Cobham — H1 2013 Earnings Presentation
59 slides from Cobham's earnings presentation, Aug 8, 2013
Slide 1: 2013 Interim Results
8 August 2013 The most important thing we build is trust AEROSPACE AND DEFENCE SYSTEMS MISSION SYSTEMS SECURITY DIVISION DIVISION DIVISION • Aerospace Communications • Defence Electronics • Aviation Services • Antenna Systems • Life Support • SATCOM • Mission Equipment • Tactical Communications and
Slide 2: Agenda
Agenda • Introduction Bob Murphy Chief Executive Officer • Financial Results Simon Nicholls Chief Financial Officer • Business Review Bob Murphy • Q&A 1 Cobham plc
Slide 3: Agenda
Agenda • Introduction Bob Murphy Chief Executive Officer • Financial Results Simon Nicholls Chief Financial Officer • Business Review Bob Murphy • Q&A 2 Cobham plc
Slide 4: Financial Highlights
Financial Highlights H1 H1 2013 2012 Change (restated*) £m £m Order Intake 976.2 768.0 27.1% Revenue 863.9 843.3 2.4% Trading Profit 154.0 157.4 (2.2%) Trading Margin 17.8% 18.7% (0.9)pts Underlying Profit before Taxation 136.9 141.3 (3.1%) Underlying Earnings Per Share 10.3p 10.6p (2.6%) Operating
Slide 5: Cobham Aerospace and Security
Cobham Aerospace and Security Commercial US Defence Maritime/ / Security 2013 H1 2012 H1 Change Other 25% (constant FX) % 31% (H1 2012: (H1 2012: 32%) Revenue £m 363.3 311.4 16.7% 22%) Non US Trading Profit £m 67.5 65.7 2.7% Commercial Defence / Aerospace/ Security Trading Margin 18.6% 21.1% (2.5)pt
Slide 6: Cobham Defence Systems
Cobham Defence Systems Non US Defence / 2013 H1 2012 H1 Change Security (constant FX) % 5% (H1 2012: 7%) Revenue £m 153.7 162.0 (5.1%) Trading Profit £m 23.8 26.0 (8.5%) US Defence / Trading Margin 15.5% 16.0% (0.5)pts Security 95% (H1 2012: 93%) 100% revenue defence/security 95% US revenue • Revenu
Slide 7: Cobham Mission Systems
Cobham Mission Systems Commercial 9% 2013 H1 2012 H1 Change (H1 2012: 7%) (constant FX) % Revenue £m 168.4 193.2 (12.8%) Trading Profit £m 32.1 37.7 (14.9%) Non US Defence / US Defence / Security Trading Margin 19.1% 19.5% (0.4)pts Security 34% 57% (H1 2012: 54%) (H1 2012: 39%) 91% revenue defence/s
Slide 8: Cobham Aviation Services
Cobham Aviation Services Non US Defence/ 2013 H1 2012 H1 Change Security (constant FX) % 43% (H1 2012: Revenue (excl JV) £m 170.5 163.9 4.0% 45%) Commercial Trading Profit £m 22.2 19.1 16.2% Aerospace/ GA Trading Margin 13.0% 11.7% 1.3pts 57% (H1 2012: 55%) Trading Margin (excl JV) 11.1% 9.4% 1.7pts
Slide 9: Revenue and Profit
Revenue and Profit Divisional summary at constant exchange* Revenue Trading Profit £m H1 2013 H1 2012 Change H1 2013 H1 2012 Change (restated) Cobham Aerospace and Security 363.3 311.4 16.7% 67.5 65.7 2.7% Margin 18.6% 21.1% Cobham Defence Systems 153.7 162.0 (5.1)% 23.8 26.0 (8.5)% Margin 15.5% 16.
