A steady stream of negative news has knocked lumps out of Babcock’s (BAB) share price in recent weeks. Now, with the half-year numbers confirming rumours of a £120m charge for restructuring (£101m net of tax) and the expected revenue impact of its Magnox nuclear decommissioning contract more than doubling to £250m, it is difficult to see how the shares can pull out of their slump.
The group’s challenges started when it cut revenue expectations in July, citing spending delays in the Ministry of Defence (MoD). However, more recently the group has been fending off attacks from multiple angles, from criticism over the closure of its Appledore shipyard to pressure on chairman Mike Turner to stand down.
These half-year results look like an attempt by management to seize the initiative, outlining actions to restructure the business and signing a partnership agreement with the MoD to allay fears of a frayed relationship between the group and its major client. The question is whether this will be enough to convince burned investors of the group’s prospects.
Analyst Peel Hunt has trimmed its forecast for adjusted pre-tax profit to £533m for March 2019, giving EPS of £85.2p (from £513m and 82.9p in FY2018).
| BABCOCK (BAB) | ||||
| ORD PRICE: | 552p | MARKET VALUE: | £2.79bn | |
| TOUCH: | 552-553p | 12-MONTH HIGH: | 868p | LOW: 521p |
| DIVIDEND YIELD: | 5.4% | PE RATIO: | 12 | |
| NET ASSET VALUE: | 565p* | NET DEBT: | 39% | |
| Half-year to 30 Sep | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 2.32 | 182 | 30.5 | 6.85 |
| 2018 | 2.25 | 65.1 | 11.5 | 7.10 |
| % change | -3 | -64 | -62 | +4 |
| Ex-div: | 06 Dec | |||
| Payment: | 16 Jan | |||
| *Includes intangible assets of £3.1bn, or 613p a share | ||||
