Cobham — H1 2017 Earnings Presentation
46 slides from Cobham's earnings presentation, Aug 3, 2017
Slide 1: 2017 Interim Results
2017 Interim Results Thursday 3rd August
Slide 2: Agenda
Agenda 01 02 03 04 Introduction Financial Results Business Review Questions David Lockwood, David Mellors, David Lockwood Chief Executive Officer Chief Financial Officer 2 Cobham plc
Slide 3: Introduction
01 Introduction David Lockwood
Slide 4: Highlights
Highlights First half results in line with expectations; full year outlook unchanged albeit there remains a wide range of potential outcomes for 2017 In early stages of turnaround; focus on priorities of: (1) customers (2) leadership and simplification and (3) control and execution Portfolio review
Slide 5: Financial Results
02 Financial Results David Mellors
Slide 6: Summary Financial Headlines
Summary Financial Headlines H1 2017 £m H1 2016 £m Order intake 915.8 1,170.4 Revenue 1,003.3 916.7 Underlying operating profit 89.9 102.2 Underlying operating margin 9.0% 11.1% Underlying earnings per share (pence) 2.5 3.8 Operating cash flow 108.3 108.0 Operating cash conversion 120% 106% Net debt
Slide 7: Order Intake Bridge
Order Intake Bridge £m 1500 27.8 19.8 139.2 17.0 1250 1,170.4 4.8 23.2 1000 915.8 430.4 750 500 250 0 H1 2016 Currency & Divestments CCC CMS CAES CAVS CAVS H1 2017 i/c Elims Other Qantas 7 Cobham plc
Slide 8: Revenue Bridge
Revenue Bridge £m 1250 94.6 3.7 12.6 1,003.3 1000 916.7 7.2 12.1 5.0 750 (3%) 2% 5% (3%) 500 Organic revenue 0.1% lower 250 0 H1 2016 Currency & Divestments CCC CMS CAES CAVS H1 2017 i/c Elims 8 Cobham plc
Slide 9: Underlying Operating Profit Bridge
Underlying Operating Profit Bridge £m 150 13.0 102.2 1.2 100 2.9 9.4 89.9 11.2 0.6 50 0 H1 2016 Currency & CCC CMS CAES CAVS Centre H1 2017 Divestments 9 Cobham plc
Slide 10: Communications and Connectivity
Communications and Connectivity £m H1 2016 FX Organic H1 2017 Order Intake 311.6 25.9 17.0 354.5 Revenue 328.5 29.4 (12.1) 345.8 Underlying operating profit 21.9 5.2 (1.2) 25.9 Underlying operating margin 6.7% 7.5% Order Book 269.6 263.4 Organic revenue decrease driven by: Profit impacted by: • AvCo
Slide 11: Mission Systems
Mission Systems £m H1 2016 FX Divested Organic H1 2017 Order Intake 179.6 17.0 (4.8) 27.8 219.6 Revenue 187.5 18.5 (7.2) 3.7 202.5 Underlying operating profit 24.3 2.7 0.4 (2.9) 24.5 Underlying operating margin 13.0% 12.1% Order Book 622.7 646.1 Organic revenue increase driven by: Profit impacted by
Slide 12: Advanced Electronic Solutions
Advanced Electronic Solutions £m H1 2016 FX Organic H1 2017 Order Intake 247.1 33.3 (23.2) 257.2 Revenue 225.6 30.2 12.6 268.4 Underlying operating profit 27.3 3.3 (9.4) 21.2 Underlying operating margin 12.1% 7.9% Order Book 615.0 630.1 Organic revenue increase driven by: Profit impacted by: • Highe
Slide 13: Aviation Services
Aviation Services £m H1 2016 FX Organic H1 2017 Order Intake 432.1 64.5 (410.6) 86.0 Revenue 175.7 17.1 (5.0) 187.8 Underlying operating profit 21.2 1.7 (11.2) 11.7 Underlying operating margin 12.1% 6.2% Order Book 1,436.4 1,276.1 Organic revenue decrease driven by: Profit impacted by: • Reduced fly
Slide 14: Movements in Net Debt
Movements in Net Debt £m 1250 1,028.2 5.9 17.0 1000 26.6 21.4 134.9 750 500 460.8 • Operating cash conversion of 120% 496.7 6.7 250 • Free cash flow of £64.6m • Gearing ratio 1.5x 0 Opening Operating Net capital Net interest Taxation Restructuring Net rights issue Other & FX Closing net net debt cas
Slide 15: Balance Sheet
Balance Sheet £m 30-Jun-17 31-Dec-16 30-Jun-16 Current working capital 335.8 384.3 384.5 Net receivables/payables >1 year 29.4 34.5 49.8 Total Working Capital 365.2 418.8 434.3 Net debt (460.8) (1,028.2) (877.2) Provisions (195.5) (237.9) (124.5) Pension deficit (64.2) (87.0) (74.0) Note: Contingent
Slide 16: Business Review
03 Business Review David Lockwood
Slide 17: Cobham Today
Cobham Today Mission Systems Aviation Services Communications & Connectivity Advanced Electronic Solutions* 4 Sectors 3 Business Units 3 Business Units 5 Business Units 3 Business Units 14 Business Units 4 Operating units 4 Operating units 25 Operating units 13 Operating units 46 Operating units * R
Slide 18: Customer Focus
