* Early readout puts trading profit at 245 mln stg
* Group's already lowered target range was 255-275 mln stg
* Scraps dividend after poor result on profit and debt
* Shares fall as much as 21 pct (Adds CEO, CFO comments from analyst call)
By Paul Sandle
LONDON, Jan 11 (Reuters) - British aerospace and defencecompany Cobham scrapped its final dividend on Wednesdayafter 2016 trading profit fell short of a target it had loweredjust two months before the year-end.
Shares in the company slumped as much as 21 percent, wipingout all the gains made since it issued its last profit warningin October. They were down 16 percent at 138 pence at 1315 GMT.
A new management team, brought in after profit fell in thefirst half of 2016, is trying to get to grips with a businessstruggling on multiple fronts.
Chief Executive David Lockwood, who took over inmid-December, said he was "extremely disappointed" that hisfirst communication with the market was to report the profitmiss, which came to light after a first look at the accounts.
"We are not going to financially engineer our way out ofthis," he told analysts. "We need stability, we need to calmeverything down and we need to focus, particularly on ourcustomers and customer related issues."
With a market cap of 2.8 billion pounds, Cobham is Britain'sthird biggest aerospace and defence company after Rolls-Royce and BAE Systems. It supplies comms equipment toboth the defence and commercial sectors and high tech systemssuch as air-to-air refuelling.
Trading profit would come in at 245 million pounds ($298million), short of its 255-275 million pound target range, thecompany said. Year-end net debt of 1.03 billion pounds was alsohigher than it expected.
The shortfall was down to continued poor trading in itscommunications and connectivity and advanced electronic systemsunits, Lockwood said.
Cobham made a $1.46 billion bet on wireless communicationsfor commercial customers when it bought equipment maker Aeroflexin 2014.
But it miscalculated the financing, analysts have said,resulting in a level of debt it struggled to service when demandslowed, and a need for an emergency rights issue.
NEW TEAM
Cobham said on Wednesday there remained "significantuncertainty" about Boeing's KC-46 air-to-air refuelling system,on which it is working.
The new team, which includes finance chief David Mellors,who was previously at Qinetiq, is assessing the balancesheet and the business.
"The final dividend decision has been made on the basis ofthe trading that we are announcing and the debt position that weare announcing," Mellors told analysts on a call.
"And that's all we have available today, and given those, itwould be the wrong thing for the business to do anything otherthan recommend no final dividend."
The first reading of trading profit could be adjusted afterthe review, including major contracts and asset carrying values,the company said.
Cobham said it was still in talks on the commercial termsfor the "complex" conformity and qualification phases of theKC-46 contract.
Analyst Sandy Morris at Jefferies, who holds a "buy" ratingon Cobham, said the update was disappointing, particularly thecompany's net debt, which was around 130 million pounds higherthan expected.
"We believe Cobham is not in meltdown, but we recognise thehigh net debt, passing of the final dividend and the absence ofagreement on KC-46 may make it appear otherwise to someobservers," he said.
Commercial terms on KC-46 needed to be resolved before ameasured assessment could be taken of Cobham's worth, he said.
($1 = 0.8230 pounds) (Editing by Kate Holton and Alison Williams)
