Cobham shares plunged as much as 21.5 per cent this morning after the engineering group issued a profit warning and launched a £500m emergency rights issue.
Its push into the commercial market to offset slowing government defence spending on both sides of the Atlantic by snapping up US communications equipment maker Aeroflex two years ago has failed to bear fruit.
The FTSE 250-listed firm's profits fell 70 per cent to £15m in the first quarter of 2016, results published this morning showed. This was partly due to delayed shipments and a one-off charge of £9m in its wireless business, formed out of the Aeroflex acquisition.
Lower demand for its commercial flying services in Australia and cost increases in its electronics arm also dented profits. However, Cobham assured that the rest of its business is trading in line with expectations.
The rights issue, which is due to take place in the second quarter, will be used to cut debt and shore up Cobham's strained balance sheet.
"In order to put the company on a sound footing and to secure funding for our major development programmes in the longer term, we have decided to refinance the business through a rights issue," Bob Murphy, chief executive of Cobham, said.
It also started a £30m cost-cutting programme and slashed its forecast for underlying trading profit in 2016 by £15m.
The company vowed to pay out the same dividend at the end of 2016 as last year, prompting questions from analysts about why it was doing this at the same time as asking investors for more cash.