Cobham to the cobblers…

Taking a look at today’s big mover: Cobham PLC


Cobham PLC, down 15% today (on another profit warning). Just having a look, the last (dec-2015) statement from the LSE shows a NAV (ex Tangibles) of -72p per share. Lets call it -£1.00 per share with the warning. Expensive by over £2 given today’s close £1.14… market cap £2.3bill, plenty more to lose.

Intangibles are 74% of the current market cap...

Company operating profit has not been above 15% in the past 5 years and now booking loss per share, so shareholders will not be getting paid anytime soon. Presume a div cut is on the way too. The one positive being that at some point in the future if the company passes through this, it can trade on a 10X earnings multiple to justify value.

“The Group will recognise a total non-cash impairment of goodwill and other intangible fixed assets of £574m.” = 30% of todays value (15% already gone, so at least 15% more downside).

“The Board recognises that making estimates on complex contracts is inherently judgemental”…. £179 mill gone there, so another 8% from the above.

lets look at debt….
net debt/EBITDA gearing ratio was 3.0x.
covenant upper threshold of not to exceed 3.5x.

Another half turn and the covenant is breached. If one recalls, then TCG was on breach the shares were at 7pence (and even that appeared expensive at the time). Given that the Group’s net debt at 31 December 2016 is as announced on 11 January 2017 was £1.03bn another impairment similar to the above will trigger this.

It is of course comforting to know that the new incoming CEO will be paid a salary of £690,000 a year and will be eligible for bonuses at Cobham. #FAIL #FAILURE

No doubt pension funds will placidly support this with their investors hard earned money!




Todays share price

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