interims results 2015 - cobham•dec 2014: emd1 first flight •summer 2015: first flight of kc-46...
TRANSCRIPT
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The most important thing we build is trust
ADVANCED ELECTRONIC SOLUTIONS AVIATION SERVICES COMMUNICATIONS AND CONNECTIVITY MISSION SYSTEMS
Interims Results 2015
Progressing Our Strategy
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Cobham plc Cobham plc
Agenda
6 August 2015 1
• Introduction Bob Murphy Chief Executive Officer
• Financial Results Simon Nicholls Chief Financial Officer
• Business Review Bob Murphy Chief Executive Officer
• Q&A
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Cobham plc Cobham plc
Agenda
2
• Introduction Bob Murphy Chief Executive Officer
• Financial Results Simon Nicholls Chief Financial Officer
• Business Review Bob Murphy Chief Executive Officer
• Q&A
6 August 2015
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Cobham plc Cobham plc
Financial Highlights
3 See Appendix for definitions, including underlying, used throughout this presentation.
* At 31 December 2014
H1 2015 H1 2014 Change
£m £m
Order Intake 960.1 728.2 31.8% 29.5%
Revenue 1,048.2 834.1 25.7% 24.0%
Trading Profit 160.3 129.7 23.6% 22.9%
Trading Margin 15.3% 15.5% (0.2)pts
Underlying Profit before Taxation 134.9 117.6 14.7% 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%
Constant FX
Change
6 August 2015
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Cobham plc Cobham plc
Cobham Communications & Connectivity (CCC)
4
Non-US Defence & Security (H1 2014: 22%)
US Defence & Security (H1 2014: 15%)
Commercial (H1 2014: 63%) • 32% revenue increase driven by:
• £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 in-building 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
2015 ()
2014(constant FX)
Change%
Revenue £m 408.9 310.5 31.7%
Trading Profit £m 58.2 49.3 18.1%
Trading Margin 14.2% 15.9% (1.7)pts
Note: US$ revenue 37%, EUR & DKK revenue 35%
6 August 2015
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Cobham plc Cobham plc
Cobham Mission Systems (CMS)
5
Non-US Defence & Security (H1 2014: 38%)
US Defence & Security (H1 2014: 53%)
Commercial (H1 2014: 9%)
• 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
2015 ()
2014(constant FX)
Change%
Revenue £m 167.1 146.3 14.2%
Trading Profit £m 24.9 21.4 16.4%
Trading Margin 14.9% 14.6% 0.3pts
Note: US$ revenue 74%
6 August 2015
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Cobham plc Cobham plc
Cobham Advanced Electronic Solutions (CAES)
6
Non-US Defence & Security (H1 2014: 4%)
US Defence & Security (H1 2014: 93%)
Commercial (H1 2014: 3%)
• 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
2015 ()
2014(constant FX)
Change%
Revenue £m 275.9 188.8 46.1%
Trading Profit £m 40.3 27.8 45.0%
Trading Margin 14.6% 14.7% (0.1)pts
Note: US$ revenue 99%
6 August 2015
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Cobham plc Cobham plc
Cobham Aviation Services (CAvS)
7
Non-US Defence & Security (H1 2014: 53%)
Commercial (H1 2014: 47%)
• 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 H2 2016
• Total trading profit increased by £3m from increased activity and higher margin from revenue mix and efficiencies
2015 ()
2014(constant FX)
Change%
Revenue £m 203.0 197.7 2.7%
Trading Profit £m 28.4 25.4 11.8%
Trading Margin 14.0% 12.8% 1.2pts
Note: AU$ revenue 56%
6 August 2015
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Cobham plc Cobham plc
Revenue and Profit
Sector Summary at Constant Exchange1
8 (1) = 2014 data presented at 2015 exchange rates.
