2017 Interim Results Thursday 3 rd August
Agenda 01 02 03 04 Introduction Financial Results Business Review Questions David Lockwood, David Mellors, David Lockwood Chief Executive Officer Chief Financial Officer 2 Cobham plc
01 Introduction David Lockwood
Highlights First half results in line with expectations; full year outlook unchanged albeit there remains a wide range of potential outcomes for 2017 In early stages of turnaround; focus on priorities of: (1) customers (2) leadership and simplification and (3) control and execution Portfolio review undertaken: commencing strategic review of Wireless and AvComm business units plc Board refresh underway 4 Cobham plc
02 Financial Results David Mellors
Summary Financial Headlines H1 2017 £m H1 2016 £m Order intake 915.8 1,170.4 Revenue 1,003.3 916.7 Underlying operating profit 89.9 102.2 Underlying operating margin 9.0% 11.1% Underlying earnings per share (pence) 2.5 3.8 Operating cash flow 108.3 108.0 Operating cash conversion 120% 106% Net debt 460.8 877.2 Net debt:EBITDA ratio 1.5x 2.3x Dividend (pence) - 2.03 6 Cobham plc
Order Intake Bridge £m 1500 19.8 27.8 17.0 139.2 1,170.4 23.2 1250 4.8 1000 915.8 430.4 750 500 250 0 CAVS H1 2016 Currency & Divestments CCC CMS CAES CAVS H1 2017 Other i/c Elims Qantas 7 Cobham plc
Revenue Bridge £m 1250 94.6 3.7 12.6 1,003.3 1000 916.7 7.2 5.0 12.1 (3%) 2% 5% (3%) 750 Organic revenue 0.1% lower 500 250 0 H1 2016 Currency & Divestments CCC CMS CAES CAVS H1 2017 i/c Elims 8 Cobham plc
Underlying Operating Profit Bridge £m 150 13.0 102.2 1.2 2.9 100 89.9 9.4 11.2 0.6 50 0 H1 2016 Currency & CCC Centre H1 2017 CMS CAES CAVS Divestments 9 Cobham plc
Communications and Connectivity £m H1 2016 FX Organic H1 2017 Order Intake 311.6 25.9 17.0 354.5 Revenue 328.5 29.4 (12.1) 345.8 Underlying operating profit 21.9 5.2 (1.2) 25.9 Underlying operating margin 6.7% 7.5% Order Book 269.6 263.4 Organic revenue decrease driven by: Profit impacted by: AvComm distributor change and large order Revenue decrease • • in 2016 Restructuring (£3.6m); increased PV • SATCOM lower aerospace retrofit (£3.8m) • Wireless test and coverage increased 2016 included Wireless charge of £9m • • volumes provide partial offset 10 Note: Revenue by currency; USD 28%, EUR/DKK 48% Cobham plc
Mission Systems £m H1 2016 FX Divested Organic H1 2017 Order Intake 179.6 17.0 (4.8) 27.8 219.6 Revenue 187.5 18.5 (7.2) 3.7 202.5 Underlying operating profit 24.3 2.7 0.4 (2.9) 24.5 Underlying operating margin 13.0% 12.1% Order Book 622.7 646.1 Organic revenue increase driven by: Profit impacted by: Actuation control subsystems Lower aerial refuelling production revenue • • Air Separation Module for B737 NG KC-46 development trading at nil margin in • • operators 2017 Decrease in aerial refuelling and KC-46 2016 included high margin UOR • • development revenue Note: Revenue by currency; USD 79% 11 Cobham plc
Advanced Electronic Solutions £m H1 2016 FX Organic H1 2017 Order Intake 247.1 33.3 (23.2) 257.2 Revenue 225.6 30.2 12.6 268.4 Underlying operating profit 27.3 3.3 (9.4) 21.2 Underlying operating margin 12.1% 7.9% Order Book 615.0 630.1 Organic revenue increase driven by: Profit impacted by: Higher development revenue Adverse revenue mix, including lower margin • • development revenue Higher EW production volumes • Increased costs (£7.5m) strengthening functional • infrastructure, IT systems and security compliance Lower RFMW components and ASICS • 12 Note: Revenue by currency; USD 99% Cobham plc
Aviation Services £m H1 2016 FX Organic H1 2017 Order Intake 432.1 64.5 (410.6) 86.0 Revenue 175.7 17.1 (5.0) 187.8 Underlying operating profit 21.2 1.7 (11.2) 11.7 Underlying operating margin 12.1% 6.2% Order Book 1,436.4 1,276.1 Organic revenue decrease driven by: Profit impacted by: Reduced flying for natural resources and Reduced revenue and mix • • Qantas repricing Non-recurring charges relating to legacy • Completion of helicopter services contract issues (£2.7m) • Initial revenue from AMSA mobilisation • Note: Revenue by currency; AUS$ 60% 13 Cobham plc
Movements in Net Debt £m 1250 1,028.2 5.9 17.0 21.4 1000 26.6 134.9 750 460.8 500 496.7 6.7 • Operating cash conversion of 120% • Free cash flow of £64.6m 250 • Gearing ratio 1.5x 0 Restructuring Opening Operating Net capital Net interest Taxation Net rights issue Other & FX Closing net & acquisition/ net debt cash flow expenditure proceeds debt pre capex. divestment costs 14 Cobham plc
