Interims Results 2015

Transcription

1 The most important thing we build is trust ADVANCED ELECTRONIC SOLUTIONS AVIATION SERVICES COMMUNICATIONS AND CONNECTIVITY MISSION SYSTEMS Interims Results 2015 Progressing Our Strategy

2 Agenda Introduction Bob Murphy Chief Executive Officer Financial Results Simon Nicholls Chief Financial Officer Business Review Bob Murphy Chief Executive Officer Q&A 1

3 Agenda Introduction Bob Murphy Chief Executive Officer Financial Results Simon Nicholls Chief Financial Officer Business Review Bob Murphy Chief Executive Officer Q&A 2

4 Financial Highlights H H Change m m Constant FX Change Order Intake % 29.5% Revenue 1, % 24.0% Trading Profit % 22.9% Trading Margin 15.3% 15.5% (0.2)pts Underlying Profit before Taxation % 16.6% Underlying Earnings Per Share 9.3p 8.7p 7.7% 9.3% Operating Cash Conversion 77.1% 63.9% 13.2pts Net Debt (1,236.6) (1,222.7) * Dividend per Share 3.05p 2.904p 5.0% * At 31 December See Appendix for definitions, including underlying, used throughout this presentation.

5 Cobham Communications & Connectivity (CCC) 2015 () 2014 (constant FX) Change % US Defence & Security (H1 2014: 15%) Revenue m % Trading Profit m % Trading Margin 14.2% 15.9% (1.7)pts Non-US Defence & Security (H1 2014: 22%) 32% revenue increase driven by: Commercial (H1 2014: 63%) 102m from test business of Aeroflex, with strong underlying demand for new products Healthy growth of 13% in commercial aerospace and 6% in US defence/security driven by demand for large transport platforms and increased shipments in Surveillance, respectively Overall 1% organic decline driven by oil and gas sector in SATCOM and lower demand for inbuilding wireless products 9m trading profit increase reflecting: Strong acquisition performance, partially offset by lower volume in commercial marine and land Cost increase in composites development programme of 3m PV increased to 12% of revenue to drive future growth; focused on commercial markets 4 Note: US$ revenue 37%, EUR & DKK revenue 35%

6 Cobham Mission Systems (CMS) 2015 () 2014 (constant FX) Change % Commercial (H1 2014: 9%) Revenue m % Trading Profit m % Trading Margin 14.9% 14.6% 0.3pts US Defence & Security (H1 2014: 53%) Non-US Defence & Security (H1 2014: 38%) Total revenue 21m higher, with organic growth of 14% including: Re-start of C-130 production for USMC and USAF Increased engineering and development revenue, primarily on the US KC-46 aerial refuelling tanker Encouraging order flow on missile actuation and weapons carriage and release products Lower A330MRTT production from in-year phasing Profitability and margin on track; continue to reflect high level of ongoing engineering and development activity in aerial refuelling 5 Note: US$ revenue 74%

7 Cobham Advanced Electronic Solutions (CAES) 2015 () 2014 (constant FX) Change % Revenue m % Commercial (H1 2014: 3%) Trading Profit m % Trading Margin 14.6% 14.7% (0.1)pts Non-US Defence & Security (H1 2014: 4%) US Defence & Security (H1 2014: 93%) Consolidated portfolio delivered 46% increase in total revenue: Significant contribution of 104m from Aeroflex microelectronics business, bringing increased commercial exposure Organic revenue 9% lower with certain programmes nearing end of production life in existing business Aeroflex contribution drives trading profit increase, with trading margin stable: Reflects ongoing mix change away from production to development programmes Offset by benefits from integration savings and continuous improvement activities 6 Note: US$ revenue 99%

8 Cobham Aviation Services (CAvS) 2015 () 2014 (constant FX) Change % Commercial (H1 2014: 47%) Revenue m % Trading Profit m % Trading Margin 14.0% 12.8% 1.2pts Non-US Defence & Security (H1 2014: 53%) Organic revenue increase driven by: Helicopter Services the primary driver, with increased revenue from rotary wing support contracts in Trinidad & Tobago and Qatar Commercial revenue in Australia broadly unchanged; some demand weakness from natural resources sector but key contract renewals and entry into service of next generation E190 aircraft Completion of second Special Mission detachment for RSAF and ongoing AMSA mobilisation ahead of flying operations commencing in H Total trading profit increased by 3m from increased activity and higher margin from revenue mix and efficiencies 7 Note: AU$ revenue 56%

