LONDON (Alliance News) - Defence technology company Cobham PLC on Tuesday said trading in the first quarter missed its expectations and said it will launch a GBP500.0 million rights issue in the second quarter of 2016.
The FTSE 250-listed company said its trading profit in the first quarter was GBP15.0 million, well behind the GBP50.0 million made in the first quarter of 2015.
The weaker performance was driven by operational issues in its wireless division which resulted in delayed shipments and the company booking a GBP9.0 million one-off charge. This was exacerbated by challenges in its commercial fly-in fly-out business and cost increases in development programmes in its Advanced Electronics Solution segment.
Cobham said it continues to trade in line with expectations across the rest of the business and said its order book grew on a like-for-like basis in the first quarter.
The hit to its earnings, coupled with investment requirements in long-term development programmes, means Cobham now expects its group leverage may be close to a net debt to earnings before interest, taxation, depreciation and amortisation ratio of 3.5 times by the end of June.
Therefore, the group has decided to cut its indebtedness and said it intends to raise GBP500.0 million through a fully-underwritten rights issue of shares in the second half.
With this strengthening the balance sheet, Cobham confirmed its intention to pay a re-based total dividend that will be flat on 2015.
"In order to put the company on a sound footing and to secure funding for our major development programmes in the longer term, we have decided to refinance the business through a rights issue to raise approximately GBP500 million," said Chief Executive Bob Murphy.
"We remain confident that continued investment in technology and know-how will enable us to maintain our leading positions in markets with good prospects leaving Cobham well placed to deliver growth over the medium term," he added.
By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance
Copyright 2016 Alliance News Limited. All Rights Reserved.
