Disgruntled investors heap pressure on Cobham boss over emergency rights issue

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Ministry of Defence supplier Cobham is facing scepticism from investors over its £500 million shock and awe rights issue, putting renewed pressure on chief executive Bob Murphy, the Standard has learnt.

Unhappy investors are concerned the company is maintaining its £126 million dividend and committing to further payouts in future — while also tapping them for more money. 

A lack of detail around the pricing of the share sale has also raised hackles. A prospectus is due to be published next month.

One investor said they were “disgruntled” while another said they were “perplexed” by the plan. 

Cobham stunned the market last week when it revealed would need an emergency rights issue to stop it breaching debt limits next month. 

Murphy said at the time the board was maintaining the dividend — which it has paid out for the past 45 years — because it was an “important part of the equity story for the company”.

He also said the size of the rights issue meant it would solve the problem of Cobham’s big debt pile.

An embarrassing accounting mix-up in its wireless business, rising costs and the commodities downturn means the firm made 70% less than it did last year in the first quarter.  The wireless issue led to the dismissal of its operations boss and finance chief and a £9 million charge.  

The board has faced further questions over its judgment when it emerged that the wireless finance boss left the group just days before Cobham gave a positive trading update to the market in March. 

Cobham said it had struck “the right balance” to signal confidence in its medium term prospects. The shares — down a huge 43% since the beginning of the year — rose 4.2p or 3% to 161.8p today.

Source Article from http://www.standard.co.uk/business/disgruntled-investors-heap-pressure-on-cobham-boss-over-emergency-rights-issue-a3242076.html

May 7, 2016 |
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