Babcock swings to loss, defers dividend on Covid-19 worries

Defence company Babcock swung to a full year loss and deferred a decision on a final dividend due to the Covid-19 pandemic as it took a hit of £503m in exceptional charges and pulled 2021 guidance.

The company on Thursday reported pre-tax losses of £178.2m compared with a profit of £235.2m on-year. Revenue fell to £4.45bn from £4.47bn on-year.

Exceptional charges of £503m included aviation goodwill impairment of £395m, other aviation charges of £143m (including oil and gas write downs, an Italy anti-trust fine and a sector restructure).

“Given the level of uncertainty we are not providing financial guidance for the year ahead. Work on critical, non-discretionary long term contracts (around 80% of group revenue) continues,” Babcock said.

“Work across our short cycle businesses (around 20% of group revenue) will be more heavily impacted due to lower demand levels. Sector margins will be impacted by lower demand and productivity levels.”

“The outlook for our civil nuclear business is tougher as a slowing UK market combined with the impacts of Covid-19 are expected to impact revenue. Year on year comparison will also be impacted by the completion of our Magnox contract in the year ended 31 March 2020.”