critical specialist
employees targeted for individual locations
and circumstances
Comment, changes and outlook
The quality of our people is a key asset and
increasingly challenging labour market conditions,
we are investing in our recruitment capabilities
and retention measures to protect and enhance
our specialist capabilities for customer delivery.
Specialist Recruitment
and Retention
The Directors have a reasonable expectation that
the Group has adequate resources for a period
of at least 12 months from the date of approval
assessed that the going concern basis of
accounting is appropriate in preparing the
material uncertainties to disclose.
As referred to on page 14, the shareholders of Ultra
have approved the acquisition of the Group by way
of Scheme of Arrangement by Cobham Ultra
Acquisitions Limited, which is indirectly controlled
by Advent. The acquisition is conditional on
approval by Her Majesty’s Government, so the
Directors have considered going concern under
two scenarios: on an ordinary course basis and on
the assumption that the acquisition completes
within the going concern period.
No acquisition by Cobham
The Directors have considered the Group’s strong
forecasts and have a reasonable expectation that
the Group has adequate resources for a period of
at least 12 months from the date of approval of
Ultra’s cash and cash equivalents as at 31
December 2021 were £138.8m and net debt was
lease liabilities). Since then, Ultra’s net cash has
increased further with the receipt of £34.8m on
24 January 2022 relating to the sale of non-core
aerospace assets, further strengthening the
Group’s liquidity.
The Group’s committed lending facilities amount
to £401.7m in total and comprise loan notes in
issue to Pricoa of £50m and $70m, and a revolving
credit facility (RCF) of £300m that is denominated
in Sterling, US Dollars, Canadian Dollars, Australian
Dollars or Euros. The RCF is provided by a group of
eight international banks and, in certain
acquisition scenarios, permits an additional
£150m “accordion” which is uncommitted and
subject to lender consent. The Group also has
access to a £5.0m and $2.5m overdraft. The
operational needs, including the funding of
day-to-day working capital requirements. The
lending facilities is as follows:
Facility Expiry
RCF £50m
November 2023
RCF £250m
November 2024
Pricoa £50m
October 2025
Pricoa $40m
January 2026
Pricoa $30m
January 2029
The Group’s net debt as at 31 December 2021 also
includes £17.3m of borrowings (fair value) from
the Canadian Government under the Strategic
Aerospace and Defence Initiative (SADI), which are
repayable over the period to 2039 (see note 23).
of net consolidated total borrowings to adjusted
2021) and that the net interest payable on
borrowings is covered at least three times
December 2021). Stress testing has been
undertaken to identify the level of cash
be required over the going concern period to
breach the covenants; both an unbudgeted cash
of £230m in adjusted EBITDA would be required.
Though global macro-economic conditions
remain uncertain with continued uncertainty
arising from impacts of the Covid-19 pandemic,
potential risks to the Group associated with this
are set out on page 45), the Group’s strong
liquidity, the long-term nature of Ultra’s business
and its positioning in attractive sectors of its
markets, taken together with the Group’s
forward order book, provide a strong level of
to come.
Completion of the acquisition of Ultra
On the assumption that the acquisition of Ultra
completes during the going concern period,
noting the analysis above regarding the Group’s
forward order book and stable nature of the
business, the Directors have also considered
the following:
+
Advent have stated in the Scheme of
Arrangement that they intend Ultra to thrive,
that they have no plans to undertake any
material restructurings, that they will not
limited exceptions) and that they will increase
investment in research and development.
+
extends beyond the going concern and
long-term viability assessment period and
Scheme of Arrangement, and repay the
Group’s existing debt facilities if debt
repayment obligations are triggered by the
change of control provisions described on
page 50.
+
which are available on Ultra’s website, does not
include any leverage or coverage covenants.
Ultra
Annual Report
and Accounts 2021
47
Strategic report
Governance
Financial statements
STATEMENT OF GOING CONCERN
Ultra’s prospects and viability
When reviewing the long-term prospects
of the Group, we consider:
i) The market
+
Long-cycle defence markets with stable
through-cycle growth
+
Short and medium-term growth expected
in our core markets of Maritime, Intelligence
and Communications, Forensic Technology,
Energy and Military Aerospace
+
A strong order book and order pipeline,
providing forward visibility
+
Capabilities in Ultra that position us to
grow above the markets
ii) Strategy and business model
+
Focus; Fix; Grow transformation improving
+
Parenting advantage accelerating growth
+
Rigorous resource allocation supporting
strong returns on capital
+
Asset light business model delivering strong
+
Assessing Ultra’s viability
The Board conducted the viability review for
a period of three years to December 2024,
to coincide with its review of its medium-term
forecasts from Ultra’s strategic plan and giving
which is within three years, and the maturity
The Directors have considered the potential
impact of the principal risks set out on pages 43
to 46 and have modelled scenarios to illustrate
the impact of the principal risks on the business
in a scenario where the Cobham acquisition
does not complete. The long-term viability
projections and prospects; its robust balance
sheet, including available cash and committed
nature of the key markets and programmes on
which the Group operates; and the long-term
nature of many of these programmes. The
Board has considered the magnitude of
potential impacts resulting from uncertain
future events or changes in conditions, the
likelihood of their occurrence and the likely
Directors would consider undertaking.
In particular, we have modelled the following
scenarios:
i) A very prolonged and deep downturn across
a large proportion of the Operating Business
Units (e.g. Defence Sector Cycle Risk,
Geo-political Risk), resulting in a 15%
year-on-year decline in revenues after 2022,
with underlying operating cash conversion
of 70%
contracts or programmes, including supply
chain disruption, or growth constraints
challenges (e.g. Bid and Contract Risk,
Programme Risk, Supply Chain Risk, Specialist
Recruitment and Retention Risk), resulting in
no revenue growth beyond 2022 and
underlying operating cash conversion
reducing to 50%
In addition, we have modelled the impact of
from the Group’s other principal risks such as
Security and Cyber Risks, and Governance,
Compliance and Internal Controls risks.
There are a number of mitigating actions that
could be taken, if necessary, such as a reduction
in dividend payments, and reductions in
non-essential capital expenditure, reductions in
discretionary spend, and renegotiation of
lending agreements and associated covenants.
If the acquisition by Cobham completes during
the viability period, the Directors have less
organisational structure during the viability
period, but based on their knowledge of the
generating potential of the Group, liquidity
modelling and Cobham’s intention statements,
the Directors have a reasonable expectation
that the Company will be able to continue in
operation and meet its liabilities as they fall due
over the period to December 2024 whether or
not the acquisition by Cobham completes.
+
management support the ability of the Group
to pay its debt service costs post acquisition in
both the operation of its existing strategy and
2023 onwards and 50% cash conversion, and
a 15% decline in revenues in 2023 onwards
and 70% cash conversion during the going
concern and viability periods.
The Directors note that they do not have
organisational structure of the Group under the
ownership of Cobham and any material changes
by the acquirer could, without mitigation, impact
the ability of the Group to cover interest
payments. Notwithstanding this uncertainty, the
Directors have a reasonable expectation that the
Group has adequate resources for a period of at
least 12 months from the date of approval of the
complete, given the strength of the Group’s
generation for 2022 and onwards, and
knowledge of the loan facilities put in
place by Advent to support the acquisition.
Going concern
Having assessed the Group’s strong liquidity
performance, the Directors have a reasonable
expectation that the Group will continue in
operation and meet its commitments as they fall
due over the foreseeable future. Accordingly, the
Directors continue to adopt the going concern
Ultra
Annual Report
and Accounts 2021
48
“During 2021, we delivered our fourth
year of organic revenue growth, grew
our order book to a record £1.3bn and
at the same time improved underlying
operating margins and investment in
transformation and R&D. This is all
despite the ongoing impact of Covid.
Our statutory results were, however,
impacted by the strengthening of
Pound Sterling against the US Dollar.
We enter 2022 with 78% order cover
and when combined with our positive
transformation progress and strong
further good growth in 2022.”
Jos Sclater
Financial review
Ultra’s 2021 results
Order book and revenue
Ultra’s order book grew by 22.2% to £1,300.9m
(2020: £1,064.2m); this represents organic growth
of 22.0%.
Revenue declined by 1.1% to £850.7m (2020:
continued strong growth rates in Maritime and
organic decline in Critical Detection & Control and
a currency translation headwind due to the
weaker US Dollar year on year.
REVENUE
£m
% impact
2020
859.8
Currency translation
(37.7) -4.4
Disposals
(5.6) -0.6
2020 (for organic measure)
816.5 -5.0
Organic growth
34.2 +4.2
2021
850.7
-1.1
£m
2021
2020
Statutory operating prot
105.9
106.3
Amortisation of
intangibles arising on
acquisition
9.8 12.6
Acquisition and
disposal-related costs
7.8 1.1
and expenses
6.1 3.3
Restructuring costs
related to disposal
–
2.8
Underlying operating
prot
129.6
126.1
£105.9m (2020: £106.3m) and statutory operating
margin remained at 12.4% (2020: 12.4%). This
as described below, as well as lower amortisation
costs as assets created by historical acquisitions
acquisition and disposal costs and legal charges
section below.
£m
% impact
2020
126.1
Currency translation
(4.8) -3.8
Disposals
(1.3) -1.0
2020 (for organic measure)
120.0 -4.8
Organic growth
9.6 +8.0
2021
129.6
+2.8
£126.1m), an increase of 2.8% on the prior year.
driven largely by the strong sales in Maritime
and Intelligence & Communications and some
margin expansion.
Ultra continued its programme of R&D, with total
spend (from customers and internal investment)
in the year of £150.0m (2020: £144.2m). Company-
funded investment increased organically by £3.1m
to £33.5m (2020: £31.8m) which represents 3.9%
of revenue (2020: 3.7%), while customer funding
increased to £116.5m (2020: £112.4m). The overall
level of R&D investment in the year was 17.6% of
revenue (2020: 16.8%). The company-funded
spend was lower than originally envisaged due to
more active and return-based oversight of IR&D
investment and our engineers having to focus
more than anticipated on delivering programmes
in a resource-constrained and supply chain
challenged environment.
Ultra
Annual Report
and Accounts 2021
49
Strategic report
Governance
Financial statements
Finance charges
£13.0m (2020: £11.6m). This was driven by the
£1.8m change in fair value on loans from the
Canadian Government into the Comms business,
which are structured such that repayments are
linked to revenue growth; the strong revenue
growth in the Communications business has
therefore led to an increase in the fair value
of the loan. The interest payable on borrowings
was covered† 12.2 times (2020: 14.7 times)
Prot before tax
tax was £116.6m (2020: £114.5m), as set out below:
£m
2021
2020
Statutory prot before tax
82.7
103.7
Amortisation of intangibles
arising on acquisition
9.8
12.6
Acquisition and disposal
related costs
7.8
1.1
Loss/(gain) on disposals
net of related restructuring
costs
2.4
(2.8)
Loss/(gain) on derivatives
7.8
(3.4)
and expenses
6.1
3.3
Underlying prot before tax
116.6
114.5
Amortisation costs declined from £12.6m to £9.8m
as the customer relationship and technology
assets created by historical acquisitions became
fully amortised. Acquisition and disposal-related
costs in the year were £7.8m (2020: £1.1m); the
bulk of this cost was incurred in relation to the
the Group by Cobham Ultra Acquisitions Limited.
A net loss of £2.4m arose from the divestment of
two non-core loss-making businesses within the
Critical Detection & Control SBU (see note 30). The
net loss on forward foreign exchange contracts
was £7.8m (2020: £3.4m gain), mainly driven by
the movement in the year’s opening and closing
expenses of £6.1m (2020: £3.3m) primarily relate
to progress being made towards resolving a
legacy legal matter.
As in 2020, transformation costs are included
Tax, EPS and dividends
The Group’s ‘underlying tax’† rate in the year
decreased to 17.1% (2020: 19.0%). The statutory
(2020: 19.0%).
Underlying EPS increased 3.9% to 135.7p (2020:
and reduced underlying tax rate. The weighted
average number of shares in issue was 71.2m
(2020: 71.0m). Basic EPS decreased to 93.8p (2020:
before tax. At 31 December 2021, the number of
shares in issue was 71.4m (2020: 71.1m).
Ultra’s dividend policy has a through-cycle target
of circa two times normalised cash and earnings
cover. However, in view of the terms of the
proposed acquisition by Cobham Acquisitions
Limited, the interim dividend of 16.2p per share,
paid on 17 September 2021, will be the only 2021
is therefore nil (2020: 41.5p) per share.
is 16.2p (2020: 56.9p), which is covered 8.4 times
by underlying EPS.
Operating cash ow and working capital
Statutory cash generated by operations was
£134.2m (2020: £142.6m). Underlying operating
in underlying operating cash conversion of 86%
(2020: 92%). Cash conversion was lower than at
the middle of 2021 due to the expected unwind of
interim update. We ended the year with net debt
of £40.0m, net cash of £0.7m when excluding
leases liabilities.
Our focus on improving working capital turn
has continued to be successful with the average
working capital turn for the Group improving to
12.3x (December 2020: 10.1x). There was a small
working capital increase of £2.8m, with reduced
by increased receivables. Capital expenditure
increased in the year to £24.7m due to facility
upgrades and transformation initiatives
(2020: £22.1m).
Non-operating cash ow
The main non-operating and non-underlying cash
items as set out in note 2 and in the statutory cash
+
(see note 30)
+
Dividend payments of £41.1m (2020: £38.7m)
+
Tax paid of £5.7m (2020: £5.4m)
+
and disposal related payments, predominantly
relating to costs incurred due to the proposed
acquisition of Ultra by Advent/Cobham
Conduct of business investigations
As previously announced, investigations
associated with conduct of business issues
in Algeria and the Philippines are ongoing, and
Ultra continues to cooperate with the relevant
authorities. A provision has been recognised
with respect to one of these matters.
Capital allocation
Our capital allocation approach remains
unchanged. We aim to maintain our asset light,
high capital return business model which will, in
for capital discipline are listed in order below:
1. Organic investment for operational
improvement and to deliver value-creative
growth
2. Inorganic mergers and acquisition investment
to accelerate strategy delivery, if it is value
creative on a risk-adjusted basis
3. Sustainable through-cycle dividend growth:
our policy remains around 2x through-cycle
cash/earnings cover ratio
4. Any excess, through-cycle capital to be
returned to shareholders if it can’t be deployed
within Ultra in the medium term to generate
strong returns
We aim to support these priorities by maintaining
through-cycle gearing between 1.5 and 2.5x net
debt (including pension and lease liabilities) to
adjusted EBITDA.
ROIC
ROIC increased to 21.2% (2020: 20.0%). The
calculation is set out in note 2.
Funding and liquidity
The Group’s committed banking facilities amount
to £401.7m (2020: £401.2m) in total. These
comprise the £300m revolving credit facility (RCF)
and £50m and $70m of Pricoa loan notes. £250m
of the RCF has a maturity to November 2024 and
£50m has a maturity to November 2023. The
facility is denominated in Sterling, US Dollars,
Canadian Dollars, Australian Dollars or Euros. The
facility permits an additional £150m ‘accordion’
which is uncommitted and subject to lender
consent and can be used in certain acquisition
scenarios. The £50m of Pricoa notes have an
expiry date of October 2025, $40m of notes
expire in January 2026 and $30m in January 2029.
The Group’s borrowings at 31 December 2021
also include £17.3m (fair value) from the Canadian
Government under the Strategic Aerospace and
Defence Initiative (SADI), which are repayable
over the period to 2039 (see note 23).
The liquidity of the Group is strong; as at
31 December 2021, the total borrowings drawn
from the RCF were £20.0m (2020: £20.0m),
giving committed facility headroom of £280.0m
(2020: £280.0m) in addition to £5.0m and $2.5m
of uncommitted overdrafts. The Group also held
£138.7m (2020: £84.1m) of cash for working capital
purposes. The facilities are used for balance sheet
and operational needs, including the funding of
day-to-day working capital requirements.
the ratio of net consolidated total borrowings/
adjusted EBITDA is less than three, and that the
net interest payable on borrowings is covered at
In certain acquisition scenarios, the ratio of net
consolidated total borrowings/adjusted EBITDA
is permitted to be up to 3.5x for two consecutive
six-month periods. The covenants are under a
Ultra
Annual Report
and Accounts 2021
50
Financial review
continued
frozen Generally Accepted Accounting Practice
(GAAP) basis i.e. excluding the impact of IFRS 16
lease liabilities.
Ultra’s net debt at the end of the year reduced to
£40.0m (2020: £85.8m) including £40.7m (2020:
£37.7m) of lease liability. ‘Net debt to adjusted
lease liabilities was 0.48x (2020: 1.05x). On a
covenant basis, which excludes pension liabilities
Net interest payable on borrowings was covered
The US Dollar borrowings represent natural
hedges against assets denominated in that
currency. Details of how Ultra manages its
liquidity risk can be found in note 22 – Financial
Change of control
The RCF and Pricoa agreements both include
change of control clauses that may result in early
repayment of the outstanding loan balances in the
event of the takeover of the Group. The RCF was
utilised by £20m as at 31 December 2021 but this
has subsequently been reduced to £nil, so the
amounts that may need to be repaid following
change of control are the £101.7m of Pricoa loans.
The SADI agreements require consent of the
Canadian Minister of Innovation, Science and
Economic Development prior to change of control;
if consent is not granted the Minster could
potentially seek repayment in full of the
outstanding loan balances (March 2022)
of C$36.0m (£21.0m) and C$5.4m (£3.2m).
Interest rate management
To reduce the risks associated with interest
Foreign exchange
movements. The average US Dollar translation
rate in 2021 was $1.38 (2020: $1.28). By their
nature, currency translation risks cannot be
mitigated, but the transaction position is
actively managed.
The majority of sales made by Ultra’s businesses
are made in local currency, thus avoiding
transaction risk. However, this risk does arise when
businesses make sales and purchases which are
denominated in foreign currencies, most often
when UK businesses transact in US Dollars. To
reduce the potential volatility, Ultra attempts to
source in US Dollars a high proportion of the
products sold in US Dollars. For the remaining net
expense, the Group’s policy is to hedge forward the
foreign currency trading exposure in order to
on a regular basis and additional layers of cover are
taken out so that, for 2022, 100% of the expected
exposure is covered, reducing to 70% of the
exposure for 2023 and around 50% of the
exposure for 2024. Exposure to other currencies
A net investment hedge is in place to reduce
income statement volatility arising from
revaluation of US Dollar borrowings held
on the UK balance sheet.
Post-employment obligations
of operation. In the UK, the Ultra Electronics
to new entrants have been invited to become
members of the Ultra Electronics Group Personal
Pension Plan and, since April 2011, the Ultra
Electronics Group Flexible Retirement Plan.
scheme, Company payments are supplemented
by contributions from employees.
scheme was a contributory scheme in which
the Company made the largest element of the
payments, which were topped up by employee
contributions up until the 2016 closure of the
scheme to future accrual. The scheme was
actuarially assessed using the projected unit
method at 31 December 2021 when the net
19, was £26.9m (2020: £56.6m). The present value
of the liabilities decreased by £19.3m to £403.9m
in 2021 primarily due to the 45bps increase in the
discount rate. There was a £15.8m increase in
scheme assets, mainly driven by increases in
fund investment values.
A full actuarial assessment was carried out as of
of £77.2m representing a decrease of £37.2m
in April 2016. Following the completion of the
assessment, Ultra reached an agreement with
the pension scheme trustee board to maintain
the £11.0m per annum payment to eliminate the
valuation will take place as of April 2022.
The scheme has a statement of investment
socially responsible investment. This is delegated
to the investment managers. Pension
management and governance is undertaken by
the pension trustees on behalf of the members.
The trustees include both Company-nominated
and employee-elected representatives. The
scheme investment strategy and the details
of the risks to which the scheme is exposed
are set out in note 29.
Certain employees within our Communications
Business Unit in Montreal, Canada participate in a
new employees. Regular payments continue to be
made, with both Company and employees making
contributions, so as to maintain a satisfactory
funding position. The Group’s remaining Canadian
contribution pension plans.
employees. Under this plan, Ultra provides
participating and contributing employees with
matching contributions, subject to plan and US
Internal Revenue Service limitations.
2022 Financial guidance
Supported by our strong order book and pipeline,
we expect to see strong year-on-year organic
revenue growth driven primarily by Maritime and
Intelligence & Communications. We also expect
Critical Detection & Control to grow organically,
led by our Forensic Technology business.
We will continue to invest into our Focus; Fix;
Grow transformation during 2022, with operating
expenditure expected to be between £8m and
£9m and capital expenditure expected to be
continue in 2023, before falling sharply in 2024.
We expect strong ROIC progression in 2022,
notwithstanding the increased investments
we are making into the business. Total capital
expenditure is expected to be between £25m
and £30m.
We continue to expect strong cash conversion
between 75% and 85% and for internal R&D to
be between 3.5% and 4.0% of Group revenue.
The underlying tax rate is expected to be
around 19–20% (with the cash tax rate expected
to be c.13%).
Jos Sclater
23 March 2022
Strategic Report
Our 2021 Strategic Report, from pages 1 to 50,
was reviewed and approved by the Board on
23 March 2022.
Simon Pryce
23 March 2022
Ultra
Annual Report
and Accounts 2021
51
Strategic report
Governance
Financial statements
Governance Report 2021
Our Executive Team
Simon Pryce
Chief Executive
See page 52.
Jos Sclater
ChiefFinancialOcer
See page 52.
Steve Izquierdo
ChiefHumanResourcesOcer
Steve is a commercially experienced HR leader
with over 20 years’ cross-industry HR experience
working within three top tier global organisations
operated as an active member of many Executive
Boards for the last seven years and has led
programmes across the businesses. Prior to
joining Ultra, Steve held a number of roles within
PepsiCo including Head of HR for the UK business
as part of the Executive Team.
Louise Ruppel
Group General Counsel
and Company Secretary
Louise Ruppel joined Ultra in January 2019.
department. She subsequently worked as an
in-house lawyer at Merrill Lynch & Co., Ltd in
London after which she was Company Secretary
and Group Legal Director at First Group plc,
a global transport company, and General
Counsel and Company Secretary at
Manchester Airports Group.
Mike Baptist OBE
President, Intelligence &
Communications
Mike Baptist has been at Ultra for over 30 years
having joined as a development engineer in 1989.
His leadership has contributed to many of Ultra’s
milestone achievements, driven by his passion for
technology and innovation. Mike is responsible for
the strategic growth and operational performance
of the Intelligence & Communications Strategic
Business Unit. He has been a member of the
Ultra Executive Team since 2014.
Thomas Link
President, Maritime
Thomas Link has worked for Ultra for over 26
years, focusing his career on anti-submarine
warfare systems and maritime domain missions.
He leads a diverse portfolio of operating
businesses located in the USA, Canada, the UK
and Australia, which deliver innovative solutions
for customers around the world. Thomas holds
a BS in Electrical Engineering from Purdue
University and an MS in Electrical Engineering
from the University of Washington.
Dr Andrew Puryear
ChiefTechnologyOcer
Andrew has a background in electrical and
computer engineering as well as extensive
technology leadership experience in aerospace
and defence. He originally joined Ultra in 2019 as
& Communications Strategic Business Unit.
Andrew is the Chairman of the newly formed US
Department of Commerce Emerging Technology
Technical Advisory Committee (ETTAC). He has
served in the US Navy Reserves since 2012 as a
founding member of a specialised detachment
within the Navy Cyber Warfare Group.
a PhD in electrical engineering with specialties in
information theory, analytics and cryptography.
He also holds an MS in electrical engineering
from Stanford and a BS in electrical engineering,
summa cum laude, from Texas A&M. He is also
a member of Tau Beta Pi and IEEE.
Jos Sclater
Mike Baptist OBE
Louise Ruppel
Thomas Link
Simon Pryce
Steve Izquierdo
Andrew Puryear
Ultra
Annual Report
and Accounts 2021
52
Tony Rice
Chairman
Appointed to the Board
18 December 2018
Tony Rice was CFO, and subsequently CEO, of
Cable & Wireless Communications plc, CEO of
Tunstall plc and prior to that held a number of
senior roles in BAE Systems plc including running
their Commercial Aircraft Business. More recently,
Tony was Chair of Dechra Pharmaceuticals plc
from 2016-2021 and is the Senior Independent
Director at Halma where he has been a Board
member since 2014.
Committees
Nomination (Chair)
Other key appointments
+
Senior Independent Director of Halma plc
+
Non-Executive Director of the Whittington
Hospital Trust
Skills and experience
Senior business management in the aeronautical
and electronics engineering sectors. Senior
Non-Executive roles in UK listed companies.
Simon Pryce
Chief Executive
Appointed to the Board
18 June 2018
Prior to his appointment, Simon was Group Chief
Executive of BBA Aviation plc for 10 years. Simon
of Lazard & Co., Limited and JP Morgan, and
then at GKN plc.
Simon is a Fellow of the Royal Aeronautical Society
and a member of the Chartered Institute for
Securities and Investment. He is also a member
of the Council of the University of Reading.
Other key appointments
+
Non-Executive Director and Chair of the
Remuneration Committee at
Electrocomponents plc
Skills and experience
Extensive experience in international automotive,
engineering, defence and aerospace sectors.
Senior leadership and general management
experience in large multinational listed companies.
Jos Sclater
ChiefFinancialOcer
Appointed to the Board
9 December 2019
Jos has 20 years’ experience in multinational
engineering, chemicals and consumer goods
in ICI, AkzoNobel, GKN and BP, both in the UK
Skills and experience
planning, transformation, mergers and
acquisitions (M&A) and driving operational
and commercial performance.
Governance Report 2021
Our Board
Simon Pryce
Daniel Shook
Ken Hunzeker
Jos Sclater
Victoria Hull
Tony Rice
Geeta Gopalan
Remuneration Committee
Audit Committee
Nomination Committee
Chair
N
A AA
A
R RR
R
R
N NN
N
N
A
Ultra
Annual Report
and Accounts 2021
53
Strategic report
Governance
Financial statements
Geeta Gopalan
Independent Non-Executive Director
Appointed to the Board
28 April 2017
Geeta has worked in commercial and retail
banking as well as social investment and
community development in the third sector. Her
executive roles included Chair Europe for Monitise
plc, and Director of Payments Services at HBOS.
Geeta also worked at Citigroup for 16 years,
during which time she was a Managing Director
for its UK retail bank and Business Development
Head of EMEA. She has experience coaching and
mentoring as well as in-depth knowledge of the
digital economy, mobile and internet spaces.
Committees
Audit, Nomination and Remuneration (Chair)
Other key appointments
+
Non-Executive Director of Virgin Money UK plc
+
Non-Executive Director of Funding Circle
Holdings plc
+
Non-Executive Director of Wizink Bank S.A.
Skills and experience
sector digital economy and the social sector.
Victoria Hull
Senior Independent Director
Appointed to the Board
28 April 2017
Victoria is a former Executive Director and
General Counsel of Invensys plc and Telewest
Communications plc. She has considerable
international and domestic experience of legal,
commercial and governance matters, having
worked in global and domestic companies
operating at an Executive Committee or
Board level.
Committees
Audit, Nomination and Remuneration
Other key appointments
+
Non-Executive Director of IQE plc
+
Non-Executive Director of Alphawave IP
Group PLC
+
Non-Executive Director and Chair of the
Remuneration Committee at Network
International Holdings plc
Skills and experience
Experience across a diverse range of sectors.
Legal and Board-level experience.
Ken Hunzeker
Independent
Non-Executive Director
Appointed to the Board
1 July 2020
Ken is a US national, with a strong military, defence
and US Government background. He retired from
the US Army in 2010, after 35 years’ active service.
During his military service, Ken was awarded the
Defence Distinguished Service Medal. After
retiring from the military, Ken held the position
of CEO of VECTRUS, a US Government Services
Contractor which specialises in information
technology and network communication services.
Committees
Audit, Nomination and Remuneration
Other key appointments
+
Non-Executive Director of TRAX International
Skills and experience
Extensive military and defence experience,
including several roles within the Pentagon
focused on developing and resourcing the US
Defence Services. He also served on multiple
tours in Iraq working with Coalition Forces.
Daniel Shook
Independent Non-Executive Director
Appointed to the Board
1 September 2019
Daniel is currently Finance Director of IMI plc, the
specialist engineering company, which he joined
in 2015. Prior to IMI, Daniel was Chief Financial
Borealis AG, the international chemical and
plastics producer. Prior to joining Borealis in
2007, he spent 12 years at the BOC Group plc,
the former FTSE 100 industrial gases company,
and management roles including Finance Director
of the Industrial Special Products division and
Group Treasurer.
Committees
Audit (Chair), Nomination and Remuneration
Other key appointments
+
Finance Director of IMI plc
Skills and experience
and extensive knowledge of complex process
manufacturing across a range of industrial
sectors.
Ultra
Annual Report
and Accounts 2021
54
the recommended cash acquisition of Ultra by
Cobham Ultra Acquisitions Limited) the interim
dividend of 16.2p per share, paid on 17 September
dividend will be paid to shareholders while the
Acquisition remains conditional on obtaining
UK Government approval.
Strategy
Our key focus as a Board was to ensure that,
notwithstanding the proposed Acquisition, the
Company continued to deliver on its strategic
objectives, key performance indicators (KPIs) and
transformation programmes. As we progressed
through our Focus; Fix; Grow journey, the Board
was impressed with the results of the
transformation workstreams, with demonstrable
progress across our operational capabilities and in
our HR and ESG initiatives as described in our
strategic report on pages 24 to 41.
Throughout the year, the Board received
presentations from senior managers across
the Group at Board meetings, Committee
meetings and at our annual dedicated strategy
day. As always, the Board actively challenged
management and was impressed with the
mindset, teamwork and resilience shown
by our senior leadership team.
Covid-19
Covid-19 continued to provide certain challenges,
but we have been fortunate that it has not
will continue to monitor the position, in particular,
with regard to any production and supply chain
issues. On behalf of the Board, I would like to
express thanks to all of Ultra’s workers for their
hard work and continued dedication to the
Company during this unprecedented time.
Our great people have continued to focus on
delivering solutions to our customers despite the
challenges presented by the pandemic and the
uncertainty caused by the Acquisition. We have
demonstrated our agility as a business with
continued strong performance despite adversity.
Our Board
On 1 July 2021, Martin Broadhurst stepped down
from the Board following a nine-year tenure
on the Board. I would like to extend the Board’s
thanks to Martin for his hard work, wise counsel
and diligence as an Independent Non-Executive
Director throughout his time at Ultra.
As I explain in more detail in the Nomination
Committee report on page 66, we commenced
a search for at least one further Independent
Non-Executive Director in 2021, but were forced
to put that on hold as a result of the Acquisition,
as it would not have been appropriate to bring
on a new Board member at a time when the
performance, travel continued to be disrupted
globally. As a Board we endeavour to visit several
business sites each year but travel restrictions
meant that we were unable to visit any overseas
sites in 2021. However, we were fortunate to be
able to visit two of our UK business sites – PCS and
SMaP – during the year when it was safe to do so.
We very much value the importance of visiting
sites, touring the facilities and seeing and hearing
what we do, and how we do it. Our employees
always have a great sense of pride in showing us
the work they do, and we are fascinated by, and
proud of, the talent and technological capabilities
we have throughout the Group.
utilising video-conferencing facilities when
needed. Where possible, and when Covid-19
restrictions allowed, our UK-based Directors met
in person for Board and Committee meetings with
Ken Hunzeker, who resides in the US, joining
virtually. We were delighted when Ken was able to
meetings that month and to be present at the
Court and General Meeting to approve the
Scheme on 6 October 2021.
Purpose, values and culture
Our renewed purpose, vision, mission, ASPIRE
values and brand, launched in January 2020,
continue to be embedded throughout the Group.
Awards which showcased the phenomenal talent
through Ultra and demonstrated that there are
great people really living our ASPIRE values
throughout Ultra. This is very important to us as
a Board as we see our culture as a key enabler
to our success, with our values running through
everything we do.
Delivering for our stakeholders
2021 was another year of progress for Ultra and
we continued to deliver for all our stakeholder
groups.
progress in our reward and recognition
programmes, diversity and inclusion initiatives
and wellbeing policies. Our 2021 UltraView
engagement survey demonstrated a 68%
favourable score, which was slightly lower than our
73.2% engagement score in May 2020. However,
given the uncertainty surrounding the proposed
Acquisition and ongoing Covid pressures, we felt
this was a good result and hope to see an
improvement in the pulse survey engagement
score later this year given all the positive people
and talent initiatives that are ongoing.
survey with our top customers and I’m very
pleased that Ultra’s score was 52, the equivalent
of a ‘good’ or ‘excellent’ ranking. We also delivered
ONE Ultra strategy for our Suppliers and launched
“Our key focus as a Board was to
ensure that, nothwithstanding the
proposed Acquisition, the Company
continued to deliver on its strategic
objectives, KPIs and transformation
programmes.”
Tony Rice
Chair
Dear Shareholder,
I am pleased to present my Chairman’s Report.
This should be read in conjunction with the
compliance report on page 55, which shows how
the Company has complied with the UK Corporate
Governance Code 2018.
It has certainly been an interesting year in many
respects. We made good progress on our Focus;
Fix; Grow transformation journey with strong
Group performance, despite the distraction
caused by the ongoing pandemic and the
proposed acquisition by Cobham. As a Board we
continued to operate within our solid corporate
governance framework which underpins
everything we do, with a focus on ensuring our
operations kept running as business as usual
despite the corporate activity.
Proposed acquisition
On 16 August 2021, we announced that we had
reached agreement with the Board of Cobham
Ultra Acquisitions Limited, a wholly owned indirect
subsidiary of Cobham Group Holdings Limited
(“Cobham”) on the terms and conditions of a
recommended all-cash acquisition of the entire
issued, and to be issued, ordinary share capital
of Ultra by Cobham (the “Acquisition”). Under
the terms of the proposed Acquisition, each
Ultra shareholder will be entitled to receive
Dividend
terms of the Acquisition, an interim dividend of
16.2p per share was paid to shareholders on
the register of members as at 27 August 2021.
In view of the terms and conditions set out in the
announcement dated 16 August 2021 (relating to
Governance Report 2021
Chairman’s governance report
Ultra
Annual Report
and Accounts 2021
55
Strategic report
Governance
Financial statements
Within our local Communities I am very proud
of the impact Ultra is having with over £500,000
donated to local community causes in the past
two years, considerable progress with our
emissions targets and increased support for
our veterans and serving forces.
For our Investors we grew our organic order book
by an impressive 22% to £1.3bn and increased
our return on invested capital (ROIC) to 21%
demonstrating Ultra’s future prospects and
Focus; Fix; Grow transformation.
Environmental and social governance
Sustainability is embedded in everything we do.
2021 and have continued to make progress
throughout the year regarding our ESG goals and
objectives, including measuring and reporting on
carbon emissions and environmental initiatives.
We are working towards becoming a signatory
right thing to do to protect our planet for a
safer tomorrow.
Looking ahead
While we await a decision from HM Government
on the Acquisition, we will continue to focus
on delivering on our strategic objectives and
transformation workstreams with a very much
business as usual mindset, and believe the
Company is well positioned to continue to
deliver value for all our stakeholders.
Tony Rice
Chairman
23 March 2021
In respect of the year ended 31 December 2021,
Ultra was subject to the Code (available from
www.frc.org.uk). Insofar as is practical, the
Company seeks to uphold the principles of the
Code in meeting its objectives to promote the
long-term sustainable success of the business
and to generate value for all its stakeholders,
contributing to wider society.
31 December 2021, the Board considers that it,
and the Company, has complied with the
provisions of the Code with the exception of
provision 38 of the Code with respect to the
contribution exceeds the prevailing level for
the wider workforce. See page 77 for further
information. As disclosed, should the
Acquisition not complete, the Remuneration
Committee intends to revisit this matter.
Further details demonstrating how the
principles and relevant provisions of the Code
have been applied can be found as follows:
Board leadership and Company purpose
Long-term value and
sustainability 54-55, 66
Culture 32-37, 54, 64
Shareholder engagement 14, 65
Employee engagement 12, 35-36, 64
Other stakeholder engagement 12-14
Concerns 61, 64, 71
Division of responsibilities
Role of Chair 58
Division of responsibilities 58-60
Non-Executive Directors 52-53, 58-59, 61
Time commitments 61
Composition, succession and evaluation
Appointments and succession planning 66
Annual re-election 86
Skills, experience and knowledge 56-57
Length of service 52-53, 56
Evaluation 63
Diversity 56-57, 66
Audit, risk and internal control
Audit Committee 67
Fair, balanced and understandable 71
Internal controls and risk
management 42-46, 70-71
External auditor 67, 70
Principal and emerging risks 42-46, 70-71
Remuneration
Policies and practices 72-85
Alignment with purpose, values 72-83
and long-term strategy
Independent judgement and discretion 72-84
Ultra
Annual Report
and Accounts 2021
56
Relevant Sectors
Geographies
Experience
Tenure
Defence &
Aerospace
Security &
Cyber
Energy
Markets
UK &
Europe
North
America
Rest of
World
Finance &
Legal
Capital
Markets &
Public
Companies
Public
Sector &
Procurement
Leadership
in Large
Organisations
Military
Length of
Service
Executive Directors:
Simon Pryce
3.5 years
Jos Sclater
2 years
Non-Executive Directors:
Tony Rice
3 years
Geeta Gopalan
4.5 years
Victoria Hull
4.5 years
Daniel Shook
2.25 years
Ken Hunzeker
1.5 years
Board composition
Governance Report 2021
continued
AGES
A
.
White Caucasian
6
B
.
BAME
1
A
B
A
.
Male
5
B
.
