12th Sep 2006 07:03
Cobham PLC12 September 2006 COBHAM PLC INTERIM RESULTS FOR THE HALF YEAR ENDED 30 JUNE 2006 Cobham plc, the aerospace and defence company, today announces first halfresults: 2005 2006 Change Orders received £697.4m £865.5m +24%Total revenue1 £516.3m £517.2m +0.2%Underlying2 trading margin 14.5% 16.0% +1.5ptsUnderlying2 earnings per share 4.44p 4.97p +12%Basic earnings per share 3.41p 6.87pOperating cash conversion3 77.7% 71.1%Interim dividend 1.01p 1.11p +10% Results reflect progress made in implementing the Group's strategy • Strong organic growth • Disposal of four non core businesses allowing focus on faster growing markets • 21% growth in revenue and 19% trading profit growth in technology divisions • 1.5 point increase in Group margin due to portfolio reshaping and operational efficiencies • Double-digit growth in order intake gives order book of £1.7bn • Robust balance sheet to fund acquisitions Gordon Page, CBE, Chairman, commented,"We have delivered a strong financial performance reflecting the continuedprogress made implementing the Group's strategy. An increasing proportion of thebusiness is now in faster growing market sectors and we have the balance sheetstrength to exploit the growth opportunities they offer. We remain confidentabout the Group's growth prospects and the results for the full year." ENQUIRIES Cobham plc Telephone: +44 (0) 1202 882 020Allan Cook, Chief Executive +44 (0) 207 067 0700 (on the day)Warren Tucker, Group Financial DirectorJulian Wais, Director of Investor Relations Weber Shandwick Square Mile +44 (0) 207 067 0700Susan Ellis, Kirsty Raper Notes: An extract of the Interim Report is attached. A presentation of the results will be available asa webcast by 4.30pm on 12 September, and the published Interim Report as a download file on27 September, at www.cobham.com. 12 September 2006 The following notes apply throughout these statements. Results to 30 June 2005 and 30 June 2006 are unaudited. H1 2005 results havebeen restated to reflect the prior year adjustment reported in the 2005 AnnualReport and the reclassification of the Fluid and Air group as discontinuedoperations (see note 1 to the Interim Report) 1. Continuing operations for 2005 exclude the results of Cobham Fluid Systems products division, Countermeasures operations and Fluid and Air group, all of which are reported as discontinued. Most of these operations were sold in the second half of 2005, with the exception of Wallop Defence Systems Ltd, part of the Countermeasures operations, which was sold in March 2006. For 2006, therefore, continuing operations exclude the results of Wallop Defence Systems only. 2. In order to assist with the understanding of earnings trends, trading profit and underlying earnings have been defined to exclude the impact of the amortisation of intangible assets arising on acquisition and the impact of marking to market of foreign exchange derivatives not realised in the period. All underlying measures include the operational results of both continuing and discontinued businesses up to the point of sale, but exclude exceptional profits or losses arising on disposals actually completed in the period. None exist in the current period or comparatives, but any impairments of goodwill would also be excluded from underlying measures. 3. Operating cash flow is defined as cash generated from operations, adjusted for cash flows from the purchase or disposal of assets. Operating cash conversion is defined as operating cash flow as a percentage of trading profit, excluding profit from joint ventures. INTRODUCTION Cobham has again made progress in the first half of 2006 achieving double-digitgrowth in orders received, trading profit, underlying earnings and dividend.Strong performances were achieved in the Antennas, Defence Electronic Systems,Life Support and Flight Operations and Services divisions. Group marginincreased by 1.5 points due to portfolio reshaping and operational efficiencies,with an increasing proportion of the business now in faster growing marketsectors. The Group order book stands at £1.7bn (2005: £1.5bn), reflecting success inwinning new land, sea and air orders including Cobham's largest contract todate, worth AUS$1bn over 12 years, for the Coastwatch border-control programmein Australia. RESULTS Total revenue for the first half of 2006, at £517.2m (2005: £516.3m) remained ata similar level to that for the first half of 2005, with over 20% growth in thetechnology divisions offset by disposals. Growth in Cobham Defence ElectronicSystems related to US military requirements has offset the anticipated shortterm dip in deliveries for Cobham Air Refuelling and Auxiliary MissionEquipment, following strong years in 2004 and 2005. Trading profit increased by10.6% to £82.6m (2005: £74.7m) reflecting a combination of the re-shaping of theGroup's portfolio, revenue growth and delivery of operational efficiencies. Underlying profit before tax increased by 12.7% to £78.9m (2005: £70.0m).Underlying earnings per share increased 11.9% to 4.97p (2005: 4.44p). Basicearnings per share grew by 101.5% to 6.87p (2005: 3.41p) mainly due toexceptional profits on disposals and gains on the revaluation of unrealisedcurrency hedge assets. In the first half of 2006, Cobham invested £23.9m (2004: £19.8m), equivalent to5.9% (2004: 5.9%) of technology division revenues in R&D, in line with thestrategic plan to accelerate growth across its businesses. Additionally, therewas £16.1m of externally funded R&D revenue, raising the total R&D expenditureto more than 9%. Disposals of Wallop Defence Systems, Precision Antennas, Atlas Composites andSlingsby Aviation raised cash proceeds of £51.5m and generated a total profit ondisposal of £15.0m. In the period, four acquisitions at a total consideration of£26.9m were made: domo Limited, a leading provider of digital wireless videosurveillance technology, Aerodata Flight Inspection GmbH in Germany; and theoutstanding minority interests in Flight Precision Limited in the UK andWavecall Communications Inc in the USA. The Group announced the disposal ofDrTM?ger in July for a consideration of €64m. Total revenue comprises the following: Half Year to Half Year to Year to£m 30.6.05 30.6.06 31.12.05-------------------------------------------------------------------------------------Revenue from continuing operations 443.4 513.6 970.3Revenue from discontinued operations (Fluid & Air and Wallop Defence Systems) 72.9 3.6 120.1-------------------------------------------------------------------------------------Total revenue 516.3 517.2 1,090.4------------------------------------------------------------------------------------- Trading profit is calculated as follows: Half Year to Half Year to Year to£m 30.6.05 30.6.06 31.12.05-------------------------------------------------------------------------------------Result before joint ventures and associates 53.3 91.1 133.9Share of post-tax results of joint ventures and associates 1.6 1.7 3.1-------------------------------------------------------------------------------------Operating profit from continuing operations 54.9 92.8 137.0Profit on disposal of undertakings - (1.9) -(Gain)/loss on revaluation of currency instruments 13.7 (10.7) 16.1Amortisation of intangible assets arising on acquisition 2.7 1.6 16.9-------------------------------------------------------------------------------------Trading profit from continuing operations 71.3 81.8 170.0Trading profit from discontinued operations 3.4 0.8 7.7-------------------------------------------------------------------------------------Trading profit (underlying operating profit) 74.7 82.6 177.7------------------------------------------------------------------------------------- The underlying profit before taxation is calculated as follows: Half Year to Half Year to Year to£m 30.6.05 30.6.06 31.12.05-------------------------------------------------------------------------------------Profit on continuing operations before taxation 50.2 89.0 126.0Profit on disposal of undertakings - (1.9) -(Gain)/loss on revaluation of currency instruments 13.7 (10.7) 16.1Amortisation of intangible assets arising on acquisition 2.7 1.6 16.9-------------------------------------------------------------------------------------Underlying profit before taxation from continuing operations 66.6 78.0 159.0Underlying profit before taxation from discontinued operations 3.4 0.9 8.0-------------------------------------------------------------------------------------Underlying profit before taxation 70.0 78.9 167.0------------------------------------------------------------------------------------- The profit after taxation used in the calculation