Final Results

PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2011

7 March 2012

·; Group order intake increased 16% at constant translation exchange rates, with book-to-bill of 1.10 times, including important multi-year KC-46A, KC-390 and SATCOM awards

·; Modest organic revenue growth4 in core businesses (excluding the divested Analytic Solutions), with a strong performance in commercial and non US defence/security markets, together representing 56% of revenue

·; Underlying EPS growth of 12%, or 13% at constant translation exchange rates

·; Run rate of annualised Excellence in Delivery savings at the end of 2013 is now expected to increase from £65m to £75m, at unchanged cost of £131m

·; Excellent free cash flow3 of £288m, with strong operating cash conversion of 95%

·; Recommended full year dividend increase of 33%, underpinned by strong earnings and cash generation

Commenting on the results and outlook, John Devaney, Executive Chairman, said:

"We have achieved modest organic growth in our core businesses and 13% underlying EPS growth at constant translation exchange rates, driven by efficiency savings from the Excellence in Delivery programme and good cost control. Conditions in our markets, including the positive trend in our export and commercial markets are expected to continue in 2012. The Board expects to achieve some underlying progress this year, before the full year net impact of the Analytic Solutions divestment and the share buy-back.

"We have made significant steps towards focusing the portfolio on markets where we have technical differentiation and leading positions and we have received some very important, long term awards, building on our attractive market positions. Excellence in Delivery has achieved real operational improvements and better-than-expected efficiency savings and we have a strong balance sheet and a highly cash generative business model, giving us the flexibility to examine attractive acquisition opportunities and increase shareholder distributions. The US Government has confirmed defence and security priorities that favour Cobham and has made some progress in reconciling these to budgetary imperatives. The continued delivery of the strategy gives the Board confidence that we will continue to make progress over the medium term."

ENQUIRIES

The following notes apply throughout these preliminary results:

1. All numbers referring to 'core businesses' exclude Analytic Solutions, which was divested in November 2011 and Commercial Systems which the Group plans to divest.

2. 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 non-hedge accounted derivative financial 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 non-controlling 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 divestments.

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.

A reconciliation of operating profit, profit before taxation and profit after taxation attributable to equity shareholders to the respective underlying numbers is shown on page 11.

3. Operating cash flow is defined as cash generated from operations, 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, excluding profit from joint ventures. Free cash flow is operating cash flow after net interest, taxation and dividends received from joint ventures.

Net debt is defined as the net of cash and cash equivalents less borrowings at the balance sheet date. 

4. Organic revenue growth is defined as revenue growth stated at constant translation exchange rates, excluding the incremental effect of acquisitions and divestments.

5. Private Venture (PV or company funded R&D - Research and Development) and R&D measures exclude Aviation Services, where there is no technology investment.

OVERVIEW OF THE YEAR

Cobham has continued to make good progress in its strategy of focusing on chosen markets where it has scale and differentiation, completing the planned divestment of the non-core Analytic Solutions business in November 2011 for US$350m in cash. In addition, it also made three acquisitions, investing up to US$280m during the year, bringing complementary and differentiated technologies to its existing market positions.

The core businesses, principally excluding Analytic Solutions which has now been divested, achieved organic revenue growth of 0.3% in the year supported by a good performance from Mission Systems and the Aviation Services business. Revenue from both commercial and non US defence/security markets, representing 56% of revenue, grew strongly. As anticipated, revenue growth was constrained by continued uncertainty in the US defence/security market.

Group order intake in the year increased 16% at constant translation exchange rates with the book-to-bill ratio at 1.10 times. At constant translation exchange rates and excluding the impact of acquisitions and disposals, the order book increased 7% on the prior year to £2.5bn. There were also some very important multi-year technology awards including a US$40m order from Inmarsat to be the maritime terminal launch partner on its Global Xpress broadband service, significant orders on the US KC-46A and the Brazilian KC-390 aerial refuelling tankers.

The Excellence in Delivery programme has produced improved operational performance and significant financial benefits, realising £25m of annualised year-on-year efficiency savings, significantly ahead of the £21m target. This was due to headcount and other reductions being achieved earlier than planned at a cost of £39m, well below the previously expected cost of £46m. The Group intends to expand the programme and estimates that the run rate of efficiency savings at the end of 2013 will increase from £65m to £75m, at an unchanged total cost of £131m.

