Cobham Share News (COB)

(ShareCast News) - Cobham warned on profits for the fifth time in just over a year, as it made further extensive write-downs after judging its balance sheet is "clearly not strong enough".The FTSE 250 aerospace and defence group has taken a total £179m charge, including £150m from the KC-46 air tanker contract with Boeing, which together reflect increased estimates of costs to complete contracts and, in some cases, lower recovery from customers.Furthermore, a £574m non-cash impairment of goodwill and other intangible fixed assets will also be recognised, which chairman Mike Wareing, who joined in November, and chief executive David Lockwood, who was appointed in the summer, aim to "reset the group to a more prudent level".Cobham, which only delivered its last profit warning in January, said many meetings with Boeing in recent weeks to incorporate a wide range of changes into the KC-46 schedule had resolved long standing technical and other issues, but had taken the charge when it "became clear that the costs to complete the development schedule would fall largely to Cobham's account".Following a further £20m profit write-down, group underlying trading profit is expected to be £225m, almost a third lower than the £332m in 2015.January's trading update had seen the dividend cut and guidance cut to £245m from the £255-275m predicted in October's profit warning.Said Wareing: "Great progress has been achieved operationally and commercially in the last few weeks, with clarity gained that the costs falling to Cobham's account are far greater than the board understood last year."Whilst the charge to finish the development phase is hugely disappointing, it is essential and does bound all historic liabilities, as well as appropriately funding the remaining work."The 2014 acquisition of wireless business Aeroflex for £900m has since been judged by many analysts as a chief cause of the company's struggles, with some of the £500m rights issue that followed being used to support the dividend.Cobham shares were crunched more than 20% on Thursday morning, only weeks after another 20% collapse from its last profit warning.Falling below 110p, a 14-year low, the company's shares have crashed almost 70% from 2015's highs above 340p."We're getting used to dire news from the group these days," said analyst Neil Wilson at ETX Capital, as it dawns that the problems at Cobham go further than anyone realised last year."There is every reason to think that management's review of the business may throw up further concerns and more write-downs. Lockwood has a bit more tidying up to do after the Bob Murphy years of acquisitions and diversification."From an investment point of view, Wilson was cautiously optimistic: "It's all a bit of a mess but the plunge in the stock might just about be the worst of it. Lockwood noted that today's warning is a 'poor entry point into 2017', but the sharp readjustment in the valuation today may be a useful entry point for investors. Although that is what was being said in January after profits warning number four."It was an "almost unbelievable" statement, said Jamie Constable at broker N+1Singer, feeling the company was indicating there may be the need for further charges to come, "so this isn't the end of it".Stating that the balance sheet is not strong enough to support the group, suggests Cobham is going to need a rescue rights issue, he said, with £1bn of debt being three times current EBITDA with a covenant at 3.5 times. Mike van Dulken at Accendo Markets said the "reset" of the balance sheet might suggest the company hopes the worst is now out in the open."Any bargain hunters today will hope that this is code for throwing the kitchen sink at the situation, clearing the decks for a fresh start free of nasties."He said the shares have breached eight-month support at 130p, ignoring May lows of 125p on the way down."Off their worst levels implies fresh interest in today's latest potential recovery trade. Good luck to them, with 2 March full year results just round the corner."