Babcock shares hit by concerns on UK defence spending cuts

 
Oliver Gill
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Babcock shares have fallen by 20 per cent over the last six months (Source: Getty)

Babcock investors scurried for cover today as the engineering outsourcer warned UK defence spending reviews could hit revenue growth.

Three-quarters of Babcock’s revenue comes from Britain and shares have fallen 20 per cent over the last six months. Yesterday, they fell over five per cent, despite Babcock reporting first-half earnings that were in line with expectations.

Underlying pre-tax profit rose 4.9 per cent to £239.5m in the six months to the end of September. Revenue was 5.9 per cent higher at £2.64bn.

Peel Hunt analyst Christopher Bamberry said the recent share price dip reflected “investor concerns regarding pressures on the funding of UK defence programmes [and] the issues at other companies in the outsourcing sub-sector”.

He also said Brexit-fuelled political uncertainty was weighing on the firm's shares.

Read more: Babcock seals the deal for £160m worth of contracts with the RAF

Babcock boss Archie Bethel said: “The increasing number and value of our opportunities both in the UK and internationally, where we continue to gain traction, highlights Babcock’s long-proven ability to grow despite uncertain market conditions.

"Our focus on technology-intensive critical services where barriers to entry are high has consistently enabled us to generate sustainable growth regardless of any decline in spending on original equipment. I expect this to remain a key element of differentiation for Babcock in the coming months and years."

Read more: Seneca backs Babcock and bucks the support services exodus

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