Cobham — H1 2012 Earnings Presentation
46 slides from Cobham's earnings presentation, Aug 8, 2012
Slide 1: 2012 Interim Results
8 August 2012 Th mostt important The i t t thing thi we b build ild iis ttrustt AEROSPACE AND DEFENCE SYSTEMS MISSION SYSTEMS SECURITY DIVISION DIVISION DIVISION • Aerospace • Defence Electronics • Aviation Services Communications • Life support • Antenna Systems • Mission Equipment • Commercial Sys
Slide 2: Agenda
Agenda • Initial Observations Bob Murphy Chief Executive Officer • Business Results Warren Tucker Chief C e Financial a ca O Officer ce • Q&A 1 2012 Interim Results Cobham plc
Slide 3: Initial Observations: Many Strong Positives
Initial Observations Many Strong Positives • Innovative, diverse, energetic people • A breadth of discriminating technologies • Customer & mission focus • Great geographical h l footprint f • Good spread p of contracting g risk • Strong margin performance & balance sheet • Delivering EiD - it is mak
Slide 4: Initial Observations: Areas to be even better
Initial Observations There are areas where we can be even better • Efficiency & continuous improvement • Contract execution • Portfolio f l balance b l & increased d scale l • Focus on organic growth 3 2012 Interim Results Cobham plc
Slide 5: Our Markets
Our Markets US defence/security • Regardless of the outcome, history dictates that we are facing declining defence budgets in the US unless world events cause a change in national defence spending – The defence budget will be a bill payer, with the US Army facing the deepest cuts – Continuing C ti i
Slide 6: Rebalancing the Portfolio
Rebalancing the Portfolio 2011 FY Group Revenue 2012 H1 Core Revenue Pro forma full H1 Thrane & Thrane Commercial 27% US Defence / Security 48% Commercial 32% US Defence / Non US Defence Security / Security 40% 25% Non US Defence / Security 28% Significant progress increasing exposure to commercial
Slide 7: Agenda
Agenda • Initial Observations Bob Murphy Chief Executive Officer • Business Results Warren Tucker Chief C e Financial a ca O Officer ce • Q&A 6 2012 Interim Results Cobham plc
Slide 8: Summary Profit and Loss Account
Summary Profit and Loss Account Full Year H1 H1 2011 2011 2012 Change £m £m £m 1,854.4 Revenue 891.9 843.3 (5.4%) 1,633.6 Core Revenue 772.7 816.8 5.7% 364.9 Trading Profit 166.9 158.0 (5.3%) 19 7% 19.7% Trading Margin 18 7% 18.7% 18 7% 18.7% - 327.9 Underlying Profit before Taxation 148.9 142.2 (4.
Slide 9: Earnings Per Share Growth
Earnings Per Share Growth 0.2% 7.0% 6.6% (1.3)% (1.6)% (1.8)% 9.1% 12.0 11.5 11.0 10.65 pence 10.5 10.0 9.76 9.5 8.9% at constant translation exchange 9.0 H1 2011 FX Translation Tax Share Pensions Acquisitions / Operating H1 2012 Buyback Net Finance Divestments Underlying EPS growth of 9% 8 2012 Int
Slide 10: Cash Flow and Dividend
Cash Flow and Dividend Full Year H1 H1 2011 2011 2012 Growth £m £m £m 337.1 Operating Cash Flow 158.7 135.7 (14.5%) 94.8% Operating Cash Conversion 97.1% 88.3% (8.8)pts 287.9 Free Cash Flow from Business * 128.9 94.0 (27.1%) 71.1 Acquisition payments less divestment proceeds and loans to JVs (72.0)
