4th Aug 2020 10:30
(Alliance News) - Shares dropped in Babcock International Group PLC on Tuesday as it gave no guidance for its current financial year and skipped its final dividend for the past year, following a weak first quarter performance as Covid-19 had a "significant impact".
Shares in the FTSE 250 aerospace and defence company were 12% lower at 253.91 pence on Tuesday in London.
For the three months to the end of June, Babcock's underlying operating profit was 40% lower year-on-year, as a result of lower levels of productivity in its core business.
This was on underlying revenue that declined by 11%. Although core business revenue increased slightly, Babcock said, there was the absence of revenue from the ended Magnox contract with the UK Nuclear Decommissioning Authority. Also hurting revenue was weakness in Babcock's Land sector, particularly in South Africa.
Order intake in the quarter was around GBP700 million, and in July the group secured around GBP500 million of new contracts in its Aviation business. As at June 30, Babcock's order book was GBP17.3 billion, with a bid pipeline at around GBP17 billion.
Looking ahead, Babcock said it is unable to give financial guidance due to uncertainty around the duration and extent of the impact of Covid-19 on productivity and pipeline development.
In addition, Babcock said has decided to not pay a financial dividend for the year ended March 31, due to the continued uncertainty.
However, the group expects to see a gradual improvement from the reduction in operating profit, and anticipates its annual results to be weighted towards the second half.
"We continue to deliver critical programmes for our customers but our financial performance is being impacted by the challenges created by Covid-19. Given the continued uncertainty over the impacts of the pandemic, we are not giving detailed financial guidance for the year at this stage," said Chair Ruth Cairnie.
"The board has decided not to pay the final dividend for the 2020 financial year in order to prioritise strengthening our balance sheet and reducing net debt. We recognise the importance of dividends to our shareholders and we will resume dividend payments at the earliest opportunity," Cairnie added.
Cairnie noted that David Lockwood will join the board on August 17 as chief executive officer designate, replacing Archie Bethel as CEO on September 14. Babcock also had announced on Friday last week that Franco Martinelli will retire once a successor is found.
By Dayo Laniyan; [email protected]
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