A company that posts an underlying operating loss of £27.7m would normally get punished by the market. Unless, of course, it goes by the name of Cobham (COB). After racking up a handful of profit warnings in a little over a year, the defence and aerospace equipment manufacturer didn’t need to do much to beat expectations, but there are signs that its chief executive, David Lockwood, is cleaning up the mess he inherited.
Net proceeds of £497m from last year’s rights issues, deferred payments against onerous contract charges, limited capital expenditure, and £27m of advanced payments from customers helped Cobham to start fixing a balance sheet that seemed beyond repair, slashing net debt by 63 per cent to £383.5m. The disposal of incompatible test and measurement businesses AvComm and Wireless earlier this year for $455m (£331m) should now give the group extra breathing space to pursue its future endeavours, starting with efforts to improve execution, reduce complexity, and eliminate duplication.
If everything goes according to plan, a cautious Lockwood believes Cobham might have a chance to capitalise on rising global defence budgets, finally deliver on lossmaking legacy contracts, and increase margins by 2-3 per cent.
Analysts at Investec expect adjusted pre-tax profit of £169.5m and EPS of 5.4p in 2018, against £156.7m and 5.4p in 2017.
| COBHAM (COB) | ||||
| ORD PRICE: | 125p | MARKET VALUE: | £2.99bn | |
| TOUCH: | 124-125p | 12-MONTH HIGH: | 150p | LOW: 102p |
| DIVIDEND YIELD: | nil | PE RATIO: | 36 | |
| NET ASSET VALUE: | 43p* | NET DEBT: | 37% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2013 | 1.79 | 127 | 10.7 | 9.68 |
| 2014 | 1.85 | 24.3 | 2.6 | 10.65 |
| 2015 | 2.07 | -39.8 | -2.8 | 11.18 |
| 2016 | 1.94 | -848 | -45.9 | 2.03 |
| 2017 | 2.05 | 66.9 | 3.5 | nil |
| % change | +6 | - | - | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes intangible assets of £894m, or 37p a share | ||||
