Cobham plc Annual Report & Accounts 2004 Contents
Cobham at a Glance  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Group Financial Highlights  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Chairman’s Statement  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Chief Executive’s Review  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Business Review  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Cobham’s Commitment to Corporate Social Responsibility  . . . . . 21
Financial Review  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Board of Directors  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Directors’ Report  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Corporate Governance  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Directors’ Remuneration Report  . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Statement of Directors’ Responsibilities  . . . . . . . . . . . . . . . . . . . . . 41
Independent Auditors’ Report  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Accounting Policies  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Consolidated Profit and Loss Account  . . . . . . . . . . . . . . . . . . . . . . . 47
Consolidated Balance Sheet  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Parent Company Balance Sheet  . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Consolidated Cash Flow Statement  . . . . . . . . . . . . . . . . . . . . . . . . . 50
Reconciliation of Net Cash Flow to Movement in Net Debt . . . . . 50
Statement of Total Recognised Gains and Losses  . . . . . . . . . . . . . 51
Reconciliation of Movements in Shareholders’ Funds  . . . . . . . . . . 51
Notes to the Financial Statements  . . . . . . . . . . . . . . . . . . . . . . . . . 52
Group Financial Record  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Shareholder Information  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Lift flap for timeline of
70 years of company
development 1910 1900 1890
19
14
BERKS
HOL
A
A
LOUIS BLERIOT
CROSSES ENGLISH
CHANNEL 1909
WRIGHT BROTHERS
ACHIEVE FIRST
POWERED FLIGHT
ALAN JOHN COBHAM
BORN 6 MAY 1894
ALAN COBHAM JOIN
BRITISH ARMY ON
OUTBREAK OF WA
BRO
TO
19
03
18
94
19
09
Cobham plc designs and manufactures equipment, specialised systems and
components for the aerospace, defence, communications, law enforcement
and national security markets and operates, maintains and modifies 
aircraft particularly in relation to special mission flight operations. ‘PROBE AND DROGUE’ METHOD
OF AIR REFUELLING INVENTED BY
FLIGHT REFUELLING LTD
FLIGHT REFUELLING LTD
MOVED TO MALVERN AND
STAVERTON DURING WWII
FLIGHT 
REFUELLING LTD
SUPPLY AIR
REFUELLING
EQUIPMENT FOR
USAF B-29S
USAF B-50 ACHIEVES
FIRST NON-STOP
FLIGHT AROUND 
THE WORLD USING
FLIGHT REFUELLING
LTD’s AIR REFUELLING
EQUIPMENT
NO. 214 SQUADRON
BECOMES FIRST RAF
DEDICATED TANKER UNIT
FLIGHT REFUELLING
LTD DEVELOPS AIR
REFUELLING
EQUIPMENT FOR
ROYAL AIR FORCE
AND ROYAL NAVY
DURING 1950s
AIR REFUELLING
USED IN COMBAT
FOR FIRST TIME IN
KOREA
FLIGHT REFUELLING LTD
RETURNED  TO FORD 1946
BUT RELOCATED TO
TARRANT RUSHTON,
DORSET 1948
FLIGHT REFUELLING LTD
ATTENDS FIRST SBAC
EXHIBITION AT FARNBOROUGH
FLIGHT REFUELLING INC 
SET UP IN USA
AIR REFUELLING TRIALS
CONDUCTED OVER SOUTH
AND NORTH ATLANTIC
WITH BRITISH AIRLINES 
1946 - 1948
1940 1950 1960 1920 1930
19
39
19
34
19
35
FLIGHT 
REFUELLING LTD
BECOMES A PUBLIC
COMPANY
ALAN
COBHAM
ENGINEERING
FORMED
COBHAM 
AIR ROUTES LTD
CREATED
SHIRE AVIATION
FORMED BY
COBHAM AND
LMES BROTHERS
SIR ALAN
COBHAM
ATTEMPTS FIRST
AIR REFUELLED
FLIGHT TO INDIA
SIR ALAN COBHAM  
FORMS FLIGHT
REFUELLING LTD AT
FORD, SUSSEX, UK
ALAN COBHAM JOINS 
DE HAVILLAND
AEROPLANE HIRE CO 
AS CHIEF PILOT
NS 
N
AR
SIR ALAN COBHAM
CARRIES OUT SURVEY
FLIGHT OF AFRICAN LAKES
SIR ALAN COBHAM
AWARDED KNIGHTHOOD
AFTER FIRST FLIGHT TO
AND FROM AUSTRALIA
SIR ALAN COBHAM
UNDERTAKES MUNICIPAL
AERODROME CAMPAIGN
TOUR OF GREAT BRITAIN
ALAN COBHAM AND SIR SEFTON
BRANCKER CARRY OUT AIR ROUTE
PROVING FLIGHT TO INDIA AND
BURMA 1924-1925
TRANSATLANTIC TRIALS
SUCCESSFULLY CARRIED OUT BY
IMPERIAL AIRWAYS ‘C’ CLASS
FLYING BOATS REFUELLED BY
FLIGHT REFUELLING LTD TANKERS
COBHAM BLACKBURN
AIRLINES FORMED
CHARLES LINDBERGH IS
FIRST TO FLY SOLO
ACROSS THE ATLANTIC
ALAN COBHAM
WINS
PRESTIGIOUS
KING’S CUP 
AIR RACE
ALCOCK AND
OWN ARE FIRST
O FLY NON-STOP
ACROSS THE
ATLANTIC
SIR ALAN COBHAM
CONDUCTS FLYING BOAT
ROUTE PROVING FLIGHT
AROUND AFRICA
ALAN COBHAM CARRIES OUT
FIRST FLIGHT TO AND FROM
SOUTH AFRICA 
1925-1926
SIR ALAN COBHAM’S NATIONAL
AVIATION DAY TOURS BRITISH ISLES 
1932-1935
FLIGHT
REFUELLING LTD
ENTERS DRONE
TARGET
BUSINESS
FLIGHT
REFUELLING
(HOLDINGS) LTD
FORMED
19
20
19
19
19
24
19
27
19
28
19
29
19
26
19
47
19
48
19
55
19
50
19
49
19
60
FLIGHT REFUELLING LTD HEAVILY
COMMITTED TO SUPPORTING
BERLIN AIRLIFT 1948-1949
19
54
19
31
19
58 FLIGHT REFUELLING LTD
‘RUSHTON’ TARGET
TOWING WINCH ENTERS
SERVICE
FLIGHT REFUELLING LTD’s
MANUFACTURING ACTIVITIES
MOVES TO NEW FACTORY IN
WIMBORNE, DORSET, UK
FLIGHT REFUELLING LTD’s AIRFIELD
DIVISION TRANSFERS FROM
TARRANT RUSHTON TO
BOURNEMOUTH INTERNATIONAL
AIRPORT AND IS RENAMED
AIRCRAFT OPERATING DIVISION
FLIGHT REFUELLING LTD’s
AIR REFUELLING
EQUIPMENT PLAYS VITAL
ROLE IN FALKLANDS
CAMPAIGN
1970 1980 1990 2000
FIRST 
FLIGHT OF 
CONCORDE SST
SIR ALAN COBHAM
DIES AGED 79 
21 OCTOBER 1973
STANLEY AVIATION
CORPORATION JOINS
FLIGHT REFUELLING
(HOLDINGS) LTD 
CHELTON LTD JOINS
FR GROUP PLC
FR GROUP PLC – 
20 COMPANIES
WORLDWIDE
COBHAM PLC – 
50 COMPANIES
WORLDWIDE
COBHAM PLC – 
78 COMPANIES
WORLDWIDE
FR GROUP PLC
RENAMED
COBHAM PLC
SARGENT FLETCHER INC 
JOINS COBHAM PLC
CARLETON
AVIATION JOINS 
FR GROUP PLC 
AS CARLETON
TECHNOLOGIES INC 
CDR NEIL ARMSTRONG
BECOMES THE FIRST
MAN TO LAND ON 
THE MOON
NATIONAL JET
SYSTEMS JOINS
COBHAM PLC
FLIGHT REFUELLING
(HOLDINGS) LTD
RENAMED 
FR GROUP PLC
FR AVIATION LTD
FORMED AS AN
INDEPENDENT
COMPANY
19
68
19
69
19
70
19
81
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73
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82
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85
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87
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20
04
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63
70 Years of Company Development 1934 - 2004 Cobham has consistently pursued an aggressive approach to building and managing a diverse portfolio 
of aerospace and defence businesses. This strategy has generated strong shareholder returns. The Group
remains in a ﬁnancial and strategic position to sustain success.
Chelton has an extensive global presence
with facilities extending into Europe,
North America and South Africa. It is one of
the world’s leading designers and suppliers
of antennas, aircraft communication and
navigation equipment, microwave 
sub-systems, radomes and composite
structures for the aerospace, defence,
law enforcement and national security,
search and rescue and communications
markets.
FLIGHT OPERATIONS & SERVICES
The group operates, modiﬁes and maintains
more than 150 aircraft in the aerospace 
and defence markets, for military training,
special mission ﬂight operations, and
outsourced freight and passenger operations
and also maintains large military aircraft.
2   COBHAM PLC
Cobham at a Glance
This group is a market leader in the design,
development and support of air refuelling
equipment, auxiliary mission equipment,
life support and oxygen systems, ﬂuid and 
air distribution components and systems 
and countermeasures for the aerospace 
and defence markets.
AEROSPACE SYSTEMS
CHELTON ANNUAL REPORT & ACCOUNTS 2004   3
Group Financial Highlights
ANALYSIS OF TURNOVER Non Military         Military
£983.0m
£493.3m | 50.2% £489.7m | 49.8%
£417.6m | 50.2% £415.0m | 49.8% £832.6m
£734.6m £371.8m | 50.6% £362.8m | 49.4%
EARNINGS PER ORDINARY SHARE – basic
76.0p (2003 - 17.2p) +341.9%
EARNINGS PER ORDINARY SHARE – fully diluted
75.5p (2003 - 17.1p) +341.5%
EARNINGS PER ORDINARY SHARE – underlying
94.8p (2003 - 93.5p) +1.4%
INTERIM DIVIDEND PAID – paid 13 December 2004
9.2p (2003 - 8.36p) +10.0%
RECOMMENDED FINAL DIVIDEND – payable 4 July 2005
21.8p (2003 - 19.8p) +10.1%
RECOMMENDED DIVIDEND PER ORDINARY SHARE
31.0p (2003 - 28.16p) +10.1%
EARNINGS PER ORDINARY SHARE – underlying
94.8p
86.4p
DIVIDEND
31.0p
2004
2003
2002
25.6p
28.16p
2004
2003
2002
93.5p
2004
2003
2002
TURNOVER
£983.0m (2003 - £832.6m) +18.1%
PROFIT on ordinary activities before taxation
£125.9m (2003 - £54.5m) +131.0%
UNDERLYING PROFIT on ordinary activities before taxation*
£146.9m (2003 - £135.3m) +8.6%
*Underlying proﬁt measures exclude the impact of amortisation of goodwill and, for 2003, integration costs and the exceptional loss on disposal of Westwind. 4   COBHAM PLC
RESULTS
Profit on ordinary activities before taxation
increased by 131% to £125.9m (2003 - £54.5m).
Earnings per share increased by 342% to 76.0p
(2003 - 17.2p). The 2003 ﬁgures include the
disposal of Westwind.
The 2004 results continue the Group’s growth
trend over the past two decades. Turnover for the
year has increased by 18.1% to £983.0m (2003 -
£832.6m). Underlying* operating proﬁt rose by
6.2% to £156.9m (2003 - £147.7m). Underlying
proﬁt before tax rose by 8.6% to £146.9m (2003
- £135.3m). Underlying earnings per share of
94.8p (2003 - 93.5p) were 1.4% higher than the
previous year.
•
The 2004 results continue the
Group’s growth trend.
•
We are well positioned in growth
markets where we continue to seek
acquisitions that will enhance our
product range and our capability 
to serve our customers.
Chairman’s Statement
GORDON PAGE
US101 helicopter
selected for
presidential transport
in the US. Cobham has
significant product
ship set value on
current variants
deployed in the UK 
and Italy.
*Underlying is defined as excluding the impact of
goodwill amortisation and, for 2003, the disposal of
Westwind and integration costs. Your directors have recommended a ﬁnal dividend of 21.8p per share 
(2003 - 19.8p). Together with the interim dividend of 9.2p per share (2003
- 8.36p) which was paid in December 2004, this represents an increase of
10.1% compared to 2003. Subject to shareholders’ approval, the ﬁnal
dividend will be paid on 4 July 2005 to all shareholders on the register at 
3 June 2005. For a decade Cobham has been one of the few UK quoted
companies to offer increased annual dividends at 10% or more.
CORPORATE DEVELOPMENT
During the year the Group successfully pursued its strategy of sustained
development through organic growth and acquisition. Six acquisitions were
completed for a total consideration of £61m. In addition, in December,
agreement was reached to acquire H Koch and Sons (Koch) for a cash
consideration of US$63m and Remec Defense & Space Inc. (Remec) for 
a cash consideration of US$260m. Both of these acquisitions are expected
to complete in the second quarter of 2005, subject to certain approvals.
Remec, in particular, positions the Group well in the network enabling
capability market. Three further small acquisitions for the Chelton group
were announced in February of 2005.
As always, the strength of the Group is based on the skill and dedication of
all of its employees and, on behalf of the Board, I thank them sincerely.
Gordon Page Chairman
10 March 2005
ANNUAL REPORT & ACCOUNTS 2004   5 6   COBHAM PLC
INTRODUCTION
We continue to operate in a demanding and ever
changing business environment. 2004 was
challenging but successful for the Group. Since
2000 we have increased our revenues by £415m
and underlying earnings per share have grown by
31p. With businesses extending over five
continents, Cobham has become a truly global
company.
MARKET IN CONTEXT
The aerospace and defence markets have
continued to develop and grow during 2004. In
the military market the key priorities now include
increased interoperability, rapid reaction, precision
strike and information superiority. These priorities
have driven technology insertion into systems
and sub-systems for network enabling capability
and for the development of unmanned aerial
vehicles.
More traditional but equally important
equipment such as air refuelling (AR), antennas
and life support systems have also shown
considerable growth.
Intelligence is key to defeating terrorism and
predicting threats. The USA and NATO continue
to invest in the development of capabilities for
collecting, producing, ﬁltering and communicating
intelligence between space, air, land and sea
operations.
In the commercial market, airline traffic has
returned to levels seen in 2000, and 2005 is
expected to see a further increase. Our two
major commercial customers, Airbus and Boeing,
are forecasting higher levels of output for 2005 
with further potential increases in 2006. Three
new commercial aircraft are on the horizon -
Airbus A350, Boeing B787 and, potentially, the
Bombardier C Series.
BUSINESS OVERVIEW
Cobham performed robustly in 2004 with record
order intake and strong revenue growth. The fall
in the dollar has slowed proﬁt growth, but this
has been partially offset by our currency hedging
programme.
It has been a year of transition and investment in
the Aerospace Systems Group. Improved
performances in air refuelling and auxiliary
equipment and life support sectors have been
overshadowed by poor operational performances
in countermeasures and ﬂuid and air distribution
sectors. The loss of a major bid at our US
countermeasures business in Milan, Tennessee
•
Cobham performed robustly in 
2004 with record order intake 
and strong revenue growth.
•
In the military market the Group’s
products and services address key
priorities which now include
increased interoperability, rapid
reaction, precision strike and
information superiority.
Chief Executive’s Review
ALLAN COOK and continued technical challenges on the A380 fuel pump system were
the major reasons for this reduction in operational performance.
Chelton had another good year of organic growth. US businesses
performed strongly driven by increased opportunities in the defence
market. Margins reduced slightly due to the dilution effect of acquisitions.
Order intake improved in antennas, avionics, microwave and law
enforcement and national security (LENS) product lines. Requirements for
increased capability on many platforms will beneﬁt Chelton. Network
enabled capability opportunities are increasing – caused by the
requirement for faster, more secure data transfer.
Flight Operations & Services had an excellent year, exceeding all its
ﬁnancial targets and winning important new business in the UK and
Australia. Proﬁt margins have continued to improve and the Group is well
placed to seek further growth opportunities.
The order book is £1.3bn. In the last twelve months a number of signiﬁcant
long-term contracts have been won or successfully renewed. In February
2005 the UK Ministry of Defence announced that the AirTanker
consortium, in which the Group is a shareholder, had been awarded
Preferred Bidder status on the Future Strategic Tanker Aircraft (FSTA)
programme. This is a signiﬁcant milestone in this 27 year programme to
provide the Royal Air Force with a new tanker/transport service based on
the Airbus A330-200 aircraft. Our bid cost has been £2.3m (2003 - £1.2m).
The cost incurred on this Cobham wide programme is not attributable to
any particular division, and is excluded from the segmental proﬁts shown
in the Business Review.
PROSPECTS
After more than a year of negotiations between the European
manufacturers of the Euroﬁghter Typhoon and the governments of the four
partner nations, UK, Germany, Italy and Spain, agreement was ﬁnally
reached on 14 December 2004 for the second production tranche of 236
combat aircraft. The announcement brought a guarantee of production
continuity through to 2013. This is a major boost for Cobham as tranche 2
production commences.
In the ﬁeld of avionics, combat aircraft require ever higher data acquisition
rates to support improved capabilities. This will require further upgrades of
new and existing aircraft in both Europe and the USA. Chelton is well
placed to support this requirement as part of its network centric capability
programme.
The Group now has a strong worldwide presence in LENS including
offshore and onshore surveillance and advanced multi-mode
communication systems. This area of activity is expected to expand
signiﬁcantly in the years ahead.
In addition, the Group’s products and services address the current military
priorities of countries with the largest defence budgets. In recent years the
Group has greatly increased its industrial presence in the USA and has
continued to invest in research and development and improved facilities 
in its US businesses. The Group is actively involved in bilateral
government/industry discussions to facilitate the secure interchange of
technologies between the USA and the UK.
Group companies are pursuing further opportunities worldwide and the
outlook for further success is encouraging.
Allan Cook Chief Executive
10 March 2005
ANNUAL REPORT & ACCOUNTS 2004   7
Light armoured tactical vehicles and ABRAMS main battle tanks currently deployed
in Iraq with Chelton’s intercom systems installed (AN/VIC 3 and LV2). 8 COBHAM PLC
Business Review
AEROSPACE SYSTEMS GROUP
*
•
Refuelling pods for both German 
Air Force and Royal Canadian Air Force
A310 tankers and for Sukhoi for
integration with an AR capable SU-30
ﬁghter were delivered in 2004.
•
Deliveries of the ﬁrst fuel tubes and
couplings for the Lockheed Martin F-35
Joint Strike Fighter were made.
*Includes Cobham head office.
†
Excludes goodwill amortisation of £8.0m (2003 - £5.7m)
and FSTA bid costs of £2.3m (2003 - £nil).
Revenue
Operating profit
†
£385.7m
£319.7m
£62.2m
£66.2m
2004
2003
2004
2003 ANNUAL REPORT & ACCOUNTS 2004   9
Conax ‘UWARS’ universal water
activated release mated with
Koch harness ﬁttings. *Includes Cobham head office.
†
Excludes goodwill amortisation of £8.0m (2003 - £5.7m).
Turnover*
Operating profit
†
£385.7
£319.7
£62.2m
£66.2m
2004
2003
2004
2003
Margin
16.1%
20.7%
2004
2003
10 COBHAM PLC
Business Review continued
AEROSPACE SYSTEMS GROUP
A330-200 aircraft 
which will form 
the FSTA fleet, with 
Flight Refuelling 
AR pod and centre line
drogues deployed.
Right: Production of a second
tranche of 236 Eurofighter
Typhoons has been agreed.
Cobham has a significant product
ship set value on this aircraft.
Below: F35 Joint Strike Aircraft
with fuel tubes and couplings
supplied by Stanley Aviation. ANNUAL REPORT & ACCOUNTS 2004   11
AEROSPACE SYSTEMS GROUP
REVIEW OF OPERATIONS
The Aerospace Systems Group reported revenue up 20.6% and underlying
operating profit down 6.0%. This result reflects strong growth in air
refuelling, UK countermeasures and life support. Proﬁt margins have fallen
due to A380 development costs, start-up losses in the US countermeasures
business, lower revenues from Euroﬁghter Typhoon production, US dollar
exchange rates and restructuring costs.
The Life Support Division has enhanced its reputation as a leader in
aviation oxygen systems. The development and qualiﬁcation of the suite of
components for the A380 oxygen system has been achieved.
In AR and Auxiliary Mission Equipment, Flight Refuelling Limited (FRL)
and Sargent Fletcher Inc (SFI) are leaders in the design and manufacture of
AR and auxiliary mission equipment. Production of refuelling pods to meet
United States Air Force Special Operations Command requirements
continues. Refuelling pods for both German Air Force and Royal Canadian
Air Force A310 tankers and for Sukhoi for integration with an AR capable
SU-30 ﬁghter were delivered in 2004. FRL and SFI are also engaged in the
production and supply of weapon carriage and release systems.
In Fluid and Air, deliveries of the ﬁrst fuel tubes and couplings for the
Lockheed Martin F-35 Joint Strike Fighter were made in the year.
FR-HiTEMP has made good progress on the development of the A380 fuel
pump system with initial deliveries of development and production
hardware and was successful in winning the B787 fuel pumps and inerting
system.
In Countermeasures,Wallop Defence Systems’ new state-of-the-art
production facility began operations in February 2005. A ﬂare order is in
production for the US Navy at FR Countermeasures (FRC), Milan,
Tennessee. Following the loss of a major countermeasures order and a
review of the US countermeasures market, Cobham is exploring a range of
strategic options for FRC.
Boeing 747 fuel
pumps and canisters
manufactured by 
FR-HiTEMP. 12 COBHAM PLC
Business Review continued
CHELTON
•
The antenna business achieved strong
growth. Increased sales were recorded
for interference cancellation systems.
•
The US defence C4ISR market is
particularly strong.
*Excludes integration costs £nil (2003 - £0.8m) and
goodwill amortisation of £11.0m (2003 - £8.4m).
Revenue
Operating profit
*
£408.9m
£316.1m
£71.8m
£60.8m
2004
2003
2004
2003 ANNUAL REPORT & ACCOUNTS 2004   13
Bell Helicopters 205 Huey
upgrade with Chelton Flight
Systems EFIS displays. 14 COBHAM PLC
Business Review continued
*Includes Cobham head office.
†
Excludes goodwill amortisation of £8.0m (2003 - £5.7m).
Turnover*
Operating profit
†
£385.7
£319.7
£62.2m
£66.2m
2004
2003
2004
2003
Margin
16.1%
20.7%
2004
2003
CHELTON
Three of eight Bowman
project HF loop Chelton
antennas fitted in 
HMS Ocean.
Right: Precision Antennas 
1.8m dish antenna.
Below: Lightweight man
portable anti-armour
weapon with Chelton
Applied Composites carbon
composite launch tubes. ANNUAL REPORT & ACCOUNTS 2004   15
CHELTON
REVIEW OF OPERATIONS
The Chelton Group reported revenue up 29.4% and underlying operating
proﬁt up 18.1%. This reﬂects strong growth in microwave, antennas and
avionics. The acquisitions in antennas and avionics contributed strongly,
but overall proﬁt margins have been diluted by recent acquisitions.
The Antenna business achieved strong growth. Increased sales were
recorded for interference cancellation systems. As Chelton focuses more 
on army communications and the digital battleﬁeld, it has increased
output of its products. Chelton vehicle intercom systems are ﬁtted to all
the US Army’s improved armour light vehicles, and sales are buoyant in
Europe and the Middle East.