Slide 10: Reconciliation Of Trading To Reported Profit
Reconciliation Of Trading To Reported Profit H1 2013 H1 2012 (restated) £m £m Trading profit 154.0 157.4 Net underlying finance costs (17.1) (16.1) Underlying profit before taxation 136.9 141.3 Taxation charge on underlying profit (2013: 20%; 2012: 20%) (26.7) (27.4) Underlying profit after taxation
Slide 11: Excellence in Delivery Progressing Well
Excellence in Delivery Progressing Well £m Benefits Actual/forecast EiD2 100 89 Actual/forecast EiD1 81 30 67 11 19 48 7 70 70 70 34 60 9 2010 2011 2012 2013 2014 2015 2016 Cumulative Total cost exceptional cost EiD2 25 43 60 £191m EiD1 23 62 100 131 Unchanged from original plan • EiD implementation
Slide 12: Underlying Earnings Per Share
Underlying Earnings Per Share 11 Cobham plc
Slide 13: Summary Cash Flow
Summary Cash Flow H1 2013 H1 2012 (restated) £m £m Trading profit (excluding joint ventures) 150.8 153.1 Depreciation, amortisation and other items 27.3 29.3 Pension contributions in excess of service cost and administration cost (7.7) (6.9) Increase in working capital (20.8) (17.2) Net capital expe
Slide 14: Balance Sheet
Balance Sheet 30/06/13 31/12/12 £m £m Intangible assets 1,198.9 1,102.1 Property, plant and equipment 296.1 304.8 Other non-current assets 104.1 86.8 Non current assets 1,599.1 1,493.7 Inventories 338.1 306.4 Trade and other receivables < 1 year 294.7 281.0 Trade and other payables < 1 year (372.3)
Slide 15: Summary
Summary • H1 results delivered consistent with full year guidance • Orders, revenue, organic margin, cash conversion, dividend • EiD benefits feeding through as anticipated • providing funds for investment • improving internal efficiencies • underpinning margin performance • Continued rebalancing of
Slide 16: Agenda
Agenda • Introduction Bob Murphy Chief Executive Officer • Financial Results Simon Nicholls Chief Financial Officer • Business Review Bob Murphy • Q&A 15 Cobham plc
Slide 17: Business Review
Business Review Returning to sustainable growth • Delivering the strategy one year on • Leveraging technology and know-how in our markets – US Defence/Security – Non US Defence/Security – Commercial • Driving results through Excellence in Delivery 16 Cobham plc
Slide 18: Delivering the strategy one year on
Delivering the strategy one year on Taking actions to drive growth Strategic Strategic Objective Actions 1. Improve insight and investment to meet customer needs • Increased PV to £43m, 6.2% of revenue 2. Operate from a more competitive cost base We will build and maintain • Rationalisation of 10 ad
Slide 19: Shaping The Portfolio For Growth
Shaping The Portfolio For Growth H1 2012 H1 2013 Commercial 30% Commercial US Defence / US Defence / Security 36% Security 38% 42% Non US Defence Non US Defence / Security / Security 28% 26% • Enhanced revenue growth and capabilities through acquisitions – Closed Axell Wireless in May - distributed
Slide 20: Declining US Defence/Security Markets
Declining US Defence/Security Markets Aligning to dynamic priorities • In the relatively early stages of a long term defence CAS 10% US Defence / downturn Security 38% – Expect ~50% decline in procurement/ RDT&E (H1 2012: 42%) CDS 17% funding from peak to trough • In the near to mid-term all branche
Slide 21: Supporting The Pivot To Asia
Supporting The Pivot To Asia Providing critical content on key platforms AAR • Extended reach through refuelling systems - from tankers to aircraft probes Sensors/Communications • Electronic Warfare jamming to prevent enemy detection • Specialised radar technology components on every aircraft and su
