The most important thing we build is trust ADVANCED ELECTRONIC SOLUTIONS AVIATION SERVICES COMMUNICATIONS AND CONNECTIVITY MISSION SYSTEMS Preliminary Results 2015 Delivering Our Strategy Working together to be a leading Global Technology and Services innovator, respected for providing solutions to the most challenging problems
Agenda Introduction Bob Murphy • Chief Executive Officer Financial Results Simon Nicholls • Chief Financial Officer Business Review Bob Murphy • Q&A • 1 3 March 2016 Cobham plc Cobham plc
Agenda Introduction Bob Murphy • Chief Executive Officer Financial Results Simon Nicholls • Chief Financial Officer Business Review Bob Murphy • Q&A • 2 3 March 2016 Cobham plc Cobham plc
Financial Highlights Aeroflex Drives Robust Performance Year to Year to Change Constant FX 31/12/15 31/12/14 Change £m £m Order Intake 2,148.0 1,908.3 12.6% 12.5% Revenue 2,072.0 1,851.7 11.9% 11.1% Trading Profit 332.2 286.7 15.9% 15.8% Trading Margin 16.0% 15.5% 0.5pts Underlying Profit before Taxation 280.4 257.0 9.1% 10.7% Underlying Earnings Per Share 19.5p 18.5p 5.4% 6.9% Operating Cash Conversion 70.7% 72.6% (1.9)pts Net Debt (1,206.8) (1,222.7) Dividend per Share 11.18p 10.65p 5.0% See Appendix for definitions, including underlying, used throughout this presentation. 3 3 March 2016 Cobham plc Cobham plc
Communications & Connectivity (CCC) Aeroflex Contribution Partially Offset by Weak Commercial Markets US Defence & Security 2015 2014 Change (2014: 15%) () (constant FX) % 15% Revenue £m 771.8 687.1 12.3% Non-US Defence 19% Trading Profit £m 108.4 113.4 (4.4)% 66% & Security (2014: 20%) Trading Margin 14.0% 16.5% (2.5)pts Commercial (2014: 65%) • Total revenue 12% higher: - Aeroflex test business contributed full year impact of £127m - Overall 4% organic revenue decline - 9% decline in commercial revenue, due to weakness in marine and land markets, partially offset by strong growth in commercial aerospace - Good defence/security organic growth of 5%, driven in particular by Avionics upgrades • Trading profit down £5m and lower trading margin of 14.0% reflects: - Aeroflex contribution including integration benefits - Significant impact of reduction in shorter cycle commercial volumes Note: US$ revenue 37%, EUR & DKK revenue 36% 4 3 March 2016 Cobham plc Cobham plc
Mission Systems (CMS) Strong AAR Execution Drives Results Commercial (2014: 7%) 2015 2014 Change () (constant FX) % 6% Revenue £m 382.4 348.7 9.7% 35% Trading Profit £m 68.0 38.6 76.2% US Defence 59% & Security Trading Margin 17.8% 11.1% 6.7pts (2014: 54%) Non-US Defence & Security (2014: 39%) • Total revenue increased by £34m with 10% organic growth driven by: - Strong production volumes and favourable mix across a variety of AAR programmes - Higher engineering and development revenue on US KC-46 tanker programme - Strong revenue and order flow from actuation products on air-to-ground munitions • Trading profit and margin significantly higher driven by: - Increase in revenue - Non-repeat of 2014 £15m aerial refuelling provision Note: US$ revenue 74% 5 3 March 2016 Cobham plc Cobham plc
Advanced Electronic Solutions (CAES) Aeroflex Drives Improvement Commercial 2015 2014 Change (2014: 11%) () (constant FX) % 17% Revenue £m 538.0 441.9 21.7% Non-US 7% Defence & Security Trading Profit £m 80.5 68.4 17.7% (2014: 4%) 76% Trading Margin 15.0% 15.5% (0.5)pts US Defence & Security (2014: 85%) • Total revenue increase of £96m: - Full year impact of Aeroflex, partially offset by divestments completed in the year - Organic revenue 7% lower with good growth from microelectronics for missiles, EW and radar, offset by mature production programmes ending • Trading profit higher, with margin slightly lower: - Contribution from Aeroflex, partially offset by adverse revenue mix in existing business - Integration efficiencies from site closures and supply chain Note: US$ revenue 99% 6 3 March 2016 Cobham plc Cobham plc