Slide 11: Cobham Aerospace & Security
Cobham Aerospace & Security • Strong contribution from surveillance and commercial aerospace businesses • Increased revenue from internet protocol mesh radios with many applications • Selected to supply Digital Audio Control System as forward forward-fit fit for the new Eurocopter EC175 • Increased
Slide 12: Cobham Defence Systems
Cobham Defence Systems • Increased production on the Wideband Global Satellite programme & next tranche awards • Increased deliveries of electronic guidance equipment for AMRAAM, AARGM and Standard Missiles • First shipments of Electronic Warfare (EW) equipment for F-15 DEWS upgrade • Award of IDECM
Slide 13: Cobham Mission Systems
Cobham Mission Systems • Significant FSTA Introduction to Service milestone achieved • Shipments of A330MRTT and C-130 aerial refuelling equipment • Increased revenue from US KC-46A & Brazilian KC-390 KC 390 tanker programmes • Award of KC-46A Body Fuel Tank and OBIGGS equipment contracts • Shipment
Slide 14: Cobham Aviation Services
Cobham Aviation Services • Increased FSTA activity • Mobilisation of two additional Boeing 717 QantasLink aircraft • Introduction of ‘gravel kit’ operations for unsealed runways at mines • Australian mining company contract extensions • FSTA conversion transferring to Spain • Four year extension of
Slide 15: Excellence in Delivery
Excellence in Delivery On Track To Deliver Benefits Standard Operating • Starting to embed a continuous improvement culture Framework (SOF) • Cross site working simplified with common language and approach implementation • Acquisition integration improved •Production System y 12 • Positive engagemen
Slide 16: Thrane & Thrane Acquisition
Thrane & Thrane Acquisition A Core Fit With Cobham Cobham’ss Strategy • Highly complementary - increases scale in maritime, land and d airborne ib SATCOM communication i i systems • Extends international reach through a combined dealer network • Makes it easier for all customers to buy a wider range
Slide 17: Summary
Summary • Organic revenue growth of 1.7% in the core businesses with a strong performance in defence/security markets outside of US • Commercial & non-US defence/security / y now represent p 60% of core revenue • £281m Thrane & Thrane acquisition completed in June and expected to be strongly accreti
Slide 18: Agenda
Agenda • Business Review Bob Murphy Chief Executive Officer • Business Results Warren Tucker Chief C e Financial a ca O Officer ce • Q&A 17 2012 Interim Results Cobham plc
Slide 19: Appendices
Appendices 1. IR calendar 2. Key Performance Indicators 3. Market positions 4. Sequestration scenarios 5. Ship set values 6. Cobham content on KC-390 and KC-46A 7. F-35 and B787 pproduction rates 8. Excellence in Delivery 9. Safe Cities 10 Core business revenue 10. 11. Revenue & profit 12. Sharehold
Slide 20: Investor Relations Calendar
Investor Relations Calendar 2012 2013 Nov Dec Jan Feb Mar April May Jun Jul Aug Sep Oct 12 7 25 8 Interim Prelim AGM Interim Management Results & Results Statement Interim Management Statement 19 2012 Interim Results Cobham plc