9 Revenue and Profit Sector Summary at Constant Exchange 1 Revenue Trading Profit m H H Change H H Change Cobham Communications and Connectivity % % Margin 14.2% 15.9% Cobham Mission Systems % % Margin 14.9% 14.6% Cobham Advanced Electronic Solutions % % Margin 14.6% 14.7% Cobham Aviation Services % % Margin 14.0% 12.8% Head Office and Eliminations (6.7) Exchange - (11.1) - (0.7) Cobham Group - as reported 1, % % Margin 15.3% 15.5% 8 (1) = 2014 data presented at 2015 exchange rates.

10 Trading Profit Bridge 2014 to 2015 m

11 Reconciliation of Trading to Reported Profit H H m m Trading profit Underlying net finance costs (25.4) (12.1) Underlying profit before taxation Taxation charge on underlying profit (2015: 21.5%; 2014: 20.0%) (29.0) (23.5) Underlying profit after taxation for the period Business restructuring (23.8) (13.1) Movements in non-hedge accounted derivative financial instruments (0.4) 5.7 Amortisation of intangible assets arising on business combinations (85.3) (48.6) Exceptional legal costs - (0.8) Other business acquisition and divestment related items (21.1) (4.2) Non-underlying finance costs - (2.4) Taxation on non-underlying items (Loss)/profit after taxation for the period (2.2)

12 Cash Flow H H m m Trading profit Depreciation and amortisation Pension contributions in excess of pension charges (8.0) (8.9) Increase in working capital (7.0) (48.6) Net capital expenditure (58.0) (25.7) Other items (5.3) 2.5 Operating Cash Flow Underlying net interest paid (24.0) (11.6) Taxation paid (13.6) (18.8) Business restructuring costs (16.5) (13.4) Free Cash Flow Dividends paid (87.7) (75.5) Acquisition payments less divestment proceeds and other related costs (4.8) (23.2) Placing and net settlement of treasury shares (8.3) Exchange movements Increase in Net Debt (13.9) Opening Net Debt (1,222.7) (453.4) Closing Net Debt (1,236.6) (313.3) Net Debt: EBITDA Note: Depreciation and amortisation shown net of profit/loss on sale of property, plant and equipment and excluding amortisation of acquired intangibles. 11

13 Working Capital Inventories Receivables Payables Current Working Capital Non-current Total Working Capital m m m m m m Opening Balance Sheet (503.6) Underlying Cash Outflow/(Inflow) 23.6 (21.5) FX (6.2) (11.0) 11.4 (5.8) 0.3 (5.5) Acquisitions and Disposals (7.6) (4.3) 2.6 (9.3) (3.3) (12.6) Non-Underlying Items (20.6) (30.1) Closing Balance Sheet (411.5)

14 Balance Sheet 30/06/ /12/2014 m m Intangible assets 1, ,997.2 Property, plant and equipment Other non-current assets Non Current Assets 2, ,478.2 Inventories Trade and other receivables < 1 year Trade and other payables < 1 year (411.5) (503.6) Current Working Capital Net current tax liabilities (134.4) (118.8) Net debt (1,236.6) (1,222.7) Provisions (122.0) (67.4) Retirement benefit obligations (83.8) (102.0) Other assets / liabilities (137.0) (219.4) Net Assets ,

15 Summary Strong revenue and earnings growth in the first half, driven by Aeroflex Modest organic revenue growth due to short-term headwinds in commercial markets Good progress in resolving the technical issues on our major aerial refuelling development programmes Improving cash conversion Completed successful refinancing of short-term borrowings associated with the Aeroflex transaction on a long-term basis Comfortable headroom under committed borrowing facilities Interim dividend increase of 5% 14

16 Agenda Introduction Bob Murphy Chief Executive Officer Financial Results Simon Nicholls Chief Financial Officer Business Review Bob Murphy Chief Executive Officer Q&A 15

17 Today s Agenda Delivering Second Half Performance Market Update Commercial US Defence & Security Non-US Defence & Security Strategy Update Summary 16

