INTERIM RESULTS FOR THE hALF YEAR ENDED 30 june 2009

6 August 2009

• Military and government business has performed well with organic revenue growth of 7%, however revenue from commercial activities declined 13% giving 1% organic growth in the Technology Divisions

• Significant contribution to revenue and profit growth from 2008 acquisitions, with M/A-COM integration on track and increasing technology collaboration resulting in new contract awards

• Underlying EPS growth of 34%; or 19% at constant currency translation

• Strong operating cash flow of £139m with cash conversion of 87%; gearing at 1.2 times net debt/EBITDA at the period end

• Interim dividend increased by 10% to 1.48p

Allan Cook, Cobham Chief Executive, said:

"We have seen good levels of organic growth in our military and government businesses in the first half, although this has been partly offset by the anticipated subdued activity in the Defence Communications and Mission Equipment businesses as well as by the generally unfavourable conditions in our commercial markets. Nevertheless, the Group has delivered strong underlying earnings growth and cash generation.

"Our core military and government markets continue to be healthy and revenue from vehicle intercoms should increase in the second half.  The Board expects to achieve further progress in the full year, with increased levels of organic revenue growth from the Technology Divisions and remains confident of high single digit organic revenue growth over the medium term."

  ENQUIRIES

The following notes apply throughout these interim results:

1.    To assist with the understanding of earnings trends, the Group has included within its published statements trading profit and underlying earnings results.  Trading profit and underlying earnings have been defined to exclude the impacts of certain acquisition related charges, portfolio restructuring costs, the mark-to-market of currency instruments not realised in the period and impairments of goodwill.  Acquisition related charges excluded from trading profit and underlying earnings include the amortisation of intangible assets recognised on acquisition, such as customer relationships, technology and software and the like, the writing off of the pre-acquisition profit element of inventory written up on acquisition and costs charged post acquisition, which relate to purchasing the shares of acquired companies.  Portfolio restructuring costs comprise exceptional profits arising on business divestments, completed in prior years, which have funded exceptional costs associated with the restructuring of the Group's business and site integrations.   Both the divestments and the integration activity originate from the Group's strategy announcement in September 2005.

2.   On continuing operations.

3.   Operating cash flow is defined as cash generated from operations, adjusted for cash flows from the purchase or disposal of fixed assets. Operating cash conversion is defined as operating cash flow as a percentage of trading profit, excluding profit from joint ventures.

4.   Cobham's Technology Divisions comprise Cobham Avionics and Surveillance, Cobham Defence Systems and Cobham Mission Systems.

5.   Throughout this document, PV (Private Venture or company funded Research and Development expenditure) for 2008 and the PV Key Performance Indicator medium term target have been restated on a proforma basis to take account of the 2008 SPARTA (now Cobham Analytic Solutions) acquisition, where the vast majority of Research and Development is funded by customers. These numbers are stated on the same basis as the 2009 result.

STRATEGIC PROGRESS

Cobham's strategy is to build leading positions in growing, high technology markets with an aerospace and defence focus.  In the Defence Systems and Avionics and Surveillance Divisions, Cobham has critical technology primarily focused on the need to transmit, receive and analyse increasing quantities of voice, data and video communications. This technology is applicable to the digital battlefield, the intelligence and homeland security markets and commercial markets.  The high technology products within the Mission Systems Division keep people safe in extreme environments and enhance platform capability, while the Group's Aviation Services Division utilises many of the technologies designed and manufactured elsewhere in Cobham, through the provision of outsourced services. 

Focus on High Growth Markets

The Group has continued to make strategic progress in the period, winning important contracts in its growth markets.  

In June, the Group announced that a Cobham-Northrop Grumman team was selected for the US Army VIS-X programme, although one of the losing competitors has subsequently filed a protest with the General Accounting Office.  This Indefinite Delivery Indefinite Quantity (ID/IQ) contract could be worth up to US$2.4bn over the next 10 years, of which Cobham's share is fifty per cent. This award is the culmination of sustained product investment in a business that was acquired in 2002 and reinforces Cobham's position as a leading competitor in the growing tactical communications market both in the US and in other export markets. The award underpins revenue growth in the Cobham Defence Systems Division over the medium term.

