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(Alliance News) - Babcock International Group PLC on Wednesday reported a sharp rise in profit for the first half of its financial year, despite revenue falling on step-downs from big projects reaching the end of their tenure.
For the six months to September, the FTSE 250 aerospace and defence firm's pretax profit was GBP152.5 million, more than doubled from GBP65.1 million the year before.
However on an underlying basis the figure dropped by 18% to GBP202.5 million from GBP245.5 million.
Revenue meanwhile dropped by 2.7% to GBP2.19 billion from GBP2.25 billion the prior year, with underlying revenue also slipping by 4.7% to GBP2.46 billion from GBP2.58 billion.
The recent results were stated under accounting rule IFRS 16, which relates to the treatment of leases, while the comparison figures are pre-IFRS 16.
Babcock said that the revenue drop on a statutory basis was due to the step downs in its Queen Elizabeth Class aircraft carriers contract, as well as the impact of exits and disposals in the group's prior year.
Even on an underlying basis, revenue declined on the ending of Babcock's Magnox contract with the UK's Nuclear Decommissioning Authority, as well as a one-off benefit of GBP90 million a year before in asset sales related to the group's Fomdec contract in Aviation.
However statutory pretax profit benefited from the lack of an exceptional charge of GBP120.4 million, relating to the reshaping of its Oil & Gas business, exits and disposals, and capacity changes a year before.
Babcock International declared an interim dividend of 7.2 pence per share, up 1.4% from 7.1p the year before.
Looking ahead, Babcock said it continues to expect to report underlying operating profit for its current financial year ending March 31 in the range of GBP540 million to GBP560 million, down from GBP588.4 million the year before.
In addition, underlying revenue is expected to be around GBP4.9 billion, down 5.0% from GBP5.16 billion reported for the prior year.
"Today's results show we are doing what we said we would do. Our delivery in the first half is in line with our expectations, with good performance across most of the group. In particular, strong performance from our Marine business has offset some weakness in the Aviation sector," said Chief Executive Archie Bethel.
"If we exclude the step downs resulting from big projects like the aircraft carriers coming to an end, and from the impact of procuring planes last year for the French Fomedec contract, our underlying revenue grew by 3.6%. This momentum, combined with the second half phasing of margin and cash flow that we expect, means I am pleased to confirm that the full year guidance we gave in May remains unchanged," Bethel added.
Shares in Babcock - which is heaquartered in London - were down 2.4% at 532.00 pence on Wednesday.
By Dayo Laniyan; dayolaniyan@alliancenews.com
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