Cobham — H1 2009 Earnings Presentation
46 slides from Cobham's earnings presentation, Aug 6, 2009
Slide 1: 2009 Interim Results
6 August 2009 The most important thing we build is trust 2009 Interim Results
Slide 2: Agenda
Agenda • Financial Results Warren Tucker Chief Financial Officer • Market Update and Business Overview Allan Cook Chief Executive • Q&A 1 2009 Interim Results 6 August 2009 Cobham plc
Slide 3: Summary Profit and Loss Account
Summary Profit and Loss Account Full Year Unaudited Unaudited 2008 H1 2008 H1 2009 Growth £m £m £m 1,466.5 Revenue 632.3 952.1 50.6% 251.6 Trading Profit 106.5 161.7 51.8% 17.2% Margin 16.8% 17.0% 0.2pts Profit Before 243.8 106.5 141.2 32.6% Taxation Underlying Earnings 15.42p 6.69p 8.96p 33.9% Per
Slide 4: Earnings Per Share Growth
Earnings Per Share Growth 15.2% (3.3)% 5.2% 16.8% 9.5 1.12 8.96 9.0 8.5 8.0 0.35 1.02 pence 7.5 0.22 7.0 6.69 6.5 18.7% at constant 6.0 translation exchange 5.5 5.0 H1 2008 FX Translation Pension PensionFinance Credit FX Transaction Growth H1 2009 Credit 3 2009 Interim Results 6 August 2009 Cobham p
Slide 5: Cash Flow and Dividends
Cash Flow and Dividends Full Year Unaudited Unaudited 2008 H1 2008 H1 2009 Growth £m £m £m 245.6 Trading Profit (ex. JV) 103.0 159.2 54.6% 260.5 Operating Cash Flow 119.8 139.1 16.1% 106.1% Operating Cash conversion 116.3% 87.4% (28.9)pts 202.9 Free Cash Flow from Business 94.0 95.1 1.2% (719.2) Dec
Slide 6: Technology Divisions' Revenue Growth
Technology Divisions’ Revenue Growth 1,000 24.1% 35.7% 4.9% (4.3)% 900 7% 187 187.4 843 843.3 13% 800 CMS 700 127 126.9 600 525.9 526 CAS £m 500 CMS 400 300 CAS 0.6% organic growth CDS 200 100 CDS 0 H1 2008 FX Translation Acquisitions Military/ Commercial/ H1 2009 Government Other 5 2009 Interim Res
Slide 7: Cobham Aviation Services
Cobham Aviation Services Acq Mix / Organic Commercial 2008 H1 Exchange Growth 2009 H1 Aerospace/GA 33% Revenue £m 107.3 2.3 1.8 111.4 Non US Military/Govt Trading Profit £m 9.7 15.3 67% Margin 9.0% - 4.7pts 13.7% 67% revenue military/government 3 year organic revenue CAGR 3.4% 32% UK revenue, 61% Au
Slide 8: Cobham Avionics and Surveillance
Cobham Avionics and Surveillance US Military/Govt Acq Mix / Organic Commercial 15% 2008 H1 Exchange Growth 2009 H1 Aerospace/GA 33% Non US Revenue £m 198.9 52.8 3.1 254.8 Military/Govt Other 18% Trading Profit £m 31.5 42.5 Communications 34% Margin 15.8% 0.2pts 0.7pts 16.7% 33% revenue military/gove
Slide 9: Cobham Mission Systems
Cobham Mission Systems Commercial Other Communications Acq Mix / Organic Aerospace/GA 9% 2008 H1 Exchange Growth 2009 H1 4% Revenue £m 138.7 34.4 (10.4) 162.7 Non US Military/Govt 21% Trading Profit £m 22.2 6.5 (1.7) 27.0 US Military/Govt 66% Margin 16.0% 0.6pts - 16.6% 87% revenue military/governme
Slide 10: Cobham Defence Systems
Cobham Defence Systems Commercial Other Acq Mix/ Organic Aerospace/GA Communications 2008 H1 Exchange Growth 2009 H1 7% 2% Non US Revenue £m 196.6 228.2 11.8 436.6 Military/Govt 9% Trading Profit £m 41.0 74.9 US Military/Govt 82% Margin 20.9% (5.9)pts 2.2pts 17.2% 91% revenue military/government 87%
Slide 11: Financial Highlights
Financial Highlights • Strong growth in military and government activities • Unfavourable conditions in commercial markets • Revenue underpinned over several years • Underlying EPS growth of 34%; or 19% at constant currency translation • Strong operating cash conversion of 87%; free cash flow of £95
Slide 12: Agenda
Agenda • Financial Results Warren Tucker Chief Financial Officer • Market Update and Business Overview Allan Cook Chief Executive • Q&A 11 2009 Interim Results 6 August 2009 Cobham plc
Slide 13: Focusing Technology in Our Markets