Investment was rewarded with satcom antenna and system selection for
Gulfstream and Embraer Legacy aircraft.
In Avionics,growth continues with additional FAA certiﬁcations for its
synthetic vision electronic ﬂight instrument system (EFIS) and its selection
for the South African C-130 ﬂeet. Delivery of production radio and audio
management systems for the A380 is underway alongside the supply of
intercom systems for the Rafale ﬁghter.
LENS is an area of increasing importance within Homeland Security.
GPS tracking made inroads into the US market place and the introduction
of an advanced internet protocol based capability to track individual
members of a group promises continued strong performance in 2005.
In Microwave, the US defence C4ISR market is particularly strong. Our 
US microwave companies received development contracts for a service 
life extension for all US air route surveillance radar rotary couplers, for a
real-time precision targeting radar, and for the waveguide assemblies for
AEGIS Weapon Systems and the F/A-22 Raptor.
In Europe, the group beneﬁted from sustained space waveguide equipment
sales. At the end of 2004 the microwave and diode division of Temex SA
was acquired. Chelton is now the only major European manufacturer of 
p-i-n diodes used in many core antenna products.
In Composites, the recent approval of the Euroﬁghter Typhoon tranche 2
programme will provide substantial work for the future.
Right: Chelton Telecom &
Microwave ferrite and microwave
silicon components and RF filters
and diplexers.
Far right: ACR hand held GPS
based position indicating radio
beacon used for search and
rescue purposes. FLIGHT OPERATIONS & SERVICES
• 
The UK MoD awarded a £140m 
ﬁve year extension to its partnering
agreement for the provision of
electronic warfare aerial training
services.
•
Preferred bidder status was 
awarded by Qantas for operation 
of eight B717 aircraft.
16   COBHAM PLC
Business Review continued
*Excluding goodwill amortisation of £2.0m (2003 - £1.8m). 2003 has been
adjusted to exclude £1.2m of FSTA bid costs.
Revenue
Operating profit
*
£188.4m
£179.7m
£25.2m
£23.1m
2004
2003
2004
2003 FR Aviation Falcon 20 aircraft 
in the new colour scheme. The
MoD EW aerial training services
contract using these aircraft has
been extended to 2014.
ANNUAL REPORT & ACCOUNTS 2004   17 18 COBHAM PLC
Business Review continued
*Includes Cobham head office.
†
Excludes goodwill amortisation of £8.0m (2003 - £5.7m).
Turnover*
Operating profit
†
£385.7
£319.7
£62.2m
£66.2m
2004
2003
2004
2003
Margin
16.1%
20.7%
2004
2003
FLIGHT OPERATIONS & SERVICES
NJS operated
Australian air Express
aircraft unloading. In
this instance providing
T sunami relief for
Indonesia.
Right: FBH joint venture –
operating in Belize.
Below: Coastwatch crew 
with a Dash-8 aircraft of
Surveillance Australia, based 
at Karratha, north west
Australia. COBHAM TSUNAMI DISASTER RELIEF
Following the Tsunami disaster in December 2004 Flight
Operations & Services companies have taken part in
disaster relief activity:
A National Air Support contracted Super Puma arrived in
Phuket, Thailand on 22 January 2005, after a two-day ferry
ﬂight from Bristow Helicopters International Operations
in China. The helicopter is under contract to the Australian
Federal Police. Its mission was to assist with transport of
Australian and New Zealand Disaster Victim Identiﬁcation
personnel from Phuket to the main morgue at T aku Pa - 35
minutes ﬂight time north of Phuket. The aircraft ﬂew 
its ﬁrst mission on 23 January. It has now returned to
China.
Two of FBH’s Bell 212 helicopters based with the UK Army
Air Corps in Brunei were detached to Indonesia on
11 January and remained there until 12 February. The
helicopters, along with ﬁve FBH maintenance personnel
and six Army pilots, were transported to Banda Aceh in a
Royal Air Force C17 aircraft. FBH’s engineers were
accommodated under canvas and lived on military rations
in what was ofﬁcially described as ‘austere conditions’.The
camp was located alongside the main runway at Banda
Aceh with an attendant stream of aid ﬂights around the
clock. The helicopters were primarily being used to
transport emergency supplies of food and water to areas
that remained cut off from other means of supply. They
ﬂew a total of 246 hours during this period.
National Jet Systems Boeing 727: following an offer to
CARE Australia by Australian air Express, a Boeing 727
freighter ﬂew from Melbourne to Jakarta via Darwin on 
8 January with a volunteer crew. The main issue facing
people in Indonesia was not a lack of water but containers
to put the water in. Several hundred empty water bottles
with puriﬁcation caps were delivered.
ANNUAL REPORT & ACCOUNTS 2004   19
FLIGHT OPERATIONS & SERVICES
REVIEW OF OPERATIONS
Flight Operations & Services’ order book grew by £50m. Revenue increased
by 4.8% and underlying operating proﬁt by 9.1%. This reﬂects growth in all
segments. Profit margins have benefited from enhanced programme
management and the elimination of BASCO losses.
In Military Training, the UK MoD awarded FR Aviation a £140m ﬁve year
extension to its partnering agreement for the provision of electronic
warfare aerial training services to the Royal Navy and Royal Air Force from
2009 to 2014.
In Special Mission Flight Operations, the Australian businesses continue
to trade strongly. The Coastwatch contract for the Australian Customs
Service was extended to June 2007.
In Outsourced Aviation Services,preferred bidder status was awarded by
Qantas for operation of eight B717 aircraft which will replace eight BAe
146 aircraft. In the resource industry market, our position as a major
supplier of air transport services has continued to strengthen. The scope of
activities in support of listed mining companies Rio Tinto, BHP Billiton and
Minara Resources has also been increased.
FR Aviation and Bristow Helicopters announced in November the
expansion of their existing joint venture, FB Heliservices (FBH), to provide,
operate and support helicopters worldwide for military and government
customers. A further seven helicopters were acquired bringing the ﬂeet to
59, together with a £10m four year contract in Brunei, which began in
October 2004.
In Large Military Aircraft Engineering, FR Aviation Services, working with
BAE Systems and Northrop Grumman, has been selected to provide 
21 year whole life support at RAF Waddington for the Sentry airborne early
warning aircraft. A £50m contract award is anticipated in 2005. 20 COBHAM PLC
TECHNOLOGY AND PRODUCT DEVELOPMENT
Research and Development Expenditure
£48.7m
£40.4m
£31.6m
£28.2m
£21.6m
2004
2003
2002
2001
2000
Innovation is arguably the most important facet of Cobham’s strategy.
Expenditure in this area increased by over 20% to £48.7m in 2004,
representing 22.5% Compound Annual Growth Rate since 2000. This
continues a 6% level of investment related to the revenues generated by
Aerospace Systems and Chelton.
Air separation and pneumatic actuation remain key areas for technology
investment in Aerospace Systems. A unique implementation of ceramic
oxygen generation has been developed by Carleton Life Support Systems:
Dräger Aerospace and Carleton have combined to develop a new oxygen
storage and distribution system for commercial aircraft emergency
applications.
FRL continues development of the successful 900 series refuelling pods
and a contract for the supply of these units as part of the Australian A330
multi-role Tanker Transport aircraft was signed in December 2004. FRL is
also working with EADS-CASA to develop the optimum control system
and refuelling interface for the KC330.
SFI is part of the team selected by the US Department of Homeland
Security to develop a state-of-the-art infrared missile protection system for
commercial aircraft. This programme strengthens SFI’s position as a world
leader in airborne mission equipment enclosure pods.
Chelton continues to invest heavily in technology, in particular growing
ERA Technology as a science and technology centre for the Group whilst
retaining its position as a provider of third party technology services to
industry.
Projects undertaken by Chelton in 2004 included the development of DSP
software driven radios, a derivative of the mINCAN© RF interference
cancellation system and a new family of GPS/satellite linked personal
locator beacons.
A signiﬁcant number of new antenna designs for land, sea and air were
introduced for diverse markets and investment continued in the
revolutionary synthetic vision aircraft display systems characterised by
Chelton’s EFIS technology.
Business Review continued ANNUAL REPORT & ACCOUNTS 2004   21
Cobham’s Commitment to 
Corporate Social Responsibility
2004 HIGHLIGHTS
•
A seminar was organised for Cobham Corporate Social
Responsibility (CSR) representatives in the UK & the rest
of Europe. With representatives attending from all sectors,
the seminar started with an introduction by the Chief
Executive, Allan Cook, and covered the drivers and key
elements of CSR. The seminar gave the attendees the
chance to develop their CSR network, discuss common
issues and review Cobham’s CSR Key Performance
Indicators. Attendees were also given an update on
environmental legislation.
•
FR Aviation Ltd achieved the British Safety Council’s 
5-Star Award for the Company's Safety & Environment
Management System. This prestigious award for safety,
health and environment management performance is
recognised nationally and internationally.
•
A further six companies in the Group achieved
certiﬁcation to ISO 14001 for their environmental
management systems, making a total of twelve
representing 39% of the Group by turnover.
In September 2004, Cobham plc published its ﬁrst CSR report on the
corporate website. This report contains details of the Group’s CSR policies,
a summary of 2003 performance and includes case studies associated with
subsidiary companies.
The Group’s second CSR report, with details of 2004 performance, will be
published on the Cobham website in May 2005.
Progress has been made against each of the goals set out in the 2003
Annual Report & Accounts.
REFINEMENT OF THE DATA COLLECTION AND REPORTING SYSTEM
Improvements have been implemented to aid those completing the
information and those responsible for collating and verifying the data.
VERIFICATION OF CSR PERFORMANCE AS PART OF THE COBHAM
ASSURANCE PROCESS
The processes used to obtain and report CSR data were reviewed at a
number of subsidiaries during the year as part of the internal assurance
programme. Further work will be performed in this area in 2005.
EXPANSION OF KEY PERFORMANCE INDICATORS (KPIs) AND THE
SETTING OF PERFORMANCE TARGETS
Progress towards achievement of this goal has been slow. The range of KPIs
has been increased but subsidiaries are still developing the data collection
and reporting processes to meet the requirement.
The Global Reporting Initiative is currently being used to guide future
Corporate Responsibility reporting strategy. As part of this review the
measures reported will be validated against the Group’s operations, its
strategic goals and risk proﬁle. This review will also assist in preparing for
the requirements of the Operating and Financial Review. Once this phase
is complete consideration can be given to the setting of targets.
COMPLETION OF A REVISED ORGANISATION-WIDE CORPORATE
FRAMEWORK AND THE SETTING OF POLICIES IN THE CSR AREA
The revision of the corporate framework is complete. The Group’s policies
on CSR are included on the Cobham plc website.
USING THE COBHAM INTERNET WEBSITE TO COMMUNICATE WITH
STAKEHOLDERS AND FACILITATE CSR AWARENESS AND CONTINUAL
IMPROVEMENT WITHIN THE GROUP
Including a CSR report on the website has been seen as a useful addition
by stakeholders. Suggestions as to how the report can be improved 
have been received and these will be incorporated in the next CSR report
where practical.
A message board has also been created on the employee section of the
website where queries can be raised and details of achievements posted. 22 COBHAM PLC
ACCOUNTING POLICIES
The Board has reviewed the accounting policies in
accordance with FRS 18 and determined they are the
most appropriate for the Group.
TRANSITION TO IFRS
As of 1 January 2005 Cobham is required to prepare its
consolidated accounts in accordance with International
Financial Reporting Standards (IFRS). Work has been
underway for some months to ascertain the likely impact
of this transition and signiﬁcant progress has been made.
A high level assessment of the likely key impacts on
Cobham’s ﬁnancial statements is as follows:
•
Under IFRS goodwill created on acquisition is no
longer amortised but reviewed annually for
impairment. This is likely to increase our basic
operating proﬁt as we charge in the order of £20m to
£25m of amortisation per annum. However, we
exclude this expense for the purpose of determining
underlying proﬁtability.
•
The requirement under IFRS 3 to recognise a broader
range of purchased intangible assets on acquisition
will reduce future goodwill assets, but have no
impact on overall assets acquired. Amortisation of
these assets will generally be over a shorter period
than the 20 years previously adopted for goodwill.
This amortisation may also be excluded from
underlying proﬁtability.
•
The changes required to the accounting for employee
share based incentives will increase operating costs,
assuming utilisation of this type of beneﬁt continues
at the rate incurred in 2004. Due to the transitional
arrangements, this increased cost will not come into
full effect until 2005.
•
The Group does not intend to change the
fundamental tenet of its foreign exchange hedging
policy. IFRS requires all hedges to be strictly
designated and the hedge effectiveness tested. Up
until now the nature of Cobham’s use of this form of
derivative instrument is to take broad hedges against
the anticipated net position of a portfolio of foreign
exchange risks. Meeting the strict hedge criteria for
all contracts may therefore not be practicable. If this
were the outcome, forward foreign currency
contracts would be recorded at fair value on the
balance sheet and movements in these fair values
booked to the income statement as they arise,
resulting in potential volatility in the reported proﬁt
and loss account. The Group will identify the
underlying proﬁt impact of the hedging policy.
FINANCIAL RECORD
•
In 2004 the share price increased by 6.0% and Cobham
delivered total shareholder return of 8.5%.
•
Operating cash ﬂow of £123.4m (2003 - £108.6m),
is a conversion rate of 82% (2003 - 76%) of operating
proﬁt (excluding goodwill amortisation and proﬁts 
from joint ventures and, for 2003, the exceptional 
impact of the loss on disposal of Westwind and
integration costs).
•
Free cash ﬂow £92.9m (2003 - £77.3m).
•
Underlying proﬁt before tax up 8.6% to £146.9m 
(2003 - £135.3m).
•
Underlying earnings per share rose 1.4% to 94.8p.
•
Recommended dividends per share increased by 10.1%.
Financial Review
WARREN TUCKER •
Other changes are expected to affect the Group’s ﬁnancial statements
to a lesser degree. These include the capitalisation of development
costs, the reclassiﬁcation of leases and employee beneﬁt provisions.
ACQUISITIONS
During the year the company completed six acquisitions for a total cash
consideration of £60.4m and deferred consideration of £0.4m.
In December agreement was reached to acquire two further businesses for
a cash consideration of US$323m. These transactions are likely to be
completed in the first half of 2005. Three further acquisitions were
completed in February 2005 for a total cash consideration of £10m and
£3m of contingent consideration.
INVESTMENTS IN ASSOCIATES AND JOINT VENTURES
In May 2004 the Group sold 21% of the shares in BASCO to ST Aero,
retaining a 19% shareholding in the company. This holding is now
accounted for as an investment for Group reporting.
In November 2004, the Group expanded the scope of its existing helicopter
joint venture, FBH, investing a further £4.3m.
RESULTS
Group turnover increased by 18.1% to £983.0m (2003 - £832.6m).
Excluding amortisation of goodwill of £20.9m (2003 - £15.8m) and the
Group’s share of joint venture and associate results and for 2003 the
impact of the disposal of Westwind and integration costs, operating proﬁt
increased by 5.6% to £150.5m (2003 - £142.5m). The share of operating
proﬁt from joint ventures and associates before goodwill amortisation 
of £0.1m (2003 - £0.1m) rose from £5.2m in 2003 to £6.4m in 2004.
Selling, distribution and administration costs were 11.9% of turnover
(2003 - 12.7%).
Proﬁt on ordinary activities before taxation increased to £125.9m (2003 -
£54.5m). Profit on ordinary activities before tax, excluding goodwill
amortisation and, for 2003, the loss on the sale of Westwind and
integration costs amounted to £146.9m (2003 - £135.3m). This
represented a 8.6% increase.
Net interest costs, including those of joint ventures, fell from £11.5m to
£10.5m as a result of more effective use of overseas borrowing facilities to
optimise interest rates and the share issue in July 2003.
TAXATION
The tax charge of £40.9m (2003 - £36.0m) on the proﬁt before tax of
£125.9m (2003 - £54.5m) represents a rate of 32.5% (2003 - 66.1%).
Excluding goodwill amortisation of £21.0m (2003 - 15.9m) and, for 2003,
the exceptional loss on the disposal of Westwind and integration costs, the
effective rate for the year would be 27.8% (2003 - 26.6%). This adjusted
tax charge is lower than the prevailing tax rates across the various countries
in which the Group operates, primarily because part of the goodwill charge
is an allowable expense for taxation and a beneﬁt has arisen from the tax
credit for research and development. Further details on the tax charge can
be found in Note 4 of Notes to the Financial Statements.
EARNINGS PER SHARE
The basic earnings per share was 76.0p (2003 - 17.2p) whilst the fully
diluted earnings per share amounted to 75.5p (2003 - 17.1p). After
adjusting for goodwill amortisation and, for 2003 integration costs and the
loss from the disposal of Westwind, underlying earnings per share increased
by 1.4% to 94.8p (2003 - 93.5p).
DIVIDENDS
The directors are recommending a ﬁnal ordinary dividend of 21.8p (2003 -
19.8p) which represents an increase of 10.1% on last year. If approved by
shareholders, this will result in a total dividend of 31.0p per share (2003 -
28.16p), also an increase of 10.1%.
The total ordinary dividend for the year will absorb £34.6m (2003 -
£31.3m), leaving proﬁt/(loss) retained of £50.1m (2003 - £(13.1)m).
FINANCING
During 2004, the Group continued to generate funds and at the year end
the net debt as deﬁned by FRS 1 was £166.1m (2003 - £154.4m). Included
in this ﬁgure are all amounts owing under bank loans, debenture loans,
ﬁnance leases and other borrowings. This level of debt represents a gearing
level of 32.7% (2003 - 33.9%). Net interest cover is at a prudent level of
14.9 times (2003 - 12.8). 2004 net debt is 0.8 times 2004 earnings before
interest, tax, depreciation and amortisation.
The Australian subsidiaries have a number of operating leases for the
provision of aircraft which are used to provide services to third parties
under back to back contracts. During the year the Group converted 15
aircraft utilised for Coastwatch under operating leases to ﬁnance leases.
The Group had three main borrowings outstanding at the end of the year
under the following facilities:
•
The March 1996 private placement of Cobham guaranteed senior notes
which raised US$50m. These notes carry a ﬁxed interest rate of 6.28%
for the seven year notes and 6.42% for the ten year notes. Principal
repayments to date amount to US$25m.
ANNUAL REPORT & ACCOUNTS 2004   23
TURNOVER ANALYSIS
The table below categorises turnover into the various end market
segments, of which military remains the largest:
% 2004 2003
Military 50 50
Commercial Aerospace 14 16
General Aviation 5 6
Outsourcing – non military 11 11
Government – non military 7 7
Industrial 7 4
Marine/ Space 6 4
Westwind (sold in December 2003) – 2 24 COBHAM PLC
Financial Review continued
•
The October 2002 private placement of Cobham guaranteed senior
notes which raised US$225m. The facility comprises two series of notes
repayable in seven and ten years. As a result of an interest swap the
interest expense varies with LIBOR.
•
The £200m club multi-currency credit agreement which was entered
into in December 2002. The borrowings carry a variable rate of interest.
At the end of 2004 £78.4m had been drawn under this agreement. The
facility reduced to £150m after the ﬁrst year of operation and is
repayable in full in January 2008.
•
In January 2005 the Group entered into a 12 month US$200m facility
to provide short-term ﬁnance for the purchase of Remec and Koch.
CASH FLOW
The Group gives high priority to cash management. It is therefore
particularly pleasing to highlight the operating and free cash flow
generated in 2004 shown in the following summary. The operating cash
ﬂow amounted to £123.4m (2003 - £108.6m), which is 82% (2003 - 76%)
of operating proﬁt (excluding the impact of goodwill amortisation, the
proﬁts from joint ventures and associates and, for 2003, the impact of the
disposal of Westwind and integration costs). £92.9m (2003 - £77.3m) of
free cash ﬂow was generated.
Control over working capital continues to be a major focus within the
operating companies. As was the case in recent years, a substantial
proportion of the year’s business was invoiced in the latter part of 2004
due, in part, to the defence procurement cycle.
Stock turns at the end of 2004 were 3.7 times (2003 - 3.2 times).
Trade debtor days at the end of 2004 were 56 days (2003 - 54 days).
The impact of acquisitions was to increase debtors by £7.9m and stocks 
by £8.9m.
Further detail relating to the cash ﬂows and movements in net debt of the
Group is given in Notes 22, 23 and 24 of Notes to the Financial Statements.
PENSIONS
The Group adopted FRS 17 during 2003 as it is regarded as being a more
prescriptive accounting treatment than SSAP 24 and we consider that the
greater transparency and consistency offered are signiﬁcant beneﬁts.
During 2004 the Group made contributions to its deﬁned beneﬁt schemes
of £7.3m in excess of the operating proﬁt charge as assessed under FRS 17.
Cobham remains committed to the support of the pension schemes within
the Group and has worked with the trustees of those schemes to ensure
that funding issues are dealt with appropriately.
During 2004 triennial actuarial valuations were completed for both the
main Cobham scheme and the Chelton multi-employer scheme. The
outcomes of these reports have been reviewed with the relevant scheme
trustees and appropriate action plans developed.
FOREIGN EXCHANGE 
The Group’s aim has been to reduce, or eliminate where practical, foreign
exchange risk. The pound sterling/US dollar exchange rate is the most
important as far as the Group is concerned.This is primarily due to the level
of US dollars which the UK and European subsidiaries expect to receive
from their business activities, as certain global aerospace and defence
contracts are denominated in US dollars. Equally, some exposure arises
from operating companies based in the USA, offset partially by dollar
denominated borrowings. All signiﬁcant foreign exchange transactions are
approved by the parent company. In addition to the structured borrowing,
a number of financial instruments are used to manage the foreign
exchange exposure, such as forward rate contracts and options.
Details of the most signiﬁcant of these are described in note 26 of Notes
to the Financial Statements. At the end of 2003, the Group adopted a
policy of managing its potential exposure on a twelve month rolling basis.
As a consequence, the majority of the anticipated exposure to US dollars in
the UK and European subsidiaries is hedged at an average rate of 1.68 for
sterling and 1.23 for Euros respectively for 2005.
GOING CONCERN
The Group’s ﬁnances are sound and the balance sheet remains strong.
Accordingly, after making enquiries, the directors have formed a judgement
at the time of approving the ﬁnancial statements that there is a reasonable
expectation that the company and the Group as a whole have adequate
resources to continue in operational existence for the foreseeable future.
For this reason they continue to adopt the going concern basis in preparing
the ﬁnancial statements.
Warren Tucker Group Financial Director
10 March 2005
£m 2004 2003
Operating proﬁt 129.6 125.9
Depreciation 42.5 33.7
Amortisation of goodwill and intangibles 21.6 16.3
Proﬁt on sale of ﬁxed assets and investments (0.1) (0.7)
Difference between pension charge and 
cash contributions (7.3) (2.5)
Movement in provisions for liabilities and charges (3.0) –
Long-term incentive plan (0.4) 0.6
Increase in working capital (19.8) (25.5)
Cash inﬂow from operating activities 163.1 147.8
Net capital expenditure and ﬁnancial investment (39.7) (39.2)
Operating cash ﬂow 123.4 108.6
Net interest paid (7.6) (11.0)
Tax paid (22.9) (20.3)
Free cash ﬂow 92.9 77.3
Dividends paid (32.3) (27.6)
Dividend received from joint venture 5.0 –
Net cash outﬂow for acquisitions 
less disposal proceeds (73.8) (115.0)
Management of current investments 0.1 –
Issue of debt in consideration of acquisition – (12.2)
Inception of new ﬁnance leases (14.9) –
Shares issued net of expenses 4.9 105.7
Loans of subsidiary undertakings acquired (1.0) (1.4)
Exchange movements 7.4 7.6
(Increase)/decrease in net debt (11.7) 34.4 ANNUAL REPORT & ACCOUNTS 2004   25
Acquisitions
NAME BUSINESS DESCRIPTION CONSIDERATION DATE ACQUIRED COUNTRY GROUP DIVISION
Precision Antennas Ltd Design and manufacture of antenna systems for £3.1m January 2004 England Chelton
airborne, land based, satellite, vehicular, wireless and 
telecommunications.
