Cobham trading update

Practical discussions about equity High-Yield Portfolios (HYP) for income
Davidsb
Posts: 10
Joined: November 17th, 2016, 5:51 pm

Cobham trading update

Postby Davidsb » January 11th, 2017, 10:34 am

http://www.investegate.co.uk/cobham-plc ... LC%20Alert

"Highlights"....

2016 Trading update

Group trading profit1 in the unaudited draft management accounts for the year ended 31 December 2016 is £245m, below the range of £255m to £275m set out in the Trading Update of 24 October 2016. The detailed year end close and audit is ongoing but is not expected to result in an increased trading profit. The new management team is commencing a thorough closing balance sheet review, including major contracts and asset carrying values. The trading profit disclosed above is before any adjustments that may arise from this review and, in particular, there is significant uncertainty surrounding the outcome of the KC-46 tanker programme. Cobham remains in discussions with its customer on the commercial terms for the complex conformity and qualification phases of this contract, which are taking place concurrently with the early phase of production.

Financial position and dividend

The Group's draft managements accounts indicate net debt at 31 December 2016 of £1.03bn (2015: £1.21bn) at the closing rate of $1.24/£, which is again before detailed year-end close reviews and unaudited.

In the light of the disappointing trading and higher than expected net debt, the Board will not be recommending a final dividend payment in respect of financial year 2016. The dividend policy for 2017 and beyond will be set out following a full review of the Group's financial situation.


Although I am a conviction non-tinkerer, I am slowly coming to the conclusion that if a company in my portfolio replaces its Chairman, CEO and CFO within a short period of time (say three months or so), then this is a sign that the new team will (a) slash/cancel the dividend, and (b) institute a balance sheet review, inevitably leading to everything in sight being written down to its lowest possible value, with all blame being allocated to the recently-departed previous incumbents.

Dod1010
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Joined: November 4th, 2016, 10:18 am

Re: Cobham trading update

Postby Dod1010 » January 11th, 2017, 11:54 am

I sold in November at £1.60 on just these fears. No dividend and what is the betting on a write down of assets and another rights issue?

At least they still have a sense of irony. Their strapline; 'The most important thing we build is trust'

Dod

monabri
Posts: 47
Joined: January 7th, 2017, 9:56 am

Re: Cobham trading update

Postby monabri » January 11th, 2017, 12:13 pm

There is a TMF review today

http://www.fool.co.uk/investing/2017/01 ... t-warning/


Having worked in the Defence industry, the work is cyclical and COB seem to be on a downward progression (IMHO) - there seems to be "issues" and the new management team will be focussed on sorting these issues out.

I tend to agree that the new boys will cut divvis - hence this is no good for a HYPer.

I think I would be tempted to get out now too ! ( I have no shares in COB). Perhaps put the net funds into one of the old favourites or hold on to the cash.

Bouleversee
Posts: 43
Joined: November 8th, 2016, 5:01 pm

Re: Cobham trading update

Postby Bouleversee » January 11th, 2017, 12:39 pm

A bit late for selling, isn't it? Down l6.71% in this morning's bulletin. I have been/still am preoccupied with other matters so not kept track of share movements for quite a while so still hold. I suppose they'll get taken over for peanuts now.

monabri
Posts: 47
Joined: January 7th, 2017, 9:56 am

Re: Cobham trading update

Postby monabri » January 11th, 2017, 1:02 pm

I was thinking about buying in but then i saw that the divvi had been scrapped.

http://www.digitallook.com/news/news-an ... 37442.html

Darka
Posts: 12
Joined: November 4th, 2016, 2:18 pm

Re: Cobham trading update

Postby Darka » January 11th, 2017, 1:19 pm

I hold and although disappointed, will not rush to sell today as that would just maximise the loss.

What I have done though is put an entry in my calendar for two months time to have another look to then decide what to do.

I'm reluctant to sell to be honest (even though I should have done months ago), as one of my goals for this year was to avoid any sales...

88V8
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Posts: 169
Joined: November 4th, 2016, 11:22 am

Re: Cobham trading update

Postby 88V8 » January 12th, 2017, 10:21 am

According to UK Dividend Champions, Cobham had not cut the div for 28 years.
On the strength of this, I bought them last year.
But the cover was not there.
Silly me.

The past is important.
But so is cover.

If and when the capital recovers, I shall ditch them.
In the meantime, hehyo.

V8

Dod1010
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Posts: 242
Joined: November 4th, 2016, 10:18 am

Re: Cobham trading update

Postby Dod1010 » January 12th, 2017, 10:56 am

To all those who are still holders, do not rely on strategic ignorance. That is about the most dangerous concept promoted by pyad. Look around you, think, and decide what you think the future holds. At least in the short term (the next year or two) Cobham will not be good news.

staffordian
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Posts: 229
Joined: November 4th, 2016, 4:20 pm

Re: Cobham trading update

Postby staffordian » January 12th, 2017, 11:43 am

Dod1010 wrote:To all those who are still holders, do not rely on strategic ignorance. That is about the most dangerous concept promoted by pyad. Look around you, think, and decide what you think the future holds. At least in the short term (the next year or two) Cobham will not be good news.


Not taking account of dividend cover doesn't, in my opinion, come under Pyad's strategic ignorance mantra.

My take on his SI is that it relates more to future macro events, or even future company-specific events, rather than hard facts which are already in the public domain.

