The most important thing we build is trust ADVANCED ELECTRONIC SOLUTIONS AVIATION SERVICES COMMUNICATIONS AND CONNECTIVITY MISSION SYSTEMS Interims Results 2015 Progressing Our Strategy
Agenda Introduction Bob Murphy • Chief Executive Officer Financial Results Simon Nicholls • Chief Financial Officer Business Review Bob Murphy • Chief Executive Officer Q&A • 1 6 August 2015 Cobham plc Cobham plc
Agenda Introduction Bob Murphy • Chief Executive Officer Financial Results Simon Nicholls • Chief Financial Officer Business Review Bob Murphy • Chief Executive Officer Q&A • 2 6 August 2015 Cobham plc Cobham plc
Financial Highlights H1 2015 H1 2014 Change Constant FX £m £m Change Order Intake 960.1 728.2 31.8% 29.5% Revenue 1,048.2 834.1 25.7% 24.0% Trading Profit 160.3 129.7 23.6% 22.9% Trading Margin 15.3% 15.5% (0.2)pts Underlying Profit before Taxation 134.9 117.6 14.7% 16.6% Underlying Earnings Per Share 9.3p 8.7p 7.7% 9.3% Operating Cash Conversion 77.1% 63.9% 13.2pts Net Debt (1,236.6) (1,222.7) * Dividend per Share 3.05p 2.904p 5.0% * At 31 December 2014 See Appendix for definitions, including underlying, used throughout this presentation. 3 6 August 2015 Cobham plc Cobham plc
Cobham Communications & Connectivity (CCC) US Defence & Security 2015 2014 Change (H1 2014: 15%) () (constant FX) % Revenue £m 408.9 310.5 31.7% Non-US Defence Trading Profit £m 58.2 49.3 18.1% & Security (H1 2014: 22%) Trading Margin 14.2% 15.9% (1.7)pts Commercial • 32% revenue increase driven by: (H1 2014: 63%) • £102m from test business of Aeroflex, with strong underlying demand for new products • Healthy growth of 13% in commercial aerospace and 6% in US defence/security driven by demand for large transport platforms and increased shipments in Surveillance, respectively • Overall 1% organic decline driven by oil and gas sector in SATCOM and lower demand for in- building wireless products • £9m trading profit increase reflecting: • Strong acquisition performance, partially offset by lower volume in commercial marine and land • Cost increase in composites development programme of £3m • PV increased to 12% of revenue to drive future growth; focused on commercial markets Note: US$ revenue 37%, EUR & DKK revenue 35% 4 6 August 2015 Cobham plc Cobham plc
Cobham Mission Systems (CMS) Commercial (H1 2014: 9%) 2015 2014 Change () (constant FX) % Revenue £m 167.1 146.3 14.2% Trading Profit £m 24.9 21.4 16.4% US Defence & Security Trading Margin 14.9% 14.6% 0.3pts (H1 2014: 53%) Non-US Defence & Security (H1 2014: 38%) • Total revenue £21m higher, with organic growth of 14% including: • Re-start of C-130 production for USMC and USAF • Increased engineering and development revenue, primarily on the US KC-46 aerial refuelling tanker • Encouraging order flow on missile actuation and weapons carriage and release products • Lower A330MRTT production from in-year phasing • Profitability and margin on track; continue to reflect high level of ongoing engineering and development activity in aerial refuelling Note: US$ revenue 74% 5 6 August 2015 Cobham plc Cobham plc
Cobham Advanced Electronic Solutions (CAES) 2015 2014 Change Commercial () (constant FX) % (H1 2014: 3%) Revenue £m 275.9 188.8 46.1% Trading Profit £m 40.3 27.8 45.0% Non-US Defence Trading Margin 14.6% 14.7% (0.1)pts & Security (H1 2014: 4%) US Defence & Security (H1 2014: 93%) • Consolidated portfolio delivered 46% increase in total revenue: • Significant contribution of £104m from Aeroflex microelectronics business, bringing increased commercial exposure • Organic revenue 9% lower with certain programmes nearing end of production life in existing business • Aeroflex contribution drives trading profit increase, with trading margin stable: • Reflects ongoing mix change away from production to development programmes • Offset by benefits from integration savings and continuous improvement activities Note: US$ revenue 99% 6 6 August 2015 Cobham plc Cobham plc
Cobham Aviation Services (CAvS) Commercial 2015 2014 Change (H1 2014: 47%) () (constant FX) % Revenue £m 203.0 197.7 2.7% Trading Profit £m 28.4 25.4 11.8% Non-US Defence Trading Margin 14.0% 12.8% 1.2pts & Security (H1 2014: 53%) • Organic revenue increase driven by: • Helicopter Services the primary driver, with increased revenue from rotary wing support contracts in Trinidad & Tobago and Qatar • Commercial revenue in Australia broadly unchanged; some demand weakness from natural resources sector but key contract renewals and entry into service of next generation E190 aircraft • Completion of second Special Mission detachment for RSAF and ongoing AMSA mobilisation ahead of flying operations commencing in H2 2016 • Total trading profit increased by £3m from increased activity and higher margin from revenue mix and efficiencies Note: AU$ revenue 56% 7 6 August 2015 Cobham plc Cobham plc
