21st Nov 2018 08:43
LONDON (Alliance News) - Shares in engineering firm Babcock International Group PLC slumped Wednesday as the firm reported a sharp fall in profit, while it also warned on the revenue impact of the ending of its Magnox joint venture.
Shares were 10% lower on Wednesday morning, at a price of 527.40 pence each, making the stock the worst performer in the FTSE 250.
For the six months to September, Babcock's pretax profit fell 64% to GBP65.1 million, though on an underlying basis the figure was 2.5% higher at GBP245.5 million.
Revenue fell 2.7% to GBP2.25 billion, with underlying revenue slipping 2.3% to GBP2.58 billion.
The Magnox contract is with the UK's Nuclear Decommissioning Authority, with Babcock cleaning up reactor sites. The ending of the contract had previously been expected to hit revenue by around GBP100 million for its next financial year, but Babcock has now guided for a GBP250 million hit.
Babcock said the contract's close will also hit underlying operating profit by around GBP20 million.
Further, in its year ending March 2021, Babcock expects a GBP100 million revenue hit, resulting in a GBP7 million knock to operating profit.
Babcock has booked GBP120 million of exceptional charges in the period, related to the re-shaping of its Oil & Gas business, exits and disposals, and capacity changes.
Babcock is paying an interim dividend of 7.10 pence per share, up from 6.85p a year prior. It has also reduced net debt by 12% to GBP1.31 billion.
By sector, Babcock Marine underlying revenue fell 6.2% at constant currency to GBP824.7 million as expected, with underlying organic operating profit down 6.0% at constant currency to GBP108.3 million.
Land underlying revenue declined 12% at constant currency to GBP798.1 million, mainly due to exits and foreign exchange, though underlying operating profit rose 16% organically at constant rates to GBP63.3 million.
Babcock's Aviation business increased underlying revenue by 24% at constant rates to GBP615.8 million, partly due to its French Air Force contract. Underlying operating profit at constant rates increased 4.5% to GBP81.6 million.
In the Cavendish Nuclear arm, underlying revenue at constant rates climbed 4.8% to GBP338.3 million, as the division performed well, and underlying operating profit was up 3.1% at constant rates to GBP29.9 million.
"We had a solid first half with underlying results in line with our expectations and we have confirmed guidance for the full year," said Chief Executive Archie Bethel.
"We are taking decisive actions to further strengthen the group which will deliver benefits next year and beyond."
"We had a solid first half with underlying results in line with our expectations and we have confirmed guidance for the full year. We are taking decisive actions to further strengthen the group which will deliver benefits next year and beyond."
Looking to its current full-year, Babcock affirmed guidance on low single-digit underlying revenue growth, as well as improved margins. Reported revenue will take an approximate GBP20 million hit from foreign exchange, as well as around GBP100 million from disposals and exits.
Related Shares:
Babcock