Focusing Technology in Our Markets UK 9% RoW 9% (2008: 11%) (2008: 10%) Mainland Australia 7% Europe 13% (2008: 11%) (2008: 17%) Aviation Services 12% USA 62% (2008: 17%) (2008: 51%) Other Communication 12% (2008: 15%) Commercial/GA 12% US Military/Govt (2008: 13%) 52% Non US Military/Govt (2008: 39
Slide 14: Commercial/General Aviation Market Outlook
Commercial/General Aviation Market Outlook Market outlook 12% Group – By year end, freight traffic expected to Revenue Commercial decrease by 17%, and passenger Aircraft traffic by 8% – Airbus order backlog 3,529 a/c or six Delivery demand over 20 years years production 16,620 – Boeing order backlog
Slide 15: Strengthening Commercial and General Aviation Positions
Strengthening Commercial and General Aviation Positions • Fully integrated ‘glass cockpit’ for the TH-57 • Selected for A380 & A350. A350 deal worth up to $70m • Leading supplier to US National Guard and US Coast Guard for interoperable communications • Strategic supplier to Rockwell Collins for TCA
Slide 16: Other Communication Market Outlook
Other Communication Market Outlook Market outlook 12% Group Revenue – Increasing demand for Land communications on the move: SATCOM broadcast operators, research organisations, insurers, recreational vehicles Marine Very Small Aperture Terminal – Customers want voice, data, video in (VSAT) Market Gr
Slide 17: Leveraging SATCOM Technologies Across Markets
Leveraging SATCOM Technologies Across Markets • Turnkey service for network operations including voice, fax, video, VPN, high speed data • Remote connectivity for voice, fax, radio and high speed data for first responders, disaster relief • Full motion antenna systems for full-time connectivity • On
Slide 18: Aviation Services Market Outlook
Aviation Services Market Outlook Market outlook 12% Group Revenue – Strong global demand for Homeland Growth in Security products and services, with market Special increasing to $213bn in 2014 (up from Mission $140bn in 2008) – Security situation in Asia is a major political Commercial/GA Non US iss
Slide 19: Integrating Products From Across Cobham
Integrating Products From Across Cobham LONG Cobham products RANGE FUEL TANKS VHF MISSION SYSTEMS ELT DISPLAY AND CONTROL MIL UHF INMARSAT ANTENNA MISSION SYSTEMS RACK DF ANTENNA VHF/UHF ENCRYPTED COMMS AUD$6m of Cobham Equipment on the Sentinel fleet 18 2009 Interim Results 6 August 2009 Cobham plc
Slide 20: US Military/Government Market Outlook
US Military/Government Market Outlook Market outlook Changing – Increased emphasis on 52% Group DoD communications niches and Revenue priorities asymmetrical warfare - C4ISR is a top priority – Budgets for cyber warfare capabilities will increase over the Total Available next five years Market £ 850
Slide 21: Increasing Ship Set Value on F-35
Increasing Ship Set Value on F-35 $2,000 250 $1,600 200 Ship Set Value US$k $1,200 150 Aircraft $950 $800 $700 100 $500 $410 $400 50 $20 $0 0 2004 2005 2006 2007 2008 2010 2011 2012 2013 2014 2015 2016 2017 2040 Ship Set Value Aircraft Production Estimated >3,000 aircraft to be produced - Cobham shi
Slide 22: Leveraging Technologies Across Unmanned Systems
Leveraging Technologies Across Unmanned Systems • Support to UAS maritime surveillance trials in Australia • Teamed with GA-ASI to support the UK Reaper fleet • Training on Sky Warrior for the US Army • Full motion video data links to Cobham soldier system • Digital COFDM links: mini UAVs to large,
Slide 23: Targeting Faster Growth Non US Military/Government Markets
Targeting Faster Growth Non US Military/Government Markets Market outlook Procurement and RDT&E Spending $bn 20.3 – Direct/indirect opportunities worth up to US$230m by 2015 20 Middle East – Defence spend CAGR 7.2% to 2010 12% Group Revenue 15 13.4 10.7 – Direct/indirect opportunities worth up to So
