ULTRA BOOKS £47MN PROVISION ON OMAN AIRPORT CONTRACT LOSS

Ultra Electronics Holdings, a British company serving the defence, security, transport and energy industries, on Wednesday said that an exceptional provision of £47mn will be recognised in respect of its terminated Oman airport IT contract.

On January 22, Ithra, Ultra Electronics’ joint venture company with Oman Investment Corporation (OIC), had received a notice of termination of the contract. The contract was formally terminated on February 9, Ultra Electronics said in a filing to the London Stock Exchange.

The company said the substantive reasons given in the notice of termination are related to Ithra not meeting contractual milestones, adding, “Ithra’s assessment is that the termination is unjustified, wrongful and unlawful.”

Ultra said it is in discussions with its legal and claims advisers regarding the termination of the contract and recovery of Ithra’s costs and claims.

“An exceptional, non-underlying, provision will be recognised in the year to December 2014 in respect of the contract. The provision, which totals £47mn, includes the write-off of contract balances, together with provision for all known liabilities,” the company said in the filing.

It said the cumulative revenue recognised from the contract is £114mn, with 2014 revenue limited to £12mn recognised in the six months to June 2014.

Ultra added that Ithra is cooperating with employer (Oman’s Ministry of Transport and Communications) and engineer (Hill International) to effect a formal handover of the contract to what has been termed a ‘completion contractor’, after which a settlement account will be produced by the employer.

The ministry had awarded the airport IT and systems integration contract worth RO127.5mn to the JV in April 2012. The agreement was related to the design, manufacture, supply, installation and operation of the complementary systems for the sixth package of the Muscat International and Salalah airports.

Ultra said it has also reviewed activities in the Middle East and while it continues to do business there and see good opportunities in the region, there may be some short-term impact. “Consequently, it has been decided to take a non-cash impairment of the outstanding goodwill on the Al Shaheen joint venture in the UAE totalling £7.4mn.”

Ultra is a minority shareholder in Al Shaheen, the JV partner being Emirates Advanced Investments (EAI). Al Shaheen’s principal area of business is in training.

SOURCE: MUSCAT DAILY