Defence contractor Cobham reinstates dividend as recovery from 2017 rights issue continues

Engineering firm Cobham has announced plans to reinstate a progressive dividend after it shored up its balance sheet and settled a dispute with aerospace giant Boeing.

The FTSE 250 defence and engineering group forecast more progress in 2019, expecting strong demand for its products in markets such as the US, but tightening budgets would place the emphasis on value for money.

Despite this, shares fell two per cent on Thursday morning.

Read more: Former Cobham boss heads across Atlantic with £1m payoff

The figures

Profit before tax was £71m for the year ending 31 December, a slight rise on £69.7m in 2017, while revenue fell two per cent to £1.86bn.

The firm turned around £383.5m net debt in 2017, finishing 2018 with a net cash position of £10.3m, while earnings per share were 3.1p, down from 3.7p.

Why it’s interesting

Britain’s third biggest defence contractor behind BAE Systems and Babcock has had a torrid time in recent years after a string of profit warnings forced it into a rights issue in 2017.

Last year, its recovery was interrupted by a dispute with Boeing over a refuelling programme delay, which took until last month to settle, costing Cobham £160m.

Cobham is known for its air-to-air refuelling technology.

Read more: Here's how City analysts reacted to Cobham's new £500m rights issue

“Five profit warnings, a cancelled dividend and two rights issues mean the last few years have been hard on shareholders in Cobham but the decision by the aviation and defence electronics expert’s board to start paying a dividend again in 2019 might suggest that they think better times lie ahead,” said Russ Mould, investment director at AJ Bell.

What Cobham said

“We continue to believe that there are considerable opportunities to improve the performance of the group over the medium term and our continuing focus on customers, culture, operational improvement, business simplification and cash will allow us to realise this potential,” chief executive David Lockwood said.