of underlying EPS is asfollows: Half Year to Half Year to Year to£m 30.6.05 30.6.06 31.12.05-------------------------------------------------------------------------------------Profit after taxation attributable to equity shareholders 38.2 77.4 97.6Profit on disposal of continuing & discontinued undertakings (after tax) - (15.0) (1.3)(Gain)/loss on revaluation of currency instruments (after tax) 9.6 (7.5) 11.2Amortisation of intangible assets arising on acquisition (after tax) 1.9 1.1 11.1-------------------------------------------------------------------------------------Underlying profit after taxation 49.7 56.0 118.6-------------------------------------------------------------------------------------Underlying earnings per ordinary share (pence) 4.44 4.97 10.58------------------------------------------------------------------------------------- The effective tax rate on underlying profit before taxation was 28.8% (2005:28.4%). Cash generated from operations, at £73.7m (2005: £75.2m), was 2.0%lower, reflecting growth in working capital particularly in companies disposedof, prior to their sale. There has also been an increase in tax paid due to theelimination of tax losses in France and the disposal of FR HiTEMP. Net debtdecreased from £168.3m at the end of 2005 to £84.9m as at 30 June 2006, primarily reflecting receipts from disposal activity and cash generated from operations. An interim dividend of 1.11p, representing a 10% increase on the comparableperiod last year, has been approved by the Board and will be paid on 13 December2006 to all shareholders on the register as at 17 November 2006. STRATEGY The Board is pleased with the implementation of the Strategic Plan announcedlast September. The portfolio reshaping has removed a number of underperformingbusinesses from the Group, enhancing profitability and growth prospects. Thefocus and streamlining has permitted the Group to concentrate resources on itscore technologies and bring the best of Cobham to our customers. Progress in aligning the divisions and operating them as a united group has beenexcellent. The five technology divisions have established clear identities andmanagement structures that allow them to participate in cross-Cobhaminitiatives. This includes technology capability audits and the development oftechnology roadmaps, strategic marketing (especially in the Middle East andAsia) and key initiatives around working capital improvements and leanmanufacturing. A number of projects are in progress to evaluate further site andbusiness integration opportunities, with integration already underway in CobhamLife Support in the USA, Cobham Antennas in Marlow, and the consolidation of thethree retained composite companies. The objective of significantly increasing investment in R&D remains a key focus,with funding in the period increasing to the initial target level of 6%. TheGroup remains confident that, over the three year transformation periodpreviously communicated, operational improvements will allow Cobham to generatesavings sufficient to increase this rate to 7%. This will enable the technologydivisions to exploit fully the considerable growth that their end markets offer. OPERATING REVIEW Cobham now has five technology based divisions and one focused on the provisionof services. Cobham Air Refuelling & Auxiliary Mission Equipment Half Year to Half Year to Change£m 30.6.05 30.6.06Revenue 52.5 41.2 (21.5)%Trading profit 9.9 3.8 (61.6)% The financial performance in the first half reflects the anticipated dip inbusiness prior to new programmes progressively coming on stream in 2008,following strong performances in 2004 and 2005. The Division continues to secureall major refuelling contracts and focus on investment in new technology, withUAV to UAV refuelling development continuing as part of the UK's ASTRAEAprogramme. Further orders worth £14m were received for equipment to be fitted to the SouthAfrican and Malaysia tanker versions of the A400M, with deliveries scheduled tocommence in 2010. Auxiliary mission equipment sales continue to grow, with an initial US$11m Lot 2contract received for the Division's pneumatic weapons carriage releaseassembly, prior to full rate production. The Boeing Small Diameter Bomb is theinitial weapon to be integrated onto the carriage. Following R&D investment intoa new generation Multi Mission Launcher for NATO countries, the Divisionreceived its first order for equipment to be fitted to the Hungarian Air Force'sGripen aircraft. Progress has been made across the Division implementing lean manufacturingimprovements to reduce waste. In some areas of auxiliary mission equipmentproduction there has been a 75% reduction in indirect labour used and a 50%reduction in the distance parts travel during production. The recent announcement that 72 Eurofighter Typhoon aircraft will be supplied toSaudi Arabia is excellent news for the Division, which supplies a range ofauxiliary mission equipment for the platform. Cobham Antennas Half Year to Half Year to Change£m 30.6.05 30.6.06Revenue 75.9 92.0 21.2%Trading profit 16.6 20.0 20.5% Strong double-digit improvements in orders, revenue and trading profit. Thisreflects the growing demand for mobile communication systems for land, sea andairborne applications, particularly broadband satellite, and the positive impactof Cobham's lean manufacturing improvement programme. It is particularlypleasing that margin performance has been broadly constant despite currencyheadwind. Deliveries of the Division's innovative interference cancellation system(mINCAN) to the US Coast Guard for marine vessels were completed. Further mINCANorders were won for the US Light Armoured Vehicle Command and Control (LAV-C2)reflecting the growing need for secure multiple communication systems to operatein close proximity, with limited space on mobile platforms. Preparations continue for integrating five locations into one new modernfacility in Marlow, UK, organised around lean principles for engineering andoperations to improve efficiency. The expected benefits are encouraging. For thehighest volume electronic assembly produced in Marlow, a reduction in travel of21km per assembly is projected throughout the production process with a 90%reduction in lead time. The integration of five composites to two has completed. Cobham Avionics and Surveillance Half Year to Half Year to Change£m 30.6.05 30.6.06Revenue 100.2 100.8 0.6%Trading profit 13.8 13.4 (2.9)% Good growth in the covert tracking Law Enforcement and National Security (LENS)market continues, which will be enhanced through the acquisition of domo Limitedcompleted in June. This growth has been offset by operational challenges in asmall number of recently acquired French businesses. Cobham's Electronic Flight Instrument System (EFIS) which is OEM fitted on thenew Bell 417, continues to demonstrate strong technical and schedule performancewith the first operational tests of the aircraft. As a consequence, the Divisionhas received an initial order for US$10m in September. In the period, Cobhamacquired the exclusive rights to complementary HeliSAS product technology whichwill provide stability augmentation for helicopter autopilots and reduce pilotworkload. As well as qualifying products for the A380 and A400M, the Division isbenefiting from the upturn in the commercial market through its audio managementtechnology. The helicopter market also remains robust with the Division's radiosfitted to the recently selected UH-145 Light Utility Helicopter in the USA. Cobham Defence Electronic Systems Half Year to Half Year to Change£m 30.6.05 30.6.06Revenue 49.2 100.7 104.7%Trading profit 10.6 23.3 119.8% Top and bottom line growth reflects the full inclusion of REMEC, and continuedstrong organic growth across all products resulting from ongoing investment inleading edge technologies and US military communication requirements. The demand for better network centric communications for in and out of theatreoperations has been particularly robust for tactical and strategic armycommunications. A multi-year contract worth up to US$49m was won for portableVHF antennas for the US Army. Sales of the digital Vehicle Intercom System (VIS)remain strong, including an agreement to supply the Ministry of Defence Army inSaudi Arabia. Across the division, positions on US land, air and marine defenceprogrammes continue to improve with good aftermarket prospects. A new VISmanufacturing facility was set up in the US to meet US Army demand. As part of the Division's operational improvement programme, companies in theRotating Systems centre of excellence were consolidated under a singlemanagement structure. Across the Division more than 