UPDATE 2-U.S. contract delays hurt Cobham, shares slump

* Still seeing delays to award of U.S. defence contracts

* Group likely to make limited underlying FY progress

* Follows warnings over delays in May and August

* Shares down 7.3 pct

(Adds analyst comment, shares, details)

By Rhys Jones

LONDON, Nov 3 (BestGrowthStock) – British aerospace electronics
group Cobham (COB.L: ) said continued delays in the award of U.S.
defence contracts would dent full-year sales and that it was
uncertain about its growth prospects for the rest of 2010.

“The group continues to experience delays and deferrals in
the award of certain U.S. defence and security contracts,” the
company said in a statement on Wednesday.

“Given the uncertainty over growth in the fourth quarter,
the board recognises that the group could make only limited
underlying progress in the full year, benefiting from cost
efficiencies already made,” it said.

Shares in Cobham, which have risen 3 percent in the last
month, were 7.3 percent down at 217.2 pence by 0840 GMT, valuing
the business at around 4 billion pounds ($6.5 billion).

The company had warned of delays in August and May but still
increased its interim dividend by 10 percent and expressed some
hope that things would pick up. [ID:nLDE6451F8][ID:nLDE6740CB]

“There’s no precise guidance but this seems like a semi
profit warning to me,” an analyst that covers Cobham but wished
to remain unidentified told Reuters.

“Roughly two thirds of Cobham’s revenues come from the U.S.
and they expected the delays to recover in the second half but
that hasn’t happened — I can see 2010 estimates being reduced.”

Cobham, whose equipment helps military vehicles and aircraft
such as the F-35 fighter plane communicate with one another,
said its aviation services division had continued to deliver
good organic growth but that the final three months of the year
would be tough for the group.

“Organic revenue in the technology divisions was slightly
down on the first nine months of 2009, and it is now unlikely
that a significant increase in organic revenue growth for the
full year will be achieved.”

Cobham said its commercial markets were stable but fragile.

“I expected a quite strong sales increase from the
commercial side but its exposure to regional and business jets
must have hit them,” the analyst said.

British aeroplane parts supplier Meggitt (MGGT.L: ) said it
expected a tough second half due to weak demand for aircraft and
a slow aftermarket, while UK aero engineer Hampson Industries’
(HAMP.L: ) order pipeline has taken longer than expected to turn
into firm orders.

Britain last month cut its defence budget by 8 percent to
help lower a huge budget deficit and said it would focus on
fighting terrorism and cyber crime, while the U.S. is also
reviewing its own defence spending policies. [ID:nLDE6720PZ]

Cobham welcomed Britain’s move to beef up its cyber security
and said its strong position in high technology defence and
security markets “reinforces the board’s confidence of
continuing progress over the medium term”.

(Editing by Paul Hoskins and Michael Shields)

($1=.6225 Pound)

UPDATE 2-U.S. contract delays hurt Cobham, shares slump