Profits down, foreign exchange headwinds, a single-digit decline in organic revenue forecast for this year and ongoing uncertainty around military budgets ought to describe a company on its knees. Yet defence contractor Cobham’s (COB) share price is nudging an all-time high - explained only by further aggressive cost cutting and confidence in mid-single-digit growth from 2015.
Finding £28m of savings - £9m more than expected - clearly flattered margins, but they still shrank: underlying pre-tax profit, which strips out a number of one-off items like a £63m write-down at the tactical communications and surveillance business, fell 4 per cent to £288m. Cobham now expects £105m of annualised savings by next year, £5m more and one year earlier than previously flagged.
Supplying radio communication to civil-aerospace programmes like the Airbus A350 accelerated growth in commercial sales to 7 per cent. "We'll see good solid growth next year, too," chief executive Bob Murphy told us. But US defence remains the big problem. Sales skidded 11 per cent lower after the withdrawal from Afghanistan caused a slump in sales to land programmes. And despite content on the KC-46 aerial refuelling tanker and F-35 fighter jet, further weakness is inevitable.
Broker Investec Securities expects adjusted pre-tax profit of £277m this year, giving adjusted EPS of 20.4p (from 21.6p).
COBHAM (COB) | ||||
|---|---|---|---|---|
| ORD PRICE: | 307p | MARKET VALUE: | £3.3bn | |
| TOUCH: | 306-307p | 12-MONTH HIGH: | 313p | LOW: 229p |
| DIVIDEND YIELD: | 3.2% | PE RATIO: | 29 | |
| NET ASSET VALUE | 97p* | NET DEBT: | 43% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 1.88 | 245 | 16.3 | 5.45 |
| 2010 | 1.90 | 189 | 13.3 | 6 |
| 2011 | 1.85 | 234 | 16.8 | 8 |
| 2012 | 1.75 | 204 | 16.0 | 8.8 |
| 2013 | 1.79 | 127 | 10.7 | 9.68 |
| % change | +2 | -38 | -33 | +10 |
Ex-div: 30 Apr Payment: 30 May *Includes intangible assets of £1.2bn, or 108p per share | ||||