18 Delivering Second Half Performance Anticipating Increased Short Cycle Market Demand Orders Anticipate stronger second half short cycle orders building on Q2 momentum Communications & Connectivity Sector Advanced Electronics Solutions Sector Revenue Higher short cycle shipments AAR deliveries on track Driving Sales, Inventory, Operations Planning (SIOP) discipline and agility Trading Profit Higher commercial short cycle revenue drives improved profit Synergy benefits being secured Proactive cost control measures Operating Cash Increased profit drives H2 cash Driving working capital equation to achieve 80% cash conversion target Investing capex in Aviation Services to support growth (AMSA win) Convert Short Cycle Orders to Revenue & Deliver AAR 17

19 Recapitalising Aerial Refuelling Capability Leveraging Common Technology Across Platforms A330MRTT A400M KC-46 KC-390 Scope Wing Pods Fuselage Refuelling Unit (centreline) Wing Dispense Equipment (pods) Hose Drum Unit (centreline) Wing Aerial Refuelling Pods Centreline Drogue System Body Fuel Tanks Wing Pods Refuelling Probe Key Milestones Production continues; >60 pods currently in service June 2015: South Korea selects A330MRTT Feb 2015: Successful simultaneous AAR demonstration with F/A-18 s Continued production ramp Dec 2014: EMD1 first flight Summer 2015: first flight of KC-46 tanker August 2017: 18 KC-46 aircraft delivered to USAF Feb 2015: First flight 2018: KC-390 Initial Operating Capability (IOC) Programme Lifecycle 30+ aircraft on order with additional orders likely Deliveries anticipated thru 2025 and beyond 33 aircraft current orders with AAR capability; expect additional AAR orders Deliveries anticipated thru 2020 and beyond 179 aircraft for USAF with follow-on order potential Deliveries anticipated thru FY committed orders with additional orders likely Deliveries anticipated thru 2020 and beyond Providing A Critical Capability and In Service Support 18

20 Today s Agenda Delivering Second Half Performance Market Update Commercial US Defence & Security Non-US Defence & Security Strategy Update Summary 19

21 We Operate In Three Principal Markets Creating a Better Balanced Portfolio Commercial Revenue (% of Group) US & Non-US Defence & Security Revenue (% of Group) 41% 73% 41% 10% 8% 18% Aviation Products Aviation Services Non-US Defence & Security 25% 59% 24% 27% 9% 5% 3% Wireless Marine Space US Defence & Security 48% 35% 2011 H % H Other 2011 H Portfolio Shape Better Aligned to Growth Strategy 20

22 Well Positioned in our Commercial Markets Connectivity and Specialist Aviation Services Enable Future Growth Commercial Revenue 41% of H Revenue CMS 2% CCC SATCOM Wireless CAES 14% CAvS 20% CAvS Airline Services Regional Services CAES Microelectronics Semiconductors CMS Pneumatic Systems Actuation Systems CCC 64% 737/A320 and widebody aircraft ramp up Strong 4G/LTE rollout, 5G development underway Demand for commercial high throughput satellites Global Xpress and Thor 7 constellations Soft demand and pricing for natural resources Drivers of Growth Strong positions for SATCOM, avionics and communications components Virtualised solutions for wireless equipment testing Demand for gravel kit jet services to the resource sector Targeted fleet modernisation and service enhancements for key customers Strong demand for Hi-Rel products for commercial space programmes Medical imaging (CT & X-ray Hi-Rel components) Fuel tank inerting positions and emergency actuation deliveries Incremental growth from securing new contract for precision valves Growth Underpinned by Differentiated Technology 21

23 US Defence & Security Beginning to Stabilise Programme Positioning Key for the Future US Defence & Security Revenue 35% of H Revenue CCC 17% Moderating downturn should temper historic declines Some Congressional momentum for potential relief from BCA caps, but remains very unclear CAES 55% CMS 28% Expect a Continuing Resolution in FY16 Modernisation of Electronic Warfare capability is US DoD imperative to combat perceived shortfall Key franchise platforms remain well funded CAES Microelectronics CMS Air-to-Air Refuelling Actuation Systems CCC Antennas Surveillance Drivers of Growth Strong Microelectronics position on F-35 Critical connectivity subsystems on major missile platforms Positions on US DoD aerial refuelling tankers: KC-46, KC-135, KC-10, KC-130 Increasing missile actuation Year over Year short cycle bookings improvement Investment Targeted on DoD Priority Areas 22