Female
2
A
B
A
.
0–2 years
1
B
.
2–4 years
4
C
.
4+ years
2
A
B
C
A
.
45–54
2
B
.
55–64
3
C
.
65+
2
A
B
C
Ultra
Annual Report
and Accounts 2021
57
Strategic report
Governance
Financial statements
Board diversity policy
A Board comprising the right balance of skills,
experience and diversity of gender and ethnicity
as well as diversity of thought is best placed to
support a company in delivering its strategic
objectives. These factors, along with others,
will be taken into consideration when seeking to
appoint a new Director to the Board and all Board
appointments will always be made on merit.
Information regarding our diversity policy and
initiatives for the wider workforce can be found
on pages 32-37.
Our Board composition and diversity
Our Board of Directors consists of an
Independent Non-Executive Chairman, four
further Independent Non-Executive Directors
and two Executive Directors. The Board
recognises the value of diversity in its broadest
sense and is committed to supporting diversity
and inclusion in the boardroom, and throughout
the Company as a whole. All our Directors have
relevant qualities and competences that leverage
collectively contribute to the proper governance
and constructive challenge to, and support
for, its management team.
The Board is aware of the recommendation
of the Parker Review Report to have at least
one Director from a non-white ethnic minority
this recommendation.
In our 2020 Annual Report and Accounts we
reported that we would take the Hampton–
Alexander target of a minimum 33% female
representation on the Board into account
while searching for at least one further Non-
Executive Director in 2021. As set out above,
that search was paused once the Acquisition was
announced. Should the Acquisition not complete
by the long stop date of 5 August 2022, we will
re-activate the search and will work towards
meeting that target during the remainder of 2022.
Further information on our diversity initiatives to
build a strong pipeline of senior leaders can be
found on pages 32-37.
Board independence
The Board monitors its own independence and
that all Directors act with independent judgement.
Over half the Board are Independent Non-
Executive Directors and all our Non-Executive
Directors are considered to be independent
pursuant to the UK Corporate Governance Code
2018 (“Code”). The Chairman of the Board was
independent upon appointment and holds regular
discussions with the other Non- Executive
Directors without Executive Directors present to
ensure that their views are impartial and free from
themselves for re-election at the Company’s
Annual General Meeting in 2022.
Ultra
Annual Report
and Accounts 2021
58
Leadership
Led by the Chair, the Board is responsible for
leading Ultra and has overall responsibility for
the management and conduct of the business
in order to generate long-term value for our
stakeholders. The Board is also responsible for
acquisitions and disposals, major contracts,
projects and capital expenditure, and considers
health and safety, environmental, legislative and
governance issues. The schedule of matters
reserved for the Board sets out matters which
are expressly reserved for the collective decision
of the Board and can be downloaded from the
Company’s website.
There is a written statement of the division of
responsibilities between Chairman and Group
Chief Executive, as well as a summary of the role
of Senior Independent Director, which is also
available to download on the Company’s website.
The appointment and removal of the Company
Secretary is a matter reserved for the whole
Board.
ultra.group
DIVISION OF RESPONSIBILITIES
Chair
of the Board, while taking account of the interests of the Group’s
stakeholders, and promoting high standards of corporate governance.
The Chair promotes a culture of openness, debate and challenge among
and Non-Executive Directors and with our shareholders. In conjunction
with the Company Secretary, the Chair ensures that the Board receives
clear, accurate and timely information.
Chief Executive
The Chief Executive is responsible for the overall leadership of the Group, the
and the implementation of Board strategy and policies agreed by the Board.
He is also responsible for the management, development and succession
planning for the senior Executive Team and leading the communication
programme with shareholders.
Chief Financial
Ocer
Supports the Group Chief Executive in implementing the Group’s strategy
goals, objectives and budgets, and for overseeing risk, internal controls and
Internal Audit.
Senior Independent
Director
The Senior Independent Director provides a sounding board for the Chair
and serves as an intermediary for the Non-Executive Directors, where
necessary. The Senior Independent Director leads the Non-Executive
Directors’ performance appraisal of the Chair and is available to meet with
shareholders, if and when necessary, if they have any concerns about the
business which have not been resolved through normal channels.
Non-Executive
Directors
Non-Executive Directors exercise independent judgement and constructively
challenge the Executive Directors and the senior management team,
scrutinising performance against objectives. They provide strategic guidance
to the Company, utilising their wealth of knowledge, insight and experience
in their specialist areas and have a pivotal role in the appointment and
removal of Executive Directors and the Company’s corporate governance
framework as a whole.
Group General
Counsel and
Company Secretary
The Group General Counsel and Company Secretary acts as secretary to the
with the Chair, ensuring Board procedures are complied with and the Board
has the information, time and resources it needs in order to function
Secretary advises the Board on all governance matters and assists the Chair
with induction programmes for new Directors and annual Board evaluations.
She also provides regular legal, governance and compliance updates to the
Board and facilitates Board training.
Governance Report 2021
continued
Ultra
Annual Report
and Accounts 2021
59
Strategic report
Governance
Financial statements
Committees of the Board
the Board has three Committees to which certain
key responsibilities are delegated. The terms of
reference for each Committee are available to
download on the Company’s website.
Only Committee members are entitled to attend
each Committee meeting, although the Chair may
invite additional attendees to join for all or part of
a meeting to provide additional information or to
the Committee in decision-making and the
discharge of its duties.
Committee Chairs report to the Board on the
matters discussed and decisions made at the next
Board meeting following any Committee meeting.
Where appropriate, Committee Chairs make
recommendations to the Board for certain
matters which require Board approvals such as
statements and Director appointments.
Read more about our Board on pages 52 to 53.
OUR BOARD AND ITS COMMITTEES
BOARD
REMUNERATION
COMMITTEE
NOMINATION
COMMITTEE
AUDIT
COMMITTEE
Daniel Shook
Geeta Gopalan
Victoria Hull
Ken Hunzeker
Geeta Gopalan
Victoria Hull
Ken Hunzeker
Daniel Shook
Tony Rice
Geeta Gopalan
Victoria Hull
Ken Hunzeker
Daniel Shook
The role of the Board
The role of the Board is to provide
entrepreneurial leadership and direction to
Ultra in promoting its long-term sustainable
success, taking into account the interests of all
stakeholder groups. The Board is responsible
for the approval of the Group’s strategy and
policies, the oversight of risk, controls and
corporate governance, and for setting and
monitoring a culture that encourages the
Group’s businesses to behave ethically and in
line with our values. The Board sets the Group’s
controls and risk management systems are
robust, while ensuring the Group is adequately
resourced, and actively engages with, and
considers the needs of, all relevant stakeholders
in Board decisions.
Audit Committee
controls and risk management systems,
monitors the integrity of all formal reports
and announcements relating to the
maintains appropriate relationships with the
internal and external auditors of the Group.
Remuneration Committee
Formulates and recommends to the Board the
remuneration policy for the Executive Team
and the Chair, ensuring alignment with the
Company’s long-term strategic goals and
having regard to pay and employment
conditions across the Company.
Nomination Committee
Reviews the structure, size and composition
of the Board and oversees succession
planning, including the development of a
diverse pipeline of candidates for Directors
and senior management positions. Considers
nominations, and the process, for appointing
new Board members.
Ultra
Annual Report
and Accounts 2021
60
Executive Team
The Executive Team is responsible for delivering
performance and ensuring the Company
maintains a supportive culture where our
people can thrive.
The Executive Team oversees the execution of the
and processes that support that delivery. The
team also makes policy, prioritisation and scarce
resource allocation decisions, taking into account
the needs of all stakeholders and the agreed
objectives and stakeholder goals.
The Executive Team meets formally at least
eight times a year, and aims to hold at least three
meetings each year at one of our operational
sites in North America and at least one visit at
an operational site in the UK when Covid-19
restrictions permit. The Executive Team uses
the opportunity to have a tour of the hosting
business as well as an all-employee presentation,
Q&A session and meetings with the senior
management and high-potential teams.
This enables the Executive Team to see the
Company’s workforce engagement strategy,
as discussed on page 64.
Due to Covid-19 travel restrictions, the Executive
Team was only able to make one site visit in North
America in 2021, to Ultra SMaP in New York State,
United States. It also visited Ultra PCS in
Cheltenham, UK.
other sites in the US and UK in 2021. Townhall
meetings were held at most sites. It is planned
to resume full Executive Team site visits in 2022
if restrictions allow.
Ethics Committee
This is an entirely independent Committee
currently made up of two independent individuals,
Major General (Retired) Tim Cross CBE and Simon
Lowe, who have vast combined experience within
The Committee visits Ultra sites on a rotating
schedule at least four times a year and has a
formal remit to:
+
Monitor alignment with best practice in our
business ethics and compliance procedures
+
Assess how our culture and values are
embedded throughout Ultra
+
Review Speak Up reports and challenge the
integrity and independence of our Speak up
platform
The Ethics Committee meets with a diverse
group of employees at each site visit, without
management present, and meets with
management separately. Following the visits, an
independent, unbiased and unedited report on
THE ROLE OF OUR EXECUTIVE TEAM
the perceived ethics and culture within the
business is provided to management. The
Committee challenges management where
necessary and, where applicable, provides
impartial advice on how ethical and cultural
matters could be improved.
Two formal Committee meetings are held each
year, at which the Committee members meet
with at least one representative of the Executive
Team present, to receive relevant updates and
presentations from Ultra management. The
Committee then provides honest, objective
feedback to the full Executive Team twice a
year, and annually to the Board.
Further information on the work carried out by
our Ethics Committee can be found on page 64.
Ethics Committee biographies
Tim Cross CBE
Major General (Retired) Tim Cross commanded
everything from a small Bomb Disposal Team in
Northern Ireland to a 30,000-strong division of
the UK Field Army. His operational deployments
included Kuwait/Iraq (1990/91), Baghdad (2003)
and the Balkans three times in the 1990s. A Lay
Minister in the Church of England, he now runs
a broad portfolio in business, academia and the
humanitarian/charity world.
Simon Lowe FCA
Simon is a fellow of the Institute of Chartered
accountants for 29 years where he led some of the
Grant Thornton’s Oversight Board and founded
and led the Grant Thornton Governance Institute
providing market-leading insight into emerging
trends and practices among the FTSE 350. He is
a frequent presenter and commentator on all
matters related to corporate governance,
including company culture.
Corporate Social Responsibility (CSR)
Committee
The CSR Committee is chaired by Rikki Douglas,
Vice President Business Development, Sonar
Systems, and comprises representatives from
across the business. Our CSR Committee develops
strategy recommendations on sustainability for
the Executive Team to review and incorporate into
Group strategy. Our Executive Team is responsible
for assessing our environmental and social risks
and opportunities, including those relating to
climate change, prior to sending it to the Board
for review and monitoring progress through
our risk management process, overseen by
Throughout the year Ultra appointed a Group CSR
Director to focus on delivering against the Group’s
sustainability objectives.
CSR Committee Chair’s Biography
Rikki Douglas
Rikki Douglas was appointed Chairperson for
Ultra Group’s CSR Committee in late 2019 and
has worked with Ultra for almost a decade.
She is currently the Vice President of Business
Development in our Sonar Systems Operating
Business Unit. Prior to this, Rikki specialised in
nuclear instrumentation and control, leading Sales
and Marketing for our Energy Strategic Business
Unit, which supports nuclear power generation
worldwide. She holds an MPhys in Physics from
the University of Lancaster, an MSc in Radiation
and Environmental Protection from the University
of Surrey, and an MBA from The Open University.
In early 2020, as part of her new role, Rikki studied
Business Sustainability Management at the
University of Cambridge. She is a strong advocate
for Ultra businesses having a positive impact in
the communities in which we operate.
BOARD
CHIEF EXECUTIVE
EXECUTIVE TEAM
ETHICS COMMITTEE
CSR COMMITTEE
Governance Report 2021
continued
Ultra
Annual Report
and Accounts 2021
61
Strategic report
Governance
Financial statements
How the Board operates
Board meetings
In 2021, there were eight scheduled Board
meetings. Additional Board meetings were
scheduled in relation to the proposed Acquisition
(see page 2 for further information) as and
when required.
The attendance at the scheduled Board
and Committee meetings is depicted in the
table below.
Geeta Gopalan was unable to attend one of the
Board and Audit Committee meetings due to a
were set. Unfortunately, the Board’s diaries did
not allow an alternative date on which all Board
members could attend.
Ordinarily, the Board aims to meet at the
meetings per annum at the Company’s businesses
in North America and one Board meeting per
annum in a UK business. To coincide with the
Board meeting, each business provides a tour of
their facility together with a presentation, and the
Board takes time to meet with employees across
a range of the business in addition to the senior
management teams.
Covid-19 continued to impact travel in 2021, which
meant that the Board was not able to travel to
North America. When restrictions allowed, the
Board held one Board meeting at Ultra SMaP
in Rugeley, UK and another at Ultra PCS in
Cheltenham, UK. Both meetings incorporated a
for the Board to meet employees from all levels of
workforce engagement strategy. See page 64 for
further information.
In conjunction with the Company Secreterial team,
forward-looking agendas are prepared for the
Board and its Committees to ensure that the
Board discharges its duties on a timely basis
throughout the year taking into account strategy,
forecast and budget planning and the Company’s
Chief Executive and the Company Secretary in
advance of each Board meeting as part of the
planning process to ensure the agenda and
papers are appropriate for the meeting. High-
quality Board packs are distributed well in advance
of each Board meeting to ensure each Director
has the requisite time to review the management
information.
Certain Executive Team members and senior
managers are invited to present at Board
meetings periodically to provide the Board
with more detailed insights into their business
or business area. This gives management the
opportunity to draw on the Board’s experience
and expertise, which shapes strategy
development and implementation.
Minutes of meetings are circulated as soon as
practicable after the Board meeting for review
and are approved at the next meeting. Any
concerns that a Director may have which have
not been resolved would be recorded in the
Board minutes, together with necessary actions
to resolve the situation.
Upon resignation, if any Director has any concerns
about the business, the Chair would ensure active
engagement with the resigning Director and
would ensure that the Board as a whole would
receive feedback of those concerns in the form
of a letter addressed to the Chair.
Directors’ induction and development
No new Directors joined the Board throughout
the year. However, a structured full and formal,
tailored, induction plan is in place which would
be utilised for any new incoming Director. The
induction programme is led by the Chair in
conjunction with the Company Secretary and
includes the provision of an information pack on
the Group and its businesses, meetings with the
other Board members, members of the Executive
Team and certain senior managers and visits to
Ultra sites to facilitate a better understanding
of the businesses.
The Board undertakes training in accordance
with an annual training programme set out at
the start of the year, when training needs are
assessed as part of the Board evaluation process.
The programme comprises presentations from
senior management, site visits and updates on
engineering, customer focus and HR matters, as
well as relevant defence markets and the political
environment, to further enhance the Board’s
understanding of the business and our sector.
Legal, governance, risk and compliance training
is also undertaken throughout the year through
a combination of online training and presentations
from the Group Counsel and Company Secretary
and external advisers.
Time commitment
The Nomination Committee has primary
responsibility for monitoring time commitments
of Directors and ensuring that each Non-Executive
Director has the requisite time to discharge
the Nomination Committee reviews requests
by Directors wishing to undertake new
responsibilities or directorships and considers
both the time commitments involved and any
number of appointments held by each Director
outside Ultra is appropriate and that all Directors,
both Executive and Non-Executive, have
to the Company.
Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
AGM
Board
Strategy Day
Total no. of meetings in 2021
1
Executive Directors:
Simon Pryce
8/8 n/a n/a n/a 1/1 1/1
Jos Sclater
8/8 n/a n/a n/a 1/1 1/1
Non-Executive Directors:
Tony Rice
8/8 5/5 3/3 2/2 1/1 1/1
Geeta Gopalan²
7/8 4/5 3/3 2/2 1/1 1/1
Martin Broadhurst³
4/4 2/2 2/2 1/1 1/1 n/a
Victoria Hull
8/8 5/5 3/3 2/2 1/1 1/1
Daniel Shook
8/8 5/5 3/3 2/2 1/1 1/1
Ken Hunzeker
8/8 5/5 3/3 2/2 n/a 1/1
1 The total number of scheduled meetings held during the year (excluding those relating to the proposed Acquisition).
3 Martin Broadhurst stepped down from the Board on 1 July 2021, prior to the Board’s strategy day.
Ultra
Annual Report
and Accounts 2021
62
Conicts of interest
Directors have a duty to disclose any potential
the Companies Act 2006. The Company has
appropriate procedures in place to manage
of any third party does not impair judgements.
All Board members are required to report any
interfere with their ability to act in the best interest
of the Company. No Board member would be
involving themselves. Any decision to approve a
minuted, together with the rationale behind the
decision and a record would be kept. Any
in a register and reviewed periodically.
Risk management and internal controls
our strategic objectives. The Board has overall
responsibility for ensuring the Company has a
which enable risk to be assessed and
During the year the Board monitored and
assessed the Group’s risk management and
internal controls systems and carried out a robust
assessment of the Group’s emerging and principal
risks, including procedures for managing and
mitigating risks. Risk appetite was also considered
in conjunction with assessing the strategic risks
as part of the process. Further details of the
Company’s emerging and principal risks can
be found on pages 42 to 46.
in 2019, risk management and internal controls
was a key focus area during the year. See page
70 of the Audit Committee report for further
information.
Investigations
As previously announced, investigations
associated with conduct of business issues in
Algeria and the Philippines are ongoing, and
Ultra continues to cooperate with the relevant
authorities.
Governance Report 2021
continued
Our Board in action
How the Board spent its time
The principal matters considered by the Board
during the year are summarised below:
Strategy
+
Regularly reviewed progress on the
implementation of the strategic plan
+
Monitored progress on the implementation
of the new organisational design
+
Reviewed how the Company’s mission,
vision and values are embedded throughout
the business
+
Considered strategic matters at a designated
strategy day
+
Received updates on M&A activity
Transformation
+
Received regular updates on, and provided
strategic direction relating to, Ultra’s Focus;
Fix; Grow transformation journey
Financial and operational performance
+
Received detailed and transparent operational
updates from the Chief Executive at each
scheduled Board meeting
+
against budget including exceptional items
and any deviations from expectations
+
Reviewed and approved Group budgets
+
Reviewed KPI progress
+
Reviewed and approved the Company’s tax
strategy
+
Discussed and approved capital and resource
allocation
+
Reviewed and approved:
+
The Annual Report and Accounts and
preliminary results announcement
+
The interim results and press release
+
The dividend policy
+
Received presentations from Strategic Business
Unit Presidents
+
pension scheme and related governance
Board changes
+
Noted Martin Broadhurst resignation from the
of his nine-year Board tenure
Market analysis and major bids
+
Received reports on market development and
industry trends
+
+
Received customer feedback
Governance and risk
+
Discussed the ongoing impact of Covid-19 on
the business including and operational risk
mitigation
+
Monitored health and safety performance
across the Group (at each scheduled Board
meeting)
+
Reviewed the Group’s internal control and risk
management framework and Group risk register
+
Approved the Group’s principal risks and
uncertainties
+
Discussed the risk appetite of the Board
+
Received reports from the Chairs of the Audit,
Remuneration and Nomination Committees
+
Received reports from the Chairs of the Ethics
Committee and CSR Committee
+
Received regular updates on litigation matters,
regulatory compliance and corporate
governance developments from the Company
Secretarial team
+
Reviewed the Company’s anti-bribery and
corruption policy compliance/training
programme
+
Considered the Company’s whistleblowing
procedure processes
+
Discussed the Board evaluation and agreed
actions as a result of the feedback
+
Approved the Group’s modern slavery
statement
+
Approved the Group’s gender pay gap disclosure
Sustainability
+
Reviewed and approved Ultra’s 2021
Sustainability Report and 2024 sustainability
goals
People and reward
+
Approved the gender pay gap report and
reviewed the Company’s initiatives to promote
female leadership
+
Received an update on diversity and inclusion
initiatives
+
Reviewed progress relating to workforce reward
and recognition
+
Monitored culture and received feedback
regarding culture from the Ethics Committee
+
Considered the Company’s workforce
engagement procedures
+
Received feedback from the global employee
engagement survey
+
Reviewed progress regarding the
implementation of the new Human Resources
Information System (HRIS)
Other
+
Cobham, including receiving advice from the
of the potential impact on all the Group’s
including holding a Court and General Meeting
to approve the proposed Acquisition
Ultra
Annual Report
and Accounts 2021
63
Strategic report
Governance
Financial statements
BOARD EVALUATION
Board Evaluation
The Board recognises that formal Board
evaluation is an important tool in assessing
Directors’ individual and collective performance
a formal review of its performance and that of
its Committees and Directors every year, with
an external evaluation on a three-year cycle
and an internal evaluation, led by the Chair
in conjunction with the Company Secretary,
in the two intervening years.
As a result of the Board and Committees’
externally facilitated evaluation in 2020,
a summary of the key focus areas for the
Board in 2021, together with actions in 2021
are as follows:
PROGRESS AGAINST 2020 BOARD EVALUATION OBJECTIVES
Focus area for 2021 Actions in 2021
Delivery of
transformation plans
The Board monitored the delivery of transformation plans as a
standard agenda item at each scheduled Board meeting, with
presentations from senior management involved in transformation
workstreams. The Board constructively challenged management
and was pleased with the progress made throughout 2021.
Succession planning
Led by the Nomination Committee, in conjunction with the Chief HR
a key focus area. See page 66 for further information.
Leveraging experience
of Non-Executive
Directors
The Non-Executive Directors play an active role in supporting
management and advising in their relevant areas wherever possible
and the Chair has ensured that each of them has been given the
opportunity to contribute to Board debate during the year.
Recruitment of a further
Non-Executive Director
As set out on page 66, a search for a further Non-Executive Director
was commenced in 2021 but was paused once the Acquisition was
announced. Should the Acquisition not complete by the long stop
date of 5 August 2022, the search will be reactivated.
Board Evaluation 2021
Following the external evaluation in 2020, an
internal evaluation process was carried out
for the Board and each of its Committees for
the year ended 31 December 2021. Directors
completed an anonymous questionnaire
online, which was constructed to encourage
respondents to provide honest feedback in
then collated and a report was produced and
and then to the Board as a whole for discussion.
Overall feedback was very positive. All Directors
enjoy being on the Ultra Board and feel that
Board meetings are open and transparent
and that their contributions are valued.
The Chair received extremely positive feedback
and is thought to be an excellent Chair who
is inclusive and fosters an atmosphere of
openness and respect in meetings. Directors
commented that the Chair provides the
right level of support to the CEO while also
constructively challenging when appropriate.
Relationships between the Board and the
management team were felt to be open
and transparent.
Many Directors stated their desire for more
site visits, if Covid-19 restrictions allow, to
management and employees throughout
the Group to better understand the culture.
Directors noted the improvements made within
the risk management and internal controls
framework and would continue to keep this
as a focus area for 2022.
Succession planning would also remain a focus
area for the year ahead, pending the outcome
of the Acquisition.
Ultra
Annual Report
and Accounts 2021
64
Workforce engagement
Our talent is critical to our success and we believe
that understanding the views of our workforce is
vital. For the purpose of employee engagement,
contracts of employment.
The Board reviews its means of engaging with
the 2018 Code recommends, on an annual basis.
Given Ultra’s geographical spread and numerous
businesses, we continued to use a combination
of methods to understand the views of the
workforce in 2021, as described in detail below.
As detailed on page 12, our UltraView global
employee engagement survey provides
employees with the opportunity to give
anonymous feedback and for Ultra’s leaders to
listen to the employee voice and act accordingly
where appropriate. An in-depth analysis of each
survey’s results is provided to the Board, together
with action plans which are discussed.
Board site visits are an important means of our
Board engaging directly with the workforce. The
Board aims to visit at least two North American
sites and at least one UK site on an annual basis.
The Board always schedules time to meet with
employees when visiting Ultra locations to listen
basis. Due to Covid-19 restrictions, the Board
was not able to travel to North America in 2021,
although the Board was fortunate to visit SMaP
in Rugeley, UK and Ultra PCS in Cheltenham, UK.
Ken Hunzeker and Dan Shook, Non-Executive
Directors, were also able to visit Ultra Energy, Ultra
SMaP, and Ultra Specialist RF in the UK and Ultra
Naval Systems and Ultra Cyber in the US during
2021. The Directors were then able to provide
feedback to the full Board following their visits.
Simon Pryce and Jos Sclater visit Ultra sites
when possible and aim to meet employees as
well as management at each visit. They often
hold townhall meetings with question and answer
sessions for direct engagement with employees.
Furthermore, employees can also engage directly
with Simon Pryce by using the ‘Ask the CEO’
email address.
Ultra is fairly unique with its own entirely
independent Ethics Committee (the “Committee”).
See page 60 for the formal remit of the Ethics
Committee including committee members’
biographies. The Committee aims to visit at least
four sites every year on a rotational basis and
holds two formal meetings each year. At least one
representative from the Executive Team attends
each meeting to provide the Committee with
Group updates and progress against Ultra’s many
initiatives, including the roll-out of our ASPIRE
values, Code of Conduct, and Diversity and
Inclusion initiatives, to enable the Committee
members to engage with employees on these
areas to get their feedback.
bi-annual meeting at Ultra Sonar System’s site in
Loudwater and was able to link up virtually to meet
with Sonar management and employees based
in Dartmouth, Canada on the day. The second
meeting was held at Ultra PCS in Cheltenham.
Holding the formal meetings at business sites
enables the Committee members to visit more
locations and meet more management and
employees throughout the Group than they
would ordinarily reach through their ordinary
course site visits.
The Ethics Committee also held virtual site visits
at Ultra Forensic Technology, with attendance
from the business sites in Dublin (Ireland),
Montreal (Canada) and Florida (US), Ultra SMaP
in Yaphank (US) and Ultra Sonobuoys based
in Columbia City (US).
In advance of each visit, the Committee members
are provided with a copy of the engagement
survey results together with any historic
Committee reports for the business, and are
reminded of any Speak Up reports that have been
made by employees there. At each site visit the
senior management to get a better understanding
of the facility it is visiting. The Committee then
meets with a diverse selection of employees
from around the business, without management
present, to hear their views and insights.
The sessions are an open dialogue with our
independent Committee members who receive
feedback regarding matters such as business
ethics, culture and the ways of working. The
Committee members also aim to reinforce the
message that our Speak Up platform is completely
independent and anonymous to encourage our
workforce to Speak Up if they suspect any
wrongdoing or if they have a concern.
Following visits, the Committee then compiles an
honest, objective report that is forwarded to the
Executive Team. Where recommendations are
made by the Committee, these are reviewed
and acted on where appropriate. Any cause
for concern would be followed up as soon
as practicable.
The Committee formally report back to the
Executive Team twice a year and present their
honest feedback regarding employees’ views and
the ethics and culture within the businesses, and
report to the Board annually. This mechanism
of workforce engagement allows the Board to
hear the views of our people from our entirely
independent Committee and the Board sees this
which also assists the Board to monitor culture
through the Group.
Our Board in action
continued
Ultra
Annual Report
and Accounts 2021
65
Strategic report
Governance
Financial statements
Ultra is committed to communicating openly
with our shareholders and building long-term
relationships with all our stakeholders to ensure
that its strategy and performance are clearly
understood.
Investor engagement in 2021 can be broken
for Ultra and after.
August) Ultra’s Investor Relations programme,
managed by the SVP of Investor Relations,
consisted of day-to-day contact with our investors.
The CEO and the CFO supplement this
programme by way of regular meetings with the
Company’s institutional investors. The Investor
Relations programme included presentations of
full year and interim results, investor roadshows,
quarterly updates and meetings with individual
investors. Live webcasts of results presentations
investors took place in conjunction with these.
The Executive Team and SVP of Investor
Relations made themselves available to investors
on an ongoing basis in order to maintain an
open dialogue, resulting in a number of ad hoc
meetings and calls taking place throughout the
year. Throughout the year investor roadshows
were attended by the CEO, CFO and Investor
Relations team. Our Board members also
make themselves available to engage with
shareholders as required.
to engage with investors was constrained. Any
engagement that did take place was chaperoned
to the Takeover Panel. Investor meetings
thereafter were held on a reactive basis but mostly
consisted of Acquisition-related questions rather
than underlying business performance.
Board engagement with investors
The Board is presented with uncensored analyst
and investor feedback twice a year after the full
year and interim results investor roadshows.
The primary means of communicating with the
Company’s shareholders are the Company’s
Annual Report and Financial Statements, Interim
Report and Annual Sustainability Report. All of
which are available on the Company’s website
and the Annual Report is sent to all shareholders
who elect to receive it in hard copy.
Furthermore, in accordance with Provision 3 of the
Code, all of our Committee Chairs are encouraged
to seek engagement with our major shareholders.
attend meetings with key stakeholders.
Following the implementation of the Company’s
Remuneration Policy in 2020, the top ten
shareholders were invited for a call with the
Remuneration Committee Chair to dicuss the
policy, and the Remuneration Committee Chair
is always available for consultation as and when
Investor engagement
HOLDERS BY GEOGRAPHY
9 February 2022
% invested capital
UK
62.78
North America
21.05
14.57
Other
1.60
Total
100.00
TOP 10 HOLDERS
Shareholder
9 February 2022
Shares
%
invested
capital
Cumulative
% invested
capital
Goldman Sachs
collateral account
3,480,485 4.87 4.87
Aviva Investors
3,379,025 4.73 9.60
Vanguard Group
3,207,833 4.49 14.10
USB collateral
account
3,173,314 4.44 18.54
stocklending
collateral account
2,851,686 3.99 22.53
Blackrock
2,848,113 3.99 26.52
Invesco
2,587,513 3.62 30.14
Santander
collateral account
2,500,000 3.50 33.64
Société Générale
2,158,791 3.02 36.67
MFS Investment
Management
2,145,494 3.00 39.67
required to discuss remuneration matters with
shareholders. There was no engagement with
Policy in 2021 as the Company continued to
operate in accordance with the approved
Remuneration Policy. Furthermore, throughout the
to a reactive approach rather than the preferred
proactive approach, as previously explained.
The Board is kept up to date with changes in
shareholdings, analyst research reports, the
current short position on the stock and recent
industry news by the SVP of Investor Relations
at every Board meeting.
During the year our Chairman and Company
Secretary had engagement with a number of
investors regarding the composition of the Board.
The Board has been involved in a number of
Diversity, Equity and Inclusion initiatives within
Inclusion report was recently published and
can be downloaded from www.ultra.group.
Through these regular, planned contacts and
engagements with investors, including
anonymous feedback reports twice per year, the
Board has regular opportunities and allocated
time to consider all stakeholder views and discuss
changes that need to be made.
Constructive use of the Annual General
Meeting (AGM)
The Annual General Meeting is the formal forum
to meet with all shareholders who wish to attend
to hear their views and answer their questions
about the Group.
At our 2021 AGM 22.3% of investors voted
against the re-election of our Chairman and
Chair of the Nomination Committee, Tony Rice,
due to the Ultra Board comprising 25%
Ultra fully supports the recommendations of
Alexander gender target as we continue to refresh
the Board, as discussed with shareholders during
Non-Executive Director commenced in 2021, this
for the Company, no further engagement has
taken place with investors on this matter.
Should the Acquisition not proceed, the
search will be re-commenced.
2022 AGM
If 20% of votes are cast against a resolution
that has been recommended by the Board for
approval at any General Meeting, where possible,
the Company will comply with Provision 4 of the
Code in the consultation with shareholders
and communication of shareholder views and
actions as a result.
Ultra
Annual Report
and Accounts 2021
66
Nomination Committee report
Dear Shareholder,
I am pleased to present the Nomination Committee
(“Committee”) report for the year ended
31 December 2021. This report should be read in
conjunction with the compliance report on page 55,
which shows how the Company has complied with
the UK Corporate Governance Code 2018.
Activity during 2021
+
Assessed the balance of experience, skills,
knowledge and diversity of our Board
+
Developed role descriptions for at least one
new Independent Non-Executive Director.
+
regarding the progress on organisational
design and succession planning
+
Considered succession planning for the
Board and Senior Leadership Team
+
Recommended to the Board that Geeta Gopalan
be appointed as Chair of the Remuneration
Committee following Martin Broadhurst’s
departure from the Board
+
Commenced a search for at least one additional
Non-Executive Director, which was later
postponed pending the outcome of the
proposed Acquisition
+
Considered the Non-Executive Director time
commitments to ensure that they can attribute
the necessary time to their roles
How the Nomination Committee operates
The Nomination Committee operates with a
forward-looking agenda, prepared in conjunction
with the Company Secretariat, to ensure the
reporting cycle.
Last year, we announced that Martin Broadhurst
would be stepping down from his role as
Non-Executive Director following his nine-year
tenure on the Board and I reported that we
would be looking to appoint at least one new
Non-Executive Director later this year.
search consultants to assist us with our search,
who provided a list of potential candidates from
diverse backgrounds. However, following the
activity regarding the potential acquisition in Q2
2021, we decided to postpone the appointment
for any further Non-Executive Director and
therefore curtailed the search process.
Board evaluation
Following an externally driven Board evaluation,
led by Clare Chalmers Limited, an internal Board
evaluation commenced in 2021, led by the Chair
in conjunction with the Company Secretary.
Directors completed an online anonymous
questionnaire regarding performance of the
Board, and each of its Committees. The results of
the evaluation were reviewed by the Nomination
Committee in Q1 2021 and are summarised on
page 63.
Board and Committee Evaluation process is
appropriate and was pleased with the results
of the evaluation process.
Leadership succession
A great deal of work was conducted over recent
years on organisational design and succession
planning throughout the Ultra Group, which
resulted in several changes to the Executive
Team in recent years. In 2021, the focus was on
succession planning for those within the Executive
Team, including the CEO and CFO, and ensuring
that we have the right Senior Leaders within the
organisation to lead Ultra through our change
programme, and potentially step into Executive
Team roles in the future.
The Nomination Committee received an
organisational design and succession planning
was pleased with the great progress in this area,
noting that the talent within Ultra has improved
and we are seeing more internal promotions.
the business has assisted with succession
planning for the Senior Leadership Team.
Diversity
Ultra is committed to treating everyone with
fairness, dignity and respect. We recognise that
Selection, development, promotion and reward
will be based on merit without regard to personal
characteristics including, but not limited to,
gender, race, colour, religion, sex, sexual
orientation, citizen status, national origin,
age, disability or genetic information.
We promote equality of opportunity across the
whole business and demonstrate this in our
approach to recruiting new Board members,
actively seeking candidates from a diverse range
of backgrounds including gender, tenure, skills,
experience and backgrounds in addition to softer
traits such as personality. This will always be a key
focus area for us when considering Board and
succession planning, notwithstanding that all
appointments will be based on merit and
candidates’ experience and business acumen.
See pages 56 for more information on our
existing Board diversity.
The Nomination Committee received very
regarding diversity and inclusion initiatives and
results within senior management teams and the
wider workforce and was very pleased to see an
improvement in our gender pay gap in 2021, as
described in detail on page 34. However, we
recognise that there is still some way to go and will
continue to keep this under review. Further details
on Ultra’s initiatives to ensure that we maintain a
diverse and inclusive workplace are included
on pages 33 to 34.
with the Company or individual Directors.
MEMBERS
Tony Rice (Chair)
Martin Broadhurst (stepped down 1 July 2021)
Geeta Gopalan
Victoria Hull
Ken Hunzeker
Daniel Shook
Attendance at meetings is detailed in the
table on page 61. The Committee’s terms
of reference are available at ultra.group.
MAIN RESPONSIBILITIES
+
Regularly review the structure, size
and composition of the Board
+
Succession planning for Board and senior
management positions, ensuring that the
leadership needs of the Company are met
+
Be responsible for identifying and
nominating for the approval of the Board,
when they arise, taking into account the
balance of skills, knowledge, experience
and diversity of the Board
+
Review the time commitment required from
Non-Executive Directors annually, taking
into account Board evaluation feedback
+
Review the independence of Non-Executive
interest for Board members
Ultra
Annual Report
and Accounts 2021
67
Strategic report
Governance
Financial statements
Audit Committee report
Dear Shareholder,
I am pleased to present the Audit Committee
report for the year ended 31 December 2021.
This report should be read in conjunction with
the compliance report on page 55, which shows
how the Company has complied with the UK
Corporate Governance Code 2018.
Throughout a year where Ultra delivered excellent
performance despite the distractions of the
proposed acquisition by Cobham and the ongoing
pandemic, the Committee continued to focus on
continuous improvements in our internal controls
and risk management procedures, as explained in
more detail on page 70.
Martin Broadhurst stepped down from the Audit
Committee during the year and I would like to
thank Martin for his contribution to the work of
the Committee over the course of his tenure.
Ultra’s interim results were released earlier than
planned on 19 July 2021 to update the market
on the stronger than anticipated performance for
the half-year to 30 June 2021. In order to update
ongoing transformation programme, KPMG
was engaged as the independent reporting
28 of the City Code on Takeovers and Mergers.
The Audit Committee reviewed the QFBS in detail,
including the management assumptions that
supported the QFBS, prior to its inclusion in the
interim results announcement 2021.
The Board considers all Audit Committee
members to be Independent Non-Executive
Directors. I am currently Group Finance Director
of IMI plc, a FTSE 250 company, and have
large multinational companies. The Board is
Committee. Additionally, all Audit Committee
members have competence relevant to the sector
in which the Company operates. The biographies
of the Committee members can be found on
pages 52-53.
The main responsibilities and activities of the
Audit Committee are set out below and detailed
throughout this report.