Trade and Assets of Applications for use in the cabin and on the ﬂightdeck C$3.2m March 2004 Canada Chelton
Pentar Communications of commercial aircraft including internet and email, C$0.6m deferred
in-ﬂight entertainment, security, maintenance and 
system control.
NEC Aero SA Design and manufacture of control panel faceplates, c4.5m April 2004 France Chelton
lighting and signage for aircraft and vehicles.
DTC Communications Inc Design and manufacture of wireless communication US$48.0m April 2004 USA Chelton
equipment used in LENS. US$0.2m deferred
Spectronic Denmark A/S Design and manufacture of wired and wireless audio DKr225m October 2004 Denmark Chelton
communication products, as well as system level 
monitoring solutions, to government agencies and a
select group of OEM manufacturers worldwide for LENS.
Temex SA (Division) Design and manufacture of ferrite and cavity c7.7m December 2004 France Chelton
components and the development and production 
of diodes principally for switching, alternator and 
multiplier applications, for use in military, space 
and telecom markets.
ACQUISITION SUMMARY FOR THE YEAR ENDED 31 DECEMBER 2004 Board of Directors
26   COBHAM PLC
J M Pope 
Company Secretary
1J D M Smith
2J W Edington
3A J Stevens
4G C Cooper
5G F Page
6A J Hannam
7A E Cook
8W G Tucker
9M Beresford
10 P Hooley
1
2
3
4
5
6
7
8
9
10 ANNUAL REPORT & ACCOUNTS 2004   27
G F PAGE CBE, MA, FRAeS, DSc Non-executive Chairman
Appointed to the Board in 1990, Gordon Page, age 61, joined the Group as managing director of Flight Refuelling Limited having previously been
commercial director – military engines of Rolls-Royce plc. He was appointed deputy chief executive in 1991, chief executive in 1992 and chairman in
November 2001. He is chairman of the Department of Trade and Industry’s Industrial Development Advisory Board and non-executive chairman of
Hamworthy plc, FKI plc and AirTanker Holdings Limited. He is president-elect of the Royal Aeronautical Society and is a past president of The Society of
British Aerospace Companies Ltd and of the Chartered Management Institute. He is chairman of the nomination committee.
A E COOK BSc, CEng, FRAeS Chief Executive
Appointed to the Board in 2001, Allan Cook, age 55, joined the Group from BAE Systems where he was group managing director of programmes and
managing director Euroﬁghter. He was formerly group managing director of GEC-Marconi Avionics and chief executive of Hughes Aircraft (Europe). He is
also a director of The Society of British Aerospace Companies Limited.
W G TUCKER BSc, ACA, MBA Group Financial Director
Appointed to the Board in 2003,Warren Tucker, age 42, joined the Group as group ﬁnancial director. Prior to joining he qualiﬁed as a chartered accountant,
worked at Lazard, held senior ﬁnance positions at British Airways plc and was deputy group ﬁnancial director of Cable and Wireless plc.
G C COOPER CBE, CPhys, FRAeS, MInstP Managing Director, Chelton Group
Appointed to the Board in 1995, Geoffrey Cooper, age 59, joined the Group as managing director of Chelton Limited on the acquisition of that company in
1989. He is responsible to the Board for the performance of the Chelton Group.
A J HANNAM Managing Director, Flight Operations & Services Group
Appointed to the Board in 2002, Alex Hannam, age 58, joined the Group as managing director of FR Aviation Group Limited in that year. Prior to joining, he
was managing director of Alenia Marconi’s radar systems division, a position he had held since 1995. He is responsible to the Board for the performance of
the Flight Operations & Services Group.
A J STEVENS BSc, CEng, FIEE, FRAeS Managing Director, Aerospace Systems Group
Appointed to the Board in 2003, Andy Stevens, age 48, joined the Group as managing director of the Aerospace Systems Group. Prior to joining he was
managing director, defence aerospace, at Rolls-Royce plc. He is responsible to the Board for the performance of the Aerospace Systems Group.
J D M SMITH BSc Independent non-executive Director
Appointed to the Board as a non-executive director and ﬁrst elected by shareholders in 1996, Mike Smith, age 65, is a non-executive director of P Z Cussons
plc, and a former director of BTR plc. He is chairman of the remuneration committee and senior independent director.
J W EDINGTON PhD, DSc, FIM, FREng Independent non-executive Director
Appointed to the Board as a non-executive director in 1996 and ﬁrst elected by shareholders in 1997, Jeff Edington, age 65, was, until his retirement,
executive director, technology with Corus Group plc (formerly British Steel plc) where he had responsibility for product and process technology, the
environment and information technology. Prior to joining British Steel in 1992, he was vice-president, research and technology at Alcan Aluminium Limited
based in Montreal.
P HOOLEY FCA, MSc Independent non-executive Director
Appointed to the Board as a non-executive director in 2002 and ﬁrst elected by shareholders in 2003, Peter Hooley, age 58, is group ﬁnance director of
Smith & Nephew plc, a position he has held since 1991. He was a non-executive director of Powell Duffryn plc from 1997-2000. He is chairman of the audit
committee.
M BERESFORD CBE, MAMechSc, FIEE Independent non-executive Director
Appointed to the Board as a non-executive director and ﬁrst elected by shareholders in 2004, Marcus Beresford, age 62, is chairman of Ricardo plc,
a non-executive director of Spirent plc and a member of the Engineering and Technology Board. He was an executive director of GKN plc from 1992-2002
and chief executive from 2001-2002. 28 COBHAM PLC
Directors’ Report
The directors submit their report and the audited ﬁnancial statements of Cobham plc for the year ended 31 December 2004.
PRINCIPAL ACTIVITIES AND BUSINESS REVIEW
Cobham’s principal activities are:
•
the design, development and support of air refuelling equipment, auxiliary mission equipment, life support and oxygen systems, ﬂuid and air distribution
components and systems, and countermeasures for the aerospace and defence markets;
•
the design and supply of antennas, aircraft communication and navigation equipment, microwave sub-systems, radomes and composite structures for
the aerospace, defence, law enforcement and national security, search and rescue and communication markets;
•
the operation, modiﬁcation and maintenance of aircraft in the aerospace and defence markets for military training, outsourced special mission ﬂight
operations, freight and passenger services and also the maintenance of large military aircraft.
A review of the business, together with an indication of likely future developments, is included in the Chairman’s Statement on pages 4 and 5, the Chief
Executive’s Review on pages 6 and 7, the Business Review on pages 8 to 20 and the Financial Review on pages 22 to 24.
DIVIDENDS
An interim dividend of 9.2p per ordinary share (2003 - 8.36p) was paid in December 2004. The directors are recommending a ﬁnal dividend of 21.8p per
ordinary share (2003 - 19.8p) payable on 4 July 2005 to ordinary shareholders on the register as at 3 June 2005, making a total ordinary dividend for the
year of 31p (2003 - 28.16p). It is proposed that the retained proﬁt of £50.1m be transferred to the proﬁt and loss reserve.
BOARD OF DIRECTORS
The current directors are listed with short biographical notes on page 27. They held ofﬁce throughout the year with the exception of Marcus Beresford who
was appointed on 1 March 2004.
The directors retiring by rotation at the Annual General Meeting (AGM) are Gordon Page, Mike Smith and Alex Hannam. Gordon Page and Alex Hannam,
being eligible, will offer themselves for re-election and further information relating to these directors is contained in the shareholder circular sent separately
with this annual report. Mike Smith, who has indicated his intention to retire from ofﬁce at the AGM, will not seek re-election. Gordon Page does not have
a service contract. Alex Hannam has a service contract which is terminable on twelve months’ notice.
DIRECTORS’ INTERESTS
None of the directors is or was materially interested in any signiﬁcant contract, during or at the end of the ﬁnancial year, particulars of which are required
to be disclosed by the Companies Act 1985 or the Financial Services Authority’s Listing Rules.
Details of directors’ share interests and of their rights to subscribe for shares are shown in the Directors’ Remuneration Report on pages 34 to 40.
CORPORATE GOVERNANCE
The company’s statement on corporate governance is set out on pages 30 to 33.
SHARE CAPITAL
Details of movements in the share capital of the company during the year are given in Note 19 of Notes to the Financial Statements.
RESEARCH AND DEVELOPMENT
The Group continues to invest in the important area of research and development. During the year the Group expended £48.7m (2003 - £40.4m) on non
customer funded research and development. The management of each of the Group’s businesses is responsible for identifying and carrying out research
and development programmes which are suitable having regard to particular market and product needs.
Further information on research and development appears on page 20.
MAJOR INTERESTS IN SHARES
Major interests in the issued ordinary share capital of the company appearing in the register maintained in accordance with Section 211 of the Companies
Act 1985 as at 10 March 2005 were as follows:
PERCENTAGE AT
NUMBER OF DATE OF
SHARES NOTIFICATION
AVIVA plc 6,214,179 5.57%
Sir Michael Cobham 4,994,100 4.47%
Aegon Investment Management 4,612,676 4.13%
Lloyds TSB Group Plc and subsidiaries 4,486,729 4.00%
Legal and General Group plc and subsidiaries 4,428,411 3.96%
Other than the above interests the directors are not aware of any notiﬁable interest in the issued ordinary share capital of the company of 3% or more. ANNUAL REPORT & ACCOUNTS 2004   29
EMPLOYMENT
The Group’s employment policies include a commitment to equal opportunities regardless of sex, race, colour, nationality or ethnic origin, disability, and
other forms of discrimination.With regard to employees who become disabled, the policy is to take all reasonable steps, including retraining, to ensure that
they can remain in employment wherever practicable.
The importance of employee development and training is recognised and Group businesses are required to encourage employees to take advantage of
available and relevant training programmes and opportunities for advancement.
The Group encourages employee participation and consultation at all levels and also the sharing of relevant business information. Such an approach
facilitates the development of new ideas and practices that add value to the business, promotes team member commitment and helps to focus company
and employee expectations. In-house newsletters, intranet, extranet and internet communications, company announcements and team meetings all play
a part in this process.
UK employees are given the opportunity to become shareholders in the company through the Cobham Savings Related Share Option Scheme (2004).
In addition, a new share scheme, the Cobham Share Incentive Plan, is being implemented which will enable employees of UK participating companies to
buy Cobham shares out of pre-tax income.
CORPORATE SOCIAL RESPONSIBILITY
Information in relation to the Group’s commitment to corporate social responsibility (including additional information in relation to employment matters)
is set out on page 21.
CREDITORS PAYMENT POLICY
Payment is generally made by Group companies to their creditors in accordance with agreed terms of business provided that those terms have been met.
It is the policy of the parent company that all invoices are paid within 30 days following the end of the month in which the invoices are approved. The total
amount of the parent company’s trade creditors falling due within one year at 31 December 2004 represents 36 days’ (2003 - 35 days’) worth as a
proportion of the total amount invoiced by suppliers during the year ended on that date.
POST BALANCE SHEET EVENTS
Note 33 of Notes to the Financial Statements concerning post balance sheet events contains information relating to a number of actual and potential
acquisitions.
POLITICAL AND CHARITABLE GIFTS
No contributions were made to political organisations. The amount donated during the year for charitable purposes was £37,320 (2003 - £36,304).
Of this sum, donations in excess of £200 were made to the value of £12,500 to local charities, £4,000 to health charities, £3,400 to rescue services and
£1,650 to children’s charities.
AUDITORS
A resolution to re-appoint PricewaterhouseCoopers LLP as auditors will be proposed at the forthcoming AGM.
ANNUAL GENERAL MEETING
The company’s AGM will be held at 12 noon on Wednesday, 8 June 2005 at Painters’ Hall, 9 Little Trinity Lane, London EC4V 2AD.
A circular containing the notice convening this meeting, together with an explanation of the business to be conducted, is sent to shareholders separately
with this annual report.
By order of the Board
John Pope Secretary
10 March 2005 30 COBHAM PLC
Corporate Governance
This part of the annual report, together with the Directors’ Remuneration Report set out on pages 34 to 40, describes how the company has both applied
the principles contained in the revised Combined Code on Corporate Governance published in July 2003 (the Code) and complied with the provisions
contained in section 1 of the Code.
BOARD COMPOSITION
The Board comprises a non-executive chairman (Gordon Page), a chief executive (Allan Cook), four other executive directors and four other non-executive
directors of whom Mike Smith is recognised as the senior independent director. Mike Smith, who has been a non-executive director since 1996 and is
coming to the end of his third three year term, will retire at the forthcoming AGM and will not seek re-election. His replacement will be announced in due
course. All non-executive directors, with the exception of the chairman, are considered to be independent. Biographies of the directors, giving details of their
experience and other main commitments, are set out on page 27 of the annual report and in relation to those directors offering themselves for 
re-election at the AGM, in the accompanying shareholder circular.The wide ranging experience and backgrounds of the non-executive directors enable them
to debate and constructively challenge management in relation to both the development of strategy and the performance of the Group. Attendance at
Board and committee meetings is set out in the following table:
BOARD AUDIT REMUNERATION NOMINATION
Number held 9 3 5 2
Number attended
G F Page 9 – – 2
A E Cook
1
9–– 1
W G Tucker 9 – – –
G C Cooper
2
8–––
A J Hannam 9 – – –
A J Stevens 9 – – –
J D M Smith 9 3 5 2
J W Edington 9 3 4 2
P Hooley
3
8342
M Beresford
4
6242
All directors attended the AGM in June 2004. In the few instances where a director was unable to attend a Board or committee meeting, his comments on the papers to be
considered at that meeting were passed in advance to the relevant chairman.
1
Allan Cook did not attend a meeting of the nomination committee which resulted in a recommendation to re-elect him.
2
Geoff Cooper, by prior agreement, represented the company at an important event and was, as a result, unable to attend one Board meeting.
3
Peter Hooley did not attend one Board meeting as the date clashed with a Smith & Nephew plc board meeting.
4
Marcus Beresford joined the Board on 1 March 2004. He was unable to attend one Board meeting as a result of commitments which he had made prior to joining the Board.
Non-executive directors are appointed for speciﬁed terms of three years which can be extended by agreement provided that the individual’s performance
continues to be effective. All non-executives have conﬁrmed they will have sufﬁcient time to meet what is expected of them and copies of their
appointment letters are available on request to the company secretary. Under the company’s articles of association, directors are subject to election by
shareholders at the ﬁrst AGM after their appointment. Under the articles at each AGM one third of the directors who are subject to retirement by rotation
must retire and any director must retire if he was not elected or re-elected at either of the previous two AGMs. The nomination committee report on 
page 31 explains the process for selection of directors and succession planning.
The chairman is, among other things, responsible for chairing Board meetings and leading the Board. The chief executive’s responsibilities include
operational performance and the achievement of strategic aims. The Board’s policy is that the roles of chairman and chief executive should be performed
by different people. The division of responsibilities between the chairman’s role and that of the chief executive is documented and clearly understood and
no conﬂicts arise, in the directors’ view, from the fact that the chairman held, until 2001, the position of chief executive. The senior independent director’s
responsibilities include the provision of an additional channel of communication between the chairman and the non-executive directors and another point
of contact for shareholders if they have reasons for concern which communication through the normal channels of chairman, chief executive or group
ﬁnancial director has failed to resolve, or where these contacts are inappropriate.
Directors and ofﬁcers of the company and its subsidiaries have the beneﬁt of a directors’ and ofﬁcers’ liability insurance policy. All directors can take
independent legal advice at the company’s expense within set limits in furtherance of their duties. ANNUAL REPORT & ACCOUNTS 2004   31
THE BOARD AND ITS PROCEEDINGS
Scheduled meetings of the Board take place eight times a year and otherwise as required.There is regular contact between meetings to progress the Group’s
business. Whilst meetings take place primarily at Wimborne they are also held at other operational locations in the UK. In addition, meetings take place
between the non-executives in the absence of the chairman and/or the executive directors.
The Board’s role is to lead the Group with a view to the creation of a strong, sustainable ﬁnancial performance and long-term shareholder value. In doing
so, it reviews and agrees Group strategy, ensures that the necessary resources are in place, monitors management performance and supervises the conduct
of the Group’s activities within a framework of prudent and effective internal controls.
The Board has adopted a schedule of matters reserved for its speciﬁc approval. The schedule provides the framework for those decisions which can be made
by the Board and those which can be delegated either to committees or otherwise. Among the key matters on which the Board alone may make decisions
are the Group’s business strategy, its ﬁve year plan, its consolidated budget, Group policies, dividends, acquisitions and disposals, and all Board
appointments and removals. Authority is delegated to management on a structured basis in accordance with the provisions of the Corporate Framework
ensuring that proper management oversight exists at the appropriate level. Matters delegated in this way include, within deﬁned parameters, the approval
of bids and contracts, capital expenditures and ﬁnancing arrangements.
The Board has adopted procedures relating to conduct of its business, including the timely provision of information, and the company secretary is
responsible for ensuring that these are observed and for advising the Board on corporate governance matters.
BOARD COMMITTEES
The Board is supported in its work by a number of committees. Information relating to the nomination and audit committees appears below and the
activities of the remuneration committee are described in the Directors’ Remuneration Report on pages 34 to 40. John Pope, company secretary, acts as
secretary to all Board committees. The appropriate committee chairman provides an oral report on the work undertaken by his committee at the following
Board meeting and committee meeting minutes are circulated to all Board members. The executive committee meets on eight occasions during the year
and develops the Group’s strategy for Board consideration and approval, makes recommendations as to acquisitions and disposals, reviews operational
activities and manages the signiﬁcant risks faced by the Group. Membership of the committee comprises all the executive directors and the chief executive
is the committee’s chairman.
NOMINATION COMMITTEE REPORT
Gordon Page, chairman of the company, is the chairman of this committee. The other members of the committee are Mike Smith, Jeff Edington, Allan Cook,
Peter Hooley and Marcus Beresford (appointed 1 March 2004). The majority of the members of the committee are independent. Details of their
qualiﬁcations and experience are set out on page 27. During the year the committee met formally on two occasions.
The committee’s terms of reference, which were reviewed during the year, are available on the company’s website or on application to the company
secretary. The committee’s main duties are to review the structure, size and composition of the Board, to consider succession planning for directors and
other senior executives and to identify and nominate for Board approval candidates to ﬁll Board vacancies. The committee dealt with all of these matters
during the year and, in addition, made recommendations regarding the re-election of certain directors at the 2004 AGM, directors’ time commitments and
was engaged in the recruitment of new independent non-executive directors with the assistance of external recruitment consultants.
Marcus Beresford was appointed a director during the year after a referral by external recruitment consultants followed by meetings with committee
members and, subsequently, the other members of the Board.
DIRECTORS’ PROFESSIONAL DEVELOPMENT
On appointment, directors undertake a structured induction programme where they receive information about the operations and activities of the Group,
the role of the Board and the matters reserved for its decision, the company’s corporate governance practices and procedures and their duties,
responsibilities and obligations as directors of a listed public limited company. This is supplemented by visits to key locations and meetings with senior
executives.
Training for directors is available as required through attendance at externally provided courses or in-house seminars. In addition, directors’ knowledge of
the legal and regulatory environment is updated through the provision of information by the Group’s advisers and by means of reports from the company
secretary.
PERFORMANCE EVALUATION
During the year, performance evaluations of the Board, the major Board committees and individual directors were carried out with the assistance of 
Edis-Bates Associates. The evaluation process involved interviews with all directors and the company secretary, the completion of questionnaires and the
preparation of a Board performance evaluation report which focused on the Board’s role, people issues affecting the Board, processes and the Board
committees.
The report was considered by the Board and speciﬁc recommendations were agreed and are being implemented. 32 COBHAM PLC
Corporate Governance continued
FINANCIAL REPORTING
In the directors’ view, the Annual Report and Accounts for 2004, together with the Interim and other reports made during 2004, present a balanced and
understandable assessment of the Group’s position and prospects.
The Directors’ Report on going concern is included in the Financial Review on page 24.
INTERNAL CONTROL AND RISK MANAGEMENT
The Group operates under a system of internal controls which has been developed and reﬁned over time to meet its needs and the risks and opportunities
to which it is exposed. These controls are contained in the Corporate Framework, which was revised and reissued during the year, and the Group Finance
Manual. They include a comprehensive budgeting system with an annual budget which is approved by the Board and monitored monthly, the regular
revision of forecasts for the year, a strategic planning process involving the preparation of a ﬁve year plan and the appropriate delegation of authorities to
operational management.
Risk management is an integral part of the system of internal control and is considered to be key to the Group’s success. Divisional managing directors are
required to ensure that appropriate processes exist to identify and manage risks and, as part of the ﬁve year planning exercise, to carry out formal risk
assessments regularly. The executive committee undertakes a top-level review of signiﬁcant risks and reports regularly to the Board on their mitigation. In
addition, the audit committee monitors the adequacy of internal ﬁnancial controls and compliance with Group standards through a self-assessment
process involving all subsidiaries, supplemented by regular risk assurance reviews and visits.
The Board is responsible for the Group’s system of internal control the aim of which is to manage risks that are signiﬁcant to the fulﬁlment of the Group’s
business objectives and to contribute to the safeguarding of shareholders’ investment and the company’s assets. It is also responsible for reviewing the
effectiveness of the system. However, such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can
only provide reasonable and not absolute assurance against material misstatement or loss.
The Board conﬁrms that there is an ongoing process for identifying, evaluating and managing the signiﬁcant risks faced by the Group. This process, which
has been in place for the year under review and up to the date of approval of the annual report and ﬁnancial statements, is regularly reviewed and accords
with the guidance for directors on internal control issued by the Turnbull committee.
The Board receives reports on a regular basis from the executive and the audit committee in relation to the effectiveness of the Group’s system of internal
control and has, accordingly, reviewed the effectiveness of the Group’s system of internal control in respect of 2004.
AUDIT COMMITTEE REPORT
The chairman of the committee is Peter Hooley. He is an independent director and the Board is satisﬁed, since he is also a ﬁnance director of a FTSE 100
company and a chartered accountant, that he has ‘relevant and recent ﬁnancial experience’ as required by the Code.
The other members of the committee, all of whom are independent directors, are Mike Smith, Jeff Edington and Marcus Beresford (appointed 1 March
2004). Details of their qualiﬁcations and experience are set out on page 27. During the year the committee met on three occasions.
The committee’s terms of reference, which were reviewed during the year, are available on the company’s website or on application to the company
secretary. The committee’s main duties are to monitor the integrity of the company’s ﬁnancial statements and any formal announcements relating to its
ﬁnancial performance, to consider the effectiveness of the Group’s internal control systems, to monitor and review the effectiveness of the Group’s internal
audit activities, to make recommendations as to the appointment, remuneration and terms of engagement of the external auditors and to monitor and
review the external auditors’ independence and objectivity and the effectiveness of the audit process.
Meetings of the committee are normally attended by the company chairman, the group ﬁnancial director, senior employees with responsibilities in relation
to ﬁnance and internal control, and the external auditors. In addition, the committee regularly holds sessions with the external auditors in the absence of
executive management. Attendance of non-members is at the discretion and by invitation of the committee.