Organic growth has also been delivered by some of Cobham's more recent acquisitions.  The US Navy has made two further awards for Low Band Transmitters (LBT) since the year end to Sensor Systems, Lansdale, a business bought in 2008. This important system protects US aircraft, ships and ground troops by disrupting enemy radar and communications and Lansdale has now received total awards for this product of US$217m.  Shipments of LBT in the period contributed to the revenue growth in the Cobham Defence Systems Division.

The Cobham Defence Systems Division also won a Research and Development (R&D) contract to lead a team of distinguished organisations on the National Cyber Range to find cutting edge solutions for the protection of US cyber resources.  Building on the acquisition of SPARTA (now Cobham Analytic Solutions) in 2008, its capabilities in this area of growing importance were further strengthened by the acquisition of Argotek Inc. (Argotek) in May. Argotek, which is now part of Cobham Analytic Solutions, provides high-end information assurance solutions to the US intelligence community.  The Group expects that these developments will strengthen its ability to win further business in this area of growing importance.

The Group has benefited from its strategy of building its position in the fast growing Surveillance market through acquisition and through investment in technology.  Among other products, sales of bi-directional communication links were a significant driver of growth in the period. Success with this product is the result of the acquisition of domo Limited (now Cobham Surveillance, Segensworth) in 2006 and ongoing investment in this technology.

The Group has continued to invest in its commercial markets and expects that this will position it well when these markets return to growth.  A number of new products are being developed and brought to market including Broadband Global Area Network (BGAN) satellite communication products which bring a full range of cabin communications options to aircraft including internet, email and telephone.

In addition, the Group has continued to consolidate its positions on the most significant, long-term commercial programmes with an antennas award on the Airbus A350 aircraft and qualification and delivery of flight test hardware for the Boeing 787 On Board Inert Gas Generating System (OBIGGS).

Investment in Leading Edge Technology

Cobham's strategy is to invest in technology with the aim of developing and bringing to market products that are at the leading edge of capability for specific customer needs. This investment in technology is pivotal to the Group's strategy of achieving sustained organic revenue growth in the markets in which it operates.  

A number of products that have been developed using PV investment (Private Venture or company funded R&D) in the past have delivered significant revenue growth in the period.  For example:

• Increased revenue in the Surveillance business from sales of public safety systems to the UK police and from bi-directional communication links and audio surveillance products;

• Sales of specialist radios in the Avionics and Surveillance Division and the Defence Systems Division and aircraft digital intercom systems;

• 3,000 Air Warrior Microclimate Cooling Units were delivered to the US Army by the Life Support business, with over 15,000 now delivered since 2005 and a large contract received in July 2009.

During the period, total PV investment increased to £45m (2008: £33m), an increase of 36% on the prior period, which as a proportion of Technology Divisions' revenue, was 5.4% (2008: 5.5%). With the addition of customer funded R&D, total R&D investment in the period was over 8%.

PV was invested across a range of potentially significant, high technology products in the Group's chosen markets, including:

• Investment in the next generation of tunable antennas with an increased frequency range capability and application across a wide range of military aircraft platforms, with Rockwell Collins and the US Navy as customers;

• Continuing investment in the SLB2000 Personal Locator Beacon to be used as a replacement for the emergency beacons used by the US Air Force (USAF) in ejection seats and parachute packs;

• Significant investment in the Radio and Audio Integrated Management System (RAIMS) already selected by Rockwell Collins and Airbus for the A350 aircraft.

In addition, a number of ground breaking customer funded awards were received to develop new technology, with potentially far-reaching applications including:

• A US$14.8m contract awarded by the US Government to continue development and deliver test hardware for the Wireless Network after Next (WNaN), with the aim of providing the US military with a viable wide-band mesh radio network for wide deployment throughout the armed services;

• Selection to continue development of the Scaleable Panel for Efficient Affordable Radars (SPEAR) programme phased array front-end. This US programme, to develop a scaleable and low cost but high performance radar, could be used across a number of significant applications.

The Group also invests in technology through the acquisition of technology driven businesses. The extraction of technology synergies by bringing new or improved products to the market, through the combination of technology for specific customer needs, is one of the principal ways that the Group can derive additional shareholder value from acquisitions.

