Cobham — FY2009 Earnings Presentation
40 slides from Cobham's earnings presentation, Mar 4, 2010
Slide 1: 2009 Preliminary Results
4 March 2009 The most important thing we build is trust 2009 Preliminary Results
Slide 2: Agenda
Agenda • Introduction Andy Stevens Chief Executive Officer • Financial Results Warren Tucker Chief Financial Officer • Business Review Andy Stevens • Q&A 1 2009 Preliminary Results 4 March 2010 Cobham plc
Slide 3: Summary Profit and Loss Account
Summary Profit and Loss Account Year to Year to 31/12/08 31/12/09 Growth £m £m Revenue 1,466.5 1,880.4 28.2% Trading Profit 251.6 337.0 33.9% Margin 17.2% 17.9% 0.7pts Underlying Profit before Taxation 243.8 295.3 21.1% Underlying Earnings Per Share 15.42p 18.80p 21.9% PV Spend %* 5.3% 5.3% 0.0pts N
Slide 4: Earnings Per Share Growth
Earnings Per Share Growth 9.4% (2.6)% 6.1% 9.0% 19.0 1.39 18.80 18.0 0.94 17.0 1.45 pence 0.40 16.0 15.42 15.0 12.5% at constant translation exchange (15.1% excluding pension finance charge) 14.0 13.0 2008 FX Translation Pension Finance FX Transaction Growth 2009 Charge 3 2009 Preliminary Results 4
Slide 5: Cash Flow
Cash Flow Year to Year to 31/12/08 31/12/09 Growth £m £m Trading Profit (ex. JV) 245.6 330.9 34.7% Operating Cash Flow 260.5 293.2 12.6% Operating Cash conversion 106.1% 88.6% (17.5)pts Free Cash Flow from Business 202.9 213.6 5.3% Decrease/(Increase) in Net Debt (719.2) 228.7 Dividend per Share 4.9
Slide 6: Technology Divisions' Revenue Growth
Technology Divisions’ Revenue Growth 7% 224 1,654 16% 1,500 CMS 177 1,246 CMS CAS 0.6% Organic Growth £m 1,000 CAS 500 CDS CDS 0 2008 FX Translation Acquisitions Defence/ Commercial/ 2009 Security Other CDS: Cobham Defence Systems, CAS: Cobham Avionics and Surveillance, CMS: Cobham Mission Systems 5
Slide 7: Technology Divisions' Organic Revenue Growth Cycle Over the Medium Term
Technology Divisions’ Organic Revenue Growth Cycle Over the Medium Term 4 Year Full Year CAGR 7.4% 2,000 0.6% 10.3% 1,500 13.2% 5.8% £m H2 1,000 14.3% 0.6% 7.8% 8.3% 500 H1 0 2005 2006 2007 2008 2009 Excludes FX, Acquisitions and Disposals. 2005, 2006, 2007 and 2008 are proforma numbers for illustra
Slide 8: Cobham Avionics and Surveillance
Cobham Avionics and Surveillance Other US Defence/ Acq Mix / Organic Comms Security 31% 18% 2008 Exchange Growth 2009 Revenue £m 432.8 67.3 (12.8) 487.3 Commercial Non US Trading Profit £m 71.7 84.6 Defence/ Aerospace/ GA Security Margin 16.6% 0.2pts 0.6pts 17.4% 22% 29% 40% revenue defence/security
Slide 9: Cobham Mission Systems
Cobham Mission Systems Commercial Other Aerospace/ Comms Organic GA 7% 2008 Exchange Growth 2009 4% Revenue £m 302.0 41.9 (26.9) 317.0 Non US Defence/ Trading Profit £m 52.2 56.8 Security US Defence/ 24% Security Margin 17.3% 0.2pts 0.4pts 17.9% 65% 89% revenue defence/security 73% US revenue 4 year
Slide 10: Cobham Defence Systems
Cobham Defence Systems Commercial Other Aerospace/ Comms Acq Mix / Organic GA 1% 2008 Exchange Growth 2009 Non US 3% Defence/ Revenue £m 529.3 293.3 50.4 873.0 Security 9% Trading Profit £m 105.2 164.4 US Defence/ Margin 19.9% (3.8)pts 2.7pts 18.8% Security 87% 96% revenue defence/security 87% US re
Slide 11: Cobham Aviation Services
Cobham Aviation Services Organic Commercial 2008 Exchange Growth 2009 Aerospace/ GA Non US Revenue £m 221.9 16.1 (7.1) 230.9 33% Defence/ Security Trading Profit £m 24.8 31.3 67% Margin 11.2% (0.4)pts 2.8pts 13.6% 67% revenue defence/security 30% UK revenue, 60% Australia 300 4 year organic revenue
Slide 12: Financial Highlights
Financial Highlights • Good growth in military and security businesses with the Defence Systems Division and Surveillance business achieving double digit organic growth • Difficult conditions in commercial markets • Integration of M/A-COM and Lansdale completed; strong results from Lansdale, SPARTA
Slide 13: Agenda
Agenda • Introduction Andy Stevens Chief Executive Officer • Financial Results Warren Tucker Chief Financial Officer • Business Review Andy Stevens • Q&A 12 2009 Preliminary Results 4 March 2010 Cobham plc
