4 August Interim Results

Transcription

1 4 August Interim Results

2 Agenda Introduction Andy Stevens Chief Executive Officer Financial Results Warren Tucker Chief Financial Officer Business Review Andy Stevens Q&A Interim Results

3 Summary Profit and Loss Account Full Year 2010 H m m m H Change 1,902.6 Revenue (7.4%) Trading Profit (0.2%) 18.3% Trading Margin 17.4% 18.7% 1.3pts Underlying Profit before Taxation % 19.68p Underlying Earnings Per Share 9.29p 9.76p 5.1% 5.0% PV Spend %* 5.2% 5.6% 0.4pts 4%* increase in organic order intake - order book 2.5bn Interim Results * Core businesses. See Appendix for definitions, including underlying, used throughout this presentation.

4 Earnings Per Share Growth % Interim Results

5 Cash Flow and Dividend Full Year 2010 H m m m H Growth Trading Profit (ex. JV) (0.8%) Operating Cash Flow % 79.3% Operating Cash conversion 82.0% 97.1% 15.1pts Free Cash Flow from Business* % 86.5 Decrease/(Increase) in Net Debt 39.3 (51.5) 6.00p Dividend per Share 1.628p 1.800p 10.6% Net Debt 377.6m, Net Debt:EBITDA 0.9x Interim Results *Excludes Excellence in Delivery

6 Divisions Changes to Organisation Core businesses seven Strategic Business Units (SBUs) Non-core businesses two SBUs Defence Systems (CDS) Aerospace and Security (CAS) Mission Systems (CMS) Analytic Solutions Commercial Systems US Composites + Passive Microwave (ex CDS) Aviation Services (CAvS) Analytic Solutions (ex CDS) Defence Communications Avionics (ex CAS) (ex CDS) Antenna Systems Beacons (ex CMS) (ex CDS) Changes effective 1 January Interim Results

7 Core Business Revenue Interim Results

8 Core Businesses - Organic Revenue Growth Cycle Over the Medium Term Excludes FX, Acquisitions and Disposals. Prior year are proforma numbers for illustration purposes Interim Results see appendix for definition of core businesses

9 Cobham Aerospace & Security Excludes FX, Acquisitions and Disposals. Prior year are proforma numbers for illustration purposes Strong performance from export oriented Antenna Systems, partly offsetting land and surveillance Increased shipments of long range SATCOM antennas to commercial customers Long term awards for S61 helicopter upgrade and new SK105 aircraft avionics Robust growth from repair and refurbishment work, including work for US FAA Interim Results core as defined on slide 5

10 Cobham Defence Systems Revenue affected by Continuing Resolution and order shortfalls, but efficiency savings and contracts benefit margin Further US DARPA development contract for US$13m on Wireless Network after Next (WNaN) Good shipments of integrated microwave assemblies for TOW missile system Excludes FX, Acquisitions and Disposals. Prior year are proforma numbers for illustration purposes Interim Results - core as defined on slide 5

11 Cobham Mission Systems Continuing shipments of under wing air refuelling pods and US$73m development subcontracts received for US KC-46 tanker Strong performance from oxygen systems, aviation restraints and actuation subsystems, with growing aftermarket Excludes FX, Acquisitions and Disposals. Prior year are proforma numbers for illustration purposes Interim Results - core as defined on slide 5

12 Cobham Aviation Services Increased flying activity for resource industry customers in Australia, with further potential opportunities opening up Strong performance from Sentinel maritime surveillance programme and Australian freight operations Preparations well underway for modification of A330 FSTA aircraft in UK Excludes FX, Acquisitions and Disposals. Prior year are proforma numbers for illustration purposes Interim Results - core as defined on slide 5

13 Excellence in Delivery... a Step Improvement in Operating Performance The Programme has 3 Elements Rolling out standard, best practice, operating model across larger sites - our Principal sites Integrating manufacturing operations of some smaller sites into Principal sites to capture scale and standardisation benefits Implementing a standard ERP system in Principal sites to enable further scale economies and Offers Numerous Benefits Driven by improved product delivery and customer service, but also: Improved operating efficiency Estimated cost savings of 65m, with one-off costs of 131m Reduced inventory levels working capital savings A simpler, more scalable business Interim Results

