Cobham dives as air-tanker contract stalls

DEFENCE manufacturer Cobham has warned of further problems with its refuelling kit for the US Air Force’s air-to-air tankers, sending its shares down nearly 10pc.

It said yesterday that Boeing – which is heading development of the KC-46 tanker – is withholding payment for Cobham’s work on the programme, which is its largest single contract.

Cobham reported that the refuelling system it built for the KC-46’S fuselage has been completed with work now under way to get it certified by regulators. Similar systems mounted on the KC-46’S wingtips have also been delivered ready for testing.

However, Cobham said that while there had been “progress” on the contract, Boeing had made “as yet unquantified damages assertions relating to the programme”, which Cobham said it was “formally disputing”. The FTSE 250 company said getting approval for the fuselage refuelling system had “taken longer and been more challenging than expected”. It added the system for the wingtips “is in its early stages with risks relating to schedule and cost. Completion could take significantly longer than originally planned”.

As a consequence, Cobham will take an extra £40m charge when it reports its interim results next week, though management said this would not change the company’s guidance on underlying annual profits, which the City is expecting to come in at about £144m.

Shares in Cobham fell 9.9pc, or 13p, to 118.6p, their biggest fall in 18 months. In March last year the company reported a £850m annual loss following huge write-downs and charges, including a £150m hit on the KC-46 contract.

Chief executive David Lockwood launched a £500m rights issue to try to get it back on track. The latest warning from Cobham came a day after Boeing said it had taken a $418m (£316m) charge on the KC-46, taking its total hit from the programme to more than $3bn. The first KC-46 is expected to be delivered in three months’ time.

Cobham’s warning came as European aviation giant Airbus reported half-year revenues slipped 1pc to €25bn (£22bn) and net profit more than halved to €496m. The company was saddled with a €98m bill for its troubled A400M military transporter and has suffered engine issues with its bestselling A320neo airliners. However, CEO Tom Enders said that production bottlenecks are being resolved. The results sent Airbus shares to an all-time high, rising 4.5pc to €109.62.