Cobham (COB) recorded a big drop in orders, shrinking margins and a 4 per cent slump in organic sales for the first half. The defence contractor continues to suffer from America’s budgetary wrangles and weak demand from Europe’s debt-loaded governments.
Management's defence has been two-fold. First, it has diversified into areas such as marine satellite communications and recreational aviation. Following organic growth of 8 per cent, 'commercial' businesses such as these accounted for 40 per cent of Cobham's total revenues last half. That proportion should rise once it completes its purchase of micro-electronics specialist Aeroflex. Second, it has cut costs. Management has now integrated or rationalised 32 sites since 2010, and is on track to achieve £24m in savings this year.
But the tough conditions in the core business continue. Defence and security sales fell 10 per cent year on year, while the group order book shrank 6 per cent, with order intake down by a quarter. Order volumes should now improve, at least. The first-half decline reflected the absence of several large aviation-services contracts Cobham signed last year, and management is also counting on an uptick in shorter-cycle business.
Management expects organic sales to fall this year, then grow about 4-6 per cent in 2015. Broker Liberum is forecasting pre-tax profits of £285m for the full year, giving EPS of 20.3p (from £288m and 21.5p).
| COBHAM (COB) | ||||
|---|---|---|---|---|
| ORD PRICE: | 296p | MARKET VALUE: | £3.4bn | |
| TOUCH: | 295-296p | 12-MONTH HIGH: | 329p | LOW: 254p |
| DIVIDEND YIELD: | 3.4% | PE RATIO: | 28 | |
| NET ASSET VALUE: | 103p* | NET DEBT: | 27% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 864 | 50.9 | 4.5 | 2.640 |
| 2014 | 834 | 54.2 | 4.3 | 2.904 |
| % change | -3 | +6 | -6 | +10 |
Ex-div: 9 Oct Payment: 7 Nov *Includes intangible assets of £1.1bn, or 96p a share | ||||
