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(Alliance News) - Defence contractor Babcock International Group said Tuesday it will not pay a dividend for financial 2021 or 2022 - but nor will it come to the market for more money - as it embarks on a thorough restructuring of the business.
Babcock said its financial 2021 results will include GBP1.7 billion in impairments and charges following a contract profitability and balance sheet review.
The company said it conducted the review as it moves to simplify the business and reduce layers in a restructuring.
"This review is looking at a sample of approximately 100 contracts, representing around GBP2.6 billion of revenue each year across all four sectors. The selected contracts received differing levels of review depending on their perceived risk. We have also performed a review of the balance sheet covering all of the balance sheet captions. Again, these reviews were performed on a risk basis across all four sectors," the company said.
Babcock expects financial 2021 underlying revenue of GBP4.69 billion, down from GBP4.87 billion in financial 2020 and underlying operating profit of GBP307 million, down from GBP524 million.
Babcock said that, as part of its focus on building a strong balance sheet, the board will not be recommending a dividend for financial 2021 or 2022.
The company added that the aims to "return Babcock to strength without the need for an equity issue".
Among actions it intends to take instead, Babcock said it expects to raise GBP400 million from disposals over the next 12 months. Additionally, its restructuring plan is expected to save GBP40 million per year from a one-off expense of GBP40 million.
"We have confidence that the markets we address and our capabilities to address those markets will be favourable in the medium term. However, we will be revising our forecasts for profitability for future periods as we continue to assess the business. We are cautious about progress in 2022 profitability as it will be a year of transition and also given the ongoing uncertainty of when COVID-19 restrictions will be lifted in our markets," Babcock said.
Added Chief Executive Officer David Lockwood: "Through self-help actions, we aim to return Babcock to strength without the need for an equity issue. We are creating a more effective and efficient company through our new operating model and, in line with our new strategic direction, will rationalise the group's portfolio to help strengthen our balance sheet."
Babcock shares were up 15% early Tuesday.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: down 0.2% at 6,877.55
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Hang Seng: up 0.2% at 28,506.19
Nikkei 225: closed up 0.7% at 29,751.61
DJIA: closed down 55.20 points, or 0.2%, at 33,745.40
S&P 500: closed marginally lower at 4,127.99
Nasdaq Composite: closed down 0.4% at 13,850.00
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EUR: down at USD1.1895 (USD1.1911)
GBP: firm at USD1.3751 (USD1.3746)
USD: up at JPY109.60 (JPY109.40)
Gold: down at USD1,725.75 per ounce (USD1,734.45)
Oil (Brent): unchanged at USD63.58 a barrel
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Tuesday's Key Economic Events still to come
1230 BST UK NIESR monthly GDP tracker
1100 CEST Germany ZEW indicator of economic sentiment
0830 EDT US CPI
1630 EDT US API weekly statistical bulletin
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The UK economy registered growth in February as the country adapted to life in lockdown conditions, according to the latest figures from the Office for National Statistics. The UK economy grew 0.4% month-on-month in February, rebounding from 2.2% contraction in January, as UK government restrictions affecting economic activity remained broadly unchanged. The latest reading missed the the market forecast, cited by FXStreet, for 0.6% growth. UK gross domestic product shrank 1.6% sequentially in the three months to February, following 1.4% contraction in the three months to January. Separately, the ONS said UK industrial production fell 3.5% year-on-year in February, slowing from a decline of 4.3% in in January.
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China's imports and exports boomed again in March, reaffirming the recovery in the world's number-two economy continues apace and demand picks up in key overseas markets as they emerge from last year's health crisis. Imports soared a forecast-busting 38% on-year as the country's army of consumers increasingly return to some form of normality. The figure was a huge increase from the 22% rise seen in January and February and is the biggest hike since February 2017. Exports rose 31%, well off the 38% increase tipped in a Bloomberg forecast but still among the highest readings since early 2018. Overseas shipments jumped more than 60% in January-February.
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BROKER RATING CHANGES
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BERENBERG RAISES SOFTCAT PRICE TARGET TO 1750 (1200) PENCE - 'HOLD'
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INVESTEC RAISES AVIVA TO 'BUY' ('ADD') - TARGET 460 (360) PENCE
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LIBERUM CUTS EASYJET TO 'HOLD' (BUY) - PRICE TARGET 1,000 PENCE
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COMPANIES - FTSE 100
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JD Sports Fashion said it delivered a resilient performance despite its high-street stores being closed for a majority of the year under lockdown restrictions. For the financial year ended January 30, revenue was GBP6.17 billion, up 0.9% from GBP6.11 billion in financial 2020. JD posted pretax profit of GBP324.0 million, down 7.0% from GBP348.5 million. On a headline basis, meaning before exceptional items, pretax profit was GBP421.3 million, down 4.0% from GBP438.8 million the year before. In January, JD Sports had said it expected to report headline pretax profit of at least GBP400 million. It declared a final and full-year dividend of 1.44 pence, up from 0.28p. JD said the annual performance demonstrated the significant retention of sales and profitability through a period of global uncertainty and multiple periods of temporary store closures reflects brought about by the Covid-19 pandemic. The international business did well, particularly in the US. During the year it launched its first flagship store for JD in Times Square, New York with a "positive reaction from customers and international brand partners". Looking ahead, JD said it expects headline pretax profit for financial 2022 to be in the range of GBP475 million to GBP500 million.
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Just Eat Takeaway.com said an improved performance in the first quarter of its current financial year was driven by strong growth in the UK and by its investment programme. The food delivery services provider said total orders in the first quarter grew by 79% year-on-year to 200.0 million, while delivery orders surged to 69.4 million from 23.3 million. Delivery orders mean Just Eat Takeaway delivers food to customers on behalf of restaurants, putting it in direct competition with recent London listing Deliveroo. Operations in the UK and Canada boosted growth, Just Eat Takeaway explained, with total orders up 96% on the prior year in both regions. In Canada, delivery orders were up 88% to 26.5 million year-on-year. Delivery orders in the UK multiplied to 22.9 million in the first quarter of 2021 from 2.9 million a year earlier.
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COMPANIES - FTSE 250
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Gamesys Group shareholders will receive 1,850 pence per share from US casino operator Bally's Corp as part of the previously announced agreed takeover, the two companies confirmed. Shareholders also will receive the 28p final dividend declared by Gamesys. The overall offer is a 14% premium to the closing price of Gamesys shares on March 23, before the original announcement was made. It values the gambling software firm at just over GBP2 billion.
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COMPANIES - GLOBAL
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The Canadian government and Air Canada announced they have agreed a financial aid plan in the form of loans to help the country's largest airline recover from the coronavirus pandemic. The agreement calls for Air Canada to have access to about CAD5.9 billion, about USD4.7 billion. "We have reached a significant and historic agreement with Air Canada," Canadian transport minister Omar Alghabra told a press conference. In order to benefit from the financial aid, Air Canada has agreed to abide by several conditions, particularly reimbursing customers whose tickets were cancelled by the carrier due to the pandemic.
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Tuesday's Shareholder Meetings
no events scheduled
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By Tom Waite; thomaslwaite@alliancenews.com
Copyright 2021 Alliance News Limited. All Rights Reserved.
