Cobham PLC (COB) - Cobham Interim Management Statement RNS Number : 8327Q Cobham plc 12 November 2012 12 November 2012 Cobham INTERIM MANAGEMENT STATEMENT Trading Environment In August the Group presented the outlook for 2012 but gave no guidance beyond that, given the US defence/security market uncertainty at that time. There remains a high degree of uncertainty in the near term but there is adequate clarity to reasonably assess the potential impact the environment is likely to have. Cobham is today outlining the strategic actions it will take to adapt to these conditions. The Group is planning for the current cyclical decline in the US defence/security market, which accounts for 40% of Cobham's revenue, to be consistent with previous US defence/security down cycles, recognising that these conditions can change rapidly with global events. Therefore the Group expects a period of declining, then flat, US defence/security budgets. Cobham continues to have strong technology positions on key strategic programmes in the US and is committed to taking the actions required to remain competitive in this important and very large market. The Group enjoys a broad geographical spread with access to growing defence/security markets in the rest of the world, accounting for 28% of revenue. Although European markets are expected to be flat to declining, certain markets including the Middle East, Asia and South America are expected to grow. Commercial markets, representing 32% of revenue, offer strong growth prospects driven by the need for technological innovation, rising demand for commercial aircraft and communications solutions for aviation and marine platforms. The growth characteristics of these latter two markets remain particularly attractive for the Group. 2012 Cobham's organic revenue growth in the ten months to October has been broadly flat in line with the Board's expectations and this trend is expected to continue for the full year. The initial phases to integrate the Thrane & Thrane (T&T) business acquired in June, have been completed on schedule and T&T is trading slightly ahead of expectations, with the remaining integration activities also being on schedule. The Group's Excellence in Delivery (EiD) programme is progressing well with the overall benefits being delivered in line with the plan. Cobham is on track to deliver a good set of results despite some difficult market conditions and the need to accelerate programme investment, particularly in Cobham Defence Systems. The Board continues to expect full year 2012 EPS to be similar to the prior year. Net debt was reduced to £446m at the end of September (30 June 2012: £536m), driven by strong cash conversion and the proceeds from the divestment of the US emergency locator beacon business, which completed in July 2012. 2013 The US defence/security market remains challenging with the market continuing through the down cycle, driven by the overall fiscal pressure the US faces but with a lack of political consensus on US Government budgets. Given these economic difficulties, regardless of whether sequestration occurs, Cobham anticipates that its US defence/security revenue will decline in 2013 by mid-to-high single digits. Overall, Cobham is therefore planning for total Group revenue to decline organically by low-to-mid single digits in 2013, as the decline in defence/security revenue is partially offset by growth in commercial markets. The Group expects that the continued success of the EiD programme and the contribution made by the acquisition of T&T will largely offset the marked operational impact of the decline in defence/security revenue, the change in sales mix, as well as substantial new investments to enable the return to organic growth. This will result in slightly lower operating margins than are expected in 2012. Cobham will also continue to significantly streamline its operations and reduce its fixed cost base to enable it to remain competitive through the defence/security down cycle by integrating, downsizing or closing further facilities. This additional streamlining will be achieved by extending the integration aspects of the EiD programme for a further two years to the end of 2015, for an additional investment of £60m, with benefits each year rising steadily to £30m per annum on completion. Outlook As with the successful EiD re-engineering programme, the further restructuring of the Group's cost base to remove fixed costs will allow Cobham to transition through a difficult period and subsequently return to growth. The majority of the additional savings will be reinvested to enable Cobham to generate incremental organic revenue and gain market share, while slightly increasing operating margins. Accordingly, and on the basis of current market trends, the Group anticipates a return to modest organic revenue growth from 2014, rising above mid single digit growth thereafter. Cobham will continue to use its knowledge of chosen technology markets and adjacent areas to reinforce its capabilities, expand its market positions and support the Group's return to organic growth by making carefully selected acquisitions consistent with its disciplined financial criteria. The Group's focus is on prioritising investment that will bring more balance between its defence/security and commercial end markets. The Board believes that taking these robust actions swiftly together with the Group's cash generative business model will underpin the Group's long standing policy of paying a 10% progressive annual dividend increase. - ends - ENQUIRIES Cobham plc Bob Murphy, Chief Executive Officer +44 (0)1202 882020 Warren Tucker, Chief Financial Officer +44 (0)1202 882020 Julian Wais, Director of Investor Relations +44 (0)1202 857998 Brunswick Mike Harrison/Will Carnwath +44 (0)20 7404 5959 NOTES 1. Cobham will hold a conference call on its Interim Management Statement at 08:30 (UK time) on Monday, 12 November 2012. Participants will be Bob Murphy, Chief Executive Officer and Warren Tucker, Chief Financial Officer. The dial-in number for the conference call will be +44 (0) 1452 555 566, the conference ID is 68632537. The conference call will recorded for playback and available at www.cobhaminvestors.com for seven days after the event. 2. Cobham's preliminary results for the year ended 31 December 2012 will be announced on 7 March 2013. 3. Cobham specialises in meeting the demand for data, connectivity and bandwidth in defence, security and commercial environments. Offering a technically diverse and innovative range of technologies and services, the Group protects lives and livelihoods, responding to customer needs with agility that differentiates it. Employing more than 10,000 people on five continents, the Group has customers and partners in over 100 countries. 4. This document contains 'forward-looking statements' with respect to the financial condition, results of operations and business of Cobham and to certain of Cobham's plans and objectives with respect to these items. Forward-looking statements are sometimes but not always identified by their use of a date in the future or such words as 'anticipates', 'aims', 'due', 'could', 'may', 'should', 'expects', 'believes', 'intends', 'plans', 'targets', 'goal', or 'estimates'. By their very nature, forward-looking statements are inherently unpredictable, speculative and involve risk and uncertainty because they relate to events and depend on circumstances that may or will occur in the future. There are various factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. These factors include, but are not limited to, changes in the economies, political situations and markets in which the Group operates; changes in government priorities due to programme reviews or revisions to strategic objectives; changes in the regulatory or competition frameworks in which the Group operates; the impact of legal or other proceedings against or which affect the Group; changes to or delays in programmes in which the Group is involved; the completion of acquisitions and divestitures and changes in exchange rates. All written or verbal forward-looking statements, made in this document or made subsequently, which are attributable to Cobham or any other member of the Group or persons acting on their behalf are expressly qualified in their entirety by the factors referred to above. Cobham does not intend to update these forward-looking statements. This information is provided by RNS The company news service from the London Stock Exchange END IMSKFLFFLFFLFBB -0- Nov/12/2012 07:00 GMT
Cobham PLC COB Cobham Interim Management Statement
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