By the end of 2012, a further £8m of annualised, year-on-year efficiency savings are expected to be achieved, with the cumulative programme benefits and costs remaining in line with the original plan.

Driven by Excellence in Delivery efficiency savings and good cost control, the Group's underlying trading margin increased to 19.7% (2010: 18.3%).

In the year, the core businesses invested £129m (2010: £125m) in total on research and development (R&D), which includes both company funded and customer funded investment. This included investment in a number of new or improved technologies such as wireless video links, oxygen generating systems, radio and audio management systems and active electronically scanned array radar systems. Core PV5 (Private Venture or company funded R&D) investment was £70m (2010: £69m), representing 5.2% (2010: 5.0%) of revenue.

Underlying EPS increased 12% (13% at constant translation exchange rates) to 22.0p (2010: 19.7p), driven by the improvement in the trading margin. The £150m share buy-back programme, completed in November 2011, increased EPS by 3%.

Operating cash conversion was strong at 95% with excellent free cash flow of £288m (2010: £219m). Net debt decreased to £232m (2010: £326m) at the year end, after the completion of the £150m share buy-back programme, with conservative gearing at 0.5 times net debt/EBITDA.

COBHAM'S MARKETS

Cobham operates in three key markets: US defence/security, accounting for 44% of core revenue, non US defence/security and commercial, each accounting for 28% of core revenue.

In the US defence/security market while significant uncertainty remains, the US Government is making some progress towards developing a sustainable 10 year plan. At the end of 2011, the President signed the 2012 defence budget, containing flat year-on-year base budget investment accounts, without the prolonged delay in agreeing the prior year budget. The 2013 Presidential base budget request is broadly consistent with 2012, although with investment accounts 4% lower. In addressing the significant budgetary demands, the Secretary of Defense has put forward plans for a modest increase in the base budget up to 2017. Strategic defence priorities have also been formally reiterated with continued focus on a number of key areas, including investment in special operations forces, unmanned systems and electronics. These priorities overlap significantly with Cobham's capabilities and should enable the Group to outperform the defence market over the medium term. In addition to strong positions on legacy platforms, which also have significant export and upgrade potential, such as the F-16 and the F-18 fighter aircraft, the V-22 tiltrotor aircraft and the Predator/Reaper unmanned aerial system, the Group has successfully positioned itself on important future growth platforms including substantial content on the KC-46A aerial refuelling tanker aircraft and the CH-53K heavy lift helicopter. The Group also has a strong position on the F-35 multi-role fighter aircraft and while expected production increases have been slowed, this aircraft retains its significant potential for growth over the medium term.

The Group's non US defence/security markets have good potential due to Cobham's breadth of geographic reach and presence on a wide range of platforms and programmes. This enables it to balance continued budgetary pressures, particularly in Europe, with a focus on exports to faster growing geographies such as India, Brazil, the Gulf Cooperation Council countries in the Middle East and parts of South East Asia, where sustained growth in defence/security budgets is expected. The Group has strong, established positions on non US platforms with good export potential such as the A330MRTT aircraft, the Eurofighter Typhoon fighter aircraft and the NH90 utility helicopter. This export driven strategy made progress in the year with important awards on the Brazilian KC-390 aerial refuelling tanker aircraft and on the Eurocopter EC175 and NH90 utility helicopters.

Cobham's commercial markets have good growth prospects, being driven by large jet, helicopter and general aviation production and the marine SATCOM market, which has exposure primarily to the oil and gas market and commercial shipping. Cobham also has specialist aviation markets in Australia, with a number of significant customers in the resources industry there. Rising passenger numbers, demand for more fuel efficient aircraft and for improved aviation and marine communication products is expected to drive growth in Cobham's markets. Production at Airbus and Boeing is expected to grow strongly in 2012 and Cobham has good positions on recently launched platforms with increasing production rates, such as the Boeing 787, for which deliveries are expected to increase from 3 aircraft in 2011 to around 40 aircraft in 2012, and the Airbus A380 for which deliveries are expected to increase from 26 aircraft to 32 aircraft. Cobham has also continued to achieve new awards in its commercial aviation markets in the year, including on the new French Skylander commuter aircraft and the Chinese COMAC C919 passenger aircraft. In the marine market, Cobham was chosen by Inmarsat as the maritime terminal launch partner on its new Global Xpress broadband service.

