Ultra Electronics warns on FY revenue, CEO steps down

Ultra Electronics warned on revenue on Monday and said it expects a tougher second half, as it announced that Rakesh Sharma has stepped down as chief executive with immediate effect.

In a trading statement ahead of its year end on 31 December 2017, the company said that while the majority of its markets have been “satisfactory”, the UK has been difficult and has become increasingly so in the second half. It pointed to mounting pressures in the funding of UK defence programmes and said this has resulted in the UK Ministry of Defence pausing, cancelling or delaying a number of programmes.

In the last few weeks, a number of Ultra’s UK orders budgeted for 2017 have been affected. As a result, the group now expects full year total revenue to be around £770m, down from £785m last year, and for organic revenue to drop by around 4%.

Meanwhile, based on an average 2017 USD/GBP exchange rate of 1.285, underlying operating profit for the full year is expected to be approximately £120m.

Ultra also said on Monday that chairman Douglas Caster, who was CEO from 2005 to 2010, will assume the role of executive chairman until a successor to Sharma is appointed.

Ultra said that following a period of reflection on the future leadership of the company, the board concluded that now is the appropriate time for a change of leadership and that Douglas Caster is ideally qualified to lead the group until a successor is appointed.

Caster said: "While market conditions have been more challenging in the last few years, the group has strong market positions, differentiated technologies and talented people. While the UK defence market is difficult, defence spending in the US, the group's largest market, is increasing.

“The board is focused on identifying the right leader to deliver shareholder value through a renewed focus on organic performance in the next stage of the group's development."

Barclays said Ultra’s forecast of operating profit of around £120m compares with its estimate of £132.4m and Bloomberg consensus of £128m.

At 1350 GMT, the shares were down 19% to 1,243p.