Yahoo Finance Fresh troubles for Cobham as watchdog launches inside information probe over rights issue
Troubled defence and aerospace company Cobham faces further problems with the financial regulator launching an investigation into potential insider dealing.
The Financial Conduct Authority is examining how the company handled information about last year’s £500m rights issue.
Cobham issued a regulatory statement on Monday revealing that the watchdog’s enforcement unit is looking into the fundraising, which was announced on April 26, 2016 as the business warned of a 70pc crash in profits.
The rights issue was intended to cut the company’s huge debt load that it built up after overpaying for acquisitions but proved controversial when part of the proceeds were used to pay the dividend at the struggling FTSE 250 business.
When the rights issued was announced, Cobham shares fell almost 20pc as investors abandoned the business.
Revealing the investigation on Monday, Cobham said it was “informed orally” three days before that the FCA was investigating “the company's handling of inside information prior to its trading update and announcement of its intention to undertake the 2016 Rights Issue on 26 April 2016” and was co-operating fully with the regulator.
If details of Cobham’s plans to raise money - which would adversely hit the share price - leaked out ahead of time, allowing traders to sell shares ahead of the official announcement, the company could face heavy financial penalties.
The announcement is especially embarrassing as Cobham’s management - which has changed since the rights issue - earlier this month announced that it is running another £500m rights issue to get the business back on track after issuing five profit warnings in 15 months.
Cobham’s boardroom has been shaken up since the first rights issue, with chief executive Bob Murphy bailing out last summer and being replaced by Laird’s David Lockwood. Finance chief Simon Nicholls also went, with David Mellors, his equivalent at QinetiQ, taking the job. Chairman John Devaney announced he was leaving in November, with senior independent director Michael Wareing stepping up to the job.
On March 2, Cobham reported a pre-tax loss of £847.9m, up from £39.8m last time round. On an underlying basis, pre-tax profit was £175.2m, down from £280.4m a year ago. Revenue also dipped, falling from £2.07bn last time round to £1.94bn.
The annual report last week showed that Mr Murphy will get a £1m golden parachute despite presiding over the company's downturn in fortunes. He is expected to receive a year’s salary under the terms of his contract as well as £200,000 to allow him to repatriate himself and his family to the US.
The report also showed he earned pay and benefits totalling £1.52m for 2016, although he received no bonus.
The FCA declined to comment on the ongoing investigation, saying its procedure is to conclude the probe before publishing its findings.
Shares in Cobham were off 2pc in lunchtime dealing.