STRATEGY UPDATE

Cobham's strategy is to build and maintain leading market positions in selected faster growing markets, with a high technology focus. It builds scale through investment in the development of leading edge and technically differentiated products and services and through carefully chosen acquisitions, which accelerate organic growth and reinforce the value added content of the Group's products. Cobham is increasingly prioritising technology and acquisition investment that will bring more balance between its defence/security and commercial markets, with focus on products which can be applied to multiple end markets, as this increases the return on investment.

Technology Investment

Cobham has a unique set of differentiated technologies, with leading positions in all its core markets. Maintaining its technical differentiation is central to Cobham's strategy and total R&D investment in the core businesses was £129m (2010: £125m). It has invested £70m (2010: £69m) in PV, representing 5.2% (2010: 5.0%) of revenue. Examples of investment in leading-edge technology include:

·; Next generation wireless video links, incorporating dual channel technology and high definition pictures, with each mesh radio or node significantly smaller, lighter and less power consumptive than before. The product has numerous airborne and ground security applications, as well as marine applications for early threat detection on oil and gas wells, and broadcast applications, including for the 2012 Olympics;

·; Enhancements to the Ceramic Oxygen Generating System, which increase its oxygen output significantly. This system, which generates pure oxygen without compressed oxygen tanks, is in use in military field hospitals and has commercial applications;

·; Development of new de-icing sliprings for the EC175 utility helicopter, which has civilian, homeland security, search and rescue and military applications;

·; Leading edge Active Electronically Scanned Array radar subsystems, which provide significantly improved performance and reliability with strong growth prospects in manned and unmanned airborne, marine and land based applications.

Cobham's PV investment is focused on specific areas of customer demand and this approach generates an excellent return on the investment made. For example, the Group has over several years invested US$14m in PV on its Radio and Audio Integration Management System (RAIMS), which has already won sole source positions on some key commercial aircraft programmes. These positions are currently estimated to generate Cobham some US$250m of revenue over the product's life, which does not include potential future awards on other commercial and/or military aircraft.

In addition, not only do Cobham's leading edge products and services provide an excellent return for the Group and enhance customer capability, they often also provide the customer with significant cost savings. In the US Department of Defense (DoD) Fiscal Year 2013 Budget Overview, dated February 2012, Cobham's Microclimate Cooling Units is one of a small number of examples specifically highlighted of capability enhancing technology that will yield a return on investment of fifteen to one for the customer.

Cobham's intention, as investment opportunities present themselves, is to increase PV over time which will drive future revenue and profitability as new or improved products and services are brought to market.

Operational Excellence

The Group is delighted with the progress being made on Excellence in Delivery, Cobham's transformation programme, which was announced in August 2010 and is planned to continue to the end of 2013. There are three components to this programme: the implementation of a Standard Operating Framework across a set of principal locations; the integration of manufacturing facilities; and the implementation of a standard Enterprise Resource Planning (ERP) IT system. The programme is bringing a number of significant operational benefits including improved productivity, shortened manufacturing lead times, improved levels of quality and reduced working capital.

During 2011, improvements to the production operations in 10 principal sites were progressively implemented with the remaining sites to be undertaken in 2012. The planned physical integrations are also starting to deliver efficiencies with nine site integrations completed.  Work was started on the design of the new ERP system. In production operations, the benefits from the work done are being reflected in improved operational performance metrics such as on time delivery, first pass quality and productivity and production lead time improvements.

The programme also achieved excellent financial results in 2011 realising £25m of annualised year-on-year efficiency savings, ahead of the £21m savings planned, with outperformance driven by head count and other reductions being achieved earlier than planned. The efficiency savings were achieved at a cost in the year of £39m, well below the previously expected cost of £46m. Cumulative gross costs incurred on the programme to the end of the year were £62m.