At each of its meetings the committee considered reports from the external auditors and also on internal controls and risk assurance. Management
generated reports were also considered on a number of matters including the introduction of International Financial Reporting Standards, taxation, banking
facilities, corporate governance and whistleblowing procedures.
The committee believes that the current arrangements comprising a programme of internal ﬁnancial control review visits to subsidiaries by head ofﬁce
personnel, business reviews carried out by the chief executive and group ﬁnancial director and a process of self assessment of internal ﬁnancial controls by
all subsidiaries provides appropriate internal audit coverage of the Group’s activities. ANNUAL REPORT & ACCOUNTS 2004   33
The committee and the external auditors have safeguards to avoid the possible compromise of the auditors’ objectivity and independence. These include
the adoption by the committee of a policy regarding the supply of audit and non-audit services and of a policy on the employment of external audit staff.
Non-audit services involving the review of interim ﬁnancial information, tax services and accounting advice, and acquisition-related due diligence can be
supplied subject to pre-approval by the committee where the cost of any individual engagement exceeds a pre-deﬁned limit. The committee has also
received reports from the external auditors conﬁrming their independence and objectivity.
Fees paid to the external auditors during the year ended 31 December 2004 are set out in Note 2 of Notes to the Financial Statements.
SHAREHOLDER RELATIONS
During the year the chief executive and group ﬁnancial director held regular meetings with institutional investors, fund managers and investors to discuss
information made public by the Group and in June they, along with divisional managing directors, held an investor day, at which presentations were given
on strategy, programmes and ﬁnancial performance.
Presentations were made on the announcement of the preliminary and interim results. The slides used and web casts were made accessible 
on-line at www.cobham.com. A conference call with analysts was made following the announcement of the agreement to acquire Remec Defense and
Space just before the year end.
The chairman wrote to a number of major shareholders during the year reminding them of his availability, and that of Mike Smith, the senior independent
director, should there be issues which they might wish to raise. They were also offered the opportunity to meet Marcus Beresford, the non-executive
director appointed during the year.
The Board is kept informed of investors’ views through the distribution of analysts’ circulars, the receipt of regular reports from the company’s brokers and
updates from the chief executive and group ﬁnancial director. Correspondence with shareholders is also made available and, following the year end, a survey
of shareholder opinion was commissioned.
Communication with shareholders takes place via RNS announcements, the company’s website, the annual and interim reports and the AGM. The AGM is
attended by all directors and shareholders have the opportunity to hear a statement as to progress made during the year, to question the Board on its
stewardship of the company and to meet directors informally.
RESPONSIBILITY STATEMENTS
Statements by the directors and the auditors relating to their responsibility for preparing the accounts and reporting respectively are set out on pages 41
to 43.
COMPLIANCE STATEMENT
Independent non-executives, excluding the chairman, made up less than half of the Board. Accordingly, the Board did not fully comply with the provisions
of the Code in 2004. The company is currently seeking additional independent non-executives with a view to achieving equality with the executive
directors. 34 COBHAM PLC
Directors’Remuneration Report
This report provides the information required by the Directors’ Remuneration Report Regulations 2002 (the Regulations). It also describes how the company
applies the principles of the Code in relation to remuneration. The report has been approved by the Board and shareholder approval will be sought at the
forthcoming AGM.
THE REMUNERATION COMMITTEE
Mike Smith is the chairman of this committee. The other committee members are Jeff Edington, Peter Hooley and Marcus Beresford (appointed 1 March
2004). All members are independent non-executives. Details of their qualiﬁcations and experience are set out on page 27. The committee met on ﬁve
occasions during 2004 and information on director attendance is set out in the table on page 30.
The committee’s terms of reference, which were reviewed during the year, are available on the company’s website or on application to the company
secretary. The committee’s main duties are to make recommendations to the Board on the Group’s policies on executive directors’ remuneration and to
determine, on the Board’s behalf, the speciﬁc remuneration packages of the chairman, executive directors and a number of senior executives. The
committee consults with the chief executive, but not in respect of his own remuneration, and has access to professional advice from New Bridge Street
Consultants (NBSC) and reports in relation to total shareholder return monitoring from Inbucon. NBSC, who were appointed by the committee, also
provided advice during the year to the company in relation to a new share incentive plan for UK employees generally and in relation to a new executive
share option scheme.
REMUNERATION POLICY
The Board’s policy is to recruit, motivate and retain executive directors of high calibre by rewarding them with competitive salary and beneﬁt packages,
increasingly linked to performance. In particular, the executive pay policy for the current and subsequent ﬁnancial years is designed to retain those
executives with the skills and experience necessary to enable the Group to achieve its objectives and satisfy shareholder expectations. More speciﬁcally, the
current strategy is to position base salaries around the median of the market and to provide an opportunity to enhance cash remuneration through a
competitive bonus plan if performance so warrants through the satisfaction of stretching performance conditions. The committee conﬁrms that a
signiﬁcant element of potential remuneration is performance linked. Remuneration is also linked to performance through participation in share incentive
schemes, which ensures that executive directors’ interests are closely aligned with shareholders’ interests. The chairman of the company ensures that the
company, through the committee, maintains contact with its principal shareholders about remuneration matters. To this end, the committee consulted
during the year in connection with the introduction of the new executive share option scheme which was duly approved at the 2004 AGM.
BASE SALARY
The committee reviews base salaries annually, generally in November, to take effect from 1 January of the following year. When reviewing salaries the
committee assesses individual responsibilities, experience, performance and personal objectives and considers external market data, internal relativities and
other factors relevant to the company and the industry. No increase to Andy Stevens’s base salary was made during the year in view of his appointment in
November 2003.
ANNUAL PERFORMANCE-RELATED BONUS
The company operates an annual cash bonus scheme for its executive directors. Bonuses are awarded by the committee having regard for the performance
of the Group, the individual and, in the case of directors with speciﬁc subsidiary company responsibilities, the performance of the relevant subsidiaries.
Bonuses in respect of 2004 were capped at 60% of base salary, 75% of which was determined by ﬁnancial performance. For 2005, the committee, as part
of its review of the effectiveness of the company’s remuneration policy, has decided that the maximum annual bonus opportunity for executive directors
should be increased to 80% of base salary to bring it into line with market practice. Of this, 81% will be determined by ﬁnancial performance.
In the cases of Allan Cook and Warren Tucker the constituent elements of their bonus plans relate to earnings per share (EPS) growth, cash generation
against budget and proven achievement of personal objectives. In the cases of Geoff Cooper, Andy Stevens and Alex Hannam, the constituent elements of
their bonus plans relate to EPS growth, proﬁt against budget for the group of subsidiary companies for which they are operationally responsible, cash
generation against budget and proven achievement of personal objectives.
In changing the bonus scheme, the committee took the opportunity to increase the potential awards for growth in EPS and toughened the targets for cash
and proﬁt generation.
Personal objectives for the other executive directors are set by Allan Cook. Personal objectives for Allan Cook are set by Gordon Page. ANNUAL REPORT & ACCOUNTS 2004   35
LONG-TERM INCENTIVES
Following a review of long-term incentive arrangements, the committee changed its approach to the provision of long-term incentives during the year. As
a result, a combination of share awards under the Cobham Long-Term Incentive Plan and grants of share options under the Cobham Executive Share Option
Scheme (2004) may be made to directors and other senior executives. In order to ensure that the aggregate award levels are not excessive, the aggregate
value of shares awarded to any individual (excluding senior executives in the US) under the above share schemes in any year is not to exceed 1.5 times base
salary unless there are exceptional circumstances, for example, the recruitment or promotion of a senior executive.
COBHAM LONG-TERM INCENTIVE PLAN (LTIP)
Under the LTIP, which was approved by shareholders in 1997, awards to acquire Cobham ordinary shares at nil cost are made to participants up to a
maximum annual value of 75% of base salary. During 2004, awards were made to 22 main Board and subsidiary company directors and senior executives.
The extent to which awards vest under the LTIP is based on the company’s total shareholder return (TSR) relative to a comparator group comprising
companies in the FTSE engineering and machinery sector and the aerospace and defence sector. The committee believes that the use of TSR as a
performance measure is justiﬁed because it aligns the interests of directors with shareholders by requiring superior TSR performance compared to those
companies in the comparator group (see below). Awards vest in full at upper quartile performance over the three year performance period and 30% of
awards vest at median performance. There is a sliding scale vesting between median and upper quartile performance and no awards vest if performance is
below median. In addition, no awards vest unless the company’s EPS growth has exceeded inﬂation by an average of 3% p.a. over three years. That part of
an award which has not satisﬁed the performance conditions over the three year performance period will lapse i.e. there is no re-testing of the performance
condition.
The committee will ensure that EPS is calculated on as consistent basis as is feasible following the transition to International Accounting Standards and that
any arbitrary results are avoided.
In assessing whether performance conditions have been met, the committee relies upon performance status and veriﬁcation reports prepared by Inbucon.
In 2004, the company achieved sixteenth position out of a total of 30 companies in its comparator group and, as a result, the awards made in 2001 did not
vest. The companies which comprise the comparator group for the LTIP award made to directors in 2004 are as follows:
AGA Foodservice Group plc; Alvis plc; BAE SYSTEMS PLC; Bodycote International plc; Castings PLC; Charter plc; Chemring Group PLC; Cookson Group plc;
domnick hunter group plc; Enodis plc; Fenner PLC; FKI plc; Halma p.l.c.; Hill & Smith Holdings PLC; IMI plc; Kidde plc; Meggitt PLC; Metalrax Group PLC;
Molins PLC; The Morgan Crucible Company plc; Rolls-Royce plc; Rotork p.l.c.; Senior plc; Severﬁeld-Rowen Plc; Smiths Group plc; Spirax-Sarco Engineering
plc; Tomkins plc; Ultra Electronics Holdings plc; UMECO plc; The Vitec Group plc; VT Group plc and The Weir Group PLC.
The committee is considering whether the current way of identifying membership of the comparator group for LTIP awards remains appropriate.
COBHAM EXECUTIVE SHARE OPTION SCHEME (2004) (ESOS)
The ESOS was approved by shareholders at the 2004 AGM and includes an ‘Approved’ part, which has been approved by the Inland Revenue, and an
‘Unapproved’ part which is not designed for Inland Revenue approval. Options to acquire Cobham ordinary shares may be made to participants up to a
maximum annual value of 100% of base salary. Options are granted at a price not less than the market value of the company’s ordinary shares on, or shortly
before, the date an option is granted. During 2004, options were granted to 98 directors and senior executives. The exercise of options will be conditional
upon the company’s underlying EPS growth exceeding inﬂation by a speciﬁed margin over a three year period. No part of an option will become exercisable
unless the company’s EPS growth over the period exceeds inﬂation by at least 3% per annum on average. If average growth in EPS in excess of inﬂation
over three years is between 3% and 5% per annum, calculated on a compound basis, shares under option with a value between 50%–100% of the
participant’s base salary will become exercisable. If average EPS growth exceeds 5% per annum, the option will become exercisable in full. There will be no
provision for re-testing of the performance condition if it is not met after three years. EPS growth is considered by the committee to be an appropriate
measure of the company’s performance for the purposes of the ESOS as it is based upon underlying ﬁnancial performance.
The committee will ensure that EPS is calculated on a consistent basis following the move to International Accounting Standards as mentioned above.
OTHER SHARE SCHEMES AND HEADROOM
A new savings related share option scheme was approved by shareholders at the 2004 AGM and was operated during the year. Executive directors are
permitted to participate in this scheme on the same terms as other UK employees. The scheme operates within speciﬁc tax legislation (including a
requirement to ﬁnance the exercise of the option using the proceeds of a monthly savings contract).
The company is in the course of implementing a new Inland Revenue approved all-employee share scheme, the Cobham Share Incentive Plan. Executive
directors are permitted to participate in this scheme, which has been approved by shareholders, on the same terms as other UK employees. This scheme
operates within speciﬁc tax legislation and enables participants to buy Cobham ordinary shares out of pre-tax income.
Consistent with the legislation and normal practice, neither of these schemes requires the imposition of pre-vesting performance conditions.
There are limits relating to the issue of shares in any ten year period in connection with the all employee share schemes and also the discretionary
employee share schemes (i.e. the LTIP and the executive share option schemes). These are 10% and 5% of the company’s issued share capital respectively.
As at the year end, 7.6m (6.8%) and 3.2m (2.9%) shares have been, or may be, issued pursuant to awards made in the previous ten years. 36 COBHAM PLC
Directors’Remuneration Report continued
PERFORMANCE GRAPH
This graph illustrates the performance of the company against a ‘broad equity market index’ over the past ﬁve years.As the company has been a constituent
of the FTSE 350 index throughout this period, that index is considered the most appropriate form of broad equity market index against which performance
should be graphed. Performance is measured by reference to TSR (share price growth plus dividends paid).
TOTAL SHAREHOLDER RETURN
This graph looks at the value, by the end of 2004, of £100 invested in Cobham on 31 December 1999 compared with that
of £100 invested in the FTSE 350 Index. The other points plotted are the values at interim ﬁnancial year-ends.
DIRECTORS’ PENSIONS
Executive directors, with the exception of Geoff Cooper, participate in the Cobham Executives’ Pension Plan (the Plan). The Plan provides beneﬁts on ﬁnal
pay principles against a normal pension age of 60 subject to actuarial reduction for earlier retirement. Pension accrues at 1/30th of pensionable earnings,
i.e. base salary, for each year of service and participants contribute at the rate of 7% of pensionable earnings.
All pensions in payment relating to post April 1997 rights are increased in line with the retail prices index, subject to a minimum of 3% per annum and a
maximum of 5% per annum, with the balance of pension being increased at 3% per annum. On death in service, a lump sum of four times pensionable
earnings is payable together with a spouse’s pension of two thirds of the member’s prospective pension. On death after retirement, a spouse’s pension is
paid at the rate of two thirds of the member’s pre-commutation pension. Similar spouse’s pensions are payable on the death of a deferred pensioner prior
to retirement.
The pension beneﬁts of directors who are members of the Plan are restricted by the Inland Revenue’s earnings cap. Contributions in respect of such
members, with the exception of Warren Tucker, are paid into funded unapproved retirement beneﬁt schemes (FURBS) and details of the amounts paid are
set out in table 2(B) on page 38. Cash payments in lieu of contributions to a FURBS are made to Warren Tucker as mentioned in the notes to table 1 on
page 37. Following Gordon Page’s retirement as an executive director, no further contributions have been paid into his FURBS.The policy in respect of newly
appointed directors is that contributions should normally be 2% of annual basic salary per month.
The committee will review the current pension arrangements in the light of the tax changes due to come into effect in April 2006. In undertaking the review
the committee will consider all relevant factors, including the views of institutional investors.
Details of directors’ pension beneﬁts as required by the Regulations are set out in table 2(A) on page 38.
SERVICE CONTRACTS
The Board’s policy on setting notice periods for new directors is that these should not normally exceed one year. It recognises, however, that it may be
necessary in the case of new executive appointments to offer a longer initial notice period which would subsequently reduce to one year. The service
contracts of Allan Cook (dated 13 June 2001), Geoff Cooper (dated 1 June 1989) and Alex Hannam (dated 13 February 2003) are terminable on one year’s
notice by either party. Warren Tucker’s and Andy Stevens’ service contracts (both of which are dated 1 January 2004) are terminable on one year’s notice
by,and six months’ notice to, the company. With the exception of Geoff Cooper’s contract, these contracts provide for automatic termination on the
director attaining retirement age, i.e. 60. Geoff Cooper’s contract does not contain an expiry date.
The company may elect to terminate directors’ service contracts by making payments in lieu of notice. Such payments are calculated by reference to the
base salary otherwise payable during the notice period. Payments in respect of annual bonus for the relevant periods may also be payable. In the case of
Warren Tucker, any payment in lieu of notice shall include a sum equal to the value of his annual beneﬁts. The company recognises and endorses the
obligation of departing directors to mitigate their own losses.
No executive director currently holds a non-executive directorship with any other company.
PERSONAL SHAREHOLDING
Executive directors are encouraged to acquire and hold, over time, Cobham ordinary shares to the value of at least one year’s salary.
31.12.99 31.12.00
Cobham plc
FTSE 350 Index Source: Datastream
31.12.01 31.12.02 31.12.03 31.12.04
Value £
60
100
160
200
80
120
140
180 ANNUAL REPORT & ACCOUNTS 2004   37
NON-EXECUTIVE DIRECTORS
The independent non-executive directors do not have service contracts. Mike Smith, Jeff Edington, Peter Hooley and Marcus Beresford have been appointed
pursuant to letters dated 14 March 1996, 12 August 1996, 10 May 2002 and 29 January 2004 respectively. Subject to appointment or re-appointment by
shareholders in the interim, the current terms will expire at the 2005 AGM, 30 September 2005, 12 June 2005 and 28 February 2007 respectively. No
compensation is payable in the events of their appointments being terminated. Each of them has, together with Gordon Page, given an undertaking that
he will have sufﬁcient time to meet what is expected of him as a director. Under Gordon Page’s letter of appointment, six months’ notice of termination is
required to be given by either party.
A committee of the Board comprising Allan Cook and Warren Tucker is responsible for determining the remuneration of the independent non-executives.
With effect from 1 January 2005, and in recognition of the increasing demands being placed on them, the annual fee was increased from £20,000 to
£25,000, per annum. In addition, the additional fee payable to the chairmen of the audit and remuneration committees was increased from £2,000 to
£5,000 per annum. Fees in respect of the services of Peter Hooley are paid to Smith & Nephew plc. Gordon Page receives an annual fee of £160,000 which
is ﬁxed until 30 November 2006. Non-executive directors do not participate in any of the company’s share schemes, pension schemes or bonus
arrangements with the exception of Gordon Page who has deferred beneﬁts under the Plan.
AUDITABLE PART
The auditable part of this Directors’ Remuneration Report is set out below on pages 37 to 40.
TABLE 1:
DIRECTORS’ EMOLUMENTS
The remuneration of the directors, including the chairman and the highest paid director, was as follows:
SALARY, FEES AND TERMINATION BENEFITS TOTAL
OTHER PAYMENTS BONUS PAYMENTS EXCLUDING PENSION EXCLUDING PENSION
£000 2004 2003 2004 2003 2004 2003 2004 2003 2004 2003
G F Page
1
194 389 – 376 – – 29 27 223 792
A E Cook 410 359 172 215 – – 23 22 605 596
A G Irwin 
2
– 146 – 90 – – – 12 – 248
R H L Clark 
3
– 139 – – – 539 – 19 – 697
G C Cooper 
4
416 324 89 150 – – 27 23 532 497
A J Hannam 
5
243 213 114 120 – – 1 73 358 406
W G Tucker 
6
352 139 118 62 – – 14 9 484 210
A J Stevens 
7
330 42 89 52 – – 21 11 440 105
J D M Smith 22 22 –––––– 22 22
J W Edington 20 20 –––––– 20 20
P Hooley 22 22 –––––– 22 22
M Beresford17––––––– 17 –
Total Remuneration 2,026 1,815 582 1,065 – 539 115 196 2,723 3,615
Subject as follows, beneﬁts relate to the provision of company cars and fuel, medical insurance, telephones and subscriptions. Allan Cook’s beneﬁts include the provision of
ﬁnancial advice. Alex Hannam’s beneﬁts relate to relocation (2003) and medical insurance.Warren Tucker’s relate to the provision of a company car and fuel (2004), relocation
(2003), medical insurance and telephones. Andy Stevens’s relate to the provision of a company car and fuel, relocation (2003), medical insurance and subscriptions. The
committee is aware that guidelines have changed regarding the disclosure of remuneration for below Board executives and will address this issue in its report for 2005.
1
Emoluments include – under salary, fees and other payments – the sum of £34,000 paid as a gratuity in view of Gordon Page’s inability to draw pension beneﬁts whilst
continuing to act as a director.
2
Emoluments for 2003 are for the period until his retirement as a director on 27 July 2003. Thereafter he continued to be employed by the company and his emoluments in
respect of the period to the end of the year amounted to £111,000.
3
Robin Clark left the company on 15 August 2003 as a result of a reorganisation of the Group's structure. He was paid a total of £539,000 compensation for early termination
being a discounted sum having regard to his entitlement to 24 months' notice under his service contract and related employment rights.
4
Emoluments include – under salary, fees and other payments – a payment of £77,000 (2003 - £58,000) made in lieu of additional pension provision. Such payment is not
taken into account in calculating bonus and share scheme entitlements.
5
Emoluments for 2003/4 include – under salary, fees and other payments – a cash allowance of £13,000 in respect of the provision of a car and fuel. Such payments are not
taken into account in calculating bonus and share scheme entitlements.
6
Emoluments for 2003 are for the period from his appointment on 28 July 2003. They include – under salary, fees and other payments – cash payments totalling £26,000 in
lieu of payments into a funded unapproved retirement beneﬁt scheme and a cash allowance of £5,000 in respect of the provision of a car and fuel. Emoluments for 2004
include – under salary, fees and other payments – a cash payment of £67,000 in lieu of payments into a funded unapproved retirement beneﬁt scheme and a cash allowance
of £5,000 in respect of the provision of a car and fuel. Such payments are not taken into account in calculating bonus and share scheme entitlements.
7
Emoluments for 2003 are for the period from his appointment on 10 November 2003. Emoluments for 2004 include – under salary, fees and other payments – £30,000 in
connection with acceptance of ofﬁce. A further sum will become payable in 2006 subject to his employment continuing. 38 COBHAM PLC
TABLE 2(A):
DIRECTORS’ PENSIONS
TRANSFER V ALUE
INCREASE IN OF PENSION ADDITIONAL
ACCRUED ADDITIONAL ACCRUED TRANSFER V ALUE
PENSION FROM PENSION IN EXCESS OF TRANSFER TRANSFER ACCRUED IN
PREVIOUS YEAR EARNED IN INFLATION AND VALUE OF VALUE OF EXCESS OF
ACCRUED END (WITH NO EXCESS OF MEMBERS’ ACCRUED ACCRUED MEMBERS’
PENSION AT ADJUSTMENT FOR INFLATION CONTRIBUTIONS PENSION AT PENSION AT CONTRIBUTIONS
31.12.04 INFLATION) DURING 2004 DURING 2004 31.12.03 31.12.04 DURING 2004
£ P.A.
1
£ P.A. £ P.A. ££££
G F Page 50,101 4,451 3,173 68,496 964,401 1,081,540 117,139
A E Cook 13,317 3,692 3,422 36,913 132,360 202,744 55,196
A J Hannam 8,217 3,542 3,411 51,691 81,454 160,601 64,172
A J Stevens 3,683 3,408 3,401 19,818 1,704 36,875 19,983
W G Tucker 5,667 3,467 3,405 18,923 15,747 43,287 20,452
1
Gordon Page reached normal retirement age in 2003 but has yet to receive any beneﬁt from the Plan. The accrued pension shown reﬂects his entitlement at normal
retirement age increased by an actuarial factor to allow for the deferment of beneﬁts.
The accrued pension shown is that which would be paid annually on retirement based on service to the end of the ﬁnancial year. The transfer values
represent the present value of future payments from the pension plan rather than remuneration currently due to the individual and cannot be meaningfully
aggregated with annual remuneration. Members of the pension plan have the option of paying additional voluntary contributions. Neither the contributions
nor the resulting beneﬁts are included in the above.
Under Inland Revenue regulations, members’ retirement beneﬁts may be reduced on account of retained beneﬁts from previous employments.
Inﬂation during 2004 has been taken to be 2.8% being the statutory increase to deferred pensions from 2003 to 2004.
Transfer values payable are calculated in accordance with Section 4 ‘Minimum Cash Equivalent’ of Guidance Note 11 issued by the Institute and Faculty 
of Actuaries.
