Yesterday's Trading: Cobham has all guns blazing

By Geoff Foster for MailOnline
Updated: 03:16 EDT, 4 March 2008

Cobham came out of the traps with all guns blazing after investors realised it would be a major beneficiary from a mammoth £17.5bn US air tanker contract.

The Daily Mail's Geoff Foster

Shares of the former Flight Refuelling defence company shot up to 191¾p and closed 7¼p better at 189¾p following the surprise decision by the US Air Force to select Airbus over Boeing for the supply and support of 179 air-to-air replacement aircraft over 15 years.

It was reassuring news for Cobham which missed out on a £500m defence deal in the US last year. Broker Numis upgraded to add from hold and said that Cobham will supply air refuelling equipment and antennas and avionics worth around £500m.

This will rise if Airbus is successful in securing more orders. Cobham has supplied the majority of all Western refuelling systems and so is in a great position to win any follow-on US orders. Analysts expect Thursday's full-year results will also please. Barclays Wealth says Cobham is a well run company with a strong track record of growth, good margins and healthy cash conversion which has funded an active and successful acquisition programme.

Recent rumours have suggested it has come up on the radar of more than one of the defence sector giants and its independence could soon be threatened. GKN, which is the preferred partner with Airbus to buy the Filton wing structure and sub-assembly business, jumped 20p to 285p on an Evolution recommendation and target price of 400p.

The Footsie initially beat a hasty retreat following Wall Street's 315 point fall on Friday and the Nikkei's overnight collapse of 610 points on continuing fears of a US recession. Broker Credit Suisse made matters worse by forecasting further heavy writedowns at rival UBS, while billionaire investor Warren Buffett also revealed he would not now be proceeding with his £400bn bail out of struggling bond insurers.

Down 114 points before lunch, London rallied to close 65.7 points off at 5,818.6. Wall Street shed 94 at the opening but recovered more than 80 points on gossip that an emergency Federal Reserve meeting had been called to slash the discount rate again. Remember, at the beginning of the credit crisis in August, the Fed sliced the discount rate by 75 basis points in a shock move which allowed banks to liquefy discredited mortgage assets at low cost while leaving open the decision on monetary policy.

Apart from HSBC, which rose 24p to 790p following its results, banks bore the brunt of the selling. Supported of late by Lloyds TSB(9p easier at 444½p) takeover hopes, mortgage banks Alliance & Leicester lost 38p to 525½p and Bradford Bingley 20½p to 204½p. Royal Bank of Scotland cheapened 15¾p to 369¼p after Deutsche Bank cut its target price to 480p from 500p.

Talk of a pending upbeat circular helped caterer Compass Group rise 5¾p to 332¼p. Buying by half a dozen directors following Friday's fall of 118p on acutely disappointing interim profits helped courtesy car company Helphire accelerate 25¼p to 197¼p.

Engineering consultancy WSP gained 25½p to 568p following impressive annual results. It reported a 45% increase in earnings per share growth, lower-than-expected net debt of £61m and a 34% rise in its order books. Business is booming for Gas Turbine Efficiency(2½p better at 44p), which supplies high quality gas turbine cleaning systems, as airlines and electricity generators seek to lower fuel costs and pollution. GTE has won £3.15m in new orders to the aviation and industrial industries. The order book is now standing at £7m, compared with £4.2m last year. Libertas Capital says buy.

Media company Galleon edged up ¼p to 27¼p after launching a Soccer Show in China with Chelsea Football Club and Guangdong TV Sports Channel. Soccer Super Star will be broadcast to 16m households at peak time. Dog of the day was biopharmaceutical company Renovo which crashed 68p to 66p after saying its scar reduction medicine Juvista has shown positive results in Phase II trials, yet failed to show efficacy in a parallel breast augmentation trial.

Majestic Wine cheapened 1½p to 238½p on hearing that chief executive Tim How, who has been at the drinks retailer for 19 years and been responsible for the company's tremendous growth over the period, plans to retire within the next 12 months. He will be succeeded by Steve Lewis, who is Chief Operating Officer.

• Goldman Sachs chief Michael Sherwood trousered more than £40m when Sepura was floated at 145p in August. Three ex-Goldman colleagues made fortunes too. Yesterday, the maker of digital walkietalkies for the emergency services crashed 32½p to 107½p on a shock profits warning just three weeks after a trading update. It said it will miss sales and earnings forecasts due to delays in contract shipments.