How the Audit Committee operates
The Audit Committee operates with a forward-
looking agenda, prepared in conjunction with
the Group Financial Controller and Company
Secretariat team, to ensure that the Committee’s
agenda is reviewed and updated as necessary
during the year to deal with matters as they
arise which are outside of the annual agenda.
MEMBERS
Daniel Shook (Chair)
Martin Broadhurst (stepped down 1 July 2021)
Geeta Gopalan
Victoria Hull
Ken Hunzeker
Attendance at meetings is detailed in the
table on page 61. The Committee’s terms
of reference are available at ultra.group
MAIN RESPONSIBILITIES
The Audit Committee supports the Board
in the following areas:
+
Oversee the Group’s risk management
+
Agree the internal and external audit plans
+
judgements
+
Monitor the integrity of all formal reports
and announcements relating to the
management
+
results to the Board
+
Appoint the internal auditors, oversee the
appointment of the external auditors and
maintain an appropriate relationship with
the internal and external auditors of the
Group
+
of the internal and external auditors to
the Board
+
of the internal and external auditors
throughout the year. The Chair of the Board, Chief
auditor (Deloitte) and internal auditor (PwC)
attended parts of these meetings by invitation.
The Committee held separate meetings with
the external auditor and internal auditor without
management present, and the Audit Committee
Chair also met with the external auditor, internal
team outside the formal Committee sessions.
External auditor
Deloitte LLP (“Deloitte”) continued as the
Company’s external auditor in 2021 further to
re-appointment at the Company’s Annual General
Meeting in May 2021. Jonathan Thomson took
over from Alex Butterworth as Lead Partner in
accordance with professional practice guidelines
Thomson had been heavily involved in the 2020
audit process therefore the change was a smooth
transition and the Committee welcomed his fresh
eyes and approach.
The Committee has primary responsibility
for recommending the re-appointment of
the external auditor to the Board before the
resolution is put to shareholders at the Company’s
Annual General Meeting. The Committee believes
that it is in the best interest of its members for
Deloitte to remain as external auditor during 2022
to leverage their knowledge and experience of the
Company while we are going through a period
of change and uncertainty regarding the future
shareholders of the Company. We therefore
recommend that Deloitte be re-appointed
as Company auditors for 2022.
As reported in last year’s Annual Report, the Audit
Committee will lead an auditor tender process by
no later than 2023, which would be the maximum
term that Deloitte could remain as auditors. Any
auditor tender process led by the Committee will
independence requirements.
Ultra
Annual Report
and Accounts 2021
68
Financial statements and accounting policies
+
Reviewed management’s
+
statements and the formal
announcement on the Group’s
+
Reviewed the Group’s going
concern and long-term viability
statement assumptions
+
+
Discussed key accounting policies and practices adopted by the Group
+
+
Reviewed underlying assumptions and the rigour of the testing underpinning the going concern statement
and long-term viability statement (as set out on pages 46-47) prior to approving them
Risk management and internal control framework
+
Reviewed and provided oversight
of the Group’s risk management
and internal controls processes
+
Group’s system of internal control
and risk management
+
+
Discussed half-yearly internal controls reports from business and Shared Service Centre reviews, together
+
Reviewed the principal risks, the Group’s risk appetite and risk metrics and considered their alignment with
the achievement of Ultra’s strategic objectives
+
Assessed the key controls in place and agreed future management actions to mitigate risks
+
Considered reports on known or suspected fraud
+
corruption and programme management
+
+
+
Reviewed the bid controls process and considered ongoing workstreams relating to sales excellence and bid
activity
+
controls framework
+
Further details of the approach to risk management can be found on pages 70-71
External audit, engagement and policy
+
Reviewed the scope and
audit process
+
Negotiated the terms of the
external auditor’s appointment,
the scope, fees and independence
+
rotation process
+
Considered Deloitte’s external audit planning report prior to the commencement of the 2021 audit
+
Received reports from the external auditor on the outcomes of their audit process and the external audit
+
Discussed Deloitte’s letter to management and management responses to that letter
+
and recommended the re-appointment of Deloitte as auditor
+
Reviewed Lead Partner candidate options and selected new Deloitte Lead Partner
+
Approved a revised external auditor’s engagement policy taking into account new Financial Reporting Council
(FRC) standards
Internal Audit
+
Internal Audit function
+
by Internal Audit
+
Agreed the risk-based Internal Audit plan for the year, monitored delivery of Internal Audit against the plan
review with stakeholders
+
implementation of remedial actions, noting the progress made in the control environment within the
Group’s businesses
Other
+
Received corporate governance
reform updates
+
Received updates relating to the BEIS UK Corporate Reporting and Audit Reform
Audit Committee report
continued
Ultra
Annual Report
and Accounts 2021
69
Strategic report
Governance
Financial statements
SIGNIFICANT JUDGEMENTS CONSIDERED
Judgement area
Committee assessment
Long-term contract
accounting
on estimates. The Committee was updated on progress on key programmes. The Committee considered the key sources of
estimation uncertainty with respect to forecast cost to complete estimates. The Committee considered the disclosures made
in the Annual Report with respect to revenue recognition including the related accounting policies and key sources of estimation
uncertainty. The Committee discussed and engaged with the external auditor when considering all these matters. See disclosure
in note 3, and in the statement of accounting policies on pages 138-146.
Valuation and
impairment testing
of goodwill and
intangible assets
from management and considered whether, given the future prospects of the acquired businesses, the value of goodwill held
on the balance sheet remains appropriate. The Committee reviewed the methodology and assumptions used to support the
balance sheet carrying values of these assets, including the discount rates applied, and the future growth rate applied into
2022 budget and strategic plan (which in their role as members of the Board, Committee members had previously reviewed).
The Committee considered the sensitivity of the asset valuations to changes in assumptions. The Committee concluded that
no disclosure of a key source of estimation uncertainty was required for this matter. The methodology for impairment testing
The Committee discussed and engaged with the external auditor when considering all these matters.
Taxation
The Committee considered the Group’s key tax accounting judgements with respect to the assessment, measurement and
these matters. The Committee concluded that no disclosure of a critical accounting judgement was required for this matter.
The Committee discussed and engaged with the external auditor when considering all these matters. See disclosure in note 10.
Conduct of business
matters
The Committee was updated on the investigations associated with conduct of business matters (see note 33 on page 135).
The Committee considered the judgements relating to these matters, particularly around the requirements of IAS 37 Provisions,
Contingent Liabilities and Contingent Assets with respect to providing for settlement costs, and disclosure of contingent
liabilities. The Committee considered the disclosures in the Annual Report. The Committee discussed and engaged with the
external auditor when considering these matters.
Dened benet
pension scheme
The Committee considered the actuarial assumptions used for the scheme valuation, the sensitivity of the valuation to changes
The Committee discussed and engaged with the external auditor when considering all these matters. See disclosure in note 29.
Proposed takeover
by Cobham Ultra
Acquisitions Limited
The Committee consider the treatment of costs associated with the proposed acquisition; certain costs are contingent upon the
discussed and engaged with the external auditor when considering these matters.
Ultra
Annual Report
and Accounts 2021
70
Audit Committee report
continued
External auditor independence and objectivity
In its assessment of the independence of the
external auditor, the Committee reviews the
independence and objectivity of the Company’s
auditor through a combination of:
+
Open dialogue with the auditor
+
+
Review of non-audit services
It is the policy of the Group that non-audit services
provided by Deloitte are restricted to reporting
required by law or regulation, review of interim
returns, reporting on government grants,
required by law or regulation, and extended
audit or assurance work that is authorised by
those charged with governance performed
controls where this work is closely linked with
the audit work. The policy prohibits due diligence
assessments of potential acquisitions, consultancy
remuneration consultancy, tax planning, Internal
Audit and actuarial services. Any non-audit
fees in excess of £50,000, in aggregate, in any
the Chair of the Audit Committee for approval.
In 2021, Deloitte provided non-audit services fees
of nil (2020: £3,000) representing 0% (2020: 0.2%)
of the total audit fees. The Committee considers
that certain non-audit services, in accordance
with the policy above, should be provided by the
external auditor, because its existing knowledge
out. Before commissioning non-audit services,
Committee, as appropriate, must ensure that
there is no issue as regards to independence
and objectivity and other potential providers
are adequately considered.
External audit eectiveness
The audit scope, approach and areas of focus
are agreed well in advance of the audit to ensure
a mutual understanding of expectations and
timeframes. Following the 2020 audit, key
audit planning process to ensure ongoing
continuous improvement.
throughout the year, the Committee considered:
+
The quality of the audit reports and ancillary
documents provided by the external auditor
+
+
The Committee’s collective views from meetings
held with the external auditor
Based on these collective reviews, the Committee
concluded that Deloitte had applied appropriate
robust and objective challenge throughout the
performance of the external auditor.
Deloitte’s 2020 audit of Ultra was selected for the
Financial Reporting Council’s Annual Audit Quality
Inspection, the outcome was pleasing and gives
comfort to the Audit Committee that our external
auditors are of a high standard.
Employment of former external auditors
Any employment of former employees of external
auditors would be considered on a case-by-case
basis and would take into account the Auditing
Practices Board’s Ethical Standards on such
appointments. Such appointments require
approval by a combination of the Chief Financial
on the seniority of the appointment.
Risk management and internal controls
The Audit Committee conducted a deep dive
into internal controls and risk management
procedures in 2021. ‘Three lines of defence’
reviews were conducted in several areas, including
ABC, Fraud, Health & Safety, Programme
Management, Trade and Export Compliance,
Bid Controls and Cyber Risk. Strategic risks were
assessed as part of the strategy process.
Due to the increasing threat of cyber security,
the Committee received a report from the Chief
cyber security solution and cyber controls
framework. In addition to internal cyber
penetration testing conducted by the Ultra IT
team, penetration testing by an independent
The risk management framework was reviewed
and challenged by the Committee. Strategic risk
assessments were carried out with the businesses
as an embedded part of the 2021 strategy
process. The risk framework and Group risk
register were reviewed by the Committee and
the Board. The focus on risk management will
be maintained in 2022.
The Group’s internal controls framework includes
controls, and risk management processes, which
together ensure the appropriate oversight of
preparation of consolidated Group accounts.
The control environment within Ultra comprises
the following:
+
Group policies
+
Group delegation of authorities
+
+
Six-monthly control review meetings
+
Risk reviews/registers at Business Unit
and Group level
+
Anti Bribery and Corruption Risk and
Environmental Risk)
+
‘three lines of defence’ analysis (including key
compliance areas, Health and Safety Controls
Framework, Programme Management)
+
Audit Committee training – audit and
governance reforms
+
Bid process reviews
+
+
Internal Audit (provided by PwC)
+
Speak Up platform for external support of
whistleblowing reporting
+
Strategic Business Unit (SBU) review of monthly
Operational Business Unit (OBU) performance
+
SBU level performance reviews
+
Executive Team oversight and challenge
+
Group Board and Committee oversight and
challenge
+
Other regulatory assurance activities
The arrangements include procedures to
ensure the maintenance of records that accurately
with International Financial Reporting Standards
(IFRS). They also require reported data to be
reviewed and reconciled, with appropriate
monitoring internally and by the Audit Committee
The Managing Directors and Presidents, the
Finance Directors and the Vice Presidents Finance
of each business are required to give a formal
written representation to the Board each year
they have disclosed full details of any fraud or
suspected fraud within their business.
Every six months, each SBU Finance Director
the internal controls processes and issues for
each business in their SBU. This includes:
+
+
Balance sheet and controls reviews, including
reviews of reconciliations
+
Outstanding internal and external audit points
+
Segregation of duties
Summary results from these reviews are
discussed in the Internal Controls Improvement
Status Report, which is presented to the Audit
Committee twice a year. The internal controls
environment continued to be strengthened
in 2021 with further standardisation of policies
and processes. Emphasis continues to be
placed on tracking progress of timely delivery of
improvement actions arising from formal control
reviews, including Internal Audit reports. In 2022,
the focus will continue to be on improving the
Ultra
Annual Report
and Accounts 2021
71
Strategic report
Governance
Financial statements
compliance culture and on the programme
management transformation roll-out of core
processes and tools to enhance the consistency
of approach across the Group.
The principal risks reported in this Annual Report
are a prioritised distillation from a corporate level
register of key risks. The Committee assessed
these emerging and key risks facing the Company
in October and December 2021 and reviewed the
risk control and monitoring frameworks in place
Following a detailed review of the risk activities
and risk reporting processes during the year, no
in the review process; however, this will always be
an area of focus for continuous improvement.
As such, the focus for 2022 will be on embedding
and expanding the new process for reviewing key
control areas using the ‘three lines of defence’ risk
model, and mapping of assurance around risk
controls and monitors.
Internal Audit
PwC remained as Ultra’s internal auditor
throughout the year. The use of an experienced
A risk-based approach is taken by the Company
in determining its Internal Audit plan, ensuring
that the plan is clearly linked to the Company’s
to highlight and address emerging risks as well
as testing established controls frameworks. The
Internal Audit plan and resources are considered
and monitored by the Committee, together with
Any newly acquired operating business would be
audited within a year of its acquisition date. Where
the year in response to changing priorities and
requirements.
The Lead Partner from PwC reports directly to
the Chair of the Committee and presents the
Progress reports on follow-up remedial actions
are reported regularly to the Committee. PwC
the business or function concerned.
the review of Internal Audit reports, meetings with
the Chair of the Committee without management
review questionnaire process with stakeholders,
and views from senior management and the
Fraud
The Committee is responsible for the oversight
of the risks of fraud and the design and
implementation of internal controls to prevent
and detect fraud. The Committee monitors the
procedures in place to detect fraudulent activities
through the risk management and internal
controls framework and biannual controls reviews.
There is a fraud reporting process in place that
forms part of the monthly business performance
reporting cycle. Any suspected fraudulent activity
is promptly reported to the Board and auditors
would be informed accordingly. Route-cause
communicated to the Business Units and policy
and processes improved as necessary. It is
believed that the internal control framework in
place, reinforced by regular audits and promotion
by executive leadership as part of the new Code of
Conduct, provides reasonable assurance against
substantial frauds being carried out. The
Committee believes there to be a low risk of
statements as a result of fraud.
Whistleblowing
The Company has an independent, anonymous
externally-hosted by NAVEX Global which is
branded ‘Speak Up’. Importantly, there is a clear
message that the Company will not accept any
retaliation in any form against someone who
reports any concern or violation in good faith.
restrictions, all Speak Up feedback is sent to Ultra’s
Senior Independent Director and, ultimately, to
the Board. The Ethics Committee also receives
reports made via Speak Up. All reports are
thoroughly investigated and corrective action is
the whistleblowing procedures and follow-up
investigative processes within the Company are
practical and appropriate for the Company.
Anti-bribery and corruption
The Company has a zero-tolerance approach to
bribery and corruption anywhere in the world.
This message is emphasised in the Company’s
employee Code of Conduct, which also includes
practical examples of corrupt behaviour that is
policies containing more information on aspects
of anti-bribery and corruption (ABC).
The Company’s ABC manual, which was
consolidated from multiple policies in Q3
improvement review in 2021, with amendments
the controls framework reviewed by the Executive
Team and the Audit Committee in 2021 and an
Internal Audit review of businesses compliance
with the framework in Q4 2021, building on an
audit of the policy and procedures conducted by
PWC in Q4 2020.
other workers were required to complete
interactive, tailored, online ABC training provided
by NAVEX Global. Core training was mandated for
all, with more advanced modules for those within
the Company operating in a higher-risk
environment. All of our Directors completed
the advanced ABC training modules. Third-party
ABC Risks training was mandated for workers
responsible for managing intermediaries and
associated persons.
In addition to this enhanced training, bespoke
in-person and virtual ABC training was delivered
by the Company’s lawyers to senior management
team members responsible for ABC oversight
across their businesses on an ad hoc basis.
Statement of compliance
throughout the year with the provisions of the
Competition and Markets Authority’s Statutory
Audit Services for Large Companies Market
Investigation (Mandatory Use of Competitive
Tender Processes and Audit Committee
Responsibilities) Order 2014.
Fair, balanced and understandable statement
The Audit Committee, having reviewed the
documents and having been additionally advised
disclosures, as well as the processes and controls
underlying its production, were appropriate and
recommended to the Board that the Annual
Report and Financial Statements 2021 are fair,
balanced and understandable. Furthermore,
they provide the information necessary for
shareholders and other stakeholders to
validly assess the Company’s position and
performance, business model and strategy.
Ultra
Annual Report
and Accounts 2021
72
Directors’ remuneration report
for the year ended 31 December 2021
Annual bonus
The Committee considered the performance
metrics holistically and determined that
performance against the financial metrics of
underlying operating profit and average working
capital turn targets was above the maximum of
the performance range. Performance against
the individual strategic objectives of the Executive
Directors coupled with their excellent individual
contributions in maintaining performance while
steering Ultra through the period from the
announcement of the recommended offer,
resulted in 100% payout of the 2021 annual
bonus plan.
Long Term Incentive Plan (LTIP)
The 2019 LTIP award was subject to four
equally weighted performance conditions:
+
Relative Total Shareholder Return (TSR)
+
Return on Invested Capital (ROIC)
1
+
Organic Operating Profit Growth
2
+
Organic Revenue Growth
2
The award was tested for performance at the end
of 2021 and based on Ultra’s financial and share
price performance over the full performance
period of the award, the vesting was determined
to be 97.3%. In last year’s report it was noted that
the Committee had exercised discretion to adjust
the profit and ROIC outcome on the 2018 LTIP
to reflect the change in accounting convention
whereby transformation costs were classified as
non-underlying and did not impact the Company’s
reported underlying profit. As this issue also
impacts the 2019 award, the Committee has again
exercised discretion to adjust the profit and ROIC
outcomes. The Committee reviewed the formulaic
outcome and considered it reflective of overall
business performance.
Implementation of policy for 2022
The Committee considered salary increases for
the CEO and CFO. In so doing, it took into account
the competitive positioning of current salaries, the
proposed increases for the general workforce and
the excellent performance of the incumbents.
The Committee decided that there should be
no salary increase for the CEO. The Committee
agreed that there should be a 3% increase in the
base salary of the CFO in line with the budget for
all employee increases, to maintain a competitive
positioning of total reward and reflect his
significant contribution to the Group.
Geeta Gopalan
Chair of the Remuneration Committee
2021 was another high-performing
distractions. Our KPIs show robust
growth despite pandemic challenges.
MEMBERS
Geeta Gopalan (Chair)
Victoria Hull
Daniel Shook
Ken Hunzeker
Martin Broadhurst (stepped down 1 July
2021)
Attendance at meetings is detailed in the
table on page 61. The Committee’s terms
of reference are available at ultra.group
Dear Shareholder,
I am pleased to present our Directors’
remuneration report for the financial year ended
31 December 2021. This report should be read
in conjunction with the compliance report on
page 55, which demonstrates how the Company
has complied with the UK Corporate Governance
Code 2018.
During the 2021 financial year, the
Remuneration Committee sought to ensure that
all remuneration decisions were in line with the
Directors’ Remuneration Policy as approved by
shareholders in May 2020 and that incentive plan
outcomes were aligned with strategic goals and
performance outcomes applied in accordance
with their rules and appropriately reflected the
interests and experience of shareholders.
Remuneration outcomes for 2021
2021 was another high-performing year for
Ultra despite some significant distractions.
Our KPIs show robust growth despite pandemic
challenges. We are also seeing the benefits from
the transformation and continuous improvement
initiatives under the Fix; Focus; Grow strategy.
The year began with continued uncertainty
wrought by the Covid-19 pandemic but through
continued focus on strategic goals and the service
of customers, half-year results were good and
prospects for the full year were very positive. The
acquisition of Ultra was announced on 16 August
2021, and this added to the uncertainty within
which Ultra needed to maintain its high level
of performance. However, despite these events,
Ultra has produced a strong set of full-year results
with organic revenue growth of 4.2% and organic
underlying operating profit growth of 8%.
The uncertainty around the acquisition by
Cobham meant that the Committee convened
additional meetings to decide on the principles it
would apply in the event that the recommended
offer for Ultra completes, to the outcomes of the
2021 annual bonus, the targets for which had
been set at the start of the year, and the vesting
of the in-flight LTIP awards for 2019, 2020 and
2021. Since the offer has not completed at the
time of reporting, this report is based on Ultra
operating in the ordinary course. Throughout
the year, the Remuneration Committee continued
to operate within its normal terms of reference.
Ultra
Annual Report
and Accounts 2021
73
Strategic report
Governance
Financial statements
The Committee has concluded that it would not be
appropriate to reduce the cash payment in lieu of
pension for the CEO further at this time (current
cash allowance represents 14% of base salary).
The additional burden on the business resulting
from the potential acquisition by Cobham and
the uncertainty over post-acquisition plans has
meant there is a delay to the proposed review
of pensions and benefits across the Group.
The Committee is mindful of investor sentiment
on this matter and remains committed to align
contribution levels by 2023 should the proposed
acquisition not proceed.
For 2022, the Committee proposes no change
to the structure and metrics of both the annual
bonus and LTIP nor to the bonus opportunity or
LTIP grant level. Targets for the 2022 bonus plan
have been set based on budgeted performance
and alignment with the current strategy.
Recommended offer for Ultra by
Cobham/Advent
During 2021, the Remuneration Committee
discussed extensively the implications of the
potential transaction on remuneration. The
Committee initially considered the impact on
in-flight LTIP awards made in 2019, 2020 and 2021.
As time progressed, the Committee considered in
detail the setting of targets for 2022 LTIP awards,
and the 2022 annual bonus, in accordance with
provisions in the Cooperation Agreement.
The Committee considered the targets for the
2022 bonus and has retained the same metrics
and degree of stretch in the targets.
The Committee decided to retain the same targets
for the 2022 LTIP as these reflect the long-term
nature of the business and change at this time
of uncertainty for the Group was not considered
appropriate.
Workforce engagement
Senior managers take part in quarterly interactive
sessions with the Chief HR Officer which include
specific sessions on remuneration structures
throughout the Group to promote openness and
transparency. The remuneration sessions explain
how remuneration is aligned throughout the
workforce levels from the top down, and how
performance incentive schemes are aligned
with Ultra’s strategy, purpose and ASPIRE values.
Managers are invited to ask questions on
remuneration structures before cascading
the session down to their teams.
Employees are encouraged to ask any questions
they have through the ‘Ask the CEO’ email address
and may ask questions anonymously through
Ultra’s Speak Up platform, with any remuneration
matters fed back to the Committee by the Chief
HR Officer. In addition, Committee members seek
direct feedback from employees at site visits. This
was more limited in 2021 due to travel restrictions
but two such events took place towards the end of
the year.
Board Changes
Martin Broadhurst stepped down from the
Board on 1 July 2021 after nine years of service.
The Committee wishes to thank him for his
valued stewardship.
The Committee will continue to operate within
its terms of reference and in accordance with our
Policy during the coming year unless or until there
is a change in connection with the acquisition of
Ultra by Cobham.
Geeta Gopalan
Chair of the Remuneration Committee
1 The ROIC measure for the 2019 awards is as defined on
page 146.
2 See page 146 for definition of organic measures. Growth rates
are averaged over the three-year performance period.
Ultra
Annual Report
and Accounts 2021
74
Annual Report on Directors’ Remuneration
This section contains details of the remuneration paid and awarded to Executive Directors for the year ended 31 December 2021. This report has been prepared
in accordance with the provisions of the Companies Act 2016 and the Regulations.
Remuneration at a glance
Performance outcomes for the year ending 31 December 2021
Name
Metric
Metric achieved
Simon Pryce
Jos Sclater
2021 Group
bonus
PBT (40%)
40%
% of max
100% 100%
AWCT (45%)
45%
% of base salary
150% 150%
Strategic Objectives (15%)
15%
Outcome value
£1,047,960 £653,438
2019 LTIP
TSR (25%)
25%
% of max vesting
97.3% 97.3%
ROIC (25%)
22.3%
No. of vested shares
63,601 25,020
Organic Underlying Operating Profit Growth (25%)
25%
Estimated value
1
2,028,876 £798,129
Organic Revenue Growth (25%)
25%
1 Estimated value on vesting has been calculated using a share price of £31.90 being the average closing share price over the three months to 31 December 2021. It should be noted that the share price during
this time was influenced by the confirmed offer for Ultra.
Summary of Remuneration Policy and implementation for 2022
The table below shows an overview of the Policy and implementation for 2022. The Policy was approved by shareholders at the May 2020 AGM and the full Policy
is set out in our 2019 Report and Accounts which can be found on our website (ultra.group).
Plan
Purpose and how it supports strategy Simon Pryce
Jos Sclater
Base salary (effective
1 April 2022)
Recognise the market value of the role and individual’s
skills experience and performance to ensure ability to
attract and retain talent
£698,640 £448,694
Benefits & pension
Provide benefits and pension consistent with the role
and competitive environment
14% 7.5%
Group annual bonus Drives and rewards annual performance against
financial and non-financial metrics
Max. % of salary
150%
Performance metrics
85% financial: 15% non-financial
Deferral
1/3rd deferred into shares
for 3 years
LTIP
Drives and rewards main strategic objectives to deliver
long-term value creation aligning Executives with
shareholders’ interests
Grant level (% of base salary)
200% 150%
Performance metrics
Four metrics,
equally weighted
Share ownership
requirements
Alignment of interests between Executives and
shareholders
% of salary
200% 200%
Deferral
In accordance with the Policy, one-third of bonus awarded is deferred into Ultra shares for three years during which dividend equivalents are payable in cash.
Executive Directors are required to retain 100% of post-tax shares received on vesting of the deferred bonus and from the LTIP until shareholding requirements
are met. Malus and clawback provisions apply to both the bonus and LTIP.
Holding periods
A two-year post-vesting holding period applies to all LTIP awards, which is enforced through sale restriction in our share plans portal. This enforcement applies
from 2021 onwards to all applicable vestings including prior years. A post-employment holding period is applicable to shares vesting under the LTIP and
deferred bonus plans granted in 2020 and beyond equivalent to 100% of salary and applies for one-year post-departure. The Company has obtained written
agreement from Executive Directors that they agree and commit to the post-employment holding requirements which are also a stated requirement in the
grant documentation.
Ultra
Annual Report
and Accounts 2021
75
Strategic report
Governance
Financial statements
Linking pay with strategy
We aim to deliver long-term, sustainable value
creation for all our stakeholders through our
Focus; Fix; Grow strategy
The Committee believes that executives’ reward
should balance the need to be agile and having
a longer-term focus, with strong alignment with
the KPIs and strategic priorities of the Group.
The Committee believes that the measures in
the incentive plans provide the right balance
between these aims.
The Remuneration Policy and implementation
in the context of the principles of the UK
Corporate Governance Code 2018 (“Code”)
The Committee believes that the current Policy
and implementation are consistent with the
six factors outlined in the Code.
+
Clarity
– remuneration arrangements are
transparent and the Committee engages
regularly with shareholders.
+
Simplicity
– the purpose, structure and strategic
alignment of each element of pay is
uncomplicated, and operationally easy to
understand.
+
Risk
– there is an appropriate mix of fixed and
variable pay, and financial and non-financial
objectives. The Committee has the discretion
to override formulaic outcomes, and malus
and clawback provisions are in place.
+
Predictability
– the range of possible pay
outcomes is set out in the performance
scenario charts on the right.
+
Proportionality
– executives are incentivised
to achieve stretching targets over one- and
three-year periods, with clear links to the
delivery of the Group’s strategy.
+
Alignment with culture
– the Policy has been
designed to support the delivery of the Group’s
long-term strategy, and the interests of its
shareholders and employees. As set out above,
the performance metrics used to determine
variable pay outcomes directly align with our
strategy with individual performance considered
in the context of the Group’s ASPIRE values.
Malus and clawback allow for adjustment of
outcomes for failure to act in accordance with
company purpose, values and strategy.
Remuneration scenarios for Executive Directors
The charts on the right show the value of the
package each of the Executive Directors would
receive based on 2022 base salary, benefits and
2022 annual bonus and LTIP awards, assuming
the scenarios noted.
LTIPAnnual bonus
AWCT
45%
TSR
25%
ROIC
25%
Organic
revenue
growth
25%
Strategic
15%
Organic
profit
growth
40%
Average working capital turn
focuses on cash returns and
business efficiency.
TSR directly measures shareholder
returns relative to the FTSE 250. It
provides alignment between
executives and shareholders.
ROIC demonstrates how well the
Company is performing and being
managed over the medium to
long term.
Organic revenue growth targets
provides an indication of the rate
at which the Group’s business
activity is expanding.
Organic profit growth
demonstrates that the additional
revenue is being gained without
profit margins being compromised.
Organic profit growth is a key
internal performance measure
which demonstrates that the
additional revenue is being
gained without profit margins
being compromised.
Individual strategic objectives
focus on key enablers to drive
forward the strategy such as
engagement, succession
planning and transformation.
Organic
profit
growth
25%
0%
100%
Maximum + 50%
share growth
MaximumTargetMinimum
C
hief
Executiv
e
£
’0
00 Long-term
variable pay
Fixed pay
100%
39%
25%
36%
25%
32%
43%
21%
26%
53%
3,961
3,263
2,110
818
Annual
variable pay
C
hief
Financial Officer
£
’0
00 Long-term
variable pay
Fixed pay
Annual
variable pay
Maximum + 50%
share growth
MaximumTargetMinimum
100%
41%
28%
31%
27%
37%
36%
23%
31%
46%
2,182
1,846
1,206
500
Notes:
Fixed pay includes 2021 annual salary, and actual benefits and pension. For the Chief Executive the pension has been calculated
at 14% of base salary.
Minimum: Fixed pay only.
Target: Fixed pay, target bonus and expected value of LTIP.
Maximum: Fixed pay, maximum bonus and maximum vesting under LTIP.
Maximum + 50% share price: Maximum plus 50% share price growth on LTIP.
Ultra
Annual Report
and Accounts 2021
76
Single figure of total remuneration (audited)
Basic salary/fees
£’000
Benefits
1
£’000
Pension
2
£’000
Total fixed
remuneration
£’000
Performance
bonus
3
£’000
LTIP
£’000
Total variable
remuneration
£’000
Total
£’000
2021
2020
20212020
20212020
20212020
20212020
20215
2020
4
2021
2020
20212020
S Pryce
694
677
2120
101114
816811
1,048
1,017
2,029 1,408
3,077 2,425
3,893 3,236
J Sclater
433
425
1717
3232
483474
653
1,452 528
798 –
528
1,934
1,002 T Rice
227
202
–
227–
––
202
–
–
––
––
227
202
M Broadhurst
6
33
64
–
33–
––
64
–
–
––
––
33
64
G Gopalan
7
63
56
–
63–
––
56
–
–
––
––
63
56
V Hull
68
61
–
68–
––
61
–
–
––
––
68
61
K Hunzeker
8,9
58
28
29
87–
–
–28
–
–
––
––
87
28
D Shook
68
64
–
68–
––
64
–
–
––
––
68
64
Notes
1 Benefits: car cash allowance, life assurance, and private medical insurance. No other taxable benefits are payable.
2 Pension: Simon Pryce received a cash supplement of 14% from 1 April 2021 (reduced from 16%). Jos Sclater received a cash supplement of 7.5% of base salary.
3 One-third of bonus is deferred into shares for three years.
4 The 2018 LTIP has been restated to reflect the actual closing share price of £23.02 on the vesting date of 2 July 2021.
5 The estimated value of the 2019 LTIP award which vests on 16 April 2022. The share price used for these awards was £31.90 being the average of the closing share price for the three months prior to
31 December 2021. The proportion of the 2019 award value that is attributable to share price growth is £1,058,323 or 109% for Simon Pryce and £281,222 or 54% for Jos Sclater. The proportion of the award
value that is attributable to share price growth may be higher than actual as the share price was influenced by the confirmed offer for Ultra.
6 Martin Broadhurst stepped down from the Board on 1 July 2021.
7 Geeta Gopalan became Remuneration Committee Chair on 1 July 2021.
8 Ken Hunzeker was appointed to the Board on 1 July 2020.
9 Benefits comprise the grossed up expenses for travel and accommodation to attend Board meetings in the UK.
Annual bonus for the year under review (audited)
Measure
Weighting Threshold
4
Maximum
4
Performance
achieved
4
Percentage of
maximum
outcome
Overall bonus
Simon Pryce
PBT
1
40%
£102.4m £116.1m £118.0m
100.00%AWCT
2
45% 10.1 10.8 12.3 100.00%
100.00%
Strategic
3
15% n/a n/a 100.00% 100.00%
Jos Sclater
PBT
1
40%
£102.4m £116.1m £118.0m
100.00%AWCT
2
45% 10.1 10.8 12.3 100.00%
100.00%
Strategic
3
15% n/a n/a 100.00% 100.00%
1 Underlying profit before tax.
2 Average working capital turn.
3 Role specific strategic objectives.
4 Targets were set at constant foreign exchange rates relative to 2020.
The maximum bonus opportunity for the Chief Executive and Chief Financial Officer for 2021 was 150% of base salary. Financial measures comprise 85%
of the overall bonus opportunity and due to very strong financial results have paid out at maximum.
The Executive Directors were also given challenging role-specific objectives which make up the remaining 15% of the annual bonus opportunity. The
Remuneration Committee reviewed the outcomes against these strategic objectives which showed strong performance especially in terms of initiatives that
progress the Fix; Focus; Grow strategy; however, they also considered the context of the overall results achieved in a challenging year when both Executive
Directors had successfully steered the Group through negotiations and a premium price offered for Ultra by Cobham as well as maintaining good levels of
engagement with other stakeholders such as customers and employees. Having taken all factors into consideration, the Committee determined that the
outcome of the strategic objectives should be at maximum.
Annual Report on Directors’ Remuneration
continued
Ultra
Annual Report
and Accounts 2021
77
Strategic report
Governance
Financial statements
Strategic objectives and performance
Simon Pryce
Outcome
Drive transformation
+
Sponsorship and execution of key transformation initiatives driving productivity,
efficiency and growth. Ensure that benefits are fully realised
Transformation costs lower and delivered ahead of plan
Technology development
+
Effective development and execution of the technology road map
Key milestones on track, roadmaps complete
Customer engagement
+
Develop senior cross SBU influence and customer relationships
Solid engagement with senior customers
Sales and bidding process
+
Standardise sales and bidding processes
Bid process complete. Sales process standardisation complete
Leadership succession
+
Improve succession in leadership/critical roles
Goal to improve 1–3-year and 3–5-year cover by 10% achieved
Drive employee engagement
+
Improve employee engagement across the organisation
Small decline in overall engagement index influenced by Offer
uncertainty (see page 35)
ESG
+
Roll out and ensure delivery of A Positive Force
Roll-out well received (see report page 24)
Jos Sclater
Outcome
Drive transformation
+
Sponsorship and execution of key transformation initiatives driving productivity, efficiency
and growth. Ensure that benefits are fully realised
Transformation governance process well embedded. Excellent
progress across project portfolio with added focus on costs
and benefits
Embed continuous improvement (CI)
+
Build the internal team, deliver SGC sprints and launch key continuous improvement
tools and training
Improved bench strength of the team, SGC sprints run
throughout the year. Significant CI cost savings achieved
Tax and pricing strategy
+
Develop and implement new tax and pricing strategy
Tax strategy developed and performing well. Transfer pricing
policy agreed and implemented
Risk management
+
Improve organisation structure on risk management and embed into the strategy
process
Risk review embedded into quarterly business reviews
Financial forecasting
+
Continue to improve cash and P&L forecasting internally
Process successfully changed to quarterly. Much improved
cost visibility. New chart of accounts launched on time and
ahead of budget
ESG
+
Implement new HS&E management system
Delivered to plan. All local policies implemented
Director
% of maximum % of salary
Total bonus
£'000
Simon Pryce
100% 150%
1,048
Jos Sclater
100% 150%
653
Pension
Pension contributions for each Executive Director are paid as a cash allowance in lieu of participation in Ultra’s DC pension plan. Simon Pryce’s cash allowance
was £100,622 which equated to 14.5% of single figure base salary, the rate having been reduced from 16% to 14% as of 1 April 2021. Jos Sclater’s cash allowance
was £32,473 which was 7.5% of base salary.
LTIP vesting for the year under review (audited)
The 2019 LTIP vested as shown below. As outlined in the Chairman’s statement and last year’s report, at the point the 2019 awards were granted, transformation
costs were classified as non-underlying and did not impact on the Company’s reported underlying profit. Reflecting the transformation agenda, Ultra has
changed the accounting convention such that transformation costs are taken above the line and therefore impact underlying profit. As in 2021, the Committee
spent time considering the impact of this change, noting that the targets at the point the awards were made were set without knowing the accounting approach
would change. As indicated in last year’s report, the Committee determined that it would be appropriate for it to exercise its discretion to adjust for these costs
in line with the approach taken for the 2018 awards.
Ultra
Annual Report
and Accounts 2021
78
Weighting
Threshold
Stretch
Outturn
% Vesting
Total Shareholder Return
Measured against the constituents of the FTSE 250 (excluding
Investment Trusts)
25% Median
Upper quartile Upper quartile
25.0%ROIC
Average ROIC calculated on an annual basis over the three-year
performance period
1
25% 15.0% 25.0% 23.6% 22.3%
Organic operating prot growth
2
25% 2.0% 5.0% 8.2% 25.0%
Organic revenue growth
2
25% 2.0% 5.0% 5.4% 25.0%
Total
97.3%
1 ROIC was defined as underlying operating profit expressed as a percentage of average invested capital (calculated as an average of the opening and closing balance sheets). Average invested capital was
calculated as net assets after adjusting for exchange rate fluctuations) adjusted for amortisation and impairment charges arising on acquired intangible assets and goodwill, and the add-back of other
non-underlying performance items impacting the balance sheet.