TABLE 2(B):
Gordon Page, Allan Cook, Alex Hannam and Andy Stevens are subject to the Inland Revenue capping rules and the following company contributions, which
are taxable beneﬁts, relate to funded unapproved retirement beneﬁt schemes:
£000 2004 2003
G F Page
1
– 291
A E Cook 135 112
A J Hannam
2
53 68
A J Stevens 73 9
1
For the period to his retirement as an executive director on 17 November 2003.
2
The contribution for 2003 includes a payment in respect of 2002.
In the case of Geoff Cooper, contributions totalling £35,000 (2003 - £34,000) were made into his personal money purchase pension scheme.
Directors’Remuneration Report continued ANNUAL REPORT & ACCOUNTS 2004   39
TABLE 3(A):
DIRECTORS’ SHARE INTERESTS
The interests of the directors and their families in Cobham plc’s ordinary shares were:
OPTIONS OVER
ORDINARY SHARES ORDINARY SHARES
At 1.1.04* At 31.12.04 At 1.1.04 At 31.12.04
G F Page 209,042 181,121 4,483 –
A E Cook 98,555 96,990 2,038 24,861
G C Cooper 219,140 220,706 1,754 18,454
A J Hannam 22,526 36,740 742 14,038
W G Tucker 17,173 34,477 – 17,247
A J Stevens 25,381 43,921 – 18,235
J D M Smith 3,000 3,000 – –
J W Edington ––––
P Hooley ––––
M Beresford* –1,500 – –
*At date of appointment if later.
The above interests are all beneﬁcial and include interests in shares provisionally allocated under the Cobham Long Term Incentive Plan.
Interests at 10 March 2005, being a date not more than one month prior to the date of the notice convening the annual general meeting, were the same
as at 31 December 2004.
TABLE 3(B):
DIRECTORS’ SHARE OPTIONS
Details of directors’ interests in options over Cobham plc’s ordinary shares granted under the Cobham Savings Related Share Option Scheme and the
Cobham Executive Share Option Scheme 2004 were:
MARKET
PRICE AT
NUMBER OF OPTIONS DURING THE YEAR EXERCISE DATE OF DATE FROM
AT AT PRICE EXERCISE WHICH EXPIRY
1.1.04 GRANTED EXERCISED LAPSED 31.12.04 – PENCE – PENCE EXERCISABLE DATE
G F Page 1,727 – 1,727 – – 483 1,183 – –
623 – 577 46 – 495 1,293 – –
840 – 688 152 – 691 1,293 – –
121 – 75 46 – 836 1,293 – –
719 – 286 433 – 840 1,293 – –
136 – 33 103 – 769 1,293 – –
317 – 20 297 – 939 1,293 – –
A E Cook 1,660 – – – 1,660 840 – 1.2.09 1.8.09
378 – – – 378 939 – 1.2.11 1.8.11
– 22,823* – – 22,823 1,347 – 20.9.07 20.9.14
G C Cooper 1,695 – – – 1,695 836 – 1.2.06 1.8.06
59 – – – 59 769 – 1.2.08 1.8.08
– 16,700* – – 16,700 1,347 – 20.9.07 20.9.14
A J Hannam 742 – – – 742 939 – 1.2.09 1.8.09
– 493 – – 493 1,076 – 1.2.08 1.8.08
– 12,803* – – 12,803 1,347 – 20.9.07 20.9.14
W G Tucker – 1,661 – – 1,661 1,076 – 1.2.12 1.8.12
– 15,586* – – 15,586 1,347 – 20.9.07 20.9.14
A J Stevens – 1,535 – – 1,535 1,076 – 1.2.10 1.8.10
– 16,700* – – 16,700 1,347 – 20.9.07 20.9.14
*Granted under the Cobham Executive Share Option Scheme 2004. All other options were granted under the Cobham Savings Related Share Option Scheme. 40 COBHAM PLC
Directors’Remuneration Report continued
TABLE 3(B):
DIRECTORS’ SHARE OPTIONS continued
The market price of Cobham ordinary shares as at 31 December 2004 was 1237.0p per share and the closing price range during the year was 1142.0p 
to 1460.0p.
TABLE 4:
GAINS MADE ON DIRECTORS’ SHARE OPTIONS
EXERCISE OPTIONS GAIN
DATE EXERCISED £000
G F Page 9.2.04 1,727 12
24.5.04 1,679 11
All options were granted for nil consideration under the Cobham Savings Related Share Option Scheme.
The aggregate gain made by the directors on the exercise of share options was £23,000 (2003 - £5,000).
Gains are calculated by reference to the middle market value of a Cobham ordinary share on the date of exercise. All shares resulting from the exercise of
share options during the year have been retained.
TABLE 5:
ALLOCATIONS UNDER THE COBHAM LONG-TERM INCENTIVE PLAN
MONETARY
CONDITIONALLY VALUE OF
AWARDED LAPSED VESTED VESTED
ALLOCATIONS DURING DURING DURING ALLOCATIONS AWARDS EXPIRY
AT 1.1.04 THE YEAR
1
THE YEAR
2
THE YEAR
3
AT 31.12.04 £
4
DATE
5
G F Page 52,518 – 31,386 21,132 – 190,188 –
A E Cook 93,978 25,338 26,903 – 92,413 – 28.4.07
G C Cooper 74,445 18,540 17,038 12,845 63,102 115,605 28.4.07
A J Hannam 19,601 14,214 – – 33,815 – 28.4.07
W G Tucker 16,217 17,304 – – 33,521 – 28.4.07
A J Stevens 25,381 18,540 – – 43,921 – 28.4.07
1
The market price of a Cobham plc ordinary share on 28 April 2004, being the date of the awards made during the year, was 1365p.
2
Lapsed shares comprise those shares conditionally awarded in 2001.
3
Shares in this column are those awarded on 18 March 1999, which vested absolutely on 17 March 2004.
The market price of the shares at the date of the award was 900p. At the date of vesting it was 1226p.
The awards are subject to the performance conditions speciﬁed on page 35.
Top quartile performance was achieved in respect of the 1999 awards with the result that 100% of the awards vested.
4
Monetary values are calculated by multiplying the numbers of shares by their market prices as at the award dates.
5
The expiry date is the last date by which qualifying conditions in respect of any outstanding interests under the LTIP have to be fulﬁlled. This date may either be the 
expiry of any relevant holding period or (where applicable) of any restricted period.
By order of the Board
J D M Smith Chairman of the Remuneration Committee
10 March 2005 ANNUAL REPORT & ACCOUNTS 2004   41
The following statement, which should be read in conjunction with the report of the auditors set out overleaf, is made with a view to distinguishing for
shareholders the respective responsibilities of the directors and of the auditors in relation to the ﬁnancial statements.
The directors are required by the Companies Act 1985 to prepare ﬁnancial statements for each ﬁnancial year which give a true and fair view of the state of
affairs of the company and the Group as at the end of the ﬁnancial year and of the proﬁt or loss for the ﬁnancial year.
The directors consider that in preparing the ﬁnancial statements on pages 44 to 74 the company has used appropriate accounting policies, consistently
applied and supported by reasonable and prudent judgements and estimates and that all accounting standards which they consider to be applicable have
been followed. The ﬁnancial statements have been prepared on a going concern basis.
The directors have responsibility for ensuring that the company keeps accounting records which disclose with reasonable accuracy the ﬁnancial position of
the company and which enable them to ensure that the ﬁnancial statements comply with the Companies Act 1985.
The directors have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the company and to prevent and
detect fraud and other irregularities.
Statement of Directors’ Responsibilities 42 COBHAM PLC
Independent Auditors’ Report
TO THE MEMBERS OF COBHAM PLC
We have audited the ﬁnancial statements which comprise the Consolidated Proﬁt and Loss Account, the Balance Sheets, the Consolidated Cash Flow
Statement, the Statement of Total Recognised Gains and Losses, the Reconciliation of Movements in Shareholders’ Funds, the related notes and the
accounting policies set out in the statement of Accounting Policies. We have also audited the disclosures required by Part 3 of Schedule 7A to the
Companies Act 1985 contained in the Directors’ Remuneration Report (‘the auditable part‘).
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The directors’ responsibilities for preparing the annual report and the ﬁnancial statements in accordance with applicable United Kingdom law and
accounting standards are set out in the Statement of Directors' Responsibilities. The directors are also responsible for preparing the Directors’ Remuneration
Report.
Our responsibility is to audit the ﬁnancial statements and the auditable part of the Directors’ Remuneration Report in accordance with relevant legal and
regulatory requirements and United Kingdom Auditing Standards issued by the Auditing Practices Board. This report, including the opinion, has been
prepared for and only for the company’s members as a body in accordance with Section 235 of the Companies Act 1985 and for no other purpose. We do
not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands
it may come save where expressly agreed by our prior consent in writing.
We report to you our opinion as to whether the ﬁnancial statements give a true and fair view and whether the ﬁnancial statements and the auditable part
of the Directors’ Remuneration Report have been properly prepared in accordance with the Companies Act 1985. We also report to you if, in our opinion,
the Directors' Report is not consistent with the ﬁnancial statements, if the company has not kept proper accounting records, if we have not received all the
information and explanations we require for our audit, or if information speciﬁed by law regarding directors' remuneration and transactions is not disclosed.
We read the other information contained in the annual report and consider the implications for our report if we become aware of any apparent
misstatements or material inconsistencies with the ﬁnancial statements. The other information comprises only the Chairman’s Statement, the Chief
Executive’s Review, the Business Review, the statement on Corporate Social Responsibility, the Financial Review, the Directors’ Report, the statement on
Corporate Governance and the unaudited part of the Directors’ Remuneration Report.
We review whether the statement on Corporate Governance reﬂects the company’s compliance with the nine provisions of the 2003 FRC Combined Code
speciﬁed for our review by the Listing Rules of the Financial Services Authority and we report if it does not. We are not required to consider whether the
Board’s statements on internal control cover all risks and controls, or form an opinion on the effectiveness of the Group’s corporate governance procedures
or its risk and control procedures.
BASIS OF AUDIT OPINION
We conducted our audit in accordance with auditing standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the ﬁnancial statements and the auditable part of the Directors’ Remuneration Report. It also includes
an assessment of the signiﬁcant estimates and judgements made by the directors in the preparation of the ﬁnancial statements, and of whether the
accounting policies are appropriate to the company's circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with
sufﬁcient evidence to give reasonable assurance that the ﬁnancial statements and the auditable part of the Directors’ Remuneration Report are free from
material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the
presentation of information in the ﬁnancial statements. ANNUAL REPORT & ACCOUNTS 2004   43
OPINION
In our opinion:
•
the ﬁnancial statements give a true and fair view of the state of affairs of the company and the Group at 31 December 2004 and of the proﬁt and cash
ﬂows of the Group for the year then ended;
•
the ﬁnancial statements have been properly prepared in accordance with the Companies Act 1985;
and
•
those parts of the Directors’ Remuneration Report required by Part 3 of Schedule 7A to the Companies Act 1985 have been properly prepared in
accordance with the Companies Act 1985.
PricewaterhouseCoopers LLP 
Chartered Accountants and Registered Auditors
Southampton
10 March 2005
NOTES
a) The maintenance and integrity of the Cobham plc website is the responsibility of the directors; the work carried out by the auditors does not involve
consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the ﬁnancial statements
since they were initially presented on the website.
b) Legislation in the United Kingdom governing the preparation and dissemination of ﬁnancial statements may differ from legislation of other jurisdictions. 44 COBHAM PLC
Accounting Policies
ACCOUNTING CONVENTION
The ﬁnancial statements have been prepared in accordance with applicable UK accounting standards under the historical cost convention, as modiﬁed by
the revaluation of certain ﬁxed assets. Compliance with SSAP 19 ‘Accounting for Investment Properties’ requires departure from the requirements of the
Companies Act 1985 relating to depreciation and an explanation of the departure is given in the tangible ﬁxed assets accounting policy note below.
BASIS OF CONSOLIDATION
The Group ﬁnancial statements include the ﬁnancial statements of the parent company and of all its subsidiaries made up to the end of the ﬁnancial year.
Joint ventures are accounted for using the gross equity method in accordance with FRS 9 ‘Associates and Joint Ventures’. Associates are accounted for using
the equity method of accounting.
Businesses acquired are accounted for as acquisitions, with effect from the date control passes. Those disposed of are accounted for up until the point of
their disposal.
TURNOVER
Turnover is measured at the fair value of the right to consideration and is generally recognised when goods are despatched or services delivered and
excludes intercompany sales, value added tax and other sales taxes. In the case of long-term contracts, turnover is recognised based upon the fair value of
work performed to date.
PENSIONS
For deﬁned beneﬁt schemes the amounts charged to operating proﬁt are the current service costs and gains and losses on settlements and curtailments.
They are included as part of staff costs. Past service costs are recognised immediately in the proﬁt and loss account if the beneﬁts have vested. If the
beneﬁts have not vested immediately, the costs are recognised over the period until vesting occurs. The interest cost and expected return on assets are
shown as a net amount of other ﬁnance costs or credits adjacent to interest.Actuarial gains and losses are recognised immediately in the statement of total
recognised gains and losses.
Other than mainland Europe schemes, deﬁned beneﬁt schemes are funded, with the assets of the scheme held separately from those of the Group, in
separate trustee administered funds. Pension scheme assets are measured at fair value and liabilities are measured on an actuarial basis using the projected
unit method and discounted at a rate equivalent to the current rate of return on a high quality corporate bond of equivalent currency and term to the
scheme liabilities. The actuarial valuations are obtained at least triennially and are updated at each balance sheet date. The resulting deﬁned beneﬁt asset
or liability, net of the related deferred tax is presented separately after other net assets on the face of the balance sheet.
For deﬁned contribution schemes the amount charged to the proﬁt and loss account in respect of pension costs and other post-retirement beneﬁts is the
contributions payable in the year. Differences between contributions payable in the year and contributions actually paid are shown as either accruals or
prepayments in the balance sheet.
DEFERRED TAXATION
Deferred tax is recognised on a full provision basis on all timing differences which have originated, but not reversed, at the balance sheet date calculated at
rates of tax expected to apply, based on current tax rates and law. Timing differences represent accumulated differences between the company's taxable
proﬁt and its ﬁnancial proﬁt and arise primarily from the recognition of the provision for the deﬁcit on the Group’s deﬁned beneﬁt pension schemes and
the difference between accelerated capital allowances and depreciation. Deferred tax liabilities have not been discounted.
INTANGIBLE FIXED ASSETS
Goodwill arising on acquisitions of subsidiary undertakings and joint ventures made after 1 January 1998 and expenditure on other intangible ﬁxed assets
comprising patents, licences and trade marks is capitalised and amortised on a straight line basis over estimated useful lives of up to 20 years. These periods
have been determined after taking into account the nature of the intangible assets acquired and the markets in which these intangible assets operate.
In accordance with the Group's accounting policy prior to the introduction of FRS 10, goodwill arising on acquisitions prior to 1 January 1998 has been
written off to reserves, but will be charged to the proﬁt and loss account on any subsequent disposal of the business to which it is related. ANNUAL REPORT & ACCOUNTS 2004   45
TANGIBLE FIXED ASSETS
Freehold land and investment properties are not depreciated. Other ﬁxed assets are depreciated on a straight line basis to their estimated residual values
over their estimated useful lives. These lives are as follows:
Freehold buildings – 50 years
Leasehold properties – The period of the lease
Other ﬁxed assets – 3 to 15 years.
In accordance with SSAP 19, investment properties are held at open market value. Any aggregate surplus or deﬁcit on revaluation is transferred to a
revaluation reserve, and no provision is made for depreciation of freehold properties. This departure from the requirements of the Companies Act 1985,
which requires all properties to be depreciated, is, in the opinion of the directors, necessary for the ﬁnancial statements to show a true and fair view in
accordance with applicable accounting standards.
The depreciation (which would, had the provisions of the Act been followed, have reduced proﬁt for the year) is only one of the factors reﬂected in the
annual valuation and the amount attributable to this factor cannot reasonably be separately identiﬁed or quantiﬁed.
INVESTMENTS
Investments are stated at cost less any provision for impairment in value.
AIRCRAFT ENGINE OVERHAUL EXPENDITURE
Expenditure is capitalised when it is incurred on aircraft engine overhauls and this ﬁxed asset addition is depreciated over its useful economic life.
RESEARCH AND DEVELOPMENT
Research and development expenditure not chargeable to customers is written off as incurred.
FINANCE LEASES
Where assets are ﬁnanced by lease agreements that give rights approximating to ownership (ﬁnance leases), the assets are treated as if they had been
purchased outright and the corresponding leasing commitments are shown as an obligation under ﬁnance leases. The relevant assets are depreciated on
the basis of expected utilisation over the shorter of the life of the contract on which they are employed or the life of the lease. Lease payments are treated
as consisting of capital and interest elements and the interest is charged to the proﬁt and loss account in proportion to the outstanding capital
commitment.
OPERATING LEASES
Operating lease payments for assets leased from third parties are charged to the proﬁt and loss account on an accruals basis.
STOCKS
Stocks and work in progress are stated at the lower of cost, which includes an appropriate proportion of productive overheads, and net realisable value.
Payments received and receivable on account of work in progress are deducted from the cost of the work carried out at the balance sheet date to the extent
of the valuation of the work done. 46 COBHAM PLC
Accounting Policies continued
FOREIGN CURRENCIES
Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction or, where forward cover contracts have been
arranged, at the contracted rate. Monetary assets and liabilities denoted in foreign currencies are retranslated at the exchange rate ruling at the balance
sheet date or at a contractual rate if applicable and any exchange differences arising are taken to the proﬁt and loss account.
For consolidation purposes the assets and liabilities of overseas subsidiary undertakings and joint ventures are translated at the closing exchange rates.
Proﬁt and loss accounts of such undertakings are consolidated at the average rates of exchange during the year. Exchange differences arising on these
translations are taken to reserves.
FINANCIAL INSTRUMENTS
Derivative instruments utilised by the Group include interest rate swaps, interest rate caps, forward rate agreements and forward currency contracts.
Receipts and payments on ﬁnancial instruments are recognised on an accruals basis, over the life of the instruments. Finance costs associated with debt
issuances are charged to the proﬁt and loss account over the life of the instruments. ANNUAL REPORT & ACCOUNTS 2004   47
Consolidated Profit and Loss Account 
for the year ended 31 December 2004
BEFORE
GOODWILL GOODWILL
AMORTISATION, AMORTISATION,
BEFORE INTEGRATION INTEGRATION
GOODWILL GOODWILL COSTS AND COSTS AND
AMORTISATION AMORTISATION TOTAL DISPOSALS DISPOSALS TOTAL 
£m NOTES 2004 2004 2004 2003 2003 2003
Group Turnover
Turnover (including share of joint ventures)
Continuing operations 975.5 848.3
Acquisitions 40.9 –
1,016.4 848.3
Discontinued operations – 17.1
1,016.4 865.4
Less: share in turnover of joint ventures (33.4) (32.8)
1 983.0 983.0 832.6 832.6
Cost of sales (714.6) – (714.6) (584.5) (0.8)
†
(585.3)
Gross Profit 268.4 – 268.4 248.1 (0.8) 247.3
Selling and distribution costs (55.5) (55.5) (48.2) (48.2)
Administrative expenses (62.4) (20.9) (83.3) (57.4) (15.8)* (73.2)
Group Operating Profit
Continuing operations 147.3 (19.8) 127.5 143.7 (16.6) 127.1
Acquisitions 3.2 (1.1) 2.1 –––
150.5 (20.9) 129.6 143.7 (16.6) 127.1
Discontinued operations – – – (1.2) – (1.2)
2 150.5 (20.9) 129.6 142.5 (16.6) 125.9
Share of operating profit in joint ventures 6.5 (0.1) 6.4 5.8 (0.1)* 5.7
Share of operating loss in associates (0.1) – (0.1) (0.6) – (0.6)
156.9 (21.0) 135.9 147.7 (16.7) 131.0
Exceptional loss on disposal of subsidiary
undertakings – discontinued operations – – (64.1)** (64.1)
Net interest 3
Group (8.5) (8.5) (9.3) (9.3)
Joint ventures (2.0) (2.0) (2.2) (2.2)
(10.5) (10.5) (11.5) (11.5)
Other finance income/(charges) 9 0.5 0.5 (0.9) (0.9)
Profit on Ordinary Activities before Taxation 146.9 (21.0) 125.9 135.3 (80.8) 54.5
Tax on profit on ordinary activities 4 (40.9) (36.0)
Profit on Ordinary Activities after Taxation 
before Minority Interests 85.0 18.5
Minority Interests (0.3) (0.3)
Profit on Ordinary Activities after Taxation
attributable to Shareholders 84.7 18.2
Dividends 6 (34.6) (31.3)
Retained profit/(loss) for the year 20 50.1 (13.1)
Earnings per Ordinary Share 7
– basic 76.0p 17.2p
– fully diluted 75.5p 17.1p
– underlying 94.8p 93.5p
There is no material difference between the results disclosed above and the results on an unmodified historical cost basis.
*Amortisation of goodwill.
†
Integration costs connected with the acquisition of the Racal Antennas business of Thales in July 2003.
**In December 2003 the Group disposed of Westwind Air Bearings Limited and Westwind Air Bearings Inc, giving rise to an exceptional loss of £64.1m. This transaction was
fully reported in the 2003 Annual Report. 48 COBHAM PLC
Consolidated Balance Sheet 
as at 31 December 2004
£m NOTES 2004 2003
Fixed Assets
Intangible assets 10 373.8 345.9
Tangible assets 11 241.0 228.1
Investments in joint ventures:
Share of gross assets 72.7 71.6
Share of gross liabilities (57.6) (58.0)
Goodwill 1.2 1.3
12 16.3 14.9
Investments in associate 12 1.0 1.6
Investments 12 – –
632.1 590.5
Current Assets
Stocks 13 183.9 190.0
Debtors:
Amounts falling due within one year 14 227.7 184.5
Amounts falling due after more than one year 14 9.6 6.3*
Investments 15 – 0.1
Cash at bank and in hand 101.3 106.1
522.5 487.0
Creditors:
Amounts falling due within one year
Borrowings 16 (116.1) (80.4)
Other creditors 16 (281.1) (259.8)
(397.2) (340.2)
Net Current Assets 125.3 146.8
Total Assets less Current Liabilities 757.4 737.3
Creditors:
Amounts falling due after more than one year
Borrowings 17 (151.3) (180.2)
Other creditors 17 (10.6) (11.7)
(161.9) (191.9)
Provisions for Liabilities and Charges 18 (38.1) (39.3)
Net assets excluding pension liabilities 557.4 506.1
Deficit on Group pension schemes 9(47.7) (49.2)
Net assets including pension liabilities 509.7 456.9
Capital and Reserves including non equity interests
Called up share capital 19 27.9 27.8
Share premium account 20 81.6 76.8
Revaluation reserve 20 1.7 1.7
Other reserve 20 0.3 0.7
Profit and loss account 20 397.1 348.8
Shareholders’ Funds 508.6 455.8
Minority interest (equity) 21 1.1 1.1
509.7 456.9
*Within the 2003 comparatives, a balance of £6.1m has been reclassified from Amounts falling due within one year to Amounts falling due after more than one year.
