(Alliance News) - Babcock International Group PLC on Friday said the civil aviation market continued to struggle in its third quarter, as the sector was hit by a resurgent Covid-19, with prospects for its traditionally bumper final stretch of trading also uncertain.
And in a worrying update on a "review of contract profitability and balance sheet", the aerospace and defence firm cautioned on possible write-downs.
Babcock shares plunged 18% to 216.90 pence each in London on Friday morning.
"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," Babcock said.
Underlying revenue for the nine months to December 31 was GBP3.40 billion, down 4.9% from GBP3.57 billion a year earlier. Babcock said that excluding disposals and foreign exchange, revenue was down 3%.
Underlying operating profit for the nine months was down 37% annually to GBP202 million from GBP320 million, or down 34% excluding forex and disposals.
"Uncertainty remains around the outturn for this financial year, especially given that our fourth quarter is historically our strongest and that the Covid-19 situation has worsened in most of our markets. Given this uncertainty, and the start of our review of contract profitability and balance sheet, we continue not to provide financial guidance for this financial year," Babcock added.
Babcock added that its contract profitability and balance sheet probe, conducted alongside an "independent accountancy firm", will be reviewed by its board and auditor PricewaterhouseCoopers before its publishes its annual results in May.
"We have recently started a detailed review of our balance sheet and contract profitability. Early indications suggest that there may be negative impacts on the balance sheet and/or income statement for current and/or future years," the company cautioned.
It comes nearly two years after Babcock once again refuted claims made by "anonymous entity" Boatman Capital Research.
Boatman in May 2019 called on Babcock to write down the value of its Defence Support Group business, adding that the unit "overvalued its main contract by GBP50 million".
Babcock said the "minor" allegations were "inaccurate and misleading", noting it was the second time Boatman had launched a "malicious" attack.
Boatman published a report back in October 2018 stating Babcock had "systematically" misled investors by "burying bad news" about performance.
By Eric Cunha; ericcunha@alliancenews.com
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