Shares in defence contractor Babcock dropped this morning as it admitted it will take a £10m Brexit hit, because of restructuring its aerial firefighting businesses to meet European operating requirements.
The Ministry of Defence’s (MoD) second-biggest supplier said while the initial blow would be from tax, it will also cost an extra £10m a year to operate the newly structured division.
Babcock provides “water-bomber” amphibious firefighting aircraft for several governments across Europe, and it won the first such contract in Canada late last year for £100m over the next decade.
In a trading update, the firm said it was also bracing for a second financial hit of £30m relating to the adjustment of pension liabilities to equalise men’s and women’s guaranteed minimum pension benefits.
The firm projected its underlying revenue for the year would be around £5.2bn, down three per cent from £5.4bn last year. The drop, it said, is because of nearing completion on several major contracts such as building the HMS Queen Elizabeth aircraft carrier (QEC), and its South African business being struck by delayed power station outages.
Chief executive Archie Bethel said: “Whilst preparing for the UK exiting the EU and for our QEC…contracts coming to an end, we continue to grow our business across our three key markets of defence, aerial emergency services and nuclear.”
It said underlying earnings were unchanged and its order book stands at around £18bn worth of orders.
Shares dropped 5.3 per cent in early trading, before recovering to around 3.8 per cent down.