24 Regional Tension Drives Non-US Defence & Security Middle East And Asia Driving Overall Market Growth Non-US Defence & Security Revenue 24% of H Revenue Increased regional tensions driving increased defence expenditure in the Middle East CAvS 45% CAvS Special Mission Heliservices CCC Antennas Avionics CAES 6% CMS Air-to-Air Refuelling Weapons Carriage CCC 28% CMS 21% Intensifying of NATO involvement in Middle East Force structure modernisation across Southeast Asia Increased political focus on border protection and surveillance operations Drivers of Growth Pilot training for EW for Royal Saudi AF & General Atomics teaming agreement 12 year A$640 million AMSA contract to begin in the second half of 2016 Military aircraft communications equipment sales in Middle East and Asia Aerial Refuelling platform wins in growing Middle Eastern and Asian markets Weapons Carriage and Release systems and munitions subsystems primarily in Middle Eastern markets Strong Programme Positions Support Future Growth 23

25 Today s Agenda Delivering Second Half Performance Market Update Commercial US Defence & Security Non-US Defence & Security Strategy Update Summary 24

26 We Have a Clear Strategy Positioning for Long Term Growth Strategic Objective The Group will build and maintain leading positions in its chosen markets by leveraging innovative technology and know-how with a deep insight into customer needs. Key Success Drivers 1. Enhance strategic focus and balance of portfolio 2. Connectivity underpins future growth 3. Focus on our customers 4. Sustained investment in technology 5. Continuously invest in people, tools & processes 6. Drive continuous improvement culture 7. Execute Aeroflex integration plan and synergy Another Period of Strategic Progress 25

27 Building a Portfolio for Sustained Growth Sharpening Our Strategic Focus, Connectivity 60% of our Portfolio Acquisitions 27% 48% 25% % 37% % 41% 24% 35% PXI Modules and Software Divestments Beacons Aviation Displays RFMW Components Revenue Contribution US Defence & Security RoW Defence & Security Commercial Strengthening Positions in Long-Term Growth Markets 26

28 Summary Making Good Strategic Progress Reconfirming 2015 guidance that assumes: Anticipated improvement in demand conditions in our short cycle, commercial land and marine markets Continued good progress on aerial refuelling programmes Aeroflex integration and synergy on track Sharpening the strategic focus of our portfolio Driving organic execution and cash generation Interim dividend up 5% Delivering Growth 27

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30 Cobham Interim Results 2015 APPENDICES 29

31 Appendices Table of Contents Investor Calendar Group Revenue Analysis Revenue Bridge Trading Margin Bridge Underlying Earnings Per Share Group Financial KPIs Shareholder Returns Capital Expenditure and Depreciation Pension Deficit Movement Credit Facilities Credit Facilities Maturity Profiles Covenants Exchange Rates Foreign Exchange Transaction Exposure Ship Set Values Definitions Glossary Cautionary Statement Notes 30

32 Investor Relations Calendar Results Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug 5 Trading Update 3 Prelim Results 28 AGM & AGM Statement 4 Interim Results Investor Events DSEI Defence & Security Equipment Exhibition, London 1 Capital Markets Day, London Farnborough Airshow 31

33 Group Revenue Analysis Commercial (H1 2014: 38%) 41% 35% US Defence & Security (H1 2014: 34%) 24% Non-US Defence & Security (H1 2014: 28%) Australia (H1 2014: 15%) Asia (H1 2014: 8%) RoW (H1 2014: 6%) 11% 5% 11% 14% 48% USA (H1 2014: 42%) Other EU (H1 2014: 15%) 11% UK (H1 2014: 14%) 32

34 Revenue Bridge m , % (3.5%) CAvS CAvS 0.3% organic growth CAES CAES CMS CMS CCC CCC H FX Translation Divestments Acquisitions Defence/ Security Commercial H

35 Trading Margin Bridge 2014 to % 1.3% 15.3% 0.8% 0.7% 0.3% 0.2% 0.1% 34

36 Underlying Earnings Per Share Year-on-year change (1.6)% (4.2)% (1.8)% 12.7% 1.8% 0.8% 35

37 Group Financial KPIs Year to 31/12/11 Year to 31/12/12 Year to 31/12/13 Year to 31/12/14 H H Organic Revenue Growth (0.6%) (0.6%) (4.0%) (1.5%) (3.9%) 0.3% Defence / Security (3.5%) (1.5%) (8.8%) (5.1%) (10.0%) 2.4% Commercial 7.6% 1.9% 6.9% 5.3% 7.6% (3.5%) Earnings Per Share Growth (constant translation) 12.6% 3.2% (4.2%) (11.3%) (11.6%) 9.3% Operating Cash Conversion 94.8% 104.5% 85.4% 72.6% 63.9% 77.1% PV Spend % 4.9% 5.3% 6.2% 6.7% 6.6% 8.4% Return on Invested Capital % 19.4% 18.1% 15.3% 12.4% 12.3% 10.4% 36

