Babcock lowers profit guidance

By James Pugh | Business | Published:

Engineering contractor Babcock has lowered its guidance for profit for the year, in the company’s first update since chief executive Archie Bethel said he would step down.

The group estimated operating profit of £540 million, at the lowest end of its previous guidance of £540 million to 560 million for the coming financial year.

Its forecasts for revenue and cash flow remained in line with November’s guidance, at £4.9 billion and £250 million respectively.

Babcock has a strong presence in the region, including the Defence Support Group operation at MoD Donnington, in Telford, and the former Macneillie specialist vehicle conversions business at Aldridge, now renamed Babcock Vehicle Engineering.

The company added that it would also incur a one-off £85 million writedown on assets in its oil and gas business as the defence giant prepares to exit its operations in Ghana and Congo.

The reduced guidance was put down to challenges to the firm’s aviation business, especially in southern Europe.

Although the company has been selected as the preferred bidder for a number of aerial emergency services contracts worth £600 million, delays have meant this revenue has not yet been forthcoming.

However, it said that its marine division, of which Mr Bethel was head before taking on the top job, continued to “exceed expectations”, with strong revenue growth driven by warship support activity in the US and Australia.

Last year Babcock broke BAE Systems’s stranglehold on UK naval shipbuilding when it won the £1.3 billion contract to build the new type 31 frigate.

The firm’s order book and pipeline remains at a record level at £34 billion.

"In response to current trading in aviation, we are implementing improvement and restructuring programmes to ensure we remain on track to deliver for the medium term. We will also write down assets and leases in our oil and gas business," Babcock said.

James Pugh

By James Pugh

Shropshire Star Business and Farming Editor.

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