Building on the considerable financial and operational success of the programme, the Group intends to expand the scope of Excellence in Delivery, including additional scope for supply chain improvements, with phasing such that significant additional benefits will arise in 2013. As a result, the Group now estimates that the run rate of efficiency savings at the end of 2013 will increase from £65m to £75m, at an unchanged total cost of £131m. Thereafter, operational improvement activities will be embedded in the principal locations as a matter of course.

In 2012, work will continue to consolidate and reinforce the production process improvements in the principal locations along with further work on engineering and supply chain processes. Design of the ERP system will be completed and four more site integrations will be undertaken to build further scale and deliver additional benefits. By the end of 2012, a further £8m of annualised, year-on-year efficiency savings are expected to be achieved, with the cumulative programme benefits and costs remaining in line with the original plan.

Portfolio Optimisation

The Group continues to have a robust balance sheet, good cash generation and a pipeline of attractive technology acquisitions with focus maintained on existing markets, enabling Cobham to build scale and capabilities from the technology synergies created. In addition, the Excellence in Delivery programme gives Cobham an enhanced capability to generate cost synergies, augmenting the value which can be extracted from acquisitions.

Notwithstanding the differentiated technology and attractive market positions that characterise the Group's acquisition pipeline, Cobham is determined only to undertake strategically attractive transactions where these satisfy its financial criteria and disciplined investment approach.

Consistent with its strategy, Cobham has invested up to US$280m on acquisitions before working capital adjustments in 2011, buying companies with differentiated technology in the Group's chosen markets, while also maintaining its financial discipline. The performance of these acquisitions in the year has been accretive to EPS and consistent with plan.

Cobham has continued to make good progress in its strategy to focus on markets where it has scale and differentiation. To this end and as previously announced, Cobham completed the planned divestment of the non-core Analytic Solutions business in November 2011 for US$350m in cash. Good progress is also being made on the divestment of the remaining non-core businesses, with Cobham MAL Limited (Cobham MAL) having been divested in December 2011.

BOARD CHANGES

As announced on 18 November 2011, Andy Stevens, Cobham Chief Executive Officer (CEO), has decided to take early retirement due to the recurrence of a long term serious back injury. He remains on the Board assisting with the management of the Group until a new CEO is appointed. Progress is being made to find a replacement.

As previously announced, Alison Wood joined the Board as a Non-executive Director on 1 July 2011 and Peter Hooley retired as a Non-executive Director at the conclusion of Cobham's Annual General Meeting on 6 May 2011, after nine years service.

FINANCIAL RESULTS

Orders

Group order intake in the year increased to £2,046m (2010: £1,799m), representing 16% growth at constant translation exchange rates. Group book-to-bill in the year was 1.10 times. Excluding Aviation Services, where order intake can be uneven due to its significant, long-term programmes, and the non-core businesses, book-to-bill was 1.05 times.

At the year end, the Group order book was £2.5bn (2010: £2.5bn), including £1.1bn (2010: £1.1bn) for the Aviation Services business. At constant translation exchange rates and excluding the impact of acquisitions and disposals, the order book increased 7% on the prior year.

The Group received some very important multi-year orders during 2011. These include initial orders for engineering and manufacturing development on the US KC-46A aerial refuelling tanker totalling US$73m and orders for the Brazilian KC-390 aerial refuelling tanker totalling US$72m. Other significant orders included a US$40m order from Inmarsat to be the maritime terminal launch partner on its Global Xpress broadband service, a significant AUD500m extension of the Australian QantasLink contract and a €45m contract awarded to a Cobham joint venture to provide helicopter air reconnaissance capability to the Dutch Caribbean Coastguard.

Further progress has been made in 2012, with a further significant award on the KC-46 tanker programme for the supply of body fuel tanks with an initial engineering order received and other significant bids submitted.

Revenue

Analysis of Group Revenue

Group revenue of £1,854m (2010: £1,903m) was adversely impacted by US dollar exchange rates and the net impact of acquisitions and disposals. Organic growth, as anticipated, was marginally negative at -0.6%, due to the performance of the non-core businesses, principally Analytic Solutions which has now been divested. However, in the core businesses organic revenue increased 0.3%.