Revenue Trading Profit
£m H1 2015 H1 2014 Change H1 2015 H1 2014 Change
Cobham Communications and Connectivity 408.9 310.5 31.7% 58.2 49.3 18.1%
Margin 14.2% 15.9%
Cobham Mission Systems 167.1 146.3 14.2% 24.9 21.4 16.4%
Margin 14.9% 14.6%
Cobham Advanced Electronic Solutions 275.9 188.8 46.1% 40.3 27.8 45.0%
Margin 14.6% 14.7%
Cobham Aviation Services 203.0 197.7 2.7% 28.4 25.4 11.8%
Margin 14.0% 12.8%
Head Office and Eliminations (6.7) 1.9 8.5 6.5
Exchange - (11.1) - (0.7)
Cobham Group - as reported 1,048.2 834.1 25.7% 160.3 129.7 23.6%
Margin 15.3% 15.5%
6 August 2015
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Cobham plc Cobham plc
129.7
160.3
7.97.9
31.3
13.4 1.0 0.7
Trading Profit Bridge
2014 to 2015
9
£m
6 August 2015
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Cobham plc Cobham plc
Reconciliation of Trading to Reported Profit
10
H1 2015 H1 2014
£m £m
Trading profit 160.3 129.7
Underlying net finance costs (25.4) (12.1)
Underlying profit before taxation 134.9 117.6
Taxation charge on underlying profit (2015: 21.5%; 2014: 20.0%) (29.0) (23.5)
Underlying profit after taxation for the period 105.9 94.1
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 22.5 15.4
(Loss)/profit after taxation for the period (2.2) 46.1
6 August 2015
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Cobham plc Cobham plc
Cash Flow
11
Note: Depreciation and amortisation shown net of profit/loss on sale of property, plant and equipment and excluding amortisation of acquired intangibles.
H1 2015 H1 2014
£m £m
Trading profit 160.3 129.7
Depreciation and amortisation 41.6 33.9
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 123.6 82.9
Underlying net interest paid (24.0) (11.6)
Taxation paid (13.6) (18.8)
Business restructuring costs (16.5) (13.4)
Free Cash Flow 69.5 39.1
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) 183.7
Exchange movements 17.4 16.0
Increase in Net Debt (13.9) 140.1
Opening Net Debt (1,222.7) (453.4)
Closing Net Debt (1,236.6) (313.3)
Net Debt: EBITDA 2.9 0.9
6 August 2015
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Cobham plc Cobham plc
Working Capital
12
Inventories Receivables Payables
Current
Working
Capital Non-current
Total
Working
Capital
£m £m £m £m £m £m
Opening Balance Sheet 431.4 436.6 (503.6) 364.4 17.1 381.5
Underlying Cash Outflow/(Inflow) 23.6 (21.5) 4.9 7.0 - 7.0
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) 73.2 22.5 15.4 37.9
Closing Balance Sheet 420.6 369.7 (411.5) 378.8 29.5 408.3
6 August 2015
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Cobham plc Cobham plc
Balance Sheet
13 6 August 2015
30/06/2015 31/12/2014
£m £m
Intangible assets 1,842.7 1,997.2
Property, plant and equipment 380.4 390.0
Other non-current assets 99.2 91.0
Non Current Assets 2,322.3 2,478.2
Inventories 420.6 431.4
Trade and other receivables < 1 year 369.7 436.6
Trade and other payables < 1 year (411.5) (503.6)
Current Working Capital 378.8 364.4
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 987.3 1,112.3
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Cobham plc Cobham plc
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%
6 August 2015 14
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Cobham plc Cobham plc
Agenda
6 August 2015 15
• Introduction Bob Murphy Chief Executive Officer
• Financial Results Simon Nicholls Chief Financial Officer
• Business Review Bob Murphy Chief Executive Officer
• Q&A
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Cobham plc Cobham plc
Today’s Agenda
• Delivering Second Half Performance
• Market Update
– Commercial
– US Defence & Security
– Non-US Defence & Security
• Strategy Update
• Summary
6 August 2015 16
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Cobham plc Cobham plc
Delivering Second Half Performance
Anticipating Increased Short Cycle Market Demand
17
Orders Revenue
• Anticipate stronger second half short cycle orders building on Q2 momentum
‒ Communications & Connectivity Sector
‒ Advanced Electronics Solutions Sector
• Higher short cycle shipments
• AAR deliveries on track
• Driving Sales, Inventory, Operations Planning (SIOP) discipline and agility
Trading Profit Operating Cash
• Higher commercial short cycle revenue drives improved profit
• Synergy benefits being secured
• Proactive cost control measures
• 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
6 August 2015
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Cobham plc Cobham plc
Recapitalising Aerial Refuelling Capability
