Defence giant Babcock International has seen profits fall by more than £100m, blaming the coronavirus pandemic and the decline of civil aviation.
The engineering titan, which operates the huge dockyards at Rosyth and in Devonport, has seen a 9% dip in underlying revenue and a 43% drop in underlying profit for the six months to the end of September 2020.
The company, which scrapped its dividend in April and is not reinstating it due to “continued uncertainty around the impact of Covid-19”, has revealed underlying revenue fell from £2.45bn, between April and September 2019, to £2.24bn in the same months this year.
Underlying operating profit plummeted from £250.6m to £143.1m over the same half-year period.
Profits from nuclear joint-ventures fell by £12m with the rest of the businesses down 34%, mainly reflecting Covid-19 and weak trading in the civil aviation businesses, a report to investors said.
The report to the stock market explained that the Covid-19 crisis caused a “disproportionate impact” on profitability with additional costs and reduced efficiency limiting margins in many areas
Babcock said its is gradually improving efficiency month by month under Covid-19 but stressed that uncertainty remains around the impact of the pandemic in its main markets including Government and customer responses.
It did, however, reveal its order book had risen to £17.2bn, from £16.9bn at this time in 2019.
Babcock chief executive David Lockwood said: “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.”
Lockwood, who moved from defence rival Cobham to Babcock to take over from Archie Bethel this year, added: “In my first three months at Babcock I have spent time seeing many parts of the business.
“Our strengths are clear. We have many high-quality businesses, with a deep understanding of our customers, operating in markets where demand for our expertise is strong.
“At the same time, there are areas that need to be addressed if we are to achieve our full potential,” concluded Lockwood. “The most important aspect will be delivering sustainable free cash flow.
“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.”