Cobham today announces that it has reached an agreement with Boeing on its damages assertions, further to the previous announcement on 26 July 2018.
Reflecting the impact of the above agreement, the Group's 2018 preliminary results will include an additional non-underlying charge of £160m. This comprises £86m relating to settlement of the above dispute and £74m relating to additional costs to complete based on this agreement.
Boeing Damages Assertions Agreement
Cobham and Boeing have signed an Agreement which:
-- Settles all disputed matters to the date of the agreement (18 February 2019);
-- Settles Boeing's damages assertions;
-- Resets the schedule for Wing Aerial Refuelling Pod (WARP) qualification and production of the WARP and the Centerline Drogue System.
Against the £86m due to Boeing in consideration of the settlement above, Cobham will offset amounts relating to Cobham's hose and drogue invoices that have been withheld by Boeing to date totalling £37m. This will result in a £49m balancing payment to be paid to Boeing during H1 2019. Boeing has ended its payment withhold against Cobham invoices.
The stringent terms of the original KC-46 contract, however, remain in place.
Costs to complete based on this Agreement
The complex WARP qualification programme remains in its early stages, and is now anticipated to complete around the middle of 2020, with associated flight test expected to commence in the first half of 2019.
The rebased schedule has led to a reassessment of the aggregate risks including supply chain, resource and concurrency ahead of final WARP certification and production. The agreed schedule is dependent on certain key third party approvals.
A non-underlying charge of £74m has been taken to reflect the best estimate of the retained KC-46 contract risks referred to above, as well as the costs of the revised schedule in the light of today's agreement. This sum is in addition to the £40m non-underlying charge announced on 26 July 2018.
The information contained within this announcement is considered to constitute inside information as stipulated under the Market Abuse Regulations (EU) No.596/2014 ("MAR"). Upon the publication of this announcement via a Regulatory Information Service, this inside information will be considered to be in the public domain.
Cobham will release its results for the year ended 31 December 2018 on 7 March 2019.
While KC-46 is part of ongoing trading, this charge is treated as exceptional as it represents a change in the estimate taken at 31 December 2016. This treatment aids traceability of amounts relating to this programme and separates it from the remaining business activities, providing increased transparency on financial and operational progress elsewhere in the business.
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