Slide 22: Growing Non US Defence/Security Market
Growing Non US Defence/Security Market Leveraging technology & know-how in faster growing geographies • Asia, Middle East and South America remain strong • Geo-political tensions remain high – there are Non US Defence / multiple “flashpoints” for potential conflict Security 26% (H1 2012: 28%) • Euro
Slide 23: FBH Enhances Aviation Services Capabilities
FBH Enhances Aviation Services Capabilities Rotary and fixed wing expertise across complementary customer base FBHeliservices (FBH) • Enables integrated fixed and rotary Aviation Services wing aviation service offerings • Defence helicopter training and support in the UK Durham Tees Valley Airport R
Slide 24: Growing Commercial Markets
Growing Commercial Markets Leveraging technology & know-how, deploying capital • Global economic recovery continuing CAVS 12% CMS 2% • Desire for greater fuel efficiency, new and improved communication products, further focus on safety CAS 22% • Ongoing demand for natural resources, offshore oil/gas
Slide 25: Growing commercial positions with long term visibility
Qantas Santos Santos 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Aviation Services 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Growing commercial positions with long term visibility 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Chevron Che
Slide 26: Multiple Drivers Underpin SATCOM Growth
Multiple Drivers Underpin SATCOM Growth Demand for operational efficiencies, crew welfare & safety Demand Drivers • Ship operators need to monitor/control fleets to reduce fuel costs and enhance compliance with emission legislation • Requires access to multiple sources of information - engine perfor
Slide 27: Axell Wireless Enhances Antenna Capabilities
Axell Wireless Enhances Antenna Capabilities Complementary expertise moving large amounts of data • Designs, develops and supplies innovative technology products including digital repeaters, fibre optical master units, multi band remotes and network management tools • Expertise in moving data over p
Slide 28: Focus On Customers Through EiD
Focus On Customers Through EiD Foundation for generating sustainable organic growth Standard Operating San Jose, USA Facility Metrics Framework (SOF) implementation 100.0% • Production System ON TIME 73.2% 13 sites DELIVERY • Engineering 10 sites • Supply Chain 7 sites ERP • System build Start Jun-1
Slide 29: Summary
Summary • Delivering on strategy to return to sustainable long term growth • US defence/security uncertainty remains the greatest challenge • Realistic view taken of the US Defence & Security market based on previous downturns • Strategic actions aligned with long term policy of paying a 10% progres
Slide 30: Appendices
Appendices • Investor Relations Calendar • Covenants • Strategy • Exchange Rates • Group Capabilities • Foreign Exchange Transaction Exposure • Continuing to Shape the Portfolio • Definitions • Aerospace and Security Division • Glossary • Defence Systems Division • Notes Pages • Mission Systems Divi
Slide 31: Investor Relations Calendar
Investor Relations Calendar 2013 2014 Sept Oct Nov Dec Jan Feb Mar Apr May June July Aug Announcements 11 6 7 Interim Prelim Interim Management Results 24 Results Statement AGM & Interim Management Statement Investor Events W/C 9 DSEI Exhibition London 9&10 SATCOM Site Visit Copenhagen 30 Cobham plc
Slide 32: Strategy
Strategy Technology and know-how are our key competitive differentiators 31 Cobham plc
Slide 33: Group Capabilities