40 new R&D programmes werestarted in the period, with companies benefiting from increased collaborationunder a single Standard Security Arrangement (SSA). Cobham Life Support Half Year to Half Year to Change£m 30.6.05 30.6.06Revenue 60.1 73.0 21.5%Trading profit 10.5 12.7 21.0% Strong double-digit growth in orders, revenue and trading profit, reflect thefull impact of the acquisition of H Koch & Sons (Koch) and continued organicgrowth. Sales of aviation oxygen and missile components were consistent with theperformance achieved in 2005. Further orders were won for restraints to be fitted to the US Army'sTank-automotive and Armament Command (TACOM) fleet of High Mobility MultipurposeWheeled Vehicles (HMMWV), and the Air Warrior personal cooling system. The USArmy is interested in expanding use of the personal cooling system to groundvehicles. An additional order was received for Cobham's fuel tank On Board Inert GasGenerating System (OBIGGS) for the Boeing C-17 Globemaster III Airlifter, andagreements for production and aftermarket support of the B787 OBIGGS wereimplemented. As part of the Division's operational improvement programme, Koch in Californiais being integrated with Conax in Florida and its production line transferred toFlorida in the first half of 2007. A business lean focus continues to be appliedto products across the Division and in one area stock turns have increased fromfive to 16. Cobham Flight Operations and Services Half Year to Half Year to Change£m 30.6.05 30.6.06Revenue 99.1 96.4 (2.7)%Trading profit 8.7 9.6 10.3% Cobham Flight Operations and Services' orders received grew by 225%. First halfrevenue was down only marginally, despite the loss of 'pass through' leaserevenues as Qantas now provide their own aircraft for Cobham to operate. Tradingprofit increased by 10%, partially due to lower bid costs and reduction in 'passthrough' revenues. In Australia, the twelve year AUS$1bn Australian Coastwatch contract was signedfor Cobham to provide key elements of a border patrol service to the Australiangovernment, starting in January 2008, and an AUS$80m extension to an air freightcontract agreed. More than US$250k of Cobham equipment will be on each of theten Coastwatch Dash-8 aircraft. A £7.5m contract extension was received by the FB Heliservices (FBH) jointventure to provide helicopters and support to the British Army Training SupportUnit Belize (BATSUB) and the Government of Belize. FBH operates and supportsmore than 60 helicopters in seven countries. In the UK, a DC-10 aircraft was converted to a tanker role in partnership withthe Cobham Air Refuelling and Auxiliary Mission Equipment Division. Theconversion was completed to a very competitive timescale and refreshed the skillbase of the work force in preparation for the conversion of aircraft under theFuture Strategic Tanker Aircraft (FSTA) programme. As part of the Division's operational improvements programme, the business inAustralia has been unified under a single management structure and new,integrated financial and engineering systems are being progressively introduced. OUTLOOK Good first half results have been achieved, with the second half expected to bestronger in line with previous years. The strong performance in Cobham DefenceElectronic Systems and anticipated dip in Cobham Air Refuelling and AuxiliaryMission Equipment is expected to continue in the short term. Excellent progresshas been made on implementation of the strategy, with the proportion of thebusiness in faster growing technologies and markets increased. Group margin roseby 1.5 points due to portfolio reshaping and the operating performanceimprovement programme. In line with the strategy, Cobham will continue to allocate resources to areasof competitive advantage, whilst pursuing cost and collaboration efficiencies,and is on target to increase R&D by 25%. The Group will seek furtheracquisitions that enhance leadership positions across the high technology growthsegments of the aerospace and defence markets and continue to keep the portfoliounder review. Cobham will not hesitate to dispose of companies whose performanceor expectations do not meet the Group's criteria. The Board remains confident about the Group's organic and acquisition growthprospects and looks forward to continued progress for the remainder of 2006. Consolidated income statement (unaudited)For the half year ended 30 June 2006 Restated Half year to half year to Year to£m Note 30.6.06 30.6.05 31.12.05-----------------------------------------------------------------------------------------------Continuing operationsRevenue 3 513.6 443.4 970.3Cost of sales (354.3) (312.9) (682.2)-----------------------------------------------------------------------------------------------Gross profit 159.3 130.5 288.1 Selling and distribution costs (29.5) (26.2) (54.7)Administrative expenses (51.3) (37.3) (83.4)Share of post-tax results of joint ventures and associates 1.7 1.6 3.1Profit on disposal of undertakings 12 1.9 - ------------------------------------------------------------------------------------------------ 82.1 68.6 153.1Comprising:Trading profit from continuing operations 3 81.8 71.3 170.0Profit on disposal of undertakings 12 1.9 - -Amortisation of intangible assets arising on acquisition (1.6) (2.7) (16.9) 82.1 68.6 153.1 Gain/(loss) on revaluation of currency instruments 9 10.7 (13.7) (16.1)-----------------------------------------------------------------------------------------------Operating profit 3 92.8 54.9 137.0 Finance income 4 20.6 15.3 31.6Finance expense 4 (24.4) (20.0) (42.6)-----------------------------------------------------------------------------------------------Profit on continuing operations before taxation 89.0 50.2 126.0Tax on continuing operations 6 (25.3) (13.9) (35.3)-----------------------------------------------------------------------------------------------Profit on continuing operations after taxtion 63.7 36.3 90.7 Discontinued operationsProfit after taxation from discontinued operations 11 13.9 2.4 7.4-----------------------------------------------------------------------------------------------Profit after taxation for the period 77.6 38.7 98.1----------------------------------------------------------------------------------------------- Profit attributable to equity shareholders 5 77.4 38.2 97.6Profit attributable to minority interests 0.2 0.5 0.5-----------------------------------------------------------------------------------------------Profit after taxation for the period 77.6 38.7 98.1----------------------------------------------------------------------------------------------- Earnings per ordinary share 5-Basic 6.87p 3.41p 8.71p-Fully diluted 6.80p 3.39p 8.66p Dividends-Proposed per share (not accrued) 1.11p 1.01p 2.40p-Proposed per share (accrued) 2.40p 2.18p --Paid per share - - 3.19p -Proposed £ million (not accrued) 12.5 11.3 27.0-Proposed £ million (accrued) 27.1 24.5 --Paid £ million - - 35.8 Consolidated balance sheet (unaudited)As at 30 June 2006 As at Restated as As at£m Note 30.6.06 at 30.6.05 31.12.05-----------------------------------------------------------------------------------------------AssetsNon-current assetsIntangible assets 527.4 589.8 528.1Property, plant and equipment 7 193.2 227.1 202.8Investment properties 4.0 4.1 4.0Investments in joint ventures and associates 13.3 15.0 14.7Trade and other receivables 10.0 8.3 8.5Derivative financial instruments 9 10.9 4.6 4.5Deferred taxation assets 6.4 3.8 6.8----------------------------------------------------------------------------------------------- 765.2 852.7 769.4-----------------------------------------------------------------------------------------------Current assetsInventories 179.9 207.3 167.2Trade and other receivables 199.1 224.0 208.5Corporation tax 1.9 1.5 2.1Derivative financial instruments 9 7.4 1.0 1.7Cash and cash equivalents 279.2 98.8 251.8Assets classified as held for sale - 28.9 18.1----------------------------------------------------------------------------------------------- 667.5 561.5 649.4-----------------------------------------------------------------------------------------------LiabilitiesCurrent liabilitiesBorrowings (237.8) (265.0) (276.9)Trade and other payables (212.2) (219.7) (174.2)Derivative financial instruments 9 (1.4) (0.4) (3.5)Corporation tax (44.9) (52.5) (48.1)Provisions (41.3) (25.4) (42.7)Liabilities classified as held for sale - (14.8) (14.2)----------------------------------------------------------------------------------------------- (537.6) (577.8) (559.6)-----------------------------------------------------------------------------------------------Non-current liabilitiesBorrowings (126.3) (156.8) (151.6)Trade and other payables (5.8) (4.7) (7.8)Derivative financial instruments 9 (6.7) (1.7) (2.0)Deferred taxation liabilities (14.2) (35.5) (8.8)Provisions (36.5) (10.8) (20.9)Retirement benefit obligation (72.7) (69.2) (81.0)----------------------------------------------------------------------------------------------- (262.2) (278.7) (272.1)----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Net assets 632.9 557.7 587.1----------------------------------------------------------------------------------------------- Capital and reservesCalled up share capital 28.2 28.0 28.1Share premium account 92.5 87.5 87.5Translation reserve (10.6) 3.1 13.0Other reserves 13.8 1.8 11.3Retained earnings 508.9 435.5 445.7-----------------------------------------------------------------------------------------------Total shareholders' equity 632.8 555.9 585.6Minority interest in equity 0.1 1.8 1.5-----------------------------------------------------------------------------------------------Total equity 632.9 557.7 587.1----------------------------------------------------------------------------------------------- Net debt (84.9) (319.8) (168.3)Gearing 13.4% 57.3% 28.7% Consolidated cash flow statement (unaudited)For the half year ended 30 June 2006 As at Restated as As at£m Note 30.6.06 at 30.6.05 31.12.05-------------------------------------------------------------------------------------------------Cash flows from operating activitiesCash generated from operations 2 73.7 75.2 210.3Corporation taxes paid (25.4) (11.2) (39.2)Interest paid (13.8) (8.7) (23.6)Interest received 9.1 5.1 11.9-------------------------------------------------------------------------------------------------Net cash from operating activities 43.6 60.4 159.4--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Net cash from / (used in) investing activities 2 9.7 (196.1) (101.9)------------------------------------------------------------------------------------------------- Cash flows from financing activitiesIssue of share capital 2 5.1 5.0 6.1Dividends paid - - (35.8)Dividends paid to minority interests - (0.8) (0.3)(Decrease)/increase in borrowings (27.6) 163.9 136.1Repayment of obligations under finance leases - (11.8) (12.8)-------------------------------------------------------------------------------------------------Net cash (used in) / from financing activities (22.5) 156.3 93.3------------------------------------------------------------------------------------------------- Net increase in cash and cash equivalents 30.8 20.6 150.8 Cash and cash equivalents at start of period 246.6 101.4 101.4Initial application of IAS 21, 32 and 39 - (7.6) (7.6)-------------------------------------------------------------------------------------------------Cash and cash equivalents at start of period as restated 246.6 93.8 93.8Exchange movements (2.9) (12.3) 2.0-------------------------------------------------------------------------------------------------Cash and cash equivalents at end of period 274.5 102.1 246.6------------------------------------------------------------------------------------------------- Cash and cash equivalents above are shown net of bank overdrafts of £4.7m(31.12.2005: £13.5m; 30.06.2005: £nil). These are classified as borrowings inthe balance sheet. Cash and cash equivalents include £ nil (31.12.2005: £8.3m; 30.6.2005: £3.3m)cash held in assets held for resale. Statement of recognised income and expense (unaudited)For the half year ended 30 June 2006 Restated Half year to half year to Year to£m Note 30.6.06 30.6.05 31.12.05-------------------------------------------------------------------------------------------------- Profit after taxation for the period 77.6 38.7 98.1Net translation differences on investments in overseas subsidiaries (7.6) (3.8) 3.2Actuarial loss on pensions - - (46.5)Movement on deferred tax relating to actuarial loss on pensions - - 14.0Fair value gain/ (loss) on cash flow hedge 9 3.1 (2.1) 1.7Movement on deferred tax relating to cash flow hedge (0.8) 0.6 (0.5)--------------------------------------------------------------------------------------------------Net expenses recognised directly in equity (5.3) (5.3) (28.1)-------------------------------------------------------------------------------------------------- Total income and expense for the period 72.3 33.4 70.0Initial application of IAS 21, 32 and 39 - 7.3 7.3--------------------------------------------------------------------------------------------------Total recognised income for the period 72.3 40.7 77.3-------------------------------------------------------------------------------------------------- Attributable to:Equity holders of the parent 72.1 40.2 76.8Minority interest 0.2 0.5 0.5-------------------------------------------------------------------------------------------------- 72.3 40.7 77.3-------------------------------------------------------------------------------------------------- Notes to the Interim Report (unaudited)For the half year ended 30 June 2006 1. Basis of preparation These unaudited consolidated interim financial statements have been prepared inaccordance with the Listing Rules of the Financial Services Authority. Thesecomprise the consolidated income statement, the consolidated balance sheet, theconsolidated cash flow statement, the statement of recognised income and expenseand the related notes ("the interim financial statements"). The accounting policies remain as published in the financial statements for theyear ended 31 December 2005 and are expected to be applied for the year ended 31December 2006, in accordance with International Financial Reporting Standards(IFRS), as adopted in the EU, and International Financial ReportingInterpretation Council (IFRIC) interpretations issued and effective at the timeof their preparation. There has been no change to these accounting policies as a result of newstandards, amendments and interpretations to existing standards that have beenpublished and which are mandatory from 1 January 2006. The Group has chosen notto early adopt IAS 34 "Interim Financial Statements" in the preparation of theseinterim financial statements. These interim financial statements have been prepared on a going concern basisunder the historical cost convention, as modified by the revaluation of certaincurrent assets, financial assets and financial liabilities held for trading andderivative contracts, which are held at fair value. The June 2005 comparative figures have been restated to reflect the prior yearadjustment recorded in the 2005 Annual Report relating to the acquisition ofNational Jet Systems Pty Ltd in 2000, with the effect that provisions at 1January 2005 have been increased by £9.0m, a deferred tax asset of £2.7m hasbeen recognised and opening reserves adjusted by a net £6.3m. The effect onprofit after tax for the six months to 30 June 2005 is an increase of £0.3m.There have also been some minor adjustments and reclassifications to thepreviously unaudited IFRS transition statements. The June 2005 comparative figures have also been restated to disclose the Fluidand Air group of companies as discontinued operations. This presentation isconsistent with that in the 2005 Annual Report and Accounts, following theirdisposal on 17 November 2005. Note 11 provides further information regarding thequantification of this restatement. The preparation of financial statements in conformity with generally acceptedaccounting principles requires the use of estimates and assumptions that affectthe reported amounts of assets and liabilities at the date of the financialstatements and the reported amounts of revenues and expenses during thereporting period. Although these estimates are based on management's bestknowledge of the amount, event or actions, actual results ultimately may differfrom those estimates. These interim financial statements and the comparative figures for the yearended 31 December 2005 do not constitute full accounts within the meaning of theCompanies Act 1985. Full accounts for that year, which include an unqualifiedaudit report and no statements under sections 237(2) or (3) of the Companies Act1985, have been delivered to the Registrar of Companies. This report is being sent to shareholders and will be available to members ofthe public at Cobham plc's, "the Company's" registered office at Brook Road,Wimborne, Dorset, BH21 2BJ, UK and on the Company's website www.cobham.com. 2. Notes to the consolidated cash flow statement Restated Half year to half year to Year to£m Note 30.6.06 30.6.05 31.12.05--------------------------------------------------------------------------------------------------Cash flows from operating activitiesProfit