Slide 14: Cobham Today – Revenue By Destination
Cobham Today – Revenue By Destination UK 9% RoW 9% (2008: 10%) (2008: 10%) Mainland Australia 8% Europe 12% (2008: 10%) (2008: 15%) USA 62% (2008: 55%) • USA will remain biggest market in the medium term • Long term positions in the Europe on defence, security and commercial programmes • Aviation Se
Slide 15: Cobham Today - Market Sectors
Cobham Today - Market Sectors Aviation Services 12% (2008: 15%) Other Communication US Defence/Security 10% 55% (2008: 11%) (2008: 44%) Commercial/GA 9% (2008: 13%) Non US Defence/Security 14% (2008: 17%) • At the heart of C4ISR moving information between sensors and decision makers • Market leading
Slide 16: US QDR and FY2011 Budget Focus on C4ISR Favours Cobham
US QDR and FY2011 Budget Focus on C4ISR Favours Cobham • Major Themes – Prevail in today’s wars – Prevent & deter conflict – Prepare to defeat adversaries & succeed in wide range of contingencies – Preserve and enhance the All Volunteer Force • Key mission areas – Defend US and support civil authori
Slide 17: Strengthening Market Positions
Strengthening Market Positions HIGH Defence/ Security Surveillance Commercial Analytic Solutions SATCOM Air C4ISR MARKET GROWTH Refuelling Weapon Systems Vehicle Avionics Communications Life Support Aviation Services Size of bubble represents Cobham LOW revenue BUILDING SCALE IN TOP 3 Cobham’s C4ISR
Slide 18: C4ISR Context
C4ISR Context • Cobham’s equipment enables the rapid, secure and resilient movement of voice, video and data between ‘sensors’ and decision makers • Many sensors, huge volumes of information to move • Lots of users to keep safe • Equipment footprint and weight remain critical – satellites, fighters
Slide 19: C4ISR Capability Examples
C4ISR Capability Examples • Electronic warfare and counter IED capabilities – ALQ-99 jamming pod on the EA-6B and EA-18G aircraft with low band transmitter jamming, detecting and direction finding signals • Command and video links for unmanned aerial vehicles (UAVs) – Supplying data links for Predat
Slide 20: Harnessing Cobham's Potential
Harnessing Cobham’s Potential • Started to get our people facing in the same direction, moving at the right speed • Continuing to focus on the development of existing and new talent • Business review will consider how: – Further synergies and cost efficiencies can be extracted – Future integration a
Slide 21: Summary
Summary • Double digit organic growth in defence and security businesses – decisive action taken to remove costs in areas affected by the commercial downturn • US QDR and FY2011 budget focus on C4ISR is positive for Cobham – room for growth • Positions on long term programmes afford excellent revenu
Slide 22: 2009 Preliminary Results 4 March 2010 Cobham plc
21 2009 Preliminary Results 4 March 2010 Cobham plc
Slide 23: Appendices
Appendices • IR calendar • Key Performance Indicators • Ship set values • US DoD Investment Spending • Surveillance and mesh network capability example • Shareholder returns • Cash flow summary • Revenue & profit • Technology divisions’ revenue & trading profit growth • Foreign exchange transaction
Slide 24: IR Calendar
IR Calendar 2010 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Announcements 4 6 5 3 Preliminary AGM Interim Interim Results & Results Management Interim Statement Management Statement Investor Days 1 (TBC) 23 2009 Preliminary Results 4 March 2010 Cobham plc
Slide 25: Key Performance Indicators
Key Performance Indicators Full Year Full Year Full Year Full Year 2006 2007 2008 2009 £m £m £m £m Technology Divisions Organic Revenue Growth 5.8% 13.2% 10.3% 0.6% EPS Growth (constant translation) 10.7% 15.9% 13.1% 12.5% Operating Cash Conversion 84.3% 81.1% 106.1% 88.6% PV Spend % * 5.1% 5.2% 5.3
Slide 26: Ship Set Values
Ship Set Values 2010 2012 2014 Ship Set Values US$ Programme / Platform F16 X X X $1,100k F/A 18 E/F/G X X X $800k - $2,800k F22 X X X $1,400k Military Fast F35 X X X $1,000k Jets/ Eurofighter Typhoon X X X $1,500k Trainers Hawk X X X $600k T50 X X X $190k Gripen X X X $175k - $760k Rivet Joint X X