Average 2011 US$/£ exchange rate = $1.60/£1. Average 2010 US$/£ exchange rate = $1.55/£1.

US defence/security revenue in the core businesses was down 7%, in a year when US DoD investment outlays declined 10%. Non US defence/security revenue increased 5% driven by air refuelling and electronic subsystems exports. Commercial revenue increased 10%, benefiting from increased flying activity for Australian resource industry customers, increased Boeing and Airbus production and revenue from the sale of SATCOM antennas to a range of aerospace and marine customers.

Trading Profit

Group trading profit increased to £365m (2010: £348m), with trading profit in the core businesses increasing to £340m (2010: £312m). Trading profit in the non-core businesses declined to £25m (2010: £36m).

The Group's underlying trading margin increased to 19.7% (2010: 18.3%). The margin in the core businesses increased to 20.8% (2010: 19.1%), driven by Excellence in Delivery and other cost savings.

Underlying Net Finance Expense and Underlying Profit Before Tax

The underlying net finance expense was £37m (2010: £42m). The net interest expense on cash and debt holdings, held primarily in US dollars, reduced to £38m (2010: £40m). As anticipated, there was a non-cash, net finance income of £1m (2010: £2m expense) from pension schemes. This item is expected to be an expense of £2m in 2012.

The Group's underlying profit before tax increased by 7% to £328m (2010: £306m).

Taxation

On an underlying basis, the Group's effective tax rate decreased to 25.5% (2010: 26.5%), in part due to the lower UK tax rate. The effective tax rate is calculated by dividing the Group's underlying tax charge of £81m (2010: £79m) by its underlying profit before tax of £319m (2010: £300m), which is stated after excluding the £9m (2010: £6m) share of post-tax results of joint ventures.

It is anticipated that in 2012 the effective underlying tax rate will decrease by at least a further 1% point, in part due to a decrease in the UK tax rate.

Earnings per Share (EPS)

Underlying EPS increased 12% to 22.0p (2010: 19.7p), driven by the improvement in the trading margin. The £150m share buy-back programme, completed in November 2011, increased EPS by 3%. At constant translation exchange rates underlying EPS increased 13%.

In addition to the above, basic EPS was higher than the comparable period at 16.8p (2010: 13.3p), in part due to £23m (2010: £1m) of post-tax business divestments and similar income and £4m of post-tax insurance income (2010: £19m expense) from a prior year settlement of a commercial dispute. Reducing basic EPS were post-tax business restructuring charges (primarily Excellence in Delivery) of £22m (2010: £9m), which are stated net of the profit on sale of a site in California, USA, post-tax debt and interest rate swap cancellation costs relating to the original financing of a divested business of £11m (2010: £nil), and some smaller items.

Retirement Obligations

The Group operates a number of defined benefit schemes, the most significant being the Cobham Pension Plan. At 31 December 2011, the estimated shortfall for accounting purposes between the value of the defined benefit schemes' assets and the present value of the future liabilities had reduced since the previous year end to £71m before deferred tax (2010: £82m, H1 2011: £68m).

Cash Flow and Net Debt

Operating cash flow, which is stated after capital expenditure but before interest and tax payments, was £337m (2010: £271m). Cash flow benefited from a decrease in working capital and lower net capital expenditure of £50m (2010: £57m). Operating cash conversion was strong at 95% (2010: 79%) of trading profit, before the Group's share of post-tax results of joint ventures.

After net interest and tax payments and the receipt of dividends from joint ventures, the Group generated excellent free cash flow of £288m (2010: £219m), from which it paid dividends of £69m (2010: £65m) and £160m (2010: £7m inflow) on share purchases, of which £150m (2010: nil) related to the share buy-back programme.

In addition, the Group made £37m (2010: £13m) of payments relating to Excellence in Delivery and received net proceeds of £77m (2010: £35m outflow) relating to acquisitions and divestments and other items.

At the year end, after funding and exchange movements, net debt which comprises short term cash balances and fixed term borrowings, decreased to £232m (2010: £326m). Included above were exchange movements of £5m which increased net debt, as it is the Group's policy to hold a significant proportion of its borrowings in foreign currency, principally US dollars, as a natural hedge against assets and earnings denominated in those currencies.