Customer Focus Improving customer Monitoring and driving Focusing on intelligence and building customer satisfaction improving delivery relationships • More regular leadership • Collecting and reviewing key • Focus on processes to meetings: resulting in customer related indicators improve on-time de
Slide 19: Leadership and Simplification
Leadership and Simplification Instilling a common sense Reducing and simplifying Focusing on most critical of purpose and motivation internal policies performance metrics • Strengthened CAES Board • Streamlined Group policy • Remove unnecessary system (SSA) framework and 40% reports and data line it
Slide 20: Control and Execution
Control and Execution Increasing visibility Increasing scrutiny of key Operational improvements and accountability development programmes • Business unit reviews increased • New internal COO appointment; • Group-level review of to monthly, with greater clarity consolidating supply chain, material pr
Slide 21: Portfolio
Portfolio Components CAES SCS CAES SCS CAES SCS CAES CCC MES Aero Comms. Products CAES CCC CCC IES CMS Wireless & Orchard SATCOM AvComm Park CCC Antennas CMS Davenport Subsystems CMS Wimborne CAVS CAVS CAVS Helicopter Special Commercial Services Mission Services/Systems Defence Commercial Commercial
Slide 22: Portfolio Review
Portfolio Review Review undertaken of Commencing strategic review of business portfolio Wireless & AvComm business units • Focus on areas where Cobham can add • Investigate how to optimise shareholder value: value: - Assess commonality of markets, - Strong technology and/or market positions capabili
Slide 23: Summary and Outlook
Summary and Outlook • First half results in line with expectations • In the early stages of a challenging turnaround – may encounter some turbulence along the way • Leading positions in attractive markets • A number of high quality businesses with differentiated technology and know-how • Full year o
Slide 24: Questions
O q COBHAM Questions
Slide 25: Appendices
Appendices
Slide 26: Revenue and Underlying Operating Profit by Sector
Revenue and Underlying Operating Profit by Sector Revenue Underlying Operating Profit H1 2017 £m H1 2016 £m H1 2017 £m H1 2016 £m CCC 25.9 27.1 345.8 357.9 Margin 7.5% 7.6% CMS 24.5 27.4 202.5 198.8 Margin 12.1% 13.8% CAES 21.2 30.6 268.4 255.8 Margin 7.9% 12.0% CAvS 11.7 22.9 187.8 192.8 Margin 6.2
Slide 27: Income Statement
Income Statement H1 2017 £m H1 2016 £m Revenue 1,003.3 916.7 Underlying operating profit 89.9 102.2 Underlying net finance costs (20.4) (26.4) Underlying profit before taxation 69.5 75.8 Amounts related to prior periods’ restructuring programmes (2.4) (8.3) Derivative financial instruments 18.2 (25.
Slide 28: Revenue by Destination and Market Segment
Revenue by Destination and Market Segment Group Revenue by Destination Group Revenue by Market Segment H1 2017 H1 2016 H1 2017 H1 2016 5% 5% 10% 11% 12% 48% 11% 47% 35% 41% 33% £1,003m £917m £1,003m 41% £917m 16% 17% 9% 9% 24% 26% USA UK Other EU Australia Asia ROW US Defence/ UK, RoW Commercial Sec
Slide 29: Market Segment Revenue by Sector
Market Segment Revenue by Sector Communications Mission Advanced Electronic Aviation and Connectivity Systems Solutions Services H1 2017 H1 2017 H1 2017 H1 2017 7% 11% 15% H1 2016 H1 2016 H1 2016 H1 2016 7% 16% 7% 16% 5% 16% 4% 43% 43% 51% 42% 33% 56% 57% 57% 77% 80% 77% 80% US Defence/ UK, RoW Comm
Slide 30: Taxation
Taxation H1 2017 £m H1 2016 £m Underlying tax charge (16.4) (16.7) Tax credit on non-underlying items 18.4 30.1 Headline tax credit 2.0 13.4 Underlying tax rate 23.6% 22.0% 30 Cobham plc
Slide 31: Underlying Earnings Per Share
Underlying Earnings Per Share Year-on-year change (13.6)% 13.1% (2.6)% (28.9)% (15.8)% 6.0 5.0 4.4p 0.5p 4.0 3.8p 0.1p 0.6p 3.1p 3.0 1.1p 2.5p 0.6p 2.0 1.0 0.0 H1 2016 PY impacts H1 2016 FX Tax rate CY impact of H1 2016 Organic H1 2017 reported of rights restated translation rights issue ‘like for l
Slide 32: Shares in Issue
Shares in Issue 2,391.0m 2,084.2m 1,707.9m Opening number of shares Weighted average Closing number of shares (1 Jan 2017) number of shares (to 30 Jun 2017) (30 Jun 2017) 32 Cobham plc
Slide 33: Balance Sheet
Balance Sheet 30-Jun-17 £m 31-Dec-16 £m Intangible assets 1,069.7 1,165.9 Property, plant and equipment 403.0 422.9 Other non-current assets 144.0 141.3 Non current assets 1,616.7 1,730.1 Inventories 415.8 405.3 Trade and other receivables < 1 year 359.0 409.8 Trade and other payables < 1 year (439.