Over the period, increasing numbers of joint bids were submitted that resulted from collaboration between the Sensor Systems, Lansdale and M/A-COM (now also part of Sensor Systems) businesses acquired in 2008 and existing Defence Systems businesses. As a result of this collaboration, the Group has already been awarded a number of contracts which have potential for additional future awards. These include:

• An electronic warfare (EW) upgrade contract with a major prime contractor on the US Navy F-18 aircraft; 

• Broad band spiral antenna applications for different customers for EW and electronic support measures (ESM);

•  An award as the specialist EW/Communications supplier on the Integrated Topside (InTop) programme for the US Navy, which aims to combine and standardise antenna systems across the fleet.

Long Term Visibility 

The aggregate book to bill ratio in the period was 0.94 times (2008: 1.29 times), primarily due to the unfavourable conditions in the Group's commercial markets, with Group order intake of £893m (2008: £818m). This, together with the impact of translation exchange rates, resulted in an order book at the end of the period of some £2.4bn (31 December 2008: £2.7bn).

The Group's forward revenue visibility and significant positions on long-term programmes are only partly reflected in the Group's order book as many customers, including its biggest end customer, the US Department of Defense, only place orders incrementally for multi-year programmes.  Apart from some small initial orders placed by the customer, the Group's order book does not include the VIS-X ID/IQ contract, announced in June 2009, of which Cobham's share is up to US$1.2bn, or the Indefinite Delivery, Definite Quantity (IDDQ) contract for Microclimate Cooling Units worth up to US$110m, which was announced in July 2009.

In addition, the order book does not reflect other multi-year programmes, some of which will be highly significant to the Group, such as the F-35 aircraft. The Group has a ship set value of almost US$1m on this aircraft and production is expected to accelerate steadily from the current year planned procurement of 14 aircraft to over 100 aircraft per annum in 2014 and full rate production of over 200 aircraft per annum in 2017, with the vast proportion of this expected future revenue not currently in the order book. There is a similar pattern across a number of other significant and long-term platforms and programmes including the Eurofighter Typhoon aircraft, the Global Hawk Unmanned Aerial Vehicle, the V-22 Osprey tiltrotor aircraft, the Advanced Medium Range Air-to-Air Missile (AMRAAM) and the A350 and B787 commercial airliners.

KEY PERFORMANCE INDICATORS (KPIs)

The financial KPIs used to measure Group performance over the medium term are set out below.  The growth targets exclude currency translation exchange impacts:

FINANCIAL RESULTS

Revenue

Total Group revenue in the period increased by 51% to £952m (2008: £632m) primarily due to the 2008 acquisitions and favourable currency translation exchange rates.  There was good organic growth in the Defence Systems Division and a solid performance from the Avionics and Surveillance Division but this was offset by the anticipated lower revenue from air refuelling in the Mission Systems Division.  

In total, organic revenue growth was 1% (2008: 14%) in the Technology Divisions.  The Aviation Services Division delivered organic revenue growth of 2%.  

In aggregate, the Technology Divisions' military and government facing activities, representing some 73% of their revenue, grew organically by 7% in the period, while the commercial facing activities, representing 27% of technology revenue, saw a decline of 13%.  An analysis of the Technology Divisions' revenue growth is as follows:

Revenue - Analysis of Technology Divisions

Average H1 2009 US$/£ exchange rate = $1.50/£1. Average H1 2008 US$/£ exchange rate = $1.98/£1.

The Defence Systems Division saw very strong growth in its Antenna Systems business partly offset by the anticipated temporary slow down in orders and shipments in vehicle intercoms, prior to the US Army's VIS-X procurement.  Within the Avionics and Surveillance Division, there was very strong growth in the Surveillance business, although this was largely offset by the market downturn in many of the commercial avionics and SATCOM markets. As anticipated, the Missions Systems Division had lower revenue from air refuelling in comparison to the previous period.  The Division's Life Support business continued to grow.

Trading Profit

Group trading profit increased by 51% to £162m (2008: £107m), driven by an improvement in the trading margin, acquisitions and favourable currency translation exchange rates.  

