Interim Results

INTERIM RESULTS FOR THE hALF YEAR ENDED 30 june 2011

3 August 2011

·; Organic revenue down 2.6% in core businesses5 with strong growth in commercial markets

·; Underlying EPS growth of 6% at constant translation exchange rates

·; Excellence in Delivery measures already implemented to generate annualised £21m of year over year efficiencies in 2011

·; Strong free cash flow of £129m with operating cash conversion of 97%

·; Robust balance sheet gives flexibility for organic and acquisitive investment, in addition to the £150m share buy-back announced in March 2011

·; Interim dividend increased by 10.6% to 1.80p

Andy Stevens, Cobham Chief Executive, said:

"Despite lower revenue reflecting challenging conditions in the US defence and security market, we have delivered 6% underlying EPS growth at constant translation exchange rates with savings from our Excellence in Delivery programme underpinning earnings progression.

"We have seen strong growth in some commercial markets but defence and security has been particularly affected in the first half by the delayed approval of the US budget. We believe the general situation in these markets will persist and we continue to expect the Group's organic revenue growth in 2011 to be marginally negative. Driven by the Excellence in Delivery programme, the Board expects the Group to achieve some underlying progress in the year.

"Despite the challenging backdrop for defence, we have leading positions in attractive commercial markets, technically differentiated products and services in the more attractive and resilient segments of defence and security, together with a strong and flexible balance sheet. We are investing in the future of Cobham with the Excellence in Delivery programme which is rapidly generating efficiency savings and customer benefits and also reconfiguring Cobham to take advantage of the many opportunities in the years ahead. We also continue to rigorously examine our portfolio of companies and acquisition opportunities to further enhance the Group's potential and profile. The Board is actively responding to market conditions and is confident that the Group will continue to make progress over the medium term."

ENQUIRIES

The following notes apply throughout these interim results:

1. To assist with the understanding of earnings trends, the Group has included within its published statements trading profit and underlying earnings results. Trading profit has been defined as operating profit from continuing operations excluding the impacts of certain transaction related costs and business restructuring costs as detailed below. Also excluded are the marking to market of currency instruments not realised in the period and items deemed by the Directors to be of an exceptional nature. Underlying earnings are defined as trading profit less net underlying finance expense, which excludes the unwinding of acquisition related discounting, and after deducting taxation and 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 disposals.

Business restructuring costs comprise exceptional costs or profits associated with the restructuring of the Group's businesses including costs associated with the Excellence in Delivery programme.

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

A reconciliation of underlying profit is shown on page 10.

2. Operating cash flow is defined as cash generated from operations, after cash flows from the purchase or disposal of tangible fixed assets. Operating cash conversion is defined as operating cash flow as a percentage of trading profit, excluding profit from joint ventures. Free cash flow is operating cash flow after net interest and taxation.

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

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

5. All numbers referring to 'core businesses' exclude Analytic Solutions and Commercial Systems as the Group plans to divest these activities.

OVERVIEW OF THE HALF YEAR

The Group has received some important multi-year orders including US$73m for the US KC-46 tanker development, US$40m for Inmarsat's Global Xpress programme and £18m for Eurofighter Tranche 3A defensive aids. There was an organic increase in order intake of 4% in the core businesses.

There was good organic4 revenue growth from Mission Systems and Aviation Services and strong growth in some commercial activities, which in aggregate comprise 29% of revenue in the core businesses. However, revenue growth was affected by the challenging US defence and security market, most notably in Defence Systems which is almost totally focused on US defence. Overall, there was an organic revenue decline in the core businesses of 2.6% in the period.

The Excellence in Delivery programme is making good progress. The standard operating framework for production is already delivering tangible benefits, including significant improvements to on time delivery and reductions in defects and lead times. Good progress is also being made on the planned integration programme, which is also part of Excellence in Delivery. In addition to the announced closure of one site earlier in the year, four sites have been successfully integrated into two new facilities and work is underway to complete the other integration activities planned for 2011.