At 31 December 2011, the Group was conservatively geared at 0.5 times net debt/EBITDA, giving it flexibility and a range of strategic options.

Share Buy-back

As previously announced, the Group completed its share buy-back programme of up to £150m in November. A total of 76m shares, representing 6.6% of the issued ordinary share capital have been purchased for £150m, excluding transaction costs, and held in treasury.

At the close of business on 31 December 2011, there were 1,079m (31 December 2010: 1,155m) ordinary shares in issue, excluding the shares held in treasury. The weighted average number of shares in the year attributable to ordinary shareholders was 1,118m (31 December 2010: 1,151m) or 1,121m (31 December 2010: 1,157m) on a diluted basis.

Acquisitions and Divestments

As previously announced, Cobham divested the non-core Analytic Solutions business for US$350m in November 2011 and the Engineering Consultancy business in February 2011 for £13.5m. In addition, Cobham MAL, part of the remaining non-core businesses, was divested for a nominal sum in December 2011.

Also previously announced was the acquisition of Telerob GmbH (Telerob), which was purchased for €78m in January 2011, and Corp Ten International Inc. in February 2011 for up to US$24m. These businesses complement existing capabilities in Cobham's homeland security markets. In October 2011, Trivec-Avant Corporation was purchased for up to US$144m, bringing with it industry leading SATCOM capabilities that align with Cobham's Antenna Systems business.

Dividends

Given the Group's high dividend cover, strong balance sheet, highly cash generative business model and confidence in its future prospects, the Board has decided to make a one-off step change to the 2011 shareholder dividend. The Board is recommending a final dividend of 6.20p (2010: 4.372p). Together with an interim dividend of 1.80p (2010: 1.628p), this will result in a total dividend of 8.00p (2010: 6.00p) per share, an increase of 33% on the prior year. The 2012 interim dividend will be rebalanced to reflect the normal split between the interim and full year dividend. The shares will be traded ex-dividend on 2 May 2012. The dividend is payable on 1 June 2012 to all shareholders on the register at 4 May 2012, subject to shareholder approval.

The fixed cumulative preferential dividend payment on the 6 per cent, second cumulative preference shares of £1 each has been approved by the Board at the rate of 6p per share (2010: 6p). The dividend in respect of the year ended 31 December 2011 will be paid on 1 June 2012 to all shareholders on the register at 4 May 2012.

RECONCILIATION OF UNDERLYING PROFIT

DIVISIONAL REVIEW

Group Operating Summary

Cobham Aerospace and Security

Total revenue was down due to an adverse US dollar exchange rate, a net reduction from acquisitions and disposals and an organic decline of 3%. Many of the Division's commercial businesses continued to improve but this was offset by some of the defence/security businesses, in particular, the Tactical Communications and Surveillance business, where there was lower land based vehicle intercoms revenue, which has normalised with exit strategies for Iraq and Afghanistan. There were also reduced shipments of surveillance equipment, particularly in the US.

The margin increased to 23.9% (2010: 22.8%) driven in part by Excellence in Delivery and other efficiency savings. As anticipated at the half year, a further gain was achieved from reduced costs following changes to the rate of certain UK pension increases. This amounted to £13m in the year (H1 2011: £3m) but was almost entirely offset by increased costs, including those related to programme and technology developments. These were one-time adjustments, relating largely to estimates in previous periods, and are now finalised.

Areas of growth included:

·; Deliveries of Radio and Audio Integration Management System benefited from increased Airbus A380, A330 and Airbus narrow body production rates, and will benefit further from anticipated 2012 production increases;

·; Sales of Cobham's new Digital Audio System to Eurocopter France increased three fold, following a switch from analogue technology, with positions won on an increasing number of Eurocopter platforms;

·; The marine SATCOM business, driven by revenue from product development work, including on the Inmarsat Global Xpress product and for the US Navy, and from shipment of new products;

·; Increased revenue from the hand-held 'Minehound' mine detector, as a result of its proven military and homeland security performance;

·; Strong demand has continued for video wireless links including the latest mesh radio products, high resolution cameras and high definition downlink products. These products have been used in the roll-out of 'Safe City' initiatives, security applications and in sports and movie events, including the 2012 Olympics.