Approved by a duly appointed and authorised committee of the Board on 10 March 2005:
Gordon Page
Warren Tucker
Directors ANNUAL REPORT & ACCOUNTS 2004   49
Parent Company Balance Sheet
as at 31 December 2004
£m NOTES 2004 2003
Fixed Assets
Tangible assets 11 4.3 4.3
Investment in group undertakings 12 721.3 246.8
725.6 251.1
Current Assets
Debtors:
Amounts falling due within one year 14 248.3 208.2
Amounts falling due after more than one year 14 – 310.8
Investments 15 – 0.1
Cash at bank and in hand 3.1 3.1
251.4 522.2
Creditors:
Amounts falling due within one year
Borrowings 16 (129.8) (59.4)
Other creditors 16 (186.1) (49.8)
(315.9) (109.2)
Net Current (Liabilities)/Assets (64.5) 413.0
Total Assets less Current Liabilities 661.1 664.1
Creditors:
Amounts falling due after more than one year
Borrowings 17 (125.0) (139.7)
Other creditors 17 (3.4) –
Provisions for Liabilities and Charges 18 (0.4) (0.4)
532.3 524.0
Capital and Reserves including non equity interests
Called up share capital 19 27.9 27.8
Share premium account 20 81.6 76.8
Special reserve 20 43.6 43.6
Other reserve 20 0.3 0.7
Profit and loss account 20 378.9 375.1
Shareholders’ Funds 532.3 524.0
Approved by a duly appointed and authorised committee of the Board on 10 March 2005:
Gordon Page
Warren Tucker
Directors 50 COBHAM PLC
Consolidated Cash Flow Statement
for the year ended 31 December 2004
£m NOTES 2004 2003
Net cash inflow from operating activities 22 163.1 147.8
Dividend received from joint venture 5.0 –
Returns on investments and servicing of finance 24a (7.6) (11.0)
Taxation (22.9) (20.3)
Capital expenditure and financial investment 24b (39.7) (39.2)
Acquisitions and disposals 24c (73.8) (115.0)
Equity dividends paid (32.3) (27.6)
Net cash outflow before use of liquid resources and financing (8.2) (65.3)
Management of liquid resources 24d 0.2 –
Financing 24e 7.2 105.1
(Decrease)/increase in Cash 23 (0.8) 39.8
Reconciliation of Net Cash Flow to
Movement in Net Debt
for the year ended 31 December 2004
£m NOTES 2004 2003
(Decrease)/increase in cash in the year (0.8) 39.8
(Increase)/decrease in debt and lease financing (17.2) 0.6
Borrowings on purchase of subsidiary –(12.2)
Decrease in liquid resources† (0.1) –
Loans of subsidiary undertakings acquired (1.0) (1.4)
Exchange movements 7.4 7.6
Movement in Net Debt in the year (11.7) 34.4
Net Debt at 1 January (154.4) (188.8)
Net Debt at 31 December 23 (166.1) (154.4)
†Liquid resources includes corporate investments. ANNUAL REPORT & ACCOUNTS 2004   51
Statement of Total Recognised 
Gains and Losses
for the year ended 31 December 2004
GROUP PARENT COMPANY
£m NOTES 2004 2003 2004 2003
Profit Attributable to Shareholders 84.7 18.2 38.4 140.7
Currency translation differences on foreign currency net investments 20 1.5 2.1 – –
Actuarial loss on pensions 9 (4.7) (7.5) – –
Movement on deferred tax relating to pension liability 1.4 1.1 – –
Total Recognised Gains relating to the year 82.9 13.9 38.4 140.7
Reconciliation of Movements in 
Shareholders’ Funds
for the year ended 31 December 2004
GROUP PARENT COMPANY
RESTATED RESTATED
£m NOTES 2004 2003 2004 2003
Profit Attributable to Shareholders 84.7 18.2 38.4 140.7
Dividends 6 (34.6) (31.3) (34.6) (31.3)
Retained profit/(loss) for the year 50.1 (13.1) 3.8 109.4
Release of goodwill previously written off against reserves – 68.4 – –
Actuarial loss on pension scheme (net of deferred tax) 9 (3.3) (5.3) – –
Currency translation differences on foreign currency net investments 20 1.5 2.1 – –
New share capital subscribed:
nominal value 19 0.1 0.1 0.1 0.1
premium on share issues 20 4.8 2.4 4.8 2.4
New share capital issued by private placing:
nominal value –2.3 –2.3
merger reserve on share issues – 104.0 – –
share issue costs –(1.7) – (1.7)
Long term incentive plan 20 (0.4) 0.6 (0.4) 0.6
Net addition to shareholders’ funds 52.8 159.8 8.3 113.1
Shareholders’ funds at 1 January 455.8 296.0 524.0 410.9
Shareholders’ funds at 31 December (which include non-equity
interests of £19,700) (2003 – £19,700) 508.6 455.8 532.3 524.0
In order to reflect the adoption of UITF 38, Shareholders’ funds as at 1 January 2003 have been restated from £297.4m and £412.3m for group and parent company 
respectively. Investment in own shares at 1 January 2003 has been reduced by £1.4m to £nil in both the group and parent company balance sheets. This restatement has had
no effect on the Group or parent company profit and loss account in either year. Notes to the Financial Statements continued Notes to the Financial Statements
1 SEGMENTAL ANALYSIS
AEROSPACE SYSTEMS FLIGHT OPERATIONS WESTWIND
AND GROUP CHELTON & SERVICES (DISCONTINUED) TOTAL
By Class of Business: £m 2004 2003 2004 2003 2004 2003 2004 2003 2004 2003
Turnover 387.6 320.5 411.4 317.0 220.4 212.2 – 17.1 1,019.4 866.8
Less share of joint ventures – – (1.7) (0.5) (31.7) (32.3) – – (33.4) (32.8)
Less inter-segmental (1.9) (0.8) (0.8) (0.4) (0.3) (0.2) – – (3.0) (1.4)
Turnover to third parties 385.7 319.7 408.9 316.1 188.4 179.7 – 17.1 983.0 832.6
Operating Profit/(Loss) 51.9 60.5 60.5 51.6 17.2 15.0 – (1.2) 129.6 125.9
Group share of joint ventures and associates – – 0.3 – 6.0 5.1 – – 6.3 5.1
Group Operating Profit/(Loss) 51.9 60.5 60.8 51.6 23.2 20.1 – (1.2) 135.9 131.0
Goodwill amortisation 8.0 5.7 11.0 8.4 2.0 1.8 – – 21.0 15.9
Integration costs – – – 0.8––––– 0.8
Underlying Operating Profit/(Loss) 59.9* 66.2 71.8 60.8 25.2 21.9† – (1.2) 156.9 147.7
Net Operating Assets 283.2 267.4 267.2 227.6 125.4 116.3 – – 675.8 611.3
Net Debt (166.1) (154.4)
Net Assets 509.7 456.9
UNITED KINGDOM OTHER EU COUNTRIES UNITED STATES REST OF THE WORLD TOTAL
By Geographical Segment: £m 2004 2003 2004 2003 2004 2003 2004 2003 2004 2003
Turnover to Third Parties
By destination – Group
– continuing activities 259.2 210.8 189.5 161.7 356.6 291.9 211.1 183.9 1,016.4 848.3
By destination – Group
– discontinued activities – 0.3 – 4.4 – 2.8 – 9.6 – 17.1
Less share of joint ventures (25.8) (26.0) (5.9) (6.3) (1.7) (0.5) – – (33.4) (32.8)
Total 233.4 185.1 183.6 159.8 354.9 294.2 211.1 193.5 983.0 832.6
By origin – Group
– continuing activities 431.3 364.8 113.0 85.4 322.4 255.1 149.7 143.0 1,016.4 848.3
By origin – Group
– discontinued activities – 11.3––– 2.4– 3.4– 17.1
Less share of joint ventures (25.8) (26.0) (5.9) (6.3) (1.7) (0.5) – – (33.4) (32.8)
Total 405.5 350.1 107.1 79.1 320.7 257.0 149.7 146.4 983.0 832.6
Operating Profit
– continuing activities 59.0 71.3 8.8 7.0 43.1 37.2 18.7 11.6 129.6 127.1
Operating Profit/(Loss)
– discontinued activities – (1.7) – – – 0.2 – 0.3 – (1.2)
Group share of joint ventures and associates 5.3 5.0 0.7 0.1 0.3––– 6.3 5.1
Group Operating Profit 64.3 74.6 9.5 7.1 43.4 37.4 18.7 11.9 135.9 131.0
Net Operating Assets 247.0 274.1 58.2 51.1 287.8 219.2 82.8 66.9 675.8 611.3
Net Debt (166.1) (154.4)
Net Assets 509.7 456.9
* Includes £2.3m of FSTA bid costs.
† Includes £1.2m of FSTA bid costs.
52 COBHAM PLC ANNUAL REPORT & ACCOUNTS 2004   53
2 OPERATING PROFIT 
£m 2004 2003
The operating profit of £129.6m (2003 – £125.9m) is after charging:
Depreciation – owned assets 39.6 33.5
– assets under finance leases 2.9 0.2
Amortisation – goodwill 20.9 15.8
– other intangible assets 0.7 0.5
Hire of plant and machinery – aircraft 13.6 20.4
– other 2.7 3.0
Other operating lease rentals 4.8 4.0
Research and development costs 48.7 40.4
Auditors' remuneration in respect of audit services to the Group amounted to £1.0m (2003 - £0.8m), of which £0.9m (2003 - £0.7m) was payable to PricewaterhouseCoopers
LLP (PWC) and £0.1m (2003 - £0.1m) was payable to other audit firms. Audit fees payable to PWC in respect of the parent company amounted to £56,000 (2003 - £55,000).
Remuneration payable to PWC for non-audit services provided to the parent company and its UK subsidiaries amounted to £0.6m (2003 - £1.0m) being for taxation services.
Non-audit fees payable to PWC in respect of taxation services provided outside of the UK amounted to £0.1m (2003 - £0.1m).
Cost of sales, gross profit and other operating expenses:
CONTINUING OPERATIONS ACQUIRED DISCONTINUED
OWNED AT 1 JANUARY OPERATIONS CONTINUING OPERATIONS OPERATIONS TOTAL
£m 2004 2004 2004 2003 2004 2003 2004 2003
Turnover 942.1 40.9 983.0 815.5 – 17.1 983.0 832.6
Cost of sales 681.6 33.0 714.6 570.6 – 14.7 714.6 585.3
Gross profit 260.5 7.9 268.4 244.9 – 2.4 268.4 247.3
Selling and distribution costs 52.6 2.9 55.5 46.7 – 1.5 55.5 48.2
Administrative expenses 80.4 2.9 83.3 71.1 – 2.1 83.3 73.2
Operating profit/(loss) 127.5 2.1 129.6 127.1 – (1.2) 129.6 125.9
Operating profit excludes the Group share in joint venture and associate companies.
Administrative expenses for acquired operations include amortisation of goodwill totalling £1.1m.
3 NET INTEREST
£m 2004 2003
Group
Interest receivable 4.3 3.4
Interest payable:
Bank loans and overdrafts (10.4) (12.2)
On finance leases (1.6) –
Other borrowings (0.8) (0.5)
(12.8) (12.7)
Net interest (8.5) (9.3)
Joint ventures
Interest receivable 0.5 0.4
Interest payable (2.5) (2.6)
(2.0) (2.2) Notes to the Financial Statements continued
54 COBHAM PLC
4TAX ON PROFIT ON ORDINARY ACTIVITIES 
£m 2004 2003
Current tax:
UK corporation tax on profits of the year 21.9 18.1
Share of joint ventures’ and associates’ tax 1.3 1.0
Overseas tax on profits of the year 15.3 14.7
Adjustments in respect of previous years (2.1) (0.5)
Total current tax 36.4 33.3
Deferred tax:
Origination and reversal of timing differences 4.4 5.1
Adjustments in respect of previous years 0.1 (2.4)
Total deferred tax 4.5 2.7
Tax on profit on ordinary activities 40.9 36.0
Excluding goodwill amortisation of £21.0m (2003 - £15.9m), the prior year tax credit of £2.0m (2003 - £2.9m) and the exceptional loss on disposal relating to 2003 of £nil
(2003 - £64.1m), the effective rate for the year is 29.2% (2003 - 28.9%). This adjusted tax charge is lower than the prevailing rates principally because part of the goodwill
charge is an allowable expense for tax purposes and some Group expenditure on research and development qualifies for additional tax credit.
The tax assessed for the year is different to the standard rate of corporation tax in the UK of 30% (2003 - 30%). The differences are explained below:
£m 2004 2003
Profit on ordinary activities before tax 125.9 54.5
Profit on ordinary activities multiplied by standard rate in the UK 30% (2003 - 30%) 37.8 16.3
Effects of:
Tax disallowed items (2004 – primarily goodwill amortisation; 2003 – primarily exceptional loss and goodwill amortisation) 3.5 21.3
Capital allowances for year in excess of depreciation (1.0) (0.2)
Other timing differences (3.4) (4.9)
Overseas tax rates higher than UK rates 2.7 2.0
Expenditure qualifying for additional R&D tax deduction (1.1) (0.7)
Adjustments to tax charge in respect of prior years (2.1) (0.5)
Current tax charge for the year 36.4 33.3
Factors that may affect future tax charges:
The Group’s effective rate of current tax on underlying profits is expected to be lower than the standard rate of corporation tax in the UK primarily because of timing differences
arising on fixed assets and because some of the goodwill amortisation is an allowable deduction for tax purposes. The group expects that this will remain broadly unchanged
in the foreseeable future.
No provision has been made for deferred tax on gains recognised on revaluing property to its market value. Also, no deferred tax is recognised on the unremitted earnings of
overseas subsidiaries, associates and joint ventures as no tax is expected to be payable on them in the foreseeable future.
5PROFIT ATTRIBUTABLE TO SHAREHOLDERS
In accordance with the concession granted under Section 230(1) of the Companies Act 1985, the profit and loss account of Cobham plc has not been separately presented in
these financial statements. The profit attributable to shareholders dealt with in the financial statements of Cobham plc is £38.4m (2003 - £140.7m).
6DIVIDENDS
£m 2004 2003
Dividends on ordinary shares
Interim paid of 9.2p per share (2003 - 8.36p) 10.3 9.3
Proposed final of 21.8p per share (2003 - 19.8p) 24.3 22.0
34.6 31.3
Dividends include £1,182 (2003 - £1,182) paid in respect of non equity second cumulative preference shares (note 19). ANNUAL REPORT & ACCOUNTS 2004   55
7 EARNINGS PER ORDINARY SHARE 
WEIGHTED WEIGHTED
AVERAGE AVERAGE
NUMBER OF PER-SHARE NUMBER OF PER-SHARE
EARNINGS SHARES AMOUNT EARNINGS SHARES AMOUNT
£M MILLION PENCE £M MILLION PENCE
2004 2004 2004 2003 2003 2003
Basic Earnings per Share (EPS)
Earnings attributable to ordinary shareholders 84.7 111.4 76.0 18.2 105.9 17.2
Effect of dilutive securities
Options – 0.7 – 0.7
Long term incentive plans – 0.1 – –
Fully Diluted EPS 84.7 112.2 75.5 18.2 106.6 17.1
In addition to the information required by FRS14, the directors believe that it is helpful to calculate an underlying earnings per share figure excluding goodwill amortisation
and for 2003 also excluding the loss on disposal of subsidiary undertakings and integration costs.
WEIGHTED WEIGHTED
AVERAGE AVERAGE
NUMBER OF PER-SHARE NUMBER OF PER-SHARE
EARNINGS SHARES AMOUNT EARNINGS SHARES AMOUNT
£M MILLION PENCE £M MILLION PENCE
2004 2004 2004 2003 2003 2003
Basic EPS 84.7 111.4 76.0 18.2 105.9 17.2
Loss on disposal of subsidiary undertakings – – 64.1 60.5
Effect of goodwill amortisation 21.0 18.8 15.9 15.0
Effect of integration costs – – 0.8 0.8
Underlying EPS 105.7 111.4 94.8 99.0 105.9 93.5
The calculation of earnings per ordinary share has been based on £84.7m (2003 - £18.2m), being the profit after taxation, minority interests and preference dividend, and on
the weighted average number of ordinary shares in issue during the year, being 111,448,271 (2003 - 105,941,221). The weighted average number of ordinary shares used 
for the fully diluted earnings per share is 112,222,295 (2003 - 106,622,128).
8DIRECTORS’ EMOLUMENTS
Details of directors’ remuneration and share options are set out in the remuneration report on pages 34 to 40.
9EMPLOYEES
2004 2003
Average number of employees
United Kingdom 4,415 4,052
Other EU Countries 1,109 1,010
United States 2,808 2,342
Rest of the World 1,531 1,586
9,863 8,990
£m 2004 2003
Employment costs
Wages and salaries 260.4 231.8
Social security costs 29.6 23.8
Other pension costs 12.6 14.6
302.6 270.2
Pensions
The Group’s pension arrangements comprise various defined benefit and defined contribution schemes throughout the world mainly with assets held in separate trustee
administered funds.
From 1 January 2003, new employees in the UK have only been able to join the defined contribution scheme. In the USA, both the Carleton Technologies and Stanley Aviation
defined benefit schemes have been closed to new members from 31 December 2003 and 31 January 2004 respectively. Since the majority of the defined benefit schemes
operated by the Group are closed to new entrants, the age profile of the schemes’ in service membership will increase over time. Under the funding method prescribed by
FRS17, the current service cost will increase as a percentage of pensionable salaries as members approach retirement. Notes to the Financial Statements continued
56 COBHAM PLC
9EMPLOYEES continued
FRS 17 assumptions 
The Group operates a number of defined benefit schemes, the most significant being the Cobham Pension Plan (CPP). A full valuation of the CPP scheme was undertaken as
at 1 April 2004 and updated to 31 December 2004 by a qualified independent actuary. During the period, the employer contributions to the CPP were 17.3% and this rate
will continue in 2005.
The major assumptions used by the actuaries of the Group schemes in respect of FRS 17 were as follows:
At 31 December 2004 UK SCHEMES USA SCHEMES EUROPEAN SCHEMES
Rate of increase in salary costs 3.50% 3.50% 1.00%
Discount rate 5.50% 5.75% 5.25%
Inflation and pensions in deferment assumption 2.90% 3.00% 1.75%
Pensions increase 2.90% – 1.75%
At 31 December 2003
Rate of increase in salary costs 3.50% 4.00%-5.00% 1.00%
Discount rate 5.50% 6.00%-6.25% 5.50%
Inflation and pensions in deferment assumption 2.75% 2.50%-3.00% 1.00%
Pensions increase 2.75% – 1.50%
At 31 December 2002
Rate of increase in salary costs 3.25% 4.00% –
Discount rate 5.60% 7.00% –
Inflation and pensions in deferment assumption 2.25% 2.50% –
Pensions increase 2.25% – –
At 31 December 2001
Rate of increase in salary costs 4.00% 4.00% –
Discount rate 6.00% 7.00% –
Inflation and pensions in deferment assumption 2.50% 2.50% –
Pensions increase 2.50% – –
The assets of the various schemes are held in managed and segregated funds held with various companies. The fair value of the assets held and the expected rates of return
are as follows:
EXPECTED LONG TERM RATE OF RETURN VALUE £M
At 31 December 2004 UK SCHEMES USA SCHEMES UK SCHEMES USA SCHEMES
Equities 8.00% 8.20%-8.30% 211.2 8.8
Bonds 5.00% 5.00% 53.1 4.2
Other 4.75% 3.10% 17.8 0.1
Total fair value of assets 282.1 13.1
At 31 December 2003
Equities 8.00% 8.00% 181.7 8.0
Bonds 5.10% 4.50% 42.3 4.0
Other 3.75% 3.20% 19.4 0.4
Total fair value of assets 243.4 12.4
At 31 December 2002
Equities 8.00% 9.00% 117.9 7.4
Bonds 5.00% 7.00% 28.7 3.6
Other 4.00% 4.00% 7.5 0.2
Total fair value of assets 154.1 11.2
At 31 December 2001
Equities 8.00% 9.00% 145.5 8.1
Bonds 5.50% 7.00% 30.1 4.8
Other 4.00% 4.00% 8.3 0.7
Total fair value of assets 183.9 13.6
The European schemes are unfunded and have no assets. ANNUAL REPORT & ACCOUNTS 2004   57
9EMPLOYEES continued
The funding position of the schemes in the Group as calculated under FRS 17 is as follows:
£m 2004 2003 2002 2001
Total market value of assets 295.2 255.8 165.3 197.5
Present value of scheme liabilities (363.3) (326.1) (231.9) (204.3)
Deficit in the scheme (68.1) (70.3) (66.6) (6.8)
Related deferred tax asset 20.4 21.1 20.0 2.1
Net pension deficit (47.7) (49.2) (46.6) (4.7)
The amounts in respect of the performance of the scheme are:
Analysis of the amounts charged to operating profit: £m 2004 2003
Current service cost 7.9 8.2
Gain on curtailment (1.0) –
Past service cost ––
Total operating charge 6.9 8.2
Analysis of the amount credited/(charged) to other finance income: £m 2004 2003
Expected return on pension scheme assets 18.9 12.7
Interest on pension scheme liabilities (18.4) (13.6)
Net return 0.5 (0.9)
Analysis of the amount recognised in the statement of total recognised gains and losses (STRGL): £m 2004 2003
Actual return less expected return on pension scheme assets 6.8 20.3
Changes in assumptions underlying the scheme liabilities (7.3) (29.7)
Experience gains and losses arising on the scheme liabilities (4.2) 1.9
Actuarial loss recognised in the STRGL (4.7) (7.5)
Movement in deficit during the year: £m 2004 2003
Deficit in scheme at beginning of the year (70.3) (66.6)
Current service cost (7.9) (8.2)
Contributions 14.2 10.7
Gain on curtailment 1.0 –
(Deficit)/gain from acquisitions (0.9) 2.2
Other finance income/(charges) 0.5 (0.9)
Actuarial loss (4.7) (7.5)
Deficit in scheme at the end of the year (68.1) (70.3) Notes to the Financial Statements continued
58 COBHAM PLC
9EMPLOYEES continued
History of experience gains and losses
Difference between expected and actual return on scheme assets: 2004 2003 2002
Amount (£m) 6.8 20.3 (50.0)
Percentage of scheme assets 2.3% 7.9% (30.2%)
Experience gains and losses on scheme liabilities:
Amount (£m) (4.2) 1.9 (8.2)
Percentage of the present value of the scheme liabilities (1.2%) 0.6% (3.5%)
Total amount recognised in the STRGL
Amount (£m) (4.7) (7.5) (61.1)
Percentage of the present value of the scheme liabilities (1.3%) (2.3%) (26.3%)
Defined contribution schemes
Contributions paid by the Group to defined contribution schemes in the year amounted to £5.7m (2003 - £6.4m). There were no significant contributions outstanding at the
end of either 2003 or 2004.
Parent Company 
The contributions paid by the company are accounted for as a defined contribution scheme, as the company is unable to identify its share of the underlying assets and liabilities
of the scheme. The cost of contributions to the Group scheme for 2004 amounted to £1.8m (2003 - £0.9m), comprising £0.2m (2003 - £0.2m) of funding related to benefits
accruing in the year and £1.6m (2003 - £0.7m) of additional funding in order to reduce the scheme deficit. Contributions for current benefit accruals represent 18.8% of
pensionable salary (2003 - 12.5%). No contributions to the scheme were outstanding at the end of either 2003 or 2004.
