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(Alliance News) - Babcock International Group PLC on Wednesday reported a sharp drop in interim profit, driven by disposals, but boasted of a "resilient" revenue performance.
Shares in the London-headquartered aerospace and defence contractor were down 5.3% in London on Wednesday morning at 336.20 pence each.
In the six months to September 30, Babcock recorded pretax profit of GBP55.3 million, down sharply from the GBP152.5 million reported the year before.
"I have been enormously impressed by the way in which our people have adapted to the Covid-19 pandemic and continued to prioritise meeting the needs of our customers. Nevertheless, while demand for our critical services has remained resilient overall, the additional costs incurred and inefficiencies created have impacted our profitability. Our operating profit performance in the first half reflects this Covid-19 impact as well as disposals, the impact of government insourcing of Magnox and Dounreay, and weak trading in civil aviation," Chief Executive David Lockwood said.
Underlying operating profit dropped to GBP143.1 million from GBP250.6 million a year prior.
The company said additional costs and inefficiencies, particularly due to restricted access to customer sites and limits on close proximity working hurt operating profit.
It continued: "These restrictions led to slower progress and impacted our ability to earn margin on some long term contracts. This situation has slowly improved over the year but continued progress is dependent on the extent of the pandemic across the countries we operate in."
Revenue slipped 3.7% year on year to GBP2.11 billion from GBP2.19 billion. Babcock's order book at the end of September stood at GBP17.2 billion, up from GBP16.9 billion at the same point the year before.
"In our defence businesses, work has continued on key programmes and in many areas where activity has been impacted, the customer has maintained capability. Some parts of our business, however, have seen a significant reduction in activity including much of the civil work in our Land sector," Babcock said.
Underlying revenue slipped 8.9% to GBP2.24 billion, which Babcock said demonstrated its "resilience" and proves demand for most of its products and services has remained high throughout the pandemic.
Babcock did not declare an interim dividend compared to the 7.2 pence distributed the year before.
CEO Lockwood added: "In the coming months, we will be reviewing our strategic priorities, execution and delivery. I look forward to reporting back on this in May. In the meantime, we remain focused on delivering for our customers, employees and shareholders and continue to look to the future with confidence."
By Paul McGowan; paulmcgowan@alliancenews.com
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