Driven by incremental efficiency savings, the Group's underlying trading margin increased by 1.3% points to 18.7%, with the margin in the core businesses increasing 1.8% points to 19.9%. The Group is confident of achieving the annualised £21m of planned year over year efficiencies in 2011 as it has already implemented the measures needed to deliver them.

In the core businesses, PV3 (Private Venture - or company funded Research and Development, R&D) investment was £35m (2010: £36m), equating to 5.6% (2010: 5.2%) of revenue. Including customer funded R&D, technology investment expressed as a percentage of revenue remained in excess of 9%.

Underlying EPS increased 5% (6% at constant translation exchange) to 9.8p, primarily due to the improvement in the underlying trading margin and a lower underlying rate of tax.

Free cash flow generation was strong at £129m, with operating cash conversion of 97%.

The share buy-back programme, which commenced part way through the period, is making good progress but had only a modest impact on the average number of shares in issue in the period. By the period end 27m shares had been purchased at a total cost of £61m.

MARKET UPDATE

The Group's largest market, US defence and security, remained uncertain in the period with continued poor visibility. However, Cobham continued to make progress, being selected on a number of important, multi-year defence programmes such as the KC-46 refuelling tanker for the US Air Force, a further award to develop a cost-effective military radio for use by US Army ground forces under the Wireless Network after Next (WNaN) programme and a contract to upgrade the avionics for US State Department Sikorsky S61 helicopters.

The general slow-down in the US defence and security market in 2010 was exacerbated by the delayed approval of the US government's 2011 budget, leading to a Continuing Resolution being in place until mid-April. This is reflected in US Treasury Department figures showing that defence investment outlays, comprising the procurement and research, development, testing and evaluation (RDT&E) accounts in the base budget, were down by 10% in the first half of 2011 on the comparative period. Continued uncertainty in the US is likely, as politicians debate the future size and shape of government budgets. The Group's UK and Continental European defence and security markets have also faced pressure, although the focused market position in Australia has continued to strengthen. Export markets including India, certain Middle Eastern and South East Asian countries and Brazil present ongoing opportunities to offset weakness in the US and other markets.

Overall, the Group's commercial markets have started to pick-up in the period. Production rates at Airbus and Boeing have increased and further increases are planned, although customer demand for some smaller aircraft remains less robust. Satellite Communication (SATCOM) markets have also shown good signs of improvement, with customers willing to invest in products that provide additional capability and differentiation. This includes the Group's HGA-7001 long range antenna which was selected as standard factory fit on the A380 aircraft in the period and has now also been selected by a total of 24 airlines. The Group's flying activity for the Australian resource industry continues to grow strongly.

STRATEGY UPDATE

Cobham has continued to make steady progress in the period with its strategic objectives as follows:

Technology Investment

Central to Cobham's strategy is the development of leading edge products and services in technically differentiated and attractive markets. These technologies straddle defence, security and commercial markets and include specialist defence and security communications and intelligence gathering, known as C4ISR, and SATCOM for commercial and defence and security applications.

Cobham's technology innovation and business development strategy has shown good progress by winning positions on important, long term programmes and platforms with new products which will generate sustained revenue over a number of years.

In the Group's commercial markets, significant progress has been made with the development of advanced products for use on key future growth platforms and programmes:

·; Completion of the qualification testing of the Radio Audio Integration Management System (RAIMS) for the A350 aircraft. This product has also been selected for the A400M aircraft, demonstrating the application of Cobham's technology to commercial and military markets;

·; Selection by Inmarsat to design and develop a range of stabilised SATCOM antennas for its marine Global Xpress programme, with an initial value estimated at US$40m.

In defence markets Cobham is continuing to develop products with important applications for key customers. Activity in the period included:

·; Award of a contract from Lockheed Martin to develop a 54 channel mINCAN miniature interference cancellation system for the US Air Force;

·; A contract from the US Navy to develop an advanced oxygen generating life support system for use by a broad range of fighter, patrol and military transport aircraft. The system will utilise Cobham's patented Ceramic Oxygen Generating System (COGS) technology.

