Cobham shares hit 13-year low on Boeing crisis

Under fire: Cobham has been rocked by five profit warnings

Michael Bow16 February 2017

Troubled defence contractor Cobham has stunned the City with its fifth profit warning in just over a year as a huge writedown sent shares tumbling 20%.

The Ministry of Defence supplier said it would take more than £800 million of charges and writedowns as a result of a hitch supplying aerospace giant Boeing with air-to-air refuelling parts, overvalued businesses and legal costs.

Profits hopes were also lowered by a further £20 million to £225 million after litany of mini-charges, as it warned hitting a similar target next year would be “challenging”. Shares in the Dorset-based company, which employs 12,000 people around the world, fell 20%, or 27p, to 13-year lows of 108p.

Chief executive David Lockwood, who took the reins two months ago, said he wanted to reset figures to give a “realistic expectations of what the company can be”.

He added: “This is not that horrible phrase kitchen-sinking. It’s a fair reflection of the company and it doesn’t make me proud at all.”

The spiralling crisis means it is in danger of breaching loan agreements, as it said the balance sheet was “clearly not strong enough to support the operations of the group”.

Lockwood is part of a completely new line-up at the top, which includes former chief financial officer at QinetiQ David Mellors and chairman Mike Wareing. They have spent the past few weeks uncovering grisly details about the 82-year-old company’s health.

Most of the balance sheet is made up of a £574 million writedown linked to the group’s disastrous 2014 takeover of US rival Aeroflex. Lockwood said the cash thrown off by the unit did not “justify” the $920 million (£739 million) paid for it in 2014.

The former Laird man also said he had signed a deal with Boeing in the early hours of this morning to fix a long-running headache over the supply of equipment for Boeing KC-46 tankers, taking a £150 million charge to limit any future costs.