2 See page 146 for definition of organic measures. Growth rates are averaged over the three-year performance period. The above outturns reflect the adjustment for transformation costs and other
adjustments determined by the Remuneration Committee.
As noted in the Directors’ Remuneration Report, the Remuneration Committee was provided with independent advice and verification of the outcome of the
performance conditions above.
Share awards granted in 2021 (audited)
Annual LTIP awards were granted to Simon Pryce and Jos Sclater in 2021. Details of the awards are shown in the table below.
Scheme
Date of grant
Basis of award
Face value
£’000
1
Number of
shares
2
Vesting at
threshold
Vesting at
maximum
Performance period
Simon Pryce
LTIP 15/03/2021 100%
200% of salary 1,397 68,160
20%3 years to 31 December 2023
Jos Sclater
LTIP 15/03/2021 100%
150% of salary 653 31,875
20%3 years to 31 December 2023
1 Face value is calculated at the time of grant using the average of the previous five days’ mid market price resulting in a grant price of £20.50.
2 All awards were granted as nil cost options.
The performance conditions applying to the awards are shown below:
Performance measures
Weighting
Targets
Vesting %
Total shareholder return (TSR)
1
25%
TSR ranking of the Group against a comparator group
Below threshold Below median
0%
Threshold
Median
5%
Stretch
Upper quartile or above
25%
Return on invested capital (ROIC)
2
25%
Return on invested capital
Below threshold
<15%
0%
Threshold
15%
5%
Stretch
25%
25%
Organic operating prot growth
3
25%
Annual growth in organic operating prot
Below threshold
<4%
0%
Threshold
4%
5%
Stretch
8%
25%
Organic revenue growth
3
25%
Annual growth in organic revenue
Below threshold
<2.5%
0%
Threshold
2.5%
5%
Stretch
6%
25%
1 Measured against constituents of the FTSE 250 (excluding investment trusts). Awards vest on a straight-line basis between threshold and stretch.
2 The ROIC measure will be the average ROIC calculated on an annual basis over the three-year performance period where ROIC is calculated as underlying operating profit expressed as a percentage
of invested capital (average of opening and closing balance sheets). Invested capital is the net assets of the Group, excluding net debt and lease liability, pension obligations, tax and derivatives.
3 Growth targets are expressed as annual growth rates and averaged over the three-year period. See page 146 for definitions of organic measures. Awards vest in a straight-line basis between threshold
and stretch.
Annual Report on Remuneration
continued
Ultra
Annual Report
and Accounts 2021
79
Strategic report
Governance
Financial statements
Payments to past Directors (audited)
No payments were made to past Directors in 2021.
Executive Directors’ service contracts and external appointments
External appointments
Simon Pryce is a Non-Executive Director of Electrocomponents plc. During 2021, he earned fees of £75,025 in respect of this appointment. No other Executive
Directors held external appointments in 2021.
Service contracts
Executive Directors have rolling contracts that can be terminated by either party giving appropriate notice.
Director
Effective date of contract
Notice period
Simon Pryce
18 June 2018
12 months
Jos Sclater
9 December 2019
12 months
Statement of Directors’ shareholdings (audited)
Directors’ interests under the Ultra Electronics discretionary share plans
Director
Date of grant
Actual share
price at grant
At 31/12/20
Granted
Vested
2
Lapsed
At 31/12/21
Earliest vesting of
outstanding
awards
Simon Pryce
LTIP
15/03/2021 20.50 15/03/2024
–
68,160– –
68,16004/06/2020 16.37 10,410 17/03/2023
– – –
10,41017/03/2020 16.37 72,867 17/03/2023
– – –
72,86716/04/2019 15.26 65,366 16/04/2022
– – –
65,36602/07/2018 16.17 71,978 10,797
–
61,181–
02/07/2021Deferred bonus
15/03/2021 20.50 15/03/2024
–
16,529– –
16,52917/03/2020 16.37 9,616 17/03/2023
– – –
9,61616/04/2019 15.26 4,151 16/04/2022
– – –
4,151Jos Sclater
1
LTIP
15/03/2021 20.50 15/03/2024
–
31,875– –
3187517/03/2020 16.37 32,453 17/03/2023
– – –
3245310/12/2019 20.66 25,714 16/04/2022
– – –
25714Deferred bonus
15/03/2021 20.50 15/03/2024
–
8,588– –
8588Recruitment Award
10/12/2019 20.66 2,016
–
2,016– –
10/12/202110/12/2019 20.66 2,018 10/12/2022
– – –
2,0181 Jos Sclater joined the Group on 9 December 2019. His Recruitment Award vests in equal tranches over three years subject to continued employment at the vesting date.
2 The total value of options exercised by Simon Pryce was £2,188,731 and by Jos Sclater £69,110.
Directors’ beneficial shareholdings as of 31 December 2021
Director
Shareholding (number of
shares beneficially held) as at
31 December 2021
Simon Pryce
62,152
Jos Sclater
5,503
Martin Broadhurst
1
2,100
Geeta Gopalan
–
Victoria Hull
1,684
Ken Hunzeker
2,000
Tony Rice
15,000
Daniel Shook
2,500
1 Martin Broadhurst stepped down from the Board on 1 July 2021.
Ultra
Annual Report
and Accounts 2021
80
Annual Report on Remuneration
continued
Statement on shareholding requirements
Under our Policy, Executive Directors are required to build and maintain a shareholding equivalent to 200% of their base salary. As of 31 December 2021, Simon
Pryce had achieved the requirement. Jos Sclater had not achieved the requirement; however, the Committee considers this acceptable due to his relatively
recent hire date meaning annual awards have not vested yet.
Director
Shareholding requirement
% of base salary
Current holding
% of base salary
Requirement met
Current holding % of
base salary (including awards
unvested and subject to
continued employment
Simon Pryce
200% 283.8%
Yes
359.9%Jos Sclater
200% 40.3% No 83.0%
Directors’ interests under the All-Employee share plan (SIP)
Director
Interests as at
1 January
2021
Shares
acquired
during the
year
Interests as at
31 December
2021
Shares
acquired from
1 January
2022 to 10
March 2022
Interests as at
10 March
2022
Simon Pryce
223 80 303 15 318
Jos Sclater
80 77 157 15 172
Directors’ interests under the Save As You Earn share plan
Director
Interests as at
1 January
2021
Share options
acquired
during the
year
Interests as at
31 December
2021
Share options
acquired from
1 January
2022 to 10
March 2022
Interests as at
10 March
2022
Simon Pryce
830 221 1,051
–
1,051
Jos Sclater
–
1,109 1,109
–1,109
Total shareholder return (TSR) table and CEO remuneration
The graph below shows the TSR performance of Ultra in comparison with the FTSE 250 Index over the past 10 years. The graph shows the value over the
measurement period of £100 invested at the start of the period in Ultra and in the Index. The Committee considers the FTSE 250 to be the relevant Index
for the TSR comparison as Ultra is a member of the Index and the membership represents a broad range of UK-quoted companies.
£0
£50
£100
£150
£200
£250
£300
£350
FTSE 250
31/12/2011 31/12/2013 31/12/2015 31/12/2017 31/12/2019 31/12/2021
Ultra Electronics
This graph shows the value, by 31 December 2021, of £100 invested in Ultra on 31 December 2011, compared with the value of £100 invested in the FTSE 250
Index on the same date.
Ultra
Annual Report
and Accounts 2021
81
Strategic report
Governance
Financial statements
The table below shows the remuneration of the CEO over this period.
Director
Year ended
Total remuneration
£’000
Annual bonus %
of max. payout
LTIP % of
max. payout
S Pryce
31/12/2021 97.3%
3,893
100%S Pryce
31/12/2020 85%
3,236
99%S Pryce
31/12/2019
1,592
95%–
S Pryce
1
31/12/2018
750
71%–
D Caster
2
31/12/2018
284
– –
D Caster
3
31/12/2017
81
– –
R Sharma
4
31/12/2017
765
– –
R Sharma
31/12/2016
1,194
82%–
R Sharma
31/12/2015
1,197
88%–
R Sharma
31/12/2014
680
– –
R Sharma
31/12/2013
612
– –
R Sharma
31/12/2012
597
– –
1 CEO from 18 June 2018.
2 Executive Chair to 18 June 2018.
3 Executive Chair from 10 November 2017.
4 CEO to 10 November 2017.
Relative importance of spend on pay
The following table shows the Group’s actual spend on pay (for all employees) relative to other financial indicators:
2021
£m
2020
£m
Change
%
Staff costs
1,4
296.1
286.5 +3.4
Dividends
2
11.6
40.4 -71.3
Revenue
850.7
859.8 -1.1
Statutory profit before tax
3
82.7
103.7 -20.3
1 £1.5m (2020: £1.5m) of staff costs relate to pay for the Executive Directors. Please note that 2020 has been restated to include National Insurance costs.
2 The dividends relate to amounts payable in respect of the relevant financial year. Under the terms and conditions set out in the announcement dated 16 August 2021 (relating to the recommended cash
acquisition of Ultra by Cobham), no final 2021 dividend will be paid to shareholders while the acquisition remains conditional on obtaining UK Government approval.
3 Revenue and statutory profit before tax are included to add further context to the annual spend.
4 2020 staff costs have been restated following a review of the pension-related charges to the income statement in 2020.
Ultra
Annual Report
and Accounts 2021
82
Pay comparisons
Change in remuneration of Directors and employees
The following table illustrates the change, as a percentage in elements of the Directors’ remuneration from 2020 to 2021 and compares that to a comparator
group of employees of the Group in the UK, excluding the Directors. This group has been selected as it best reflects the remuneration environment of
the Directors.
Base salary
Taxable
benefits
Bonus
Base salary
Taxable
benefits
Bonus
2021
2020
Executive Directors
Simon Pryce
2% -9% 3% 2% -4% 29%
Jos Sclater
2% 2% 24% 0% 0% n/a
Non-Executive Directors
Tony Rice
12% n/a n/a 4% n/a n/a
Martin Broadhurst
1
-47% n/a n/a 1% n/a n/a
Geeta Gopalan
2
13% n/a n/a 2% n/a n/a
Victoria Hull
3
12% n/a n/a 10% n/a n/a
Ken Hunzeker
4,5
108% 100% n/a n/a n/a n/a
Daniel Shook
6% n/a n/a 0% n/a n/a
Comparator Group
Parent company employees
6
n/a n/a n/a n/a n/a n/a
UK employees
7
3% 3% 24% 4% 6% 42%
1 Martin Broadhurst stepped down from the Board on 1 July 2021.
2 Geeta Gopalan became Remuneration Committee Chair on 1 July 2021.
3 Victoria Hull became Senior Independent Director on 13 May 2020.
4 Ken Hunzeker joined the Board on 1 July 2020.
5 Ken Hunzeker’s taxable benefits are travel and accommodation for UK Board meetings. As there was no travel in 2020 due to Covid travel restrictions, 100% is shown rather than the formulaic calculation.
6 The Regulations require disclosure of the change in remuneration of the employees of the parent company. As the parent company has only seven senior-level employees other than the Directors, it would
not be representative to provide a percentage change in their pay.
7 As the parent company has few employees, the Remuneration Committee has decided to voluntarily disclose the percentage change in remuneration of all UK employees of the Group.
CEO pay ratio
Below is the outcome of the CEO pay ratio compared with representative UK employees utilising Option A in accordance with the Regulations. Option A was
chosen as it is the most statistically accurate. We have also voluntarily disclosed a global ratio to reflect the fact that just over half of our employees are located
outside the UK.
The calculations for the relevant representative employees have been made based on those employed at 31 December 2021. To provide the comparable
figure for bonus we have used the expected 2021 bonus although this had not been paid at the time of the calculation. Additionally, we adjusted the data
to reflect full-time equivalent salaries for those employed on a part-time basis and in so doing we assumed a 37-hour week. No elements of remuneration
have been omitted.
Method
Data set
25th
percentile
pay ratio
Median pay
ratio
75th
percentile
pay ratio
2021
Option A
UK 134:1 90:1 64:1
2021
Option A
Global 94:1 80:1 48:1
2020
Option A
UK 92:1 74:1 41:1
2020
Option A
Global 76:1 63:1 41:1
2019
Option A
UK 54:1 37:1 27:1
2019
Option A
Global 50:1 31:1 19:1
Our pay philosophy across the Group is based on six core principles including consistency, fairness, transparency, competitiveness and rewarding short- and
long-term performance. Reward is managed by reference to consistent external market benchmarks in all of our markets and individual performance is taken
account of in the individual’s pay. Eligibility for short- and long-term incentives is determined by seniority. The CEO receives a larger proportion of his reward in
variable pay and as such his total reward may vary significantly year by year depending on financial and individual performance. The Group has performed very
well in the last couple of years which has resulted in larger incentive payments. In particular, the 2019 LTIP has vested at near maximum and the share price that
has been used to estimate the value of the vested shares (£31.90) is influenced by the confirmed offer for Ultra share price which has resulted in a higher pay ratio
for 2021. The employees in the sample have typically also benefitted from this improved performance in terms of short-term incentive but their total reward is
proportionately more fixed than at risk. The Committee believes the median pay ratio is consistent with the Group’s pay philosophy and progression policies.
Annual Report on Remuneration
continued
Ultra
Annual Report
and Accounts 2021
83
Strategic report
Governance
Financial statements
The table below shows the total pay and benefits and the base salary for the employee at each quartile of the UK sample.
£
25th
percentile
50th
percentile
75th
percentile
Total pay and benefits
29,060 43,374 60,814
Salary
27,013 39,230 55,384
Statement of shareholder voting
Votes cast at the 2021 AGM to approve the 2020 Directors’ remuneration report
Directors’ remuneration report vote – 2021 AGM
Total number
of votes % of votes cast
Votes for
56,366,605
98.49%
Votes against
861,588
1.51%
Total votes cast (for and against)
57,228,193
100.00%
Votes withheld
5,965,629
Total votes cast
63,193,822
Directors’ Remuneration Policy vote – 2020 AGM
Total number
of votes % of votes cast
Votes for
50,910,945
81.51%
Votes against
11,545,822
18.49%
Total votes cast (for and against)
62,456,767
100.00%
Votes withheld
1,160,704
Total votes cast
63,617,471
Implementation of the Remuneration Policy for Executive Directors in 2022
Salary increases
Salary increases are effective from 1 April 2022. The increase for the Chief Financial Officer is at the level budgeted for the general workforce, which was 3.0%.
Executive Director salaries effective 1 April 2022 are shown below.
2022 salary
£'000
2021 salary
£'000
Increase
awarded from
1 April 2022
S Pryce
698,640 698,640
0.0%
J Sclater
448,694 435,625
3.0%
Annual bonus for 2022
The maximum bonus for the Executive Directors in 2022 will be 150% of base salary. One-third of any bonus payable will be deferred into shares for three years.
The structure of the 2022 bonus is unchanged from 2021 and will include up to 40% of the maximum for achievement of an agreed profit target, up to 45%
payable for the achievement of an agreed improvement in average working capital turn (AWCT) and up to 15% payable for the achievement of individual
strategic targets. All targets and objectives have been developed in line with performance objectives for the Group assuming that there is no acquisition.
The Committee discussed the targets for 2022 to ensure that they remain sufficiently stretching and continue to align with strategic goals. The Committee
discussed whether there should be any change to the targets, particularly to the positioning of threshold and maximum. As Ultra’s business is based on
long-term contracting arrangements, the level of stretch is considered appropriate in the current environment.
We have not disclosed actual targets as we consider these to be commercially sensitive. We will disclose them retrospectively in the 2022 report.
No bonus will be paid if the Committee considers the Group’s financial performance to be unsatisfactory or there is a negative event which, in line with its Policy,
would require the Committee to adjust the formulaic outcome.
Should the acquisition for Ultra by Cobham proceed, the portion of the 2022 bonus relating to the period from the start of 2022 until the date of the acquisition
will be dealt with by the Remuneration Committee in accordance with the terms of the Cooperation Agreement and exercising the discretion afforded to it.
Ultra
Annual Report
and Accounts 2021
84
Long-term awards to be granted in 2022
The Committee intends to grant an annual LTIP award if the acquisition of Ultra has not been Court Sanctioned by 23 March 2022, which is permissible under
the terms of the Cooperation Agreement. Should the acquisition of Ultra by Cobham proceed, the Remuneration Committee will determine the extent of vesting
in accordance with the terms of the Cooperation Agreement and exercising the discretion afforded to it. Awards to the CEO and CFO will be 200% and 150%
of base salary respectively, which is consistent with the prior year. The measures and targets that will apply to the awards are shown in the table below. The
Committee considered whether to retain the same targets and measures and concluded that with so much uncertainty over the acquisition and in external
markets, this was the best course of action. Independent advice was taken as well as input on industry growth and internal modelling to support this. Share
awards will be made at the appropriate time determined by the Remuneration Committee and based on the average closing share price for the five dealing
days preceding the date of grant.
Performance measures
Weighting
Targets
Vesting %
Total shareholder return (TSR)
1
25%
TSR ranking of the Group against a comparator group
Below threshold Below median
0%
Threshold
Median
5%
Stretch
Upper quartile or above
25%
Return on invested capital (ROIC)
2
25%
Return on invested capital
Below threshold
<15%
0%
Threshold
15%
5%
Stretch
25%
25%
Organic operating prot growth
3
25%
Annual growth in organic operating prot
Below threshold
<4%
0%
Threshold
4%
5%
Stretch
8%
25%
Organic revenue growth
3
25%
Annual growth in organic revenue
Below threshold
<2.5%
0%
Threshold
2.5%
5%
Stretch
6%
25%
1 Measured against constituents of the FTSE 250 (excluding investment trusts). Awards vest on a straight-line basis between threshold and stretch.
2 The ROIC measure will be the average ROIC calculated on an annual basis over the three-year performance period where ROIC is calculated as underlying operating profit expressed as a percentage
of invested capital (average of opening and closing balance sheets). Invested capital is the net assets of the Group, excluding net debt and lease liability, pension obligations, tax and derivatives.
3 Growth targets are expressed as annual growth rates and averaged over the three-year period. See page 146 for definitions of organic measures. Awards vest in a straight-line basis between threshold
and stretch.
Pension
As mentioned in the Chair’s statement, the Committee has decided not to reduce the CEO’s annual cash allowance further in 2022. It had been the Committee’s
intention to reduce the current 14% of base salary by 2% in 2022 and by a further 2% in 2023; however, this has been delayed pending the outcome of the
acquisition of Ultra by Cobham. The CFO has a pension contribution rate of 7.5% which is aligned with the rate currently available for the majority of the
UK workforce.
Non-Executive Directors
Fee levels with effect from 1 April 2022 which are unchanged from 2021 are as follows:
Fees £’000
Chair
235
Non-Executive Director (base fee)
59
Senior Independent Director (additional fee)
10
Committee Chair (additional fee)
10
All Non-Executive Directors were appointed under letters of appointment. All Non-Executive Directors are subject to annual re-appointment at the Company’s
Annual General Meeting:
Letter of appointment end date
Tony Rice
AGM 2022
Victoria Hull
27/04/2023
Geeta Gopalan
27/04/2023
Daniel Shook
01/09/2022
Ken Hunzeker
01/07/2023
Annual Report on Remuneration
continued
Ultra
Annual Report
and Accounts 2021
85
Strategic report
Governance
Financial statements
The role and composition of the Remuneration Committee
Role
The Remuneration Committee is responsible for recommending to the Board the Policy for Executive Directors and for setting the remuneration package for
each Executive Director. The Committee also has input into the remuneration arrangements of the Executive Team in conjunction with the Chief Executive and
has oversight of the Policy and remuneration packages for other senior leaders, in particular the variable elements. The Committee ensures that remuneration
conditions for the senior team and the wider workforce are clear and consistent.
The Committee aims to align the Policy with the overall strategy of the Group, ensuring that remuneration reflects the interests of our shareholders and other
stakeholders governed by the Policy and our philosophy and values.
During the year, the Committee met six times (three of which were scheduled) and covered matters including:
Principal activities of the Committee
+
Evaluated the performance conditions in all executive incentive plans
+
Reviewed the annual gender pay gap data
+
Reviewed the outcome of the CEO pay ratio and other comparison statistics
+
Considered and agreed the annual pay increase for the CEO, CFO and Executive Team
+
Reviewed the outcome of salary bonus and long-term incentives for the senior management group as well as nominations for awards
+
Considered the impact of change of control on in-flight share incentives, both discretionary and all-employee plans and how the Committee would
determine vesting, including consideration as to whether or not exercise of discretion might be appropriate
+
Discussed issues around recruitment and retention and oversaw the approach and terms of retention initiatives across the Group in response to the
Offer for Ultra
+
Agreed the approach and strategic objectives for the Executive Directors including specific ESG-focused objectives
Composition
Martin Broadhurst was Chair of the Committee until 1 July 2021 when the role was assumed by Geeta Gopalan. Daniel Shook, Victoria Hull and Ken Hunzeker
were members throughout the year. The General Counsel and Company Secretary is the Secretary to the Committee. The Chair and Chief Executive attend
meetings by invitation except where matters directly relating to their own remuneration are discussed. Additionally, the Committee may receive presentations
on specific topics from the Chief Human Resources Officer, Group Reward Director, Chief Financial Officer and the Independent Adviser.
Advice
During the year, the Committee received independent advice on executive remuneration and share schemes from the executive compensation practice at
Alvarez & Marsal Taxand LLP. A&M are signatories to the Code of Conduct of the Remuneration Consultants Group. A&M received fees of £72,472 (excluding
VAT) for advice to the Committee. In addition, A&M provided advice on taxation matters relating to all-employee share schemes totalling £25,797 (excluding
VAT), which is also considered to be independent.
2022 Annual General Meeting
The Committee encourages shareholders to vote in favour of the Directors’ remuneration report at the 2022 AGM. The Directors’ remuneration report was
approved by the Board on 10 March 2022 and signed on its behalf by:
Geeta Gopalan
Chair of the Remuneration Committee
Ultra
Annual Report
and Accounts 2021
86
Directors’ report
For the year ended 31 December 2021
The Directors of the Company present their report
statements for the year ended 31 December 2021.
Results and dividends
The Group results for the year ended
31 December 2021 are set out on page 3
of the strategic report.
An interim dividend of 16.2 pence per share (2020:
15.4 pence per share) was paid to shareholders
on the register of members as at 27 August 2021.
An additional interim dividend of 39.2 pence per
share was also paid in 2020 (which was equivalent
withdrawn as a precautionary measure due to
Covid-19) was paid on 17 September 2021. In
view of the terms and conditions set out in the
announcement dated 16 August 2021 (relating
to the recommended cash acquisition of Ultra
dividend (2020: 41.5 pence per share) will be paid
to shareholders while the acquisition (see page 2)
remains pending.
Research and development
The Directors are committed to maintaining
expenditure. During the year a total of £150.0m
(2020: £144.2m) was spent, of which £116.5m
(2020: £112.4m) was funded by customers
and £33.5m (2020: £31.8m) by Ultra.
Political donations
Neither the Company nor any of its subsidiaries
have made any political donations during the
year (2020: £nil).
Directors and re-election
Details of the Directors serving during the year
are set out on pages 52-53 of the corporate
governance report.
If the proposed acquisition by Cobham has not
then completed and the Company remains
publicly listed Geeta Gopalan, Victoria Hull, Ken
Hunzeker, Simon Pryce, Tony Rice, Jos Sclater and
Daniel Shook will all stand for re-election at the
Company’s Annual General Meeting (AGM) 2022.
See biographies on pages 52-53.
Directors and their interests
The Directors who served throughout the year
and to the date of signing of this Report, and
their interests in the shares and share options of
Ultra at the end of the year and as at 10 March
2022 are shown in the Annual Report on
Remuneration (see pages 79 to 80).
Post balance sheet events
The Group completed the sale of some legacy
aerospace product lines from the Critical
Detection & Control SBU, realising net cash
proceeds of £34.8m on 24 January 2022
(see note 35).
Directors’ indemnities
In accordance with our Articles of Association
and to the extent permitted by law, Directors
are granted an indemnity from the Company
in respect of liability incurred as a result of their
appointment to the Board. In addition, the
liability insurance policy. Neither the indemnity
provided by the Company nor the insurance policy
provides cover in the event that a Director is
proven to have acted fraudulently or dishonestly.
Directors’ conicts of interest
The Company has in place procedures for
interest. The Company’s Articles of Association
also contain provisions to allow the Directors to
so that a Director is not in breach of his or her duty
under UK company law. If Directors become aware
should notify the Board in accordance with the
Company’s Articles of Association. Directors have
a continuing duty to update any changes to their
the quorum and vote in respect of any matters in
Independent advice
All Directors have access to the advice of the
Group General Counsel and Company Secretary
and, in appropriate circumstances, may obtain
independent professional advice at the Company’s
expense. No such requests were made in 2021.
Branches
The Company and its subsidiaries have
established branches, where appropriate,
in a number of countries outside the UK.
Their results are, however, not material
Contractual arrangements
The Group contracts with a large number of
customers in order to sell its wide portfolio
of specialist capabilities to a broad range of
customers around the world. The Group’s largest
customers are the US Department of Defense
and the UK Ministry of Defence. A wide range
of separate contracts are entered into with
teams. The Group also contracts with numerous
suppliers across the world and manages
these arrangements to ensure that it is not
over-dependent on a single supplier. This is
normally achieved through dual sourcing of
specialist components.
Purchase of own shares
During the year Ultra purchased nil ordinary
shares (2020: nil). Further information regarding
the Company’s share capital and share schemes
statements.
Annual General Meeting (AGM)
A separate circular providing the Notice of Annual
General Meeting and details of the resolutions to
be put to the meeting will be sent to shareholders
in due course. All Directors will submit themselves
for election or re-election at the AGM.
Substantial shareholdings
As at 9 February 2022, being the latest practicable
date prior to the approval of this report, Ultra had
shareholders of Ultra:
Shareholder
9 February 2022
Shares
%
Invested
capital
Cum%
Invested
capital
Goldman Sachs
collateral account
3,480,485 4.87 4.87
Aviva Investors
3,379,025 4.73 9.60
Vanguard Group
3,207,833 4.49 14.10
UBS collateral
account
3,173,314 4.44 18.54
Bank of New York
stocklending
collateral account
2,851,686 3.99 22.53
Blackrock
2,848,113 3.99 26.52
Invesco
2,587,513 3.62 30.14
Santander
collateral account
2,500,000 3.50 33.64
Société Générale
collateral account
2,158,791 3.02 36.67
MFS Investment
Management
2,145,494 3.00 39.67
Capital structure
Details of the authorised and issued share
capital, together with details of the movements
in Ultra’s issued share capital during the year,
are shown in note 26. Ultra has one class of
income and each share carries the right to
one vote at general meetings of Ultra. There
a holding or on the transfer of shares, which are
both governed by the general provisions of the
Company’s Articles of Association and prevailing
legislation. No person has any special rights
of control over Ultra’s share capital and all
issued shares are fully paid. With regard to
the appointment and replacement of Directors,
Ultra is governed by its Articles of Association,
the UK Corporate Governance Code, the Act
and related legislation. The Articles of Association
themselves may be amended by special resolution
of the shareholders. The Directors operate
in accordance with a Schedule of Matters
Reserved for the Board, which is available
from the Investors’ section on the Group
website (ultra.group).
Ultra
Annual Report
and Accounts 2021
87
Strategic report
Governance
Financial statements
Additional disclosure requirements
The following information which is required to be included in the Directors’ report and forms part of this report may be found elsewhere in the Annual Report
as follows.
Information
Location
Business review Strategic report: pages 21-23
Future developments
Strategic report: page 11
Corporate social responsibility
Strategic report: pages 24-41
Workforce engagement
Strategic report: page 12 and Governance report: page 64
Customer and supplier relationships
Strategic report: page 13
The environment and greenhouse gas emissions
Strategic report: pages 26-31
Principal risks and uncertainties facing the Group Strategic report: pages 42-47
NON-FINANCIAL INFORMATION STATEMENT
The Group has complied with the requirements of section 414CB of the Companies Act 2006 by
Reporting requirement Our policies and standards
Our commentary
Environmental matters
+
Environmental policy
Protecting our planet
– pages 26-31
Employees
+
Code of Conduct
+
Health and safety policy
Supporting our people – page 39
Supporting our people
– pages 36-37
Human rights
+
Human rights policy
+
+
+
+
Doing the right thing – pages 40-41
Social responsibility
+
Corporate Social
+
A Positive Force: Our
commitment to a sustainable
future
A Positive Force – pages 24-41
Anti-corruption and bribery
+
Anti-bribery and corruption
policy
Doing the right thing – page 39
Audit Committee report – page 71
Principal risks and impact
on business activity
Principal risks and uncertainties
– pages 42-47
Business model
Our business model – pages 16-17
Non-nancial key
performance indicators
Key performance indicators
– pages 18-19
Auditor
Each of the Directors at the date of approval
(1) so far as the Director is aware, there is no
relevant audit information of which Ultra’s
auditor is unaware, and
(2) the Director has taken all the steps that he/
she ought to have taken as a Director to
make himself/herself aware of any relevant
audit information and to establish that Ultra’s
auditor is aware of that information
interpreted in accordance with the provisions
of section 418 of the Act.
This Directors’ report was approved by the
Board on 23 March 2022 and signed on its
behalf by:
Louise Ruppel
General Counsel and Company Secretary
35 Portman Square London
W1H 6LR
Registered number: 02830397
Ultra
Annual Report
and Accounts 2021
88
Directors’ responsibility
statement
The Directors are responsible for preparing the
accordance with applicable law and regulations.
Company law requires the Directors to prepare
that law, the Directors are required to prepare the
IFRSs as adopted by the UK and Article 4 of the
International Accounting Standards Regulation
(IAS) and have elected to prepare the Company’s
Generally Accepted Accounting Practice (UK
Accounting Standards and applicable law)
including FRS 101. Under company law, the
Directors must not approve the accounts unless
Company, as well as the undertakings included in
the consolidation for that period.
the Directors are required to:
+
Select suitable accounting policies and then
apply them consistently
+
Make judgements and accounting estimates
that are reasonable and prudent
+
State whether applicable UK Accounting
Standards have been followed subject to any
material departures disclosed and explained
+
concern basis unless it is inappropriate to
presume that the Company will not continue
in business
International Accounting Standard 1 requires
that Directors:
+
Properly select and apply accounting policies
+
Present information, including accounting
policies, in a manner that provides relevant,
reliable, comparable and understandable
information
+
Provide additional disclosures, when compliance
impact of particular transactions, other events
+
Make an assessment of the Company’s ability
to continue as a going concern
The Directors are responsible for keeping
show and explain the Company’s transactions and
disclose with reasonable accuracy at any time the
comply with the Companies Act 2006. They are
also responsible for safeguarding the assets of the
Company and for taking reasonable steps for the
prevention and detection of fraud and other
irregularities.
The Directors are responsible for the maintenance
information included on the Group’s website
www.ultra.group. Legislation in the UK governing
jurisdictions.
taken as a whole:
+
framework, give a true and fair view of the
or loss of the Company and the undertakings
included in the consolidation taken as a whole.
+
The strategic report includes a fair review of the
development and performance of the business
and the position of the Company and the
undertakings included in the consolidation,
together with a description of the principal
risks and uncertainties that they face.
+
taken as a whole, are fair, balanced and
understandable and provide the information
necessary for shareholders to assess the
Company’s position, performance, business
model and strategy.
By order of the Board
Louise Ruppel
General Counsel and Company Secretary
Directors’ report
continued
Ultra
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and Accounts 2021
89
Strategic report
Governance
Financial statements
Independent auditor’s report
To the members of Ultra Electronics Holdings plc
1. Opinion
In our opinion:
+
+
+
including Financial Reporting Standard 101 “Reduced Disclosure Framework”; and
+
+
the consolidated income statement;
+
the consolidated statement of comprehensive income;
+
the consolidated and parent company balance sheets;
+
the consolidated and parent company statements of changes in equity;
+
+
the related notes 1 to 51; and
+
the statement of accounting policies.
is applicable law and United Kingdom Accounting Standards, including FRS 101 “Reduced Disclosure Framework” (United Kingdom Generally Accepted
Accounting Practice).
2. Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards
responsibilities in accordance with these requirements. The non-audit services provided to the Group and parent company for the year are disclosed
or the parent company.
3. Summary of our audit approach
Key audit matters
+
+
Valuation of goodwill.
The risk level of these key audit matters is considered to be unchanged from prior periods.
Materiality
Scoping
We focused our Group audit scope primarily on the audit work at 13 components. Ten of these were subject
the extent of our testing was based on our assessment of the risks of material misstatement. These
Signicant changes in our approach
Pensions Liabilities to be a key audit matter in the current year due to the relative lack of complexity
and judgement in this area.
Ultra
Annual Report
and Accounts 2021
90
Independent auditor’s report
To the members of Ultra Electronics Holdings plc
continued
4. Conclusions relating to going concern
statements is appropriate.
Our evaluation of the Directors’ assessment of the Group’s and parent company’s ability to continue to adopt the going concern basis of accounting included:
+
Obtaining an understanding of relevant controls over management’s going concern models, including the review of the inputs and assumptions used in
those models;
+
Testing the accuracy of management’s models, including agreement to the most recent Board approved budgets and forecasts;
+
Challenging the key assumptions of these forecasts by:
–
Reading analyst reports, industry data and other external information and comparing these with management’s estimates;
–
Comparing forecast revenue with the Group’s order book and historical performance;
–
Evaluating the historical accuracy of forecasts prepared by management;
–
Assessing the sensitivity of the headroom and management’s forecasts;
–
Considering the impact of climate change on management’s forecasts;
+
Assessing the credit facility headroom and covenant compliance through review of original agreements and evaluation against both the year-end position
and forecasts; and
+
statements are authorised for issue.
In relation to the reporting on how the Group has applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.
5. Key audit matters
a separate opinion on these matters.
Ultra
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and Accounts 2021
91
Strategic report
Governance
Financial statements
5. Key audit matters
continued
5.1. Revenue and prot recognition
Key audit matter description
The Group recognised revenue of £850.7m in 2021 (2020: £859.8m), with sales recognised on both an
over-time (£543.5m, 2020: £503.7m) and on a point-in-time (£307.2m, 2020: £356.1m) basis in accordance
with ‘IFRS 15: Revenue from Contracts with Customers’.
to recognise in any single accounting period requires the exercise of management judgement. Within the
Group’s contract portfolio there are a number of programmes where the estimates required in reaching
the associated risks.
we undertook a contract risk assessment process across the Group, based on analysis of potential
contractual arrangements, unusual contract terms, and those that might have higher levels of
judgement associated with the risk of schedule delivery and/or technical complexity. In addition,
statements, including any potential climate-related risks.
operational information, and review of external information about the market and geo-political conditions.
We also leveraged our understanding of the business, and the results of prior audits.
degree of management judgement required in estimating the outturn margin position. These are:
+
US Navy Sonobuoys;
+
Hull Mounted Sonar 2150; and
+
Underwater Warfare Suite Upgrade (UWSU).
judgements considered); and page 108 (note 3 of the Financial Statements).
How the scope of our audit responded
to the key audit matter
We obtained an understanding of the relevant controls in relation to the long-term contract accounting
process.
To gain assurance over the contract judgements and estimates made, our work included:
+
Testing the underlying calculations used in the contract assessments for accuracy and completeness,
including the estimated costs to complete the contract alongside associated contingencies;
+
actual costs incurred to date when compared to the remaining work to be performed under the contract;
+
Inspecting contract risk registers to provide evidence over the judgement taken when providing for the
cost of mitigating technical risks and meeting future milestones;
+
Validating contract value and associated judgements made by management with reference to signed
contract terms and latest project status reports;
+
Making inquiries of contract engineers and project managers with regard to contract progress, future
risks and the existence of any unusual contract terms or side agreements separate to the original contract;
+
Testing a sample of billings and costs incurred to date to third party data;
+
Assessing the reliability of management estimates through consideration of the historical accuracy
of prior period management estimates and understanding the reasons for movements or changes;
+
Considering whether there were any indicators of management override of controls or bias in arriving
at the reported position; and
+
Considering any potential impact of climate change on the contracts.
Key observations
We consider the costs to complete on long-term contracts and therefore the revenue and margin
recognised to be appropriate.
Ultra
Annual Report
and Accounts 2021
92
5. Key audit matters
continued
5.2. Valuation of goodwill
Key audit matter description
The Group held £362.7m (2020: £363.0m) of goodwill arising on its acquisitions as at 31 December 2021.
utilised, leading to an overstatement of the value in use of the associated assets.
In planning our audit, we determined there to be a heightened level of impairment risk in relation to the
carrying value of goodwill associated with the Energy cash generating unit (CGU). This was due to the high
growth rate forecast in the strategic plan despite the current year negative performance against budget.
This CGU had goodwill of £18m at 31 December 2021. Through our risk assessment we determined that
judgements considered); and page 114 (note 13 of the Financial Statements).
How the scope of our audit responded
to the key audit matter
We obtained an understanding of the relevant controls over the monitoring and valuation of the carrying
value of goodwill. Our procedures performed included:
+
Challenging the 5-year growth rate assumptions in the strategic plan period with reference to market,
industry and economic data, considering any contradictory evidence;
+
Challenging forecast performance based on recent CGU performance and the assessment of
management’s historical forecasting accuracy;
+
Testing the long-term growth rate assumption with reference to the long-term economic outlook, current
contracts, and benchmarking it against the rates used by peers;
+
With the involvement of our valuation specialists, benchmarking the discount rate against independently
available data and performing peer group analysis;
+
Testing the integrity of management’s model to determine whether it was both arithmetically accurate
and had been prepared on a basis consistent with management’s assumptions;
+
Challenging the appropriateness of management’s sensitivities to determine the completeness of risks
and opportunities modelled;
+
Assessing additional sensitised scenarios based on our own interpretation of reasonable worst-case
scenarios, including both (i) the loss of a key customer, and (ii) a severe scenario of no growth from FY21
actuals; and
+
strategic plan.