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 FY2027
• 60 committed orders with additional orders likely
• Deliveries anticipated thru 2020 and beyond
18
Providing A Critical Capability and In Service Support
Leveraging Common Technology Across Platforms
6 August 2015
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Cobham plc Cobham plc
Today’s Agenda
• Delivering Second Half Performance
• Market Update
– Commercial
– US Defence & Security
– Non-US Defence & Security
• Strategy Update
• Summary
19 6 August 2015
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Cobham plc Cobham plc
6%
3%
5%
9%
8%
H1 2015
27%
41%
2011 H1 2015
We Operate In Three Principal Markets
Creating a Better Balanced Portfolio
20
Commercial Revenue (% of Group)
US Defence & Security
Non-US Defence & Security Aviation
Services
Wireless
Marine
Space
Aviation
Products
8%
10%
9%
5%
3%
6%
41%
48%
35%
25%
24%
73%
59%
2011 H1 2015
Other
US & Non-US Defence & Security Revenue
(% of Group)
Portfolio Shape Better Aligned to Growth Strategy
6 August 2015
18%
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Cobham plc Cobham plc
CCC64%
CMS2%
CAES14%
CAvS20%
• 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
Well Positioned in our Commercial Markets
Connectivity and Specialist Aviation Services Enable Future Growth
6 August 2015 21
Growth Underpinned by Differentiated Technology
Drivers of Growth
CCC • SATCOM • Wireless
• Strong positions for SATCOM, avionics and communications components
• Virtualised solutions for wireless equipment testing
CAvS • Airline Services • Regional Services
• Demand for gravel kit jet services to the resource sector
• Targeted fleet modernisation and service enhancements for key customers
CAES • Microelectronics • Semiconductors
• Strong demand for Hi-Rel products for commercial space programmes
• Medical imaging (CT & X-ray Hi-Rel components)
CMS • Pneumatic Systems • Actuation Systems
• Fuel tank inerting positions and emergency actuation deliveries
• Incremental growth from securing new contract for precision valves
Commercial Revenue 41% of H1 2015 Revenue
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Cobham plc Cobham plc
CCC17%
CMS28%
CAES55%
• Moderating downturn should temper historic declines
• Some Congressional momentum for potential relief from BCA caps, but remains very unclear
• 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
US Defence & Security Beginning to Stabilise
Programme Positioning Key for the Future
6 August 2015 22
Investment Targeted on DoD Priority Areas
US Defence & Security Revenue 35% of H1 2015 Revenue
Drivers of Growth
CAES • Microelectronics
• Strong Microelectronics position on F-35
• Critical connectivity subsystems on major missile platforms
CMS • Air-to-Air Refuelling • Actuation Systems
• Positions on US DoD aerial refuelling tankers: KC-46, KC-135, KC-10, KC-130
• Increasing missile actuation
CCC • Antennas • Surveillance
• Year over Year short cycle bookings improvement
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Cobham plc Cobham plc
CCC28%
CMS21%
CAES6%
CAvS45%
• Increased regional tensions driving increased defence expenditure in the Middle East
• Intensifying of NATO involvement in Middle East
• Force structure modernisation across Southeast Asia
• Increased political focus on border protection and surveillance operations
Regional Tension Drives Non-US Defence & Security
Middle East And Asia Driving Overall Market Growth
6 August 2015 23
Strong Programme Positions Support Future Growth
Non-US Defence & Security Revenue 24% of H1 2015 Revenue
Drivers of Growth
CAvS • Special Mission • Heliservices
• 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
CCC • Antennas • Avionics
• Military aircraft communications equipment sales in Middle East and Asia
CMS • Air-to-Air Refuelling • Weapons Carriage
• Aerial Refuelling platform wins in growing Middle Eastern and Asian markets
• Weapons Carriage and Release systems and munitions subsystems primarily in Middle Eastern markets
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Cobham plc Cobham plc
Today’s Agenda
• Delivering Second Half Performance
• Market Update
– Commercial
– US Defence & Security
– Non-US Defence & Security
• Strategy Update
• Summary
6 August 2015 24
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Cobham plc Cobham plc
We Have a Clear Strategy
Positioning for Long Term Growth
25
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
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.
