By Sarah Young
LONDON (Reuters) - British aerospace and defence company Cobham (L:COB) cut its profit forecast for the second time this year blaming continued weak demand for some electronics products, knocking its shares and raising questions about 2017.
Cobham is awaiting new management. After an earlier profit warning prompted an emergency rights issue, the board said chief executive Bob Murphy would be replaced. His exit will follow that of CFO Simon Nicholls, who had already resigned.
The company said on Monday that 2016 trading profit could come in as much as 12 percent lower than a previous consensus forecast, prompting analysts to question Cobham's future financial health.
Shares in Cobham fell 17 percent to 133 pence at 0914 GMT, their lowest level since June. The stock had hit an 11-year low of 126.6 pence in May, and is down 45 percent since the beginning of 2016, lagging a 3 percent rise in Britain's mid-cap index (FTMC) of which it is a component.
While new management could help improve forecasting, there were concerns about what they find when they arrive, said one analyst who declined to be named.
"The worry is that they'll be a kitchen sinking when the new management start in January time, in which case it (Cobham) could be under quite a bit of financial stress again," the analyst said.
Cobham, which made its name in the 1930s developing air-to-air refuelling techniques, raised new finance from a rights issue in June to prevent its net borrowing to core earnings coming close to a covenant level agreed with its lenders.
Any further earnings downgrades could bring it towards that level again, said analysts, but management played down that risk.
"We're in a tough spot at the moment," said CFO Nicholls. "We don't at this stage see any fundamental or medium term issues in terms of the capital structure of the group."
Cobham warned on Monday that its annual trading profit would now come in at between 255 million pounds and 275 million pounds, as much as 12 percent lower than a previous consensus forecast of 291 million pounds, and compared to the 322 million pounds it made in 2015.
Both Cobham's new CEO David Lockwood, current boss of technology company Laird (L:LRD), a company which warned on profit earlier this month, and new CFO David Mellors will join no later than Jan. 1 2017.
Cobham blamed the most recent downgrade on a range of factors -- low demand from shipping customers for its communications products and from defence customers for its electronics products, plus slower than expected progress on the Boeing (NYSE:BA) U.S. KC-46 air-to-air refuelling system on which it is working.
It is also making slower and more costly than expected improvement in its Wireless unit, which makes equipment used to maintain mobile signal in difficult environments.