Key observations
impairment has been recognised.
6. Our application of materiality
6.1. Materiality
of our work.
Materiality
£5.9m (2020: £5.7m) £2.7m (2020: £2.3m)
Basis for determining materiality
Parent company materiality equates to 0.5%
(2020: 0.4%) of the parent company net assets.
Rationale for the benchmark applied
be the key performance measure for the Group
therefore an appropriate basis on which to
determine materiality.
The parent company is non-trading, and we
therefore consider that net assets is the most
appropriate metric to determine materiality.
Independent auditor’s report
To the members of Ultra Electronics Holdings plc
continued
Ultra
Annual Report
and Accounts 2021
93
Strategic report
Governance
Financial statements
Underlying PBT
Underlying PBT
£116.6m
Group materiality
Group materiality £5.9m
Component performance
materiality range £1.7m to £2.1m
Audit Committee reporting
threshold £0.295m
6.2. Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected misstatements exceed
Performance materiality
65% (2020: 70%) of Group materiality
65% (2020: 70%) of parent company materiality
Basis and rationale for determining
performance materiality
In determining performance materiality, we considered the following factors:
+
The impact of the planned acquisition of the Group on the level of risk;
+
Our past experience of the audit and our risk assessment, including our assessment of the Group’s
overall control environment;
+
The lack of changes to the business and macroeconomic environment in the period, and the level
of stability within the Group’s management team; and
+
The relatively low level of uncorrected and corrected misstatements in prior periods, and
6.3. Error reporting threshold
7. An overview of the scope of our audit
7.1. Identication and scoping of components
Our Group scoping was performed taking account of the following considerations:
Following a restructure, the Group is divided into 20 operating components (2020: 25) spread predominantly across four key territories – the UK, USA, Canada
and Australia. Each component sits within one of three operating segments, with central oversight provided from management located in the UK and all results
are consolidated at the Group level.
Ultra
Annual Report
and Accounts 2021
94
7. An overview of the scope of our audit
continued
Revenue
Full audit scope
65%
21%
Review at Group level
14%
Prot before tax
Full audit scope
74%
8%
Review at Group level
18%
7.2. Our consideration of the control environment
In the current year our controls approach was principally designed to inform our risk assessment and we did not place reliance on the controls for the purposes
of our testing. As part of this work, we also assessed relevant general IT controls at component level, and in respect of the Group’s consolidation system.
Management is in the process of implementing these improvements.
7.3. Our consideration of climate-related risks
As highlighted in management’s Task Force on Climate-related Financial Disclosures (TCFD) on pages 29 to 31, the Group is exposed to the impacts of climate
change on its business and operations. We obtained management’s climate-related risk assessment to understand the process of identifying climate-related
programmes and goodwill impairment, as described in the key audit matters in sections 5.1 and 5.2 above, however the Group does not consider climate
change to represent a principal risk as discussed in more detail on page 29 of the Annual Report.
Our consideration of climate-related risks also extended to our work in respect of going concern and long-term viability.
and our knowledge obtained in performing the audit.
7.4. Working with other auditors
Each component in scope was subject to an audit performance materiality level between £1.7m and £2.1m (2020: £1.6m and £2.2m). This audit work on
to be performed and timing of their reporting to us. We also provided direction on enquiries made by the component auditors through online and telephone
procedures to be performed were issued where relevant.
Travel restrictions imposed as a result of Covid-19 meant that visits to business unit sites in the UK and overseas have continued to be limited during 2021.
audit working papers.
Independent auditor’s report
To the members of Ultra Electronics Holdings plc
continued
Ultra
Annual Report
and Accounts 2021
95
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Governance
Financial statements
8. Other information
statements and our auditor’s report thereon. The Directors are responsible for the other information
information and, except to the extent otherwise explicitly stated in our report, we do not express any
form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other
in the course of the audit, or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact.
We have nothing to report in this regard.
9. Responsibilities of Directors
statements that are free from material misstatement, whether due to fraud or error.
disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the
Group or the parent company or to cease operations, or have no realistic alternative but to do so.
to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
This description forms part of our auditor’s report.
11. Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities,
including fraud is detailed below.
11.1. Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, we
considered the following:
+
The nature of the industry and sector, control environment and business performance including the design of the Group’s remuneration policies, key drivers
for Directors’ remuneration, bonus levels and performance targets;
+
+
The latest information regarding the regulatory investigations into business conduct within the Group, as discussed by management on page 49 and note 33;
+
–
Identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance;
–
Detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud;
–
The internal controls established to mitigate risks of fraud or non-compliance with laws and regulations; and
+
We also obtained an understanding of the legal and regulatory frameworks that the Group operates in, focusing on provisions of those laws and regulations
this context included the UK Companies Act, Listing Rules, pension and taxation legislation.
be fundamental to the Group’s ability to operate or to avoid a material penalty including in respect of export controls (International Trade Law and International
Ultra
Annual Report
and Accounts 2021
96
11. Extent to which the audit was considered capable of detecting irregularities, including
fraud
continued
11.2. Audit response to risks identied
+
+
Enquiring of management, the Audit Committee and external legal counsel concerning actual and potential litigation and claims;
+
Performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud;
+
Reading minutes of meetings of those charged with governance, reviewing internal audit reports and reviewing correspondence with relevant regulatory
authorities; and
+
In addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other adjustments; assessing
transactions that are unusual or outside the normal course of business.
Report on other legal and regulatory requirements
12. Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
+
+
The strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and the parent company and their environment obtained in the course of the audit, we have
13. Corporate Governance Statement
The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially
+
set out on page 46;
+
The Directors’ explanation as to its assessment of the Group’s prospects, the period this assessment covers and why the period is appropriate, set out on
page 47;
+
The Directors’ statement on fair, balanced and understandable set out on page 71;
+
+
+
The section describing the work of the Audit Committee, set out on page 67.
Independent auditor’s report
To the members of Ultra Electronics Holdings plc
continued
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and Accounts 2021
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Financial statements
14. Matters on which we are required to report by exception
14.1. Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
+
We have not received all the information and explanations we require for our audit; or
+
Adequate accounting records have not been kept by the parent company, or returns adequate
for our audit have not been received from branches not visited by us; or
+
and returns.
We have nothing to report in respect
of these matters.
14.2. Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures
of Directors’ remuneration have not been made or the part of the Directors’ Remuneration report
to be audited is not in agreement with the accounting records and returns.
We have nothing to report in respect
of these matters.
15. Other matters which we are required to address
15.1. Auditor tenure
15.2. Consistency of the audit report with the additional report to the Audit Committee
Our audit opinion is consistent with the additional report to the Audit Committee we are required to provide in accordance with ISAs (UK).
16. Use of our report
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body,
for our audit work, for this report, or for the opinions we have formed.
Jon Thomson FCA (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, UK
23 March 2022
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98
Note
2021
£m
2020
£m
Revenue 3 850.7 859.8
Cost of sales
(597.3 )
(609.0 )
Gross prot 253.4 250.8
Other operating income 4 6.5 0.9
Administrative expenses
(138.9 )
(139.5 )
Other operating expenses 5
(1.2 )
(1.5 )
Acquisition and disposal related costs
2
(7.8 )
(1.1 )
2
(6.1 )
(3.3 )
Operating prot
6 105.9 106.3
(Loss)/gain on disposals
30 5.6
(2.4 )
Investment income 8 0.1 3.7
Finance costs 9
(20.9 )
(11.9 )
Prot before tax 82.7 103.7
Tax
10 19.9 )
(15.8 )
(Prot for the year 66.9 83.8
Attributable to:
Owners of the Company 66.9 83.8
Non-controlling interests – –
Earnings per ordinary share (pence)
Basic
12 93.8 118.0
Diluted
12 93.5 117.7
The accompanying notes are an integral part of this consolidated income statement. All results are derived from continuing operations.
Consolidated income statement
For the year ended 31 December 2021
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Financial statements
Note
2021
£m
2020
£m
Prot for the year 66.9 83.8
Items that will not be reclassied to prot or loss:
29 25.7 (9.3 )
10 2.9
(3.5 )
Total items that will not be reclassied to prot or loss 22.2
(6.4 )
Items that are or may be reclassied to prot or loss:
3.5
(11.2 )
(Loss)/gain on loans used in net investment hedges
(0.3 ) 1.5
Total items that are or may be reclassied to prot or loss 3.2
(9.7 )
Other comprehensive income/(expense) for the year 25.4
(16.1 )
Total comprehensive income for the year 92.3 67.7
Attributable to:
Owners of the Company 92.3 67.7
Non-controlling interests – –
The accompanying notes are an integral part of this consolidated statement of comprehensive income.
Consolidated statement of comprehensive income
For the year ended 31 December 2021
Ultra
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and Accounts 2021
100
Note
2021
£m
2020
£m
Non-current assets
Goodwill
13 362.7 363.0
Other intangible assets
14 68.9 82.2
Property, plant and equipment
15 73.4 66.6
Leased assets
16 35.9 33.6
Deferred tax assets
24 14.7 13.6
Derivative nancial instruments
22 1.0 2.1
Trade and other receivables
19 13.5 12.9
Current assets
Inventories
17 92.9 103.6
Trade and other receivables
19 207.6 188.5
Current tax assets 6.6 8.8
Cash and cash equivalents
22 138.8 114.4
Derivative nancial instruments
22 1.4 5.8
Assets classied as held for sale –
30 6.8
Total assets 1,024.2 995.1
Current liabilities
Trade and other payables
20 199.3 )
(215.7 )
(Current tax liabilities
(5.3 )
(5.9 )
Derivative nancial instruments
22 0.2 )
(1.1 )
(Borrowings
21 38.3 )
(12.1 )
(Liabilities classied as held for sale –
30
(1.2 )
Short-term provisions
25 19.6 )
(23.3 )
((258.7 )
(263.3 )
Non-current liabilities
Retirement benet obligations
29
(34.8 )
(73.1 )
Other payables
20 12.0 )
(11.4 )
(Deferred tax liabilities
24 15.0 )
(21.5 )
(Derivative nancial instruments
22 0.1 )
(1.5 )
(Borrowings
21
(166.7 )
(161.9 )
Long-term provisions
25 5.0 )
(2.8 )
((238.7 )
(267.1 )
Total liabilities
(497.4 )
(530.4 )
Net assets 526.8 464.7
Equity
Share capital
26 3.6 3.6
Share premium account 208.1 205.5
Capital redemption reserve 0.4 0.4
Reserve for own shares
(0.3 )
(1.4 )
Translation reserve 35.7 32.5
Retained earnings 279.3 224.1
Equity attributable to owners of the Company 526.8 464.7
Non-controlling interests – –
Total equity 526.8 464.7
The nancial statements of Ultra Electronics Holdings plc , registered number 02830397, were approved by the Board of Directors and authorised for issue
on 23 March 2022. The accompanying notes are an integral part of this consolidated balance sheet.
On behalf of the Board,
S. PRYCE
, Chief Executive Ocer
J. SCLATER
, Chief Financial Ocer
Consolidated balance sheet
As at 31 December 2021
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Financial statements
Note
2021
£m
2020
£m
Net cash ow from operating activities
27 121.5 130.0
Investing activities
Interest received 0.1 0.3
Purchase of property, plant and equipment
(22.2 )
(13.4 )
Proceeds from disposal of property, plant and equipment 2.1 0.2
Expenditure on product development and other intangibles
(2.5 )
(8.7 )
Disposal of subsidiary undertakings
30 1.2 5.3
Net cash used in investing activities
(21.3 )
(16.3 )
Financing activities
Equity-settled employee share schemes 2.6 2.3
Disposal of own shares 1.6 –
Dividends paid
(41.1 )
(38.7 )
Dividends paid to non-controlling interest –
(0.1 )
Repayments of borrowings
(70.0 )
(76.2 )
Proceeds from borrowings 70.0 11.1
Principal payment on leases
(8.3 )
(9.0 )
Net cash used in nancing activities
(45.2 )
(110.6 )
Net increase in cash and cash equivalents
27 55.0 3.1
Net cash and cash equivalents and bank overdrafts at beginning of year
27 84.1 82.2
(0.4 )
(1.2 )
Net cash and cash equivalents and bank overdrafts at end of year
27 138.7 84.1
Bank overdrafts are netted with cash and cash equivalents because they form an integral part of the Group’s cash management within the cash pooling
For the year ended 31 December 2021
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102
Equity attributable to equity holders of the parent
Share
capital
£m
Share
premium
account
£m
Capital
redemption
reserve
£m
Reserve for
own shares
£m
Translation
reserve
£m
Retained
earnings
£m
Non-
controlling
interest
£m
Total
equity
£m
Balance at 1 January 2020 3.5 203.2 0.4 (1.4 ) 42.2 182.6 0.1 430.6
– – – – – 83.8 – 83.8
Other comprehensive expense for the year – – – – –
(9.7 ) (6.4 )
(16.1 )
Total comprehensive income for the year – – – – – 67.7
(9.7 ) 77.4
Equity-settled employee share schemes 0.1 2.3 – – – 2.6 – 5.0
Tax on share-based payment transactions – – – – – 0.2 – 0.2
Non-controlling interest distribution – – – – – –
(0.1 ) (0.1 )
Dividend to shareholders – – – – – –
(38.7 )
(38.7 )
Balance at 31 December 2020 3.6 205.5 0.4 (1.4 ) 32.5 224.1 – 464.7
– – – – – 66.9 – 66.9
Other comprehensive income for the year – – – – 3.2 22.2 – 25.4
Total comprehensive income for the year – – – – 3.2 89.1 – 92.3
Disposal of own shares – – – 1.1 – 0.5 – 1.6
Equity-settled employee share schemes – 2.6 – – – 5.9 – 8.5
Tax on share-based payment transactions – – – – – 0.8 – 0.8
Dividend to shareholders – – – – – –
(41.1 )
(41.1 )
Balance at 31 December 2021 3.6 208.1 0.4 (0.3 ) 35.7 279.3 – 526.8
Consolidated statement of changes in equity
For the year ended 31 December 2021
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Financial statements
1 Segment information
For management purposes, the Group is organised into three operating segments: Maritime, Intelligence & Communications and Critical Detection & Control.
The operating segments are consistent with the internal reporting as reviewed by the CEO who is deemed to be the Chief Operating Decision-Maker. See the
Business Unit reviews on pages 21-23 for further information.
2021
2020
External
revenue
£m
Inter-
segment
£m
Total
£m
External
revenue
£m
Inter-
£m
Total
£m
Revenue
Maritime
395.4 0.3 395.7
391.8 0.8 392.6
Intelligence & Communications
241.3 0.2 241.5
241.0 0.6 241.6
Critical Detection & Control
214.0 0.3 214.3
227.0 0.9 227.9
Eliminations
–
(0.8) (0.8)
–
(2.3) (2.3)
Consolidated revenue
850.7
–
850.7859.8
–
859.8All inter-segment trading is at arm’s length.
2021
Maritime
£m
Intelligence &
Communications
£m
Critical
Detection &
Control
£m
Unallocated
£m
Total
£m
Underlying operating prot
59.4 37.9 32.3
–
129.6Amortisation of intangibles arising on acquisition
(0.4) (7.0) (2.4)
–
(9.8)
(see note 2)
– – –
(6.1) (6.1)
Acquisition and disposal-related costs
(see note 2)
(0.7) (6.9) (7.8)
–
(0.2)Operating prot/(loss)
58.3 30.9 29.7 (13.0) 105.9
Loss on disposals
(2.4)
Investment income
0.1
Finance costs
(20.9)
Prot before tax
82.7
Tax
(15.8)
Prot after tax
66.9
acquisition related costs primarily relate to those incurred in relation to the proposed acquisition of Ultra by Cobham Ultra Acquisitions Limited.
Notes to accounts – Group
For the year ended 31 December 2021
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Annual Report
and Accounts 2021
104
Notes to accounts – Group
For the year ended 31 December 2021
continued
1 Segment information
continued
2020
Maritime
£m
Intelligence &
Communications
£m
Critical Detection
& Control
£m
Unallocated
£m
Total
£m
Underlying operating prot
58.6 33.5 34.0
–
126.1Amortisation of intangibles arising on acquisition
(0.5) (8.9) (3.2)
–
(12.6)
(see note 2)
– – –
(3.3) (3.3)
Acquisition and disposal-related costs
(see note 2)
(0.2) (0.9)
– –
(1.1)Restructuring costs related to disposal
(see note 2)
(2.0)
–
(0.8)–
(2.8)Operating prot/(loss)
55.9 23.7 30.0 (3.3) 106.3
Gain on disposals
5.6
Investment income
3.7
Finance costs
(11.9)
Prot before tax
103.7
Tax
(19.9)
Prot after tax
83.8
Capital expenditure, additions to intangibles and leased assets, depreciation and amortisation
Capital expenditure and
additions to leased assets and
intangibles (excluding goodwill
and acquired intangibles)
Depreciation and
amortisation
2021
£m
2020
£m
2021
£m
2020
£m
Maritime
17.7
15.0
10.710.6
Intelligence & Communications
8.2
8.4
15.717.8
Critical Detection & Control
10.7
5.0
8.69.1
Total
36.6
28.4
35.037.5
The 2021 depreciation and amortisation expense includes £16.1m of amortisation charges (2020: £18.6m), £10.9m of property, plant and equipment
depreciation charges (2020: £10.4m) and £8.0m of leased asset depreciation charges (2020: £8.5m).
Total assets by segment
2021
£m
2020
£m
Maritime
299.0
260.2
Intelligence & Communications
323.1
336.2
Critical Detection & Control
239.6
254.0
861.7
850.4
Unallocated
162.5
144.7
Consolidated total assets
1,024.2
995.1
Unallocated assets represent current and deferred tax assets, derivatives at fair value and cash and cash equivalents.
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Financial statements
1 Segment information
continued
Total liabilities by segment
2021
£m
2020
£m
Maritime
151.8
126.8
Intelligence & Communications
97.4
92.3
Critical Detection & Control
63.2
66.9
312.4
286.0
Unallocated
185.0
244.4
Consolidated total liabilities
497.4
530.4
Revenue by destination
The following table provides an analysis of the Group’s sales by geographical market:
2021
£m
2020
£m
North America
534.7
546.5
United Kingdom
166.2
158.4
Rest of World
89.5
89.9
Mainland Europe
60.3
65.0
850.7
859.8
During the year, there was one direct customer (2020: one) that individually accounted for greater than 10% of the Group’s total turnover. Sales to this customer
in 2021 were £242.1m (2020: £203.2m) across all segments.
Other information (by geographic location)
Non-current assets Total assets
Capital expenditure and
additions to leased assets and
intangibles (excluding goodwill
and acquired intangibles)
2021
£m
2020
£m
2021
£m
2020
£m
2021
£m
2020
£m
United Kingdom
150.9
159.2
265.5298.7
10.010.5
USA
310.3
309.1
445.2412.0
9.914.5
Canada
85.9
84.3
140.0131.8
15.83.1
Rest of World
7.3
5.7
11.07.9
0.90.3
554.4
558.3
861.7850.4
36.628.4
Unallocated
15.7
15.7
162.5144.7
–
–
570.1
574.0
1,024.2995.1
36.628.4
Ultra
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and Accounts 2021
106
2 Additional non-statutory performance measures
To present the adjusted performance of the Group on a consistent basis year on year, additional non-statutory performance indicators are used. This analysis
of the Group’s operating results is presented to provide readers with additional performance indicators that are prepared on a non-statutory basis. It includes
presentation is regularly reviewed by management to identify items that are unusual and other items relevant to an understanding of the Group’s performance
comparable with similarly titled measures and disclosures by other organisations. The non-statutory disclosures should not be viewed in isolation or as an
calculated as follows:
2021
£m
2020
£m
Operating prot
105.9
106.3
Amortisation of intangibles arising on acquisition
(see note 14)
9.8
12.6
6.1
3.3
Acquisition and disposal-related costs
7.8
1.1
Restructuring costs related to disposal
(see note 30)
–
2.8
Underlying operating prot
129.6
126.1
Depreciation of property, plant and equipment
(see note 15)
10.9
10.4
Depreciation of leased assets
(see note 16)
8.0
8.5
Amortisation of internally generated intangible assets
(see note 14)
1.2
1.4
Amortisation of software, patents and trademarks
(see note 14)
5.1
4.6
Adjusted EBITDA
154.8
151.0
Prot before tax
82.7
103.7
Amortisation of intangibles arising on acquisition
(see note 14)
9.8
12.6
Acquisition and disposal related costs
7.8
1.1
Loss/(gain) on fair value movements of derivatives
(see note 22)
7.8
(3.4)
Loss/(gain) on disposals net
(see note 30)
2.4
(2.8)
6.1
3.3
Underlying prot before tax
116.6
114.5
Cash generated by operations
(see note 27)
134.2
142.6
(8.3)
(9.0)
Purchase of property, plant and equipment
(22.2)
(13.4)
Proceeds on disposal of property, plant and equipment
2.1
0.2
Expenditure on product development and other intangibles
(2.5)
(8.7)
1.4
1.5
Disposal-related restructuring costs
(see note 30)
–
1.6
Acquisition and disposal-related payments
6.8
1.3
Underlying operating cash ow
111.5
116.1
Underlying operating cash conversion (KPI)
86%
92%
Notes to accounts – Group
For the year ended 31 December 2021
continued
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and Accounts 2021
107
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Governance
Financial statements
2 Additional non-statutory performance measures
continued
2021
£m
2020
£m
Net cash ow from operating activities
(see note 27)
121.5
130.0
Interest received
0.1
0.3
Purchase of property, plant and equipment
(22.2)
(13.4)
Proceeds on disposal of property, plant and equipment
2.1
0.2
Expenditure on product development and other intangibles
(2.5)
(8.7)
(8.3)
(9.0)
Free cash ow
90.7
99.4
Net assets
526.8
464.7
Net debt
(see note 27)
40.0
85.8
(see note 29)
34.8
73.1
(see note 22)
0.2
(7.6)
Net tax liabilities/(assets)
5.5
(1.5)
Total invested capital
607.3
614.5
Average invested capital
610.9
630.3
Underlying operating prot
129.6
126.1
ROIC (KPI)
21.2%
20.0%
Earnings per share
The reconciliation from statutory earnings to underlying earnings, as used for the underlying earnings per share metric, is set out in note 12.
Organic measures
Order book
Revenue
£m
% impact
£m% impact
£m% impact
2020
1,064.2 859.8 126.1
Currency translation
4.9 +0.5 (37.7) -4.4 (4.8) -3.8
Disposals
(2.4) -0.2 (5.6) -0.6 (1.3) -1.0
2020 (for organic measure)
1,066.7 816.5 120.0
Organic growth (KPI)
234.2 +22.0 34.2 +4.2 9.6 +8.0
2021
1,300.9
+22.2
850.7-1.1
129.6+2.8
Ultra
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and Accounts 2021
108
3 Revenue
An analysis of the Group’s revenue is as follows:
2021
2020
Maritime
£m
Intelligence &
Communications
£m
Critical
Detection &
Control
£m
Total
£m
Maritime
£m
Intelligence &
Communications
£m
Critical
Detection &
Control
£m
Total
£m
Point in time
84.5 97.8 124.9 307.2
100.4 119.0 136.7 356.1
Over time
310.9 143.5 89.1 543.5
291.4 122.0 90.3 503.7
395.4 241.3 214.0 850.7
391.8 241.0 227.0 859.8
The estimate of future costs on over-time contracts is a critical accounting estimate as set out on page 139. Across the aggregated portfolio of over-
time contracts open at 31 December 2021, a 1% increase in estimated costs to complete the portfolio equates to £6.8m (2020: £5.3m). The impact on revenue
would depend on the margin and percentage of completion of any given contract within the portfolio; however, when taken in aggregate, it is not likely to
exceed £6.8m.
in previous periods.
2022
£m
2023
£m
2024 and
beyond
£m
Total
£m
Point in time revenue
252.1 84.8 34.3 371.2
Over-time revenue
460.3 230.3 239.1 929.7
4 Other operating income
Amounts included in other operating income were as follows:
2021
£m
2020
£m
Foreign exchange gains
6.5
0.9
6.5
0.9
Foreign exchange gains and losses are impacted by gains or losses on foreign exchange transactions and revaluation of currency assets and liabilities.
5 Other operating expenses
Amounts included in other operating expenses were as follows:
2021
£m
2020
£m
Foreign exchange losses
1.2
1.5
1.2
1.5
Notes to accounts – Group
For the year ended 31 December 2021
continued
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Financial statements
2021
£m
2020
£m
Raw materials and other bought-in inventories expensed in the year
267.3
303.6
296.1
286.5
Depreciation of property, plant and equipment
(see note 15)
10.9
10.4
Depreciation of leased assets
(see note 16)
8.0
8.5
Amortisation of internally generated intangible assets
(see note 14)
1.2
1.4
Amortisation of software, patents and trademarks
(see note 14)
5.1
4.6
Amortisation of acquired intangible assets
(see note 14)
9.8
12.6
Government grant income
(see note 23)
(0.5)
(0.2)
Net foreign exchange gain
(0.1)
(2.1)
Loss on disposal of property, plant and equipment
0.1
0.1
Short-term lease rentals
0.1
0.1
Low-value asset lease rentals
0.1
0.2
Income from property subletting
(0.6)
(0.7)
Research and development costs
33.5
31.5
Auditor’s remuneration for statutory audit work (including expenses)
1.8
1.4
Analysis of auditor’s remuneration
2021
£m
2020
£m
Fees payable for the audit of the annual accounts
0.6
0.5
Fees payable for the audit of subsidiaries
1.2
0.9
Total for statutory Group audit services
1.8
1.4
Total non-audit services in 2021 were £nil (2020: £3,000). The Company-only audit fee included in the Group audit fee shown above was £20,000 (2020: £20,000).
Particulars of employees (including Executive Directors) are shown below. Employee costs during the year amounted to:
2021
£m
2020
£m
Wages and salaries
256.9
250.8
Social security costs
27.8
24.6
11.4
11.1
296.1
286.5
The average monthly number of persons employed by the Group during the year was as follows:
2021
Number
2020
Number
Production
1,727
1,813
Engineering
1,618
1,463
Selling
261
209
Support services
925
768
4,531
4,253
Information on Directors’ remuneration is given in the section of the Directors’ Remuneration report described as having been audited and those elements
required by the Companies Act 2006 and the Financial Conduct Authority form part of these accounts.
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110
8 Investment income
2021
£m
2020
£m
Bank interest
0.1
0.3
Fair value movement on derivatives
(see note 22)
–
3.4
0.1
3.7
9 Finance costs
2021
£m
2020
£m
0.6
0.6
Interest on loans and overdrafts
5.4
5.4
Financial liabilities at FVTPL – net change in fair value
(see note 23)
4.7
2.9
Finance charge on leases
1.4
1.7
Total borrowing costs
12.1
10.6
1.0
1.3
Fair value movement on derivatives
(see note 22)
7.8
–
20.9
11.9
10 Tax
2021
£m
2020
£m
UK taxes
Corporation tax
(1.3)
5.2
Adjustment in respect of prior years
0.9
(0.5)
(0.4)
4.7
Overseas taxes
Current taxation
14.3
11.9
Adjustment in respect of prior years
(0.6)
(5.2)
13.7
6.7
Total current tax
13.3
11.4
Deferred tax
1.9
7.5
Recognition of deferred tax liability on overseas retained earnings
–
0.8
UK tax rate change
0.6
0.2
Total deferred tax charge
2.5
8.5
Total tax charge
15.8
19.9
for the year. In other territories current tax is calculated at the rates prevailing in the respective jurisdictions and deferred tax has been calculated at enacted
tax rates that are expected to apply to the period when assets are realised or liabilities are settled. US deferred tax balances at 31 December 2021 have been
calculated at 24% (2020: 24%).
Notes to accounts – Group
For the year ended 31 December 2021
continued
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Financial statements
10 Tax
continued
In addition to the amount charged to the income statement, the following amounts relating to tax have been recognised directly in other comprehensive
income:
Deferred tax
2021
£m
2020
£m
Arising on income and expenses recognised in other comprehensive income:
4.5
(1.8)
Tax rate changes
(1.0)
(1.1)
Total deferred tax charge/(credit) recognised directly in other comprehensive income
3.5
(2.9)
In addition to the amount charged to the income statement and other comprehensive income, the following amounts relating to tax have been recognised
directly in equity:
2021
£m
2020
£m
Deferred tax
Change in estimated excess tax deductions related to share-based payments
(0.8)
(0.2)
Total deferred tax credits recognised directly in equity
(0.8)
(0.2)
follows:
2021
£m
2020
£m
82.7
103.7
15.7
19.7
2.0
1.6
0.6
0.3
Expenses for which no deferred tax asset is recognised
(0.1)
(0.5)
4.7
3.8
CFC exemption
(4.4)
(1.8)
Current and deferred tax on intra-Group dividends
0.8
1.2
Innovation incentives
(2.2)
(0.8)
Adjustments in respect of prior years
(1.4)
(4.0)
Other
0.1
0.4
Tax expense for the year
15.8
19.9
The Group is subject to enquiries and audits by tax authorities in the jurisdictions in which it operates. The Group considers material tax uncertainties on their
may arise. As at 31 December 2021, the Group holds provisions for such potential issues of £1.1m (2020: £3.4m). These provisions relate to multiple issues,
across the jurisdictions in which the Group operates. As the outcome relating to tax matters can be uncertain until a conclusion is reached with the relevant
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112
11 Dividends
Amounts recognised as distributions to equity holders in the year:
2021
£m
2020
£m
Final dividend for the year ended 31 December 2020 of 41.5p per share, additional interim dividend of 39.2p per share (equivalent
29.5
27.8
Interim dividend for the year ended 31 December 2021 of 16.2p (2020: 15.4p) per share
11.6
10.9
41.1
38.7
Proposed nal dividend for the year ended 31 December 2021 of nil (2020: 41.5p) per share
–
29.5
Under the terms and conditions set out in the announcement dated 16 August 2021 (relating to the recommended cash acquisition of Ultra by Cobham Ultra
Government approval. Consequently, the total full year dividend is unchanged from the interim dividend of 16.2p (2020: 56.9p full year).
12 Earnings per share
2021
pence
2020
pence
Basic underlying (see below)
135.7
130.6
Diluted underlying (see below)
135.2
130.3
Basic
93.8
118.0
Diluted
93.5
117.7
The calculation of the basic, underlying and diluted earnings per share is based on the following data:
2021
£m
2020
£m
Earnings
66.9
83.8
Underlying earnings
66.9
83.8
Amortisation of intangibles arising on acquisition (net of tax)
7.5
9.8
Acquisition and disposal-related costs (net of tax)
7.5
0.7
Loss/(gain) on fair value movements of derivatives (net of tax)
6.3
(2.8)
Loss/(gain) on disposals, per note 30 (net of tax)
2.3
(1.7)
6.1
3.0
Earnings for the purposes of underlying earnings per share
96.6
92.8
Reconciliation of tax charge for the year to underlying tax charge as used in the determination of underlying earnings per share:
2021
£m
2020
£m
Tax charge for the year
(see note 10)
15.8
19.9
Amortisation of intangibles arising on acquisition
2.4
2.8
Acquisition and disposal-related costs
0.3
0.4
Loss/(gain) on fair value movements of derivatives
1.5
(0.6)
Loss/(gain) on disposals (net of restructuring costs in 2020)
–
(1.1)
–
0.3
Tax charge for the purposes of underlying earnings per share
20.0
21.7
2021
£m
2020
£m
(see note 2)
116.6
114.5
Tax rate applied for the purposes of underlying earnings per share
17.1%
19.0%
Notes to accounts – Group
For the year ended 31 December 2021
continued
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and Accounts 2021
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Financial statements
12 Earnings per share
continued
The weighted average number of shares is given below:
2021
Number
of shares
2020
Number
of shares
Number of shares used for basic earnings per share
71,234,315
71,026,681
244,736
179,001
Number of shares used for fully diluted earnings per share
71,479,051
71,205,682
During 2021, the Company purchased and cancelled nil (2020: nil) shares. See note 26.
13 Goodwill
2021
£m
2020
£m
Cost
At 1 January
410.8
424.3
2.5
(7.9)
Disposals
–
(8.9)
(see note 30)
(2.4)
3.3
At 31 December
410.9
410.8
Accumulated impairment losses
At 1 January
(47.8)
(58.4)
Disposals
–
8.9
(0.4)
1.7
At 31 December
(48.2)
(47.8)
Carrying amount at 31 December
362.7
363.0
The Group’s SBUs, which represent CGU groupings, are: PCS, Energy, Forensic Technology, Intelligence & Communications and Maritime. These represent the
lowest level at which the goodwill is monitored for internal management purposes. Goodwill is allocated to CGU groupings as set out below:
2021
Pre-tax
discount rate
%
2020
Pre-tax
discount rate
%
2021
£m
2020
£m
PCS
10.6–10.7
10.2–11.2
30.232.5
Energy
10.6–10.7
10.2–11.2
18.017.9
Forensic Technology
10.7
10.7
26.125.6
Intelligence & Communications
10.6–10.7
10.2–11.2
179.2178.2
Maritime
10.6–10.9
10.2–11.2
109.2108.8
Total – Ultra Electronics
362.7
363.0
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114
13 Goodwill
continued
to this allocation to the extent that operations, to which goodwill relates, are transferred between CGU groups. The size of a CGU group varies but is never
larger than a reportable operating segment.
The recoverable amounts of CGUs are determined from value-in-use calculations. In determining the value-in-use for each CGU, the Group prepares cash
The key assumptions used in the value-in-use calculations are those regarding the discount rate, future revenues, growth rates, forecast gross margins,
and underlying operating cash conversion
10.7% (2020: 11.2%) and Australia: 10.9% (2020: 11.2%). Future revenues are based on orders already received, opportunities that are known and expected at
the time of setting the budget and strategic plans and future growth rates. Budget and strategic plan growth rates are based on a combination of historical
experience, available Government spending data, and management and industry expectations of the growth rates that are expected to apply in the major
applied into perpetuity at the end of the strategic planning period, are set at 2.0% (2020: 2.0%). Ultra considers the long-term growth rate to be appropriate
for the sectors in which it operates, taking into consideration greater defence spending uncertainty and the possible impacts of climate change.
Within each of the strategic plans, a number of assumptions are made about business growth opportunities, contract wins, product development and available
markets. A key assumption is that there will be continued demand for Ultra’s products and expertise from a number of US Government agencies and prime
Sensitivity analysis, which included consideration of the potential impacts of Brexit, has been performed on the value-in-use calculations to:
(i) reduce the post-2026 growth assumption from 2.0% to nil;
(ii) increase the discount rates by 3.0%;
The value-in-use calculations exceed the CGU carrying values after applying sensitivity analysis.
Notes to accounts – Group
For the year ended 31 December 2021
continued
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Financial statements
14 Other intangible assets
Acquired intangibles
Internally
generated
capitalised
development
costs
£m
Software,
patents and
trademarks
£m
Total
£m
Customer
relationships
£m
Intellectual
property
£m
order book
£m
Other
acquired
£m
Cost
At 1 January 2020
202.4 101.2 29.4 7.6 29.9 43.6 414.1
(3.4) (1.8) (0.4) (0.1) (0.4) (0.7) (6.8)
Additions
– – – –
0.2 8.5 8.7
– – – –
0.3
–0.3
(see note 15)
– – – – –
0.4 0.4
Disposals
– – – –
(0.4) (2.1) (2.5)
At 1 January 2021
199.0 99.4 29.0 7.5 29.6 49.7 414.2
1.2 0.6 (0.1) 0.2 2.1
–
0.2Additions
– – – – –
2.5 2.5
(see note 15)
– – – – –
1.6 1.6
Disposals
(6.0) (1.0) (28.9) (0.6) (37.4)
–
(0.9)At 31 December 2021
194.2 99.0
–
7.5 28.9 53.4 383.0
Accumulated amortisation
At 1 January 2020
(155.8) (79.7) (29.4) (5.6) (22.3) (28.6) (321.4)
2.8 1.6 0.4 0.1 0.4 0.5 5.8
– – – –
(0.2)
–(0.2)
Disposals
– – – –
0.4 2.0 2.4
Charge
(7.3) (4.7) (1.4) (4.6) (18.6)
–
(0.6)At 1 January 2021
(160.3) (82.8) (29.0) (6.1) (23.1) (30.7) (332.0)
(0.8) (0.6) 0.1 (0.1) (1.6)
–
(0.2)Disposals
6.0 1.0 28.9 36.4
– –
0.5
(see note 15)
– – – – –
(0.8) (0.8)
Charge
(5.4) (4.3) (1.2) (5.1) (16.1)
–
(0.1)At 31 December 2021
(160.5) (86.7)
–
(6.2) (24.5) (36.2) (314.1)
Carrying amount
At 31 December 2021
33.7 12.3
–
1.3 4.4 17.2 68.9
At 31 December 2020
38.7 16.6
–
1.4 6.5 19.0 82.2
Of the £33.7m net book value within customer relationships, £18.9m related to Herley and £8.2m related to Forensic Technology, with estimated weighted
average remaining lives of 9.1 years and 6.5 years respectively. Of the £12.3m net book value within intellectual property, £6.4m related to Herley and £3.4m
related to Forensic Technology, with estimated weighted average remaining lives of 4.0 years and 5.0 years respectively. Of the £17.2m (2020: £19.0m) net book
value within the software, patents and trademarks category, £0.1m (2020: £0.1m) related to patents and trademarks. The amortisation of intangible assets
charge is included within administrative expenses. Intangible assets, other than goodwill, are amortised over their estimated useful lives, typically as follows:
Customer relationships
5 to 21 years
Intellectual property
5 to 10 years
1 to 3 years
Other acquired
1 to 5 years
Development costs
2 to 10 years
Other intangibles:
Software
3 to 5 years
Patents and trademarks
10 to 20 years
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116
15 Property, plant and equipment
Land and buildings
Plant and
machinery
£m
Assets under
construction
£m
Total
£m
Freehold
£m
Short
leasehold
£m
Cost
At 1 January 2020
42.7 24.5 96.9
–
164.1
(0.6) (0.4) (1.4)
–
(2.4)Additions
0.6 1.3 11.5
–
13.4Disposals
(0.1)
–
(13.2)–
(13.3)
(see note 14)
– –
(0.4)
–(0.4)
–
0.1 1.5
–1.6
At 1 January 2021
42.6 25.5 94.9
–
163.0
0.3 0.1 0.6
–
1.0Additions
3.0 2.1 12.3 4.8 22.2
Disposals
(5.0) (1.5) (1.8)
–
(8.3)
(see note 14)
– –
(1.6)
–(1.6)
(0.4)
–
0.4– –
At 31 December 2021
40.5 26.2 104.8 4.8 176.3
Accumulated depreciation
At 1 January 2020
(9.8) (18.4) (71.7)
–
(99.9)
0.2 0.4 0.8
–
1.4Charge
(1.1) (1.9) (7.4)
–
(10.4)Disposals
0.1
–
12.9–
13.0
– –
(0.5)
–(0.5)
At 1 January 2021
(10.6) (19.9) (65.9)
–
(96.4)
(0.2) (0.1) (0.4)
–
(0.7)Charge
(1.0) (2.0) (7.9)
–
(10.9)Disposals
0.5 1.6 2.2
–
4.3
(see note 14)
– –
0.8
–0.8
(0.7) 0.7
– – –
At 31 December 2021
(12.0) (19.7) (71.2)
–
(102.9)Carrying amount
At 31 December 2021
28.5 6.5 33.6 4.8 73.4
At 31 December 2020
32.0 5.6 29.0
–
66.6
Freehold land amounting to £4.1m (2020: £7.4m) has not been depreciated.
