THE Dorset aerospace giant Cobham saw its share price plunge yesterday after it announced an emergency rights issue amid falling profits.

The Wimborne-headquartered firm saw trading profit in the first quarter of this year drop to £15million from £50m last year.

It has announced a £500m rights issue in order to reduce its debt-to-earnings ratio.

It said it was announcing “decisive action to reduce the group’s indebtedness”.

Cobham said the reasons for a “slow start to the year” included “operational issues” in its wireless business.

The wireless business was formed out of its acquisition of the New York-based Aeroflex Holding Corp, whose acquisition in 2014 was the biggest deal in Cobham’s history.

The “issues” in its wireless business had resulted in delayed shipments and a one-off charge of £9m.

Other reasons for the profit fall included “increasing headwinds” in the commercial fly-out sector, with oil and gas customers in Australia slowing down their activity. There had also been cost increases on a small number of development programmes in Cobham’s advanced electronic solutions sector.

It said it expected underlying trading profit to be around £15m below its previous expectations for the full year.

Despite the slowdown, Cobham said the rights issue would strengthen its balance sheet and allow it to pay a total dividend the same as in 2015.

It said it would be reviewing costs with a target of saving a net £10m this year through a mix of restructuring, manufacturing outsourcing and cuts to overheads.

Cobham’s share price fell by more than 17 per cent yesterday to 177.6p.

Chief executive Bob Murphy said: “In order to put the company on a sound footing and to secure funding for our major development programmes in the longer term, we have decided to refinance the business through a rights issue to raise approximately £500m.

“Profit in the first quarter of 2016 was behind our expectations due to delayed shipments and operational headwinds and contributed to an increase in the next debt to EBITDA (earnings before interest, taxes, depreciation and amortization) ratio.

“For the full year, the scale of the order book and the impact of the cost reduction programme which we are currently implementing, will mean that the profit shortfall is expected to be limited to about £15m.

“We remain confident that continued investment in technology and know-how will enable us to maintain our leading positions in markets with good prospects, leaving Cobham well placed to deliver growth over the medium term.”

Cobham announced in 2014 that it was buying Aeroflex Holding Corp, based in Plainview, New York, for £1.46bn US dollars in the largest deal in its history.

Aeroflex’s microelectronic components and test measurement equipment were used in the wheels, antenna and robotic arm joints of Nasa’s Mars rover, Curiosity.