UK Engineer Babcock profits drop, but core markets resilient

Credit: REUTERS/Hannah McKay

(Adds Chair, analyst comment, context)

Aug 4 (Reuters) - Babcock International's underlying profits slumped about 40% in the first quarter as higher costs from the coronavirus downturn hurt the British engineering group's operations, while sales from its core business grew slightly.

The company, which mainly operates in the defence and civil nuclear markets, has been hit by writedowns in its oil and gas aviation unit and delays in contracts, while new safety measures to contain the virus have added to costs.

The company's shares, which have lost more than 50% in value this year, are seen opening 3%-5% lower, according to a premarket indicator.

Babcock, whose biggest customer is Britain's Ministry of Defence, also said it had cancelled the final dividend for its financial year ended March 31 after having deferred the decision earlier this year.

Chairwoman Ruth Cairnie said dividends would be reinstated as soon as possible.

Jefferies analysts, while cutting their price target by 90 pence on the company, said Babcock's 11% drop in organic growth was in line with its forecast, but the hit to profit was "more substantial". (Reporting by Pushkala Aripaka in Bengaluru; editing by Patrick Graham and Saumyadeb Chakrabarty) ((; Twitter: @pullthekart; within UK: +44 20 7542 1810, outside UK: +91 80 6182 2600; Mobile: +91 852 751 3793 ;)) Keywords: BABCOCK INTL OUTLOOK/ (UPDATE 1)

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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