Delayed results from specialist engineering services play Babcock (BAB) weren't worth the wait for investors as £2 billion worth of impairments saw the stock sink 11.2%.
For year ended 31 March, pre-tax losses widened to £1.72 billion from £88.9 million year-on-year as revenue fell 3% to £4.18 billion.
Total impairments and charges of £2 billion made this a messy set of numbers as the company looked to leave behind its historic issues with unprofitable contracts and accounting issues.
‘Following extensive reviews, we now have a turnaround plan to restore Babcock to strength without the need for new equity,’ the company said.
TURNAROUND PLAN
As part of its plan, Babcock said it would focus on being an international aerospace, defence and security company. The plan would also aim to deliver annualised savings of about £40 million.
Looking ahead, the company said that while fiscal 2022 will benefit from operating model savings, it will be a year of transition.
‘The impact of Covid-19 on performance in FY22 is uncertain. While activity levels have broadly recovered, the additional costs from operating in a Covid-secure way remain,’ the company said.
Shore Capital analyst Robin Speakman commented: ‘There is much to digest in this morning’s report and we will spend the next few days interrogating the numbers to update our forecast stance and valuation thoughts.
‘Babcock serves ‘essential services’ markets with marine, aviation and defence at its core; at a fundamental level, these are all growing in scope and sophistication, driving forward a long-term opportunity. This should underpin solid prospects, in our view.’
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