There are now plenty of reasons not to consider Cobham an HYP candidate, and there may well have been valid reasons a while ago (I'm not a holder nor have I looked into Cobham as I hold BAe in that sector) but IMHO the sector still holds some promise given the increased world tensions, so to argue that the future isn't good for Cobham on a strategic front sounds a little tenuous to me.

To argue that it is not good on company specific grounds though, is a totally different matter.

And if I were a holder, tempted to sell, I would be very likely to hold a little longer as bad news usually leads to an exaggerated fall, followed by a degree of recovery, as Terry often mentions.

Staffordian

Dod1010
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Joined: November 4th, 2016, 10:18 am

Re: Cobham trading update

Postby Dod1010 » January 12th, 2017, 12:20 pm

Agreed on all counts Staffordian. Sometimes SI can affect a sector (such as the supermarkets in 2014) and sometimes specific companies (Cobham at the time of its rights issue) As I said at that time it seemed to be a problem of its own making and I thought that the Rights Issue would have set it on the right path again but it became increasingly obvious that that was not the case.

Followers of SI would have ignored both the supermarket general problem and the specific Cobham problem. That is the thing I am criticising/commenting on.

Dod

staffordian
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Posts: 229
Joined: November 4th, 2016, 4:20 pm

Re: Cobham trading update

Postby staffordian » January 12th, 2017, 12:46 pm

Good points Dod, and I certainly share your concerns about supermarkets, none of which I hold, and retail in general.

I only hold a "half portion" of Card Factory and I don't see any retail candidates as buys for the foreseeable.

Staffordian

bluedonkey
Posts: 9
Joined: November 13th, 2016, 3:41 pm

Re: Cobham trading update

Postby bluedonkey » January 12th, 2017, 1:17 pm

So if we put SI to one side, what conclusion do we then reach about the Cobham share price over say the next 12-24 months?

Dod1010
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Re: Cobham trading update

Postby Dod1010 » January 12th, 2017, 5:35 pm

bluedonkey wrote:So if we put SI to one side, what conclusion do we then reach about the Cobham share price over say the next 12-24 months?


Since this is the HYP practical Board I would suggest that is off topic but I would not hold your breath as far as income is concerned.

Dod

Davidsb
Posts: 10
Joined: November 17th, 2016, 5:51 pm

Re: Cobham trading update

Postby Davidsb » January 12th, 2017, 6:16 pm

Assuming that my patented "Three new executive post holders" theorem holds good, the new guys will want to create as large a slush fund as possible whilst still maintaining credibility. They will get one stab at this in the 31/12/16 year-end results, with a possible second (smaller) slice at the 2017 interims. After that, blaming the previous incumbents gets too difficult......

The company showed £1.7bn or so of intangible assets in the 2016 interims, so I suspect that around £500m or so of provisions will come off that figure in the prelims. The trading update gave a forecast profit of c£245m, from which we should deduct (say) £50m of financing cost - so a loss after writedowns of around £300m for 2016. This may be optimistic if the team decide to go for a big one-time hit, involving plant, stock and debtor writedowns as well.

Assuming c£200m per year of pre-tax profits for 2017 and 2018, I would expect to see no dividend in 2017, and just a token final dividend in 2018. This of course assumes that the company is not hit by external forces, in which case all bets are off.....

Gengulphus
Lemon Slice
Posts: 415
Joined: November 4th, 2016, 1:17 am

Re: Cobham trading update

Postby Gengulphus » January 12th, 2017, 9:18 pm

Dod1010 wrote:Followers of SI would have ignored both the supermarket general problem and the specific Cobham problem. That is the thing I am criticising/commenting on.

Why would followers of SI have ignored the specific Cobham problem, namely its poor dividend cover?

Before criticising/commenting on something, it's a good idea to establish that it is actually the case! And merely saying that it is doesn't make it so...

Gengulphus

Dod1010
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Re: Cobham trading update

Postby Dod1010 » January 12th, 2017, 9:56 pm

I suspect that davidsb is pretty much on the button.

Dod

77ss
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Joined: November 4th, 2016, 10:42 am

Re: Cobham trading update

Postby 77ss » January 12th, 2017, 11:56 pm

Darka wrote:I'm reluctant to sell to be honest (even though I should have done months ago), as one of my goals for this year was to avoid any sales...


No disrespect intended, but is this a reasonable goal to set yourself?

Surely you can never know in advance what is going to happen to the shares you hold. Does not setting such a goal inhibit you from making a sensible sell decision?

Gengulphus
Lemon Slice
Posts: 415
Joined: November 4th, 2016, 1:17 am

Re: Cobham trading update

Postby Gengulphus » January 13th, 2017, 2:25 am

Dod1010 wrote:I suspect that davidsb is pretty much on the button.

Followers of SI can suspect exactly the same thing without any conflict with their belief in SI.

Gengulphus

jackdaww
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Posts: 210
Joined: November 4th, 2016, 11:53 am

Re: Cobham trading update

Postby jackdaww » January 13th, 2017, 9:01 am

Dod1010 wrote:To all those who are still holders, do not rely on strategic ignorance. That is about the most dangerous concept promoted by pyad. Look around you, think, and decide what you think the future holds. At least in the short term (the next year or two) Cobham will not be good news.


=======================

i sold mine over a year ago at 280.

i would probably continue to hold now had i kept them , and will consider buying now as a speculative turnaround story .

:idea:

Dod1010
2 Lemon pips
Posts: 242
Joined: November 4th, 2016, 10:18 am

Re: Cobham trading update

Postby Dod1010 » January 13th, 2017, 9:15 am

Well done Jackdaww. lend me your crystal ball some time will you?

Dod


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