Group Capabilities COMMERCIAL Commercial US Defence / US DEFENCE/SECURITY Security CAPABILITIES 36% 38% CAPABILITIES (H1 2012: 30%) (H1 2012: 42%) Aerospace & Security Defence Systems • SATCOM terminals • Microwave electronics • Aircraft data and audio Mission Systems communication equipment • Safet
Slide 34: Continuing to Shape the Portfolio
Continuing to Shape the Portfolio US Defence Non US Defence / Security / Security Commercial HIGHER SATCOM Mission Equipment Aerospace Communications Market Growth Antenna Systems Aviation Services Life Support Tactical Comms & Surveillance Defence Electronics LOWER Building Scale In Top 3 33 Cobham
Slide 35: Aerospace and Security
Aerospace and Security Commercial US Defence Maritime/ / Security Other 25% 31% (H1 2012: (H1 2012: 32%) 22%) Non US Commercial Defence / Aerospace/ Security GA 24% 20% (H1 2012: (H1 2012: 26%) 20%) 51% Commercial 38% US revenue • Leading manufacturer of aircraft data and audio communication equipme
Slide 36: Defence Systems
Defence Systems • Adapting innovative technologies to provide mission critical solutions that protect and enhance lives • Specialize in Electronic Warfare (EW) microwave electronics and antenna subsystems for airborne and shipboard programs. Current platforms include F-15, F-16, F/A-18 E/F, EA-18G,
Slide 37: Mission Systems
Mission Systems Commercial 9% (H1 2012: 7%) Non US Defence / US Defence / Security Security 34% 57% (H1 2012: 54%) (H1 2012: 39%) 91% revenue defence/security 66% US revenue • 2,000 air-to-air refuelling systems delivered and the only variable speed drogue in operation • More than 700 Explosive Ordn
Slide 38: Aviation Services
Aviation Services • Operate the world’s largest civil aerial maritime surveillance programme for the Australian Customs and Border Protection service • Provide operational readiness and electronic warfare training for the UK Navy and Airforce, and NATO forces, playing our part to ensure the forces a
Slide 39: Continuing to secure long term non US defence/security contracts
Qantas Santos Santos 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Aviation Services 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Continuing to secure long term non US defence/security contracts 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 H
Slide 40: Ship Set Values
Ship Set Values Milita ry / Fa s t J e t T ra ine rs U S $k R o ta ry U S $k F16 500-900 EH101 400-625 F/A 18 E/F/G 1,000-2,500 EC 175 80-170 F35 1,100 Apache 500 Eurofighter Typhoon 1,400 CH47 (Chinook) 90 Hawk 500 CH 53K 480 Rafale 170 S 61 500 PC-7 160 MH60/UH 60 220-500 T50 100-150 V22 1,100 Gri
Slide 41: Key Performance Indicators
Key Performance Indicators Year to Year to Year to Year to Year to 31/12/08 31/12/09 31/12/10 31/12/11 31/12/12 H1 2012 H1 2013 Core Business Organic Revenue Growth 9.5% 0.9% 0.7% 0.3% (0.8)% 1.7% (3.0)% Defence / Security 9.8% 0.5% (3.2)% (1.6)% 2.0% (7.5)% Commercial (16.4)% 1.4% 9.6% 1.4% 1.0% 8.
Slide 42: Group Revenue Analysis
Group Revenue Analysis Commercial US Defence / 36% Security (H1 2012: 30%) 38% (H1 2012: 42%) UK 11% (H1 2012: 10%) Australia 15% RoW 10% Non US Defence (H1 2012: 14%) (H1 2012: 8%) / Security 26% (H1 2012: 28%) Other EU countries 17% (H1 2012: 18%) USA 47% (H1 2012: 50%) Commercial revenue up 6 per
Slide 43: Revenue Bridge
Revenue Bridge COBHAM 11 (¢:)) Ei Li 22 ‘ee. 843 Non- | Com 800 sats (7)% 8% 600 $< (3)% Organic Growth 400 200 0 ql ‘ 5 H1 2012 FX Translation Divestments Acquisitions Defence/ Commercial H1 2013 Security 42 Cobham ple
Slide 44: Shareholder Returns
