Babcock cautioned investors to expect multi-billion pound impairments and charges for the financial year just ended following its contract profitability and balance sheet review (CPBS).
However, management’s “aim” was to avoid an equity raise.
The defence engineer’s CPBS had flagged £1.7bn-worth of impairments and charges for the year until 31 March.
A “vast majority” of those charges would be one-off and non-cash in nature and would subtract a lower-than-expected amount of approximately £30m from the group’s underlying operating profits each year.
To take note of too, the company cautioned that its preliminary full-year numbers might be delayed due to working restraints imposed by Covid-19 and the “large number” of potential adjustments being considered.
Draft unaudited results for the past full-year showed a 3.7% drop in underlying revenues to £4.69bn with operating profits, before the CPBS impact, seen down 22.3% at £307m.
Offsetting the CPBS charges, the engineer said that it would simplify its business and “reduce layers”, which was expected to yield about £40m of cost savings annually.
Asset disposals worth at least £400bn were also on the table.
Nevertheless, management expressed caution about the 2022 financial year because it was expected to be one of “transition”.
Its aim however was to return the firm to strength without recourse to an equity issue.
As of 0813 GMT, shares of Babcock had popped 34.3% higher to 325.0p.
