A costly investment strategy designed to push Cobham (COB) away from austerity-hit defence markets into more commercial sectors appears to have back-fired. Operational difficulties within its wireless division alongside other issues forced the engineer to warn on profits for the second time in less than six months. The group is now dangerously close to breaching its debt covenants.
With 2016 profits now expected to come in £15m below expectations and a strong US dollar ballooning the cost of funding the $1.5bn (£869m) acquisition of wireless communications expert Aeroflex, management was left with little choice but to tap up shareholders for £500m. Details of the rights issue, which chief Bob Murphy says should "put the company on a sound footing", will be revealed in June.
Aside from a £9m charge arising from recent shipment delays, Cobham also complained of extra costs developing its latest batch of electronic communication systems and the commodity price downturn. The latter conundrum was particularly damaging for its aviation business, which specialises in charter flights for Australian natural resources customers.