Slide 24: Strengthening Network Centric Market Positions
Strengthening Network Centric Market Positions HIGH Military/Govt Surveillance Commercial Analytic Solutions SATCOM Air C4ISR* MARKET GROWTH Refuelling Weapon Systems Vehicle Avionics Communications Size of bubble Life Support represents Cobham revenue * Radar, EW, Aviation ISR, Missiles, Services C
Slide 25: Making Good Progress Against Strategic Objectives
Making Good Progress Against Strategic Objectives Progress Examples – RAIMS for Airbus A350 Sub-systems 1 supplier – VIS-X IP based vehicle intercom system – TH-57 Cobham cockpit – SATCOM, Life Support, AAR, Vehicle Communications, Top 3 in our 2 Mission Equipment, C4ISR Sensor Systems, Surveillance
Slide 26: Summary
Summary • Good overall growth in our core military and government businesses • Weakness in the commercial markets has reduced the level of organic growth, but this is a cyclical situation – long term prognosis is still positive • Strategic acquisitions made in the last 18 months are performing well
Slide 27: Appendices
Appendices • IR calendar • Key Performance Indicators • Ship set values • US Government budget • Shareholder returns • Revenue & trading profit growth • US$/£ translation exchange rates • Exceptional profits from portfolio restructuring • Reconciliation of IFRS to Underlying Result • Definitions & g
Slide 28: IR Calendar
IR Calendar 2009 2010 Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Announcements 4 6 5 3 Preliminary AGM Interim Interim Results Results Management Statement Investor Days 13 Cobham Sensor Systems 27 2009 Interim Results 6 August 2009 Cobham plc
Slide 29: Key Performance Indicators (KPIs)
Key Performance Indicators (KPIs) Full Year Unaudited Unaudited 2008 H1 2008 H1 2009 £m £m £m 10.3% Technology Divisions Organic Revenue Growth 14.3% 0.6% 13.1% Earnings Per Share Growth (constant translation) 19.2% 18.7% 106.1% Operating Cash Conversion 116.3% 87.4% 5.7% PV Spend % * 5.5% 5.4% * H1
Slide 30: Ship Set Values
Ship Set Values 2008 2010 2012 2014 2008 2010 2012 2014 Ship Set Ship Set Values US$ Values US$ Programme / Platform Programme / Platform EH101 / VH71 X X X X $1,200k F16 X X X X $1,100k MD902 X X X X $200k F/A 18 E/F/G X X X X $800k - $2,800k EC120 X X X X $190k F22 X X X X $1,400k EC135 X X X X $3
Slide 31: US DoD Investment Spending $Bn
US DoD Investment Spending $Bn Procurement RDT&E = 2.0% 2008–2013 CAGR 5.9% 194 194 008 CAGR = 186 190 2003–2 184 176 160 140 147 150 71 69 132 72 80 79 77 76 68 72 57 64 118 122 125 104 107 98 75 76 79 78 84 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: Department of Defense press
Slide 32: Shareholder Returns
Shareholder Returns Full Year Unaudited Unaudited 2008 H1 2008 H1 2009 Growth 28.7% Underlying Tax Rate 29.5% 28.0% Earnings Per Share 15.42p Underlying 6.69p 8.96p 33.9% 8.38p Basic 5.49p 9.29p 8.34p Diluted 5.46p 9.25p 4.95p Dividend Per Share 1.345p 1.48p 10.0% 17.83p Free Cash Flow Per Share 8.2
Slide 33: Revenue and Profit
Revenue and Profit Revenue Trading Profit £m H1 2008 H1 2009 Growth H1 2008 H1 2009 Growth Technology Divisions 526.0 842.5 60.2% 94.9 144.4 52.2% Margin 18.0% 17.1% Cobham Aviation Services 107.3 111.4 3.8% 9.7 15.3 57.7% Margin 9.0% 13.7% Operating Divisions 631.9 951.7 50.6% 104.6 159.7 52.7% Hea
Slide 34: Group Revenue Growth
Group Revenue Growth 20.4% 29.7% 0.5% 1,000 187.4 3.2 952.1 900 800 129.2 £m 700 632.3 600 500 400 H1 2008 FX Translation Acquisitions Growth H1 2009 33 2009 Interim Results 6 August 2009 Cobham plc
Slide 35: Group Trading Profit Growth
