Revenue And Profits Fall For Defence Giant Babcock

Babcock collaborated on building the HMS Queen Elizabeth aircraft carrier (Picture: MOD).

Britain’s second largest defence contractor has revealed a 64% plunge in profits in the first half of the year.

Engineering group Babcock International’s profits were pushed lower by a £120 million charge related to the restructuring of its oil and gas business and costs after its decision to sell the historic Appledore shipyard in Devon.

The figure covers the six months to the end of September.

Revenue was also down by 2.7 % to £2.25 billion.

Profits were pushed lower after it took a one-off £120 million charge to reshape its business related to a restructuring of its oil and gas structures, as well as offloading certain assets including its Appledore shipyard.

The defence contractor's biggest customer is the Ministry of Defence (MOD).

An MOD spokesperson said: “We are committed to working closely with Babcock, to safely deliver submarine support work, including planned maintenance projects.

"As with other complex projects, it is normal practice to work closely with the company to support programme delivery.”

On an underlying basis, Babcock posted a 2.5% rise in pre-tax profits to £245.5 million.

Shares fell 9% in early session trading. Chief executive Archie Bethel said:

"We are taking decisive actions to further strengthen the group, which will deliver benefits next year and beyond."

Editor of the Defence Analysis newsletter, Francis Tusa, says despite the fall in profits, Babcock is still "stable":

"The underlying figures are still stable - at the end of the day - if your contract is to support nuclear submarines, literally, out 50, 60 years...you have got a cash flow second to none," he said.

Meanwhile, unions are stepping up a campaign to save the historic Appledore shipyard from closure by calling for a new ferry to be built there.

Babcock announced earlier this month that it would close the shipyard in Devon after failing to secure more work and despite being offered a £60m package by the Defence Secretary Gavin Williamson.

The GMB union says it could be saved if it was awarded a contract to build a ferry for the Isles of Scilly. The yard is set to close next year.

The union says future work building new frigates and support ships for the Royal Navy could be awarded to Appledore.