In homeland security and surveillance markets the Group has also been developing a range of advanced products for important customer programmes. In particular:

·; Selection to develop antennas for use in an emergency services communication system to be installed in the new World Trade Centre Museum and Memorial in New York, USA;

·; The launch of a unique wireless internet protocol 'mesh' system providing mapping, video and voice on the move for law enforcement and security applications, after a period of PV investment. The system, which is easy to use, was successfully deployed during the visit of the Duke and Duchess of Cambridge to Los Angeles, USA in July 2011. It is capable of operating in high interference environments, transmitting quality video over an extended range and forms part of Cobham's 'SAFE CITY' solution.

In the core businesses, PV investment was £35m (2010: £36m), or 5.6% (2010: 5.2%) of revenue. Including customer funded R&D, technology investment, expressed as a percentage of revenue, remained in excess of 9%. Group PV investment was £38m (2010: £39m), equating to 5.0% (2010: 4.7%) of revenue.

Operational Excellence

Cobham announced its operational improvement and efficiency programme, Excellence in Delivery, in August 2010. The programme will bring a number of significant benefits including improved productivity, shortened manufacturing lead times, improved levels of quality and reduced working capital. It will also produce a simpler and more scalable business, a sharper focus on the customer and enhancements to internal communication and collaboration.

The programme is making good progress. Work to implement the standard operating framework is now underway in 10 of the 14 principal locations, which are expected to cover eighty percent of Group manufacturing profit by programme completion. The standard operating framework for production has been fully implemented in one site and is nearing completion in a further two sites. The standardised processes are already delivering tangible benefits where implemented, including significant improvements to on time delivery and reductions in defects and lead times.

Good progress is also being made on the planned integration programme for 2011, which is also part of Excellence in Delivery, and includes the closure and integration of three facilities into existing sites and the integration of a further six sites into two new sites. In addition to the announced closure of one site earlier in the year, four of the six sites have been successfully integrated into the two new facilities and work is underway to complete the other integration activities planned for 2011.

The Group is confident that it will deliver the expected £21m of annualised year over year efficiency savings in 2011 as it has already implemented the measures needed to deliver them and has achieved £15m (2010: nil) of efficiencies in the year-to-date. By the end of the year, the Group expects to have delivered £30m of efficiencies in total, of which £9m were delivered from Excellence in Delivery in the second half of 2010. It still expects to generate a run-rate of £65m per annum by the end of 2013, at a total cost of £131m. Excellence in Delivery costs were £19m (2010: nil) in the period.

Portfolio Optimisation

The Group's strategy is to build scale in its chosen markets through carefully chosen acquisitions which accelerate organic growth and reinforce the value added content of the Group's products, and through exiting subscale businesses.

Two previously announced acquisitions in the homeland security market were completed in January 2011. Telerob, a manufacturer of advanced bomb disposal robots, was purchased for €78m and Corp Ten International, a provider of software for tracking and surveillance purposes, for up to US$24m. The Group is looking to invest in further high quality assets with differentiated technology in its chosen markets, in accordance with its strict financial criteria and a disciplined approach to investment, which will enhance its potential and profile. The intention is to bolt-in acquisitions funded from free cash flow with larger transactions funded from the Group's debt capacity.

Cobham will also continue to rigorously examine the portfolio and will divest businesses or product lines where these no longer fit the Group's strategy. Accordingly, the Group announced in May its intention to divest two businesses, Analytic Solutions and Commercial Systems, which have sub-scale positions or which operate in non-core markets.

Analytic Solutions and Commercial Systems are reported separately as non-core businesses. With the planned divestment of Analytic Solutions, the retained US composites business has been combined with the Group's other composites activities within Aerospace and Security. The passive microwave business has also been transferred from the Defence Systems Division to enable it to benefit from technology overlap with the Antenna Systems business in the Aerospace and Security Division. Appendix I (page 17) restates the full year historical segmental results to reflect these changes.

