Cobham shares plunge 20 percent as Boeing deal takes £150m hit

Shares in British engineer Cobham (LON:COB) fell nearly 20 percent on Monday, after issuing yet another downgrade of its profit expectations for 2016 alongside a disappointing update on its troubled contract with Boeing.

The group cut its profit expectations by a further £20 million, down to £225 million just a month after its last downgrade. Profits were affected for several reasons, including £4 million of expenditure on new IT systems to comply with forthcoming US regulations, and £8 million of bad debt charges.

Cobham also gave an update on the significant uncertainty surrounding the outcome of the KC-46 tanker programme with Boeing. It said that “here have been many meetings between Cobham and The Boeing Company to incorporate a wide range of changes into the KC-46 schedule that provides a solid baseline for completion of the programme”, but that the “issue remains challenging”.

It concluded that it would result in the costs to complete the development schedule falling largely to Cobham’s account. As a result, the Group has taken a charge of £150 million, “which fully bounds historic liabilities and appropriately funds the remaining work”.

Looking towards 2017, the group’s board said “the ability of the Group to forecast performance is also not as strong as it should be and these factors lead to the early view for 2017 at this stage of the year having a wide range of potential outcomes, ” declining to give any further guidance.

David Lockwood, CEO of Cobham, added:

“2016 was an incredibly turbulent and disappointing year for Cobham. Execution failure in many businesses led us to miss expectations badly and provides a poor entry point into 2017. The medium term provides significant opportunity with encouraging market dynamics and strong product and programme offerings. The route to realising this potential is strong operational performance and financial control, which will be the relentless focus through 2017. This has commenced and the potential to improve is clear.”

Cobham shares are currently down 19.57 percent at 108.90 (0946GMT).