38 Shareholder Returns Full Year 2014 H H Growth Earnings Per Share 18.5p Underlying 9.3p 8.7p 7.7% 2.6p Basic (0.2)p 4.2p 2.6p Diluted (0.2)p 4.2p 10.65p Dividend Per Share 3.05p 2.904p 5.0% 37

39 Capital Expenditure and Depreciation H H m Net Capex (1) Depn (2) Net Capex (1) Depn (2) Cobham Communications and Connectivity Cobham Mission Systems Cobham Advanced Electronic Solutions Cobham Aviation Services Head Office Core Businesses Non Core Businesses Cobham Group (1) Shown net of proceeds on disposal of property, plant and equipment. (2) Depreciation excludes amortisation of acquired intangibles but includes amortisation of other intangibles of 2.4m (2014: 2.2m). Shown net of profit/loss on sale of property, plant and equipment. 38

40 Pension Deficit Movement HY to June FY to Dec m m Opening Deficit (102.0) (87.3) Service Cost (3.3) (5.5) Admin Cost (0.3) (0.6) Net Finance Cost (1.7) (3.6) Total Employer Contributions Other Actuarial Variations 11.9 (27.7) FX impact - (0.3) Closing Deficit (83.8) (102.0) Primary Assumptions Discount Rate 3.8% 3.5% Price Inflation Rate 3.4% 3.2% Salary Inflation Rate 3.7% 3.5% Life Expectancy of Male aged 65 in yrs 25.5yrs 39

41 Credit Facilities Loan / Facility Usage m m US$ Loan Notes Fixed rate (Mar 2016) Floating rate (May 2017) Fixed rate (Oct 2017) Floating rate (Feb/Mar 2018) Fixed rate (Mar 2019) Fixed rate (Oct 2019) Fixed rate (Oct 2020) Fixed rate (Oct 2021) Fixed rate (Oct 2024) Bank Facilities US$90m multi-currency revolving credit agreement (Oct 2016) US$75m credit agreement (Dec 2016) EUR70m multi-currency revolving facility (Jun 2017) DKK525m multi-currency revolving facility (Oct 2018) US$270m multi-currency revolving credit agreement (Oct 2018) AUS$90m revolving credit facility (Oct 2018) US$185m bi-lateral credit agreement (Oct 2018) US$40m Schuldschein agreement (May 2020) EUR131m Schuldschein agreement (May 2020) EUR4m Schuldschein agreement (May 2022) Total Committed Facilities 1, ,460.5 Overdrafts Finance Leases Gross Debt 1, ,460.7 Cash (224.1) Net Debt 1, ,

42 Credit Facilities Maturity Profile 1,800 1,600 1,400 1,200 Mar, Oct, Dec May, Jun, Oct Net Debt at June ,237m 1,000 Feb, Mar, Oct m Mar, Oct May, Oct 400 Oct 200 Oct 0 Dec 15 Dec 16 Dec 17 Dec 18 Dec 19 Dec 20 Dec 21 Dec 22 Dec 23 Dec 24 41

43 Covenants Jun-15 Dec-14 Jun-14 Dec-13 Net Debt ( m) - Balance Sheet (1,236.6) (1,222.7) (313.3) (453.4) Net Debt ( m) - Average Rate (1) (1,242.4) (1,159.2) (333.6) (479.6) EBITDA (2) - rolling 12 months ( m) Net Debt to EBITDA (not to exceed 3.5 times) EBITA - rolling 12 months ( m) Net Interest - rolling 12 months ( m) Interest Cover (to exceed 3 times) (1) For covenant purposes net debt is typically expressed at average translation rates. (2) EBITDA includes pro forma adjustments in respect of acquisitions and divestments.

