LONDON (Alliance News) - Aerospace and defence manufacturer Cobham PLC on Thursday said its reported pretax profit was dragged lower by the acquisition of telecommunications equipment maker Aeroflex in the first half, though the same acquisition meant its revenue jumped higher and sent its underlying pretax profit up.
Cobham shares were up 6.8% to 280.10 pence on Thursday morning, the best performer in the FTSE 250.
Cobham said its pretax profit for the six months to the end of June was down to GBP4.0 million from GBP54.0 million a year earlier, entirely due to a surge in administrative expenses and financing costs in the half related to the Aeroflex deal. Stripping out the effects of the Aeroflex acquisition, and other exceptional costs, pretax profit for the group rose to GBP135.0 million from GBP118.0 million.
But while the deal had a one-off impact on Cobham's profit for the half, it boosted its revenue to GBP1.05 billion from GBP834.0 million and pushed its order intake for the period up to GBP960.0 million from GBP728.0 million, a 32% rise.
Excluding the contribution from Aeroflex, Cobham's organic revenue growth in the half was 0.3%. The group said defence and security market revenue was boosted by better aerial refuelling sales, along with a good contribution from the aviation service sector.
This was, however, mostly offset by weakness in commercial markets, with revenue from the marine satellite communications business lower ahead of the launch of FTSE 100-listed Inmarsat PLC's Global Xpress constellation. Cobham also saw reduced revenue from oil and gas markets. Aerospace markets, including satellite communications antennas and avionics products, were the bright spots in the commercial market.
Cobham said it will pay an interim dividend of 3.05 pence per share, up from 2.904p a year earlier.
"We have delivered strong revenue and earnings growth in the first half, primarily due to our Aeroflex acquisition. We have achieved modest organic revenue growth overall driven by aerial refuelling and the Aviation Services business. While we continue to see good revenue growth from our commercial aerospace products, there are currently short-term headwinds in certain of our commercial marine and land markets," said Cobham Chief Executive Bob Murphy.
The company said it anticipates demand conditions will improve in its shorter-cycle, commercial land and marine markets, and expects to see further progress on its aerial refuelling programmes.
As a result, Cobham said trading for the full year remains in line with its expectations, though it reiterated what it said in its first-quarter trading update that earnings will be more heavily-weighted to the second half than in the past.
"Looking further ahead, the board remains confident that our leading positions in attractive markets, in particular those benefiting from the increasing demand for connectivity related mobile communications, together with our continued focused investment, leave us well placed to deliver sustainable long-term growth," Murphy added.
Cobham said it seeing some short-term challenges in land and marine markets within is commercial division, which resulted in a fall in organic revenue from commercial activities in the first half.
Cobham said it remains confident on the long-term potential of commercial markets, however, and it expects to benefit from a recovery in the second half, driven by the upcoming global entry of the Inmarsat Global Xpress satellite constellation. Inmarsat, the FTSE 100-listed satellite communications company, said Thursday it expects its third Global Xpress satellite to be deployed by the end of August, after delays it faced in the first half.
In the US defence and security market, Cobham said it is seeing signs that investment accounts are starting to stabilise, which should help to make revenue from this market more predictable going forward. The group also expects to benefit from a growing focus on networked intelligence, communication links and interoperability in the US defence market. It said it has benefited from the resumption of multi-year production on the C-130 aircraft for the US Marine Corp and the US Air Force, for which Cobham supplies a number of services, including aerial refuelling.
For defence and security markets outside the US, first-half trends were broadly in line with previous trading, with growth in Asian and Middle East markets and more subdued conditions in Europe. In the medium-term, the group said it expects to generate solid growth in revenue from its non-US defence and security activities, including from aerial refuelling contracts. It also expects further growth in aviation services, particularly in the Middle East.
Liberum analyst Ben Bourne said Cobham results were "better than feared" and said the signs of stabilisation in global defence markets will benefit the company given the "strong platform exposure" it has.
By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance
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