Babcock H1 profits up but warns on Omicron, inflation, supply chain pressure

UK defence engineering firm Babcock reported a rise in underlying interim profit, but expressed caution over the Omicron coronavirus variant and ongoing inflation and supply chain constraints.

Underlying pre-tax profit for the six months to September 30 came in at £98.7m compared with £58.2m a year ago. Revenue rose to £2.2bn from £2.05bn.

Operating profits recovered to £75.4m, after a massive £758.3m loss last year.

“While we have seen a recovery of activity from the heavily COVID-19 impacted prior period, and we have largely been able to recover extra costs, we are cautious about our ability to maintain activity levels and recover all costs in the remainder of this financial year given the uncertainty from new Covid-19 variants and varied government responses,” the company said.

“Some external uncertainty remains for the second half of the year as we manage inflation and supply chain pressures.”

Babcock's half-year performance was driven by its £400m disposals plan, which saw it offload the Frazer-Nash consultancy for £290m, AirTanker holdings for £95m, and its oil and gas aviation business for £10m.

The company's contract backlog increased to £10.9bn from £9.4bn.