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Third time unlucky for Cobham shareholders

The defence contractor has canned its full-year dividend following another warning on profitability
January 11, 2017

Shares in Cobham (COB) were marked down heavily on Wednesday morning after "slower than anticipated ramp-up of new production programmes" at its key aerospace division hit profits and forced the defence contractor to can its full-year dividend.

IC TIP: Hold at 139p

Forecast trading profits of £245m will come in around £10m below the lower end of previous guidance. But the eventual shortfall might be even worse if the group is forced to book any writedowns following a balance sheet review currently being undertaken by management that's assessing major contracts and the carrying value of assets.

The Dorset-based group, which is engaged in the development, delivery and support of advanced aerospace and defence systems, had to downgrade its profit forecasts twice during 2016 and was forced to tap shareholders to the tune of £500m in order to reorganise a debt burden that had ballooned following the £900m acquisition of communications group Aeroflex.

There was further bad news. Net debt is up and Cobham reiterated last October's warning that there is "significant uncertainty" surrounding the outcome of the KC-46 air-to-air refuelling tanker programme. It's sadly ironic given that Cobham, in an earlier incarnation of Airspeed Ltd, pioneered air-to-air refuelling in the interwar years under the auspices of Sir Alan Cobham.