Cobham rallies as new CEO named

Massive cuts to military budgets have inflicted serious damage on profits at Britain's big defence contractors. Most have pulled their socks up, cutting spending and putting a sensible survival strategy in place.

Chemring remains a basket case, but it's really depressing to see Cobham, one of our great engineers, go the same way. Now, top brass have had enough, deciding that Bob Murphy is no longer the man to lead a recovery.

True, Cobham shares soared to a record high under Murphy's leadership, but over the past year-and-a-bit they've also slumped to a decade low. A nasty profits warning and half-a-billion pound rights issue took the market by surprise and lost Cobham friends in the City.

Raising cash is fine when shareholders can see it makes sense and that there really is no other option. Need money for earnings enhancing acquisitions? No problem. But when they've just paid out £126 million in annual dividends and plan to spend the same again this year, questions get asked.

Perhaps Murphy thought that by keeping them divided he would also keep his job. Wrong.

Clearly, the rest of the Cobham team thought otherwise. Now, with Qinetiq's finance director David Mellors due at Cobham by the end of the year, the company has made another great hire, poaching David Lockwood from electronics firm Laird.

It's certainly a step nearer the big time for Lockwood, who'll take over by 1 January 2017, trading £800 million Laird for the £2.8 billion Cobham. He'll get a big increase in basic salary, too, up to £690,000, with bonuses on top.

If you want to know what the market thinks, just look at the company's respective share prices. Cobham rose over 5% Wednesday morning, Laird fell 7%. And I understand why, having had the pleasure of talking to David numerous times over the years.

He's highly-respected and has overseen an increase in Laird's share price of around a third since taking over four years ago, just after Murphy arrived at Cobham.

Lockwood also has previous experience in defence, having done time at both BAE Systems and Thales. He's a mathematician, too, so he'll be able to make sense of the numbers at Cobham, where first-quarter profit plunged 70% to just £15 million. The second quarter was better, and it's confident of a strong second half.

A 28% increase in like-for-like order intake during the six months to June is certainly encouraging, and Cobham has a decent spread of businesses equipped to cope with current conditions. It's an environment in which Lockwood should thrive. It's just a shame he can't arrive sooner.

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