Notes to accounts – Group
For the year ended 31 December 2021
continued
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Governance
Financial statements
16 Leased assets
The Group’s leases relate to real estate, vehicles, printers & copiers, and other equipment. The Group therefore splits the leases between the following
categories: land and buildings, and plant and machinery.
Land and
buildings
£m
Plant and
machinery
£m
Total
£m
Cost
At 1 January 2020
43.2 1.4 44.6
(1.0)
–
(1.0)Additions
6.1 0.2 6.3
Disposals
(1.3)
–
(1.3)
1.4
–
1.4At 1 January 2021
48.4 1.6 50.0
0.3
–
0.3Additions
11.7 0.2 11.9
Impairment
(0.7)
–
(0.7)Disposals
(2.2) (0.1) (2.3)
At 31 December 2021
57.5 1.7 59.2
Accumulated depreciation
At 1 January 2020
(7.9) (0.6) (8.5)
0.3
–
0.3Charge
(8.0) (0.5) (8.5)
Disposals
0.5 0.1 0.6
(0.3)
–
(0.3)At 1 January 2021
(15.4) (1.0) (16.4)
(0.1)
–
(0.1)Charge
(7.6) (0.4) (8.0)
Disposals
1.1 0.1 1.2
At 31 December 2021
(22.0) (1.3) (23.3)
Carrying amount
At 31 December 2021
35.5 0.4 35.9
At 31 December 2020
33.0 0.6 33.6
As permitted under IFRS 16 paragraph 6, the Group has elected not to recognise leases that are less than one year in length or are for a low-value asset (<£3.5k)
on the balance sheet. These leases are expensed on a straight-line basis as short-term leases or leases of low-value assets. This expense is included in note 6.
external parties; sublet income received on any of the above leases is also included in note 6.
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118
17 Inventories
2021
£m
2020
£m
Raw materials and consumables
56.4
58.3
Work in progress
29.1
35.0
Finished goods and goods for resale
7.4
10.3
92.9
103.6
The amount of any write-down of inventory recognised as an expense in the year was £1.6m (2020: £3.1m).
18 Over-time contract balances
Amounts receivable from over-time contract customers relates to work performed and revenue recognised on agreed contracts prior to the customer
being invoiced.
The movement in the year of amounts receivable from over-time contract customers was as follows:
Total
£m
As at 1 January 2020
90.7
(1.5)
Revenue earned net of billings
(6.5)
Other
(3.3)
As at 1 January 2021
79.4
(0.1)
Revenue earned net of billings
7.9
As at 31 December 2021
87.2
Other movements relate to adjustments to revenue recognised in a prior period.
Amounts payable to over-time contract customers relate to payments received from customers in relation to the contract prior to the work being completed
and the revenue recognised.
The movement in the year of amounts payable to over-time contract customers was as follows:
Total
£m
As at 1 January 2020
(67.3)
0.5
Cash advances net of revenue recognised
(12.4)
Other
0.5
2.3
As at 1 January 2021
(76.4)
(0.4)
Cash advances net of revenue recognised
(5.1)
Other
1.8
1.2
As at 31 December 2021
(78.9)
Within the opening 2021 balance of £76.4m (2020: £67.3m), £57.0m was utilised during the period (2020: £59.7m).
Notes to accounts – Group
For the year ended 31 December 2021
continued
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Financial statements
19 Trade and other receivables
2021
£m
2020
£m
Non-current
Amounts receivable from over-time contract customers
(see note 18)
13.5
12.9
13.5
12.9
2021
£m
2020
£m
Current
Trade receivables
106.5
101.5
Loss allowance against receivables
(2.0)
(1.4)
Net trade receivables
104.5
100.1
Amounts receivable from over-time contract customers
(see note 18)
73.7
66.5
Other receivables
3.6
6.2
Prepayments
18.6
10.6
Accrued income
7.2
5.1
207.6
188.5
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.
2021
£m
Related
loss allowance
£m
Total
£m
2020
£m
Related
loss allowance
£m
Total
£m
Current
81.2
–
81.2 78.3
–
78.31 to 3 months
18.4
–
18.4 20.2
–
20.2
4 to 6 months
3.2
–
3.2 1.1
–
1.1
7 to 9 months
1.5 (0.1) 1.4
0.4 (0.1) 0.3
Over 9 months
2.2 (1.9) 0.3
1.5 (1.3) 0.2
Total
106.5 (2.0) 104.5
101.5 (1.4) 100.1
The Group makes loss allowances against its trade receivables and amounts receivable from over-time contract customers based on expected credit losses at
an amount equal to lifetime expected credit losses based on prior experience and relevant forward-looking factors.
The Group recognises a loss allowance of 100% against all receivables over a year past due. For amounts receivable from over-time contract customers, accrued
income, and other receivables the expected credit loss allowance is immaterial.
Movement in the loss allowance for trade receivables was as follows:
2021
£m
2020
£m
Current
Balance at beginning of year
1.4
1.8
Increase in loss allowance for trade receivables regarded as potentially uncollectable
1.1
0.4
Decrease in loss allowance for trade receivables recovered during the year or provision utilised
(0.5)
(0.8)
Balance at end of year
2.0
1.4
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120
19 Trade and other receivables
continued
Credit risk
While the Group has elements of concentration of credit risk, with exposure to a number of large counterparties and customers, the customers are mainly
Government agencies or multinational organisations with whom the Group has long-term business relationships. The Group’s assessment is that credit risk in
immaterial in respect of receivables from these customers.
exposure to credit risk.
20 Trade and other payables
2021
£m
2020
£m
Amounts included in current liabilities:
Trade payables
31.6
44.4
Amounts due to over-time contract customers
(see note 18)
71.1
68.2
Other payables
15.4
19.9
Accruals
71.8
46.2
Deferred income
25.8
20.6
215.7
199.3
Amounts included in non-current liabilities:
Amounts due to over-time contract customers
(see note 18)
7.8
8.2
Deferred income
3.6
3.8
11.4
12.0
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
21 Borrowings
2021
£m
2020
£m
Amounts due in less than one year:
Bank loans and overdrafts
0.1
30.3
Government loans
(see note 23)
3.7
–
Lease liability
8.3
8.0
12.1
38.3
Amounts due after more than one year:
Bank loans
19.3
19.0
Unsecured loan notes
101.4
101.0
Government loans
(see note 23)
13.6
12.2
Lease liability
32.4
29.7
166.7
161.9
Total borrowings:
Amount due for settlement within 12 months
12.1
38.3
Amount due for settlement after 12 months
166.7
161.9
178.8
200.2
The Government loans are stated at fair value, bank loans, unsecured loan notes and overdrafts are stated at amortised cost.
covenants are that the ratio of net consolidated total borrowings to adjusted EBITDA is less than three, and that the net interest payable on borrowings is
removed from adjusted EBITDA and net debt, and adjusted EBITDA is amended to remove the EBITDA generated by businesses up to the date of their disposal.
Notes to accounts – Group
For the year ended 31 December 2021
continued
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and Accounts 2021
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Governance
Financial statements
Derivative nancial instruments
Fair value measurements recognised in the balance sheet
based on the degree to which the fair value is observable:
+
Level 1 fair value measurements are those derived from quoted (unadjusted) active markets for identical assets or liabilities.
+
Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived from prices).
+
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable
market data (unobservable inputs).
Level 3
£m
Level 2
£m
2021
Total
£m
Financial assets at fair value
–
2.4 2.4
Total
–
2.4 2.4
Financial liabilities at fair value
Government loans
(see note 23)
17.3
–
17.3
–
2.6 2.6
Total
17.3 2.6 19.9
Level 3
£m
Level 2
£m
2020
Total
£m
Financial assets at fair value
–
7.9 7.9
Total
–
7.9 7.9
Financial liabilities at fair value
Government loans
(see note 23)
12.2
–12.2
–
0.3 0.3
Total
12.2 0.3 12.5
Current (liabilities)/assets Non-current (liabilities)/assets
2021
£m
2020
£m
2021
£m
2020
£m
Financial (liabilities)/assets carried at fair value through prot or loss
Foreign exchange currency liabilities
(1.1)
(0.2)
(1.5)(0.1)
Foreign exchange currency assets
1.4
5.8
1.02.1
Ultra
Annual Report
and Accounts 2021
122
continued
Financial assets
2021
£m
2020
£m
Cash and cash equivalents
138.8
114.4
Currency derivatives used for hedging
2.4
7.9
Trade receivables
104.5
100.1
Accrued income
7.6
5.1
Financial liabilities
2021
£m
2020
£m
Currency derivatives used for hedging
2.6
0.3
Bank loans and overdrafts
19.3
49.3
Unsecured loan notes
101.4
101.0
Government loans
17.3
12.2
Lease liabilities
40.7
37.7
Trade payables
31.6
44.4
Deferred consideration
2.3
2.3
Accruals and other payables
63.2
38.3
unsecured loan notes, the derived fair value has been determined as £107.4m (2020: £110.6m) which compares with the carrying amount of £101.4m (2020:
£101.0m). The fair value of the unsecured loan notes has been derived from indicative quotes for borrowings of similar amounts, terms and maturity periods
Liquidity risk
The Group maintains committed banking facilities with core banks to provide prudent levels of borrowing headroom.
The Group’s banking facilities are provided by a small group of banks, led by The Royal Bank of Scotland. On 7 November 2017, the Group obtained a
£300m revolving credit facility, £50m has an expiry date of November 2023 and £250m has an expiry date of November 2024. The facility incorporates an
uncommitted £150m accordion. The facility is denominated in Sterling, US Dollars, Canadian Dollars, Australian Dollars and Euros and is used for balance
sheet and operational needs.
All bank loans are unsecured. Interest was predominantly charged at 0.65% (2020: 0.65%) over base or contracted rate. At 31 December 2021, the Group
had available £280m (2020: £280m) of undrawn, committed revolving credit facilities.
At 31 December 2021, the Group also has unsecured loan notes in issue to Prudential Investment Management Inc (Pricoa) of £50.0m with an expiry date
of October 2025 (2020: £50m), US$40m with an expiry date of January 2026 and US$30m with an expiry date of January 2029 (2020: US$70m).
The Group is strongly cash-generative and the funds generated by operating companies are managed regionally to fund short-term local working capital
requirements. Where additional funding is required, this is provided centrally through the Group’s committed banking facilities.
The Group, through its Canadian subsidiaries Ultra Electronics Tactical Communication Systems (TCS) and Ultra Electronics Maritime Systems (UEMS),
participates in Canadian programmes that provide Government support in relation to the development of certain of its products. Further disclosure is provided
in note 23.
The Group has access to an overdraft facility of up to £5m net, £75m gross, across its UK GBP bank accounts; the balances across these accounts are notionally
pooled. Cash and overdrafts are only presented net when there is a right and intention to settle on a net basis, otherwise overdrafts are presented as current
liabilities. No amounts have been presented net in the current or prior year. The Group also has a separate US$2.5m overdraft allocated against one account.
The overdrafts are available for short-term working capital requirements.
Credit risk
ratings assigned by international credit rating agencies. The credit risk on Government loans, which are both from the Canadian Federal Government, is
Notes to accounts – Group
For the year ended 31 December 2021
continued
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and Accounts 2021
123
Strategic report
Governance
Financial statements
continued
The table below sets out the credit ratings of the counterparties for the Group’s derivative assets and cash and cash equivalents:
Derivative
assets
£m
Cash and cash
equivalents
£m
2021
AA-
–
42.3
A+
2.0 47.6
A
0.4 48.9
Total
2.4 138.8
Within 1 year
£m
1 to 2 years
£m
2 to 5 years
£m
Over 5 years
£m
Total
£m
2021
Bank loans and overdrafts
0.9 21.3
– –
22.2 Unsecured loan notes
3.8 3.8 87.9 24.3 119.8
Government loans
3.7 4.7 4.8 4.1 17.3
Trade payables
31.6
– – –
31.6
35.0 30.3 21.4
–
86.7
(33.9) (29.5) (20.8)
–
(84.2)Deferred consideration
–
2.3
–
– 2.3
Accruals and other payables
63.2
– – –
63.2
Within 1 year
£m
1 to 2 years
£m
2 to 5 years
£m
Over 5 years
£m
Total
£m
2020
Bank loans and overdrafts
30.4 0.1 20.5
–
51.1Unsecured loan notes
3.8 3.8 60.9 54.4 122.9
Government loans
3.4 0.1 5.0 3.7 12.2
Trade payables
44.4
– – –
44.4
11.1 3.8 0.5
–
15.4
(10.9) (3.7) (0.5)
–
(15.1)Deferred consideration
– –
2.3
–2.3
Accruals and other payables
38.3
– – –
38.3
Within 1 year
£m
1 to 2 years
£m
2 to 5 years
£m
Over 5 years
£m
Total
£m
2021
Lease liabilities
(9.7) (9.2) (18.4) (7.3) (44.6)
Subletting income
0.3
– – –
0.32020
Lease liabilities
(9.6) (8.0) (17.6) (7.2) (42.4)
Subletting income
0.5 0.2
– –
0.7
Ultra
Annual Report
and Accounts 2021
124
continued
Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximising the return to stakeholders
through the optimisation of the debt and equity balance. The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 21,
cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in the
consolidated statement of changes in equity. The Group is not subject to externally imposed capital requirements.
Currency risk
The Group uses currency derivatives in the form of forward currency contracts to hedge its foreign currency transaction risk. The currencies giving rise to this
risk are primarily US Dollars and Canadian Dollars. The majority of the exposure arises from USD denominated revenue from the UK PCS business, primarily in
the aerospace sector.
At 31 December 2021, the net fair value of the Group’s currency derivatives is estimated to be a liability of approximately £0.2m (2020: asset £7.6m), comprising
statement for the period was £7.8m (2020: gain £3.4m).
Weighted
average
hedge
rate
Not
exceeding
1 year
£m
Between
1 year and
5 years
£m
Over
5 years
£m
Total
£m
2021
Sell US Dollars, purchase GBP
1.35
74.6 119.3
–
193.9 Other currencies
n/a
14.5
(0.6) –
13.9
Total
89.1 118.7
–
207.8 2020
Sell US Dollars, purchase GBP
1.29 92.8 36.4
–
129.2
Other currencies
n/a (1.2) (1.4)
–
(2.6)Total
91.6 35.0
–
126.6The notional amount is the Sterling equivalent of the net currency amount purchased or sold by Ultra. Ultra is net seller of USD.
Net investment hedges
Of the Group’s US denominated borrowings of $70m, $19m (2020: $29m) was designated as a net investment hedge at the year end. The net value of the
The hedging loss taken to other comprehensive income in the year was £0.3m (2020: £1.5m gain). The total cumulative amount recorded within the translation
income statement.
Interest rate risk
interest rate
Total
£m
Within 1 year
£m
1 to 2 years
£m
2 to 5 years
£m
5+ years
£m
2021
Cash and cash equivalents net of bank overdrafts
0.13% 138.7
138.7
– – –
Loan notes
3.71% 101.4
– –
79.5 21.9
Unsecured bank loans
0.70% 19.3
–
19.3
–
Government loans
4.43% 17.3 3.7 4.6 4.9 4.1
2020
Cash and cash equivalents net of bank overdrafts
0.27% 84.1 84.1
– – –
Loan notes
3.71% 101.0 51.0
– –
50.0Unsecured bank loans
0.67% 19.0
– –
19.0–
Government loans
4.43% 12.2 3.4 0.1 5.0 3.7
Bank overdrafts are netted with cash and cash equivalents because they form an integral part of the Group’s cash management within the cash pooling arrangements, the interest exposure is on the
net balance.
Notes to accounts – Group
For the year ended 31 December 2021
continued
Ultra
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and Accounts 2021
125
Strategic report
Governance
Financial statements
continued
Market risk sensitivity analysis
Interest rate risk
statement and equity in the year.
The Group has closely monitored the market and the output from the various industry working groups managing the transition to new benchmark interest
rates; during December 2021, the terms of the revolving credit facility were amended to replace UK LIBOR with SONIA and US LIBOR with SOFR, the impact
of this change on the Group is negligible.
£m
2021
1% change
Interest rate sensitivity
(0.2)
2020
Interest rate sensitivity
(0.7)
Currency risks
The Group’s main sensitivity is to changes in the exchange rate between the US Dollar and pound Sterling. The Group has estimated the impact on the income
statement and equity of a 10% and 25% strengthening or weakening of average actual and transactional currency rates applicable during the year and a 10%
10% weakening of GBP
10% strengthening of GBP
25% weakening of GBP
25% strengthening of GBP
tax
£m
Equity
£m
tax
£m
Equity
£m
tax
£m
Equity
£m
tax
£m
Equity
£m
2021
Transaction
8.9
–
(8.9)–
26.6–
(26.6)–
P&L translation
9.5 (5.2) (9.5) 5.2 23.8 (12.9) (23.8) 12.9
Foreign exchange derivatives
(22.5)
–
17.9–
(67.8)–
39.5–
Total foreign exchange
(4.1) (5.2) (0.5) 5.2 (17.4) (12.9) (10.9) 12.9
2020*
Transaction
11.8
–
(11.8)–
35.3–
(35.3)–
P&L translation
9.2 (5.1) (9.2) 5.1 23.0 (12.8) (23.0) 12.8
Foreign exchange derivatives
(3.3)
–
16.6–
(25.1)–
27.4–
Total foreign exchange
17.7 (5.1) (4.4) 5.1 33.2 (12.8) (30.9) 12.8
23 Government grants and loans
The Group, through its Canadian subsidiaries Ultra Electronics Tactical Communication Systems (TCS) and Ultra Electronics Maritime Systems (UEMS),
participates in three Canadian programmes that provide Government support in relation to the development of certain of its products.
Under the Strategic Aerospace and Defence Initiative (SADI), the Canadian Federal Government provides a long-term funding arrangement in respect
of certain eligible research and development project costs. Under this arrangement:
+
C$31.8m was provided to TCS and will be reimbursed over the period to 2032.
+
Up to C$8m will be provided to UEMS up to the end of 2023 and reimbursed over the period 2024 to 2039. The UEMS programme was extended by three
and considered the value of expected payments using a risk-adjusted discount rate; the discount rate used was 18% for TCS and 15% for UEMS.
+
For TCS, the amount repayable depends on future revenue growth of the TCS business to 2032 and will be up to x1.5 of the amounts received up to a
maximum of C$47.7m (£27.8m). C$5.4m (£3.2m) has been repaid to date, with a further C$6.3m (£3.7m) repaid in early 2022.
+
For UEMS, the amount repayable depends on future revenue growth of the UEMS business from 2024 to 2039 and will be between x1.0 and x1.5 of the
amounts received up until the end of the funding period.
Ultra
Annual Report
and Accounts 2021
126
23 Government grants and loans
continued
future years, particularly in later years. For TCS, if the compound annual revenue growth rate over the period from 2021 to 2032 was 3.0% higher than assumed
in the valuation model, then the net present value of the liability as at 31 December 2021 would increase by C$0.4m (£0.2m). If the forecast revenue growth
occurs in earlier years than envisaged, then the net present value of the liability will increase; if the revenue growth increases were to occur one year earlier
than assumed in the valuation model, then the net present value of the liability as at 31 December 2021 would increase by C$4.0m (£2.9m).
payment of C$2.1m was paid during the year. Royalties repaid have also been included as costs in the income statement in the period where they have
been incurred.
2021
£m
2020
£m
Fair value of loan brought forward
12.2
9.5
Contributions
0.3
–
(see note 9)
4.7
2.9
0.1
(0.2)
Fair value of loan carried forward
17.3
12.2
2021
£m
2020
£m
Canadian Government
0.5
0.2
The amount recorded in other comprehensive income (FVTOCI), relating to changes in credit risk, was £nil (2020: £nil).
24 Deferred tax
The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the current and prior reporting period.
Accelerated
tax
depreciation
*
£m
Employee
share options
costs
£m
Derivatives
£m
Retirement
obligations
£m
Goodwill
£m
Other
£m
Total
£m
At 1 January 2020
(6.8) 1.3 (0.7) 12.5 (12.9) 10.1 3.5
(Charge)/credit to income
(0.4) 0.1 (0.6) (1.8) (3.5) (2.1) (8.3)
Credit to other comprehensive income
– – – –
2.9
–2.9
Credit direct to equity
– – – –
0.2
–0.2
0.4 (0.2) 0.5
– – –
0.3
(0.2) 0.1 (0.1) 0.4 (0.2)
–
(0.4)At 1 January 2021
(7.0) 1.7 (1.4) 14.0 (16.1) 7.4 (1.4)
(Charge)/credit to income
(0.4) 0.6 1.5 (1.9) (3.5) 1.9 (1.8)
Charge to other comprehensive income
– – – –
(3.5)
–(3.5)
Credit direct to equity
– – – –
0.8
–0.8
(0.2)
– – –
(0.1)–
(0.3)
(0.7) (0.6)
– –
0.3–
(0.2)
0.9 (0.7)
– – –
(0.2)–
At 31 December 2021
(7.4) 3.1 0.1 8.9 (19.9) 8.4 (6.8)
2021
£m
2020
£m
Non-current assets
14.7
13.6
Non-current liabilities
(21.5)
(15.0)
(6.8)
(1.4)
Notes to accounts – Group
For the year ended 31 December 2021
continued
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Annual Report
and Accounts 2021
127
Strategic report
Governance
Financial statements
24 Deferred tax
continued
All deferred tax assets and liabilities are presented as non-current in accordance with IAS 1.56. There are deferred tax assets attributable to current items
of £12.8m (2020: £9.5m) and deferred tax liabilities attributable to current items of £1.0m (2020: £1.7m).
Unrecognised deferred tax assets
25 Provisions
Warranties
£m
Contract-
related
provisions
£m
Other
£m
Total
£m
At 1 January 2021
7.5 9.9 7.2 24.6
–
(2.2) 2.2
–Created
1.9 3.1 6.3 11.3
Reversed
(1.9) (3.5) (1.3) (6.7)
Utilised
(0.6) (1.7) (1.0) (3.3)
– –
0.2 0.2
At 31 December 2021
6.9 5.6 13.6 26.1
Included in current liabilities
6.7 4.7 11.9 23.3
Included in non-current liabilities
0.2 0.9 1.7 2.8
6.9 5.6 13.6 26.1
Warranty provisions are based on an assessment of future claims with reference to past experience. Such costs are generally incurred within two years after
delivery. Contract-related provisions – for example, including provisions for agent fees and costs relating to contract execution and delivery – are utilised over
matters, deferred consideration and dilapidation costs. Reorganisation costs will be incurred over the period of the reorganisation, which is typically up to two
years. Deferred consideration is payable when earnings targets are met. Dilapidations will be payable at the end of the contracted life, which is up to 15 years.
26 Share capital and share options
2021
2020
No.
£m
No.
£m
Authorised:
5p ordinary shares
90,000,000 4.5
90,000,000 4.5
Allotted, called-up and fully paid:
5p ordinary shares
71,410,205 3.6
71,122,599 3.6
The Company did not purchase or cancel any shares in the year.
287,606 ordinary shares having a nominal value of £14,380 were allotted during the year under the terms of the Group’s various share option schemes.
The aggregate consideration received was £2.6m.
The share premium account represents the premium arising on the issue of equity shares.
The “own shares reserve” represents the cost of shares in Ultra Electronics Holdings plc purchased in the market and held by the Ultra Electronics Employee
Trust to satisfy options under the Group’s Long-Term Incentive Plan (LTIP) share schemes. At 31 December 2021, the number of own shares held was 28,045
(2020: 108,494).
Share options
The Group’s equity-settled share-based payments are measured at fair value at the date of the grant. The fair value determined at the grant date is expensed
on a straight-line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest. The Group recognised total expenses of £5.9m
(2020: £2.6m) in relation to equity-settled share-based payment transactions. Expected volatility was determined by calculating the historical volatility of the
Group’s share price.
Ultra
Annual Report
and Accounts 2021
128
26 Share capital and share options
continued
During the year to 31 December 2021, the Group operated the following equity-settled share option schemes:
1. Savings-Related Share Option Schemes, Company Share Option Plan and Executive Share Option Scheme
A Savings-Related Share Option Scheme is open to all UK, US, Canadian and Australian employees and provides for a purchase price equal to the average of the
daily average market price before the grant less 20% in the UK, Canada and Australia and 15% in the USA. Prior to 2021, the option price discount was 10% for all
options expire. Options are forfeited if the employee leaves the Group before the options vest.
The Company Share Option Plan provides share options for nominated employees in the UK. The purchase price is set at a mid-market price on the date of the
grant. This is an approved scheme and vesting is unconditional. Options vest after three years and lapse after 10 years from the date of the grant.
The Executive Share Option Scheme provides share options for nominated employees in the UK, the USA and Canada. The purchase price is set at a mid-market
price on the date of the grant. This is an unapproved scheme and vesting is unconditional. Options vest after three years and lapse after seven years from the
date of the grant.
The number and weighted average exercise price of share options for all share-based payment arrangements (excluding LTIP) are as follows:
Weighted
average
exercise price
(£)
2021
Number
of options
2021
Weighted
average
exercise price
(£)
2020
Number
of options
2020
Beginning of year
16.44
717,780
16.53 970,757
Granted during the year
16.42 253,087
– –
Exercised during the year
16.51
(260,057)
16.94 (161,655)
Expired during the year
16.98
(68,663)
16.32 (91,322)
Outstanding at the end of the year
16.34
642,147
16.44 717,780
Exercisable at the end of the year
16.96
174,942
19.04 190,626
2021
2020
Range of exercise price of outstanding options (£)
14.45–21.91
14.45–21.91
Weighted average remaining contracted life (years)
3.29
3.73
Weighted average fair value of options granted (£)
5.21
–
2. Long-Term Incentive Plan
Details in relation to the Ultra Electronics Long-Term Incentive Plan 2017 awards to Executive Directors are included in the Directors’ remuneration report
on pages 72-85. In April 2021, LTIPs were also awarded to nominated employees and are subject to the same four performance metrics (see page 95) as the
Executive Director awards. The awards will vest in April 2024 upon achievement of those performance targets and are conditional upon continued employment.
The number of the LTIPs are as follows:
Number
of options
2021
Number
of options
2020
Beginning of year
1,106,422
903,632
Granted during the year
483,353
426,153
Exercised during the year
(133,276)
(32,946)
Expired during the year
(316,718)
(190,417)
Outstanding at the end of the year
1,139,781
1,106,422
2021
2020
Weighted average remaining contracted life (years)
1.33
1.39
Weighted average fair value of options granted (£)
18.38
15.09
Notes to accounts – Group
For the year ended 31 December 2021
continued
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and Accounts 2021
129
Strategic report
Governance
Financial statements
2021
£m
2020
£m
Operating prot
105.9
106.3
Adjustments for:
Depreciation of property, plant and equipment
10.9
10.4
Amortisation of intangible assets
16.1
18.6
Amortisation of leased assets
8.0
8.5
Cost of equity-settled employee share schemes
5.9
2.5
(11.2)
(11.0)
Loss on disposal of property, plant and equipment
0.1
0.1
Increase in provisions
1.3
0.2
Operating cash ow before movements in working capital
137.0
135.6
Decrease/(increase) in inventories
3.5
(13.8)
(Increase)/decrease in receivables
(19.0)
19.3
Increase in payables
12.7
1.5
Cash generated by operations
134.2
142.6
Income taxes paid
(5.7)
(5.4)
Interest paid
(5.6)
(5.5)
Lease liability interest paid
(1.4)
(1.7)
Net cash from operating activities
121.5
130.0
on the balance sheet.
Reconciliation of net movement in cash and cash equivalents to movements in net debt:
2021
£m
2020
£m
Net increase in cash and cash equivalents
55.0
3.1
–
65.1
Change in net debt arising from cash ows
55.0
68.2
Lease liability movement
(3.0)
3.5
Fair value adjustments and changes in interest accruals
(4.6)
(2.7)
(0.6)
(0.6)
Disposal of business
0.2
–
(1.2)
0.6
Movement in net debt in the year
45.8
69.0
Net debt at start of year
(85.8)
(154.8)
Net debt at end of year
(40.0)
(85.8)
Net cash and cash equivalents and overdrafts comprised the following:
2021
£m
2020
£m
Cash and cash equivalents
138.8
114.4
Overdrafts
(0.1)
(30.3)
Net cash and cash equivalents and bank overdrafts
138.7
84.1
Cash and cash equivalents comprise cash at bank and short-term deposits with an original maturity date of three months or less.
Ultra
Annual Report
and Accounts 2021
130
continued
Net debt comprised the following:
2021
£m
2020
£m
Cash and cash equivalents
138.8
114.4
Borrowings
(178.8)
(200.2)
(40.0)
(85.8)
2021
£m
2020
£m
Borrowings at start of year
(200.2)
(265.3)
Less overdraft at start of year
30.3
28.3
Liabilities arising from nancing activities at start of year
(169.9)
(237.0)
Repayments of borrowings
70.0
76.2
Proceeds from borrowings
(70.0)
(11.1)
Other non-cash movements
(4.6)
(2.7)
(0.6)
(0.6)
Principal payment on leases
8.3
9.0
Lease liability non-cash movements
(11.3)
(5.5)
Disposal of business
0.2
–
(0.8)
1.8
Liabilities arising from nancing activities at end of year
(178.7)
(169.9)
Add overdraft at end of year
(0.1)
(30.3)
Borrowings at end of year
(178.8)
(200.2)
Capital commitments
At the end of the year capital commitments were:
2021
£m
2020
£m
Contracted but not provided
8.0
2.8
was sold in the year and the liability has been derecognised.
Dened contribution schemes
Dened benet schemes
within a trust which is legally separate from the Company. Trustees are appointed by both the Company and the scheme’s membership and act in the
interests of the scheme and all relevant stakeholders, including the members and the Company. The Trustees are also responsible for the investment
of the scheme’s assets.
This scheme provides pensions and lump sums to members on retirement and to their dependants on death.
Notes to accounts – Group
For the year ended 31 December 2021
continued
Ultra
Annual Report
and Accounts 2021
131
Strategic report
Governance
Financial statements
continued
The Trustees are required to use prudent assumptions to value the liabilities and costs of the scheme whereas the accounting assumptions must be best
estimates.
appropriate investment and funding strategies. The Trustees manage governance and operational risks through a number of internal controls policies,
including a risk register.
Investment strategy
The investment strategy is set by the Trustees of the scheme. The investment strategy is targeting a level of investment return above that assumed under
The UK Scheme’s investment strategy is to invest broadly 54% in return-seeking assets and 46% in matching assets, with the aim of moving to 20% growth
The Trustees’ investment strategy includes investing in liability driven investment (LDI), the value of which will increase with decreases in interest rates, and will
regularly assess the position.
a particular manager underperforming its investment objectives, having a negative impact on the funding position of the scheme. The investment performance
and liability experience are regularly reviewed by the Trustees, and the Trustees will consult with the Company over any changes to the investment strategy.
Rather than holding the underlying assets directly, the scheme invests in pooled investment vehicles managed by professional external investment managers,
whom the Trustees have appointed with the help of their investment advisers.
GMP equalisation
Following a High Court judgment on 26 October 2018, it became apparent across the UK pension industry that equalisation was required with respect to
this was recorded as a debit to the income statement in 2018 with a corresponding increase in scheme liabilities. There have been no material changes in
estimates in subsequent years.
Valuation
The scheme is subject to regular actuarial valuations, which are usually carried out every three years. The last actuarial valuation of the scheme was on 5 April
requirements of the Pensions Act 2004 and so include deliberate margins for prudence. This contrasts with these accounting disclosures, which are determined
using best estimate assumptions.
were measured using the projected unit method.
UK
2021
Canada
2021
UK
2020
Canada
2020
Switzerland
2020
Discount rate
1.90% 2.75%
1.45% 2.25% 0.20%
3.30% 3.00%
2.95% 3.00% 0.60%
2.75% 2.20%
2.35% 2.20% 0.60%
Expected rate of salary increases
n/a 3.45%
n/a 3.45% 1.00%
Future pension increases (pre 6/4/08)
3.10% n/a
2.85% n/a 0.00%
Future pension increases (post 6/4/08)
2.05% n/a
1.95% n/a 0.00%
the scheme’s liabilities by £21.9m and £36.8m respectively. If the life expectancy of members was to increase by one year, the scheme liabilities would increase
by £19.0m. The average duration of the scheme liabilities is 17 years (2020: 18 years).
The assumptions used are provided by Willis Towers Watson as Company advisers, and also by reference to the Bank of England gilt curve, at a duration
appropriate to the scheme’s liabilities.
Ultra
Annual Report
and Accounts 2021
132
continued
The key demographic assumption used was in relation to the mortality rates of current and future pensioners. Due to the size of the scheme the mortality rates
were based on standard tables, namely:
Current pensioners – males
Current pensioners – females
Future pensioners – males
Future pensioners – females
The mortality assumptions used in the valuation of the UK scheme make appropriate allowance for future improvements in longevity and are set out below:
2021
2020
Current pensioners (at 65) – males
23 years
22 years
Current pensioners (at 65) – females
24 years
24 years
Future pensioners (at 65) – males
24 years
24 years
Future pensioners (at 65) – females
26 years
26 years
UK
2021
£m
Canada
2021
£m
Switzerland
2021
£m
Total
2021
£m
UK
2020
£m
Canada
2020
£m
Switzerland
2020
£m
Total
2020
£m
Current service cost
–
0.1
–0.1
–
0.1 0.4 0.5
Administration expenses
–
0.1
–0.1
–
0.1
–0.1
Interest on pension scheme liabilities
6.1 0.2
–
6.37.4 0.2
–
7.6
Past service cost
– – – –
0.1
– –
0.1
Expected return on pension
scheme assets
(5.1) (0.2)
–
(5.3)(6.1) (0.2)
–
(6.3)Gain on settlements
– –
(2.3) (2.3)
– – – –
Charge
1.0 0.2 (2.3) (1.1)
1.4 0.2 0.4 2.0
Of the current service cost for the year, £nil (2020: £0.1m) has been included in cost of sales, and £0.1m (2020: £0.4m) has been included in administrative
expenses.
Actuarial gains and losses have been reported in the statement of comprehensive income.
