Struggling defence giant ejects its boss
THE boss of troubled defence group Cobham is stepping down – two weeks after insisting: ‘I’m staying right here doing my job.’
Bob Murphy will be replaced by David Lockwood, the highly regarded chief executive of technology firm Laird, after weeks of shareholder pressure.
The move drew an instant reaction in the City, with Cobham shares rising slightly while Laird fell more than 6pc.
Cobham chairman John Devaney finally caved in to pressure to replace Murphy after a dire year in which the firm has been crippled by a financial scandal.
The troubled engineer, which pioneered air-to-air refuelling and makes kit that allows police at the Olympics in Rio to communicate in an emergency, has fallen into the red, launched an emergency fund-raising and seen its shares lose a third of their value.
Devaney said Murphy will step down by the end of 2016 to ‘pursue other opportunities’ after four years at the helm.
The firm wished him well in his ‘future endeavours’ and Devaney said: ‘David has a background in defence and communications technology which are at the heart of Cobham.
‘We look forward to him joining the company and thank Bob for his contribution.’
Murphy received pay of £1.3m last year of which £756,000 was salary and £210,000 ongoing costs from relocating him from America to the UK along with other benefits and pension contributions.
The firm said while he will be leaving in up to six months he will be paid for the next 12 months as per his contract.
Lockwood will start by the beginning of the calendar year on a salary of £690,000.
Murphy’s undoing was the £1.1bn purchase of rival Aeroflex in 2014 which left the firm heavily indebted and facing concerns it had overpaid. Cobham was then rocked by a financial scandal in one of its electronics divisions.
It sacked the operations and finance directors in its wireless communications arm over accounting irregularities.
The financial bombshells forced the company to shoulder a £9m one-off charge so that it could put its books right and it issued a profit warning.
The wireless division makes equipment for mobile operators such as Vodafone. Bosses had discovered that the unit had been booking profits before it should. At the time the firm said full-year profits would be £15m lower than the previous forecast of £315m.
The scandal torpedoed an attempt by finance director Simon Nicholls to leave and join building supplies firm Wolseley.
After learning of the scandal at Cobham, Wolseley decided it no longer wanted Nicholls. In recent weeks Cobham announced David Mellors would be joining as finance director from defence research firm Qineti Q, where he has the same role.
Some investors are unhappy the two most senior board positions at the firm are being replaced at the same time. Others are aggrieved their holding has been diluted after the cash call.
Murphy had to tap shareholders for £500m to shore up Cobham’s finances to avoid breaching loan terms or a fire sale of its assets.
At the time, he published a prospectus which said if the rights issue failed it could entitle lenders to recall loans and that the ‘group does not expect that it will have the funds immediately available to repay such amounts’.
The fund-raising was successful but the bad news continued and at the beginning of this month Murphy said the firm had plunged to a £38.4m loss for the half-year from a £4m profit, blaming a lack of political will to fund new projects in America.
Cobham’s shares rose by 0.6p to 160.9p while Laird fell by 23p to 308p.