Revenue and Profit Sector Summary at Constant Exchange 1 Revenue Trading Profit £m H1 2015 H1 2014 Change H1 2015 H1 2014 Change Cobham Communications and Connectivity 408.9 310.5 31.7% 58.2 49.3 18.1% Margin 14.2% 15.9% Cobham Mission Systems 167.1 146.3 14.2% 24.9 21.4 16.4% Margin 14.9% 14.6% Cobham Advanced Electronic Solutions 275.9 188.8 46.1% 40.3 27.8 45.0% Margin 14.6% 14.7% Cobham Aviation Services 203.0 197.7 2.7% 28.4 25.4 11.8% Margin 14.0% 12.8% Head Office and Eliminations (6.7) 1.9 8.5 6.5 Exchange - (11.1) - (0.7) Cobham Group - as reported 1,048.2 834.1 25.7% 160.3 129.7 23.6% Margin 15.3% 15.5% (1) = 2014 data presented at 2015 exchange rates. 8 6 August 2015 Cobham plc Cobham plc
Trading Profit Bridge 2014 to 2015 £m 160.3 1.0 0.7 13.4 31.3 129.7 7.9 7.9 9 6 August 2015 Cobham plc Cobham plc
Reconciliation of Trading to Reported Profit H1 2015 H1 2014 £m £m Trading profit 160.3 129.7 Underlying net finance costs (25.4) (12.1) Underlying profit before taxation 134.9 117.6 Taxation charge on underlying profit (2015: 21.5%; 2014: 20.0%) (29.0) (23.5) Underlying profit after taxation for the period 105.9 94.1 Business restructuring (23.8) (13.1) Movements in non-hedge accounted derivative financial instruments (0.4) 5.7 Amortisation of intangible assets arising on business combinations (85.3) (48.6) Exceptional legal costs - (0.8) Other business acquisition and divestment related items (21.1) (4.2) Non-underlying finance costs - (2.4) Taxation on non-underlying items 22.5 15.4 (Loss)/profit after taxation for the period (2.2) 46.1 10 6 August 2015 Cobham plc Cobham plc
Cash Flow H1 2015 H1 2014 £m £m Trading profit 160.3 129.7 Depreciation and amortisation 41.6 33.9 Pension contributions in excess of pension charges (8.0) (8.9) Increase in working capital (7.0) (48.6) Net capital expenditure (58.0) (25.7) Other items (5.3) 2.5 Operating Cash Flow 123.6 82.9 Underlying net interest paid (24.0) (11.6) Taxation paid (13.6) (18.8) Business restructuring costs (16.5) (13.4) Free Cash Flow 69.5 39.1 Dividends paid (87.7) (75.5) Acquisition payments less divestment proceeds and other related costs (4.8) (23.2) Placing and net settlement of treasury shares (8.3) 183.7 Exchange movements 17.4 16.0 Increase in Net Debt (13.9) 140.1 Opening Net Debt (1,222.7) (453.4) Closing Net Debt (1,236.6) (313.3) Net Debt: EBITDA 2.9 0.9 Note: Depreciation and amortisation shown net of profit/loss on sale of property, plant and equipment and excluding amortisation of acquired intangibles. 11 6 August 2015 Cobham plc Cobham plc
Working Capital Current Total Working Working Inventories Receivables Payables Capital Non-current Capital £m £m £m £m £m £m Opening Balance Sheet 431.4 436.6 (503.6) 364.4 17.1 381.5 Underlying Cash Outflow/(Inflow) 23.6 (21.5) 4.9 7.0 - 7.0 FX (6.2) (11.0) 11.4 (5.8) 0.3 (5.5) Acquisitions and Disposals (7.6) (4.3) 2.6 (9.3) (3.3) (12.6) Non-Underlying Items (20.6) (30.1) 73.2 22.5 15.4 37.9 Closing Balance Sheet 420.6 369.7 (411.5) 378.8 29.5 408.3 12 6 August 2015 Cobham plc Cobham plc
Balance Sheet 30/06/2015 31/12/2014 £m £m Intangible assets 1,842.7 1,997.2 Property, plant and equipment 380.4 390.0 Other non-current assets 99.2 91.0 Non Current Assets 2,322.3 2,478.2 Inventories 420.6 431.4 Trade and other receivables < 1 year 369.7 436.6 Trade and other payables < 1 year (411.5) (503.6) Current Working Capital 378.8 364.4 Net current tax liabilities (134.4) (118.8) Net debt (1,236.6) (1,222.7) Provisions (122.0) (67.4) Retirement benefit obligations (83.8) (102.0) Other assets / liabilities (137.0) (219.4) Net Assets 987.3 1,112.3 13 6 August 2015 Cobham plc Cobham plc
Summary • Strong revenue and earnings growth in the first half, driven by Aeroflex • Modest organic revenue growth due to short-term headwinds in commercial markets • Good progress in resolving the technical issues on our major aerial refuelling development programmes • Improving cash conversion • Completed successful refinancing of short-term borrowings associated with the Aeroflex transaction on a long-term basis • Comfortable headroom under committed borrowing facilities • Interim dividend increase of 5% 14 6 August 2015 Cobham plc Cobham plc
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