5 March 2009 The most important thing we build is trust 2008 Preliminary Results
Agenda • Financial Results Warren Tucker Chief Financial Officer • Market Update and Business Overview Allan Cook Chief Executive • Q&A 1 2008 Preliminary Results 5 March 2009 Cobham plc
Summary Profit and Loss Account Year to Year to 31/ 12/ 07 31/ 12/ 08 Growth £m £m Orders Received 1,186.6 1,663.9 40.2% Revenue 1,466.5 1,061.1 38.2% Trading Profit 251.6 198.8 26.6% Margin 17.2% 18.7% (1.5)pts PV Spend % * 5.7% 5.6% 0.1pts Profit Before taxation 243.8 206.5 18.1% Underlying Earnings Per Share 15.42p 13.09p 17.8% Note: See Appendix for definitions, including underlying, used throughout this presentation. * Prior year restated due to SPARTA 2 2008 Preliminary Results 5 March 2009 Cobham plc
Earnings Per Share Growth 0.7% 10.1% 4.7% 2.3% 17.0 16.0 15.42 1.32 15.0 0.09 0.30 14.0 0.62 13.09 13.0 pence 12.0 13.1 % at constant 11.0 translation exchange 10.0 9.0 8.0 2007 FX Translation FSTA Project Costs FX Transaction Growth 2008 3 2008 Preliminary Results 5 March 2009 Cobham plc
Cash Flow and Dividends Year to Year to 31/ 12/ 07 31/ 12/ 08 Growth £m £m Trading Profit (ex. JV) 193.0 245.6 27.3% Operating Cash Flow 156.6 260.5 66.3% Operating Cash conversion 106.1% 25.0pts 81.1% Free Cash Flow from Business 133.9 202.9 51.5% Decrease/ (I ncrease) in Net Debt (719.2) 77.0 Dividend per Share 4.95p 10.0% 4.50p Net Debt £641.3m: £7m translation impact for every 1 cent movement * 4 2008 Preliminary Results 5 March 2009 * @£= US$1.42. Year end rate £= US$1.44 Cobham plc
Cash Flow Summary Year to Year to 31/ 12/ 08 31/12/07 £m £m Trading Profit (excluding joint ventures) 193.0 245.6 Depreciation and other movements 33.8 34.5 Decrease/(Increase) in working capital and provisions (27.6) 35.4 Net capital expenditure (42.6) (55.0) Operating cash flow 156.6 260.5 Taxation paid (23.3) (58.2) Dividends received from joint ventures 3.2 8.9 Other (3.7) (2.2) Free cash flow 202.9 133.9 Dividends paid (43.8) (52.7) Acquisition payments less disposal proceeds (17.7) (616.6) Movements in funding and exchange movements 4.6 (252.8) Decrease/ (increase) in net debt 77.0 (719.2) 5 2008 Preliminary Results 5 March 2009 Cobham plc
Revenue and Profit Revenue Trading Profit £m 2008 Growth 2008 Growth 2007 2007 Technology Divisions 869.7 1,245.6 43.2% 180.3 229.1 27.1% 18.4% Margin 20.7% 221.9 15.3% 24.8 13.2% Cobham Aviation Services 192.5 21.9 11.2% Margin 11.4% Operating Divisions 1,062.2 1,467.5 38.2% 202.2 253.9 25.6% Head Office & Other (1.1) (1.0) (3.4) (2.3) Cobham Group 1,466.5 38.2% 251.6 26.6% 1,061.1 198.8 Margin 18.7% 17.2% 6 2008 Preliminary Results 5 March 2009 Cobham plc
Technology Divisions’ Revenue Growth 7 2008 Preliminary Results 5 March 2009 Cobham plc
Technology Divisions’ Organic Revenue Growth 2005 to 2008 10.3% 13.2% 10.2% 5.8% 17.5% 9.6% 10.8% 8.4% 17.1% 8.6% (7.2)% 13.9% 8 2008 Preliminary Results 5 March 2009 Cobham plc
Technology Divisions’ Revenue and Profit Revenue Trading Profit Organic £m 2007 2008 Growth 2007 2008 Avionics and Surveillance 326.9 432.8 10.2% 51.9 71.7 16.6% Margin 15.9% Defence Systems 299.9 529.3 10.8% 74.8 105.2 19.9% Margin 24.9% Mission Systems 262.8 302.0 8.6% 54.1 52.2 17.3% Margin 20.6% Technology Divisions 869.7 1,245.6 10.3% 180.3 229.1 18.4% Margin 20.7% Note: Intercompany eliminations not shown. 9 2008 Preliminary Results 5 March 2009 Cobham plc
Foreign Exchange Transaction Exposure Dollar/Euro exposure predominantly hedged for 2009 & 10 with $58m @ 1.45 £0.5m PBT translation impact for every 1 cent movement 10 2008 Preliminary Results 5 March 2009 Cobham plc
Group Revenue Analysis By Destination RoW Australia 10% UK 10% 10% Mainland Europe 15% USA 55% Drivers • Faster growing geographies • Cross-selling out of home markets • Long term investment in Washington DC, India & Middle East • Cobham teamed with primes selling in developing markets 55% of revenue is from the USA 11 2008 Preliminary Results 5 March 2009 Cobham plc
Group Revenue Analysis By Market Driver Aviation Services 15% US Military/ Government 44% Other Communication 11% Commercial/ GA Aerospace 13% Non US Military/ Government 17% Drivers • Low commercial exposure • Securing preferred suppliers positions with certain primes • Demographics and outsourcing by primes/ governments • Suitability of technology for either OEM fit or upgrade • Demand for satellite on the move from military and developing markets • Acquisition synergies • Significant investment in selling capabilities 70% of revenue is from military and government contracts – 10% from Aviation Services 12 2008 Preliminary Results 5 March 2009 Cobham plc
