04 Nov 09 4 November 2009. For the first nine months of 2009 the Group’s revenue has grown strongly, broadly in line with the Board’s expectations, including acquisitions and favourable currency translation.
Cobham’s military and government businesses have performed well in continuing healthy market conditions and it is encouraging to report that Cobham Defence Systems’ revenue is now beginning to benefit from the recent order intake for vehicle intercom systems. As expected, Cobham’s commercial businesses have declined in generally unfavourable market conditions.
Since the end of the first half of 2009, there have been a number of material events and transactions:
• It was announced at the interim results that the US Army VIS-X programme for next generation vehicle intercom systems, which is worth US$1.2bn to Cobham over ten years, had been protested by one of the losing bidders. In October this protest was denied and the programme will now progress with the Cobham-Northrop Grumman team as the selected supplier. Two orders valued at US$40m were announced in October for the supply of the ROVIS (AN/VIC-3) digital vehicle intercom
system under the current agreement with the US Army;
• A contract award was announced in July to provide microclimate cooling systems to the Air Warrior programme office, with expected revenue of up to US$110m over the next five years;
• Also in July, Cobham announced a contract modification from the US Navy worth US$32m to provide additional AN/ALQ-99 Low Band Transmitters and a US$15m contract for the development and demonstration of the low-cost Wireless Network after Next, with potential for deployment throughout the Armed Services;
• In October an AUD$100m contract extension was announced for the provision of air freight services to Australian air Express until 2015. A further £18m contract was announced in August to modify and support four King Air aircraft for the first phase of the UK Military Flying Training Service (UKMFTS).
In August, it was announced that Andy Stevens, currently Cobham’s Chief Operating Officer, had been appointed as Cobham’s new Chief Executive with effect from 1 January 2010. On the same day Cobham announced the retirement of the Chairman, David Turner, at the conclusion of the Annual General Meeting in May 2010. The process for identifying a successor to the Chairman continues.
At the end of September, Cobham’s net debt had increased to £468m (30 June 2009: £442m). This was primarily due to the July payment of the final dividend, an adverse movement in foreign exchange rates, as most of Cobham’s debt is US dollar denominated, and net deferred acquisition related payments, partly offset by good cash generation from operations in the period.
The FT reported that Cobham said sales had grown “strongly” over the first nine months, as revenues from military and government customers plus currency effects helped offset declines in its commercial business.
“The board expects to achieve its previous outlook of further progress, with the fourth quarter performance expected to lead to increased levels of organic revenue growth from the technology divisions in the full year,” the company said in an interim statement. Analysts at Citigroup expect Cobham to generate pre-tax profits of around £280m ($464m) on revenues of £1.9bn, up 31 per cent and 13 per cent respectively compared with the previous year.
While many defence stocks have underperformed in recent months on fears of budget cuts in the US and UK, Cobham, which is exposed to fast growing niches such as military communication gear, has found favour. Since the start of the year Cobham shares have risen almost 10 per cent to 225 1/5p, despite news that Allan Cook, the long serving chief executive, will retire in December and David Turner, chairman, will leave next year.