LONDON (Alliance News) - Defence and aerospace technology company Cobham PLC issued its second profit warning of 2016 on Monday as the same problems which hampered its performance in the first quarter dragged on.
Cobham said that, while it anticipates an improvement in trading in the fourth quarter, its results for 2016 will miss its previous expectations. It now anticipates trading profit for the full year, including favourable currency movements, will be GBP255.0 million to GBP275.0 million, down from GBP332.0 million a year before.
Shares in Cobham were down 15% to 136.20 pence on Monday, the worst performer in the FTSE 250. The stock has fallen by 44% in 2016.
Cobham had issued a profit warning in April and launched a rights issue of shares at the same time in order to shore up its financial position in the face of deteriorating trading conditions.
The company - which makes satellite communications equipment, microelectronics products and air-to-air refuelling technology for the aviation, maritime, defence and space sectors - had a rotten start to the year.
In the first quarter, the firm's Wireless business suffered operational issues which resulted in delayed shipments and an impairment charge being booked in the first half. This was exacerbated by ongoing challenges in Cobham's commercial fly-in fly-out business, particularly a slowdown among natural resources sector clients in Australia, which has resulted in reduced flying activity in this market.
Added to those issues were cost increases in development programmes in its Advanced Electronics Solution segment, resulting from technical and supplier quality issues.
Together, they resulted in Cobham swinging to a GBP38.0 million loss in the first half to the end of June, compared to a GBP4.0 million profit a year prior.
But rather than abate, the problems continued in the third quarter.
Cobham said its SATCOM arm, housing its satellite communications business, has continued to see subdued demand, only partially offset by limited revenue growth from next-generation Ka band products.
In the Wireless business, progress has been made on the operational issues which soured the first quarter, but at a slower pace than had originally been anticipated. Some revenue for the division has been deferred and additional costs have been incurred due to higher resource requirements.
In Integrated Electronic Solutions, within Cobham's Advanced Electronic Solutions segment, some additional costs and revenue deferrals have been suffered due to technical problems on a small number of space-related development programmes. Cobham did note these have been largely resolved.
Mission Systems, Cobham's refuelling systems arm, is supplying the hose and drogue refuelling system and body fuel tanks for the Boeing US KC-46 tanker. This aircraft secured US Department of Defense Milestone C approval in August, signalling it can now enter production.
Flight tests have been completed on this programme, and Cobham said it is now progressing with the US Federal Aviation Administration conformity process, in addition to holding talks on the commercial terms for the conformity process and qualification phases.
Cobham expects a "satisfactory outcome" to those talks but said the timing is not certain and is currently hitting cash receipts.
Cobham also noted its Aviation Services business traded in line with its expectations in the third quarter.
By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance
Copyright 2016 Alliance News Limited. All Rights Reserved.
