Cobham is pushing to further grow its US business as it eyes more acquisitions as well as organic growth despite the economic downturn.
The UK aerospace and defence supplier has already seen its US business expand by 169% in the past five years from £300 million ($492 million) in 2004 to £807 million in 2008. For the first time last year, the USA accounted for more than half of Cobham's total revenues. That figure is expected to easily surpass 60% in 2009.
"It's a big chunk and it's growing," says executive vice-president North America Charlie Stuff. "We're focusing on moving more business into North America."
Cobham completed six acquisitions in the USA last year and another in May. Stuff expects the firm's US revenues to spike again this year as it looks to buy more companies and the revenues generated by its acquisitions in 2008 are counted for a full year.
ACQUISITIVE COMPANY
"We're an acquisitive company," says Stuff. "We acquired $1.2 billion worth of US companies in 2008. We're moving in that direction and continue to do so."
He says Cobham is looking at companies of all sizes, mainly in the defence sector. Most of its recent acquisitions have been put into its Defence Systems division, which last year saw its revenues soar 76% to $795 million, with about 70% generated in the USA.
"That $795 million will almost double this year - that's how much this division has changed through acquisitions," says defence systems division president Jeremy Wensinger. Many recent acquisitions were targeted for their command, control, communications, computers and intelligence (C4I) capability, he adds.
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The idea, he says, is to provide more "aggregate capability" by joining several previously smaller independent C4I companies.
"It wasn't a random set of companies we glued together," says Wensinger, adding that Cobham could not have added this capability organically given the lengthy and costly research and development required for C4I technology.
"A lot of the focus now is on how we put one and one together and make it more than two," says Wensinger. "We're trying to integrate more and become more a C4ISR system or subsystem player. You'll see a change in the type of work we pursue."
Stuff says all of Cobham is now focusing more on offering integrated solutions, combining different products from different units that were previously sold independently. "We're definitely going after more subsystem integration. We want to climb up from tier 3 to tier 2."
To better promote its integrated offering, Cobham has completed a comprehensive rebranding that eliminated several legacy names and created four major divisions. Two of the other divisions, Cobham Avionics and Surveillance and Cobham Mission Systems, also have large US businesses. Only Aviation Services has no US presence, but this could change.
"We're looking at services and training and bringing the capability we provide in the UK and Australia to the USA," says Stuff.
In particular, Cobham is looking at the US military pilot training market, with organic growth the more likely path as Stuff says no suitable US companies are currently for sale in this sector.
Another major focus for Cobham is to increase its export business. Stuff says exports account for less than 10% of its US revenues, but there are untapped opportunities, particularly in emerging markets such as India.
ORGANIC GROWTH
More exports should fuel further organic growth, which last year was at or near double-digits at all four of Cobham's divisions. The exports could also offset any negative impact resulting from the expected drop in US defence spending.
US military and government customers accounted for 44% of Cobham's revenues last year. Although the USA is reducing its defence spend, Cobham does not expect to be affected as much as other defence firms, given its strong presence in submarkets where funding is increasing, such as intelligence assurance, electronics, satellite communications and unmanned air vehicles.
And Cobham has the cash for more US spending, says Stuff: "We're not slowing anything. We see more opportunity than risk with what's going on"
Source: Flight International
