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Cobham (LSE: COB).

Head Office

Brook Road, Wimborne, Dorset, BH21 2BJ, UK


The Company

Cobham operates in the commercial, defence and security markets. Cobham has market leading positions in air-to-air refuelling; aviation services; audio, video and data communications, including satellite communications; defence electronics; life support and mission equipment. Cobham has three divisions specialising in the provision of components, subsystems, safety services, and communications. Cobham has developed world leading positions in areas such as air-to-air refuelling, crew oxygen supply and vehicle intercom systems.

Cobham Defence Systems provides critical technology for network centric and intelligence operations, moving information around the digital battlefield with customised and off-the-shelf solutions for people and systems to communicate on land, sea and air. Cobham radar products, specialist antennas and microwave subsystems play critical roles in many of the world's major defence systems and platforms, including the Aegis radar system, F-35 Lightning II Joint Strike Fighter and Standard Missile.

3 August 2018

Business and balance sheet in better shape

                     Note  Statutory results    Underlying results (1)
[pounds sterling]m         H1 2018   H1 2017    H1 2018    H1 2017

Order intake               1,027.1     915.8    1,027.1      915.8
Revenue                      924.5   1,028.2      924.5    1,028.2
Organic revenue      2     -%                   -%
Operating profit             208.8      38.9       90.4       94.1
Operating margin                                    9.8%       9.2%
Earnings per share             6.9p      0.9p       2.0p       2.7p
Operating cash       3                             38%       115%
Free cash flow                                      9.2       64.6
Net debt             4        53.6     460.8       53.6      460.8
Net debt/EBITDA      4                              0.2x       1.5x

Underlying results are presented to assist with the understanding of the Group's performance trends. These measures are defined in the notes on page 3 and reconciled to GAAP measures in this statement on page 20. Results include the impact of IFRS 15 (2017 restated).

Encouraging operational and underlying financial progress evidenced by growing order intake and some operating margin improvement, with stronger balance sheet following divestments

* Improved portfolio focus following AvComm and Wireless divestment during the period for US$455m cash; [pounds sterling]216.3m total non-underlying profit on divestments

* 26 July update on KC-46 tanker development including programme status, unquantified customer damages assertions and additional [pounds sterling]40m non-underlying own costs to complete

* Full year 2018 underlying profit expectations unchanged

* Modest increase in underlying operating profit on prior year after reassessment of certain provisions ([pounds sterling]4.3m net credit), adverse currency translation ([pounds sterling]4.1 m) and lost contribution from divestments ([pounds sterling]5.6m)

* As expected, free cash flow includes utilisation of the 2016 exceptional charges of ([pounds sterling]43.8m), other working capital outflows ([pounds sterling]17.5m) and accelerated interest costs on debt pay-down ([pounds sterling]20.4m); net debt [pounds sterling]53.6m at 30 June 2018

David Lockwood, Cobham Chief Executive Officer, said:

"These underlying results show that we are making encouraging progress to improve our operational performance, with the business and the balance sheet in better shape. Risks and challenges remain and we are continuing to engage with Boeing to resolve the issues around the KC-46 tanker programme.

Cobham has differentiated technologies and know-how and leading positions in a number of attractive markets, with global defence budgets being driven by heightened security threats.

Overall, the Board's expectations for 2018 Group underlying profit remains unchanged, and we continue to have confidence in our medium and longer term outlook."
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Title Annotation:Leading Companies in the Industry
Publication:United Kingdom Armaments
Geographic Code:4EUUK
Date:Aug 20, 2019
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