After the divestments have been completed, the Group will be left with scale positions and technology differentiation in all seven of its remaining strategic business units. It intends to reinforce these positions by reinvesting the proceeds of the planned divestments as value adding opportunities arise.

FINANCIAL RESULTS

Orders

Orders received by the Group increased to £969m (2010: £937m) with organic order intake in the core businesses increasing 4%. The Group has received some important multi-year awards including US$73m for the US KC-46 tanker development, US$40m for Inmarsat's Global Xpress programme and £18m for Eurofighter Tranche 3A defensive aids.

Excluding orders received by the non-core businesses and Aviation Services, where order intake can be uneven due to its significant, long term programmes, the book to bill ratio was 1.09 times. At the end of the period, the Group's order book was £2.5bn (31 December 2010: £2.5bn), including £0.2bn (2010: £0.1bn) of orders relating to the non-core businesses.

Revenue

Group revenue decreased to £892m (2010: £963m) primarily due to US dollar translation exchange rates and a decline in organic growth. Changes to Group revenue in the period were as follows:

Analysis of Group Revenue

Average H1 2011 US$/£ exchange rate = $1.61/£1. Average H1 2010 US$/£ exchange rate = $1.53/£1.

Organic revenue in the core businesses was down 2.6% in the period. The non-core businesses declined 11%.

Defence and security revenue was down 8% organically in the core businesses, almost entirely affected by the US market. Commercial revenue increased 12% on the prior period, benefiting from increased flying activity for resource industry customers in Australia, sales to Airbus and Boeing and sales of SATCOM and other antennas to a range of aerospace customers. Commercial activities comprise in aggregate 29% of revenue in the core businesses.

Trading Profit

Group trading profit was £167m (2010: £167m), with trading profit in the core businesses increasing to £154m (2010: £149m). Trading profit in the non-core business was £13m (2010: £18m).

The Group's underlying trading margin increased to 18.7% (2010: 17.4%). The margin in the core businesses increased to 19.9% (2010: 18.1%), driven by incremental efficiency savings from the Excellence in Delivery programme. The underlying trading margin in the non-core businesses declined to 11.2% (2010: 12.8%), reflecting lower revenue and the absence of Excellence in Delivery activity in these businesses.

Underlying Net Finance Expense and Underlying Profit Before Tax

Underlying net finance expense was £18m (2010: £23m). The net interest expense on cash and debt holdings is primarily payable in US dollars and reduced to £18m (2010: £22m), benefiting from the movement in the US dollar translation exchange rate. As anticipated, there was no (2010: £1m) net finance charge from pension schemes.

Group underlying profit before tax increased by 3% to £149m (2010: £145m).

Taxation

On an underlying basis, the effective tax rate decreased to 25.5% (2010: 26.5%) in part due to the lower tax rate in the UK. The effective tax rate is calculated by dividing the Group's underlying tax charge of £37m (2010: £38m) by its underlying profit before tax, after excluding the £3m (2010: £2m) share of post-tax results of joint ventures.

Earnings per Share (EPS)

Underlying EPS increased 5% to 9.8p (2010: 9.3p), primarily due to the improvement in the underlying trading margin, a lower underlying rate of tax and lower net interest payable. The share buy-back programme, which commenced part way through the period, had only a modest impact on EPS. At constant translation exchange rates, underlying EPS increased 6%.

Basic EPS was higher than the comparable period at 7.0p (2010: 6.6p), primarily driven by the post-tax and non-cash unrealised gain of £1m (2010: unrealised loss £11m) on the revaluation of currency instruments and a post-tax gain on disposals of £4m (2010: nil), partly offset by a post-tax portfolio restructuring charge of £13m, which in 2011 related to Excellence in Delivery (2010: credit £1m).

Retirement Obligations

The Group operates a number of defined benefit pension schemes, the most significant being the Cobham Pension Plan. At the period end, 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 to £68m before deferred tax (31 December 2010: £82m).