Group Trading Profit Growth 18.4% 17.0% 5.3% 11.1% 11.8 161.7 160 5.6 18.2 140 £m 19.6 120 106.5 100 80 H1 2008 FX Translation Acquisitions FX Transaction Growth H1 2009 34 2009 Interim Results 6 August 2009 Cobham plc
Slide 36: Technology Divisions' Revenue and Profit
Technology Divisions’ Revenue and Profit Revenue Trading Profit H1 H1 Organic H1 H1 £m 2008 2009 Growth 2008 2009 Avionics and Surveillance 198.9 254.8 1.6% 31.5 42.5 Margin 15.8% 16.7% Defence Systems 196.6 436.6 6.0% 41.0 74.9 Margin 20.9% 17.2% Mission Systems 138.7 162.7 (7.5)% 22.2 27.0 Margin
Slide 37: Technology Divisions' Organic Revenue Growth 2005 to 2009
Technology Divisions’ Organic Revenue Growth 2005 to 2009 3 year CAGR 9.7% 10.3% 13.2% 5.8% 4 year CAGR 1,000 for H1 7.6% 14.3% 0.6% H2 £m 7.8% 8.3% H1 500 2005 2006 2007 2008 2009 Excludes FX, Acquisitions and Disposals. 2005, 2006, 2007 and 2008 are proforma numbers for illustration purposes 36 20
Slide 38: Aviation Services Revenue Growth
Aviation Services Revenue Growth 2.2% 1.6% 112 1.8 111.4 110 2.3 108 107.3 £m 106 104 102 100 H1 2008 FX Translation Growth H1 2009 37 2009 Interim Results 6 August 2009 Cobham plc
Slide 39: Cash Flow Summary
Cash Flow Summary Full Year Unaudited Unaudited 2008 H1 2008 H1 2009 £m £m £m 245.6 Trading Profit (excluding joint ventures) 103.0 159.2 34.5 Depreciation and other movements 18.9 22.8 35.4 Decrease/(Increase) in working capital and provisions 21.1 (11.8) (55.0) Net Capital expenditure (23.2) (31.1
Slide 40: Foreign Exchange Transaction Exposure
Foreign Exchange Transaction Exposure Historic average effective rate 2005 $1.70 : £1* 2006 $1.77 : £1 2007 $1.83 : £1 2008 $1.93 : £1 2009 Total $203m 95% hedged for 2009 Hedging in place $193m Avg hedge rate $1.70: £1 2010 Total $177m Hedging in place $144m Avg hedge rate $1.58: £1 2011 to 2014 $1
Slide 41: US$/£ Translation Exchange Rates
US$/£ Translation Exchange Rates 2008 2009 Full Year Opening Half Year Half Year Income Statement (average rate) 1.86 1.98 1.50 Balance Sheet (closing rate) 1.44 1.99 1.98 1.63 £1.0m PBT translation impact for every 1 cent movement 40 2009 Interim Results 6 August 2009 Cobham plc
Slide 42: Exceptional Profits from Portfolio Restructuring
Exceptional Profits from Portfolio Restructuring Past Years 2005 £5.6 m 2006 £14.5 m 2007 £(7.7)m 2008 £(4.5)m £7.9 m Restructuring in 2009 North American Avionics Restructuring £0.3 m North American Mission Systems Restructuring £(2.1)m Sale of UK property £0.1 m £(1.7)m Available to invest on furt
Slide 43: Reconciliation of IFRS to Underlying Result
Reconciliation of IFRS to Underlying Result 2008 Unaudited Unaudited Full Year H1 2008 H1 2009 £m £m £m 128.5 Operating profit 83.9 160.1 7.4 Portfolio restructuring 2.6 1.7 59.5 Unrealised losses on revaluation of currency instruments 8.4 (46.7) 46.8 Amortisation of intangible assets arising on acq
Slide 44: Definitions
Definitions Underlying To assist with the understanding of earnings trends, the Group has included within its published statements trading profit and underlying earnings results. Trading profit and underlying earnings have been defined to exclude the impacts of certain acquisition related charges, p
Slide 45: Glossary
Glossary AARGM Advanced Anti-Radiation Guided Missile C4ISR Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance CNI Communication Navigation Identification COFDM Coded Orthogonal Frequency Division Multiplexing DF Direction Finding ELT Emergency Locator Transmi
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’ speeches, the question and answer session and any other related verbal or written communications. This document contains certain “forward-looking