Slide 27: 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 $1,000 $950 $800 $700 100 $500 $410 $400 50 $20 $0 0 04 05 06 07 08 10 11 12 13 14 15 16 17 2040 20 20 20 20 20 20 20 20 20 20 20 20 20 Ship Set Value Aircraft Production Estimated >3,000 aircraft to be p
Slide 28: US DoD Investment Spending $Bn
US DoD Investment Spending $Bn Procurement RDT&E AGR = 1.6% 2010–2013 C .9% 3–201 0 CAGR = 4 194 194 200 185 189 175 181 160 140 147 150 71 69 132 76 6 80 77 80 76 64 68 72 57 113 122 125 98 102 105 75 76 79 78 84 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: National Defense Budget
Slide 29: Surveillance and Mesh Network Capability Example
Surveillance and Mesh Network Capability Example Key Mesh 1 Mesh 2 Police SOLO link out command SOLO Transmitter Camera Camera Camera Camera Camera Police command Mobile surveillance SOLO Transmitter Camera Mobile surveillance 28 2009 Preliminary Results Camera Camera Car 4 March 2010 Cobham plc
Slide 30: Shareholder Returns
Shareholder Returns Year Year to to 31/12/08 31/12/09 Growth Underlying Tax Rate 28.7% 27.8% Earnings Per Share Underlying 15.42p 18.80p 21.9% Basic 8.38p 16.26p Diluted 8.34p 16.17p Dividend Per Share 4.95p 5.45p 10.0% Free Cash Flow Per Share 17.83p 18.70p 4.9% 29 2009 Preliminary Results 4 March
Slide 31: Cash Flow Summary
Cash Flow Summary Year to Year to 31/12/08 31/12/09 £m £m Trading Profit (excluding joint ventures) 245.6 330.9 Depreciation and other movements 34.5 47.8 Decrease/(Increase) in working capital and provisions 35.4 (8.2) Net Capital expenditure (55.0) (77.3) Operating cash flow 260.5 293.2 Taxation p
Slide 32: Revenue and Profit
Revenue and Profit Year to Year to Year to Year to £m 31/12/08 31/12/09 Growth 31/12/08 31/12/09 Growth Technology Divisions 1,245.6 1,653.7 32.8% 229.1 305.6 33.4% Margin 18.4% 18.5% Cobham Aviation Services 221.9 230.9 4.1% 24.8 31.3 26.2% Margin 11.2% 13.6% Operating Divisions 1,465.6 1,879.6 28.
Slide 33: Technology Divisions' Revenue and Trading Profit
Technology Divisions’ Revenue and Trading Profit Revenue Trading Profit Year to Year to Organic Year to Year to £m 31/12/08 31/12/09 Growth 31/12/08 31/12/09 Cobham Avionics and 432.8 487.3 (3.0)% 71.7 84.6 Surveillance Margin 16.6% 17.4% Cobham Defence Systems 529.3 873.0 9.5% 105.2 164.4 Margin 19
Slide 34: Foreign Exchange Transaction Exposure
Foreign Exchange Transaction Exposure Transaction Exposure: Historic average effective rate 2006 $1.77 : £1 2007 $1.83 : £1 2008 $1.93 : £1 2009 $1.70 : £1 2010 Total $197m 92% hedged for 2010 Hedging in place $182m Avg hedge rate $1.59: £1 Hedging in place 2011 $91m Avg hedge rate $1.58: £1 2012 to
Slide 35: US$/£ Translation Exchange Rates
US$/£ Translation Exchange Rates 2008 2009 Opening Full Year Full Year Income Statement (average rate) n/a 1.86 1.56 Balance Sheet (closing rate) 1.99 1.44 1.61 £0.8m PBT translation impact for every 1 cent movement 34 2009 Preliminary Results 4 March 2010 Cobham plc
Slide 36: 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 £(4.1)m North American Mission Systems Restructuring £(3.7)m Sale of UK property £0.1m £(7.7)m £0.2 m Programme closed 35
Slide 37: Reconciliation of IFRS to Underlying Result
Reconciliation of IFRS to Underlying Result Year to Year to 31/12/08 31/12/09 £m £m Operating profit 128.5 286.6 Portfolio restructuring 7.4 7.7 Unrealised losses on revaluation of currency instruments 59.5 (42.9) Amortisation of intangible assets arising on acquisition 46.8 78.7 Acquisition related
Slide 38: 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 39: Glossary
Glossary AAGRM Advanced Ant-Radiation Guided Missile Acq Acquisition AGM Annual General Meeting AMRAAM Advanced Medium-Range Air-to-Air Missile BGAN Broadband Global Area Network C4ISR Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance CAGR Compound Annual Gro
Slide 40: 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