Aerospace firm issues its FIFTH profit warning in under 2 years
Companies: Cobham
Shares in Cobham, the struggling Aerospace company, fell more than 22% on Thursday after the firm stunned investors with a profit warning, a huge write-down, and confirmation that it could not forecast past 2017.
In a packed regulatory announcement, COB said that underlying profit was now expected to be £225m, down £20m since the 11 January update, citing £6m of additional amortisation, £4m on IT security compliance, £2m for "several" year-end accruals not booked in the draft management accounts, and finally £8m of bad debt charges.
It also confirmed that the Company, which specialises in communications equipment and control systems for the defence industry, will take a £574m impairment hit relating to problems across several of its units.
KC-46 Tanker Programme
Adding to investors' concerns, the firm also conceded that it had taken a charge of £150m relating to the KC-46 Tanker Programme with Boeing:
"Over the last few weeks, there have been many meetings between Cobham and The Boeing Company to incorporate a wide range of changes into the KC-46 schedule that provides a solid baseline for completion of the programme...
The schedule remains challenging and is being executed against the ongoing backdrop of an onerous commercial arrangement.
Through the commercial negotiations associated with the changes, it became clear that the costs to complete the development schedule would fall largely to Cobham's account. As a result, the Group has taken a charge of £150m, which fully bounds historic liabilities and appropriately funds the remaining work, after taking into account historic performance."
Cobham Chairman Mike Wareing conceded that the charge was "hugely disappointing", but stressed that it was essential, it covers all historic liabilities and appropriately funds the remaining work.
Balance sheet woes
In a final hit for investors, Cobham said that it could not give any guidance for its 2017 balance sheet, saying "the ability of the group to forecast performance is also not as strong as it should be", followed by this serious admission:
"The balance sheet is clearly not strong enough to properly support the operations of the group, given the important role it plays in many customer programmes. A strong balance sheet will be an important part of delivering medium term growth."
A capital injection such as an equity issue appears very much on the cards to shore up the financial position of the Group and today's share price move will be incorporating some of this expected dilution.
All in all, a very bad day for Cobham investors, with the stock now trading at 109p, down 58% from its 12-month high. Its market cap is now at just £1.8bn, less than half of the level it was at this time last year.