after taxation for the period 77.6 38.7 98.1 Adjustments for:Tax 6 25.4 14.9 40.8Finance income 4 (20.7) (15.3) (31.9)Finance expense 4 24.4 20.0 42.6Profit on disposal of undertakings 12 (15.0) - (5.6)(Gain)/loss on revaluation of currency instruments 9 (10.7) 13.7 16.1Share of post tax profits from joint ventures and associates (1.7) (1.6) (3.1)Depreciation 18.5 22.9 44.5Amortisation of intangible fixed assets 1.9 4.3 18.2Profit on sale of property, plant and equipment (2.2) - (2.1)Pension contributions in excess of pension expenditure (0.6) (2.7) (3.4)Share based payments 1.6 1.4 2.7--------------------------------------------------------------------------------------------------Operating cash flows before movements in working capital and provisions 98.5 96.3 216.9(Decrease) / increase in provisions (4.6) 2.7 12.6Increase in working capital (20.2) (23.8) (19.2)--------------------------------------------------------------------------------------------------Movements in working capital and provisions (24.8) (21.1) (6.6)--------------------------------------------------------------------------------------------------Cash generated from operations 73.7 75.2 210.3-------------------------------------------------------------------------------------------------- Cash flows from investing activitiesDividends received from joint venture 3.0 0.7 1.2Proceeds on disposal of property, plant and equipment 7 13.2 0.4 6.4Purchase of property, plant and equipment (29.1) (17.2) (38.9)Purchase of intangible fixed assets (0.2) - (4.0)Capitalised expenditure on development costs (0.1) (1.6) (1.7)Acquisition of subsidiaries net of cash acquired 10 (12.3) (178.4) (189.0)Acquisition of minority interests (4.2) - -Payment of deferred consideration (3.0) - (2.3)Disposal of undertakings 48.8 - 149.4Investment in joint ventures and associates - - 1.0Special pension contribution (6.4) - (24.0)--------------------------------------------------------------------------------------------------Net cash from / (used in) investing activities 9.7 (196.1) (101.9)-------------------------------------------------------------------------------------------------- Reconciliation of net cash flow to movement in net debt Restated Half year to half year to Year to£m 30.6.06 30.6.05 31.12.05-----------------------------------------------------------------------------------------------Increase in cash and cash equivalents in the period 30.8 20.6 150.8Decrease / (increase) in debt and lease financing 27.6 (153.0) (127.2)Exchange movements 25.0 (15.3) (19.8)-----------------------------------------------------------------------------------------------Movement in net debt in the period 83.4 (147.7) 3.8Net debt at beginning of period (168.3) (163.9) (163.9)Initial application of IAS 21, 32 and 39 - (8.2) (8.2)-----------------------------------------------------------------------------------------------Net debt at beginning of period as restated (168.3) (172.1) (172.1)-----------------------------------------------------------------------------------------------Net debt at end of period (84.9) (319.8) (168.3)----------------------------------------------------------------------------------------------- Net debt includes £ nil (31.12.2005: £8.2m; 30.6.2005: £3.2m) net cash held inassets held for resale. During the half year to 30 June 2006 the Group drew downdebt of £8.8m and repaid debt of £36.4m. During the half year to 30 June 2006the Company issued 6,052,680 shares on the exercise of share options. 3. Segmental analysis by business The segmental analysis is based on the new divisional structure effective from 1 January2006, comprising six operating divisions and one non-operating division which includes HeadOffice and other activities. The comparative figures for 30 June 2005 and 31 December 2005 have been restated inaccordance with this new divisional structure. The principal activities of the Cobham divisions are: Air Refuelling & Auxiliary Mission Equipment Air refuelling equipment and pneumatic weapons carriage release systemsAntennas Antenna components and sub-systemsAvionics & Surveillance Electronic products for airborne, marine and land applicationsDefence Electronic Systems Air, ground and ship board antenna sub-systems, positioners, radomes and high-power microwave componentsLife Support Aviation oxygen, pneumatic technology for fin actuation in missiles and cryostatic cooling productsFlight Operations & Services Operation and maintenance of aircraft in aerospace and defence markets Air Refuelling & Defence Auxiliary Mission Avionics & Electronic£m Equipment Antennas Surveillance Systems---------------------------------------------------------------------------------------------------- RevenueHalf year to 30.6.06 Revenue 41.2 92.0 100.8 100.7Inter-segmental revenue (1.1) (2.4) (2.8) (1.6)----------------------------------------------------------------------------------------------------Third party revenue - continuing operations 40.1 89.6 98.0 99.1Third party revenue - discontinued operations - - - -----------------------------------------------------------------------------------------------------Total third party revenue 40.1 89.6 98.0 99.1---------------------------------------------------------------------------------------------------- Half year to 30.6.05 (restated)Revenue 52.5 75.9 100.2 49.2Inter-segmented revenue (1.7) (3.2) (2.8) (0.3)----------------------------------------------------------------------------------------------------Third party revenue - continuing operations 50.8 72.7 97.4 48.9Third party revenue - discontinued operations - - - -----------------------------------------------------------------------------------------------------Total third party revenue 50.8 72.7 97.4 48.9---------------------------------------------------------------------------------------------------- Year to 31.12.05 (restated) Revenue 127.1 173.9 196.3 130.9Inter-segmental revenue (2.7) (7.2) (6.4) (1.2)----------------------------------------------------------------------------------------------------Third party revenue - continuing operations 124.4 166.7 189.9 129.7Third party revenue - discontinued operations - - - -----------------------------------------------------------------------------------------------------Total third party revenue 124.4 166.7 189.9 129.7---------------------------------------------------------------------------------------------------- ResultHalf year to 30.6.06 Result before joint ventures and associates 3.8 19.2 12.1 24.2Share of post-tax results of joint ventures and associates - - - -----------------------------------------------------------------------------------------------------Operating profit from continuing operations 3.8 19.2 12.1 24.2Profit on disposal of undertakings - - - -Gain on revaluation of currency instruments - - - -Amortisation of intangible assets on acquisition - 0.8 1.3 (0.9)----------------------------------------------------------------------------------------------------Trading profit from continuing operations 3.8 20.0 13.4 23.3Trading profit from discontinued operations - - - -----------------------------------------------------------------------------------------------------Total trading profit 3.8 20.0 13.4 23.3---------------------------------------------------------------------------------------------------- Half year to 30.6.05 (restated)Result before joint ventures and associates 9.9 16.4 13.7 9.7Share of post-tax results of joint ventures and associates - 0.2 - -----------------------------------------------------------------------------------------------------Operating profit from continuing operations 9.9 16.6 13.7 9.7Loss on revaluation of currency instruments - - - -Amortisation of intangible assets on acquisition - - 0.1 0.9----------------------------------------------------------------------------------------------------Trading profit from continuing operations 9.9 16.6 13.8 10.6Trading profit from discontinued operations - - - -----------------------------------------------------------------------------------------------------Total trading profit 9.9 16.6 13.8 10.6---------------------------------------------------------------------------------------------------- Year to 31.12.05 (restated) Result before joint ventures and associates 26.4 38.0 25.0 19.5Share of post-tax results of joint ventures and associates - 0.2 - -----------------------------------------------------------------------------------------------------Operating profit from continuing operations 26.4 38.2 25.0 19.5Loss on revaluation of currency instruments - - - -Amortisation of intangible assets on acquisition 0.1 1.3 2.9 