Cobham’s rising orders fail to lift its bottom line

Adam Hignett
Defence firm Cobham had a 15 per cent rise in orders
SHARES in aerospace firm Cobham drifted down yesterday as full-year results revealed rising orders failed to translate into profits.

The company’s reliance on defence contracts took its toll as governments around the world cut military budgets. Its US market, which alone accounts for 34 per cent of earnings, saw revenues fall four per cent as the country reined back on spending.

Cobham’s non-US defence market was hit even harder as revenues fell six per cent. Earnings were dragged down by weak government spending in Europe failing to offset growth in its Asian, Middle Eastern and South American markets.

The company had better success in its commercial segment, which accounts for nearly 40 per cent of revenues. Revenues in this division increased by five per cent as it capitalised on increasing aircraft production and demand for its specialist communications products.

The company’s high exposure to foreign markets bought the added problem of a strong sterling, which the company said had cost it £85m in revenues. It spent £897m on acquisitions, with the majority being used to purchase Aeroflex, a company specialising in the production of integrated circuits and semiconductors.

Overall group revenues inched up three per cent on the year to £1.85bn, on the back of a 15 per cent increase in orders, worth £1.9bn.

But acquisitions, sterling’s strength and £32m in restructuring costs, meant pre-tax profit plunged 11 per cent to £257m. Shares closed down 3.39 per cent at 32.70p.