UK
2021
£m
Canada
2021
£m
Switzerland
2021
£m
Total
2021
£m
UK
2020
£m
Canada
2020
£m
Switzerland
2020
£m
Total
2020
£m
Fair value of scheme assets
369.1 8.4
–
377.5353.3 8.1 8.1 369.5
Present value of scheme liabilities
(403.9) (8.4)
–
(412.3)(423.2) (9.0) (10.4) (442.6)
(34.8)
– –
(34.8)(69.9) (0.9) (2.3) (73.1)
Related deferred tax asset
7.9 1.0
–
8.913.3 0.3 0.4 14.0
Net pension liability
(26.9) 1.0
–
(25.9)(56.6) (0.6) (1.9) (59.1)
Notes to accounts – Group
For the year ended 31 December 2021
continued
Ultra
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133
Strategic report
Governance
Financial statements
continued
UK
2021
£m
Canada
2021
£m
Switzerland
2021
£m
Total
2021
£m
UK
2020
£m
Canada
2020
£m
Switzerland
2020
£m
Total
2020
£m
Present value of obligation at 1 January
(423.2) (9.0) (10.4) (442.6)
(386.4) (8.4) (8.2) (403.0)
Current service cost
–
(0.1)
–(0.1)
–
(0.1) (0.4) (0.5)
Interest cost
(6.1) (0.2)
–
(6.3)(7.4) (0.2)
–
(7.6)Actuarial gains and losses
11.4 0.5
–
11.9(43.3) (0.8) (0.1) (44.2)
– – – –
–
0.1 (0.6) (0.5)
Past service cost
– – – –
(0.1)
– –
(0.1)
Liabilities extinguished on settlements
– –
10.4 10.4
– – – –
14.0 0.4
–
14.414.0 0.4 (1.1) 13.3
Present value of obligation
at 31 December
(403.9) (8.4)
–
(412.3)(423.2) (9.0) (10.4) (442.6)
Movements in the fair value of scheme assets during the year were as follows:
UK
2021
£m
Canada
2021
£m
Switzerland
2021
£m
Total
2021
£m
UK
2020
£m
Canada
2020
£m
Switzerland
2020
£m
Total
2020
£m
Fair value at 1 January
353.3 8.1 8.1 369.5
315.2 8.0 6.5 329.7
Interest income
5.1 0.2
–
5.36.1 0.2
–
6.3Return on assets
13.7 0.1
–
13.835.1 0.1 (0.3) 34.9
–
0.1
–0.1
(0.1) (0.1) 0.4 0.2
Employer contributions
11.0 0.4
–
11.411.0 0.4 0.4 11.8
Assets distributed on settlements
– –
(8.1) (8.1)
– – – –
Administration expenses
–
(0.1)
–(0.1)
–
(0.1)
–(0.1)
(14.0) (0.4)
–
(14.4)(14.0) (0.4) 1.1 (13.3)
Fair value at 31 December
369.1 8.4
–
377.5353.3 8.1 8.1 369.5
Scheme assets were as follows:
UK
2021
£m
Canada
2021
£m
Total
2021
£m
UK
2020
£m
Canada
2020
£m
Switzerland
2020
£m
Total
2020
£m
Fair value:
Equities
67.2 3.1 70.3
82.5 2.4 2.7 87.6
Bonds
–
5.1 5.1
–
5.5 2.0 7.5
Property
41.6
–
41.638.1 39.7
–
1.6Other assets
11.4 0.2 11.6
9.4 0.2 1.4 11.0
Other investment funds:
Absolute return
53.0
–
53.089.6 90.0
–
0.4LDI
106.0
–
106.0101.5
– –
101.5Multi-asset credit
89.9
–
89.932.2
– –
32.2369.1 8.4 377.5
353.3 8.1 8.1 369.5
The scheme’s investments are in pooled funds which are unquoted.
Ultra
Annual Report
and Accounts 2021
134
continued
The analysis of the actuarial gain/(loss) in the consolidated statement of comprehensive income was as follows:
UK
2021
£m
Canada
2021
£m
Total
2021
£m
UK
2020
£m
Canada
2020
£m
Switzerland
2020
£m
Total
2020
£m
Changes in assumptions underlying the present value
of the scheme liabilities
14.6 0.5 15.1
(41.4) (0.8) 0.3 (41.9)
Experience gains/(losses) arising on scheme liabilities
(3.2)
–
(3.2)(1.9) (2.4)
–
(0.5)Actual return less expected return on pension
scheme assets
13.7 0.1 13.8
35.1 0.1 (0.2) 35.0
25.1 0.6 25.7
(8.2) (0.7) (0.4) (9.3)
Cumulative actuarial losses, net of deferred tax, recognised in the consolidated statement of comprehensive income at 31 December 2021 were £61.6m (2020:
2021
£m
2020
£m
2019
£m
2018
£m
2017
£m
(412.3)
(442.6) (403.0) (370.7) (389.0)
Fair value of scheme assets
377.5
369.5 329.7 297.7 306.3
(34.8)
(73.1) (73.3) (73.0) (82.7)
Experience adjustments on scheme liabilities
(3.2)
(2.4) (7.3) (3.8) (0.8)
Percentage of scheme liabilities
0.8%
0.5% 1.8% 1.0% 0.2%
Experience adjustment on scheme assets
13.8
35.0 31.2 (12.1) 15.3
Percentage of scheme assets
3.7%
9.5% 9.5% (4.1%) 5.0%
30 Acquisitions and disposals
Disposals
In June 2021, certain non-core assets from our contract electronics manufacturing business in the Critical Detection & Control SBU were disposed of and in
August 2021, certain non-core assets from our Forensic Technology business in Switzerland, also part of the Critical Detection & Control SBU, were disposed of.
The assets and liabilities disposed of were as follows:
2021
£m
Other intangible assets
0.9
Property, plant and equipment
1.8
Inventories
3.7
Trade and other receivables
0.4
Net cash
0.4
Trade and other payables
(1.3)
Retirement obligation
(2.3)
Total
3.6
Proceeds received
(1.2)
Loss on disposal
2.4
Notes to accounts – Group
For the year ended 31 December 2021
continued
Ultra
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and Accounts 2021
135
Strategic report
Governance
Financial statements
30 Acquisitions and disposals
continued
Classied as held for sale
shown in the table below at their fair value. All of these assets and liabilities related to non-core aerospace assets to be divested to help facilitate the closure of
our Greenford PCS site and were held within the Critical Detection & Control SBU. The disposal of these assets completed on 24 January 2022, for cash
consideration of £34.8m; the gain on disposal recorded in FY22 was £29.2m.
2021
£m
Goodwill
2.4
Inventories
4.4
Total assets classied as held for sale
6.8
Trade and other payables
(1.2)
Total liabilities classied as held for sale
(1.2)
Net assets classied as held for sale
5.6
31 Related party transactions
Remuneration of key management personnel
The remuneration of key management personnel, which includes the Directors of the Group, is set out below in aggregate for each of the categories
Directors’ remuneration report on page 76.
2021
£m
2020
£m
5.9
5.5
0.3
0.3
–
0.4
Share-based payments
3.4
3.1
9.6
9.3
32 Non-controlling interests
There is a 5% non-controlling interest in the Group’s CORVID Holdings Limited subsidiary. Before any intra-Group eliminations, the consolidated revenue of the
subsidiary in the year was £3.1m (2020: £2.7m), the gain was £48,000 (2020: £5,000 gain) and the net assets were £1.8m (2020: £4.1m). Sales to Group companies
were £2.4m (2020: £2.1m).
During 2021, dividends totalling £nil (2020: £820,000) were issued. £nil (2020: £41,000) in dividend was paid to the non-controlling interest holder.
33 Contingent liabilities
occurrence of an uncertain future event not wholly within the control of the Group.
The Group has entered into a number of guarantee and performance bond arrangements in the normal course of business, totalling £41.5m (2020: £37.3m).
As previously announced, investigations associated with conduct of business issues are ongoing, and Ultra continues to cooperate with the relevant authorities.
A provision has been booked with respect to one matter where the IAS 37 provision recognition criteria have been deemed to have been met. On the other
possible to reliably predict or estimate.
Future liabilities contingent on deal completion: costs already incurred in relation to the proposed acquisition of the Group by Cobham Ultra Acquisitions Limited
uncertain future event not wholly in the control of the Group, consequently they do not meet the IAS 37 criteria to be provided for as at 31 December 2021.
Ultra
Annual Report
and Accounts 2021
136
34 Additional information as required by Listing Rules Requirement 9.8.4
+
Long-term incentive plans – see Directors’ remuneration report
+
Allocation of equity securities for cash – see note 26
+
Election of independent Directors – see Directors’ report on page 86
+
Contractual arrangements – see Directors’ report on page 86
+
Details of independent Directors – see Chairman’s governance report on pages 54-55
+
Substantial shareholders – see Directors’ report on page 86
35 Post balance sheet events
The Group completed the sale of some legacy aerospace product lines from the Critical Detection & Control SBU realising net cash proceeds of £34.8m on 24
January 2022 (see note 30).
36 Related undertakings
The Company owns either directly or indirectly the ordinary share capital of the following undertakings:
Company name
Country incorporated
%
owned
Direct/Indirect
(Group interest)
3e Technologies International Inc.
United States
100%
Indirect (Group interest)
AEP Networks Limited
Ireland
100%
DirectCORVID Holdings Limited
Guernsey
95%
Direct
CORVID Protect Holdings Limited
Guernsey
95%
Indirect (Group interest)
DF Group Limited
United Kingdom
100%
Direct
EMS Development Corporation
United States
100%
Indirect (Group interest)
ERAPSCO
United States
50%
Indirect (Group interest)
Flightline Electronics Inc.
United States
Indirect (Group interest)100%
Forensic Technology (Europe) Limited
Ireland
100%
DirectForensic Technology AEC Thailand Limited
Thailand
100%
Direct
Forensic Technology Inc.
United States
100%
Direct
Forensic Technology Mexico S. de RL. de C.V
Mexico
100%
Indirect (Group interest)
Forensic Technology-Tecnologia Forense Ltda
Brazil
100%
Indirect (Group interest)
Giga Communications Limited
United Kingdom
100%
Direct
GIGASAT, INC.
United States
100%
Direct
Australia
100%
Indirect (Group interest)
Herley Industries Inc.
United States
100%
Indirect (Group interest)
Herley-CTI Inc.
United States
100%
Indirect (Group interest)
Prologic Inc.
United States
100%
Indirect (Group interest)
Ultra Electronics (USA) Group Inc.
United States
100%
Indirect (Group interest)
Ultra Electronics Advanced Tactical Systems Inc.
United States
100%
Indirect (Group interest)
Ultra Electronics Aneira Inc.
United States
100%
Indirect (Group interest)
Ultra Electronics Australia Pty Limited
Australia
100%
Direct
Ultra Electronics Avalon Systems Pty Limited
Australia
100%
Indirect (Group interest)
Ultra Electronics Canada Inc.
Canada
100%
Direct
Ultra Electronics Connecticut LLC
United States
100%
Indirect (Group interest)
Ultra Electronics Defense Inc.
United States
100%
Indirect (Group interest)
Ultra Electronics DNE Technologies Inc.
United States
100%
Indirect (Group interest)
Ultra Electronics Enterprises (USA) LLC
United States
100%
Indirect (Group interest)
Ultra Electronics Finance Limited
Jersey
100%
Indirect (Group interest)
Ultra Electronics Forensic Technology Inc./
Les Technologies Ultra Electronics Forensic Inc.
Canada
100%
Direct
Notes to accounts – Group
For the year ended 31 December 2021
continued
Ultra
Annual Report
and Accounts 2021
137
Strategic report
Governance
Financial statements
36 Related undertakings
continued
Company name
Country incorporated
%
owned
Direct/Indirect
(Group interest)
Ultra Electronics Hong Kong Holdings Limited Hong Kong
100%
Direct
Ultra Electronics ICE, Inc.
United States
100%
Indirect (Group interest)
Ultra Electronics in collaboration with
Oman Investment Corporation LLC (in liquidation)
Oman
70%
Direct
Ultra Electronics Inc.
United States
100%
Indirect (Group interest)
Ultra Electronics Investments (USA) LLC
United States
100%
Indirect (Group interest)
Ultra Electronics Limited
United Kingdom
100%
Direct
Ultra Electronics Maritime Systems Inc.
Canada
100%
Indirect (Group interest)
Ultra Electronics Measurement Systems Inc.
United States
100%
Indirect (Group interest)
Ultra Electronics Ocean Systems Inc.
United States
100%
Indirect (Group interest)
Ultra Electronics Pension Trustee Company Limited
United Kingdom
100%
Indirect (Group interest)Ultra Electronics Precision Air and Land Systems Inc.
United States
100%
Indirect (Group interest)
Ultra Electronics Secure Intelligence Systems Inc.
United States
100%
Indirect (Group interest)
Ultra Electronics Swiss Holdings Company Limited United Kingdom
100%
Indirect (Group interest)Ultra Electronics TCS Inc.
Canada
100%
Indirect (Group interest)
Ultra Electronics TopScientic Aerospace Limited
Hong Kong
50%
Direct
UnderSea Sensor Systems Inc.
United States
100%
Indirect (Group interest)
Weed Instrument Company Inc.
United States
100%
Indirect (Group interest)
aerospace markets.
Registered Oce: Ultra Electronics Holdings plc ,35 Portman Square, Marylebone, London W1H 6LR, England
Ultra
Annual Report
and Accounts 2021
138
Statement of accounting policies
A summary of the Group’s principal accounting policies, all of which have been
applied consistently across the Group throughout the current and preceding
year, unless otherwise stated, is set out below:
Basis of accounting
accounting standards in conformity with the requirements of the Companies
Act 2006 and International Financial Reporting Standards (IFRSs) as adopted
by the UK.
cost basis except for certain assets and liabilities which are measured at fair
value, see note 22.
Adoption of new and revised standards
During the year, the Group revised its accounting policy in relation to upfront
arrangements in response to the IFRS Interpretations Committee agenda
decision clarifying how IFRS Standards apply to these types of arrangements.
The new accounting policy is presented below. The impact to prior periods
was not material.
Software-as-a-Service (SaaS) arrangements
SaaS arrangements are service contracts providing the Group with the right
to access the cloud provider’s application software over the contract period.
access to the cloud provider’s application software, are recognised as
operating expenses when the services are received. Some of the costs
incurred relate to the development of software code that enhances or
These costs are recognised as intangible software assets and amortised over
the useful life of the software on a straight-line basis. The useful lives of these
accounted for prospectively as a change in accounting estimate.
Capitalisation of conguration and customisation costs in SaaS
arrangements
implementing SaaS arrangements may entail the development of software
on-premise software to enable it to connect with the cloud-based software
applications (referred to as bridging modules or APIs). Judgement was applied
recognition criteria for, an intangible asset in IAS 38 Intangible Assets. During
the year, the Group recognised £nil as intangible assets in respect of
arrangements.
Determination whether conguration and customisation services are
distinct from the SaaS access
software are recognised as operating expenses when the services are
received. In a contract where the cloud provider provides both the SaaS
the Directors applied judgement to determine whether these services are
and customisation costs incurred are expensed as the software is
modify or customise the cloud software, these activities are not distinct from
the access to the cloud software over the contract term. Judgement has been
recognised £1.1m as prepayments in respect of customisation and
which are considered not to be distinct from the access to the SaaS access
over the contract term.
Other
The following IFRIC interpretations, amendments to existing standards and
new standards have been adopted in the current year but have not impacted
+
Amendment to IFRS 16 – COVID-19-Related Rent Concessions beyond 30
June 2021
+
Amendments to IFRS 9 and IFRS 7 – initial application of Interest Rate
Benchmark Reform
+
IFRS 17 (including the June 2020 Amendments to IFRS 17) Insurance
Contracts
+
Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between
an Investor and its Associate or Joint Venture
+
+
Amendments to IFRS 3 Reference to the Conceptual Framework
+
Amendments to IAS 16 Property, Plant and Equipment – Proceeds before
Intended Use
+
+
Annual Improvements to IFRS Standards 2018-2020 Cycle – Amendments to
IFRS 1 First-time Adoption of International Financial Reporting Standards,
IFRS 9 Financial Instruments, IFRS 16 Leases, and IAS 41 Agriculture
+
Amendments to IAS 1 and IFRS Practice Statement 2 Disclosure of
Accounting Policies
+
+
Amendments to IAS 12 Deferred Tax related to Assets and Liabilities arising
from a Single Transaction
The Directors do not expect that the adoption of the Standards listed above
future periods.
Going concern
a reasonable expectation that the Group has adequate resources to continue
statements. Further detail is contained in the Strategic Report on pages
46-47.
Basis of consolidation
the Company and entities controlled by the Company (its subsidiaries) made
up to 31 December each year. Control is achieved when the Company:
+
Has the power over the investee;
+
Is exposed, or has rights, to variable returns from its involvement with the
investee; and
+
The Company reassesses whether or not it controls an investee if facts and
circumstances indicate that there are changes to one or more of the three
elements of control listed above.
Consolidation of a subsidiary begins when the Company obtains control over
the subsidiary and ceases when the Company loses control of the subsidiary.
and other comprehensive income from the date the Company gains control
until the date when the Company ceases to control the subsidiary.
Ultra
Annual Report
and Accounts 2021
139
Strategic report
Governance
Financial statements
Basis of consolidation
continued
attributed to the owners of the Company and to the non-controlling interests.
Total comprehensive income of subsidiaries is attributed to the owners of the
Company and to the non-controlling interests even if this results in the
subsidiaries to bring their accounting policies into line with the Group’s
accounting policies.
relating to transactions between members of the Group are eliminated in
full on consolidation.
Changes in the Group’s interest in a subsidiary that do not result in a loss of
control are accounted for as equity transactions. The carrying amounts of the
the amount by which the non-controlling interests are adjusted and the fair
value of the consideration paid or received is recognised directly in equity
and attributed to the owners of the Company.
consideration received and the fair value of any retained interest; and (ii) the
previous carrying amount of the assets (including goodwill) and liabilities
of the subsidiary and any non-controlling interests. Amounts previously
recognised in other comprehensive income in relation to the subsidiary
retained earnings) in the same manner as would be required if the relevant
assets or liabilities were disposed of. The fair value of any investment retained
in the former subsidiary at the date when control is lost is regarded as the fair
value on initial recognition for subsequent accounting or, when applicable,
the cost on initial recognition of an investment in an associate or jointly
controlled entity.
Critical accounting judgements and
key sources of estimation uncertainty
In the application of the Group’s accounting policies, the Directors are
required to make judgements (other than those involving estimations)
estimates and assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources. The estimates
and associated assumptions are based on historical experience and other
estimates. The estimates and underlying assumptions are reviewed on an
ongoing basis and included consideration of the potential ongoing impacts
of Brexit and Covid-19. Revisions to accounting estimates are recognised in
period, or in the period of the revision and future periods if the revision
Critical judgements in applying the Group’s accounting policies
have been made in the process of applying the Group’s accounting
Critical accounting estimates and assumptions
The key assumptions concerning the future, and other key sources of
risk of causing a material adjustment to the carrying amounts of assets and
long-term contract arrangements and are accounted for in accordance with
IFRS 15 Revenue from Contracts with Customers. This revenue is derived from
recognition on these contracts is based on estimates of future costs as well
as an assessment of contingencies for technical risks and other risks; for
example, assessment of the time and cost required to design, build, integrate
and test a new product where the technology involved is currently at a low
technology readiness level, and other risks such as the ability to obtain the
are no individual contracts where the estimation uncertainty is considered
portfolio of over-time contracts of a 1% increase in estimated costs to
complete is included in note 3.
The Group accounts for its post-retirement pension plans in accordance
assumptions. For each of these assumptions, there is a range of possible
values. Relatively small changes in some of these variables can have a
but it has no impact on short-term cash contributions since these are
based upon separate independent actuarial valuations.
Details of the pension scheme estimates, assumptions and obligations
at 31 December 2021 are provided in note 29.
Contingent liabilities
As set out in note 33, the Group concluded, with respect to a conduct
of business matter, that the amount of any possible obligation cannot
contingent liability.
Proxy Board
Certain Group companies in the USA undertake work of importance to
US national security; consequently activities are conducted under foreign
ownership regulations, which require operation under a Proxy Agreement.
The regulations are intended to insulate these activities from undue foreign
the management of a Proxy Board is Ultra Electronics Advanced Tactical
Systems Inc. (ATS).
The Directors consider that the Group has control over the operating and
in the Group consolidated accounts in accordance with IFRS 10 Consolidated
Financial Statements.
Business combinations
Acquisitions of subsidiaries and businesses are accounted for using the
acquisition method. The consideration transferred in a business combination
is measured at fair value, which is calculated as the sum of the acquisition-
date fair values of assets transferred by the Group, liabilities incurred by the
Group to the former owners of the acquiree and the equity interest issued by
the Group in exchange for control of the acquiree. Acquisition-related costs
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Business combinations
continued
assumed are recognised at their fair value at the acquisition date, except that:
+
Deferred tax assets or liabilities and assets or liabilities related to employee
+
with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations
are measured in accordance with that standard.
Goodwill is measured as the excess of the sum of the consideration
transferred, the amount of any non-controlling interests in the acquiree, and
the fair value of the acquirer’s previously held equity interest in the acquiree
acquired and the liabilities assumed. If, after reassessment, the net of the
assumed exceeds the sum of the consideration transferred, the amount
of any non-controlling interests in the acquiree and the fair value of the
acquirer’s previously held interest in the acquiree (if any), the excess
When the consideration transferred by the Group in a business combination
includes an asset or liability resulting from a contingent consideration
arrangement, the contingent consideration is measured at its acquisition-
date fair value and included as part of the consideration transferred in a
business combination. Changes in fair value of the contingent consideration
that qualify as measurement period adjustments are adjusted retrospectively,
with corresponding adjustments against goodwill. Measurement period
adjustments are adjustments that arise from additional information obtained
during the ‘measurement period’ (which cannot exceed one year from
the acquisition date) about facts and circumstances that existed at the
acquisition date.
The subsequent accounting for changes in the fair value of the contingent
consideration that do not qualify as measurement period adjustments
reporting dates and its subsequent settlement is accounted for within
is remeasured at subsequent reporting dates in accordance with IFRS 9,
or IAS 37 Provisions, Contingent Liabilities and Contingent Assets, as
appropriate, with the corresponding gain or loss being recognised
When a business combination is achieved in stages, the Group’s previously
held interests in the acquired entity are remeasured to their acquisition-date
Amounts arising from interests in the acquiree prior to the acquisition-date
that have previously been recognised in other comprehensive income are
that interest were disposed of.
If the initial accounting for a business combination is incomplete by the end
of the reporting period in which the combination occurs, the Group reports
provisional amounts for the items for which the accounting is incomplete.
Those provisional amounts are adjusted during the measurement period
information obtained about facts and circumstances that existed as of
recognised as of that date.
Goodwill
Goodwill is initially recognised and measured as set out above. Goodwill
is not amortised but is reviewed for impairment at least annually. Any
impairment is recognised immediately in the income statement and is
not subsequently reversed.
For the purpose of impairment testing, goodwill is allocated to each of the
combination. Cash-generating units or groups of cash-generating units to
which goodwill has been allocated are tested for impairment annually, or
more frequently when there is an indication that the unit may be impaired. If
the recoverable amount of the cash-generating unit is less than the carrying
carrying amount of any goodwill allocated to the unit and then to the other
assets of the unit pro rata on the basis of the carrying amount of each asset
in the unit. An impairment loss recognised for goodwill is not reversed in
a subsequent period.
Goodwill arising on acquisitions before the date of transition to IFRSs has
been retained at the previous UK Generally Accepted Accounting Practice
(GAAP) amounts subject to being tested for impairment at that date.
Revenue recognition
The Group recognises revenue from the sales of goods and from long-term
contract. Revenue is recognised either when the performance obligation in
the contract has been performed, i.e. ‘point in time’ recognition, or, over time,
as control of the performance obligation is transferred to the customer.
Under a book-and-hold agreement with a customer, the Group may have
physical possession of an asset that the customer controls, therefore the
revenue is recognised when the customer has control of the asset. The Group
recognised at the appropriate point whether over time or at a point in time;
1. Identify the contract(s) with a customer.
2. Identify the performance obligations.
3. Determine the transaction price.
4. Allocate the transaction price to the performance obligations.
For each performance obligation, the Group determines if revenue will be
recognised over time or at a point in time.
Over time
+
by the Group’s performance as it performs.
+
The Group’s performance creates or enhances an asset that the customer
controls as the asset is created or enhanced.
+
The Group’s performance does not create an asset with an alternative use
to the Group and it has an enforceable right to payment for performance
completed to date.
Statement of accounting policies
continued
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Financial statements
Revenue recognition
continued
Revenue that is recognised over time is determined by reference to the
stage of completion of the performance obligation. For each performance
obligation to be recognised over time, revenue and attributable margin are
calculated by reference to reliable estimates of transaction price and total
expected costs, after making suitable allowances for technical and other risks,
except in limited scenarios where the proportion of costs incurred would not
be representative of the stage of completion. Owing to the complexity of
some of the contracts undertaken by the Group, the cost estimation process
and the allocation of costs and revenue to each performance obligation are
carried out using the experience of the Group’s engineers, project managers
updated on a regular basis. Some of the factors impacting cost estimates
of the work to be performed, the technology readiness level, the availability of
materials and the performance of sub-contractors. Revenue and associated
margin are recognised progressively as costs are incurred and as risks have
been mitigated or retired.
For contracts with multiple activities or deliverables, management considers
whether those promised goods and services are: (i) distinct – to be accounted
for as separate performance obligations; (ii) not distinct – to be combined with
or (iii) part of a series of distinct goods and services that are substantially the
same and have the same pattern of transfer to the customer. Goods and
or together with other resources that are readily available to the customer
Ultra contracts might be to design and build a system as one performance
obligation when the criteria above are assessed. Other Ultra contracts might
contain one performance obligation to design a system and a separate
obligation to build them: these are required to be treated as separate
performance obligations if, for example, the customer obtains control
of the design and could ask another contractor to build them.
At the start of a contract, the total transaction price is estimated as the
amount of consideration to which the Group expects to be entitled in
exchange for transferring the promised goods and services to the customer,
excluding sales taxes. The transaction price is allocated to each performance
obligation based on relative standalone selling prices of all items in the
contract. This could be based on list prices, external market evidence or,
where individual tailored products are concerned, based on the estimated
expected costs to produce the item or deliver the services, plus a reasonable
consideration (for example, discounts dependent on sales levels, returns,
refunds, rebates and other incentives) is included based on the expected
value, or most likely amount, only to the extent that it is highly probable that
there will not be a reversal in the amount of cumulative revenue recognised.
The transaction price does not include estimates of consideration resulting
existing or creates new enforceable rights and obligations.
Payment terms vary from contract to contract but will typically be 30 days
from the date of invoice. The Group’s contracts are not considered to include
between the consideration and the cash selling price.
Incremental costs of obtaining a contract are capitalised to the extent that
they are recoverable from the customer and the anticipated contract period
will be more than one year. Incremental costs are those that would not have
arisen if the contract had not been obtained. Unconditional bid or proposal
costs would not be capitalised as costs to obtain a contract because they are
incurred whether the contract is obtained or not. Ultra has not capitalised any
price and the Group’s measure of progress towards the satisfaction of the
performance obligation is recognised either as: (i) an additional separate
contract; (ii) as a termination of the existing contract and creation of a new
contract; or (iii) as part of the original contract using a cumulative catch-up.
Where the outcome of a long-term contract cannot be estimated reliably,
contract revenue is recognised to the extent of contract costs incurred that
it is probable will be recoverable. Contract costs are recognised as expenses
in the period in which they are incurred.
When it is probable that total contract costs will exceed total contract revenue,
the expected loss is recognised as an expense immediately.
Point in time
If performance obligations do not meet the criteria to recognise revenue over
time, then revenue from the sale of goods or services is recognised at a point
in time. This is measured at the fair value of the consideration received or
receivable and represents amounts receivable for goods or services provided
in the normal course of business, net of discounts, VAT and other sales-related
taxes. Revenue is normally recognised when control of the goods or services
has transferred to the customer. This may be:
+
At the point of physical delivery of goods and acceptance by the customer;
+
When the customer has legal title to the asset;
+
the asset; or
+
product testing has been completed.
In the majority of cases, revenue is recognised at the point of physical delivery
and acceptance by the customer, and the Group has the right to payment.
Contract assets and liabilities
The timing of payments received from customers, relative to the recording
liabilities recorded on the Group’s balance sheet.
The majority of development programmes have payment terms based on
contractual milestones, which are not necessarily aligned to when revenue
is recognised, particularly for those contracts with revenue recognised over
time by reference to the stage of completion. This can lead to recognition of
revenue in advance of customer billings; ‘amounts receivable from over-time
contract customers’ relates to work performed and revenue recognised on
agreed contracts prior to the customer being invoiced. On other
development programmes, a proportion of the transaction price is received
in advance and consequently a contract liability arises; ‘amounts payable to
over-time contract customers’ relates to payments received from customers
in relation to the contract prior to the work being completed and the revenue
recognised.
For contracts where revenue is recognised at a point in time, ‘deferred
income’ recorded on the balance sheet represents payments received from
customers prior to the work being completed and the revenue recognised,
and ‘accrued income’ recorded on the balance sheet represents any revenue
recognised on agreed contracts prior to the customer being invoiced.
When a good or service provided is returned or to be refunded the revenue is
reversed equal to the amount originally recognised as revenue for that good
or service. Consideration of returns and refunds is made when calculating the
transaction price to be allocated to the performance obligation.
A warranty may represent a separate performance obligation if it is
distinct from the other elements of the contract (i.e. it can be sold separately
and provides additional goods and services beyond the agreed-upon
treated as provisions. If it is a separate performance obligation, then the
revenue is recognised when the control of the additional good or service
under the warranty is passed to the customer.
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Research and development
Expenditure on research activities is recognised as an expense in the period
in which it is incurred.
Any internally generated intangible asset arising from development activities
development cost of the asset can be measured reliably.
Internally generated assets are amortised on a straight-line basis over
their useful lives. Where no internally generated intangible asset can be
recognised, development expenditure is recognised as an expense in
the period in which it is incurred.
Other intangible assets
Costs associated with producing or maintaining computer software
programmes for sale are recognised as an expense as incurred. Costs
software products controlled by the Group, that will generate economic
are recognised as intangible assets. Capitalised software development
expenditure is stated at cost less accumulated amortisation and impairment
losses. Amortisation is provided on a straight-line basis over the estimated
useful life of the related asset (see note 14).
Acquired computer software licences for use within the Group are capitalised
as intangible assets on the basis of the costs incurred to acquire and bring to
Patents and trademarks are stated initially at historical cost. Patents and
amortisation and impairment losses.
Intangible assets arising from a business combination whose fair value can
be reliably measured are separated from goodwill and amortised over their
remaining estimated useful lives.
At each balance sheet date, the Group reviews the carrying amounts of its
tangible and intangible assets to determine whether there is any indication
exists, the recoverable amount of the asset is estimated in order to determine
the extent of the impairment loss. Where the asset does not generate cash
recoverable amount of the cash-generating unit to which the asset belongs.
annually and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value
discounted to their present value. If the recoverable amount of an asset
is estimated to be less than its carrying amount, the carrying amount of
the asset is reduced to its recoverable amount. An impairment loss is
recognised as an expense immediately.
Where an impairment loss subsequently reverses, the carrying amount of the
asset is increased to the revised estimate of its recoverable amount, but so
that the increased carrying amount does not exceed the carrying amount
that would have been determined had no impairment loss been recognised
for the asset in prior years. A reversal of an impairment loss is recognised as
income immediately, except for goodwill.
Property, plant and equipment
Property, plant and equipment is shown at original historical cost, net
of depreciation and any provision for impairment.
estimated residual value, of each asset on a straight-line basis over its
expected useful life as follows:
Freehold buildings
40 to 50 years
Short leasehold improvements
over remaining period of lease
Plant and machinery
3 to 20 years
Freehold land and assets under construction are not depreciated.
Leases
IFRS 16 requires that all leases and the related rights and obligations should
be recognised on the lessee’s balance sheet, unless the lease is less than one
year in length or is for a low value asset. Leases that do not meet these criteria
are expensed on a straight-line basis.
For each lease, a liability for lease obligations to be incurred in the future must
be recognised. Correspondingly, a right-of-use asset is capitalised. The asset
and liability are initially measured at the present value of all future lease
payments plus directly attributable costs.
The Group’s leases relate to real estate, vehicles, printers & copiers and other
Non-property.
The Group’s property leases range from one year to 25 years in length and
are based primarily in the UK, USA and Canada. The Group’s non-property
leases range from one year to seven years.
The Group recognises a right-of-use asset and a lease liability at the lease
commencement date. The asset and liability are initially measured at the
present value of all future lease payments plus directly attributable costs.
Payments made before the commencement date and incentives (e.g. rent free
periods) received from the lessor are also included in the carrying amount of
the right-of-use asset. The asset is then amortised over the useful life of the
lease on a straight-line basis. Further details on the valuation of the right-of-
use asset and the lease liability and the discount rate applied in calculating
the present value are discussed below.
impact of the lease is split between the principal and interest.
Short-term leases and leases of low-value assets
As permitted under IFRS 16 paragraph 6, the Group has elected not to
recognise leases that are less than one year in length or are for a low-value
asset (<£3.5k) on the balance sheet. These leases are expensed on a
straight-line basis as short-term leases or leases of low-value assets.
Valuation of lease liabilities and right-of-use assets
IFRS 16 requires the Group to make judgements that impact the initial
valuation of the lease liabilities and the right-of-use assets. These judgements
include: determining what contracts are in scope of IFRS 16, determining the
lease contract term and determining the interest rate used for discounting
The lease term is the non-cancellable period of the lease contract. It can also
be impacted by periods covered by an option to extend the lease if the Group
is reasonably certain that it will exercise that option. For lease contracts with
to the economic useful life of the asset or typical market contract term. The
lease term is used to determine the depreciation rate of right-of-use assets.
Statement of accounting policies
continued
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Financial statements
Property, plant and equipment
continued
method. The present value of the lease payment is determined using the
discount rate. The discount rate is determined based on: 1) the risk-free rate
on Government bonds in the location and currency of the lease over a similar
premium. Discount rates remain the same throughout the lease unless
the lease term or renewal assumptions change and range between
0.5% and 10.5%.
The lease liability and right-of-use asset are remeasured when there
is a change in the future lease payments arising from a change in the
expected lease term, or a change in the estimated total cost of the lease.
Subletting
The Group sublets some property space to third parties. For these sublets,
rewards of the property are transferred to the lessee through the lease,
the cash income from the sublet is deducted from the right-of-use asset and
liability of the Group’s lease (“head lease”) for that property unless the head
lease is a short lease or a low value asset lease.
If the sublease is considered an operating lease, then the payments received
from the lease are recognised as income on a straight-line basis.
Inventories
basis and including an appropriate proportion of overheads incurred in
bringing the inventories to their present location and condition) and net
realisable value. Provision is made for any obsolete, slow-moving or
defective items.
Trade receivables
Trade receivables are initially measured at transaction price (being the same
as fair value) then subsequently remeasured at amortised cost less any
impairment. An appropriate provision is recorded for expected credit losses
Group measures the provision at an amount equal to lifetime expected
credit losses, estimated by reference to past experience and relevant
forward-looking factors.
Amounts receivable from over-time
contract customers
For a contract recognised over time under IFRS 15 the control of the product
may be passed to the customer before the customer is invoiced. At this point,
revenue is recognised and an asset is recorded on the balance sheet as
an amount receivable from over-time contract customers. The amount
when it is to be invoiced within 12 months, otherwise it is recorded as a
non-current asset. This asset is transferred to trade receivables once the
customer is invoiced, following which cash is expected to be received per
the agreed contractual terms. Refer to note 19 for details on the average
debtor days.
Amounts due to over-time contract customers
For a contract recognised over time under IFRS 15, a payment may be
received from the customer before the control of the product is passed to
the customer. At this point a liability is recorded on the balance sheet as an
amount due to over-time contract customers, which is recognised net of any
refunds expected to be paid. This liability is derecognised when the control is
passed to the customer and revenue can be recorded. Amounts due to over-
time contract customers is recorded as a current liability when the revenue is
as a non-current liability.
Cash and cash equivalents
Cash and bank balances comprise cash at bank and in hand and short-term
deposits with an original maturity date of three months or less. Cash and
overdrafts are only presented net when there is a right and intention to settle
on a net basis, otherwise overdrafts are presented as current liabilities. For
of cash and short-term deposits, less overdrafts, which are repayable
on demand.
Assets and liabilities held for sale
of carrying amount and fair value less costs to sell.
be recovered through a sale transaction rather than through continuing use.
This condition is regarded as met only when the sale is highly probable and
the asset is available for immediate sale in its present condition. Management
must be committed to the sale which should be expected to qualify for
Foreign currency
Transactions denominated in foreign currencies are recorded in the local
currency at the actual exchange rates at the date of the transactions.
Monetary assets and liabilities denominated in foreign currencies at the
balance sheet date are reported at the rates of exchange prevailing at that
date. Any gain or loss arising from a change in exchange rates subsequent
to the date of the transaction is included as an exchange gain or loss in
the income statement.
into Sterling, which is the functional currency of the Company, using the
sheets of overseas subsidiary undertakings are translated into Sterling at
equity and transferred to the Group’s translation reserve. The Group does
not hedge exposure arising from the retranslation of the results of
foreign subsidiaries.
Goodwill and fair value adjustments on the acquisition of foreign entities
are treated as assets and liabilities of the foreign entity and translated at
the closing rate. The Group has elected to treat goodwill and fair value
adjustments arising on acquisitions before the date of transition to IFRSs
as Sterling-denominated assets and liabilities.
Borrowing costs
are incurred, except where they relate to qualifying assets, in which case
they are capitalised.
Government grants
Government grants are recognised in the income statement so as to match
them with the expenditure towards which they are intended to contribute,
to the extent that the conditions for receipt have been met and there is
reasonable assurance that the grant will be received.
Government assistance provided in the form of below-market rate of interest
the fair value of the loan and is matched against the related expenditure.
The fair value of the loan is calculated using prevailing market interest rates.
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and their assets are held independently of the Group by Trustees.
determined using the projected unit Credit method, with actuarial valuations
being carried out at each balance sheet date. The actuarial gains and losses
are recognised in full in the period in which they occur. They are recognised
outside the income statement and presented in the statement of
comprehensive income.
are already vested, and otherwise is amortised on a straight-line basis over
Curtailment gains or losses are recognised immediately in the income
statement.
for unrecognised past service cost, and as reduced by the fair value of
scheme assets.
an expense as they fall due.
