4 August 2011 2011 Interim Results
Agenda • Introduction Andy Stevens Chief Executive Officer • Financial Results Warren Tucker Chief Financial Officer • Business Review Andy Stevens • Q&A 1 1 2011 Interim Results Cobham plc
Summary Profit and Loss Account Full Year H1 H1 2010 2010 2011 Change £m £m £m 1,902.6 Revenue 963.4 891.9 (7.4%) 348.4 Trading Profit 167.2 166.9 (0.2%) 18.3% Trading Margin 17.4% 18.7% 1.3pts 306.1 Underlying Profit before Taxation 144.6 148.9 3.0% 19.68p Underlying Earnings Per Share 9.29p 9.76p 5.1% 5.0% PV Spend %* 5.2% 5.6% 0.4pts 4%* increase in organic order intake - order book £2.5bn * Core businesses. See Appendix for definitions, including underlying, used throughout this presentation. 2 2011 Interim Results Cobham plc
Earnings Per Share Growth % 3 2011 Interim Results Cobham plc
Cash Flow and Dividend Full Year H1 H1 2010 2010 2011 Growth £m £m £m 342.4 Trading Profit (ex. JV) 164.7 163.4 (0.8%) 271.4 Operating Cash Flow 135.1 158.7 17.5% 79.3% Operating Cash conversion 82.0% 97.1% 15.1pts * 218.6 Free Cash Flow from Business 103.0 128.9 25.1% 86.5 Decrease/(Increase) in Net Debt 39.3 (51.5) 6.00p Dividend per Share 1.628p 1.800p 10.6% Net Debt £377.6m, Net Debt:EBITDA 0.9x 4 2011 Interim Results *Excludes Excellence in Delivery Cobham plc
Changes to Organisation Core businesses – seven Strategic Business Units (SBUs) Non-core businesses – two SBUs Divisions Analytic Solutions Defence Aerospace and Mission Commercial Systems Systems (CDS) Security (CAS) Systems (CMS) Analytic US Composites Aviation + Passive Solutions Services (CAvS) Microwave (ex CDS) (ex CDS) Defence Avionics Communications (ex CAS) (ex CDS) Antenna Beacons Systems (ex CMS) (ex CDS) Changes effective 1 January 2011 5 2011 Interim Results Cobham plc
Core Business Revenue 6 2011 Interim Results Cobham plc
Core Businesses - Organic Revenue Growth Cycle Over the Medium Term Excludes FX, Acquisitions and Disposals. Prior year are proforma numbers for illustration purposes 7 2011 Interim Results – see appendix for definition of core businesses Cobham plc
Cobham Aerospace & Security • Strong performance from export oriented Antenna Systems, partly offsetting land and surveillance • Increased shipments of long range SATCOM antennas to commercial customers • Long term awards for S61 helicopter upgrade and new SK105 aircraft avionics • Robust growth from repair and refurbishment work, including work for US FAA Excludes FX, Acquisitions and Disposals. Prior year are proforma numbers for illustration purposes 8 2011 Interim Results – core as defined on slide 5 Cobham plc
Cobham Defence Systems • Revenue affected by Continuing Resolution and order shortfalls, but efficiency savings and contracts benefit margin • Further US DARPA development contract for US$13m on Wireless Network after Next (WNaN) • Good shipments of integrated microwave assemblies for TOW missile system Excludes FX, Acquisitions and Disposals. Prior year are proforma numbers for illustration purposes 9 2011 Interim Results - core as defined on slide 5 Cobham plc
Cobham Mission Systems • Continuing shipments of under wing air refuelling pods and US$73m development subcontracts received for US KC-46 tanker • Strong performance from oxygen systems, aviation restraints and actuation subsystems, with growing aftermarket Excludes FX, Acquisitions and Disposals. Prior year are proforma numbers for illustration purposes 10 10 10 2011 Interim Results - core as defined on slide 5 Cobham plc
Cobham Aviation Services • Increased flying activity for resource industry customers in Australia, with further potential opportunities opening up • Strong performance from Sentinel maritime surveillance programme and Australian freight operations • Preparations well underway for modification of A330 FSTA aircraft in UK Excludes FX, Acquisitions and Disposals. Prior year are proforma numbers for illustration purposes 11 11 11 2011 Interim Results - core as defined on slide 5 Cobham plc
Excellence in Delivery ... a Step Improvement in Operating Performance … and Offers Numerous Benefits The Programme has 3 Elements • Driven by improved product delivery and • Rolling out standard, best practice, operating model across larger sites - customer service, but also: our Principal sites – Improved operating efficiency • Integrating manufacturing operations of some smaller sites – Estimated cost savings of £65m, with into Principal sites to capture scale one-off costs of £131m and standardisation benefits – Reduced inventory levels – working • Implementing a standard ERP capital savings system in Principal sites to enable further scale economies – A simpler, more scalable business 12 12 12 2011 Interim Results Cobham plc