11.3----------------------------------------------------------------------------------------------------Trading profit from continuing operations 26.5 39.5 27.9 30.8Trading profit from discontinued operations - - - -----------------------------------------------------------------------------------------------------Total trading profit 26.5 39.5 27.9 30.8---------------------------------------------------------------------------------------------------- Flight Life Operations Other £m Support & Services Activities Total---------------------------------------------------------------------------------------------------- Revenue Half year to 30.6.06 Revenue 73.0 96.4 17.5 Inter-segmental revenue - (0.1) - -----------------------------------------------------------------------------------------Third party revenue - continuing operations 73.0 96.3 17.5 513.6Third party revenue - discontinued operations - - 3.6 3.6----------------------------------------------------------------------------------------------------Total third party revenue 73.0 96.3 21.1 517.2---------------------------------------------------------------------------------------------------- Half year to 30.6.05 (restated) Revenue 60.1 99.1 15.2 Inter-segmented revenue (0.8) - - -----------------------------------------------------------------------------------------Third party revenue - continuing operations 59.3 99.1 15.2 443.4Third party revenue - discontinued operations - - 72.9 72.9----------------------------------------------------------------------------------------------------Total third party revenue 59.3 99.1 88.1 516.3---------------------------------------------------------------------------------------------------- Year to 31.12.05 (restated) Revenue 129.9 197.0 32.5 Inter-segmental revenue - 0.2 - -----------------------------------------------------------------------------------------Third party revenue - continuing operations 129.9 197.2 32.5 970.3Third party revenue - discontinued operations - - 120.1 120.1----------------------------------------------------------------------------------------------------Total third party revenue 129.9 197.2 152.6 1,090.4---------------------------------------------------------------------------------------------------- Result Half year to 30.6.06 Result before joint ventures and associates 12.3 7.9 11.6 91.1Share of post-tax results of joint ventures and associates - 1.7 - 1.7----------------------------------------------------------------------------------------------------Operating profit from continuing operations 12.3 9.6 11.6 92.8Profit on disposal of undertakings - - (1.9) (1.9)Gain on revaluation of currency instruments - - (10.7) (10.7)Amortisation of intangible assets on acquisition 0.4 - - 1.6----------------------------------------------------------------------------------------------------Trading profit from continuing operations 12.7 9.6 (1.0) 81.8Trading profit from discontinued operations - - 0.8 0.8----------------------------------------------------------------------------------------------------Total trading profit 12.7 9.6 (0.2) 82.6---------------------------------------------------------------------------------------------------- Half year to 30.6.05 (restated) Result before joint ventures and associates 10.5 7.3 (14.2) 53.3Share of post-tax results of joint ventures and associates - 1.4 - 1.6----------------------------------------------------------------------------------------------------Operating profit from continuing operations 10.5 8.7 (14.2) 54.9Loss on revaluation of currency instruments - - 13.7 13.7Amortisation of intangible assets on acquisition - - 1.7 2.7----------------------------------------------------------------------------------------------------Trading profit from continuing operations 10.5 8.7 1.2 71.3Trading profit from discontinued operations - - 3.4 3.4----------------------------------------------------------------------------------------------------Total trading profit 10.5 8.7 4.6 74.7---------------------------------------------------------------------------------------------------- Year to 31.12.05 (restated) Result before joint ventures and associates 21.2 13.8 (10.0) 133.9Share of post-tax results of joint ventures and associates - 2.9 - 3.1----------------------------------------------------------------------------------------------------Operating profit from continuing operations 21.2 16.7 (10.0) 137.0Loss on revaluation of currency instruments - - 16.1 16.1Amortisation of intangible assets on acquisition 1.3 - - 16.9----------------------------------------------------------------------------------------------------Trading profit from continuing operations 22.5 16.7 6.1 170.0Trading profit from discontinued operations - - 7.7 7.7----------------------------------------------------------------------------------------------------Total trading profit 22.5 16.7 13.8 177.7---------------------------------------------------------------------------------------------------- FSTA bid costs of £1.8m (30.6.05: £1.3m; 31.12.05: £2.5m) are included in "Other Activities". 4. Finance income and expense Restated Half year to half year to Year to£m 30.6.06 30.6.05 31.12.05-------------------------------------------------------------------------------------------Continuing operationsFinance income:Bank interest 8.5 3.8 10.2Other interest 0.8 0.7 0.4Expected return on pension scheme assets 11.3 10.8 21.0-------------------------------------------------------------------------------------------Total finance income 20.6 15.3 31.6------------------------------------------------------------------------------------------- Finance expense:Interest on bank overdrafts and loans (13.1) (7.1) (21.1)Interest on obligations under finance leases - (1.9) (0.9)Interest on other borrowings (0.3) (0.8) (0.6)Interest on pension scheme liabilities (11.0) (10.2) (20.0)-------------------------------------------------------------------------------------------Total finance expense (24.4) (20.0) (42.6)------------------------------------------------------------------------------------------- Discontinued operationsFinance income:Bank interest 0.1 - 0.3-------------------------------------------------------------------------------------------Total finance income 0.1 - 0.3------------------------------------------------------------------------------------------- TotalFinance income:Bank interest 8.6 3.8 10.5Other interest 0.8 0.7 0.4Expected return on pension scheme assets 11.3 10.8 21.0-------------------------------------------------------------------------------------------Total finance income 20.7 15.3 31.9-------------------------------------------------------------------------------------------Finance expense:Interest on bank overdrafts and loans (13.1) (7.1) (21.1)Interest on obligations under finance leases - (1.9) (0.9)Interest on other borrowings (0.3) (0.8) (0.6)Interest on pension scheme liabilities (11.0) (10.2) (20.0)-------------------------------------------------------------------------------------------Total finance expense (24.4) (20.0) (42.6)------------------------------------------------------------------------------------------- Net finance expense (3.7) (4.7) (10.7)------------------------------------------------------------------------------------------- 5. Earnings per share Basic EPS Restated Half year to half year to Year to 30.6.06 30.6.05 31.12.05-------------------------------------------------------------------------------------------Profit after taxation attributable to equity shareholders £m 77.4 38.2 97.6Weighted average number of shares million 1,126.9 1,119.4 1,120.7Basic EPS pence 6.87 3.41 8.71------------------------------------------------------------------------------------------- Fully diluted EPS-------------------------------------------------------------------------------------------Profit after taxation attributable to equity shareholders £m 77.4 38.2 97.6Weighted average number of shares million 1,126.9 1,119.4 1,120.7Effect of dilutive securities:Options 10.0 7.1 5.7Long term incentive plans 1.2 1.7 --------------------------------------------------------------------------------------------Fully diluted number of shares million 1,138.1 1,128.2 1,126.4-------------------------------------------------------------------------------------------Fully diluted EPS pence 6.80 3.39 8.66------------------------------------------------------------------------------------------- Underlying EPS £m-------------------------------------------------------------------------------------------Profit after taxation attributable to equity shareholders 77.4 38.2 97.6Profit on disposal of businesses (after tax) (15.0) - (1.3)(Gain)/loss on revaluation of currency instruments (after tax) (7.5) 9.6 11.2Amortisation of intangible assets arising on acquisition (after tax) 1.1 1.9 11.1-------------------------------------------------------------------------------------------Underlying profit after taxation 56.0 49.7 118.6------------------------------------------------------------------------------------------- Weighted average number of shares million 1,126.9 1,119.4 1,120.7Underlying EPS pence 4.97 4.44 10.58------------------------------------------------------------------------------------------- The tables above include results of both continuing and discontinued operations.The EPS arising from discontinued operations is shown in Note 11. 