6 August 2015
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Cobham plc Cobham plc
2012 2013 2014 2015+
Building a Portfolio for Sustained Growth
26
Strengthening Positions in Long-Term Growth Markets
37%
28%
35% 48%
25%
27%
Acquisitions
Beacons Aviation Displays
Divestments
PXI Modules and Software
35%
24%
41%
Sharpening Our Strategic Focus, Connectivity 60% of our Portfolio
6 August 2015
RFMW Components
2011
US Defence & Security RoW Defence & Security Commercial
Revenue Contribution
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Cobham plc Cobham plc
Summary
• 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%
Making Good Strategic Progress
27
Delivering Growth
6 August 2015
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Cobham plc Cobham plc
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Cobham plc Cobham plc
APPENDICES Cobham Interim Results 2015
6 August 2015 29
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Cobham plc Cobham plc
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 6 August 2015
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Cobham plc Cobham plc
Investor Relations Calendar
6 August 2015 31
2015 2016
Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug
Results 5
Trading Update
3
Prelim Results
28 AGM & AGM
Statement
4
Interim Results
Investor Events
15 – 18 DSEI
Defence & Security
Equipment Exhibition,
London
1
Capital Markets
Day, London
11 - 15 Farnborough
Airshow
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Cobham plc Cobham plc
48%
11%
14%
11%
11%5%
35%
24%
41%
Group Revenue Analysis
6 August 2015 32
Non-US Defence & Security (H1 2014: 28%)
US Defence & Security (H1 2014: 34%)
Commercial (H1 2014: 38%)
USA (H1 2014: 42%)
UK (H1 2014: 14%)
Other EU (H1 2014: 15%)
Australia (H1 2014: 15%)
Asia (H1 2014: 8%)
RoW (H1 2014: 6%)
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Cobham plc Cobham plc
CCCCCC
CMS
CMSCAES
CAESCAvS
CAvS
1110
191 13
11
834
1,048
H1 2014 FX Translation Divestments Acquisitions Defence/Security
Commercial H1 2015
Revenue Bridge
6 August 2015 33
£m
2.4% (3.5%)
0.3% organic growth
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Cobham plc Cobham plc
Trading Margin Bridge
2014 to 2015
34
15.5%15.3%
0.8%0.7%
0.2% 0.1%0.3%
1.3%
6 August 2015
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Cobham plc Cobham plc 6 August 2015 35
Underlying Earnings Per Share
(1.6)% (4.2)% (1.8)% 12.7% 1.8% 0.8% Year-on-year change
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Cobham plc Cobham plc
Group Financial KPIs
6 August 2015 36
Year to
31/12/11
Year to
31/12/12
Year to
31/12/13
Year to
31/12/14H1 2014 H1 2015
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%
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Cobham plc Cobham plc
Shareholder Returns
6 August 2015 37
Full Year
2014H1 2015 H1 2014 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%
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Cobham plc Cobham plc
Capital Expenditure and Depreciation
6 August 2015 38
(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.
£m Net Capex(1)
Depn(2)
Net Capex(1)
Depn(2)
Cobham Communications and Connectivity 9.2 9.5 6.2 6.8
Cobham Mission Systems 1.1 2.7 3.6 2.5
Cobham Advanced Electronic Solutions 8.1 8.5 3.2 5.9
Cobham Aviation Services 33.6 19.6 11.1 17.4
Head Office 6.0 1.3 1.5 1.2
Core Businesses 58.0 41.6 25.6 33.8
Non Core Businesses - - 0.1 0.1
Cobham Group 58.0 41.6 25.7 33.9
H1 2015 H1 2014
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Cobham plc Cobham plc
Pension Deficit Movement
6 August 2015 39
HY to June
2015
FY to Dec
2014
£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 11.6 23.0
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 2045 25.5yrs 25.5yrs
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Cobham plc Cobham plc
Credit Facilities
6 August 2015 40
Loan / Facility Usage
£m £m
US$ Loan Notes
Fixed rate (Mar 2016) 51.5 51.5
Floating rate (May 2017) 31.8 31.8