In addition, there were a number of important business developments in the year which it is anticipated will benefit future results:

·; Cobham's HGA-7001 aircraft SATCOM antenna has been selected by Virgin Atlantic and Emirates airlines for 2012 cabin upgrade programmes. This successful antenna enables Inmarsat SwiftBroadband, for broadband internet usage in flight. It has now been selected by 40 airlines and other customers to date, and is also certified on a range of new-build Airbus, Boeing and other commercial aircraft;

·; A range of new SATCOM products are being developed in anticipation of rapid growth in the Ka band market;

·; Expected significant production increases on Eurocopter NH90 and EC175 helicopters, together with new awards for the supply and maintenance of main and tail rotor sliprings;

·; Supply of the complete avionics suite on the SK105 Skylander commuter aircraft, with first hardware deliveries expected in 2012.

Cobham Defence Systems

Total revenue was down due to an adverse US dollar exchange rate and an organic decline of 7%. The business is almost entirely focused on the US defence market with orders and revenue affected by the 10% reduction in investment outlays in this market in the year. In particular, there was lower revenue from the sale of land based antennas and airborne electronic warfare products.

The margin increased to 17.9% (2010: 14.7%) primarily due to Excellence in Delivery efficiency savings, good cost control and favourable margins in the first half on the completion of current phases of certain production contracts.

Areas of growth included:

·; First low rate production deliveries of electronic warfare subsystems on the F-35 programme, as subsystems completed development and qualification;

·; Missile guidance subsystems, particularly for the Advanced Anti-Radiation Guided Missile and Advanced Medium Range Air-to-Air Missile programmes;

·; Good revenue from the development of integrated assemblies for the US Air Missile Defence Radar programme.

In addition, there were a number of important business developments in the year which it is anticipated will benefit future results:

·; Completion of qualification and delivery of the first integrated radar subsystems for the Apache Block III attack helicopter. The programme enters production in 2012 and will be deployed by the US Army and several other armed forces;

·; First shipments of electronic warfare equipment on an F-15 fighter aircraft upgrade programme, with revenue expected to increase from US and export shipments;

·; Release by the US Government in late 2011 and early 2012 of the next tranche of Wideband Global Satellite awards to Boeing, after a gap in funding, with Cobham as a significant supplier.

Cobham Mission Systems

Total revenue was up due to organic growth of 8% driven by the Mission Equipment business, primarily due to increased revenue from aerial refuelling products and strong aftermarket sales. Headline revenue also benefited from the January 2011 acquisition of Telerob, which was partly offset by the adverse US dollar exchange rate.

The margin increased to 23.5% (2010: 20.3%) benefiting from a higher margin sales mix, including recognition of a key milestone on the UK Future Strategic Tanker Aircraft aerial refuelling programme, and good savings achieved from facility integrations completed in previous years and from Excellence in Delivery.

Areas of growth included:

·; Engineering revenue on aerial refuelling programmes in development, including the US KC-46, the Brazilian KC-390 and the European A400M tanker programmes;

·; Shipments of fifth generation A330MRTT aerial refuelling equipment for the UK, Australia, Saudi and UAE air forces;

·; Shipments relating to C-130 aerial refuelling programmes for the US and for export and strong aftermarket sales on legacy platforms;

·; Shipments of light weight rail missile launchers to a new US customer;

·; Oxygen and nitrogen gas systems on a range of aircraft programmes including the US F-15 and F-16 fighter aircraft, the Korean T-50, the Brazilian Embraer ALX and the US Hawker T-6 trainer aircraft, as well as the US Apache attack helicopter.

In addition, there were a number of important business developments in the year which it is anticipated will benefit future results:

·; Wins on the significant and long-term US KC-46 and Brazilian KC-390 aerial refuelling programmes, with significant initial contract awards;

·; First deliveries of the new Boeing 787 commercial aircraft, which utilises Cobham's nitrogen gas system, with aircraft deliveries scheduled to increase from 3 in 2011 to around 40 in 2012;

·; Selection on a number of prestigious space programmes including awards for the nitrogen oxygen recharge system on the International Space Station, pressure control regulators for US deep space exploration initiatives and specialist propellant tanks for US satellite launches;

·; Following the integration of Telerob, opportunities for unmanned ground systems are now being pursued in the US market along with continuing interest in the global market.