The Group's trading margin increased to 17.0% (2008: 16.8%), with the improvement in the organic trading margin offsetting the 2008 acquisition margin mix.  The organic margin improvement of 1.8% points was driven by continuing operational efficiencies including the ongoing facility integration programme and procurement savings, together with the rapid removal of costs in businesses impacted by the downturn in commercial markets.

Net Finance Expense and Underlying Profit Before Tax

The net finance expense was £21m (2008: £0m).  The net interest expense on cash and debt holdings increased to £18m (2008: £1m) as a result of the acquisitions completed in 2008 partly offset by cash generation from operations.  As anticipated, there was a net finance debit from pension schemes of £3m in the period (2008: credit £1m) primarily due to the fall in the market value of assets at 31 December 2008.

Underlying profit before tax was up 32% at £141m (2008: £107m).

Taxation

On an underlying basis, but excluding the share of post-tax results of joint ventures, the effective tax rate for the period reduced to 28.0% (2008: 29.5%). This is calculated by dividing the Group's underlying tax charge on the enlarged business of £39m (2008: £30m) by its underlying profit before tax.  In part, the rate benefited from the impact of consortium relief relating to Cobham's investment in AirTanker Limited.

Earnings per Share (EPS)

Underlying EPS grew 34% to 9.0p (2008: 6.7p) primarily due to an improvement in the Group's underlying trading margin, favourable currency translation exchange rates and the contribution from acquisitions completed during 2008.  EPS growth at constant currency translation rates was 19%.  Excluding the impact of the non-cash net finance debit from pension schemes, EPS growth at constant currency translation rates was 22%.

Basic EPS was higher than the comparable period at 9.3p (2008: 5.5p). This was primarily due to higher underlying profit and an increase in post-tax, non-cash profits from the unrealised mark-to-market of currency instruments of £34m (2008: loss £6m), which was partly offset by an increase in the post-tax, non-cash amortisation of intangible assets arising on acquisition of £27m (2008: £7m).

Acquisitions and Divestments

Physical integration of the M/A-COM acquisition (now part of Sensor Systems), which completed at the end of September 2008, is continuing on schedule with all IT systems now operating independently from the former owner. The M/A-COM waveguide activities have been transferred to the existing Exeter, New Hampshire facility with cable activities to follow later in the year. Plans are in place to integrate the Manchester, New Hampshire microwave facility into the Lowell, Massachusetts facility. The two monolithic microwave integrated circuits (MMIC) wafer design and fabrication facilities in Virginia are to be integrated into one facility by the end of 2010.

In March 2009, Cobham announced the sale of M/A-COM Technology Solutions (MTS) for up to US$90m, including senior loan notes and contingent consideration. The business, which was not core to the Group's strategy, had been treated as held for sale and consequently its trading is not included in the income statement or in earnings. It is anticipated that there will be no gain or loss on sale as the investment was held for resale at fair value.  

In May 2009, the Group completed the acquisition of Argotek for US$36.25m, a business that provides high-end information assurance services to the US intelligence community.  Argotek will add technical depth and expertise and expanded customer relationships to the Cobham Analytic Solutions business.

Retirement Obligations

The Group operates a number of defined benefit pension schemes, the most significant being the Cobham Pension Plan. At the period end, the estimated shortfall for accounting purposes between the value of the defined benefit scheme assets and the present value of future liabilities was £164m before deferred tax (31 December 2008: £51m). The main factors behind this are a decrease in the discount rate based on AA-rated investment grade corporate bond yields and an increase in the long-term inflation assumption, both applied to scheme liabilities, together with a reduction in the value of scheme assets.

Cash Flow and Net Debt

Operating cash flow in the period, after capital expenditure and PV which is expensed in the income statement but before the payment of tax and interest, was £139m (2008: £120m) representing 87% (2008: 116%) of trading profit before the Group's share of post-tax results of joint ventures.  

After the payment of tax, restructuring costs and net interest and the receipt of dividends from joint ventures, the Group generated free cash flow of £95m (2008: £94m).  From free cash flow the Group invested a net £10m (2008: £344m) in acquisitions, comprising the acquisition of Argotek and deferred and contingent payments on acquisitions completed in prior years, offset by proceeds relating to the disposal of MTS.