Fixed rate (Oct 2017) 47.7 47.7
Floating rate (Feb/Mar 2018) 66.8 66.8
Fixed rate (Mar 2019) 100.1 100.1
Fixed rate (Oct 2019) 114.5 114.5
Fixed rate (Oct 2020) 28.0 28.0
Fixed rate (Oct 2021) 159.0 159.0
Fixed rate (Oct 2024) 270.2 270.2
869.6 869.6
Bank Facilities
US$90m multi-currency revolving credit agreement (Oct 2016) 57.2 54.9
US$75m credit agreement (Dec 2016) 47.7 47.7
EUR70m multi-currency revolving facility (Jun 2017) 49.6 42.0
DKK525m multi-currency revolving facility (Oct 2018) 49.9 16.5
US$270m multi-currency revolving credit agreement (Oct 2018) 171.7 164.9
AUS$90m revolving credit facility (Oct 2018) 44.0 26.3
US$185m bi-lateral credit agreement (Oct 2018) 117.6 117.6
US$40m Schuldschein agreement (May 2020) 25.4 25.4
EUR131m Schuldschein agreement (May 2020) 92.8 92.8
EUR4m Schuldschein agreement (May 2022) 2.8 2.8
658.7 590.9
Total Committed Facilities 1,528.3 1,460.5
Overdrafts 0.1 0.1
Finance Leases 0.1 0.1
Gross Debt 1,528.5 1,460.7
Cash (224.1)
Net Debt 1,528.5 1,236.6
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Cobham plc Cobham plc
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Dec 15 Dec 16 Dec 17 Dec 18 Dec 19 Dec 20 Dec 21 Dec 22 Dec 23 Dec 24
£m
Mar,
Oct,
Dec
Feb, Mar,
Oct
Oct
Net Debt at June 2015£1,237m
May, Jun,
Oct
Mar,Oct
Oct
May,Oct
Credit Facilities – Maturity Profile
6 August 2015 41
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Cobham plc Cobham plc
Covenants
6 August 2015 42 (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.
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) 422.5 440.2 366.3 395.0
Net Debt to EBITDA (not to exceed 3.5 times) 2.9 2.6 0.9 1.2
EBITA - rolling 12 months (£m) 323.7 297.6 300.6 322.4
Net Interest - rolling 12 months (£m) 41.9 28.4 21.4 27.0
Interest Cover (to exceed 3 times) 7.7 10.5 14.0 11.9
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Cobham plc Cobham plc
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$/DKK forward coverage
6 August 2015 43
Average
rate
Closing
rate
%
change
June 2015
US$ 1.53 1.57 (3)%
AUS$ 1.95 2.05 (5)%
EUR 1.37 1.41 (3)%
DKK 10.19 10.53 (3)%
Dec 2014
US$ 1.65 1.56 5%
AUS$ 1.83 1.91 (4)%
EUR 1.24 1.29 (4)%
DKK 9.25 9.60 (4)%
June 2014
US$ 1.67 1.71 (2)%
AUS$ 1.83 1.81 1%
EUR 1.22 1.25 (2)%
DKK 9.09 9.31 (2)%
Revenue PBT Net Debt
£m £m £m
US$ 7 1 7
AUS$ 1
EUR / DKK 2 1
10 1 8
Impact of pro rata 1 cent movement
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Foreign Exchange Transaction Exposure
6 August 2015 44
2015 Total $159m
Hedging in place $159m
$/£ -98% $/DKK - 100%
hedged for 2015
Average hedge rates $1.59: £1
$1:DKK 5.75
2016
Hedging in place Average hedge rates
$1.53: £1 $1:DKK 5.47
Average hedge rates $1.56: £1
$1:DKK 5.34 $48m 2017 to 2022
Transaction Exposure: Historic average
effective rate
2011 $ 1.56 : £1 2012 $1.59 : £1 2013 $1.59 : £1 2014 $1.61 :£1
Dollar/Euro exposure predominantly hedged for 2015 with $56m @ 1.28
$129m
$126m
$43m $125m
$28m
$/DKK $/£
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Cobham plc Cobham plc
Missile US $k
AMRAAM 50-150
AARGM 120
PAC3/Patriot 210
Standard Missile 90-125
THAAD 2,000
Commercial Aircraft
A320 60-100
A350 130
A380 260
B737 50-110
B777 50
B787 105-150
C919 90
G650 30
MRJ 50
Military Fast Jet US $k
F-16 500-1000
F/A-18 E/F/G 1,000-2,700
F-35 1,200
Typhoon 1,400
Hawk 600
Rafale 160
PC-7 140
T-50 100-150
Gripen 180-500
Medium/Large Military Aircraft
Sentry E-2D 250
Poseidon P-8 880
C-130/KC-130 300-3,200
Satellite
Boeing 702 500-5,000
Rotorcraft US $k
EH101 550-775
EC175 80-170
Apache 500
CH-47 Chinook 90
CH-53K 400
S-61 40
MH60/UH60 350-850
V-22 500-1,100
UAV
Predator/Reaper 250-700
Global Hawk 1,700-2,000
Naval
EDG1000 1,200-1,400
Aegis 2,200-4,500
Ship Set Values
45 6 August 2015
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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
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 Net debt is defined as the net of borrowings less cash and cash equivalents at the balance sheet date.