44 Exchange Rates Translation impact 2015 underlying PBT at June closing rates would be c. 3.5m lower Movements in exchange do not impact organic performance comparisons Translation risk not hedged as generally impact is only crystallised to the extent that profit is not reinvested in the business and is repatriated to the UK Risk partly mitigated by matching the currency profile of debt to that of the functional currencies of our operations Transaction impact Mostly hedged where we have costs or revenues that are not in underlying functional currency of the business See next slide Foreign Exchange Transaction Exposure highlighting US$/ and US$/DKK forward coverage June 2015 Dec 2014 June 2014 Average rate Closing rate % change US$ (3)% AUS$ (5)% EUR (3)% DKK (3)% US$ % AUS$ (4)% EUR (4)% DKK (4)% US$ (2)% AUS$ % EUR (2)% DKK (2)% Impact of pro rata 1 cent movement Revenue PBT Net Debt m m m US$ AUS$ 1 EUR / DKK

45 Foreign Exchange Transaction Exposure Transaction Exposure: Historic average effective rate $/DKK $/ 2011 $ 1.56 : $1.59 : $1.59 : $1.61 : Total $159m Hedging in place $159m $129m $126m $/ -98% $/DKK - 100% hedged for 2015 Average hedge rates $1.59: 1 $1:DKK 5.75 Hedging in place 2016 $125m $43m Average hedge rates $1.53: 1 $1:DKK to 2022 $28m $48m Average hedge rates $1.56: 1 $1:DKK 5.34 Dollar/Euro exposure predominantly hedged for 2015 with

46 Ship Set Values Military Fast Jet US $k F F/A-18 E/F/G 1,000-2,700 F-35 1,200 Rotorcraft US $k EH EC Apache 500 Missile US $k AMRAAM AARGM 120 PAC3/Patriot 210 Typhoon 1,400 CH-47 Chinook 90 Standard Missile Hawk 600 Rafale 160 PC T Gripen Medium/Large Military Aircraft UAV CH-53K 400 S MH60/UH V ,100 THAAD 2,000 Commercial Aircraft A A A B Sentry E-2D 250 Predator/Reaper B Poseidon P Global Hawk 1,700-2,000 B C-130/KC ,200 Naval C Satellite EDG1000 1,200-1,400 G Boeing ,000 Aegis 2,200-4,500 MRJ 50 45

47 Definitions Underlying To assist with the understanding of earnings trends, the Group has included within its published financial statements non-gaap measures including trading profit and underlying earnings results. Trading profit has been defined as operating profit from continuing operations excluding the impacts of business acquisition and divestment related activity and business restructuring costs as detailed below. Also excluded are changes in the marking to market of non-hedge accounted derivative financial instruments, impairments of intangible assets and items deemed by the Directors to be of an exceptional nature. Underlying earnings are defined as trading profit less net underlying finance costs, which excludes acquisition related items, and after deducting associated taxation and non-controlling interests. Business acquisition and divestment related items Business acquisition and divestment related items excluded from trading profit and underlying earnings include the amortisation of intangible assets recognised on acquisition, adjustments to businesses held for sale, the writing off of the pre-acquisition profit element of inventory written up on acquisition, and other direct costs associated with business combinations and terminated divestments. Business restructuring costs Business restructuring costs relate to the restructuring of the Group s portfolio which are incremental to normal operations. Operating cash flow Operating cash flow is defined as net cash from operating activities before payment of tax, interest, restructuring costs and M&A related costs but after cash flows from the purchase or disposal of property, plant, equipment and intangible assets. Operating cash conversion is defined as operating cash flow as a percentage of trading profit. Free cash flow Net debt Organic revenue growth PV investment Free cash flow is defined as net cash from operating activities less cash flows related to the purchase or disposal of property, plant, equipment and intangible assets but excluding payments relating to M&A related activities. Net debt is defined as the net of borrowings less cash and cash equivalents at the balance sheet date. Organic revenue growth is defined as revenue growth stated at constant translation exchange rates, excluding the incremental effect of acquisitions and divestments. PV (Private Venture) or company funded R&D (Research and Development) measures exclude Aviation Services, where there is no R&D activity. Invested capital Invested capital comprises net assets adjusted to exclude net debt, retirement benefit obligations, derivative financial instruments, current and deferred tax, provisions and other financial assets. Intangible assets recognised on business combinations are grossed up to original cost before amortisation and an adjustment is also made to reinstate historic goodwill previously written off directly to reserves. Return on invested capital Trading profit as a percentage of the average invested capital during the period. 46