At the period end, the Group had net debt of £442m (31 December 2008: £641m). It is the Group's policy to hold a significant proportion of its borrowings in foreign currency, principally US dollars, as a natural hedge against assets and earnings denominated in those currencies. Movements in exchange rates in the period accounted for £112m of the reduction in net debt.

Based on the period end net debt, the Group's gearing equated to approximately 1.2 times net debt/EBITDA, assuming a full year contribution from acquisitions, consistent with the Group's banking covenants.  

Financing

As previously reported, during late 2008 and the first quarter of 2009 the Group secured US$325m and £50m of additional facilities with six counterparty banks.  In addition, at the end of the first quarter of 2009 a US$350m private placement debt issue was successfully completed in the US.  Some £12m of the proceeds were used to cancel interest rate swaps that were no longer required as the private placement loan notes were themselves issued at a fixed rate of interest.

The US$650m outstanding under the short term acquisition financing facility at 31 December 2008 has been repaid during the first half of 2009 from these new facilities and existing cash resources.  

The Group has significant facilities and resources available for future investment and a spread of maturities out until 2019, with the Group's main £300m multi-currency bank facility maturing in 2012.  

Dividends

An interim dividend of 1.48p (2008: 1.345p), representing a 10% increase on the comparable period, has been approved by the Board and will be paid on 11 December 2009 to all shareholders on the register at 13 November 2009.

RECONCILIATION OF UNDERLYING PROFIT

DIVISIONAL REVIEW

Group Operating Summary

Cobham Avionics and Surveillance

Total revenue increased by 28% to £255m, largely driven by favourable currency translation exchange rates with a small contribution from 2008 acquisitions and organic growth of 2%.  The Division's organic growth was driven principally by very strong growth in the Surveillance business, whose main markets are national security and law enforcement, partly offset by the impact of the market downturn in the Division's commercial Avionics and SATCOM markets.  

The Division's margin increased in the period to 16.7% (2008: 15.8%). The operating margin declined in the businesses that were impacted by the downturn in commercial markets but this was partially mitigated by the rapid removal of costs and by the benefits from facility integration across the Division.  The net margin decline in these businesses was offset by an increase in the margin in the Surveillance business and in France.

The main revenue growth drivers in the period included:

• Demand for surveillance equipment across the national security and law enforcement markets, including delivery of public safety systems to the UK police, increased revenue from bi-directional communication links and audio surveillance products;

• Sales of tactical radios and aircraft digital intercom systems driven by interoperability requirements across public safety organizations;

• Within the SATCOM business, growth in sales of land based communication on the move products and initial deliveries of aircraft based BGAN satellite communication products.

In addition, there were a number of important business developments in the period which it is anticipated will benefit future results:

• Selection by Airbus Industries to supply SATCOM antennas on single aisle and long range aircraft to enable long range communications with Air Traffic Control on the flight deck and support the latest Inmarsat services for cabin applications.  The deal is expected to be worth up to US$70m.  Airbus also selected Cobham's communication and navigation antennas for the A350, further consolidating the Group's position on that aircraft;
• Excellent progress developing the next BGAN generation of aircraft based satellite communication with Inmarsat type approval achieved and systems delivered to the launch customer in the US.  The systems enable a full range of connectivity options to aircraft, including streaming video, internet, email, VPN, telephone and fax service;
• Further integration of business units across the Avionics business, with centres of excellence created in Prescott, Arizona and Mineral Wells, Texas;  
• Significant PV developments are due to complete in 2009 in the areas of synthetic vision, digital cockpit audio systems, multi-band radios and helicopter stabilisation systems, which will position the business for future growth. 

Cobham Defence Systems

Total revenue increased by 123% to £437m, driven by the contribution from 2008 acquisitions, favourable currency translation exchange rates and organic growth of 6%. The Division achieved very strong organic growth in Antenna Systems and Analytic Solutions but this was partly offset by the anticipated temporary slow down in vehicle intercoms orders and shipments prior to award of the VIS-X contract.  The subsequent award of the contract to Cobham and the subsequent customer order for the current VIC-3 product underpins confidence in the organic revenue growth of the Defence Systems Division in the full year.