Organic revenue growth
Organic revenue growth is defined as revenue growth stated at constant translation exchange rates, excluding the incremental effect of acquisitions and divestments.
PV investment
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
Definitions
6 August 2015
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Glossary
47
4G Fourth Generation
5G Fifth Generation
AAR Air-to-Air Refuelling
AARGM Advanced Anti-Radiation Guided Missile
AESA Active Electronically Scanned Array (radar)
AGM Annual General Meeting
AMDR Air and Missile Defence Radar
AMRAAM Advanced Medium-Range Air-to-Air Missile
AMS Aeroflex Microelectronic Solutions
AMSA Australian Maritime Safety Authority
ATS Aeroflex Test Solutions
BCA Budget Control Act
BD Business Development
BEU Battery Electronics Unit
C4ISR Command, Control, Communications, Computers, Intelligence,
CAES Cobham Advanced Electronic Solutions
CAGR Compound Annual Growth Rate
CAPEX Capital Expenditure
CAS Cobham Aerospace and Security
CAvS Cobham Aviation Services
CCC Cobham Communications and Connectivity
CDMA Code Division Multiple Access
CFIUS Committee on Foreign Investment in the United States
CMS Cobham Mission Systems
CT Computed Tomography
DAS Distributed Antenna System
DoD Department of Defence
DSEI Defence and Security Equipment International
EBITA Earnings Before Interest Tax and Amortisation
EBITDA Earnings Before Interest Tax Depreciation and Amortisation
EDGE Enhanced Data rates for GSM Evolution
EiD Excellence in Delivery
EMD Engineering, Manufacturing and Development
E-Scan Electronically Scanned
EU European Union
EVP Executive Vice President
EW Electronic Warfare
FBH FB Heliservices
FIFO Fly-In Fly-Out
FSTA Future Strategic Tanker Aircraft
FX Foreign Exchange
GDP Gross Domestic Product
GPRS General Packet Radio Service
GSM Global System for Mobile communications
GX Global Xpress
HD High Definition
HiRel High Reliability
HSR Hart–Scott–Rodino (Antitrust Improvements Act)
HSXPA Third Generation High Speed Packet Access
IMS Interim Management Statement
IOC Initial Operating Capability
IP Internet Protocol
JV Joint Venture
KPI Key Performance Indicator
LCM Life-Cycle Management
LRIP Low Rate Initial Production
LTE Long Term Evolution
M&A Mergers & Acquisitions
M2M Machine-to-Machine
MENA Middle East and North Africa
MRJ Mitsubishi Regional Jet
MRTT Multi Role Tanker Transport
NATO North Atlantic Treaty Organisation
OCF Operating Cash Flow
PAC 3 Patriot Advanced Capability-3
PBT Profit Before Tax
PCI Peripheral Component Interconnect
PM Programme Management
PP Private Placement
PTS Points
PV Private Venture (Company funded R&D)
PXI PCI eXtensions for Instrumentation
R&D Research & Development
RDT&E Research, Development, Test & Evaluation
RF Radio Frequency
RF/MW Radio Frequency / Microwave
RoW Rest of World
RSAF Royal Saudi Air Force
SAR Search-And-Rescue
SATCOM Satellite Communication
SEWIP Surface Electronic Warfare Improvement Program
SSA Special Security Agreement
SWAP-C Space, Weight, Power and Cooling
SWP Strategic Workforce Planning
TC&S Tactical Communications & Surveillance
TD-SCDMA Time Division Synchronous Code Division Multiple Access
THAAD Terminal High Altitude Area Defence
UAV Unmanned Aerial Vehicle
UMTS Universal Mobile Telecommunications System
USAF United States Air Force
USMC United States Marine Corps
WCDMA Wideband Code Division Multiple Access
WIP Work In Process
YTD Year-to-Date
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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 plc (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 6 August 2015
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Notes Page
49 6 August 2015