Cobham tanks as it warns on profit, announces rights issue

(ShareCast News) - Shares in FTSE 250 aerospace and defence group Cobham tanked after it proposed a £500m rights issue in the second quarter of the year as it reported a big drop in first-quarter trading profit.Profit fell to £15m from £50m in the first quarter of 2015, missing the board's expectations. The company attributed the slow start to the year to operational issues in the Wireless business resulting in delayed shipments and a one-off charge of £9m.It also pointed to increasing headwinds in the commercial fly-in fly-out business and cost increases on a small number of development programmes in the Advanced Electronics Solutions Sector.For the full year, the profit shortfall is expected to be about £15m, Cobham said, as it confirmed its intention to rebase the dividend and pay out the same amount this year as last.The company said on Tuesday that it is targeting run-rate net savings of around £30m per year by 31 December 2016, with anticipated net savings of £10m to be delivered in 2016. These savings will be achieved from a combination of restructuring, manufacturing outsourcing and overhead reduction activities across the group.Cobham also laid out plans for a rights issue in the second quarter.Chief executive Bob Murphy said: "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 £500m."JPMorgan said the rights issue was immediately 18% EPS dilutive on its estimates. In addition, it said the three main issues affecting profit are all new.RBC Capital Markets said that besides the 5% cut to profit guidance, "this morning's release raises concerns regarding execution, which may take a while to rebuild".At 1004 BST, Cobham shares were down 20% to 172.80p.