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Third profit warning in less than 12 months hits aerospace and defence business

Cobham (COB) 139.9p

Loss to date: 2.7%

Previous Shares view: 143.9p, 23 Jun 2016

Our recovery play on aerospace and defence firm Cobham (COB) is now in the red as the company serves up its third profit warning in less than 12 months (25 Oct). A re-setting of expectations was a risk we flagged but something we probably didn’t expect until the incoming CEO David Lockwood and finance director David Mellors were in place.

COB - Comparison Line Chart (Rebased to first)

The company was forced to trim guidance from the previous £290m to between £255m and £275m after a weak third quarter contribution from its satellite communications and wireless businesses. JP Morgan says: ‘We see three key issues for investors: 1) implications for the balance sheet; 2) implications for the dividend; 3) lack of guidance on 2017 pending arrival of new management.’ When launching its £507m rights issue this spring the company said it would maintain its dividend and the new funds would help reduce its net debt to earnings before interest, tax, depreciation and amortisation (EBITDA) to less than two times – it now expects a year end ratio of 2.6 times. (TS)

We hope the company has hit rock bottom but concede new management face a big challenge.

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