Cobham’s commercial charge

An across the board decline left the underlying trading margin at Cobham’s core businesses down 180 basis points at 19.2 per cent. A double-digit drop in profit from defence systems to £44.9m, together with a decline at aviation services, offset slim gains in aerospace and security, leaving group underlying pre-tax profit down 8 per cent at £302m. Expect further margin erosion this year, too, says management. However, exposure to the military has shrunk to 40 per cent from nearly half in 2011 and cutting costs there should double savings to £100m by 2016. Commercial markets like satellite communications, offshore oil & gas and shipping now comprise over a third of turnover following the purchase of Thrane & Thrane (T&T) in June, and from sales of antenna for the Boeing 787 and Airbus A350. Yet chief executive Bob Murphy wants more and further acquisitions look inevitable. Elsewhere, orders from the Middle East may be lumpy, but India is spending big on defence and T&T gives valuable access to China.

Broker Investec Securities expects underlying pre-tax profit of £285m in 2013, giving adjusted EPS of 20.9p (2012: 22.6p).