Babcock caught in eye of storm
Profits sink 64pc to £65m Firm writes off £120m Shares hit a seven-year low
THe boss of Babcock came out fighting as £120m of write-downs sent its profits plunging.
In a combative performance, chief executive archie Bethel insisted the troubled defence stalwart had enjoyed a ‘pretty solid’ six months.
But shares fell nearly 5pc to 566p – their lowest level for seven years – as first-half profits dived 64pc to £65.1m. The latest sell-off took investors’ losses since the summer to nearly 35pc.
The share price has more than halved since 2014, wiping around £3bn off the value of Babcock, which helped build engines for the Spitfire, services Britain’s nuclear submarines, and worked on the new Queen elizabeth aircraft carrier ( picturedabove).
The 127-year-old company has been in the spotlight since the release last month of a report by a shady, untraceable analyst writing under the name of Boatman Capital Research.
Boatman said Babcock had misled investors by burying bad news, said its leadership team was not up to the job and warned that relations with Babcock’s biggest customer, the ministry of Defence, were deteriorating.
In a staunch defence yesterday Bethel, at the helm since 2016, said: ‘We added £650m in new orders in the first six months of the year. Where is the evidence relations are strained?
‘It’s a really sad day in my opinion when a fictitious, anonymous company based in Panama can put out a report on Twitter and can immediately get the front pages of papers.
‘If another report came out tomorrow and said that Babcock is the best company in the world and the chief executive is a great guy, the media wouldn’t print it.’
Business with the moD, which it has worked with for about 100 years, made up around 40pc of Babcock’s £2.3bn worth of revenue in the first half.
It left its full- year outlook unchanged, saying it expects low single-digit revenue growth this year. The one-off charge of £120m includes £80.3m to reshape its oil and gas helicopter services business, while the rest came from disposals and the closure of its appledore shipyard in Devon. Babcock has been left with 13 helicopters that cannot service north Sea rigs after a fatal air crash in norway in 2016 put customers off using them.
It is looking to sell the aircraft or find other uses for them. The helicopters were included as part of the £1.6bn deal to buy helicopter company avincis in 2014.
Investors were also spooked by Babcock’s cut to the amount of revenue and profit it expects to bring in from a nuclear decommissioning contract.
It has taken a cautious stance on the magnox joint venture, saying it now expects a drop-off in revenue of £250m, more than the £100m it expected before.
Commenting on the share price movements, Bethel said: ‘That’s fine with us. That’s not bad.’
at the beginning of this month Babcock said it would end its lease at appledore in march.
The GmB union yesterday asked Babcock to build a new Isles of Scilly ferry at the dockyard in a bid to keep it going.
But Bethel said: ‘ We’re not interested in continuing work at appledore.’ He said that 160 of 199 staff there had been moved to its Devonport shipyard.