Cobham hikes divi, but looks ahead with caution

Defence technology group Cobham saw robust growth in its core businesses in the first half, but said that it is approaching 2013 'with caution', particularly as its order intake slipped by over a fifth.

Nevertheless, the firm hiked its interim dividend per share by 33% from 1.8p to 2.4p.

Core revenues, which exclude Analytic Solutions (divested in November 2011) and Commercial Systems (divested in July 2012), increased by 6% from £773m to £817m in the six months to June 30th. Organic core revenue growth rose 1.7%, better than the 1% core growth expected by Credit Suisse.

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However, total revenue fell 5% from £892m to £843m, while the order intake dropped 21% from £969m to £768m, in part due to the divestment of Analytic Solutions. Excluding this sale and adjusting for acquisitions, group orders fell 8%.

Underlying pre-tax profits fell 4% from £149m to £142m. Underlying earnings per share (EPS) increased 9% from 9.8p to 10.7p; Credit Suisse was expecting around 7% EPS growth. Underlying results are from continuing operations excluding the impacts of certain M&A-related costs and business restructuring costs (as well as other items).

The company said that the divestment of the Beacon business and the more first half-weighted contribution from the 2011 share buy-back means that full-year EPS growth will be lower than the first half. As such, full-year EPS will be at similar levels than the previous year.

"We have made progress in the first half delivering organic revenue growth, earnings per share up 9% and a further step in rebalancing the portfolio towards our commercial markets," said the new Chief Executive Bob Murphy.

He said that the outlook for the commercial and non-US defence/security businesses is "positive" - these units now represent 60% of revenue.However, the outlook forthe US defence/security market for the end of 2012 and 2013 is particularly uncertain due to the upcoming US elections and the lack of political consensus on US Government budgets, Murphy added.

Cobham's exposure to the US defence/security markets has been reduced over the last year from 48% of group revenue to 40% (core pro-forma).

"Given the uncertainties referred to we are approaching 2013 with caution and building flexibility into the operating model including preparations for appropriate cost management in response to differing US Government budgetary outcomes."

BC