Cash Flow and Net Debt

Operating cash flow, which is stated after capital expenditure but before interest and tax payments, was £159m (2010: £135m). Net capital expenditure was £24m (2010: £28m). Operating cash conversion was 97% (2010: 82%) 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 strong free cash flow of £129m (2010: £103m), from which it paid a final dividend of £50m (2010: £46m, with the final dividend paid in the second half).

In addition, the Group made the following other payments from free cash flow:

·; £20m (2010: nil) relating to Excellence in Delivery;

·; £64m (2010: £9m) net on acquisitions, disposals and other costs relating to business combinations as follows:

·; £65m of payments relating to the acquisition of Telerob;

·; £8m of payments relating to the acquisition of Corp Ten;

·; £4m of payments relating to deferred and contingent consideration for acquisitions and disposals completed in prior years and other business combination costs;

·; £13m proceeds from the divestment of the Engineering Consultancy Group.

·; £8m loan advanced to a Group joint venture;

·; Total share purchases of £66m (2010: £10m inflow), including £57m (2010: nil) relating to the share buy-back.

At the period end, after funding and exchange movements, net debt, comprising short term cash balances and fixed term borrowings, increased to £378m (31 December 2010: £326m). Included above were exchange movements of £27m which partly offset the increase in 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 the period end, the Group's gearing was 0.9 times net debt/EBITDA.

Share Buy-back

The Group's previously announced share buy-back programme of up to £150m commenced on 7 March. Good progress towards the target has been made during the period, with some 27m shares purchased and held in treasury, at a total cost of £61m.

At the period end, the Group had some 1,127m (30 June 2010: 1,154m, 31 December 2010: 1,155m) ordinary shares in issue, excluding the shares held in treasury. The weighted average number of shares in the period attributable to ordinary shareholders was 1,145m (30 June 2010: 1,150m, 31 December 2010: 1,151m) or 1,148m (30 June 2010: 1,158m, 31 December 2010: 1,157m) on a diluted basis.

Dividends

An interim dividend of 1.80p (2010: 1.628p), representing a 10.6% increase on the comparable period, has been approved by the Board.

The shares will be traded ex-dividend on 12 October 2011. The dividend will be paid on 11 November 2011 to shareholders on the register at 14 October 2011.

RECONCILIATION OF UNDERLYING PROFIT

DIVISIONAL REVIEW

The Group Operating Summary has been restated to disclose separately the non-core businesses and to reflect the transfer of the US composites and passive microwave activities from Defence Systems to Aerospace and Security. Appendix I (page 17) shows a restatement of the historical full year segment results to reflect these changes.

Group Operating Summary

Cobham Aerospace and Security

Total revenue was down principally due to an adverse US dollar translation exchange rate, the net impact of acquisitions and disposals and an organic decline of 5%. The export oriented Antenna Systems business put in a strong performance but this was offset principally by a decline in the Tactical Communications and Surveillance business, where there was lower revenue from land based tactical communication products and reduced shipments of surveillance equipment, the latter being affected by the US Continuing Resolution.

The margin was slightly lower at 22.2% (2010: 22.5%) being impacted by lower sales in the land-based tactical communications business. This was partly offset by savings from the Excellence in Delivery programme and an initial gain from reduced costs following changes to the rate of certain UK pension increases.

Areas of growth included:

·; Strong demand for Cobham's wireless video link products from special forces and growth in exports from surveillance products used for audio intercept activities;

·; Increased shipments of the long range HGA-7001 SATCOM antenna, which is certified on the Airbus A320 family, A330, A340, A350 and Boeing 787, 747-8 and 777 aircraft. It has now also been selected for the Airbus A380 programme as a standard fit product and the first retrofit order for the Boeing 747 has been received, with the antenna now selected by a total of 24 airlines;

·; Strong sales of the hand-held 'MINEHOUND' mine detector have continued in the US and the UK, for use in military and humanitarian applications. The product is now being used extensively, following its development with PV funding;

·; Robust growth from repair and refurbishment work in the passive microwave business, including support to the US Federal Aviation Administration in the repair of rotary joint assemblies used in major airport radar installations. This work is expected to continue to 2015.

