Cobham 80th Anniversary, 1934 - 2014

Results Centre

Interim Results

Underlying1 results
H1 2015
Order Intake £335m  £835m £1,170m       £960m    +22%
Revenue £409m  £508m   £917m    £1,048m     -13%
Trading Profit   £15m     £87m   £102m       £160m     -36%
Profit before Tax     £2m    £74m     £76m       £135m     -44%
Earnings per share (EPS)     0.1p      4.3p       4.4p          7.9p     -45%
Operating cash conversion3 (147)%   150%    106%         77%  +29ppts

Statutory results

Revenue     £917m   £1,048m        -13% 
(Loss)/Profit before Tax4    £(38)m       £4m  
EPS4      (1.9)p      (0.2)p  
Net Debt     £877m  £1,207m*  

Interim Dividend per share
*At 31 December 2015

                                 2.03p     2.585p     -21%

  • First half trading reflects previously announced Q1 performance issues and increased headwinds in Aviation Services.  Positive momentum in Q2, including good progress in Wireless and Advanced Electronic Solutions
  • Like for like order intake up 28%, with book-to-bill of 1.28x, benefiting from multi-year Aviation Services Qantas award (1.00x excluding Aviation Services); other significant Connectivity awards received for next generation Airbus platforms
  • Improved cash conversion of 106% (2015: 77%), driven by lower working capital and capital expenditure
  • Rights issue completed; reducing net debt to EBITDA to 2.3x at 30 June 2016
  • Interim dividend per share rebased to 2.03p, with total 2016 dividend expected to be approximately 7.4p per share (£126m), consistent with the Rights Issue Prospectus
  • As previously announced, full year performance expected to show a more pronounced H2 earnings bias in part resulting from:
     - Improving performance in Wireless; further progress expected
     - Increased activity in aerial refuelling production and development programmes
     - Ongoing resolution of Advanced Electronic Solutions technical and supplier quality issues
     - Increased SATCOM volume, particularly related to high-speed broadband and fisheries
     - On track to achieve £10m net savings in 2016; £4m achieved in H1

The following notes apply throughout these interim results:

  1. To assist with the understanding of earnings trends, the Group has included within its published financial statements non-GAAP measures including trading profit and underlying earnings results. Trading profit has been defined as operating profit from continuing operations excluding the impacts of business acquisition and divestment related activity and business restructuring costs as detailed below. Also excluded are changes in the marking to market of non-hedge accounted derivative financial instruments, gains and losses arising on dividend related foreign exchange contracts, impairments of intangible assets and items deemed by the Directors to be of an exceptional nature.

    All underlying measures include the operational results of all businesses including those held for sale until the point of sale.

    Business acquisition and divestment related items excluded from trading profit and underlying earnings include the amortisation of intangible assets recognised on acquisition, gains or losses arising on business divestments, adjustments to businesses held for sale, the writing off of the pre-acquisition profit element of inventory written up on acquisition and other direct costs associated with business combinations and terminated divestments. 

    usiness restructuring costs relate to the restructuring of the Group's portfolio which are incremental to normal operations and these relate primarily to the integration of the Aeroflex businesses acquired in 2014.

    Underlying earnings are defined as trading profit less net underlying finance costs, and after deducting associated taxation and non-controlling interests.

    A reconciliation of operating profit and profit before taxation to the respective underlying numbers is shown on page 18.

  2. Restatement relates to reflection of  the bonus element of  the rights issue in prior period EPS and Dividend per Share figures.

  3. Free cash flow is defined as net cash from operating activities plus dividends received from joint ventures, less cash flows related to the purchase or disposal of property, plant, equipment and intangible assets but excluding payments relating to M&A related activities.

    Operating cash flow is free cash flow before payment of tax, interest and restructuring costs.  Operating cash conversion is defined as operating cash flow as a percentage of trading profit.

    A reconciliation of trading profit to operating cash is shown on page 17.

    Net debt is defined as the net of borrowings less cash and cash equivalents at the balance sheet date.

  4. Statutory loss and EPS include non-underlying charges associated with acquisition and integration of Aeroflex and non-hedge accounted derivative financial instruments.        

Bob Murphy, Cobham Chief Executive Officer, said:

“After a challenging start to the year we have delivered a significant improvement in trading performance in the second quarter.

"We have won a number of key contract awards in the first half and notably every one of the Sectors has a stronger order book than a year ago.  Our balance sheet is now strengthened and we have achieved stronger cash generation.  A number of challenging market and contract execution risks still remain ahead of us, including on our development programmes, and macro-economic uncertainties that could have an impact on our shorter cycle businesses.  However, the Board's expectations for the full year, excluding currency translation impacts, remain unchanged, with a more pronounced earnings bias to the second half of the year. 

"The Board is confident that the Group's strategy of investing in technology and know-how, building and maintaining leading positions in its chosen markets each with attractive prospects, leaves Cobham well placed to deliver growth over the medium term."