Balance Sheet £m 30-Jun-17 31-Dec-16 30-Jun-16 Current working capital 335.8 384.3 384.5 Net receivables/payables >1 year 29.4 34.5 49.8 Total Working Capital 365.2 418.8 434.3 Net debt (460.8) (1,028.2) (877.2) Provisions (195.5) (237.9) (124.5) Pension deficit (64.2) (87.0) (74.0) Note: Contingent Liabilities have been disclosed in note 14 to the Interim Financial Statements 15 Cobham plc
03 Business Review David Lockwood
Cobham Today 4 Communications & Mission Aviation Advanced Systems Services Connectivity Electronic Solutions * Sectors 14 3 3 5 3 Business Units Business Units Business Units Business Units Business Units 46 4 4 25 13 Operating units Operating units Operating units Operating units Operating units * Reporting into refreshed SSA Board 17 Cobham plc
Customer Focus Improving customer Monitoring and driving Focusing on intelligence and building customer satisfaction improving delivery relationships • More regular leadership • Collecting and reviewing key • Focus on processes to meetings: resulting in customer related indicators improve on-time delivery enhanced understanding of • Aligning internal measures to • Group-wide training; customer views and needs our customer commitments targeting training 500 • Air Marshall Greg Bagwell CB employees in 2017 • Actively using customer score CBE appointment cards • Coaching on operational • Increased government and planning techniques where trade body participation needed Increasing customer intimacy; improving delivery 18 Cobham plc
Leadership and Simplification Instilling a common sense Reducing and simplifying Focusing on most critical of purpose and motivation internal policies performance metrics • Strengthened CAES Board • Streamlined Group policy • Remove unnecessary system (SSA) framework and 40% reports and data line items reduction in policies • Increased engagement with • Reporting burden reduced - top 200 leaders and • Delegated authorities used 70% fewer non-financial key collaboration encouraged as an active management performance indicators tool • Visited two thirds of • Monthly operational review businesses - three quarters packs now standardised; of headcount – and all- comprehensive finance pack hands meetings Freeing potential 19 Cobham plc
Control and Execution Increasing visibility Operational improvements Increasing scrutiny of key and accountability development programmes • Business unit reviews increased • New internal COO appointment; • Group-level review of to monthly, with greater clarity consolidating supply chain, material programmes; drive on performance and improved quality, information technology increased rigour accountability and engineering functions • Reinforcement of underlying • Culture of transparency • Launching supply chain and processes (e.g. LCM) manufacturing plans to drive cost reductions and improve quality and customer delivery • Investment in quality, supply chain and infrastructure Many improvement initiatives underway 20 Cobham plc
Portfolio Components CAES SCS CAES SCS CAES SCS CCC CAES Aero MES Comms. Products CAES CCC CCC CMS IES Wireless & Orchard SATCOM CCC AvComm Park Antennas CMS Davenport Subsystems CMS Wimborne CAVS CAVS CAVS Special Commercial Helicopter Mission Services Services/Systems Defence Commercial Commercial Aerospace Connectivity Bubble sizes proportionate to Cobham revenue contribution in H1 2017 21 Cobham plc
Portfolio Review Review undertaken of Commencing strategic review of business portfolio Wireless & AvComm business units • Focus on areas where Cobham can add • Investigate how to optimise shareholder value: value: - Assess commonality of markets, - Strong technology and/or market positions capabilities and offerings - Judge market knowledge and - Comprise c10% of Group revenue management expertise to optimise performance A defence and commercial aerospace company which designs and delivers services, systems and products 22 Cobham plc
Summary and Outlook • First half results in line with expectations • In the early stages of a challenging turnaround – may encounter some turbulence along the way • Leading positions in attractive markets • A number of high quality businesses with differentiated technology and know-how • Full year outlook remains unchanged – albeit with a wide range of potential outcomes 23 Cobham plc
04 Questions
Appendices
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