6. Taxation charge Restated Half year to half year to Year to£m 30.6.06 30.6.05 31.12.05-------------------------------------------------------------------------------------------Continuing operationsUnited Kingdom 13.4 5.1 20.5Overseas 11.9 8.8 14.8-------------------------------------------------------------------------------------------Tax on continuing operations 25.3 13.9 35.3Tax on discontinued operations 0.1 1.0 5.5-------------------------------------------------------------------------------------------Total tax charge for the period 25.4 14.9 40.8-------------------------------------------------------------------------------------------Tax charge included in share of post-tax results of joint ventures and associates 0.7 0.6 1.6------------------------------------------------------------------------------------------- 7. Property, plant and equipment Details of property, plant and equipment acquired and disposed of are as follows: Restated Half year to half year to Year to£m 30.6.06 30.6.05 31.12.05-------------------------------------------------------------------------------------------Additions 28.1 17.2 38.6Carrying amount of disposals 15.4 0.4 4.3Proceeds of disposals 13.2 0.4 6.4-------------------------------------------------------------------------------------------Commitments for the acquisition of property, plant and equipment are as follows: As at As at As at£m 30.6.06 30.6.05 31.12.05-------------------------------------------------------------------------------------------Commitments 40.7 0.3 3.1------------------------------------------------------------------------------------------- Capital commitments at 30 June 2006 mainly relate to aircraft for the Australian Coastwatch contract. 8. Contingent liabilities There have been no changes in contingent liabilities since 31 December 2005. 9. Derivative financial instruments Currency Cash flow Fair value translation £m hedge hedge derivatives Total----------------------------------------------------------------------------------------------------------Movement in fair valuesInitial application of IAS 32 and 39 - 0.9 17.6 18.5Fair value gain/(loss) in half year to 30 June 2005- Through income statement - 0.8 (13.7) (12.9)- Through reserves (2.1) - - (2.1)----------------------------------------------------------------------------------------------------------Fair value at 30 June 2005 (2.1) 1.7 3.9 3.5 Fair value gain/(loss) in half year to 31 December 2005- Through income statement - (4.2) (2.4) (6.6)- Through reserves 3.8 - - 3.8----------------------------------------------------------------------------------------------------------Fair value at 31 December 2005 1.7 (2.5) 1.5 0.7 Fair value gain/(loss) in half year to 30 June 2006- Through income statement - (4.3) 10.7 6.4- Through reserves 3.1 - - 3.1----------------------------------------------------------------------------------------------------------Fair value at 30 June 2006 4.8 (6.8) 12.2 10.2---------------------------------------------------------------------------------------------------------- Interest rate swaps are accounted for using hedge accounting. Movements in fairvalues are matched against the corresponding liabilities (fair value hedge through the income statement) or reflected in reserves (cash flow hedge throughreserves) as appropriate. Currency instruments are not accounted for using hedge accounting and movementsin fair values are reflected in the income statement. The fair values of the Group's currency and interest rate derivatives areestablished using valuation techniques, primarily discounting cash flows, basedon assumptions that are supported by observable market prices or rates. Currency Cash flow Fair value translation £m hedge hedge derivatives Total----------------------------------------------------------------------------------------------------------Balance sheet analysisDerivative financial instruments - non-current assets - 1.5 3.1 4.6Derivative financial instruments - current assets - 0.2 0.8 1.0Derivative financial instruments - current liabilities (0.4) - - (0.4)Derivative financial instruments - non-current liabilities (1.7) - - (1.7)----------------------------------------------------------------------------------------------------------Fair value at 30 June 2005 (2.1) 1.7 3.9 3.5---------------------------------------------------------------------------------------------------------- Derivative financial instruments - non-current assets 1.3 - 3.2 4.5Derivative financial instruments - current assets 0.4 - 1.3 1.7Derivative financial instruments - current liabilities - (0.5) (3.0) (3.5)Derivative financial instruments - non-current liabilities - (2.0) - (2.0)----------------------------------------------------------------------------------------------------------Fair value at 31 December 2005 1.7 (2.5) 1.5 0.7----------------------------------------------------------------------------------------------------------Derivative financial instruments - non-current assets 4.6 - 6.3 10.9Derivative financial instruments - current assets 0.7 - 6.7 7.4Derivative financial instruments - current liabilities - (0.6) (0.8) (1.4)Derivative financial instruments - non-current liabilities (0.5) (6.2) - (6.7)----------------------------------------------------------------------------------------------------------Fair value at 30 June 2006 4.8 (6.8) 12.2 10.2---------------------------------------------------------------------------------------------------------- 10. Acquisitions of subsidiaries The acquisitions during the half year to 30 June 2006 were as follows: Proportion Date of of shares Names of businesses acquired Principal activity acquisition acquired % Cost of acquisition-------------------------------------------------------------------------------------------------------------------New subsidiaries Aerodata Flight Inspection and calibration Inspection GmbH aircraft safety systems 13 February 2006 100% €7.1mdomo Limited Digital wireless video technology 14 June 2006 100% £17.8m-------------------------------------------------------------------------------------------------------------------Remaining minority interests in subsidiaries to obtain 100% holding Wavecall Communications Inc. Satellite communications 9 June 2006 25% US$2mFlight Precision Limited Inspection and calibration of aircraft safety system 13 February 2006 49% €4.5m ------------------------------------------------------------------------------------------------------------------- Components of the cost of acquisition of new subsidiaries: £m Total-------------------------------------------------------------------------------------------------------------------Cash 13.8Contingent consideration 8.7Directly attributable acquisition costs 0.2------------------------------------------------------------------------------------------------------------------- 22.7------------------------------------------------------------------------------------------------------------------- As at 30 June 2006, fair values of assets and liabilities acquired are provisional and subject to potential subsequent adjustment. A summary of the book values and fair value adjustments of the acquisitions is as follows: ------------------------------------------------------------------------------------------ Book value Fair prior to£m value acquisition------------------------------------------------------------------------------------------Non-current assets - Intangibles 8.8 0.2 - Property, plant and equipment 1.5 1.8Current assets - Inventories 0.4 0.2 - Trade receivables 1.0 1.4 - Bank and cash balances 1.7 1.7Current liabilities - Trade payables (1.1) (1.1) - Corporation tax (0.5) (0.5)Non-current liabilities - Deferred tax liability (2.7) -------------------------------------------------------------------------------------------Net assets acquired 9.1 3.7 ----------Goodwill 13.6 ------------------------------------------------------------------------------Total