Slide 34: Cash Conversion
Cash Conversion H1 2017 £m H1 2016 £m Underlying operating profit (less post tax share of JV profits) 89.9 102.1 Depreciation and amortisation 41.4 33.9 Share based payments 2.3 1.3 Movements in provisions (35.9) (7.7) Pension contributions in excess of pension charges (8.6) (8.2) Decrease in workin
Slide 35: Movement in Net Debt
Movement in Net Debt H1 2017 £m H1 2016 £m Operating cash flow 108.3 108.0 Net interest paid (21.4) (27.1) Taxation paid (17.0) (9.7) Costs of prior years’ restructuring programmes (5.3) (17.2) Free cash flow 64.6 54.0 Dividends paid - (91.6) Net divestments (0.6) (6.5) Net rights issue proceeds and
Slide 36: Capital Expenditure and Depreciation
Capital Expenditure and Depreciation H1 2017 H1 2016 £m Net Capex(1) Depn(2) Net Capex(1) Depn(2) Cobham Communications and Connectivity 3.0 7.7 3.4 7.4 Cobham Mission Systems 1.1 3.2 4.1 2.8 Cobham Advanced Electronic Solutions 6.9 8.1 2.0 6.5 Cobham Aviation Services 15.0 18.0 20.4 14.9 Head Offic
Slide 37: Defined Benefit Pension Schemes
Defined Benefit Pension Schemes H1 2017 £m FY 2016 £m Market value of scheme assets 797.6 790.0 Present value of scheme liabilities (861.8) (877.0) Net pension liability before deferred tax (64.2) (87.0) Primary assumptions Discount rate 2.60% 2.65% Inflation rate 3.30% 3.45% Life expectancy of male
Slide 38: Credit Facilities
Credit Facilities Loan/Facility Usage £m £m US$ loan notes US$75m fixed rate (Oct. 2017) 57.7 57.7 US$180m fixed rate (Oct. 2019) 138.6 138.6 US$250m fixed rate (Oct. 2021) 192.5 192.5 US$425m fixed rate (Oct. 2024) 327.1 327.1 715.9 715.9 £m Bank facilities US$75m credit agreement (Dec 2019) 57.7 5
Slide 39: Covenants
Covenants H1 2017 FY 2016 H1 2016 FY 2015 Net debt (£m) – balance sheet (460.8) (1,028.2) (877.2) (1,206.8) Net debt (£m) – average rate (1) (469.6) (937.9) (786.0) (1,160.7) EBITDA (2) (£m) 314.8 316.5 346.5 396.4 Net debt to EBITDA (not to exceed 3.5 times) 1.5 3.0 2.3 2.9 EBITA (£m) 238.9 245.2 2
Slide 40: Exchange Rates
Exchange Rates Period End Impact of pro rata 1 cent movement Average Rate Rate Revenue £m PBT £m H1 2017 US$ 9 1 US$ 1.26 1.30 AUS$ 2 0 AUS$ 1.67 1.69 EUR/DKK 3 0 EUR 1.16 1.14 DKK 8.64 8.47 14 1 FY 2016 US$ 1.35 1.24 AUS$ 1.83 1.71 EUR 1.22 1.17 DKK 9.11 8.71 H1 2016 US$ 1.43 1.34 AUS$ 1.95 1.80 EU
Slide 41: Hedging
Hedging Transaction Exposure $ / DKK $/£ Historic Average Effective Rate 2017 Total $89m $126m 2013 $1.59: £1 2014 $1.61: £1 Hedging in Place $71m 80% $112m 89% 2015 $1.59: £1 Average Hedge Rate $1:DKK 6.50 $1.43:£1 2016 $1.51: £1 Hedging in Place 2018 $40m $80m Average Hedge Rate $1:DKK 6.48 $1.37:
Slide 42: Investor Events
IR Calendar 25th 1st 2nd Results Trading Preliminary Interim update Results Results 2017 2018 SEP OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG 17 17 17 17 18 18 18 18 18 18 18 18 Investor Events 12th- 15th 26th DSEI AGM & exhibition, AGM London statement 42 Cobham plc
Slide 43: Definitions
Definitions Underlying measures To assist with the understanding of earnings trends, the Group has included within its published financial statements non-GAAP measures including underlying operating profit and underlying profit. The non-GAAP measures used do not include the impact of items described
Slide 44: Disclaimer
Disclaimer 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 statement
Slide 45: Notes
Notes CoBHAm 45 Cobham plc
Slide 46: Notes
Notes CoBHAm 46 Cobham plc