Aerospace and defence firm Babcock (BAB) fell 3.8% to 535p after downgrading its profit guidance and warning of an £85m write-off associated with its oil and gas business.
Underlying operating profit for the year through March is now expected to come in at £540m, down from previous guidance of between £540m and £560m.
The company said however that expectations for underlying earnings per share were in line with current consensus expectations. Meanwhile underlying revenues were still expected at around £4.9bn and guidance for free cash flow remained unchanged at over £250m.
RESTRUCTURING AND NON-CORE ASSET SALES
Babcock said it would restructure its aviation division and would also write down the value of oil and gas assets, exiting its businesses in Ghana and Congo.
The oil industry has been affected by volatile crude prices in recent months, while rival providers of helicopter services to the sector have recently emerged from bankruptcy leading to competitive pressures.
These will likely be challenges for a new chief executive as current incumbent Archie Bethel prepares to retire. Bethel is expected remain in place until a successor is found.
CORE BUSINESSES REMAIN ROBUST
The firm’s marine, nuclear and land divisions all continue to perform strongly, with a group order book of £18bn and a bid pipeline of £16bn.
Shore Capital analyst Robin Speakman focused on the positives. ‘Across the wider group, performance appears more robust. Marine is indicated to be performing strongly. Nuclear defence work also continues in line with expectations, whilst civil nuclear remain subdued.
‘Land operations are ‘trading well’, with strength noted in South Africa. Aviation is mixed, noting weakness in Oil & Gas, with good performances in the UK and International defence. Southern Europe Aviation has seen challenges with contract awards delays noted previously.’
