Babcock hit by £2bn impairment charge, losses widen

Babcock said on Friday that full-year losses widened after a review of its contracts and balance sheet led to a hefty impairment charge, sending shares in the defence company tumbling.

In the year to the end of March 2021, operating losses widened to £1.6bn from £75.6m the year before as it took a £2bn impairment charge. Meanwhile, revenue during the year fell to £4.1bn from £4.4bn in 2020.

Babcock said the Covid-19 pandemic had a material impact in the year and continues to cause uncertainty across its markets. It said the impacts were most severe for its non-defence businesses - e.g. civil aviation and civil training - where activity in some cases stopped.

The defence businesses saw some interruption and increased costs initially. As a result, most defence programmes and sites were reopened, albeit with social distancing restrictions and higher levels of employees working from home. "This led to less efficient delivery, hence profitability was affected proportionately more than revenue," it said.

Chief executive officer David Lockwood said: "We have now completed the series of reviews announced in January. These have reinforced our confidence in the underlying strength of the Babcock business and at the same time helped identify the necessary strategic changes to improve our performance. We have a plan in place to strengthen the group without the need for an equity issue.

"The full year 2021 performance reflects both the new financial baseline for the business and the impact of Covid-19 on our operations and markets."

Babcock said that going forward, it will focus on being an international aerospace, defence and security company.

At 0830 BST, the shares were down 9.2% at 276.80p.