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12 Sep 07. Foreign exchange and restructuring costs weighed on half-year results at Cobham, although the defence engineer said underlying growth was robust at the midpoint of its restructuring programme. The group, which generates 47 per cent of its business in the US, was hit by £27m currency translation costs for the six months to June 30. Disposals caused a £29m shortfall in revenues during the period, while a failed acquisition attempt cost £3.9m. The expenses contributed to a fall in interim revenues from £513.6m to £493.8m and a fall in pre-tax profits from £89m to £68.2m. The shares fell 5 per cent, or 9¾p, to 184¾p. Cobham’s adjusted figures, however, showed a rise in underlying profits from £78.9m to £86.1m. Gordon Page, chairman, said: “We continue to deliver operational efficiencies, enhance our technology base, win positions on long-term programmes and make progress with our acquisition strategy.” Cobham supplies technology to the US Special Forces’ C130H Combat Talon II tanker aircraft fleet. It gained £40m in sales from mid-air refuelling technology.
During its restructuring programme, which has skewed year-on-year comparisons,
Cobham has disposed of underperforming units such as its fluids business. In its avionics and surveillance division, which makes unmanned vehicle technology and other products, trading profits rose from £13.4m to £20.8m on revenues ahead 22 per cent to £119.5m. Growth reflected strong sales to the US Department of Homeland Security and UK security agencies, as well as “covert subject and internet surveillance product sales”. In Cobham’s antennae division, trading profit dipped from £20m to £18.4m, hit by the disposal of Precision Antennas in April 2006. The company bought US-based Patriot Antennas for a consideration of $44m (£22m). The company’s order book stood at £1.7bn. Earnings per share declined from 6.87p to 4.43p, though it said underlying earnings grew from 4.97p to 5.48p. Allan Cook, chief executive, said the company was targeting US acquisitions. The interim dividend is 1.22p (1.11p).
FT Comment
• The lower interim figures from Cobham were standard for a company undergoing an ultimately earnings-enhancing restructuring. Analysts at Dresdner Kleinwort maintained their “buy” rating and accepted Cobham’s underlying earnings per share growth of 10 per cent, saying that it reflected “excellent organic revenue growth and further margin expansion” in spite of a foreign-exchange headwind that equalled 6 to 7 per cent of sales. Meanwhile, Citigroup also reiterated its “buy” rating on Cobham shares. (Source: FT.com)

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