Downturn in military spending in US knocks profits at Cobham

Dorset-based Cobham, which is best known for making systems that allow planes to refuel in mid-air and antennae for fighter jets, has been affected by lower military spending, particularly in the run-up to the US election.

It is looking to offset the downturn through its commercial business, which has been boosted by supplying antennae, oxygen systems and communications kit to aircraft makers.

Its customers include Boeing and Airbus, which are ramping up output this year in order to meet airline demand for more efficient planes.

Cobham, which employs 11,000 people worldwide, reported a 4 per cent fall in profits to £142m in the first half of 2012 after it sold a defence-focused business in the US.

Strong demand from civil aviation helped its commercial business account for nearly a third of its revenues in the first half of 2012 – up to 32 per cent from 27 per cent the previous year.

As part of its strategy, it recently bought Danish radio and satellite communications firm Thrane & Thrane, which is mainly geared towards commercial businesses.

There is £96,000 of Cobham kit on a typical Boeing 787 and £192,000 of its equipment is found on an Airbus A380 superjumbo.

The group warned the US presidential elections later this year have the potential to cause delays to orders in the second half of 2012 or even a 10 per cent cut in spending next year, although this was an unlikely outcome.

And orders taken in the period were down 21 per cent to £768m, partly driven by the sale of the US business, but even stripping this out, underlying orders still fell 8 per cent lower as it came up against strong comparatives from the previous year.

Chief executive Bob Murphy, who joined the group as chief executive from BAE Systems in June, said: “We remain positive on the outlook for our commercial and non-US defence/security businesses, which now represent 60 per cent of revenue. The outlook for the 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.”

The group makes a diverse range of high-tech products, including video technology used to guide army bomb disposal robots. It also made antennae for the Mars Rover which landed on the Red Planet this week.