Babcock shares hit by concerns on UK defence spending cuts

Oliver Gill
Follow Oliver
The RAF End Combat Operations In The Middle East After 19 years
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

Related articles