Cobham Aviation Services

Total revenue, which excludes joint ventures, was up due to organic growth of 7%, primarily due to the Australian operations and a favourable Australian dollar translation rate.

The margin increased to 14.3% (2010: 13.3%), primarily driven by an increased contribution from the Division's joint ventures, whose profit after tax is consolidated within trading profit.

Areas of growth included:

·; Further progress made in Australia as certain key resource sector customers extended contracts, while others expanded operations, contracting for more or larger aircraft;

·; Operation of the fourth BAe146 aircraft supporting the Australian Air Express freight contract was extended with increased utilisation;

·; Conversion work commenced on the UK tanker programme, with the first two A330MRTT aircraft inducted into the modification programme.

In addition, there were a number of important business developments in the year which it is anticipated will benefit future results:

·; A significant AUD500m order was received in Australia to extend and expand the B717 QantasLink contract, with the additional aircraft to commence operations in 2012;

·; Activity in the resources industry in Australia remains robust with opportunities to increase the number of aircraft flown or provide larger aircraft;

·; Also within Australia Cobham is able to operate its BAe 146 regional jets from February 2012 into gravel or unsealed airstrips. This will be the only capability of its type in Australia, coming on line to provide large sections of the resource industry with quieter, safer, faster and more comfortable jet services, replacing existing prop aircraft;

·; Initial tests were completed on an Australian Sentinel Dash 8 aircraft, to enable it to undertake incremental Search and Rescue services for the Australian government in the north of Australia;

·; A €45m contract to a Cobham joint venture to provide helicopter air reconnaissance capability to the Dutch Caribbean Coastguard, starting in 2012.

Non-core Businesses

The Group's non-core businesses comprise Analytic Solutions, which was divested in November 2011, and Commercial Systems which is in the course of divestment.

Total revenue was down as a result of the adverse US dollar exchange rate and an organic decline of 6%. Both Analytic Solutions and Commercial Systems improved on their first half revenue performance, with Commercial Systems benefiting from stabilisation in the smaller aircraft avionics market and new product launches in the emergency beacons business.

OUTLOOK

Cobham has achieved modest organic revenue growth in its core businesses and 13% underlying EPS growth at constant translation exchange rates, driven by efficiency savings from the Excellence in Delivery programme and good cost control. Conditions in the Group's markets, including the positive trends in export and commercial markets are expected to continue in 2012. The Board expects to achieve some underlying progress this year, before the full year net impact of the Analytic Solutions divestment and the share buy-back.

The Group has made significant steps towards focusing the portfolio on markets where it has technical differentiation and leading positions and it has received some very important, long term awards, building on its attractive market positions. Excellence in Delivery has achieved real operational improvements and better-than-expected efficiency savings and the Group has a strong balance sheet and a highly cash generative business model, giving it the flexibility to examine attractive acquisition opportunities and increase shareholder distributions. The US Government has confirmed defence and security priorities that favour Cobham and has made some progress towards reconciling these with budgetary imperatives. The continued delivery of the strategy gives the Board confidence that Cobham will continue to make progress over the medium term.

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Forward Looking Statements

Nothing in this press release should be construed as a profit forecast or be interpreted to mean that the future earnings per share of Cobham will necessarily be the same as, or greater than, the earnings per share for completed financial periods.

This document contains '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 or 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 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.

1. Basis of preparation

The financial information set out in this statement does not constitute the Group's statutory accounts for the years ended 31 December 2011 and 31 December 2010.

Statutory accounts for the year ended 31 December 2010 have been delivered to the Registrar of Companies, and those for 2011 will be delivered following the Company's Annual General Meeting.

The auditors have reported on those accounts; their reports were unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their reports and did not contain any statements under section 498 (2) or (3) of the Companies Act 2006.

The attached audited financial information and the full Group financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, International Financial Reporting Interpretation Council (IFRIC) interpretations and those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates.

There were no changes to previously published accounting policies or other adjustments required on adoption of new or amended standards which became applicable in 2011.