Slide 21: Key Performance Indicators
Key Performance Indicators Year to Year to Year to Year to / / 31/12/08 31/12/09 / / 31/12/10 / / 31/12/11 / / H1 2011 H1 2012 Core Business Organic Revenue Growth 9.5% 0.9% 0.7% 0.3% (2.6)% 1.7% Defence / Security 9 8% 9.8% 0 5% 0.5% (3 2)% (3.2)% (7 9)% (7.9)% 2 0% 2.0% Commercial (16.4)% 1.4% 9.6
Slide 22: Market Positions
Market Positions HIGHER Mission Aerospace Antenna Equipment Comms Systems Life Support Aviation Tactical Services Sensor Comms & Systems Surveillance (TC&S) LOWER BUILDING SCALE IN TOP 3 SATCOM capabilities of Antenna Systems integrating with Thrane & Thrane to form new SBU 21 2012 Interim Results C
Slide 23: Sequestration Scenarios
Sequestration Scenarios US DoD Base Defence Spending, Spending FY11A FY11A-FY21E FY21E ($ bn) 22 2012 Interim Results Chart courtesy of Citi Europe Cobham plc
Slide 24: Ship Set Values
Ship Set Values Milita ry / Fa s t J e t T ra ine rs US$K R o ta ry US$K F16 400‐800 EH101 360‐600 F/A 18 E/F/G 900‐3500 EC 175 90 F35 1,100 Apache 580 Eurofighter Typhoon 1,450 CH47 (Chinook) 80 Hawk CH 53K 380 500 Rafale S 61 500 165 MH60/UH 60 220 510 220‐510 PC-7 160 V22 1,030 T50 150 Co mme rc
Slide 25: Cobham Content and Announcement Dates KC-390 and KC-46A
Cobham Content and Announcement Dates KC 390 and KC-46A KC-390 KC 46A KC-390 KC-46A 24 2012 Interim Results Cobham plc
Slide 26: Forecast Production Rates B787
Forecast Production Rates B787 160 148 147 146 146 146 138 141 138 141 142 139 140 140 140 143 145 140 123 120 108 100 80 60 54 40 20 3 0 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 201 201 201 201 201 201 201 201 201 202 202 202 202 202 202 202 202 202 202 203 Source: Cobham Interna
Slide 27: Forecast Production Rates F-35
Forecast Production Rates F-35 140 122 120 98 100 78 80 62 60 48 43 42 40 32 20 0 2011 2012 2013 2014 2015 2016 2017 2018 Source: Cobham Internal Analysis 26 2012 Interim Results Cobham plc
Slide 28: Safe Cities
Safe Cities Scalable private secure communications network 27 2012 Interim Results Cobham plc
Slide 29: Excellence in Delivery
Excellence in Delivery Efficiencyy savings g of £75m pa p byy end of 2013 Benefits Exceptional costs Original plan Original plan Exit run-rate run rate for 2013 is £75m Actual/forecast Actual/forecast 75 65 42 42 2 60 30 34 55 9 9 0 ‐23 ‐25 ‐25 ‐26 ‐39 ‐34 ‐ 44 ‐46 Cumulative Unchanged exceptional 2
Slide 30: Core Business Revenue
Core Business Revenue 11 2 817 20 800 773 11 1% 2% CAVS CAVS 1.7% Organic Growth 600 CMS CMS £m 400 CDS CDS 200 CAS CAS 0 H1 2011 FX Translation Net Acquisitions Defence/ Commercial/ H1 2012 and Divestments Security Other 29 2012 Interim Results Cobham plc
Slide 31: H1 Revenue and Profit
H1 Revenue and Profit Revenue Trading Profit Organic £m H1 2011 H1 2012 Growth H1 2011* H1 2012 Growth Cobham Aerospace and Security 309.3 306.2 (8.3)% 66.3 65.0 (2.0)% Margin 21.4% 21.2% Cobham Defence Systems 149.8 159.1 3.7% 25.2 25.6 1.6% Margin 16.8% 16.1% Cobham Mission Systems 167.7 190.9 12.
