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Cobham (COB)     

hlyeo98 - 11 Jan 2017 12:58


Shares in Cobham fell on Wednesday morning after the UK aerospace and defence company scrapped its dividend and issued its fourth profit warning within the past 14 months.

Cobham said in a trading update that its unaudited draft management accounts for 2016 showed group trading profit of £245m, below the range of between £255m and £275m set out by management in October.

“The detailed year-end close and audit is ongoing but is not expected to result in an increased trading profit,” the company said.

Cobham revealed it would abandon plans for a final dividend payment for 2016, despite saying in October that it had no intention of scrapping the payout.

“In the light of the disappointing trading and higher than expected net debt, the board will not be recommending a final dividend payment in respect of financial year 2016,” the company said. “The dividend policy for 2017 and beyond will be set out following a full review of the group’s financial situation.”

Unaudited net debt at the end of the year was £1.03bn, compared with £1.21bn in 2015, the FTSE 250 company said.

Cobham’s share price fell more than 20 per cent in the first hour of trading on Wednesday, before recovering slightly. It was down 15.5 per cent at 139p by late morning.

Analysts at Liberum said that while the trading statement was “disappointing”, investors “will have been waiting for this” and “recovery should be in sight under new management”.

Some analysts had blamed the company’s problems on former chief executive Bob Murphy, who championed a costly diversification strategy aimed at reducing the group’s exposure to constrained defence markets.

Cobham has made a raft of management changes in recent months. David Lockwood, the former chief executive of UK technology company Laird, took over the top job last month. David Mellors, former finance director at Qinetiq, became Cobham’s chief financial officer this month.

The company’s chairman, John Devaney, also stepped down at the end of last year, and was replaced by Michael Wareing on an interim basis.

Cobham said on Wednesday that the new management team was “commencing a thorough closing balance sheet review, including major contracts and asset carrying values”.

In April last year, the company said its 2016 profits would be £15m below expectations as it was forced to launch a £507m rescue rights issue to prevent the debt incurred in a 2014 acquisition spree nudging the covenants agreed with bankers.

In October, the company said overall trading in the third quarter had “remained challenging” and was “behind management’s expectations”, mainly because of poor performance in its satellite communications and wireless businesses.

The company has also been marred by legal issues in recent months. In November, insolvency litigator Manolete Partners accused two former directors of Cobham subsidiary MMI Research of unlawfully transferring millions of pounds in cash to another Cobham subsidiary, leaving MMI unable to pay creditors. No defence has yet been filed.
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