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Cobham looks to second half

The defence contractor is working its way through the issues highlighted in April's profit warning
August 5, 2016

Shares in Cobham (COB) recovered some ground after an early trading sell-off following release of first-half figures that effectively fleshed out April's profit warning - the second within six months. Operational issues within the group's wireless communications division were chiefly to blame, but performance was also stymied by a fall-away in demand for flying services due to reduced commercial activity in Australia's extractive industries.

IC TIP: Hold at 165p

The end result was that Cobham swung to an operating loss of £12m against a profit of £29.7m in the corresponding period in 2015. And even on an underlying basis, when you disregard the effect of disposals and one-off charges, pre-tax profits contracted by 44 per cent to £76m. On a positive note, cash conversion improved from 77 per cent to 106 per cent, although the interim dividend was rebased to 2.03p to take account of the emergency rights issue.

Cobham faces execution risks on some of its big defence contracts in the US. Nevertheless, performance should be buoyed by increased satellite communication volumes, particularly related to high-speed broadband, and remedial measures to tackle those technical and supplier quality issues at its wireless business.

Prior to these figures, JPMorgan Cazenove gave adjusted profits of £290m for the December year-end, leading to EPS of 12.8p, against £332m and 16.5p in 2015.

 

COBHAM (COB)
ORD PRICE:165pMARKET VALUE:£2.82bn
TOUCH:164.7p-165p12-MONTH HIGH:263pLOW: 124p
DIVIDEND YIELD:6.4%PE RATIO:NA
NET ASSET VALUE:77p*NET DEBT:67%

Half-yearto 30 JuneTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20151.054.3-0.172.59
20160.92-38.4-1.852.03
% change-13---21

Ex-div: 6 Oct

Payment: 4 Nov

*Includes intangible assets of £1.77bn, or 104p a share