Babcock shares plunged almost 20 per cent this morning after announcing a review into the profitability of its contracts.
The company, whose biggest customer is the Ministry of Defence, also saw operating profits slump to £202m from £320m the previous year.
The review, supported by an independent accounting firm, will have the results audited by PwC.
Babcock said the review’s results could have rippling financial effects on future years.
Despite a profits decline, the company has completed nearly £1b worth of its orderbook since March.
Babcock said: “Trading in the third quarter saw a continuation of trends in the first half of the year, with weakness in our civil aviation businesses and a negative impact from COVID-19.”
Analysts at JP Morgan said that the first quarter of 2021 looked “challenging” as the impacts of Covid-19’s latest wave have a larger impact than originally thought.
Shares in the FTSE-listed engineer have recovered slightly but are still down more than 16 per cent to 220p.