14 By the End of 2013, EiD is Expected to Deliver 65m in Benefits Annually Plan Benefits Exceptional costs Actual Forecast Benefit impact , m Exit run-rate for 2013 is 65m H2 15 H1 H2 H Cumulative exceptional cost Will deliver 21m of year over year benefit Interim Results

15 Financial Highlights US Defence and Security challenging period; non-us and Commercial growing Core business trend continues at slightly negative EPS up 6% at constant translation EiD really making a difference 2011 savings already in place Operating cash flow conversion 97%, free cash flow 129m Dividend up 10.6%, 61m shares bought back to 30 June Interim Results - core as defined on slide 5

16 Agenda Introduction Andy Stevens Chief Executive Officer Financial Results Warren Tucker Chief Financial Officer Business Review Andy Stevens Q&A Interim Results

17 Market Development Challenging conditions in the US defence/security market We re in the more attractive sectors Improving marketing and pipeline in stronger markets Wins on Chinese C919, French SK 105, Korean KT-1 & T-50 & Brazilian AF-1 Good pipeline of opportunities in India, Middle East and South America Commercial revenue almost one third of our core business Greater focus on aftermarket Aftermarket revenue increased to 17% Winning US Army, Navy and Air Force business Getting more products on major platforms Scope of supply on the US tanker will be more than refuelling equipment More customers are identifying us as a strategic supplier interim results

18 Technology Investment Rate of PV investment increased to secure next generation of programmes and upgrades Invested 5.6% of revenue for core businesses Our focus is on developing technically differentiated products and services Weight, size and power performance are key factors Good progress developing products that straddle multiple markets Completed qualification testing of RAIMS for A350 selected for A400M Leveraging COGS technology Developing SATCOM antennas for Inmarsat Technology differentiation is at the heart of our competitive advantage interim results COGS (Ceramic Oxygen Generating System) RAIMS (Radio & Audio Interface Management System)

19 Technology Investment Lighter, Smaller, Innovative SATCOM Antenna certification Targeting OEMs, airlines & retrofit markets 24 airlines have adopted our product interim results *Based on Airbus analysis

20 Fixed wing Rotary Unmanned Commercial Regional Military Civil Technology Investment OBIGGS - Military Gas Inerting Technology for Commercial Markets Retrofit C17 retrofit C130 retrofit FAA mandate Civil OEM adoption B787 Under development Under development Military OEM adoption AH64, MH-47, MH-60, V22 UH-1 C17 production Platform X Platform Y Time Smaller and lighter than comparable systems interim results OBIGGS On Board Inert Gas Generation Systems

21 Operational Excellence EiD is Making Good Progress Standard Operating Framework Production system implementation now live across 10 of our 14 principal locations Engineering framework design underway Integration Five sites closed and a further four underway New IT System Completed concept work based on a standard ERP system Key: live site Customers are very supportive of this programme interim results

22 Operational Excellence EiD is Transforming Our Operational Performance World class delivery and quality performance an additional differentiator Streamlining reduces product development cycles and time to market Improved engineering efficiency creates further capacity for new product development Standardardised operating model enables greater synergy benefits from acquisitions Improvement example (Nashua) Jan 11 Jun 11 Deliveries to customer (on time to promise) 92% 100% Inventory turns Avg. manufacturing lead time 30 days 10 days Productivity improvement +25% Excellence in Delivery is key to our growth interim results

23 Portfolio Optimisation Focusing on Higher Growth Markets Australia 14% (2010: 11%) UK 10% (2010: 10%) RoW 10% (2010: 10%) Revenue analysis for core businesses Other EU countries 15% (2010: 14%) Other Communication 8% (2010: 10%) Geography USA 51% (2010: 55%) Commercial/GA 21% (2010: 17%) US Defence / Security 42% (2010: 47%) Non US Defence / Security 29% (2010: 26%) Market Growth across 50% of the business Commercial & non US defence/security interim results - core as defined on slide 2. Group revenue analysis on slide 34