By the End of 2013, EiD is Expected to Deliver £65m in Benefits Annually Actual Benefits Plan Forecast Exceptional costs Benefit impact 2010-13, £m Exit run-rate for 2013 is £65m 65 55 42 55 30 30 9 9 15 H1 H2 H1 H2 -19 -23 -25 -26 -34 -46 2010 2011 2012 2013 Cumulative 26 131 72 106 exceptional cost Will deliver £21m of year over year benefit 13 2011 Interim Results Cobham plc
Financial Highlights • US Defence and Security challenging period; non-US and Commercial growing • Core business trend continues at slightly negative • EPS up 6% at constant translation • EiD really making a difference – 2011 savings already in place • Operating cash flow conversion 97%, free cash flow £129m • Dividend up 10.6%, £61m shares bought back to 30 June 14 14 14 2011 Interim Results - core as defined on slide 5 Cobham plc
Agenda • Introduction Andy Stevens Chief Executive Officer • Financial Results Warren Tucker Chief Financial Officer • Business Review Andy Stevens • Q&A 15 15 15 2011 Interim Results Cobham plc
Market Development • Challenging conditions in the US defence/security market – We‟re in the more attractive sectors • Improving marketing and pipeline in stronger markets – Wins on Chinese C919, French SK 105, Korean KT-1 & T-50 & Brazilian AF-1 – Good pipeline of opportunities in India, Middle East and South America – Commercial revenue almost one third of our core business • Greater focus on aftermarket – Aftermarket revenue increased to 17% – Winning US Army, Navy and Air Force business • Getting more products on major platforms – Scope of supply on the US tanker will be more than refuelling equipment More customers are identifying us as a strategic supplier 16 2011 interim results Cobham plc
Technology Investment • Rate of PV investment increased to secure next generation of programmes and upgrades – Invested 5.6% of revenue for core businesses • Our focus is on developing technically differentiated products and services – Weight, size and power performance are key factors • Good progress developing products that straddle multiple markets – Completed qualification testing of RAIMS for A350 – selected for A400M – Leveraging COGS technology – Developing SATCOM antennas for Inmarsat Technology differentiation is at the heart of our competitive advantage 17 2011 interim results COGS (Ceramic Oxygen Generating System) RAIMS (Radio & Audio Interface Management System) Cobham plc
Technology Investment Lighter, Smaller, Innovative SATCOM Antenna certification Targeting OEMs, airlines & retrofit markets – 24 airlines have adopted our product 18 2011 interim results *Based on Airbus analysis Cobham plc
Technology Investment OBIGGS - Military Gas Inerting Technology for Commercial Markets ◊ FAA mandate Civil Retrofit ◊ C130 retrofit Military ◊ C17 retrofit Regional ◊ Under development Civil OEM Commercial adoption ◊ B787 Unmanned ◊ Under development Military ◊ AH64, MH-47, MH-60, V22 OEM ◊ UH-1 Rotary adoption Fixed wing ◊ C17 production ◊ Platform „X‟ ◊ Platform „Y‟ Time Smaller and lighter than comparable systems 19 2011 interim results OBIGGS – On Board Inert Gas Generation Systems Cobham plc
Operational Excellence EiD is Making Good Progress • Standard Operating Framework – Production system implementation now live across 10 of our 14 principal locations – Engineering framework design underway • Integration – Five sites closed and a further four underway • New IT System – Completed concept work based on a standard ERP system Key: live site Customers are very supportive of this programme 20 2011 interim results Cobham plc
Operational Excellence EiD is Transforming Our Operational Performance • World class delivery and quality performance an additional differentiator • Streamlining reduces product development cycles and time to market • Improved engineering efficiency creates further capacity for new product development • Standardardised operating model enables greater synergy benefits from acquisitions • Improvement example (Nashua) Jan ’11 Jun ’11 • Deliveries to customer (on time to promise) 92% 100% • Inventory turns 7.3 11.3 • Avg. manufacturing lead time 30 days 10 days • Productivity improvement +25% Excellence in Delivery is key to our growth 21 2011 interim results Cobham plc
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