Satellite communications group Cobham (COB) has taken a more conservative view on prospects given the lack of clarity on US defence budgets. A 3 per cent drop in first-half underlying pre-tax profit, which strips out currency and acquisition benefits, met forecasts and organic revenue is still expected to end the year down by low-to-mid single digits. But now there is talk only of "potential" for a return to modest organic revenue growth in 2014. It has dropped the "above" that had preceded forecasts for mid-single-digit growth after that, too.
That in itself is not a problem, but it does conflict with the share price rally that values the company on 13 times earnings estimates for 2014. Analysts at Investec Securities are already reviewing their forecasts, currently for adjusted pre-tax profit of £311m next year and adjusted EPS of 22.8p, up from the £294m and 21.7p forecast in 2013. Underlying revenue from US defence tumbled 7 per cent during the period, although a revenue milestone last year meant non-US defence work fell 9 per cent. Still, there are positives, too.
Revenue from commercial work, mainly flying miners and oil men around Australia, supplying commercial jets with communications systems and antennas for ships, grew 8 per cent and now generates 36 per cent of sales. It will be more, and demand from the Far East is already picking up. And Cobham is two-thirds of the way to cutting £100m of costs by 2016 after finding an extra £2m of savings.
COBHAM (COB) | ||||
|---|---|---|---|---|
| ORD PRICE: | 294p | MARKET VALUE: | £3.17bn | |
| TOUCH: | 294-295p | 12-MONTH HIGH: | 313p | Low: 186p |
| DIVIDEND YIELD: | 3.1% | PE RATIO: | 22 | |
| NET ASSET VALUE: | 100p* | NET DEBT: | 45% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 843 | 89.3 | 7.24 | 2.40 |
| 2013 | 864 | 50.9 | 4.53 | 2.64 |
| % change | +2 | -43 | -37 | +10 |
Ex-div: 9 Oct Payment: 8 Nov *Includes intangible assets of £1.2bn, or 111p a share | ||||
