Babcock musters defences as it prepares for results
Under heavy fire from investors and analysts, the UK’s second-largest defence contractor Babcock is preparing to announce its half-year results on Wednesday.
The FTSE 250 engineering firm is expected to announce an exceptional write-down of £100m, mainly related to its helicopter business.
Shares in the firm – which spans areas including marine and nuclear defence – have sunk to nearly 2011-level lows, as it deals with doubts over its strategy and the damaging effects of an excoriating report released last month.
Analysts at AJ Bell said the firm is suffering from a combination of factors, at a time when outsourcing is “under the microscope” following the collapse of Carillion, adding “little has gone right” since it dropped out of the FTSE 100 last year. Its shares have halved in value over the past four years, following a decade and a half of growth.
In a trading statement last month, Babcock forecast low single-digit underlying sales growth, and flat margins for the full year. Earlier this month, the firm announced it would close its Appledore shipyard in Devon due to a lack of business.
Babcock has been battling a rising tide of criticism, after a highly-critical note by Boatman Capital Research, an anonymous group, was released last month. Babcock finally responded to the note last week, claiming it made “false and malicious statements”.
Boatman’s findings – though largely just repeating information that had already been released – struck a chord with some investors, and analysts at the Royal Bank of Canada backed parts of the report in a note last month, downgrading its stock in the process.
With private equity giants reportedly eyeing the company, the pressure is on its chairman Mike Turner to draw a line under recent controversies and prepare Babcock for the battles ahead.