News Column

Cobham Pretax Profit, Revenue Declines On Strong Comparative

August 7, 2014

Alice Attwood

LONDON (Alliance News) - Cobham PLC saw its shares jump Thursday after the company said that pretax profit and revenue declined in its first-half on a strong comparative period that was boosted by non-repeating large multi-year orders though said that it remains confident that it will meet its expectations and achieve good commercial growth in the full-year.

Cobham was leading the FTSE 250 gainers Thursday morning with shares trading 4.67% higher at 300.40 pence per share.

In its half-year results for the six months to June 30, 2014 Cobham said pretax profit fell 14% to GBP118 million, from GBP137 million last year. Revenue declined 3% to GBP834 million from the GBP864 million recorded last year.

The aerospace and security technology company said order intake for the year also dropped, taking a 25% hit to GBP728 million from GBP976 million reported in the first-half of 2013; the prior year order intake in Aviations Services included large multi-year orders, said the company, which were not repeated during the half-year.

Despite the metric falls the company has boosted its interim dividend to 2.904 pence per share from 2.64 pence per share last year, signalling its confidence for the full-year.

Cobham said strong organic revenue growth continued in its commercial markets during the period, though this was offset by a 10% decline in defence and security markets.

Looking ahead the company said its expectations for the year are unchanged and that it anticipates continued good commercial growth, increased shorter cycle revenue and achievement of significant aerial refuelling engineering milestones in its second-half. It expects to generate mid-single digit organic revenue growth from 2015.

Cobham also said it expects an improvement in its trading margin from a combination of higher volumes and improved mix in the second-half with continued focus on enhancing operational performance, it said, as well as cash conversion to normalise, with an unwind of working capital on achievement of engineering milestones, said the company.

The FTSE 250-listed technology company said that while it its reconfirming its full-year guidance, this comes with a greater-than-usual weighting of earnings and operating cash generation to the second-half, although with stronger foreign currency headwinds.

"Overall, we continue to expect Group organic revenue to decline by low-to-mid single digits in 2014, and we will continue to take appropriate actions to substantially mitigate the impact of this reduction. The Board continues to anticipate that Cobham can deliver mid-single digit organic revenue growth from 2015. This is expected to be underpinned by continued strong growth in commercial markets, a moderating rate of decline in the US defence/security market and increasing revenue from non-US defence/security markets," said Chief Executive Officer Bob Murphy.

Cobham's strategy of bringing more balance to the group continues to make progress with the acquisition of Aeroflex, it said, with the next significant step in that process, expected to complete late in the third quarter.

In April the aerospace and security technology company said trading in its first quarter had been in line with the board's expectations and that it continued to plan for organic revenue to decline by low-to-mid single digits during the course of the year. However, while trading had been in line, translation of the company's revenue and earnings during the quarter have been hit by foreign currency headwinds, as anticipated in its 2013 preliminary results, it said.

In its full-year results in March, Cobham saw its pretax profit tumble 38% to GBP127 million from GBP204 million amid challenging trading conditions in the defence and security markets as strong growth in its commercial markets was offset by continued weakness in the defence and security markets. Despite the drop, the company boosted its dividend as it worked to realign the organisation in preparation for its next stage of development, it said.

Cobham operates in three end markets; US defence/security, non-US defence/security and commercial, which comprises specialist aerospace, marine and land markets. Commercially driven businesses are now the company's biggest contributors to revenue, accounting for approximately 40% of the group's total.

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Source: Alliance News

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