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Cobham, the UK aerospace and defence group, will bolster its commercial division and reduce its reliance on US military spending as concerns about the Pentagon’s budget weigh on the sector, according to its new chief executive.
Bob Murphy, who joined the group as chief executive from BAE Systems in June, said he wants the group to focus increasingly on the commercial aviation sector as fears of military spending cuts in the US weigh on the group.
The group’s exposure to the US defence sector has fallen to 40 per cent, from 48 per cent in 2011. “I think we’re underweight in commercial versus overweight in defence,” said Mr Murphy. “I’m happy with the defence position that we have.”
Cobham derives 27 per cent of revenues from its commercial business, with the remainder gained from non-US defence and security.
The effects of acquisitions and disposals dominated Cobham’s first-half results, with the group’s disposal of its analytic solutions business for £222m in October last year contributing to a 5 per cent year-on-year drop in group revenue, which fell to £843m.
The disposal knocked almost a fifth off the group’s order intake on a year-on-year basis. Cobham recorded £768m orders in the first half of 2012, compared with almost £1bn orders in the first half of 2011.
The acquisition of Thrane & Thrane
, the Danish satellite telecommunications equipment, in April for £281m will start feeding through to Cobham’s top line in 2013, according to the group.
Cobham said it would pursue growth both organically and via acquisitions. Mr Murphy said: “You shouldn’t be surprised to see other acquisitions similar to Thrane & Thrane – good businesses that make strategic sense. We want to find businesses that are good, long-term value companies.
Cobham issued cautious guidance for the remainder of the year, with uncertainty about US military spending, the recent disposal of its Beacon business in July and the lack of share buyback expected to weigh on the business in the coming year.
The group’s underlying trading margin remained steady at 18.7 per cent, however the margin in Cobham’s core business fell 1.2 percentage points to 18.8.
Profit before tax at the group fell 9.2 per cent to £90m. Diluted earnings per share rose 4.9 per cent to 7.27p, with the group’s recent share buyback helping to support the increase. Shares in the group fell 4.7 per cent to 227p in morning trading.