10 INTANGIBLE FIXED ASSETS
Group: £m GOODWILL OTHER TOTAL
Cost
At 1 January 2004 391.2 5.6 396.8
Foreign exchange adjustments –(0.1) (0.1)
Additions 49.9 0.2 50.1
Adjustments to contingent consideration in respect of prior year acquisitions (note 18) (0.5) – (0.5)
At 31 December 2004 440.6 5.7 446.3
Accumulated amortisation
At 1 January 2004 49.1 1.8 50.9
Charge for the year 20.9 0.7 21.6
At 31 December 2004 70.0 2.5 72.5
Net book amount
At 31 December 2004 370.6 3.2 373.8
At 1 January 2004 342.1 3.8 345.9
Other intangible fixed assets are purchased patents, licenses and trade marks. ANNUAL REPORT & ACCOUNTS 2004   59
11 TANGIBLE FIXED ASSETS
PLANT AND PAYMENTS
LAND AND BUILDINGS MACHINERY FIXTURES ON ACCOUNT
(INCLUDING FITTINGS AND ASSETS
INVESTMENT LONG SHORT AIRCRAFT & TOOLS AND UNDER
Group: £m PROPERTIES FREEHOLD LEASES LEASES VEHICLES) EQUIPMENT CONSTRUCTION TOTAL
Cost or valuation
At 1 January 2004 – cost – 80.4 16.9 4.3 312.3 55.3 10.2 479.4
At 1 January 2004 – valuation 4.1 –––––– 4.1
Foreign exchange adjustments – (1.4) (0.2) (0.5) (4.0) (0.9) (0.3) (7.3)
Additions – 5.4 0.3 4.6 38.0 4.7 4.9 57.9
Undertakings acquired – 0.1 – – 5.7 0.9 – 6.7
Disposals – – – (0.2) (3.7) (2.1) (0.4) (6.4)
Reclassifications – 2.8 (1.9) 1.6 7.3 0.4 (10.2) –
At 31 December 2004 4.1 87.3 15.1 9.8 355.6 58.3 4.2 534.4
Accumulated depreciation
At 1 January 2004 – 14.2 3.6 1.2 196.7 39.7 – 255.4
Foreign exchange adjustments – (0.2) – (0.1) (1.9) (0.7) – (2.9)
Charge for the year – 2.0 0.3 0.8 32.9 6.5 – 42.5
Undertakings acquired –––– 3.2 0.5 – 3.7
Disposals – – – (0.2) (3.1) (2.0) – (5.3)
Reclassifications – 0.6 (0.6) – 0.6 (0.6) – –
At 31 December 2004 – 16.6 3.3 1.7 228.4 43.4 – 293.4
Net book amount
At 31 December 2004 4.1 70.7 11.8 8.1 127.2 14.9 4.2 241.0
At 1 January 2004 4.1 66.2 13.3 3.1 115.6 15.6 10.2 228.1
Investment properties are shown at open market value based upon a directors’ valuation confirmed by an unsolicited offer to purchase. The historic cost of these investment
properties is £2.4m (2003 - £2.4m).
Assets capitalised held under finance leases included mainly in plant and machinery: £m 2004 2003
Cost 16.4 0.7
Accumulated depreciation (3.5) (0.6)
Net book amount 12.9 0.1
£m 2004 2003
Capital commitments
Contracts placed 2.6 4.3
PLANT AND
MACHINERY
(INCLUDING
INVESTMENT AIRCRAFT
Parent Company: £m PROPERTIES & VEHICLES) TOTAL
Cost or valuation
At 1 January 2004 4.1 0.5 4.6
Additions –0.1 0.1
At 31 December 2004 4.1 0.6 4.7
Accumulated depreciation:
At 1 January 2004 –0.3 0.3
Charge for the year –0.1 0.1
At 31 December 2004 –0.4 0.4
Net book amount
At 31 December 2004 4.1 0.2 4.3
At 1 January 2004 4.1 0.2 4.3
Investment properties are shown at open market value based upon a directors’ valuation which equates to cost.
The parent company had no capital commitments at 31 December 2004 (2003 - £nil). Notes to the Financial Statements continued
60 COBHAM PLC
12 FIXED ASSET INVESTMENTS 
Group: £m 2004 2003
Investments in joint ventures
At 1 January 14.9 12.1
Reclassification from investment in associates 0.6 –
Additional investment in year 4.3 –
Goodwill amortisation (0.1) (0.1)
Dividends received (6.2) –
Share of profit after tax for the year 2.8 2.9
At 31 December 16.3 14.9
Goodwill at cost of £1.8m (2003 - £1.8m) and net book amount of £1.2m (2003 - £1.3m) relating to joint ventures is included within interests in joint ventures at
31 December 2004. Related amortisation of £0.1m (2003 - £0.1m) has been charged during the year.
Group: £m 2004 2003
Investment in associates
At 1 January 1.6 1.0
Release of net liability on disposal 0.3 –
Reclassification to investment in joint ventures (0.6) –
Additional investment in year –0.4
Undertakings acquired –0.9
Foreign exchange (0.1) 0.1
Share of loss after tax for the year (0.2) (0.8)
At 31 December 1.0 1.6
Group: £m 2004 2003
Group investments
At 1 January ––
Arising on partial disposal of associate ––
At 31 December ––
Details of joint ventures are included in note 35.
Parent Company: £m SHARES LOANS 2004
Investment in group undertakings
At 1 January 250.2 (3.4) 246.8
Additions 471.1 – 471.1
Borrowings reclassified to Creditors: Amounts falling due after one year – 3.4 3.4
At 31 December – cost 721.3 – 721.3 ANNUAL REPORT & ACCOUNTS 2004   61
13 STOCKS 
Group: £m 2004 2003
Raw materials and consumables 68.8 72.4
Work in progress 106.7 96.6
Finished goods and goods for resale 18.6 28.4
Payments on account (10.2) (7.4)
183.9 190.0
There is no significant difference between the replacement cost and the value of stocks shown.
14 DEBTORS 
GROUP PARENT COMPANY
£m 2004 2003 2004 2003
Amounts falling due within one year
Trade debtors 195.7 157.1 – –
Amounts owed by subsidiary undertakings – – 244.0 204.2
Amounts owed by joint ventures and associates (note 34) 1.3 0.6 – 0.4
Other debtors 10.3 8.5 0.1 –
Prepayments and accrued income 17.4 15.3 4.2 3.6
Amounts recoverable on contracts 1.5 1.5 – –
Taxation recoverable 1.5 1.5 – –
227.7 184.5 248.3 208.2
Amounts falling due after more than one year
Amounts owed by subsidiary undertakings – – – 310.8
Other debtors 9.6 6.3 – –
9.6 6.3 – 310.8
Within the 2003 Group comparatives, a balance of £6.1m has been reclassified from amounts falling due within one year to amounts falling due after more than one year.
15 CURRENT INVESTMENTS 
GROUP PARENT COMPANY
£m 2004 2003 2004 2003
Listed investments –0.1 –0.1
16 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR 
GROUP PARENT COMPANY
£m 2004 2003 2004 2003
Borrowings
Bank loans and overdrafts 98.6 65.1 124.6 53.8
Senior notes 5.2 5.6 5.2 5.6
Other borrowings 1.7 9.6 – –
Finance leases 10.6 0.1 – –
116.1 80.4 129.8 59.4
Finance lease interest allocated to future periods is £0.6m (2003 - £nil), all of which is payable in 2005.
Further details concerning borrowings are given in note 17.
Other borrowings include a loan of £nil (2003 - £8.0m) from joint venture companies. Notes to the Financial Statements continued
62 COBHAM PLC
16 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR continued
GROUP PARENT COMPANY
£m 2004 2003 2004 2003
Other creditors
Payments received on account 23.4 26.5 – 0.1
Trade creditors 102.3 95.7 2.0 0.6
Bills of exchange payable 3.4 1.4 – –
Amounts owed to subsidiary undertakings – – 148.7 15.6
Other creditors 17.2 20.5 – –
Taxation payable 48.4 33.8 6.6 6.3
Payroll and other taxes, including social security 15.9 18.2 0.5 1.7
Accruals and deferred income 46.0 41.4 4.0 3.5
Proposed dividends – group 24.3 22.0 24.3 22.0
Dividends payable to minority interests 0.2 0.3 – –
281.1 259.8 186.1 49.8
Taxation payable
UK corporation tax 44.8 26.9 6.6 6.3
Overseas tax 3.6 6.9––
48.4 33.8 6.6 6.3
17 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR 
GROUP PARENT COMPANY
£m 2004 2003 2004 2003
Borrowings
Senior notes 125.0 139.7 125.0 139.7
Bank loans 15.5 28.2 – –
Loan notes 10.3 0.2 – –
Other borrowings 0.3 12.0 – –
Finance leases† 0.2 0.1––
151.3 180.2 125.0 139.7
†Comprising obligations payable between one and two years.
GROUP PARENT COMPANY
£m 2004 2003 2004 2003
Other creditors
Other 10.3 11.0 – –
Amounts owed to subsidiary undertakings (reclassified from investments in 
group undertakings) –– 3.4–
Accruals and deferred income 0.3 0.7 – –
10.6 11.7 3.4 –
GROUP PARENT COMPANY
£m 2004 2003 2004 2003
Borrowings
Senior notes, debenture loans, bank loans, loan notes and other
borrowings are repayable as follows:
Between one and two years 9.4 19.9 2.6 5.6
Between two and five years 47.3 26.2 33.9 8.4
After five years 94.6 134.1 88.5 125.7
151.3 180.2 125.0 139.7 ANNUAL REPORT & ACCOUNTS 2004   63
17 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR continued
Senior notes, repayable on maturity, were issued in October 2002. The facility comprises two series of notes. One for US$55m which has a bullet repayment after seven years
and the other for US$170m which has a bullet repayment after ten years. The notes carry a fixed interest rate of 5.14% in respect of the seven year notes and a rate of 5.58%
in respect of the ten year notes. These fixed rates have been swapped into rates that vary with LIBOR.
Senior notes, repayable by instalments, were issued in March 1996 and comprise two series of notes for US$25m, one with an average life of seven years and the other an
average life of ten years. Repayments totalling US$25m have been made to date. The notes carry a fixed interest rate of 6.28% for the seven year notes and 6.42% for the
ten year notes.
Loan notes, repayable in two years, carry a fixed interest rate of 4.25%.
18 PROVISIONS FOR LIABILITIES AND CHARGES 
DEFERRED CONTINGENT
Group: £m TAXATION CONSIDERATION OTHER TOTAL
At 1 January 2004 18.4 7.6 13.3 39.3
Re-analysis from creditors –5.5 0.25.7
Provisions created 2.2 – 4.3 6.5
On acquisitions in the year (0.4) – 0.3 (0.1)
Adjustment to contingent consideration in respect of prior
year acquisitions (note 10) – (0.5) – (0.5)
Provisions released –– (2.9) (2.9)
Expenditure charged against provisions – (5.3) (4.4) (9.7)
Foreign exchange adjustments – (0.2) – (0.2)
At 31 December 2004 20.2 7.1 10.8 38.1
The provisions for liabilities and charges, excluding deferred taxation, represent:
AMOUNT
CLASS OF PROVISION ESTIMATED REPAYMENT PERIOD £M
Legal claims Within one year 0.8
Onerous trading contracts Over the next three years 9.0
Warranty claims Over the next three years 1.0
Contingent consideration Within one year 1.4
Contingent consideration Over one to two years 0.5
Contingent consideration Over two to three years 1.4
Contingent consideration Over three to four years 3.8
17.9
GROUP PARENT COMPANY
£m 2004 2003 2004 2003
Deferred taxation
The amount provided for represents:
Accelerated capital allowances 15.2 14.2 – –
Other timing differences 5.0 4.2 0.4 0.4
Deferred tax provision 20.2 18.4 0.4 0.4
Deferred tax asset on pension liability (note 9) (20.4) (21.1) – –
(0.2) (2.7) 0.4 0.4
£m GROUP PARENT COMPANY
At 1 January 2004 (2.7) 0.4
Provisions created 4.5 –
On acquisitions in the year (0.6) –
Amount credited to statement of total recognised gains and losses (1.4) –
At 31 December 2004 (0.2) 0.4 Notes to the Financial Statements continued
64 COBHAM PLC
19 CALLED UP SHARE CAPITAL
£m 2004 2003
Authorised
Equity
147,920,000 (2003 - 147,920,000) 25p ordinary shares 37.0 37.0
Non equity
20,000 (2003 - 20,000) 6% second cumulative preference shares of £1 – –
37.0 37.0
Allotted, issued and fully paid
Equity
111,606,905 (2003 - 110,970,790) 25p ordinary shares 27.9 27.8
Non equity
19,700 (2003 - 19,700) 6% second cumulative preference shares of £1 – –
27.9 27.8
During the year 351,947 ordinary shares were issued in connection with the Cobham Savings Related Share Option Scheme and 284,168 were issued in connection with the
executive share option schemes. The nominal value of such shares was £0.1m and the cash consideration received net of costs was £4.9m.
The following options over ordinary shares were outstanding as at 31 December 2004:
DATES NORMALLY
DATES GRANTED NUMBER OF SHARES PRICES – PENCE EXERCISABLE
Cobham Savings Related Share Option Scheme 1997 - 2004 1,577,249 (2003 - 1,824,778) 495 to 1076 2005 - 2012
Cobham Executive Share Option Scheme 1995 - 2004 1,610,677 (2003 - 1,477,639) 315 to 1404 1998 - 2014
The 6% second cumulative preference shareholders are entitled to receive a fixed cumulative preference dividend at the rate of 6% per annum in priority to the payment of
dividends on the ordinary shares (note 6). In addition, on a return of assets on the liquidation or otherwise of the company, the assets available for distribution are to be applied
first in repaying to the holders of the 6% second cumulative preference shares the amounts paid up on their shares. On a show of hands every member holding 6% second
cumulative preference shares who is present in person has one vote and on a poll every member has one vote for every £1 in nominal amount of the shares of which the
member is the holder. The 6% second cumulative preference shares are non-redeemable.
20 RESERVES
SHARE PROFIT
PREMIUM REVALUATION OTHER AND LOSS
Group: £m ACCOUNT RESERVE RESERVE ACCOUNT TOTAL
At 1 January 2004 76.8 1.7 0.7 348.8 428.0
Premium on share issues 4.8 – – – 4.8
Long term incentive plan – – (0.4) – (0.4)
Retained profit for the year – – – 50.1 50.1
Actuarial loss on defined benefit pension schemes* – – – (3.3) (3.3)
Foreign exchange – – – 1.5 1.5
At 31 December 2004 81.6 1.7 0.3 397.1 480.7
*Net of tax. ANNUAL REPORT & ACCOUNTS 2004   65
20 RESERVES continued
SHARE PROFIT
PREMIUM SPECIAL OTHER AND LOSS
Parent Company: £m ACCOUNT RESERVE RESERVE ACCOUNT TOTAL
At 1 January 2004 76.8 43.6 0.7 375.1 496.2
Premium on share issues 4.8––– 4.8
Long term incentive plan – – (0.4) – (0.4)
Retained profit for the year – – – 3.8 3.8
At 31 December 2004 81.6 43.6 0.3 378.9 504.4
Reserves are attributable to equity interests.
The cumulative goodwill written off directly to reserves on acquisitions net of disposals totals £108.5m from 1954 to 31 December 2004 (2003 - £108.5m).
The Group’s share of the post acquisition reserves of joint ventures and associates at 31 December 2004 was £8.2m (2003 - £11.3m).
The other reserve relates to provisions made in accordance with UITF 17 for shares allocated under the long term incentive plans.
Included within the Group profit and loss account reserve is a deficit of £47.7m (2003 - £49.2m) stated after deferred taxation assets of £20.4m (2003 - £21.1m) in respect
of FRS 17 pension deficits on Group pension funds.
21 MINORITY INTEREST
£m GROUP
At 1 January 2004 1.1
Share of profit 0.3
Dividend (0.2)
Foreign exchange adjustment (0.1)
At 31 December 2004 1.1
22 RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES
£m 2004 2003
Operating profit 129.6 125.9
Depreciation 42.5 33.7
Amortisation of goodwill and intangibles 21.6 16.3
Profit on sale of fixed assets –(0.7)
Profit on sale of current asset investments (0.1) –
Difference between pension charge and cash contribution (7.3) (2.5)
Provisions for liabilities and charges (3.0) –
Long term incentive plan (0.4) 0.6
Decrease/(increase) in stocks 11.3 (22.0)
(Increase)/decrease in debtors (36.7) 1.2
Increase/(decrease) in creditors 5.6 (4.7)
Net Cash Inflow from Operating Activities 163.1 147.8 23 ANALYSIS OF NET DEBT
OTHER 
AT CASH NON–CASH EXCHANGE AT
1 JANUARY FLOW CHANGES MOVEMENTS 31 DECEMBER
£m 2004 2004
Cash at bank and in hand 106.1 (0.8) – (4.0) 101.3
Current asset investments 0.1 (0.1) – – –
Debt due within one year (80.3) (25.6) (1.0) 1.4 (105.5)
Debt due after one year (180.1) 18.9 – 10.1 (151.1)
Finance leases (0.2) 4.4 (14.9) (0.1) (10.8)
(2.3)
Total (154.4) (3.2) (15.9) 7.4 (166.1)
Other non-cash changes comprise conversion of operating leases into finance leases and loans of subsidiary undertakings acquired.
£m 2004 2003
Senior notes, loans, other borrowings, debenture loans and finance leases 267.4 260.6
Cash at bank and in hand including short term deposits (101.3) (106.1)
Current investments –(0.1)
Net debt 166.1 154.4
Included in Group and parent company cash at bank and in hand at 31 December 2004 is £3.0m held in an escrow account which relates to the disposal of Westwind. It is
expected that this cash will be released from escrow in June 2005 and until then release is subject to the purchaser’s approval.
Notes to the Financial Statements continued
66 COBHAM PLC ANNUAL REPORT & ACCOUNTS 2004   67
24 ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CONSOLIDATED CASH FLOW STATEMENT
£m 2004 2003
a. Returns on Investments and Servicing of Finance
Interest received 4.3 2.4
Interest paid (10.0) (13.4)
Interest element of finance lease rentals (1.6) –
Dividends paid to minority interests (0.3) –
Net cash outflow from returns on investments and servicing of finance (7.6) (11.0)
b. Capital Expenditure and Financial Investment
Payments to acquire tangible fixed assets (40.6) (39.3)
Payments to acquire intangible fixed assets other than goodwill (0.2) (1.2)
Receipts from sale of fixed assets 1.1 1.3
Net cash outflow for capital expenditure and financial investments (39.7) (39.2)
c. Acquisitions and Disposals
Purchase of subsidiary undertakings (60.4) (138.8)
Net (overdraft)/cash acquired with subsidiary undertakings (0.8) 8.1
Deferred and contingent consideration (8.3) (3.6)
Investment in joint ventures and associates (4.3) (0.4)
Sale of subsidiary undertaking – 21.2
Net cash balance disposed of with subsidiary undertaking –(1.5)
Net cash outflow for acquisitions and disposals (73.8) (115.0)
d. Management of Liquid Resources
Sale of current investments 0.2 –
Net cash inflow from management of liquid resources 0.2 –
e. Financing
Issue of ordinary share capital 4.9 107.4
Expense on issue of ordinary share capital –(1.7)
Debt due within a year:
increase in short term loans 39.1 0.5
(repayment)/increase of debenture loans and other borrowings (5.5) 2.0
(repayment)/increase of loans payable to joint ventures (8.0) 8.0
Debt due beyond a year:
repayment of long term borrowings (18.9) (9.3)
repayment of debenture loans and other borrowings –(1.7)
Capital element of finance lease rentals (4.4) (0.1)
Net cash inflow from financing 7.2 105.1 Notes to the Financial Statements continued
68 COBHAM PLC
25 PURCHASE OF UNDERTAKINGS 
The acquisitions during the year were as follows:
By the Chelton Group 
● Precision Antennas Limited in England in January for £3.1m 
● Certain trade and assets of Pentar Inc and Pentar Communications Systems LLC in Canada in March for C$3.2m and C$0.6m deferred consideration
● NEC Aero SA in France in April for €4.5m 
● DTC Communications Inc in the USA in April for US$48.0m cash and US$0.2m deferred consideration 
● Spectronic in Denmark in October for DKr225m 
● Temex SA (Division) in France in December for €7.7m.
The amount accrued in the financial statements in respect of deferred consideration payable in future years in respect of acquisitions made in 2004 is £0.4m.
A summary of all the undertakings acquired showing book values and fair value adjustments is as follows:
FAIR V ALUE ADJUSTMENTS
£m BOOK V ALUES REV ALUATIONS ACCOUNTING POLICY TOTAL
Tangible fixed assets 3.0 – – 3.0
Intangible fixed assets 1.3 – (1.3) –
Stocks 9.4 (0.5) – 8.9
Debtors 7.9 – – 7.9
Cash at bank and in hand (0.8) – – (0.8)
Creditors and provisions (5.2) (1.0) – (6.2)
Loans (1.0) – – (1.0)
Pension liability (0.2) (0.7) – (0.9)
14.4 (2.2) (1.3) 10.9
Goodwill (note 10) 49.9
60.8
Satisfied by:
Cash and borrowings undertaken including expenses of acquisition (note 24c) 60.4
Deferred consideration 0.4
60.8
Included within the £10.9m fair value of assets acquired are assets relating to the Spectronic acquisition of £2.6m for which the valuation is provisional. This provisional
valuation is due to the size of the acquisition and its proximity to the year end. As a result, further fair value adjustment may be required in 2005.
Fair value adjustments
Revaluations
The adjustments to stocks represent the increase in provisions against excess stocks and demonstration stocks. The adjustment to creditors and provisions reflects accruals for
dilapidation expense and provision for warranty claims offset by the deferred tax implications of the fair value adjustments made. The adjustment to pension liabilities reflects
pension deficits acquired.
Accounting policies 
The adjustment to intangible fixed assets reflects the write-off of items in line with Group policy.
26 DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS 
Set out below are the narrative disclosures relating to financial instruments. The numerical disclosures are set out in notes 27 to 30. The group has taken advantage of the
exemption available under FRS 13 “Derivatives and other financial instruments” not to provide numerical disclosures in relation to short term debtors and creditors, other than
currency risk disclosures.
Financial instruments 
The Group primarily finances its operations through a mixture of retained profits and borrowings. The Group does not use complex derivative financial instruments. Where it
does use financial instruments these are mainly to manage the currency risks arising from normal operations and to raise finance for the Group’s operations. The Group’s
financial instruments, other than derivatives, comprise borrowings, cash and various items such as trade debtors and trade creditors that arise directly from its operations.
The Group also uses forward foreign currency contracts to manage transactional currency risks arising from the group’s operations and interest rate swaps to manage interest
rate risks.
It is, and has been throughout the period under review, the Group’s policy that no trading in financial instruments shall be undertaken. 26 DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS continued
Foreign currency risk is the most significant aspect for the Group in the area of financial instruments. It is exposed to a lesser extent to other risks such as interest rate risk
and liquidity risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below. The policies have remained unchanged throughout
the year.
Foreign currency risk 
The Group, which is based in the UK and reports in sterling, has significant investment in overseas operations in the USA, with further investments in other EU countries,
Australia, Canada, South Africa and Asia. As a result, the Group’s balance sheet can be affected by movements in these countries’ exchange rates. The Group’s policy is to reduce,
or eliminate where practicable, both structural and transactional foreign exchange risk. Where significant, currency denominated net assets are partially hedged by currency
borrowings. Currency exposures are reviewed regularly and all significant foreign exchange transactions are approved by the parent company.
The pound/US dollar exchange rate is the most important as far as Cobham is concerned, particularly given the level of US dollars which the subsidiaries expect to receive
from their normal business activities. In addition to the longer term borrowing structure, a number of financial instruments are used to manage the foreign exchange position,
such as forward contracts. As at 31 December 2004, US$221m of forward contracts were in place and stretching out to 2014. These contracts are at an average exchange rate
of $1.68: £1. It is the Group’s current belief that the net dollar receipts from its subsidiaries will exceed the level of the outstanding commitment.