48 Glossary 4G 5G AAR AARGM AESA AGM AMDR AMRAAM AMS AMSA ATS BCA BD BEU C4ISR CAES CAGR CAPEX CAS CAvS CCC CDMA CFIUS CMS CT DAS DoD DSEI EBITA EBITDA EDGE EiD EMD E-Scan EU EVP EW FBH FIFO FSTA FX GDP GPRS GSM GX HD HiRel Fourth Generation Fifth Generation Air-to-Air Refuelling Advanced Anti-Radiation Guided Missile Active Electronically Scanned Array (radar) Annual General Meeting Air and Missile Defence Radar Advanced Medium-Range Air-to-Air Missile Aeroflex Microelectronic Solutions Australian Maritime Safety Authority Aeroflex Test Solutions Budget Control Act Business Development Battery Electronics Unit Command, Control, Communications, Computers, Intelligence, Cobham Advanced Electronic Solutions Compound Annual Growth Rate Capital Expenditure Cobham Aerospace and Security Cobham Aviation Services Cobham Communications and Connectivity Code Division Multiple Access Committee on Foreign Investment in the United States Cobham Mission Systems Computed Tomography Distributed Antenna System Department of Defence Defence and Security Equipment International Earnings Before Interest Tax and Amortisation Earnings Before Interest Tax Depreciation and Amortisation Enhanced Data rates for GSM Evolution Excellence in Delivery Engineering, Manufacturing and Development Electronically Scanned European Union Executive Vice President Electronic Warfare FB Heliservices Fly-In Fly-Out Future Strategic Tanker Aircraft Foreign Exchange Gross Domestic Product General Packet Radio Service Global System for Mobile communications Global Xpress High Definition High Reliability HSR HSXPA IMS IOC IP JV KPI LCM LRIP LTE M&A M2M MENA MRJ MRTT NATO OCF PAC 3 PBT PCI PM PP PTS PV PXI R&D RDT&E RF RF/MW RoW RSAF SAR SATCOM SEWIP SSA SWAP-C SWP TC&S TD-SCDMA THAAD UAV UMTS USAF USMC WCDMA WIP YTD Hart Scott Rodino (Antitrust Improvements Act) Third Generation High Speed Packet Access Interim Management Statement Initial Operating Capability Internet Protocol Joint Venture Key Performance Indicator Life-Cycle Management Low Rate Initial Production Long Term Evolution Mergers & Acquisitions Machine-to-Machine Middle East and North Africa Mitsubishi Regional Jet Multi Role Tanker Transport North Atlantic Treaty Organisation Operating Cash Flow Patriot Advanced Capability-3 Profit Before Tax Peripheral Component Interconnect Programme Management Private Placement Points Private Venture (Company funded R&D) PCI extensions for Instrumentation Research & Development Research, Development, Test & Evaluation Radio Frequency Radio Frequency / Microwave Rest of World Royal Saudi Air Force Search-And-Rescue Satellite Communication Surface Electronic Warfare Improvement Program Special Security Agreement Space, Weight, Power and Cooling Strategic Workforce Planning Tactical Communications & Surveillance Time Division Synchronous Code Division Multiple Access Terminal High Altitude Area Defence Unmanned Aerial Vehicle Universal Mobile Telecommunications System United States Air Force United States Marine Corps Wideband Code Division Multiple Access Work In Process Year-to-Date 47

49 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 statements with respect to the financial condition, results of operations and business of (Cobham) and to certain of Cobham s plans and objectives with respect to these items. Forward-looking statements are sometimes but not always identified by their use of a date in the future or such words as anticipates, aims, due, could, may, should, expects, believes, intends, plans, targets, goal, or estimates. By their very nature, forward-looking statements are inherently unpredictable, speculative and involve risk and uncertainty because they relate to events and depend on circumstances that may or will occur in the future. There are various factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. These factors include, but are not limited to, changes in the economies, political situations and markets in which the Group operates; changes in government priorities due to programme reviews or revisions to strategic objectives; changes in the regulatory and competition frameworks in which the Group operates; the impact of legal or other proceedings against or which affect the Group; changes to or delays in programmes in which the Group is involved; the completion of any acquisitions and divestitures and changes in currency exchange rates. All written or verbal forward-looking statements, made in this document or made subsequently, which are attributable to Cobham or any other member of the Group or persons acting on their behalf are expressly qualified in their entirety by the factors referred to above. Cobham does not intend to update these forward-looking statements. 48

50 Notes Page 49