Acquisitions Company Division Activity Location Consideration S-TEC Avionics and Fixed wing autopilots USA $38m Surveillance (January) Sensor & Antenna Defence Systems Electronic warfare technology USA $240m Systems Lansdale and subsystems (February) H1 2 0 0 8 Specialist cellular MMI Research Avionics and UK £13m communications for Surveillance (April) + £3m intelligence contingent Defence Systems Intelligence, scientific, systems $372m SPARTA USA engineering and technical + $35m (June) assistance services deferred M/A-COM Defence Systems RF, Microwave components & USA $425m sub systems (September) H2 Digital equipment, including GMS Avionics and USA $26m video surveillance and high Surveillance (October) definition and wireless video technologies US$1.2bn of acquisitions - integration is on or ahead of plan 13 2008 Preliminary Results 5 March 2009 Cobham plc
Financial Highlights • Order book increased from £1.8bn to £2.7bn, giving excellent long term revenue visibility • Growth markets and technology focus underpin 10% organic increase in Technology Divisions’ revenue; strong growth from Cobham Aviation Services • Underlying EPS growth of 18% (13% at constant translation exchange rates) driven by acquisitions and organic growth • Cash conversion of 106% and free cash flow of £203m • US$1.2bn of acquisitions completed with good progress on integration • 10% increase in 2008 dividend; double digit compound growth since 1980 14 2008 Preliminary Results 5 March 2009 Cobham plc
Agenda • Financial Results Warren Tucker Chief Financial Officer • Market Update and Business Overview Allan Cook Chief Executive • Q&A 15 2008 Preliminary Results 5 March 2009 Cobham plc
The US Defence Market What is known Implications for Cobham • Three major budget sources • Growth in all core budgets for Cobham – Core defence US$664bn – Homeland security US$43bn • Capabilities focused on critical intelligence and defence areas – National security • Growth in core defence budget to Oct 2010, then ‘flat’ • Priorities match core capabilities • Priorities include C4ISR, cyber security, • Ongoing demand for missile defence recapitalisation • Missile defence continues to be • Able to benefit from new platforms and important to national security upgrades with technology • No programme cuts announced • Operational deployment is not a major driver for Cobham • Strength in export A&D orders • Reduction in ongoing activities in Iraq Major growth opportunities in defence, homeland security and national security markets 16 2008 Preliminary Results 5 March 2009 Cobham plc
Other Defence Markets • Established positions on most major platforms and programmes • Governments face a familiar but escalating dilemma – increased geopolitical tensions and continued threat to national security, leading to a greater dependency on intelligence assurance and homeland security opportunities for Cobham • European defence budgets remain under pressure and account for only 16% of revenue. Cobham’s UK contracts are long term, running to 2025 and beyond with modest growth overall • Australian markets have, so far, held up considerably better than America, rising to AUD$22.4bn. Cobham’s core Sentinel contract runs to 2019 • Compound growth of 20% forecast for India, Saudi Arabia, UAE and South Korea for the period 2008 to 2013 Major growth will occur in markets such as Asia and the friendly Middle East countries 17 2008 Preliminary Results 5 March 2009 Cobham plc
Non Defence Markets • Non defence markets account for 29% of Cobham revenue – Commercial and General Aviation 13%, Aviation Services 5% and other communication 11% • Airlines in all regions face a tough 2009 with too much capacity still in the market, with North America forecast to do slightly better than other regions • Majority of Cobham products fitted post production of ‘green’ aircraft and less susceptible to near term decline in aircraft orders • Business aviation subdued, although new airframes are scheduled for entry into service in 2010 and beyond • Commercial avionics business levels should be sustained through 2009 • OEMs are seeking higher levels of systems integration from avionics suppliers • Cobham’s success with Rockwell Collins on the communication package for the A350 is an indication of the shift in dynamics OEMs are seeking greater levels of system integration 18 2008 Preliminary Results 5 March 2009 Cobham plc
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