Cobham edges towards recovery after ‘stressful’ couple of years

A TURNAROUND looks to be starting to take hold at Cobham after a disastrous end to the previous year – but the company has warned that its recovery remains on a knife edge.

The FTSE 250 defence and technology business, which has issued five profit warnings over the past two years, reported a £14.3m pretax profit for the first six months of the year, reversing a £38.4m loss a year ago. Revenue was 9.5pc higher at £1bn.

Investors jumped on the news, with shares rising 8.4pc to 145.3p. At the start of the year Cobham posted a fullyear loss of £847.9m, after shocking the market with almost a quarter of a billion pounds of writedowns and adjustments.

These included a £150m hit on its programme to build an inflight refuelling system for the US Air Force’s new fleet of airtoair tankers.

To get Cobham back on an even keel, David Lockwood, the new chief execu tive, ordered a £500m rights issue – its second in a year – to get the £1bn debt pile under control, as well as launching a review of the business.

An investigation into potential insider trading relating to the earlier fundraising has added to Cobham’s woes.

“Performance has been what we expected and we’ve got where we hoped to at this stage but beneath the surface some of how we got here has been stressful,” said Mr Lockwood.

He added that Cobham had “a number of quality businesses with differentiated technologies and knowhow and leading positions in a number of attractive markets. This gives us confidence in Cobham’s future”. Mr Lockwood’s review of the businesses in the group – which some analysts say has become unwieldy – hints at possible disposals.

The company has revealed its Wireless and Avcomm businesses – responsible for about 10pc of revenue – are now the subject of a strategic review, something Mr Lockwood said would “happen in months: it’s destabilising for the business, staff and customers”.

Jefferies analyst Sandy Morris gave a cautious welcome to Cobham’s interim numbers. “The firsthalf results are in line with consensus, and guidance is unchanged,” he said. “We suspect, however, that words and proposed actions will count for more than the numbers [and] in that respect, we do not have a lot to work with.”

Cobham said that, during the half, orders rose 4pc to £915.8m when stripping out currency changes and oneoffs. On its preferred measure of underlying profit, it suffered a £12.3m drop to £89.9m. Debt was almost halved from a year ago to £460.8m.