The troubled defence company Cobham sacked a director in its ailing wireless division just days before it published upbeat annual results — only revealing his departure and a £9m accounting black hole eight weeks later.
The revelation will heap more pressure on Cobham’s chief executive Bob Murphy and chairman John Devaney, with investors furious they were not told about the problems sooner.
Dorset-based Cobham, which makes probes used in the mid-air refuelling of fighter jets, last week asked shareholders for £500m to avoid it breaching debt covenants. It blamed the emergency rights issue, which sent its shares crashing 20%, on accounting irregularities in the wireless business.
Cobham said it had sacked the operations and finance directors of the division, after discovering problems with the booking of profits and revenues.
Profits in the first three months of the year had plunged 70% to £15m, it said, putting it close to breaking the terms on its debt. Analysts have been increasingly concerned about Cobham’s £1.2bn debt pile since its $1.5bn (£1bn) acquisition of the electronics and communication business Aeroflex in 2014.
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On March 3, Cobham reported growing annual profits and sales and said it was in line for a “stable” year. The results contained no mention of problems at the wireless arm, which makes mobile phone base stations and the antennae systems used in buildings such as London’s Shard. But filings at Companies House show that two directors left the division on February 29 — three days before the annual results appeared.
One of these departures is understood to be directly linked to the £9m impairment, and is one of the unnamed directors Cobham said it had sacked.
The company admitted that while it did not disclose the problems in its annual results, they were factored into the accounts. It said: “A number of operational and financial issues were identified within the wireless business when the 2015 accounts were being closed, and these were reflected in the revenue and profit figures the group reported for the year. It was felt prudent to conduct a further detailed operational review of the wireless business post publication of the 2015 results.”
The FTSE 250 company, which was founded in 1934 by aviation pioneer Sir Alan Cobham, is searching for a new finance director to replace Simon Nicholls. He is taking up the same role at building supplies company Wolseley.
The shares closed at 154p on Friday, valuing the company at £1.8bn.