Trade payables
Trade payables are initially measured at fair value then subsequently
remeasured at amortised cost.
Loans and overdrafts
Loans and overdrafts are recognised initially at fair value, being proceeds
received less directly attributable transaction costs. Subsequent to initial
recognition, loans and overdrafts are stated at amortised cost with any
transaction costs amortised to the income statement over the period of the
amount initially recognised and the redemption value is recognised in the
income statement over the period of the borrowings.
Share-based payments
The Group issues equity-settled share-based payments to certain employees.
Equity-settled share-based payments are measured at fair value at the date of
grant. The fair value determined at the grant date is expensed on a straight-
line basis over the vesting period, based on the Group’s estimate of shares
conditions.
Fair value is measured by use of a Black-Scholes model for the share option
plans and a stochastic model for awards made under the 2017 Long-Term
Incentive Plan.
The credits in respect of equity-settled amounts are included in equity.
Provisions
Provisions, including property-related and contract-related provisions,
are recognised in the balance sheet when the Group has a legal or
constructive obligation as a result of a past event, and where it is
settle the obligation.
products under warranty, based on known exposures and historical
occurrences. Provisions for restructuring costs are recognised when
the Group has a detailed formal plan for the restructuring that has
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds
received, net of direct issue costs.
Taxation
The tax expense represents the sum of the current tax payable and
deferred tax.
it excludes items of income or expense that are taxable or deductible in
other years and it further excludes items that are never taxable or deductible.
The Group’s liability for current tax is calculated using tax rates that have
been enacted or substantively enacted by the balance sheet date.
statements and the corresponding tax bases used in the computation of
Deferred tax liabilities are generally recognised for all taxable temporary
recognition (other than in a business combination) of other assets and liabilities
arising on investments in subsidiaries except where the Group is able to
The carrying amount of deferred tax assets is reviewed at each balance sheet
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised. Deferred tax is
charged or credited in the income statement, except when it relates to items
charged or credited directly to equity, in which case the deferred tax is also
dealt with in equity.
relate to income taxes levied by the same taxation authority and the Group
intends to settle its current tax assets and liabilities.
IFRS 9
currency contracts and interest rate swaps, to reduce its exposure to
exchange rate and interest rate movements. Ultra does not hold or
issue derivatives for speculative or trading purposes.
The Group’s hedging strategy under IFRS 9 is to minimise income statement
volatility arising from re-valuation of US Dollar assets and liabilities held on the
US Dollar borrowings with the net investments in US companies and net US
Dollar assets held on the UK balance sheet.
Classication and measurement
Statement of accounting policies
continued
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Financial statements
continued
measured at fair value. Where assets are measured at fair value, gains and
or loss, FVTPL), or recognised in other comprehensive income (fair value
through other comprehensive income, FVTOCI).
A debt instrument is measured at amortised cost if: a) the objective is to
of principal and interest. A debt instrument is measured at FVTOCI if: a) the
the instrument solely represent payments of principal and interest. All other
liability attributable to changes in credit risk is recognised in other
comprehensive income. The Canadian Government loans are measured
Hedge accounting
Hedge accounting will not generally be applied to transactional hedging
relationships, such as hedges of forecast or committed transactions.
However, hedge accounting will be applied to translational hedging
relationships where it is permissible under IFRS 9. When hedge accounting is
criteria at the beginning of each hedged period:
+
There is an economic relationship between the hedged item and the
hedging instrument.
+
from that economic relationship.
+
The hedge ratio of the hedging relationship is the same as that actually
used in the economic hedge.
relating to the hedge ratio but the risk management objective for that
designated hedging relationship remains the same, the hedge ratio of the
hedging relationship is adjusted so that it meets the qualifying criteria.
amount of the hedged asset or liability will be adjusted by the increase or
decrease in the fair value attributable to the hedged risk and the resulting gain or
loss will be recognised in the income statement where permissible under IFRS 9.
fair value of the hedging instrument will be recognised in the consolidated
statement of comprehensive income and accumulated in equity.
the accumulated gains and losses recognised in equity will be either recycled
will be recognised as adjustments to its initial carrying amount.
Income statement
Additional line items are disclosed in the consolidated income statement
when such presentation is relevant to an understanding of the Group’s
Exceptional items
When items of income or expense are material and they are relevant to
material costs or reversals arising from a restructuring of the Group’s
operations, material creation or reversals of provisions, and material
litigation settlements.
Underlying and non-statutory performance
measures
IFRS and are considered to be non-statutory. This additional information is
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.
The underlying presentation is regularly reviewed by management to
identify items that are unusual, due to their materiality and nature, and other
items relevant to an understanding of the long-term trends of the Group’s
performance. The non-statutory performance measures are consistent
with how business performance is planned and reported within the internal
management reporting to the divisional management teams, Executive
Committee and to the Board. Some of the measures are used for setting
remuneration targets.
The reconciliations between underlying and statutory measures are shown
underlying earnings per share, are set out in note 12.
is used by the Board to monitor and measure the
underlying trading performance of the business using a measure that is
+
Costs associated with mergers & acquisitions (M&A), including the costs
associated with the proposed acquisition of the Group by Cobham Ultra
Acquisitions Limited, disposals or closures: delivery of the Group’s strategy
has included investment in acquisitions that enhance Ultra’s portfolio of
capabilities, as well as disposal or closure of non-core businesses, facilities
is to align short-term operational decisions with this longer-term strategy.
Items excluded are directly attributable external legal and adviser costs,
adjustments to the fair value of contingent consideration and acquired
inventory, payment of retention bonuses, restructuring costs related to
disposals and closures, and gains or losses made upon the disposal or
closures. Similarly, amortisation and impairment of goodwill or intangible
they are not related to the in-year operational performance of the business,
being driven by the timing and amount of historical investment in acquired
businesses. The directly attributable external costs associated with the
proposed acquisition of the Group by Cobham Ultra Acquisitions Limited,
such as adviser costs incurred on bid-defence and subsequent adviser and
not related to the in-year operational performance of the business or
execution of the Group’s strategy.
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Underlying and non-statutory performance
measures
continued
+
investigations and settlement of litigation that are not in the normal course
of business. These costs are not related to the in-year operational
performance of the business and are excluded.
+
there is volatility in the valuation of outstanding instruments as exchange
particular periods. These gains or losses are excluded to ensure appropriate
and timely commercial decisions are made regarding mitigating the Group’s
foreign currency exposures.
is used by the Board to monitor and
measure the underlying cash performance of the business using a measure
that is comparable over time. The Group is cash-generative and reinvests
funds to meet its strategic objectives. Management believes that using cash
generated by operations, after principal payments on leases, net expenditure
development and other intangibles, and adding back the operating cash
& expenses is the appropriate underlying metric of the cash cost of sustaining
a growing business.
Underlying operating cash conversion
is the ratio of underlying operating
is used by management to monitor utilisation of cash in line
operating activities, after interest received, purchase of property, plant
and equipment, proceeds on disposal of property, plant and equipment,
expenditure on product development and other intangibles, and principal
payments on leases.
Organic growth
currency translation, acquisitions, disposals and closures of businesses.
It is calculated as the annual rate of increase that was achieved at constant
currency exchange rates, assuming that acquisitions made during the
prior-year were only included for the same proportion of the current year,
operation or ownership. The constant exchange comparison retranslates the
prior year reported results from the prior year’s average exchange rates into
the current year’s average exchange rates. See note 2 for reconciliations
between absolute growth and organic growth.
Adjusted EBITDA
depreciation charges and before amortisation arising on non-acquired
intangible assets. Net debt used in the ‘net debt to adjusted EBITDA’ metric
comprises borrowings including pension obligations and lease liabilities, less
cash and cash equivalents. For covenant purposes, net debt does not include
pension obligations and all impacts of IFRS 16 are removed from adjusted
EBITDA and net debt, and adjusted EBITDA is amended to remove the
EBITDA generated by businesses up to the date of their disposal.
ROIC
capital (average of opening and closing balance sheets). Invested capital is
pension obligations, tax and derivatives. This allows ROIC to be calculated on
the operating assets of the business within the control of management. The
calculation for ROIC is shown in note 2. ROIC under the previous measure,
as used in the LTIP targets for the 2017–2019 issuances, is calculated as
(average of opening and closing balance sheets). Invested capital is calculated
to eliminate the impact of the 2017 equity raise and subsequent buy-back)
adjusted for amortisation and impairment charges arising on acquired
intangible assets and goodwill, and the add-back of other non-underlying
performance items, such as tax, fair value movements on derivatives, the S3
programme, acquisition and disposal-related costs and the Ithra (Oman)
contract, impacting the balance sheet.
Average Working Capital Turn
(AWCT) is the ratio of the 12-month average
payables excluding lease liabilities) to gross revenue, calculated at constant
FX rates.
Interest cover
interest per note 8).
Underlying tax
underlying tax rate is underlying tax expressed as a percentage of underlying
share. See note 12.
exclude fair value movements on derivatives.
Order intake
is the value of new contractually committed customer orders
(and amendments to existing orders) booked in the year.
Order book
obligations from contractually committed customer orders.
Order cover
is the ratio of the 31 December 2021 closing order book due
for execution in 2022, to consensus revenue for 2022.
Statement of accounting policies
continued
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147
Strategic report
Governance
Financial statements
Note
2021
£m
2020
restated
£m
2019
restated
£m
Fixed assets
Property, plant and equipment
37 1.8
1.0
2.5Other intangible assets
38
1.5
– –
39 785.3
1,076.4
1,078.6Leased assets
40 2.5
1.7
2.11,080.6
1,083.2 789.6
Current assets
Trade and other receivables
41 7.9
9.0
3.0Cash and cash equivalents
11.1
5.2 3.8
20.1
8.2 11.7
Creditors:
43 (140.0)
(121.0)
(111.0)Net current liabilities
(100.9)
(102.8) (128.3)
Total assets less current liabilities
979.7
980.4 661.3
Creditors:
amounts falling due after more than one year
44 (188.8)
(124.5)
(122.7)Provisions for liabilities
45
(6.1)
– –
Net assets
849.1
857.7 472.5
Capital and reserves
Share capital
47 3.5
3.6
3.6Share premium account
48 203.2
208.1
205.5Capital redemption reserve
48 0.4
0.4
0.4
48 266.8
637.3
649.6Own shares
48 (1.4)
(0.3)
(1.4)Shareholders’ funds
849.1
857.7 472.5
were approved by the Board of Directors and authorised for issue on 23 March 2022.
On behalf of the Board,
J. SCLATER
The accompanying notes are an integral part of this balance sheet.
Company balance sheet
For the year ended 31 December 2021
Company’s investment in DF Group Limited. £35.8m has been reversed as at 31 December 2019 and £291.8m has been reversed at 31 December 2020. In addition, £2.5m of liabilities previously presented
in the 31 December 2020 balance sheet within ‘Creditors: amounts falling due within one year’ were not the legal liability of the Company and have been removed from the balance sheet. See note 51.
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148
Share
capital
£m
Share
premium
account
£m
Capital
redemption
reserve
£m
Retained
earnings
£m
Own
shares
£m
Total
£m
Restated balance at 1 January 2020*
3.5 203.2 0.4 266.8 (1.4) 472.5
– – –
418.0
–418.0
Total comprehensive income for the year
– – –
418.0
–418.0
Equity-settled employee share schemes
0.1 2.3
–
2.6–
5.0De-recognition of deferred tax on share based payments
– – –
0.9
–0.9
Dividends paid
– – –
(38.7)
–(38.7)
Restated balance at 31 December 2020*
3.6 205.5 0.4 649.6 (1.4) 857.7
– – –
22.6
–22.6
Total comprehensive income for the year
– – –
22.6
–22.6
Disposal of own shares
– – –
0.5 1.1 1.6
Equity-settled employee share schemes
–
2.6
–5.9
–8.5
Tax on share based payments
– – –
(0.2)
–(0.2)
Dividends paid
– – –
(41.1)
–(41.1)
Balance at 31 December 2021
3.6 208.1 0.4 637.3 (0.3) 849.1
Company statement of changes in equity
For the year ended 31 December 2021
of the Company’s investment in DF Group Limited. £35.8m has been reversed at 31 December 2019 and £291.8m has been reversed at 31 December 2020. The 31 December 2020 retained earnings balance
has also been restated for £2.5m of liabilities previously presented in the 31 December 2020 balance sheet within ‘Creditors: amounts falling due within one year’ which were not the legal liability of the
Company. See note 51.
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Strategic report
Governance
Financial statements
37 Property, plant and equipment
Total
£m
Cost
At 1 January 2020
2.6
Additions
1.0
Disposals
–
At 1 January 2021
3.6
Additions
0.1
(1.5)
Disposals
(0.6)
At 31 December 2021
1.6
Accumulated depreciation
At 1 January 2020
(0.8)
Charge
(0.3)
Disposals
–
At 1 January 2021
(1.1)
Charge
(0.4)
0.8
Disposals
0.1
At 31 December 2021
(0.6)
Net book value
At 31 December 2021
1.0
At 31 December 2020
2.5
38 Other intangible assets
Total
£m
Cost
At 1 January 2021
–
Additions
0.9
1.5
At 31 December 2021
2.4
Accumulated depreciation
At 1 January 2021
–
Charge
(0.1)
(0.8)
At 31 December 2021
(0.9)
Net book value
At 31 December 2021
1.5
At 31 December 2020
–
Notes to accounts – Company
For the year ended 31 December 2021
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150
39 Investments
a) Principal subsidiary undertakings
The Company owns either directly or indirectly 100% of the ordinary share capital of a number of subsidiary undertakings as set out in note 36.
b) Investment in subsidiary undertakings
Total
£m
At 1 January 2021*
1,078.6
Additions
2.7
Disposals
(4.9)
At 31 December 2021
1,076.4
Group Limited. See note 51.
40 Leased assets
Total
£m
Cost
At 1 January 2020
2.8
Additions
–
At 1 January 2021
2.8
Additions
–
At 31 December 2021
2.8
Accumulated depreciation
At 1 January 2020
(0.3)
Charge
(0.4)
At 1 January 2021
(0.7)
Charge
(0.4)
At 31 December 2021
(1.1)
Carrying amount
At 31 December 2021
1.7
At 31 December 2020
2.1
The Company’s leased assets relate to real estate.
Notes to accounts – Company
For the year ended 31 December 2021
continued
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Strategic report
Governance
Financial statements
41 Trade and other receivables
Amounts falling due after more than one year
2021
£m
2020
£m
Deferred tax assets
(see note 42)
2.1
1.5
2.1
1.5
Amounts falling due within one year
2021
£m
2020
£m
Amounts due from subsidiary undertakings
4.0
0.4
Other receivables
0.9
0.4
Prepayments
2.0
0.7
6.9
1.5
Total trade and other receivables
9.0
3.0
Amounts due from subsidiary undertakings are unsecured and repayable on demand.
42 Deferred tax
Movements in the deferred tax asset were as follows:
2021
£m
2020
£m
Beginning of year
0.7
0.1
(0.2)
0.6
(Charge)/credit direct to equity
(0.2)
–
End of year
0.3
0.7
The deferred tax balances are analysed as follows:
2021
£m
2020
£m
Employee share option costs
2.1
–
(1.8)
0.7
Deferred tax
0.3
0.7
These balances are shown as follows:
2021
£m
2020
£m
Debtors: amounts falling due after more than one year
2.1
1.5
Creditors: amounts falling due after more than one year
(1.8)
(0.8)
Deferred tax
0.3
0.7
recognised as their recovery is uncertain.
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43 Creditors: amounts falling due within one year
2021
£m
2020
restated
£m
Borrowings
(see note 46)
0.4
10.7
Amounts owed to subsidiary undertakings
103.2
82.5
Other payables
0.8
1.4
16.6
16.4
121.0
111.0
The bank loans held in borrowings above are unsecured. Interest was predominantly charged at 0.65% (2020: 0.65%) over base or contracted rate.
Amounts owed to subsidiary undertakings are unsecured and repayable on demand.
removed from the balance sheet. See note 51.
44 Creditors: amounts falling due after more than one year
2021
£m
2020
£m
Borrowings
(see note 46)
122.7
121.9
Deferred tax liability
(see note 42)
1.8
0.8
124.5
122.7
45 Provisions for liabilities
Contract-
related and
other
£m
Total
£m
At 1 January 2021
– –
Created
6.1 6.1
At 31 December 2021
6.1 6.1
Contract-related and other provisions comprise provisions relating to contract execution and delivery which are utilised over the period as stated in the contract
Notes to accounts – Company
For the year ended 31 December 2021
continued
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Strategic report
Governance
Financial statements
46 Borrowings
Borrowings fall due as analysed below:
2021
£m
2020
£m
Amounts due within one year
Bank loans and overdrafts
–
10.1
Lease liability
0.4
0.6
0.4
10.7
Amounts due after more than one year
Bank loans
19.3
18.8
Unsecured loan notes
101.4
101.0
Lease liability
2.0
2.1
122.7
121.9
Interest on unsecured loan notes was charged at 3.71% (2020: 3.71%); £79.5m (2020: £50.0m) of notes are repayable in 2-5 years and £21.9m (2020: £51.0m) are
47 Called-up share capital
The movements are disclosed in note 26.
48 Equity reserve
(2020: £2.1m gain). Further details in respect of dividends are presented in note 11 and in respect of share-based payments in note 26.
The Company holds 28,045 own shares (2020: 108,494).
49 Related parties
Transactions with Corvid Holdings Limited are set out in note 32.
50 Contingent liabilities
Contingent liabilities relating to Ultra Electronics Holdings plc are as set out in note 33.
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51 Prior year restatement
the value-in-use exceeded the carrying value of the investment by £35.8m in 2019 and £454.2m in 2020. The cumulative impairment losses that had been
increase in retained earnings, investments and net assets in 2020.
In addition to the above, £2.5m of liabilities previously presented in the 31 December 2020 balance sheet within ‘Creditors: amounts falling due within one year’
were not the legal liability of the Company. As such, this has been corrected with the associated liability removed from the balance sheet, and an associated
entry recorded in the retained earnings as at 31 December 2020.
A reconciliation of the 2019 and 2020 balance sheet as previously reported to the restated position is provided below:
2019
As previously
reported
£m
Impairment
reversal
£m
2019
As restated
£m
2020
As previously
reported
£m
Impairment
reversal and
derecognition of
liability
£m
2020
As restated
£m
Fixed assets
Property, plant and equipment
1.8 2.5
–
1.8–
2.5Investments
749.5 35.8 785.3 751.0 327.6 1,078.6
Leased assets
2.5 2.1
–
2.5–
2.1753.8 35.8 789.6 755.6 327.6 1,083.2
Current assets
Trade and other receivables
7.9
–
7.9 3.0
–3.0
Cash and cash equivalents
3.8
–
3.8 5.2
–5.2
11.7 8.2
–
11.7–
8.2Creditors: amounts falling due within one year
(140.0)
–
(140.0) (113.5) 2.5 (111.0)
Net current liabilities
(128.3) (105.3) 2.5 (102.8)
–
(128.3)Total assets less current liabilities
625.5 35.8 661.3 650.3 330.1 980.4
Creditors: amounts falling due after more than one year
(188.8)
–
(188.8) (122.7)
–(122.7)
Net assets
436.7 35.8 472.5 527.6 330.1 857.7
Capital and reserves
Share capital
3.5 3.6
–
3.5–
3.6Share premium account
203.2 205.5
–
203.2–
205.5Capital redemption reserve
0.4 0.4
–
0.4–
0.4Retained earnings
231.0 35.8 266.8 319.5 330.1 649.6
Own shares
(1.4)
–
(1.4) (1.4)
–(1.4)
Shareholders’ funds
436.7 35.8 472.5 527.6 330.1 857.7
Notes to accounts – Company
For the year ended 31 December 2021
continued
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Strategic report
Governance
Financial statements
A summary of the Company’s principal accounting policies, all of which have
been applied consistently throughout the year and preceding year, unless
the Company, are set out below:
Basis of accounting
The Company accounts have been prepared under the historical cost
convention and in accordance with FRS 101 Reduced Disclosure Framework.
by section 408 of the Companies Act 2006. As permitted by FRS 101, the
Company has taken advantage of the disclosure exemptions available under
disclosed in the Company statement of changes in equity.
Fixed assets and depreciation
Property, plant and equipment are shown at original historical cost, net of
depreciation and any provision for impairment. Depreciation is provided at
asset on a straight-line basis over its expected useful life as follows:
Short leasehold improvements
over remaining period of lease
Plant and machinery
3 to 20 years
Leases
IFRS 16 requires that all leases and the related rights and obligations should
be recognised on the lessee’s balance sheet, unless the lease is less than one
year in length or is for a low-value asset. Leases that do not meet these
criteria are expensed on a straight-line basis.
For each lease, a liability for lease obligations to be incurred in the future must
be recognised. Correspondingly, a right-of-use asset is capitalised. The asset
and liability are initially measured at the present value of all future lease
payments plus directly attributable costs.
The Company’s leases relate to real estate, vehicles, printers and copiers and
other equipment. The Company therefore chose to split the leases between
the following categories: property and non-property.
The Company’s property lease is eight years in length and is based in the UK.
The Company’s non-property leases range from one year to three years.
The Company recognises a right-of-use asset and a lease liability at the lease
commencement date. The asset and liability are initially measured at the
present value of all future lease payments plus directly attributable costs.
Payments made before the commencement date and incentives received
from the lessor are also included in the carrying amount of the right-of-use
asset. The asset is then amortised over the useful life of the lease on a
straight-line basis. Further details on the valuation of the right-of-use asset
and the lease liability and the discount rate applied in calculating the present
value are discussed below.
The cash impact of the lease is split between the principal and interest.
Short-term leases and leases of low-value assets
The Company has elected not to recognise leases that are less than one
year in length or are for a low-value asset (<£3.5k) on the balance sheet.
These leases are expensed on a straight-line basis as short-term leases
or leases of low-value assets.
Valuation of lease liabilities and right-of-use assets
IFRS 16 requires the Company to make judgements that impact the initial
valuation of the lease liabilities and the right-of-use assets. These judgements
include: determining what contracts are in scope of IFRS 16, determining the
lease contract term and determining the interest rate used for discounting
The lease term is the non-cancellable period of the lease contract. It can
also be impacted by periods covered by an option to extend the lease if the
Company is reasonably certain that it will exercise that option. For lease
contract to be equal to the economic useful life of the asset or typical market
contract term. The lease term is used to determine the depreciation rate of
right-of-use assets.
method. The present value of the lease payment is determined using the
discount rate. The Company has used two discount rates; one for property
and one for non-property leases. The discount rate is determined based on:
1) the risk free rate on Government bonds in the location and currency of the
lease over a similar term as the lease; 2) the Company’s borrowing rate; and
the lease unless the lease term or renewal assumptions change and range
between 1.9% and 2.9%.
The lease liability and right-of-use asset are remeasured when there is a
change in the future lease payments arising from a change in the expected
lease term, or a change in the estimated total cost of the lease.
Taxation
UK corporation tax is provided at amounts expected to be paid (or recovered)
using the tax rates and laws that have been enacted or substantially enacted
by the balance sheet date.
originated but not reversed at the balance sheet date where transactions or
events that result in an obligation to pay more tax in the future, or a right to
pay less tax in the future, have occurred at the balance sheet date. Temporary
and therefore recognised, only when, on the basis of all available evidence,
it can be regarded as more likely than not that there will be suitable taxable
can be deducted. Deferred tax is measured at the average tax rates
are expected to reverse based on tax rates and laws that have been
enacted or substantively enacted by the balance sheet date. Deferred
tax is not discounted.
entities under common control. The details of this UK scheme, for which Ultra
Electronics Limited is the sponsoring employer, are set out in note 29. There
to Ultra Electronics Holdings plc.
Statement of accounting policies
For the Company accounts
Ultra
Annual Report
and Accounts 2021
156
Investments
Fixed asset investments are shown at cost less provision for impairment.
Assessment of impairments requires estimates to be made of the value-in-
use of the underlying investments. These value-in-use calculations are
The criteria used in this assessment are consistent with those set out in note
13 and the critical accounting estimates and assumptions as set out below.
Going concern
reasonable expectation that the Group has adequate resources to continue
statements. Further detail is contained in the strategic report on pages 46-47.
Share-based payments
The Company issues equity-settled share-based payments to certain
employees. Equity-settled share-based payments are measured at fair
value at the date of the grant. The fair value determined at the grant date
is expensed on a straight-line basis over the vesting period, based on the
Company’s estimate of shares that will eventually vest. Further disclosure
in relation to share-based payments is given in note 26.
Related parties
The Remuneration of the Directors, who are considered to be the key
management personnel of the Company, is disclosed in the audited
part of the Directors’ remuneration report on page 72.
Loans and overdrafts
Interest-bearing loans and overdrafts are recorded as the proceeds are
received, net of direct issue costs where there is a facility commitment.
In these circumstances, issue costs are deducted from the value of the
loan and amortised over the life of the commitment. Where there is no
including premiums payable on settlement or redemption are accounted for
and are added to the carrying amount of the instrument to the extent that
they are not settled in the period in which they arise.
Critical accounting judgements and
key sources of estimation uncertainty
In the application of the Company’s accounting policies, the Directors are
required to make judgements (other than those involving estimates) that have
assumptions about the carrying amounts of assets and liabilities that are
not readily apparent from other sources. The estimates and associated
assumptions are based on historical experience and other factors that are
The estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the period in which
future periods.
Critical accounting judgements in applying
the Company’s accounting policies
There were no critical accounting judgements that would have a
Critical accounting estimation and
assumptions
risk of resulting in a material adjustment to the carrying amounts of assets
Footnote
The calculations for organic measures are also set out in note 2.
The calculation for underlying earnings per share is set out in note
12. Further detail on non-statutory performance measures is set
out on pages 145-146.
is before amortisation of
intangibles arising on acquisition, acquisition and disposal related
Adjusted EBITDA
before depreciation charges and before amortisation arising
on non-acquired intangible assets. See note 2.
Underlying operating margin
is the underlying operating
is before amortisation of
intangibles arising on acquisition, fair value movements on
derivatives, acquisition and disposal-related costs, gain or loss
legal charges and expenses. See note 2.
Underlying tax
The underlying tax rate is underlying tax expressed as a
to calculate the underlying earnings per share. See note 12.
is cash generated by
legal charges and expenses. See note 2.
Operating cash conversion
Net debt
used in the net debt to adjusted EBITDA metric
comprises borrowings including pension obligations and
lease liabilities, less cash and cash equivalents.
Interest cover
charge on leases, adding back bank interest per note 8).
Organic growth
of increase that was achieved at constant currency translation
when compared to the prior year results as adjusted for any
ownership. See note 2.
Order intake
is the value of new contractually committed
customer orders (and amendments to existing orders) booked
in the year.
Order book
performance obligations from contractually committed
customer orders.
Order cover
is the ratio of the 31 December 2021 closing order
book due for execution in 2022, to consensus revenue for 2022.
Underlying earnings per share
is before amortisation
of intangibles arising on acquisition, fair value movements
on derivatives, acquisition and disposal-related costs net
of contingent consideration adjustments, gain or loss on
Average Working Capital Turn
is the ratio of the 12-month
inventory, receivables and payables excluding lease liabilities)
to gross revenue, calculated at constant FX rates.
ROIC
a percentage of invested capital (average of opening and closing
Group, excluding net debt and lease liability, pension obligations,
tax and derivatives. See note 2.
Total shareholder return
is annual shareholder return (capital
growth plus dividends paid, assuming dividends reinvested) over
Statement of accounting policies
For the Company accounts
continued
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and Accounts 2021
157
Strategic report
Governance
Financial statements
Acronym
ADSI
Air Defence Systems Integrator
AGR
Active Guard and Reserve
AI
ASW
Anti-submarine warfare
ATCS
Amphibious Tactical Communications Systems
AWCT
Average working capital turn
BAME
Black, Asian and Minority Ethnic
BEIS
Department for Business, Energy & Industrial Strategy (UK)
C2I
Command, Control and Intelligence
C4ISR/EW
Command, Control, Communications, Computers (C4)
Intelligence, Surveillance and Reconnaissance (ISR)/Electronic
Warfare (EW)
CAGR
Compound annual growth rate
CGI
Crime Gun Intelligence
CSC
Canadian Surface Combatant
CSR
Corporate Social Responsibility
DARPA
Defense Advanced Research Projects Agency
ECU RP
End Crypto Unit Replacement Programme
EPS
Earnings per share
ER-DIFAR
Extended Range Directional Frequency Analysis
and Recording
ERP
Enterprise resource planning
ESG
Environmental, Social and Governance
EW
Electronic Warfare
FIPS
Federal Information Processing Standards
FTR
Flight Termination Receiver
HMS
Hull mounted sonar
HiPPAG
High pressure pure air generator
HSM
Hardware security modules
IAMD
Integrated Air and Missile Defence
IBIS
IDIQ
IFRS
International Financial Reporting Standards
IP
Intellectual Property
IR&D
Internal research and development
IS
Information systems
ISR
Intelligence, surveillance and reconnaissance
ISS
Integrated sonar system
ITAR
ITN
Integrated tactical network
JADC2
Joint all-domain command and control
MIMO
Multiple input/multiple output
MDI
Multi-domain integration
Acronym
MDIS
Multi-domain intelligence systems
MIS
Management information systems
ML
Machine learning
MSC/ECP
Main static converter/electric cruise propulsion
NATO
North Atlantic Treaty Organisation
NCSC
National Computer Security Center
Net zero Decarbonisation target whereby greenhouse gases emitted
from the atmosphere. The corporate standard followed by
Ultra is set by the Science Based Targets initiative.
NGSSR
Next Generation Surface Search Radar
OBU
Operating Business Unit
Order book
performance obligations from contractually committed
customer orders
ORION
Ultra ORION is a family of multichannel, multiband, point-to-
point (PTP) point-to-multipoint (PMP) and mesh radio systems
PBT
PCS
Precision Control Systems
PSSC
Precision Strike Sensor Core
REAP
Rosetta Echo Advanced Payloads
RF
Radio Frequency
ROIC
Return on invested capital
Sales pipeline
bidding on and the opportunities within the programmes
we are currently delivering on
SBU
Strategic Business Unit
SSA
US Social Security Administration
SSNR
Spectral signal to noise ratio
SSTD
Surface Ship Torpedo Defence
SWaP
Size, Weight and Power
TRILOS
US Army network modernisation programme, Terrestrial
Transmission Line of Sight Radio
UAV
Unmanned aerial vehicle
UGV
Unmanned ground vehicle
UI/UX
User experience/user interface
uIFF
USAF
United States Air Force
USMC
United States Marine Corps
USMDA
United States Missile Defence Agency
USN S&T
United States Navy Science and Technology
USV
Unmanned surface vehicle (water-based)
UUV
Unmanned underwater vehicle
VDS
Variable depth sonar
Glossary
Ultra
Annual Report
and Accounts 2021
158
Financial highlights
2017
£m
2018
†
£m
2019
£m
2020
£m
2021
£m
Revenue
Maritime
329.5 317.9 353.0 391.8
395.4
Intelligence & Communications
200.5 211.1 224.8 241.0
241.3
Critical Detection & Control
245.4 237.7 247.6 227.0
214.0
Total revenue
775.4 766.7 825.4 859.8
850.7
Underlying operating prot
1
Maritime
59.3 52.8 52.5 58.6
59.4
Intelligence & Communications
18.8 21.6 30.2 33.5
37.9
Critical Detection & Control
42.0 38.3 35.5 34.0
32.3
1
120.1 112.7 118.2 126.1
129.6
Underlying operating margin
1
15.5% 14.7% 14.3% 14.7%
15.2%
Prot before tax
60.6 42.6 91.0 103.7
82.7
48.9 32.4 74.6 83.8
66.9
2
116.5 89.3 86.8 116.1
111.5
3
65.3 67.6 64.7 99.4
90.7
Net debt at year end
4
(74.5) (157.5) (154.8) (85.8)
(40.0)
Underlying earnings per share (p)
5
116.7 109.5 119.5 130.6
135.7
Dividend per share (p)
49.6 51.6
^
54.2 56.9
**16.2
Average employee numbers
4,172 4,119 4,089 4,253
4,531
5 Underlying earnings per share is before amortisation of intangibles arising on acquisition, fair value movements on derivatives, acquisition and disposal related costs net of contingent consideration
and in 2018 the loss on closing out a foreign currency derivative contract. See note 12.
† Not prepared under IFRS 16.
^
be paid to shareholders while the acquisition remains conditional on obtaining certain clearances, including UK Government approval. Consequently, the total full year dividend is unchanged from the interim
dividend of 16.2p.
Shareholder information
Five-year review
Annual General Meeting
A separate circular providing the Notice of Annual General Meeting
and details of the resolutions to be put to the meeting will be sent to
shareholders in due course. Proxy votes lodged for each Annual General
Meeting are announced at the meeting and published on the Group’s website
(www.ultra.group). Electronic communication with shareholders is preferred
friendly. However, shareholders may opt to receive hard copy
communications if they wish.
Ultra
Annual Report
and Accounts 2021
159
Strategic report
Governance
Financial statements
Jos Sclater
Simon Pryce
Steve Izquierdo
Chief Human
Louise Ruppel
General Counsel &
Company Secretary
Andrew Puryear
Group Chief
Intelligence &
Communications
Other Critical Detection
& Control business units
Other Group
support functions
Maritime
Sonobuoy Systems
Eric Webster – President
Thomas Link
President
Mike Baptist
President
Communications
Alain Cohen – President
Precision Control Systems
Mike Clayton – President
Global Business Services
Lead: Scott Meyers
Sonar Systems
Bernard Mills – President
Forensic Technology
Alvaro Venegas – President
Corvid – ICT
Lead: Andrew Nanson
Energy
Ognjen Starovic – President
Specialist Radio Frequency
Dan Pikora – President
C2I
Jill Daiber – President
Cyber
Michael Murray – President
Naval Systems & Sensors
Martin Lewis – President
Signature Management & Power
Peter Crawford – President
Businesses operate under the US Proxy Board
Businesses operate under a US Special Security Agreement (SSA)
Operating Business Unit
Strategic Business Unit
Contacts
Company Secretary
Louise Ruppel
Email: information@ultra-electronics.com
Phone: +44 (0) 20 8813 4321
Head of Investor Relations
Gabriella Colley
Email: investor.relations@ultra-electronics.com
Phone: +44 (0) 7891 206 239
Joint Brokers
Numis Securities Ltd.
10 Paternoster Square, London EC4M 7LT
JP Morgan
25 Bank Street, Canary Wharf, London E14 5JP
Auditor
Deloitte LLP
1 New Street Square, London, EC4A 3HQ
Tax Advisers
PricewaterhouseCoopers LLP
10 Bricket Road
St Albans
Herts AL1 3JX
Registrars
Equiniti
6, Broadgate Tower, 20 Primrose Street,
London EC2A 2EW
PR advisors
MHP
6 Agar Street, London WC2N 4HN
Ultra’s organisational structure
P
P
P
S
S
S
S
S
S
Ultra
Annual Report
and Accounts 2021
160
Business addresses
Maritime
Ultra Sonobuoy Systems
4868 East Park 30 Drive, Columbia City
Indiana 46725-8861, USA
Tel: +1 260 248 3500
Ultra Sonar Systems
40 Atlantic Street, Dartmouth
Nova Scotia B2Y 4N2, Canada
Tel: +1 902 466 7491
Knaves Beech Business Centre, Loudwater
High Wycombe, Buckinghamshire HP10 9UT
England
Tel: +44 (0)1628 530000
12 Douglas Drive Technology Park, Mawson Lakes
Adelaide
South Australia 5095, Australia
Tel: +61 (0)8 8169 1200
Ultra Naval Systems & Sensors
115 Bay State Drive, Braintree, Massachusetts
02184-5203, USA
Tel: +1 781 848 3400
Ultra Signature Management & Power
95 Horseblock Road, Unit 2 Yaphank
New York 11980, USA
Tel: +1 631 345 6200
Towers Business Park
Wheelhouse Road, Rugeley
Tel: +44 (0)1889 503300
www.ultra.group
I&C
Ultra C2I
4101 Smith School Road Building IV, Suite 100
Austin, Texas 78744, USA
Tel: +1 512 327 6795
Ultra Communications
5990 Côte de Liesse, Montreal
Quebec H4T 1V7, Canda
Tel: +1 514 855 6363
Ultra Specialist Radio Frequency
10 Sonar Drive
Woburn, Massachusetts 01801, USA
Tel: +1 781 729 9450
Ultra Cyber
419 Bridport Road
Greenford, Middlesex UB6 8UA, England
Tel: +44 (0)20 8813 4567
9713 Key West Avenue, Suite 500
Rockville, Maryland 20850, USA
Tel: +1 301 670 6779
www.ultra.group
Critical Detection & Control
Ultra Energy
Innovation House, Lancaster Road
Ferndown Industrial Estate
Wimborne, Dorset BH21 7SQ, England
Tel: +44 (0)1202 850450
PO Box 300
Round Rock, Texas 78680-0300, USA
Tel: +1 512 434 2800
www.ultraelectronicsenergy.com
Ultra Precision Control Systems
Arle Court, Cheltenham
Gloucestershire GL51 6PN, England
Tel: +44 (0)1242 221166
www.ultra-pcs.com
Ultra Forensic Technology
800 Hymus Boulevard, Ville St-Laurent
Québec H4S 0B5, Canada
Tel: +1 514 4894 247
www.ultra-forensictechnology.com
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Ultra
Annual Report and Accounts 2021
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