Cobham achieves organic growth following divestment

Posted on 7 Mar 2012 by Tim Brown

Aerospace firm Cobham today released its 2011 preliminary results showing 0.3% organic growth for the year following good performance from its Mission Systems and the Aviation Services business.

The revenue from both commercial and non US defence/security markets (representing 56% of revenue) grew strongly but as anticipated, revenue growth was constrained by continued uncertainty in the US defence/security market. Group order intake in the year increased 16% and excluding the impact of acquisitions and disposals, the order book increased 7% on the prior year to £2.5bn.

Cobham completed its planned divestment of the Analytic Solutions business in November 2011 for US$350m in cash and also made three acquisitions, investing close to US$280m during the year.

There were also some very important contracts awarded during the year including a US$40m order from Inmarsat to be the maritime terminal launch partner on its Global Xpress broadband service, significant orders on the US KC-46A and the Brazilian KC-390 aerial refuelling tankers.

According to the company, its Excellence in Delivery programme has produced improved operational performance and significant financial benefits, realising £25m of annualised year-on-year efficiency savings, significantly ahead of the £21m target. In a statement, the company explained that “this was due to headcount and other reductions being achieved earlier than planned at a cost of £39m, well below the previously expected cost of £46m.”

Cobham says it intends to expand the programme and estimates that efficiency savings at the end of 2013 will increase from £65m to £75m, at an unchanged total cost of £131m. By the end of 2012, a further £8m of annualised, year-on-year efficiency savings are expected to be achieved, with the cumulative programme benefits and costs remaining in line with the original plan.

“We have achieved modest organic growth in our core businesses and 13% underlying EPS growth at constant translation exchange rates, driven by efficiency savings from the Excellence in Delivery programme and good cost control,” Cobham Executive Chairman, John Devaney said. “Conditions in our markets, including the positive trend in our export and commercial markets are expected to continue in 2012.”

Driven by Excellence in Delivery efficiency savings and good cost control, the Group’s underlying trading margin increased to 19.7% (2010: 18.3%). In the year, the core businesses invested £129m (2010: £125m) in total on research and development (R&D), which includes both company funded and customer funded investment. This included investment in a number of new or improved technologies such as wireless video links, oxygen generating systems, radio and audio mmanagement systems and active electronically scanned array radar systems.

Core PV 5 (Private Venture or company funded R&D) investment was £70m (2010: £69m), representing 5.2% (2010: 5.0%) of revenue. Underlying EPS increased 12% (13% at constant translation exchange rates) to 22.0p (2010: 19.7p), driven by the improvement in the trading margin.

The £150m share buy-back programme, completed in November 2011, increased EPS by 3%. Operating cash conversion was strong at 95% with excellent free cash flow of £288m (2010: £219m). Net debt decreased to £232m (2010: £326m) at the year end, after the completion of the £150m share buy-back programme, with conservative gearing at 0.5 times net debt/EBITDA.

There will be a preliminary results presentation at 9.30am UK time on Wednesday, 7 March 2012. The preliminary results presentation will be webcast live on the Cobham website ( and will remain on the website for subsequent viewing. There will also be a listen only dial-in facility available which can be accessed on +44 (0)20 3140 0668, confirmation code 990075# and in the US/Canada on +1 631 510 7490, confirmation code 990075#. The published Annual Report will be available as a download file on from 27 March 2012.