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Babcock International profits less buoyant than expected

"We have sharpened our focus on our three key markets of defence, aerial emergency services and civil nuclear”
babcock
Some of Babcock's key defence contracts are coming to an end

Defence contractor Babcock International Group PLC (LON:BAB) kept annual profits afloat as revenues slipped but said it expected both measures to sink in the coming year.

Underlying revenue for the year to 31 March of £5.16bn were down 3.8% compared to the prior year amid a drop-off in payments for the Queen Elizabeth Class warships contract as it approaches completion, together with exits from small non-core businesses.

READ: Babcock forced to refute further claims from shadowy short-seller Boatman Capital

Cost reductions and the joint venture with the Royal School of Military Engineering enabled margins to be maintained and a 1.1% increase in profit before tax to £517.9mln, though it was short of the £519.1mln average analyst forecast.

Earnings per share were up 1.2% to 84p as the full year dividend was lifted 1.7% to 30p per share. Free cash flow jumped 29.4% to £323.7mln, net debt was cut 14.1% to £957.7mln and the combined order book and pipeline was flat at £31bn.

Chief executive Archie Bethel said, "we have sharpened our focus on our three key markets of defence, aerial emergency services and civil nuclear” and said the new financial year was not expected to see any reduction in the challenges faced in the wider market environment.

He guided to reduced revenue of around £4.9bn and underlying operating profit in range of £515mln-535mln.

Babcock shares were down more than 9% to 460.4p on Wednesday morning. 

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