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

·; An avionics upgrade for US State Department Sikorsky S61 helicopters, being aerospace communications including tactical radios, new generation audio and radio display units and the Group's advanced cockpit display, the Electronic Flight Instrumentation System (EFIS);

·; Award of a contract for the complete suite of aerospace communications and avionics for the new SK105 Skylander commuter aircraft, due for first delivery in 2012;

·; Completion of a major Test Readiness Review for the VIS-X next generation vehicle intercom system for the US Army, which can be used in both new production and as an upgrade for an installed base of more than 85,000 systems;

·; Receipt of the first order for large mast technology for the US Army Win-T programme, linking tactical ground units with the US Department of Defense's worldwide information network;

·; Work starting on a four year programme to provide 3,700 major radio frequency and microwave components for each Aegis surveillance and fire control radar system for the US Navy, with opportunities to ship export and land based variants. Including a new multi-million dollar award to supply shipboard cables, the programme is valued at US$50m;

·; Ongoing technology integration of the RVision and Corp Ten acquisitions and a strategic and significant contract received to provide a software tracking service solution to an important Middle East customer.

Cobham Defence Systems

Total revenue was down due to an adverse US dollar translation exchange rate and an organic decline of 11%. The business is almost totally focused on the US defence market with orders and revenue affected by the Continuing Resolution. In addition, there were further delays to the Wideband Global SATCOM programme, which is now expected to resume in early 2012, and reduced orders for COM-201 and COM-231 ground antennas, due to the US Army drawing on its product inventory.

Despite lower revenue, the margin increased to 18.2% (2010: 12.5%) due to Excellence in Delivery efficiency savings made in the second half of 2010. In addition, the Division benefited from favourable margins on completion of certain contracts.

Areas of growth included:

·; Revenue from the WNaN programme, to develop a cost-effective military radio for use by ground personnel, with a further US Defense Advanced Research Projects Agency (DARPA) contract worth US$13 million received for the same programme and US$40m of options;

·; Production of integrated microwave assemblies for use in the tube-launched, optically-tracked, wireless-guided (TOW) missile system, which is in service with more than 40 armed forces around the world for ground and air launched applications;

·; Shipments of integrated microwave assemblies for the Apache helicopter and for the low rate initial production of the F-35 Joint Strike Fighter.

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

·; Proposals were submitted for assemblies for a new electronic warfare (EW) jammer for the F-18 aircraft, with first orders expected in 2012. The total estimated value is US$100m, with the period of performance 2012 through 2017;

·; Completion of the critical design review for the Shipboard Electronic Warfare Improvement Programme (SEWIP) Block II with the US Navy giving authorisation to build engineering development model hardware. SEWIP Block II is planned to replace the US Navy's primary electronic warfare system.

Cobham Mission Systems

Total revenue was up due to organic growth of 4% driven by the Mission Equipment business, which benefited from increased shipments of air-to-air refuelling products, weapons carriage and release systems and aftermarket sales. Headline revenue also benefited from the January 2011 Telerob acquisition, which was partly offset by the adverse US dollar translation exchange rate.

The margin increased to 20.9% (2010: 16.8%) due to a higher margin sales mix. In addition, cost savings were generated by the move to a streamlined and modern Wimborne, UK facility.

Areas of growth included:

·; Shipments of under wing air refuelling pods, including deliveries for the Australian and UAE air forces;

·; Deliveries of On Board Oxygen Generation Systems (OBOGS) for US Navy F-18 and V-22 aircraft programmes, the US T-6A Joint Primary Aircraft Training System (JPATS) and F-15 and F-16 aircraft programmes outside the US, with a strong aftermarket contribution from a growing installed base;

·; Very strong growth from the sale of aviation restraints across a range of rotary and fixed wing platforms including UH-60 Blackhawk, CH-47, F-16, F-18 and the T-38 Escape System Upgrade Programme;

·; Strong demand for pneumatic actuation subsystems and components for Hellfire missiles and Paveway guided bomb units, with over 10,000 systems expected to be delivered in 2011.

