Shareholder Executive

The United Kingdom Hydrographic Office (UKHO)

Purpose

The UK Hydrographic Office (UKHO) exists to help preserve life and safety at sea. It has a world-class reputation for providing safe and accurate navigational information. This is essential to support the operations of the Royal Navy and other mariners around the world. The UKHO also plays a central role in discharging the UK's treaty obligations to provide hydrographic services for waters of UK national responsibility, as required under international convention.

Legal Status and Ownership

UKHO is a trading fund of the Ministry of Defence.

Government Objectives

• operational support to Defence – the UKHO provides value to Royal Navy and other Defence customers by delivering the hydrographic services to support operational tasks
• support to 'Safety at Sea' treaty obligations – in support of the Maritime and Coastguard Agency, the UKHO discharges those actions required in order to support the UK's obligations under the United Nations International Convention for the Safety of Life at Sea (SOLAS), and to promote hydrographic services
• developing profitable business streams – subject to maintaining the capability to deliver against the two objectives above, the UKHO is required to extract maximum value from its assets and capabilities by generating profitable revenue from other customers
• organisational excellence – in delivering the above objectives, the Government requires the UKHO to demonstrate organisational excellence.

Financial Performance

£m	2008	2007	2006
Turnover	94	84	73
Operating Profit	8	7	7
Profit/(Loss) for the year	1	7	7
Net Cash flow	(0)	0	1
Net Operating Assets	37	38	37
RONA	21.6%	18.4%	18.9%
ROCE	15.0%	11.8%	13.5%
Shareholders' Funds	45	51	47
Dividends	8	5	6

Commentary

UKHO's turnover increased by 12% to £94.3m and profit on ordinary activities was up £0.4m to £7.9m. Net profit after provision for restructuring costs (Project Amber) was £0.6m. A dividend of £7.9m has been paid, including a special divided of £3m. This brings the total dividend paid since the trading fund was formed in 1996 to £54.9m.

The most significant activity during the year was the development of a new flagship digital product, the Admiralty Vector Chart Service (AVCS). This was subsequently launched on 17 April 2008. AVCS provides the mariner with an integrated global set of carriage compliant electronic navigational charts (ENCs), schemed in folios along all the major shipping routes and covering the world's top ports. To deliver this service the business has introduced new ordering, flexible licensing and updating services. Cooperation with other national hydrographic offices has been essential in order to give the service the coverage and the overall consistency expected by the mariner.

As part of Project Amber, UKHO has carried out a review of the size and skills of the workforce required to deliver the digital future. As a result the business will see a reduction in the number of employees and a reskilling programme that will involve developing existing staff and selective recruitment.

The review of the UKHO's status reported in December 2007. It concluded that UKHO should remain as a trading fund, further exploiting the flexibilities afforded by the trading fund model but also leveraging the freedoms afforded by its subsidiary companies.