24 MARKET GROWTH Portfolio Optimisation Strategy is to Build Scale and Leadership HIGHER Aerospace Comms Defence/ Security Commercial Antenna Systems Mission Equipment Commercial Systems (Avionics & Beacons) Analytic Solutions Life Support Sensor Systems Tactical Comms & Surveillance (TC&S) Aviation Services LOWER BUILDING SCALE IN TOP 3 Size of bubble represents Cobham revenue Homeland security acquisitions performing well - integrated into TC&S & Mission Equipment interim results

25 Summary Order intake improving with revenue growth in Commercial, non-us defence/security and aftermarket EPS up 6%, despite challenging US Defence and Security market, underpinned by savings from Excellence in Delivery (EiD) programme Increasing technology investment and reconfiguring the business to capture opportunities Technically differentiated products and services in more attractive and resilient market segments Strong and flexible balance sheet for organic and acquisitive investment Actively responding to market conditions and confident of making progress over the medium term interim results

26 Appendices 1. IR calendar 2. Key Performance Indicators 3. Ship set values 4. Surveillance and mesh network example 5. Shareholder returns 6. Cash flow summary 7. Revenue & profit 8. Group revenue analysis 9. Foreign exchange transaction exposure 10.US$/ translation exchange rates 11.Reconciliation of IFRS to Underlying Result 12.Group Revenue and Trading Profit Re-stated Segmental Results Full Year 13.Strategy summary 14.Definitions & glossary 15.Cautionary statement Interim Results

27 Investor Relations Calendar Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Announcements 9 Interim Management Statement 8 Preliminary Results 26 AGM & Interim Management Statement 9 (TBC) Interim Results Exhibitions/ Air Shows w.c. 12 DSEI Exhibition, London w/c 9 Farnborough Air Show Interim Results

28 Key Performance Indicators Full Year 2010 H H H H H H % Core Businesses Organic Revenue Growth 5.8% 5.9% 12.0% 1.5% 3.0% (2.6)% 3.8% Earnings Per Share Growth (constant translation) 9.9% 15.3% 19.2% 18.7% 3.6% 5.8% 79.3% Operating Cash Conversion 71.1% 75.1% 116.3% 87.4% 82.0% 97.1% 5.0% Core Businesses PV Spend % * 6.3% 5.7% 6.1% 6.0% 5.2% 5.6% Defence/Security (8)% Commercial 12% (2.6)% interim results

29 Ship Set Values Military Fast Jets / Trainers Programme/Platform Ship Set Values US$k F16 $500-$800 F/A 18 E/F/G $880-$4,000 F35 $1,300 Eurofighter Typhoon $1,500 Hawk $500 Rafale $150 PC-7 $160 T50 $220 Gripen $160-$500 Medium / Large C17 $500 Military C130/KC130 $700-$4,000 Predator/Reaper $300-$600 AMRAAM $120 UAV / Missiles AARGM $140 PAC3/Patriot $200 Global Hawk $1,900-$2,200 EH101 $400-$600 Apache $580 Rotary CH53K $400 MH60/UH60 $300-$650 V22 $1,000 A320 $60 A350 $100 A380 $230 Commercial B737 $120 B787 $110-$150 C919 $35 SK105 $350 Naval DDG 1000 $2,600 Aegis DPYIDV $2, interim results

30 Ship Set Value US$k Ship Set Value US$k Aircraft Aircraft Increasing Ship Set Value on F-35 $2,000 $2, $1, $1,600 $1,200 $1,300 $950 $1, $1,200 $800 $400 $0 $800 $400 $0 $20 $20 $ $410 $500 $500 $ $700 $ $1,200 Some reduction in LRIP Ship Set Value Aircraft Production Estimated >3,000 aircraft to be produced - Cobham ship set value still increasing interim results

31 Surveillance and Mesh Network Capability Example Key Mesh 1 Mesh 2 SOLO link out Police command SOLO Transmitter Camera Camera Camera Camera Camera Police command Mobile surveillance SOLO Transmitter Camera Camera Camera Car Mobile surveillance

