7th Aug 2014 10:32
LONDON (Alliance News) - Cobham PLC saw its shares jump Thursday morning after the company said that pretax profit and revenue declined in its first-half after strong order levels seen in the comparative period last year were not repeated, though said that it remains confident that it will meet its expectations and achieve good commercial growth in the full-year.
Cobham sits atop the FTSE 250 Thursday after leading for much of the morning with shares trading 4.08% higher at 298.70 pence per share.
In its half-year results for the six months to June 30, 2014 Cobham said pretax profit fell 14% to GBP118 million, from GBP137 million last year. Revenue declined 3% to GBP834 million from the GBP864 million recorded last year.
The aerospace and security technology company said order intake for the year also dropped, taking a 25% hit to GBP728 million from GBP976 million reported in the first-half of 2013; the prior year order intake in Aviations Services included large multi-year orders, said the company, which were not repeated during the half-year.
Despite the metric falls the company has boosted its interim dividend to 2.904 pence per share from 2.64 pence per share last year, signalling its confidence for the full-year.
Cobham said strong organic revenue growth continued in its commercial markets during the period, though this was offset by a 10% decline in defence and security markets.
Looking ahead the company said its expectations for the year are unchanged and that it anticipates continued good commercial growth, increased shorter cycle revenue and achievement of significant aerial refuelling engineering milestones in its second-half. It expects to generate mid-single digit organic revenue growth from 2015.
Cobham said trading margin for the first-half was down 2.3% with reduced revenue from higher margin and shorter cycle businesses, as well as a shift from mature production contract to lower margin engineering development revenue. Looking ahead, the defence company expects an improvement in its trading margin from a combination of higher volumes and improved mix in the full-year with continued focus on enhancing operational performance, it said, as well as cash conversion to normalise, with an unwind of working capital on achievement of engineering milestones, said the company.
The FTSE 250-listed technology company said that while it its reconfirming its full-year guidance, this comes with a greater-than-usual weighting of earnings and operating cash generation to the second-half, although with stronger foreign currency headwinds.
"Overall, we continue to expect Group organic revenue to decline by low-to-mid single digits in 2014, and we will continue to take appropriate actions to substantially mitigate the impact of this reduction. The Board continues to anticipate that Cobham can deliver mid-single digit organic revenue growth from 2015. This is expected to be underpinned by continued strong growth in commercial markets, a moderating rate of decline in the US defence/security market and increasing revenue from non-US defence/security markets," said Chief Executive Officer Bob Murphy.
Cobham's strategy of bringing more balance to the group continues to make progress with the acquisition of Aeroflex, it said, with the next significant step in that process, expected to complete late in the third quarter.
The defence and aerospace products supplier announced its plans in May to buy US-based test systems and wireless communications business Aeroflex Holding Corp for about GBP869 million in cash, including debt, a deal that will further grow Cobham's connectivity business and boost its earnings.
Cobham bought similar businesses Thrane & Thrane in 2012 and Axell Wireless in 2013, but this deal is bigger, with Aeroflex expected to contribute about 17% of the combined company's revenue. It is expecting to eke about GBP50 million of annual cost synergies out of the deal, for a total investment of about GBP128 million.
In April the aerospace and security technology company said trading in its first quarter had been in line with the board's expectations and that it continued to plan for organic revenue to decline by low-to-mid single digits during the course of the year. However, while trading had been in line, translation of the company's revenue and earnings during the quarter have been hit by foreign currency headwinds, as anticipated in its 2013 preliminary results, it said.
In its full-year results in March, Cobham saw its pretax profit tumble 38% to GBP127 million from GBP204 million amid challenging trading conditions in the defence and security markets as strong growth in its commercial markets was offset by continued weakness in the defence and security markets. Despite the drop, the company boosted its dividend as it worked to realign the organisation in preparation for its next stage of development, it said.
Cobham operates in three end markets; US defence/security, non-US defence/security and commercial, which comprises specialist aerospace, marine and land markets. Commercially driven businesses are now the company's biggest contributors to revenue, accounting for approximately 40% of the group's total.
By Alice Attwood; [email protected]; @AliceAtAlliance
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