The Division's margin decreased, as anticipated, to 17.2% (2008: 20.9%) primarily due to the 2008 acquisition margin mix.  The organic trading margin increased by 2.2% points in the period as a result of continuing operating efficiencies. 

The main revenue growth drivers in the period included:

• Multiple full rate production contracts received by the Sensor Systems business for the LBT with a total value of US$65m.  These awards bring the total number ordered by the US Navy to 157, out of a total anticipated order quantity of 292, of which 46 systems have been delivered.  The LBT is designed to protect strike aircraft, ships and ground troops by disrupting enemy radar and communications;

• Acceleration of the US Marine Corps Tactical Elevated Antenna Mast (TEAM) programme, designed to extend line-of-sight communication range and improve communication reliability in difficult terrain; 

• The next generation Tactical Area Communication System (TASMUS) programme for Turkey providing an antenna backbone for network centric communication;

• Sales of a variety of land based antennas to the Indian army and specialist radios to the German police force.

In addition, there were a number of important business developments in the period which it is anticipated will benefit future results:

• In June, a Cobham-Northrop Grumman team was selected for the VIS-X programme for the US Army which is expected to ship from the end of 2010, although one of the losing competitors has subsequently filed a protest with the General Accounting Office, which has until 28 October 2009 to issue a decision regarding the protest.  The ID/IQ contract could be worth up to US$2.4bn over the next 10 years, of which Cobham's share is fifty per cent.  Cobham will continue to supply VIC-3 systems to support the existing installed base on more than 85,000 vehicles;

• Initial trial unit orders from Lockheed Martin for the mINCAN interference cancellation system to be fitted to the US Joint Light Tactical Vehicle (JLTV) and Light Armoured Vehicle Command & Control (LAVC2) platforms;

• A contract was won with the US Navy Space and Naval Warfare (SPAWAR) Systems Command to develop a Controlled Radiation Pattern Antenna/Digital Antenna Control Unit (CRPA/DACU) anti-jam GPS for military helicopters.  Agusta Westland also selected the Division to provide a similar solution;

• A contract was also secured to provide the nose radome and embedded antennas on the Korean Aerospace Industries T-50 Golden Eagle aircraft;

• An initial production contract for a Radio Frequency Processor for the US Advanced Anti-Radiation Guided Missile (AARGM);

• In January an R&D contract was awarded to lead a distinguished team of commercial, defence, and academic organizations on the National Cyber Range to find cutting edge solutions for the protection of US cyber resources.

Cobham Mission Systems

Total revenue was up 17% to £163m driven by favourable currency translation exchange rates.  Compared to a very strong first half in 2008, organic revenue declined by 7%. As anticipated, this was driven by lower air refuelling revenue.   The Life Support business continued to grow.

The margin increased to 16.6% (2008: 16.0%) due to currency mix, with benefits from operational efficiencies offsetting the weaker trading in the Mission Equipment business.

Despite the reversal of air refuelling revenue, the main revenue growth drivers in the period included:

• Follow-on orders totalling US$14m were received for the improved High Mobility Multi Wheeled Vehicle (HMMWV) Restraint System and 8,000 ship sets were delivered, bringing the total deliveries since programme inception to 125,000;

• Shipment of 3,000 Air Warrior Microclimate Cooling Units to the US Army, bringing the total ship sets delivered since 2005 to over 15,000;

• Over 200 Small Diameter Bomb weapons carriage and release units were delivered to Boeing, the 100th refuelling probe to the V-22 Osprey programme and 100 refuelling tanks in support of the F-22 and C-130J, also with strong aftermarket sales for customers in the US and India;

• A suite of products were delivered for Tranche 2 of the Eurofighter programme, with deliveries to Saudi Arabia commencing. Orders related to Tranche 3 of this programme are anticipated before the year end.