Slide 32: Prior Year Revenue and Profit With Brand Charge
Prior Year Revenue and Profit With Brand Charge Revenue Trading Profit Year to Year to Year to Year to £m 31/12/10 31/12/11 Growth 31/12/10 31/12/11 Growth Cobham Aerospace and Security 681.8 637.0 (6.6)% 148.1 146.9 (0.8)% Margin 21.7% 23.1% Cobham Defence Systems 361 7 361.7 323 9 323.9 (10 5)% (1
Slide 33: Shareholder Returns
Shareholder Returns Full Year 2011 H1 2011 H1 2012 Growth 25 5% 25.5% U d l i Tax Underlying T Rate R t 25 5% 25.5% 20 0% 20.0% Earnings Per Share 22.05p Underlying 9.76p 10.65p 9.1% 16.80p Basic 6.96p 7.30p 16.76p Diluted 6.93p 7.27p 8.00p Dividend Per Share 1.80p 2.40p 33.3% 25.74p Free Cash Flow
Slide 34: Cash Flow Summary
Cash Flow Summary Full Year 2011 H1 2011 H1 2012 £m £m £m 355.5 Trading Profit (excluding joint ventures) 163.4 153.7 69 2 69.2 Dep eciation and othe Depreciation other mo movements ements 33 6 33.6 33 5 33.5 (48.8) Pension contributions in excess of service cost (9.8) (7.5) 11.0 (Increase)/Decrease
Slide 35: Foreign Exchange Transaction Exposure
Foreign Exchange Transaction Exposure Transaction Exposure: p Historic average g effective rate 2008 $1.93 : £1 2009 $1.70 : £1 2010 $1.58 : £1 2011 $ 1.56 : £1 2012 Total $122m 94% hedged for 2012 Hedging in place $ $115m Avg hedge rate $1.59: £1 Hedging in place 2013 $74m Avg hedge rate $1.59: £1
Slide 36: US$/£ Translation Exchange Rates
US$/£ Translation Exchange Rates Dec 2010 June 2011 Dec 2011 June 2012 Income Statement (average rate) 1.61 1.60 1.58 Balance Sheet (closing rate) 1.57 1.61 1.55 1.57 £0 7 PBT translation £0.7m t l ti impact i t for f every 1 centt movementt 35 2012 Interim Results Cobham plc
Slide 37: Reconciliation of IFRS to Underlying Result
Reconciliation of IFRS to Underlying Result Full Year 2011 H1 2011 H1 2012 £m £m £m 3 3 234.3 Profit o before o taxation o 99.4 90.2 0 31.9 Business restructuring - primarily Excellence in Delivery 19.2 15.8 5.4 Unrealised movements in non-hedge accounted derivative financial instruments (1.1) (4.4)
Slide 38: Thrane & Thrane Offers Communication Solutions for Four Market Areas
Thrane & Thrane Offers Communication Solutions for Four Market Areas • Maritime - equipment is typically used by merchant vessels, commercial vessels, fishing vessels and pleasure craft for radio and satellite communication communication. Customers include mainly shipyards and commercial and private
Slide 39: Strategic Rationale for Thrane & Thrane
Strategic Rationale for Thrane & Thrane • Highly complementary - increases Marine systems scale in maritime maritime, land and Cobham Thrane & Thrane airborne SATCOM communication • VSAT market leader across C, X and • Portable radios, VHF and MF/HF systems Ku bands • Leader in Inmarsat L band termi
Slide 40: Definitions
Definitions Core businesses All numbers referring to ‘core businesses’ exclude Analytic Solutions, which was divested in November 2011 and Commercial Systems which the Group plans to divest. Underlying To assist with the understanding of earnings trends, the Group has included within its published s
Slide 41: Glossary
Glossary AARGM Advanced Anti-Radiation Guided Missile AMRAAM Advanced Medium-Range Air-to-Air Missile C4ISR C Command, d Control, C t l Communications, C i ti Computers, C t Intelligence, I t lli Surveillance S ill and d Reconnaissance R i CAGR Compound Annual Growth Rate CAS Cobham Aerospace and Se
Slide 42: Notes Page
Notes Page 41 2012 Interim Results Cobham plc
Slide 43: Notes Page
Notes Page 42 2012 Interim Results Cobham plc
Slide 44: Notes Page
Notes Page 43 2012 Interim Results Cobham plc
Slide 45: Notes Page
Notes Page 44 2012 Interim Results Cobham plc
Slide 46: Cautionary Statement
Cautionary Statement For the purposes of the following disclaimers, references to this “document” shall be deemed to include references to the presenters presenters’ speeches, speeches the question and answer session and any other related verbal or written communications. This document contains cert