Aviation Services (CAvS) Strong Performance in Difficult Commercial Markets 0% 2015 2014 Change Commercial () (constant FX) % (2014: 46%) Revenue £m 390.1 387.4 0.7% 44% Trading Profit £m 57.3 52.0 10.2% 56% Trading Margin 14.7% 13.4% 1.3pts Non-US Defence & Security (2014: 54%) • Modest organic revenue increase driven by: - Growth in defence/security revenue; Special Mission and Helicopters both contribute - Commercial revenue slightly lower with reduced flying in the natural resources sector • Total trading profit increased £5m due to improved revenue mix and contract execution Note: AU$ revenue 56% 7 3 March 2016 Cobham plc Cobham plc
Revenue and Profit Sector Summary at Constant Exchange 1 Revenue Trading Profit Year to Year to Year to Year to £m Change Change 31/12/15 31/12/14 31/12/15 31/12/14 Cobham Communications and Connectivity 771.8 687.1 12.3% 108.4 113.4 (4.4%) Margin 14.0% 16.5% Cobham Mission Systems 382.4 348.7 9.7% 68.0 38.6 76.2% Margin 17.8% 11.1% Cobham Advanced Electronic Solutions 538.0 441.9 21.7% 80.5 68.4 17.7% Margin 15.0% 15.5% Cobham Aviation Services 390.1 387.4 0.7% 57.3 52.0 10.2% Margin 14.7% 13.4% Head Office and Eliminations (10.3) (0.9) 18.0 14.4 Exchange - (12.5) - (0.1) Cobham Group - as reported 2,072.0 1,851.7 11.9% 332.2 286.7 15.9% Margin 16.0% 15.5% (1) = 2014 data presented at 2015 exchange rates. 8 3 March 2016 Cobham plc Cobham plc
Reconciliation of Trading to Reported Profit Year to Year to 31/12/15 31/12/14 £m £m Trading profit 332.2 286.7 Underlying net finance costs (51.8) (29.7) Underlying profit before taxation 280.4 257.0 Taxation charge on underlying profit (2015: 21.5%; 2014: 20.25%) (60.2) (52.0) Underlying profit after taxation for the period 220.2 205.0 Business restructuring (67.5) (52.2) Movements in non-hedge accounted derivative financial instruments (18.8) (21.8) Amortisation of intangible assets arising on business combinations (176.8) (113.6) Impairment of Goodwill (26.6) - Exceptional legal costs - (0.8) Other business acquisition and divestment related items (30.5) (40.7) Non-underlying finance costs - (3.6) Taxation on non-underlying items 62.3 56.7 (Loss) / profit after taxation for the year (37.7) 29.0 9 3 March 2016 Cobham plc Cobham plc
Free Cash Flow FCF Includes Investment in Development Programmes, CAPEX, Aeroflex Integration £m 450 56.8 400 332.2 350 48.9 300 250 98.7 200 150 80.9 105.5 100 55.0 50 0 Slight Reduction in Net Debt to £1.21B – Net Debt:EBITDA of 2.9x Note: Depreciation and amortisation shown net of profit/loss on sale of property, plant and equipment and excluding amortisation of acquired intangibles. 10 3 March 2016 Cobham plc Cobham plc
Working Capital Bridge £m 500 10.9 41.9 378.3 400 359.3 53.0 36.8 4.0 13.0 300 33.0 Net operating cash outflow of £48.9m 200 100 0 11 3 March 2016 Cobham plc Cobham plc
Balance Sheet 31/12/2015 31/12/2014 restated £m £m Intangible assets 1,729.5 2,040.8 Property, plant and equipment 379.9 390.0 Other non-current assets 102.6 88.8 Non Current Assets 2,212.0 2,519.6 Inventories 410.4 429.5 Trade and other receivables < 1 year 366.0 435.3 Trade and other payables < 1 year (398.1) (505.5) Current Working Capital 378.3 359.3 Net current tax liabilities (116.5) (118.8) Net debt (1,206.8) (1,222.7) Provisions (142.5) (127.0) Retirement benefit obligations (56.7) (102.0) Other assets / liabilities (158.1) (196.1) Net Assets 909.7 1,112.3 12 3 March 2016 Cobham plc Cobham plc
Summary • Robust performance in 2015 in challenging market conditions • Absolute increases driven by the impact of Aeroflex; organic revenue decline of 1% • Group Trading Margin 16% includes: • Benefit of excellent progress with Aeroflex integration • Further traction in continuous improvement activities and cost reduction measures • Cash flow performance includes: • Increase in working capital on development programmes and short cycle demand impact • Business restructuring costs related to Connectivity strategy execution • Recommended increase in final dividend of 5% • Increased Free Cash Flow generation remains a major priority for 2016 • Focus on Net debt reduction • Group remains well funded on a long term basis 13 3 March 2016 Cobham plc Cobham plc
Agenda Introduction Bob Murphy • Chief Executive Officer Financial Results Simon Nicholls • Chief Financial Officer Business Review Bob Murphy • Q&A • 14 3 March 2016 Cobham plc Cobham plc
Today’s Agenda • Our Markets • Delivering Our Strategy • Summary 15 3 March 2016 Cobham plc Cobham plc
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