consideration 22.7 ------------------------------------------------------------------------------ Directly attributable acquisition costs included in the cost of acquisition arethe direct legal and accounting costs incurred in developing the acquisitioncontracts and performing due diligence activities. All intangible assets were recognised at their respective fair values. Theresidual excess of the total cost over the fair value of the net assets acquiredis recognised as goodwill in the financial statements. Goodwill represents thepremium paid in anticipation of future economic benefits from assets that arenot capable of being separately identified and separately recognised. Adjustments from book value to fair value include adjustments arising from theapplication of Group accounting policies, the recognition of intangible fixedassets under IFRS3 "Business Combinations" and fair value adjustments toproperty, plant and equipment and receivables. The profit after tax since the date of acquisition was £0.1m. If theacquisitions had taken effect on 1 January 2006, Group total revenues would havebeen estimated at £519.7m and profit after tax £78.3m. This information is not necessarily indicative of the results of operations thatwould have occurred had the operations been acquired at the start of the year,nor of future results of the combined operations. 11. Discontinued operations On 8 March 2006 Wallop Defence Systems Limited was sold, completing the disposalof the Group's Countermeasures operations, which was initiated on 28 June 2005.At 31 December 2005 and at 30 June 2005 this operation was classified as heldfor sale and presented separately in the balance sheet. The results of thisbusiness are reported within discontinued operations in 2006, as in 2005. For the half year to 30 June 2005 and year to 31 December 2005 discontinuedoperations also included the Group's other Countermeasures business, FRCountermeasures Inc, and the Cobham Fluid Systems products division, which weresold in the second half of 2005. On 17 November 2005 the Group disposed of the Fluid and Air group. In additionto the businesses noted above, this was disclosed as a discontinued operation inthe financial statements for the year ended 31 December 2005. Discontinuedoperations for the half year to 30 June 2005 have been restated to includerevenue of £58.4m and profit after taxation of £2.0m of the Fluid and Air group. The results of the discontinued operations as described above included in theconsolidated income statements are as follows: Half year to Restated half year Year to£m 30.6.06 to 30.6.05 31.12.05------------------------------------------------------------------------------------------------- Revenue 3.6 72.9 120.1Expenses (2.7) (69.5) (112.1)-------------------------------------------------------------------------------------------------Profit from discontinued operations before tax 0.9 3.4 8.0Tax (0.1) (1.0) (1.9)-------------------------------------------------------------------------------------------------Profit for the year after tax 0.8 2.4 6.1Profit on disposal before tax 13.1 - 4.9Tax on profit on disposal - - (3.6)-------------------------------------------------------------------------------------------------Total profit after taxation from discontinued operations 13.9 2.4 7.4------------------------------------------------------------------------------------------------- Earnings per ordinary share of discontinued operations-Basic 1.23p 0.21p 0.66p-Fully diluted 1.22p 0.21p 0.66p------------------------------------------------------------------------------------------------- 12. Disposal of undertakings As referred to in Note 11 above, on 8 March 2006, the Group disposed of WallopDefence Systems Limited for £33.8m, resulting in a profit on disposal, reportedwithin discontinued operations, of £13.0m. A further £0.1m of income has arisenfrom disposal costs provided in 2005 which are no longer required. On 13 April 2006 the Group disposed of Precision Antennas Limited for £15.4m, on19 May 2006 it sold Atlas Composites Limited for £0.6m and on 29 June 2006 itsold Slingsby Aviation Limited for £1.7m. These entities do not form a separateline of business for the Group and hence have been included within continuingoperations. The net profit on disposal of £1.9m has been disclosed separately onthe income statement under "Profit on disposal of undertakings". 13. Related party transactions Transactions between the Company and its subsidiaries, which are related partiesof the Company, have been eliminated on consolidation and are not disclosed inthis note. Details of transactions between the Group and other related partiesare disclosed below. Trading transactions During the period, Group entities entered into the following trading transactions with joint ventures and associate companies: Half year to Restated half year Year to£m 30.6.06 to 30.6.05 31.12.05------------------------------------------------------------------------------------------------- Sale of goods 0.6 0.7 1.4Purchase of goods - - (0.2)Amounts owed by related parties - 0.1 0.1Amounts owed to related parties - - (0.1)Dividends received 3.0 - 1.2Management fees - - (0.1)------------------------------------------------------------------------------------------------- Sales of goods to related parties were made at the Group's usual list prices forsales to non-related parties. Goods are bought on the basis of the price listsin force with non-related parties. The amounts outstanding are unsecured and will be settled in cash. No guaranteeshave been given or received. No expense has been recognised in the period forbad or doubtful debts in respect of the amounts owed by related parties. Transactions with key management personnel During the period the Board gave its consent to the extension of Mr A Hannam'semployment for a year beyond his contractual retirement date, 28 March 2006.Contributions to the Cobham Executive Pension Plan on Mr Hannam's behalf ceasedon 28 March 2006. In lieu of this a one-off payment of £96,630 was made to a newMoney Purchase arrangement. Limited life assurance cover is being provided forthe duration of the contract extension. 14. Post balance sheet events On 26 July 2006 the Group announced the disposal of DrTM?ger Aerospace GmbH to B/E Aerospace, Inc for a total consideration of €64m, on a debt and cash freebasis. Independent review report to Cobham plc Introduction We have been instructed by the Company to review the financial information forthe six months ended 30 June 2006 which comprises the consolidated interimbalance sheet as at 30 June 2006 and the related consolidated interim statementsof income, cash flows and recognised income and expense for the six months thenended and the related notes. We have read the other information contained in theInterim Report and considered whether it contains any apparent misstatements ormaterial inconsistencies with the financial information. Directors' responsibilities The Interim Report, including the financial information contained therein, isthe responsibility of, and has been approved by the directors. The Listing Rulesof the Financial Services Authority require that the accounting policies andpresentation applied to the interim figures should be consistent with thoseapplied in preparing the preceding annual accounts except where any changes, andthe reasons for them, are disclosed. The Interim Report has been prepared in accordance with the basis set out inNote 1. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the disclosed accounting policies havebeen applied. A review excludes audit procedures such as tests of controls andverification of assets, liabilities and transactions. It is substantially lessin scope than an audit and therefore provides a lower level of assurance.Accordingly we do not express an audit opinion on the financial information.This report, including the conclusion, has been prepared for and only for thecompany for the purpose of the Listing Rules of the Financial Services Authorityand for no other purpose. We do not, in producing this report, accept or assumeresponsibility for any other purpose or to any other person to whom this reportis shown or into whose hands it may come save where expressly agreed by ourprior consent in writing. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2006. PricewaterhouseCoopers LLPChartered AccountantsSouthampton12 September 2006 Notes:(a) The maintenance and integrity of the Cobham plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the Interim Report since it was initially presented on the website.(b) Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Cobham