* Cuts 2016 trading profit forecast by another 20 mln stg
* Takes big asset writedowns, contract hit
* Says balance sheet “clearly not strong enough”
* Shares plunge as much as 20 pct to 13 year low (Adds CEO, analyst comments, background, updates shares)
By Paul Sandle
LONDON, Feb 16 (Reuters) - British engineer Cobham said it would have to take drastic action to turn around its fortunes after cutting its profit forecast for the fifth time in 15 months and warning 2017 could get even worse, wiping as much as a fifth off its market value.
New Chief Executive David Lockwood said on Thursday he would set out plans on March 2 to help the company, best known for its air-to-air refueling technology, to fight back from an ill-fated acquisition, contract problems, tough markets and high debts.
“Investors are ditching the stock as it looks like the problems at Cobham go further than anyone realised,” said Neil Wilson, senior market analyst at ETX Capital.
Analysts said the company might have to seek more cash from shareholders or to convert some of its debt into equity.
At 1230 GMT Cobham shares, already down more than 50 percent in the last 12 months, were off 12.9 percent at 118 pence, having earlier hit a 13-year low of 102.5 pence.
Lockwood, who took over in December, said he had written down assets, including those acquired in the ill-fated takeover of communications equipment maker Aeroflex in 2014, by 574 million pounds, and announced a 150 million pound charge on a troubled contract with Boeing’s KC-46 tanker programme.
“I want you (...) to have realistic expectations of the journey to come back to being the company we could be,” he told investors on a conference call.
He said the company had not reached its debt limits, but was “clearly in an uncomfortable position”, with a net debt-to-earnings ratio of 3 times, compared with a 3.5 times threshold.
“The balance sheet is clearly not strong enough to properly support the operations of the group,” Lockwood said.
Cobham, which scrapped its final dividend last month, had net debt of around 1 billion pounds at the end of 2016, almost half of its current market value.
The company said it now expected 2016 trading profit of around 225 million pounds, down 20 million pounds from its previous forecast made just a month ago.
“The board considers that delivery of a similar performance to that of 2016 in 2017 may be challenging,” it added.
Cobham, Britain’s third-biggest defence and aerospace group after Rolls-Royce and BAE Systems, supplies communications equipment and high tech systems such as air-to-air refueling.
It said its saving grace was its position as a key supplier to heavyweight defence and aerospace companies.
“It is that importance to our customers which is the foundation of my confidence we can get this group back on its feet”, Lockwood said.
$1 = 0.8019 pounds Editing by Kate Holton and Mark Potter