32 Shareholder Returns Full Year 2010 H H Growth 26.5% Underlying Tax Rate 26.5% 25.5% Earnings Per Share 19.68p Underlying 9.29p 9.76p 5.1% 13.27p Basic 6.55p 6.96p 13.20p Diluted 6.50p 6.93p 6.00p Dividend Per Share 1.628p 1.800p 10.6% 19.00p Free Cash Flow Per Share 8.96p 11.26p 25.7% Interim Results

33 Cash Flow Summary Full Year 2010 H H m m m Trading Profit (excluding joint ventures) Depreciation and other movements (71.8) Decrease/(Increase) in working capital and provisions (29.6) (4.9) (57.1) Net Capital expenditure (27.8) (23.6) Operating cash flow (21.6) Taxation paid (14.9) (17.4) 6.0 Dividends received from JVs (37.2) Interest (20.0) (16.9) Free cash flow (64.6) Dividends paid - (49.8) (13.4) Restructuring costs (0.3) (20.1) (5.9) Acquisition payments less disposal proceeds, other related costs and loans to JVs (9.4) (72.0) (28.8) Product damages award Issue of share capital less purchase of treasury shares 10.0 (65.7) (26.5) Exchange movements (64.0) Decrease/(Increase) in net debt 39.3 (51.5) Net Debt Net Debt : EBITDA Interim Results

34 Revenue and Profit Revenue Trading Profit m H H Organic Growth H H Cobham Aerospace and Security (4.9)% Margin 22.5% 22.2% Cobham Defence Systems (11.0)% Margin 12.5% 18.2% Cobham Mission Systems % Margin 16.8% 20.9% Cobham Aviation Services % Margin 12.0% 14.3% Head Office and eliminations (3.6) (4.0) Core Group businesses (2.6)% Margin 18.1% 19.9% Non core businesses Cobham Group (3.9)% Margin 17.4% 18.7% Interim Results

35 Group Revenue Analysis Australia 12% (2010: 9%) UK 9% (2010: 9%) RoW 10% (2010: 9%) Other EU countries 13% (2010: 13%) Other Communication 8% (2010: 10%) USA 56% (2010: 60%) Commercial/GA 20% (2010: 16%) US Defence / Security 47% (2010: 51%) Non US Defence / Security 25% (2010: 23%) interim results

36 Foreign Exchange Transaction Exposure Transaction Exposure: 2011 Total $195m Historic average effective rate 2007 $1.83 : $1.93 : $1.70 : $1.58 : 1 94% hedged for 2011 Hedging in place $183m Avg hedge rate $1.56: 1 Hedging in place 2012 $73m Avg hedge rate $1.61: to 2014 $90m Avg hedge rate $1.61: 1 Dollar/Euro exposure predominantly hedged for 2011 with 1.38, Interim Results

37 US$/ Translation Exchange Rates Full Year Opening Half Year Half Year Income Statement (average rate) Balance Sheet (closing rate) m PBT translation impact for every 1 cent movement interim results

38 Reconciliation of IFRS to Underlying Result Full Year 2010 H H m m m Operating profit Business restructuring (1.1) Unrealised losses/(gains) on revaluation of currency instruments 14.7 (1.1) 63.3 Amortisation of intangible assets arising on acquisition Settlement of commercial dispute M&A deferred & contingent payment & expenses Trading profit (42.3) Net underlying finance expense (22.6) (18.0) Underlying profit before taxation Interim Results

39 Group Revenue and Trading Profit Re-stated Segmental Results Full Year Revenue Trading Profit m Year to 31/12/09 Year to 31/12/10 Organic Growth Year to 31/12/09 Year to 31/12/10 Cobham Aerospace and Security (4.6)% Margin 23.0% 22.8% Cobham Defence Systems (1.3)% Margin 15.5% 14.7% Cobham Mission Systems % Margin 17.3% 20.3% Cobham Aviation Services % Margin 13.6% 13.3% Head Office and eliminations (11.6) (7.8) (0.1) 1.7 Core Group businesses 1, , % Margin 19.0% 19.1% Non core businesses Cobham Group 1, ,902.6 (0.3)% Margin 17.9% 18.3% interim results