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

·; Award of two development subcontracts for US$73m by Boeing for the hose and drogue air refuelling system on the next generation US Air Force tanker, the KC-46, following announcement of the US air refuelling award in February;

·; Further orders from Boeing to manufacture more than 400 units for the seventh production lot of the BRU-61/A weapons carriage and release system, capable of supporting the US Air Force's Small Diameter Bomb (SDB) programme. To date, Cobham has supplied more than 1,400 of these systems.

Cobham Aviation Services

Total revenue was up due to organic growth of 8% and a favourable Australian dollar translation exchange rate. Organic growth was driven by the Australian operations.

The margin increased to 14.3% (2010: 12.0%) benefiting from higher revenue in both the resource industry and freight operations in Australia and an increased profit contribution from the UK joint venture.

Areas of growth included:

·; Increased flying activity for resource industry customers in Australia, particularly in support of Chevron's Barrow Island Liquefied Natural Gas (LNG) plant development;

·; Flying activity on the Sentinel maritime surveillance programme for the Australian government has remained high;

·; The fourth dedicated freight aircraft introduced to Australia late last year, in support of the Australian Air Express customer, has continued to operate at higher than forecast levels;

·; In the UK, the modification and systems integration of four Beechcraft King Air B350 aircraft was completed, with the aircraft entering service on schedule under the UK Military Flying Training Services (MFTS) Royal Navy rear crew training contract.

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

·; Solid progress has been made on final certification of jet operations into gravel and unsealed runways in Australia. This will open up new opportunities for support to the resource industry;

·; Preparations for the modification of the Airbus A330 for the Future Strategic Transport Aircraft (FSTA) programme in the UK are well underway, with UK Civil Aviation Authority approvals imminent. The first of 12 aircraft is due to be received by Cobham in August 2011;

Non-core Businesses

The Group's non-core businesses comprise Analytic Solutions and Commercial Systems.

Total revenue was down as a result of an adverse US dollar translation exchange rate and an organic decline of 11%. In Analytic Solutions, revenue continued to be significantly impacted by temporary delays in the award of orders under the Missile Defense Agency Engineering and Support Services (MiDAESS) umbrella contract, although the rate of order release has now started to increase significantly, including the recently announced award to the business of nine task orders totalling US$227m over two years. Lower shipments of emergency locator beacons affected revenue in the Commercial Systems business ahead of a new product launch, which is expected in the second half.

OUTLOOK

Despite lower revenue reflecting challenging conditions in the US defence and security market, Cobham has delivered 6% underlying EPS growth at constant translation exchange rates, with savings from the Excellence in Delivery programme underpinning earnings progression.

The Group has seen strong growth in some commercial markets but defence and security has been particularly affected in the first half by the delayed approval of the US budget. The Group believes that the general situation in these markets will persist and continues to expect the Group's organic revenue growth in 2011 to be marginally negative. Driven by the Excellence in Delivery programme, the Board expects the Group to achieve some underlying progress in the year.

Despite the challenging backdrop for defence, the Group has leading positions in attractive commercial markets, technically differentiated products and services in the more attractive and resilient segments of defence and security, together with a strong and flexible balance sheet. The Group is investing in the future with the Excellence in Delivery programme which is rapidly generating efficiency savings and customer benefits and also reconfiguring itself to take advantage of the many opportunities in the years ahead. The Group also continues to rigorously examine its portfolio of companies and acquisition opportunities to further enhance its potential and profile. The Board is actively responding to market conditions and is confident that the Group will continue to make progress over the medium term.

APPENDIX I

CHANGES TO SEGMENTAL REPORTING

The table below sets out historical full year figures previously disclosed for 2009 and 2010, restating the disclosure of the non-core businesses and the transfer of the US composites and passive microwave businesses.

Revenue

Trading Profit

- E n d s -

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.

Consolidated statement of changes in equity (unaudited)