US defence cuts prompt Cobham profit warning

Michael Bow
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COBHAM, the London-listed maker of sophisticated military equipment, yesterday issued a profit warning for next year due to declining revenues from the US defence market.

The firm, which got 40 per cent of its revenues from sales of defence and surveillance equipment in the US this year, said group revenues would decline by “low-to-mid” digits in 2013.

The FTSE 250 company posted revenues of £892m in its last set of results, leading to a 10 per cent fall in profits to £90m in the first half of the year. It blamed a cyclical downturn in the $500bn (£314bn) US defence and security market for the predicted drop.

Chief executive Bob Murphy said: “Cobham is more focused in taking actions today in recognition of the likely longer term trend. US spending is likely to decline for an extended period.

“Although we see decline coming we know that this is a market which is strategically important.”

The US defence budget will be cut by $24bn next year and almost double that in 2014, unless newly re-elected President Barack Obama and Congress can come to an agreement over the country’s looming fiscal cliff. Cobham said it would invest in organic growth in the future to improve its prospects going into 2014 and 2015.

“In areas like South America and the Middle East we do have opportunities there where we can leverage from our current technologies,” Murphy added.