40 Our Strategy 1 Focus on Defence, Security & Commercial markets Maintain an appropriately focused portfolio on the defence, security and commercial markets, such that we can can add value and manage risk across the portfolio 2 Sell technically differentiated products & services Sell technically differentiated products and services that meet customer s needs in markets that have attractive characteristics, and in which we can maintain a sustainable competitive advantage Continue to provide core Tier 3 capabilities and selectively offer Tier 2 to meet customer needs 3 Build sustainable scale positions Develop and maintain top 3 positions in our markets Build or maintain scale positions in these markets to ensure we have the necessary scale to support investment, maintain market leadership and deliver long term business growth 4 Deliver operational excellence Achieve Excellence In Delivery for our customers, capturing cost synergies through simplifying and standardising processes, integrating operations and building operational capabilities Attract, develop and retain superior talent and manage it across the business 5 Actively manage the portfolio Actively manage the portfolio, exiting businesses that do not fit with our strategy Acquire businesses that build scale, allow us to exploit our existing capabilities in adjacent segments or deliver distinctive technologies or capabilities to accelerate our organic growth Interim Results

41 Definitions Underlying Business restructuring costs Net debt 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 transaction related costs and business restructuring costs as detailed below. Also excluded are the marking to market of currency instruments not realised in the period and items deemed by the Directors to be of an exceptional nature. Underlying earnings are defined as trading profit less net underlying finance expense, which excludes the unwinding of acquisition related discounting, and after deducting taxation and noncontrolling interests. Transaction related costs excluded from trading profit and underlying earnings include the amortisation of intangible assets recognised on acquisition, the writing off of the pre-acquisition profit element of inventory written up on acquisition and other direct costs associated with business combinations and disposals. Business restructuring costs comprise exceptional costs or profits associated with the restructuring of the Group s businesses including costs associated with the Excellence in Delivery programme. Net debt is defined as the net of cash and cash equivalents less borrowings at the balance sheet date. Operating Cash Flow Operating cash flow is defined as cash generated from operations, after cash flows from the purchase or disposal of tangible fixed assets. Operating cash conversion is defined as operating cash flow as a percentage of trading profit, excluding profit from joint ventures. Free cash flow is operating cash flow after net interest and taxation. Free Cash Flow per share Defined as free cash flow/average number of shares in issue Organic revenue growth Organic revenue growth is defined as revenue growth stated at constant translation exchange rates, excluding the incremental effect of acquisitions and disposals. PV Investment Core businesses Private Venture (PV or company funded R&D Research and Development) measures exclude Aviation Services, where there is no technology investment. All numbers referring to core businesses exclude Analytic Solutions and Commercial Systems as the Group plans to divest these activities Interim Results

42 Glossary AARGM Acq AMRAAM C4ISR CAGR CAS CAvS CDS CMS COGS DoD EBITDA EiD EPS ERP EW FAA FX GA IED IFRS JSF JV MIDAESS MFTS OCI OEM PBT PV RAIMS R&D RDT&E RoW SATCOM SBU SOF UAV WnAN Advanced Anti-Radiation Guided Missile Acquisition Advanced Medium-Range Air-to-Air Missile Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance Compound Annual Growth Rate Cobham Aerospace and Security Cobham Aviation Services Cobham Defence Systems Cobham Mission Systems Ceramic Oxygen Generating Unit Department of Defense Earnings Before Interest Tax Depreciation and Amortisation Excellence in Delivery Earnings Per Share Enterprise Resource Planning Electronic Warfare Federal Aviation Authority Foreign Exchange General Aviation Improvised Explosive Device International Financial Reporting Standards Joint Strike Fighter Joint Venture Missile Defence Agency Engineering and Support Services Military Flying Training Services Organisational Conflict of Interest Original Equipment Manufacturer Profit Before Tax Private Venture (Company funded R&D) Radio and Audio Interface Management System Research & Development Research, Development, Test and Evaluation Rest of World Satellite Communication Strategic Business Unit Standard Operating Framework Unmanned Aerial Vehicle Wireless network After Next Interim Results

43 Notes Page interim results

44 Notes Page interim results

45 Notes Page interim results

46 Notes Page interim results

47 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 interim results