In addition, there were a number of important business developments in the period which it is anticipated will benefit future results:

• Award of a five year IDDQ contract from the US Army to provide Microclimate Cooling Systems to the Air Warrior programme office, with expected revenue of up to US$110m during the next five years;

• Receipt of initial On Board Oxygen Generating System (OBOGS) production orders for USAF A-10, Embraer Brazil A-1M, Turkish Aerospace Hurkus Trainer and follow-on orders for the Korean F-15 OBOGS and US Navy F-18E/F/G;

• Qualification and delivery of flight test hardware for the Boeing 787 was completed for the OBIGGS. Orders were received for 15 USAF C-17 OBIGGS II modules;

• Dry contact trail and reel trials of the next generation 905E refuelling pods were completed in May on the EADS-CASA built A330 Multi-Role Tanker Transport (MRTT) aircraft for the Royal Australian Air Force;

• The transfer on schedule of the weapons carriage and release product lines from El Monte, California was completed with production commencing in July 2009 in Buffalo, New York. Integration of the refuelling product lines will complete later in 2009 as planned.

Cobham Aviation Services

Total revenue increased 4% to £111m, due to favourable currency translation exchange rates and organic growth of 2%.  

The main revenue growth drivers in the period included:

• In the UK there was increased activity on large military aircraft maintenance;
• In Australia there was an increased rate of effort on the Sentinel programme, partly offsetting the shedding of some less profitable contracts in the Regional Services business.

The Division's margin increased to 13.7% (2008: 9.0%) due principally to the impact of the revenue growth drivers above.

In addition, there were a number of important business developments in the period which it is anticipated will benefit future results:

• Receipt of two contracts from the Australian Border Protection Command worth a total of AUD$43m.  The first increases the Sentinel fleet in response to illegal immigrant vessel activity, using two existing Cessna F 406 aircraft with operations commencing in July 2009. The second is for additional flying hours for the all electronic fleet of ten Bombardier Dash 8 aircraft, with the first aircraft fitted with the Surveillance Information Management (SIM) system entering service in July 2009;

• Two contract extensions were secured with key West Australian resource sector clients, with a combined contract value of some AUD$90m;

• In the UK, award of a £18m order for the Military Flying Training Services (MFTS) Royal Navy rear crew training contract to convert four Beechcraft King Air B350 aircraft followed by five years of maintenance and support at RNAS Culdrose. 

OUTLOOK

The Group has seen good levels of organic growth in its military and government businesses in the first half, although this has been partly offset by the anticipated subdued activity in the Defence Communications and Mission Equipment businesses as well as by the generally unfavourable conditions in Cobham's commercial markets. Nevertheless, the Group has delivered strong underlying earnings growth and cash generation.  

Cobham's core military and government markets continue to be healthy and revenue from vehicle intercoms should increase in the second half. The Board expects to achieve further progress in the full year, with increased levels of organic revenue growth from the Technology Divisions and remains confident of continued high single digit organic revenue growth over the medium term.

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Forward Looking Statements

Nothing in this press release should be construed as a profit forecast or be interpreted to mean that the future earnings per share of Cobham will necessarily be the same as, or greater than, the earnings per share for completed financial periods.

This document contains 'forward-looking statements' with respect to the financial condition, results of operations and business of Cobham and to certain of Cobham's plans and objectives with respect to these items.

Forward-looking statements are sometimes but not always identified by their use of a date in the future or such words as 'anticipates', 'aims', 'due', 'could', 'may', 'should', 'expects', 'believes', 'intends', 'plans', 'targets', 'goal', or 'estimates'. By their very nature, forward-looking statements are inherently unpredictable, speculative and involve risk and uncertainty because they relate to events and depend on circumstances that may or will occur in the future.

There are various factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. These factors include, but are not limited to, changes in the economies, political situations and markets in which the Group operates; changes in government priorities due to programme reviews or revisions to strategic objectives; changes in the regulatory or competition frameworks in which the Group operates; the impact of legal or other proceedings against or which affect the Group; changes to or delays in programmes in which the Group is involved; the completion of acquisitions and divestitures and changes in exchange rates.

All written or verbal forward-looking statements, made in this document or made subsequently, which are attributable to Cobham or any other member of the Group or persons acting on their behalf are expressly qualified in their entirety by the factors referred to above. Cobham does not intend to update these forward-looking statements.