Cobham PLC (COB) - Cobham Interim Management Statement
RNS Number : 8327Q
12 November 2012
12 November 2012
Cobham INTERIM MANAGEMENT STATEMENT
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
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.
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
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.
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.
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 -
Bob Murphy, Chief Executive Officer +44 (0)1202 882020
Warren Tucker, Chief Financial Officer +44 (0)1202
Julian Wais, Director of Investor Relations +44 (0)1202
Mike Harrison/Will Carnwath +44 (0)20 7404
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
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
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
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
IMSKFLFFLFFLFBB -0- Nov/12/2012 07:00 GMT
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