Engineering giant Babcock warned its underlying full-year profits would be at the lower-end of its previous guidance as it continues to face strong headwinds in aviation business ferrying workers to oil and gas platforms.
The aerospace and defence contractor, which last week announced that Scottish chief executive Archie Bethel is retiring, said profits would come in at around £540 million, at the foot of its previous estimates issued in November of between £560 million and £540 million. Its underlying revenue guidance remained at £4.9 billion, with its free cash flow estimate staying unchanged at more than £250 million.
The group said it would pass an exceptional charge of £85 million through its accounts to write down the value of its assets and leases, predominantly in its oil and gas business. The division carries around 260,000 workers a year to North Sea rigs and recently won a three-year contract from Serica Energy.
Babcock said: “Oil and gas continues to be a tough market. The three large providers of helicopter services who operate worldwide in oil and gas have all emerged from Chapter 11 bankruptcy protection with reduced debt and written-down assets.
“This has effectively reset global market pricing levels, forcing us to respond quickly to remain competitive. We will also exit our oil and gas businesses in Ghana and Congo.”
The company added: “Trading in our aviation business is mixed with good performances across our UK and international defence businesses offset by continued challenges in Southern Europe and in our oil and gas business. As flagged in November, there have been delays in the award of new contracts for aerial emergency services in Italy and Spain; since then, we have won or been selected as preferred bidder for contracts worth around £600 million but the delays have pushed revenue into future periods.”