The Group has transactional currency exposures. Such exposures arise from sales and purchases by operating units in currencies other than the unit’s functional currency.
The Group’s policy is to minimise trading in subsidiaries’ non operating currencies. However, where this is impractical the Group will seek to reduce its exposure through the
use of forward contracts.
The Group does not hedge balance sheet and profit and loss translation exposures. Generally, borrowings are arranged in local currencies to provide a natural hedge against
overseas assets.
Interest rate risk 
The Group has various long and short term borrowings principally in sterling and US dollars at fixed and floating rates of interest. The Group is continually monitoring its
exposure to movements in interest rates in order to bring greater stability and certainty with respect to borrowing costs. Group policy is to assess borrowings with regard to
fixed or variable rates of interest depending on prevailing market conditions, including instances where interest rate swaps are used.
Surplus funds are placed on short term deposit. These deposits have floating rates of interest, and thus there is some modest exposure to interest rates.
Liquidity risk 
The Group has a strong cash flow and where practicable the funds generated by operating companies are managed on a regional basis. For short term working capital purposes
in the UK, most operating companies utilise local bank facilities within an overall Group arrangement. In the USA a central treasury function is maintained which all 
US subsidiaries use. These practices allow a balance to be maintained between continuity of funding, security and flexibility.
As regards liquidity, the Group’s policy has throughout the year been to maintain a mix of short, medium and long term borrowings with their lenders. The private placement
of Cobham guaranteed senior notes which raised US$225m in October 2002 enabled the Group to reduce short term and increase long term borrowings. Short-term flexibility
is achieved by overdraft facilities. Details of the year end position, which is in accordance with this policy, are given in note 29. It is, in addition, the Group’s policy to maintain
undrawn committed borrowing facilities in order to provide flexibility in the management of the Group’s liquidity; details are also given in note 29.
ANNUAL REPORT & ACCOUNTS 2004   69 Notes to the Financial Statements continued
70 COBHAM PLC
27 FOREIGN CURRENCY RISK 
The table below shows the extent to which Group companies have monetary assets and liabilities in currencies other than their local currency. Except where the exposure is
hedged, foreign exchange differences on retranslation of these assets and liabilities are taken to the profit and loss account of the Group companies and the Group.
AUSTRALIAN OTHER
Net foreign currency monetary (liabilities)/assets: £m STERLING US DOLLARS DOLLARS EUROS CURRENCIES TOTAL
Functional currency of Group operation:
Sterling – (64.7) (0.2) 3.0 6.0 (55.9)
US dollars 0.3 – – (3.1) (0.2) (3.0)
Australian dollars (0.2) 1.5 – – 2.3 3.6
Euros – 8.6 – – – 8.6
Other currencies (1.8) 2.3 – (1.8) – (1.3)
At 31 December 2004 (1.7) (52.3) (0.2) (1.9) 8.1 (48.0)
AUSTRALIAN OTHER
£m STERLING US DOLLARS DOLLARS EUROS CURRENCIES TOTAL
Functional currency of Group operation:
Sterling – (71.8) 0.7 0.5 (0.7) (71.3)
US dollars 0.4 – – (2.6) 0.7 (1.5)
Australian dollars (0.9) 1.6 – – 2.0 2.7
Euros (17.3) 4.2 – – (0.3) (13.4)
Other currencies (1.9) 4.7 – (1.5) – 1.3
At 31 December 2003 (19.7) (61.3) 0.7 (3.6) 1.7 (82.2)
The amounts shown in the table above take into account the effect of any forward currency contracts entered into for the purpose of managing these currency exposures.
Hedges of foreign currency transactions 
As described above, it is the Group’s policy to partially hedge foreign currency denominated net assets by currency borrowings. As these are not formally matched, the Group
recognises all gains and losses on these in the period they are incurred.
28 INTEREST RATE RISK 
Interest rate risk and profile of financial liabilities
The interest rate risk profile of the Group’s financial liabilities was:
FLOATING RATE FIXED RATE FINANCIAL
FINANCIAL FINANCIAL LIABILITIES ON WHICH
LIABILITIES LIABILITIES NO INTEREST IS PAID TOTAL
Currency: £m 2004 2003 2004 2003 2004 2003 2004 2003
Sterling 30.0 46.1 0.1 8.3 4.5 7.4 34.6 61.8
US dollars 155.5 144.0 13.0 19.8 5.4 5.4 173.9 169.2
Australian dollars – 0.1 24.6 17.8 0.1 0.7 24.7 18.6
Euros 38.4 16.4 4.9 5.9 7.7 8.7 51.0 31.0
Other currencies 0.7 1.8 – – 0.3 0.2 1.0 2.0
At 31 December 224.6 208.4 42.6 51.8 18.0 22.4 285.2 282.6
All the Group’s short-term creditors (other than borrowings) are excluded from the above tables either due to the exemption granted to short term items or because they do
not meet the definition of a financial liability. In addition provisions for liabilities and charges of £23.9m (2003 - £23.3m) and long term creditors of £7.0m (2003 - £5.7m)
have been excluded as they do not meet the definition of a financial liability under FRS 13. ANNUAL REPORT & ACCOUNTS 2004   71
28 INTEREST RATE RISK continued
Interest rate risk and profile of financial liabilities continued
FINANCIAL
FIXED RATE LIABILITIES ON WHICH
FINANCIAL LIABILITIES NO INTEREST IS PAID
WEIGHTED AVERAGE WEIGHTED AVERAGE 
INTEREST RATE PERIOD FOR WHICH WEIGHTED AVERAGE 
%RATE IS FIXED – YEARS PERIOD UNTIL MATURITY – YEARS
Currency: 2004 2003 2004 2003 2004 2003
Sterling 6.9 7.0 2.5 1.6 2.7 4.0
US dollars 6.3 6.3 1.2 2.2 4.0 4.8
Australian dollars 9.2 6.6 0.5 0.8 1.0 1.0
Euros 4.8 4.8 1.2 2.1 1.3 1.5
Other currencies – – – – 1.0 1.0
At 31 December 7.1 6.1 0.8 1.6 2.5 3.1
The floating rate liabilities comprise borrowings and overdrafts that bear interest at rates based on the appropriate LIBOR and base rates.
Interest rate risk and profile of financial assets 
Currency: £m 2004 2003
Sterling 32.1 29.2
US dollars 50.7 64.5
Australian dollars 3.7 8.6
Euros 13.2 6.1
Other currencies 9.5 4.0
At 31 December 109.2 112.4
Floating rate 87.7 100.7
Fixed rate 4.3 1.1
No interest paid 17.2 10.6
At 31 December 109.2 112.4
The financial assets comprise cash, short term deposits and current investments at short term money market rates applicable to the currency together with certain long-term
debtors that meet the definition of financial assets under FRS 13. Of the fixed rate financial assets, £nil (2003 - £1.1m) is denominated in US dollars, £4.3m (2003 - £nil) is
denominated in Euros and the interest rate applied is 3.4%, fixed for approximately four years. Of the long term debtors of £9.6m (2003 - £6.3m), £1.7m (2003 - £0.1m) has
been excluded as it does not meet the definition of a financial asset under FRS 13.
Of the financial assets upon which no interest is paid £8.6m (2003 - £6.2m) is denominated in sterling, £3.7m (2003 - £1.4m) in US dollars, £4.3m (2003 - £2.6m) in 
Euros and £0.6m (2003 - £0.4m) in other currencies. Sterling balances of £7.9m (2003 - £6.1m) are receivable in eight years and the balance is receivable on demand.
As per note 14 (Debtors), £6.1m of debtor balances in 2003 has been reclassified from Amounts falling due within one year to Amounts falling due after more than one year.
29 LIQUIDITY RISK 
Maturity of Financial Liabilities 
The maturity profile of the carrying amount of the Group’s financial liabilities, other than short term creditors, was as follows:
FINANCE PROVISIONS AND
DEBT LEASES LONG TERM CREDITORS TOTAL
Currency: £m 2004 2003 2004 2003 2004 2003 2004 2003
Within one year, or on demand 105.5 80.3 10.6 0.1 7.0 5.0 123.1 85.4
Between one and two years 9.2 19.8 0.2 0.1 2.6 7.2 12.0 27.1
Between two and five years 47.3 26.2 – – 8.2 9.8 55.5 36.0
Over five years 94.6 134.1 –––– 94.6 134.1
At 31 December 256.6 260.4 10.8 0.2 17.8 22.0 285.2 282.6 Notes to the Financial Statements continued
72 COBHAM PLC
29 LIQUIDITY RISK continued
Borrowing facilities
The Group has the following undrawn committed borrowing facilities in various currencies available in respect of which all conditions precedent had been met. These facilities
are at floating interest rates:
£m 2004 2003
Expiring within one year 47.8 45.3
Expiring between one and two years ––
Expiring between two and five years 71.6 21.6
Expiring in over five years – 108.1
At 31 December 119.4 175.0
30 FAIR VALUES 
Fair values of financial assets and financial liabilities 
The following table provides a comparison by category of the carrying amounts and the fair values of the Group’s financial assets and liabilities. Fair value is the amount at
which a financial instrument could be exchanged in an arm’s length transaction between informed and willing parties, other than a forced or liquidation sale, and excludes
accrued interest.Where available, market values have been used to determine fair values.Where market values are not available, fair values have been calculated by discounting
expected cash flows at prevailing interest and exchange rates. For floating rate loans, fair values closely approximate to cost.
BOOK V ALUE FAIR V ALUE
31 December: £m 2004 2003 2004 2003
Primary financial instruments held or issued to finance the Group’s operations:
Short term borrowings (116.1) (80.4) (116.2) (80.6)
Long term borrowings (151.3) (180.2) (149.4) (184.1)
Other long term creditors (3.6) (6.0) (3.6) (6.0)
Provisions for liabilities and charges (14.2) (16.0) (14.2) (16.0)
Cash in hand 101.3 106.1 101.3 106.1
Current asset investments –0.1 –0.2
Other long term debtors 7.9 6.2 7.9 6.2
Derivative financial instruments held to manage the interest rate profile:
Interest rate swaps –– 1.7 1.8
Of the unrecognised profits and losses on interest rate swaps at 31 December 2003, a profit of £3.6m (2003 - £4.2m) was recognised in the profit and loss account in the
year. At 31 December 2004, a profit of £2.0m (2003 - £4.0m) is expected to be recognised in the profit and loss account in the forthcoming year.
BOOK V ALUE FAIR V ALUE
31 December: £m 2004 2003 2004 2003
Derivative financial instruments held to hedge the currency exposure on
expected future sales:
Forward foreign currency contracts 3.4 6.0 22.9 12.8
Of the unrecognised profits in forward foreign currency contracts at 31 December 2003, a profit of £0.9m (2003 - £nil) was recognised in the profit and loss account in the
year. At 31 December 2004 a profit of £4.9m (2003 - £0.8m) is expected to be recognised in the profit and loss account in the forthcoming year.
31 OPERATING LEASES 
The following annual operating lease commitments existed at the year end:
GROUP
LAND AND BUILDINGS OTHER
£m 2004 2003 2004 2003
Annual commitments which expire:
Within one year 0.9 0.5 2.7 4.9
Between one and five years 2.9 1.7 7.8 11.7
In five years or more 1.8 0.9 1.5 2.6
5.6 3.1 12.0 19.2 ANNUAL REPORT & ACCOUNTS 2004   73
32 CONTINGENT LIABILITIES 
As at 31 December 2004 the parent company had contingent liabilities in respect of bank and contractual performance guarantees and other matters arising in the ordinary
course of business entered into for or on behalf of certain Group undertakings. It is not expected that any material liability will arise in respect thereof.
33 POST BALANCE SHEET EVENTS 
After the year end the Group has acquired WA Systems Limited in the UK, Mastsystems International Oy in Finland and TCRMA in France for a total of £9.8m plus a further
£3m in contingent consideration.
As at 31 December 2004, the Group has also agreed to purchase Remec Defense and Space Inc for US$260m subject to shareholder and regulatory approval and H. Koch &
Sons Co for US$63m subject to regulatory approval.
34 RELATED PARTY TRANSACTIONS 
Directors 
The directors of Cobham plc had no material transactions with the company during the year, other than as a result of service agreements. Details of the directors’ remuneration
are disclosed in the remuneration report.
Joint V entures and Associates 
The following transactions took place between the Group and its joint venture and associate companies during the year:
£m 2004 2003
Increase in short term loan movements –2.7
(Reduction)/increase in borrowings from joint ventures and associates (8.0) 8.0
Dividends receivable from joint ventures 6.2 –
Net sales of goods, contracts and services 0.8 0.4
Rent waiver to associate 0.2 –
Investment in joint ventures and associates (note 12) 4.3 1.3
The following balances relating to joint ventures and associates were included in the consolidated balance sheet at the year end:
£m 2004 2003
Receivable balances:
Trading balances (note 14) 0.1 0.6
Dividend receivable from joint ventures (note 14) 1.2 –
Payable balances:
Other borrowings (note 16) –8.0 Notes to the Financial Statements continued
35 PRINCIPAL INTERESTS IN UNDERTAKINGS 
All subsidiary undertakings have been included in the consolidation. The undertakings which, in the opinion of the directors, principally affected the results for the year or the
net assets of the group were:
74 COBHAM PLC
PERCENTAGE 
COUNTRY OF OF NOMINAL
REGISTRATION / INCORPORATION CLASS OF VALUE OF
UNDERTAKING AND OPERATION SHARES / STOCKS SHARES HELD
Chelton continued
DTC Communications Inc USA Common 100
ERA Technology Limited England Ordinary 100
European Antennas Limited England Ordinary 100
Hyper Technologies SA France Ordinary 100
Kevlin Corporation USA Common 100
Label SA France Ordinary 100
Micromill Electronics Limited England Ordinary 100
Nauticast AG Austria Ordinary 100
NEC Aero SA France Ordinary 100
Northern Airborne Technology Limited Canada Common 99.1
Novatech Design Limited Canada Common 100
Nurad Technologies Inc USA Common 100
Omnipless Manufacturing 
(Proprietary) Limited* South Africa Ordinary 100
Orion Electronics Limited Canada Common 100
Precision Antennas Limited England Ordinary 100
Racal Antennas Limited England Ordinary 100
Salies SA France Ordinary 100
Sea Tel Inc USA Common 100
Seimac Limited Canada Common 100
Sivers Lab AB Sweden Ordinary 100
Slingsby Aviation Limited England Ordinary 100
Spectronic Denmark A/S Denmark Ordinary 100
TEAM SA France Ordinary 98.7
Flight Operations and Services
Aviation Défense Service SA (joint venture) France Ordinary 45
FB Heliservices Limited (joint venture) England Ordinary 50
FBS Limited (joint venture) England Ordinary 50
Flight Precision Limited England Ordinary 51
FR Aviation Group Limited* England Ordinary 100
FR Aviation Limited England Ordinary 100
FR Aviation Services Limited England Ordinary 100
National Air Support Pty Limited Australia Ordinary 100
National Jet Systems Pty Limited Australia Ordinary 100
Surveillance Australia Pty Limited Australia Ordinary 100
PERCENTAGE 
COUNTRY OF OF NOMINAL
REGISTRATION / INCORPORATION CLASS OF VALUE OF
UNDERTAKING AND OPERATION SHARES / STOCKS SHARES HELD
Aerospace Systems
Carleton Technologies Inc USA Common 100
Carleton Life Support Systems Inc USA Common 100
Cobham Fluid Systems Limited* England Ordinary 100
Conax Florida Corporation USA Common 100
Dräger Aerospace GmbH Germany Ordinary 100
Flight Refuelling Limited* England Ordinary 100
FR Countermeasures Inc USA Common 100
FR-HiTEMP Limited England Ordinary 100
Sargent Fletcher Inc USA Common 100
Stanley Aviation Corporation USA Preferred & 
Common 100
Wallop Defence Systems Limited England Ordinary 100
Chelton
ACR Electronics Inc USA Common 100
Air Précision SA France Ordinary 100
Artex Aircraft Supplies Inc USA Common 100
Atlantic Microwave Corporation USA Common 100
Atlas Composites Limited England Ordinary 100
Chelton Antennas SA France Ordinary 100
Chelton Applied Composites AB Sweden Ordinary 100
Chelton Avionics Inc USA Common 100
Chelton Avionics (Proprietary) Limited South Africa Ordinary 100
Chelton Defence Communications Limited England Ordinary 100
Chelton (Electrostatics) Limited England Ordinary 100
Chelton Flight Systems Inc USA Common 100
Chelton Inc USA Common 100
Chelton Limited* England Ordinary 100
Chelton Radomes Limited England Ordinary 100
Chelton Radomes Witney Limited England Ordinary 100
Chelton Telecom & Microwave SA France Ordinary 100
Cobham Composites Limited England Ordinary 100
Comant Industries Inc USA Common 100
Continental Microwave & Tool Co Inc USA Common 100
Credowan Limited England Ordinary 100
Culham Electromagnetics 
and Lightning Limited England Ordinary 100
In the case of the companies marked*, the stated percentage nominal value of issued shares is held by, or by a nominee for, Cobham plc. Otherwise, shares are held by, or by
a nominee for, a subsidiary undertaking of Cobham plc. Group Financial Record
RESTATED RESTATED
£m 2000 2001 2002 2003 2004
Turnover 568.4 721.8 734.6 832.6 983.0
Underlying Profit before Taxation 90.2 103.5 115.8 135.3 146.9
Profit before Taxation 89.0 87.5 99.9 54.5 125.9
Taxation (26.4) (27.7) (28.1) (36.0) (40.9)
Profit after Taxation 62.6 59.8 71.8 18.5 85.0
Minority interest (0.2) (0.2) (0.3) (0.3) (0.3)
Attributable to Shareholders 62.4 59.6 71.5 18.2 84.7
Dividends (20.2) (23.6) (25.9) (31.3) (34.6)
Profit/(Loss) Retained 42.2 36.0 45.6 (13.1) 50.1
Net Assets Employed
Intangible assets 165.3 243.9 250.3 345.9 373.8
Tangible assets 186.6 191.0 194.2 228.1 241.0
Investments 5.6 10.6 14.5 16.5 17.3
Current assets 306.1 385.0 405.1 487.0 522.5
663.6 830.5 864.1 1,077.5 1,154.6
Current liabilities (277.8) (318.0) (277.1) (340.2) (397.2)
Long term liabilities (114.9) (198.5) (242.2) (231.2) (200.0)
Net assets excluding pension liabilities 270.9 314.0 344.8 506.1 557.4
Pension liabilities – – (46.6) (49.2) (47.7)
Net assets including pension liabilities 270.9 314.0 298.2 456.9 509.7
Financed by
Ordinary share capital 24.8 25.2 25.4 27.8 27.9
Reserves 245.5 288.0 272.0 428.0 480.7
Shareholders’ Funds 270.3 313.2 297.4 455.8 508.6
Minority interest 0.6 0.8 0.8 1.1 1.1
270.9 314.0 298.2 456.9 509.7
RESTATED RESTATED
Pence 2000 2001 2002 2003 2004
Dividend per ordinary share 20.20 23.23 25.60 28.16 31.00
Earnings per ordinary share – underlying 64.2 75.4 86.4 93.5 94.8
Earnings per ordinary share – basic 63.0 59.4 70.7 17.2 76.0
Earnings per ordinary share – fully diluted 62.3 58.8 70.2 17.1 75.5
Net assets per ordinary share 273 311 294 412 457
£m 2000 2001 2002 2003 2004
Market capitalisation 1,040 1,086 1,035 1,295 1,381
Notes: Underlying profit before taxation represents the profit on ordinary activities before taxation, amortisation of goodwill, integration costs and exceptional items.
In 2001 long term liabilities and reserves were restated to reflect the impact of adopting FRS 19 ‘Deferred Tax’ in 2002.
In 2002 current assets, long term liabilities, pension liabilities and profit/(loss) retained were restated to reflect the adoption of FRS 17 ‘Retirement Benefits’. Years prior to
2002 have not been restated for this adoption of FRS 17.
ANNUAL REPORT & ACCOUNTS 2004   75 76 COBHAM PLC
Shareholder Information
ANALYSIS OF SHAREHOLDERS
(a) At 31 December 2004, 5,179 ordinary shareholders were on the register compared with 5,149 at 31 December 2003.
(b) Analysis of ordinary shareholders on the register at 31 December 2004:
PERCENTAGE NUMBER OF PERCENTAGE
NUMBER OF OF REGISTERED ORDINARY OF ORDINARY
REGISTERED HOLDERS SHARES HELD SHARES
Size of holding HOLDERS % (000’S) %
Up to 1,000 3,788 73.14 957,909 0.86
1,001 – 10,000 929 17.94 2,879,722 2.58
10,001 – 50,000 218 4.21 5,052,851 4.53
50,001 – 250,000 153 2.95 17,415,830 15.60
250,001 – 1,000,000 70 1.35 34,614,046 31.01
1,000,001 and above 21 0.41 50,686,547 45.42
5,179 100.00 111,606,905 100.00
Category
Private persons 3,914 75.57 7,272,386 6.52
Nominees 1,168 22.55 101,028,164 90.52
Insurance companies 3 0.06 526,556 0.47
Pension funds 2 0.04 206 0.00
Other corporate bodies 92 1.78 2,779,593 2.49
5,179 100.00 111,606,905 100.00
Source: Lloyds TSB Registrars.
REGISTRARS
Enquiries concerning shareholdings or dividends should, in the first instance, be addressed to the company’s registrars, Lloyds TSB Registrars, The Causeway, Worthing,
West Sussex BN99 6DA (telephone: +44 (0)870 600 3970). Shareholders should promptly notify the registrars of any change of address or other particulars.
The registrars provide a range of shareholders' services on line. The portfolio service provides access to information on investments including balance movements, indicative
share prices and information on recent dividends and also enables address and mandate details to be amended on line. For further information and practical help on transferring
shares or updating your details, please visit www.shareview.co.uk. The share dealing service enables shares to be sold by UK shareholders by telephone or over the internet.
For telephone sales please call 0870 850 0852 between 8.30am and 4.30pm. For internet sales please visit www.shareview.co.uk/dealing.
INDIVIDUAL SAVINGS ACCOUNTS (ISAs)
The company has introduced corporate sponsored ISAs through The Share Centre Limited, an independent stockbroker. Further information may be obtained from The Share
Centre Limited on +44 (0)1296 414444 or by writing to The Share Centre Limited, PO Box 2000, Aylesbury, Bucks HP21 8ZB. Alternatively, details can be requested via e-mail:
cobham@share.co.uk.
CAPITAL GAINS TAX
For the information of shareholders who held Cobham plc ordinary shares on 31 March 1982, the market value, adjusted for capitalisation and rights issues, of the company’s
ordinary shares on that date for capital gains tax purposes was 86.02p.
FINANCIAL CALENDAR
Annual general meeting 8 June 2005
Final dividend (if approved) 4 July 2005
Interim results 13 September 2005
Interim dividend December 2005
REGISTERED OFFICE
Brook Road, Wimborne, Dorset BH21 2BJ
Telephone: +44 (0) 1202 882020
Facsimile: +44 (0) 1202 840523
Internet: www.cobham.com
Registered in England No. 30470 PRODUCED BY ROYLE FINANCIAL PRINT LIMITED, LONDON Cobham plc
Brook Road
Wimborne
Dorset
BH21 2BJ
United Kingdom
Telephone 
+44 (0)1202 882020
Facsimile
+44 (0)1202 840523
Internet
www.cobham.com