Cobham (COB) did a decent job steadying investor nerves at the halfway point, revealing a 25 per cent uptick in order intake at constant currencies and a reiteration of its cash guidance, amid an ongoing contractual dispute with Boeing over the troublesome KC-46 aerial refuelling programme.
Management is on a mission to overhaul the embattled engineer, mindful that it must improve the reliability of its products and ensure that they are delivered on time and on budget if it’s to succeed in achieving top-line growth. Significant challenges remain, although a book-to-bill ratio of 1.11 times and strengthening of the balance sheet offer hope that Cobham is now on the right path to recovery. Proceeds from the controversial $455m (£350m) disposal of Cobham’s two testing businesses were used to slash net debt by 86 per cent to £53.6m, helping to free the engineer from hefty interest payments which, alongside increased working capital, weighed on cash generation during the period.
Updates on Boeing’s “unquantified” damage claims, a major overhang on the stock, weren’t provided. Broker Jefferies notes that existing free cash-flow guidance factors in the possibility that Cobham will be forced to pay significant compensation, but adds that there’s likely a limit on the group’s contractual liability. S&P Capital IQ consensus estimates adjusted EPS of 5p for the year-end, rising to 7p in 2019.
| COBHAM (COB) | ||||
| ORD PRICE: | 129p | MARKET VALUE: | £3.08bn | |
| TOUCH: | 128.9-129p | 12-MONTH HIGH: | 150p | LOW: 110p |
| DIVIDEND YIELD: | nil | PE RATIO: | 14 | |
| NET ASSET VALUE: | 52p* | NET DEBT: | 4% | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 1.03 | 18.5 | 0.9 | nil |
| 2018 | 0.92 | 179 | 6.9 | nil |
| % change | -10 | +869 | +667 | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes intangible assets of £856m, or 36p a share | ||||