Shareholder Returns Full Year 2012 H1 2013 H1 2012 (restated) (restated) Growth Earnings Per Share 22.5p Underlying 10.3p 10.6p (2.6%) 16.0p Basic 4.5p 7.2p 15.9p Diluted 4.5p 7.2p 8.80p Dividend Per Share 2.64p 2.40p 10.0% 43 Cobham plc
Slide 45: Cash Flow
Cash Flow H1 2013 H1 2012 (restated) £m £m Trading profit (excluding joint ventures) 150.8 153.1 Depreciation and amortisation 30.1 30.2 Pension contributions in excess of service cost and administration cost (7.7) (6.9) Increase in working capital (20.8) (17.2) Net capital expenditure (22.6) (22.6)
Slide 46: Capital Expenditure and Depreciation
Capital Expenditure and Depreciation H1 2013 H1 2012 £m Net Capex (1) Depn (2) Net Capex (1) Depn (2) Cobham Aerospace and Security 7.9 7.5 8.7 6.8 Cobham Defence Systems 4.8 7.0 1.9 7.6 Cobham Mission Systems 5.9 3.2 2.8 3.2 Cobham Aviation Services 3.8 12.1 9.1 12.1 Head Office - 0.1 - 0.1 Core Bu
Slide 47: Pension Deficit Movement
Pension Deficit Movement HY to FY to June 2013 Dec 2012 (restated) £m £m Opening Deficit (73.4) (71.2) Service Cost (2.6) (4.6) Admin Cost (0.4) (1.1) Total Employer Contributions 10.7 20.0 Net Finance Cost (1.6) (2.9) Actuarial Variations 18.6 (13.7) FX impact - 0.1 Closing Deficit (48.7) (73.4) Pr
Slide 48: Credit Facilities
Credit Facilities Loan / Facility Usage £m £m US$ Loan Notes Fixed rate (Mar 2014) 50.5 50.5 Fixed rate (Mar 2016) 53.4 53.4 Floating rate (May 2017) 33.0 33.0 Floating rate (Feb/Mar 2018) 69.2 69.2 Fixed rate (Mar 2019) 103.8 103.8 Fixed rate (Oct 2020) 29.0 29.0 338.9 338.9 Bank Facilities US$75m
Slide 49: Credit Facilities – Maturity Profile
Credit Facilities – Maturity Profile £m 800 Dec 700 Mar 600 Mar, Oct 500 Net Debt at 400 May, June 2013 Jun, £484m Oct 300 200 Feb, Mar 100 Mar 0 Jun 13 Dec 13 Dec 14 Dec 15 Dec 16 Dec 17 Dec 18 Dec 19 Dec 20 floating rate fixed rate 48 Cobham plc
Slide 50: Covenants
Covenants June 2013 Dec 2012 June 2012 Dec 2011 Net Debt (£m) - Balance Sheet (484.3) (359.9) (535.6) (232.5) Net Debt (£m) - Average Rate (466.7) (370.9) (531.5) (216.0) EBITDA (1) - rolling 12 months (£m) 401.0 407.5 436.4 429.8 Net Debt to EBITDA (not to exceed 3.5 times) 1.2 0.9 1.2 0.5 EBITA (1
Slide 51: Exchange Rates
Exchange Rates Dec 2011 June 2012 Dec 2012 June 2013 Income Statement (average rate) US$ 1.60 1.58 1.58 1.55 AU$ 1.55 1.53 1.53 1.53 EUR 1.15 1.22 1.23 1.18 DKK 8.59 9.04 9.18 8.78 Balance Sheet (closing rate) US$ 1.55 1.57 1.63 1.52 AU$ 1.52 1.53 1.57 1.66 EUR 1.20 1.24 1.23 1.17 DKK 8.90 9.19 9.20
Slide 52: Foreign Exchange Transaction Exposure
Foreign Exchange Transaction Exposure Historic average effective rate 2009 $1.70 : £1 2010 $1.58 : £1 2011 $ 1.56 : £1 2012 $1.59 : £1 2013 Total $139m 98% hedged for 2013 Hedging in place $136m Avg hedge rate $1.59: £1 Hedging in place 2014 $78m Avg hedge rate $1.59: £1 2015 to 2022 $94m Avg hedge
Slide 53: 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 has been defined as operating profit from continuing operations excluding the impacts of certain M&A relat
Slide 54: Glossary
Glossary AARGM Advanced Anti-Radiation Guided Missile AMRAAM Advanced Medium-Range Air-to-Air Missile C4ISR Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance CAGR Compound Annual Growth Rate CAS Cobham Aerospace and Security CAvS Cobham Aviation Services CDS
Slide 55: Notes Page
Notes Page COBHAM 54 Cobham ple
Slide 56: Notes Page
Notes Page COBHAM 55 Cobham ple
Slide 57: Notes Page
Notes Page COBHAM 56 Cobham ple
Slide 58: Notes Page
Notes Page COBHAM 57 Cobham ple
Slide 59: 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