After its second profit warning in six months and the prospect of an emergency rights issue, defence components specialist Cobham plunges as much as 20% before to trimming daily losses back to 18%.
Shares in the £2 billion cap stand at 176.3p after a trading update appraised the market of the fact that its 2016 profits would be £15 million below expectations due to operational issues in the wireless business; increasing headwinds in the commercial fly-in fly-out business; and cost increases on a small number of development programmes in the advanced electronics solutions sector.
Slow first quarter earnings coupled with the ongoing investment requirements in long term development programmes mean that Cobham now expects leverage could be close to the net debt to EBITDA covenant ratio of 3.5x at 30 June 2016, the next covenant testing date. To that end, the group has decided to raise sufficient new equity to reduce the net debt to EBITDA ratio to around 2x.
Undoubtedly Cobham is facing some pretty stiff challenges right now but it's worth bearing in mind that despite these trials, it remains a company of some quality and today's retrenchment will doubtless be seen as a buying opportunity for some.