Pre-tax profits fell to pounds 16.6m for the six months to 30 September from pounds 23.7m in the corresponding period of 1991. Turnover fell to pounds 399.6m from pounds 415.3m.
A combination of recession, a pounds 5m cost overrun at the combined cycle plant at Killingholme, Tyne and Wear, a pounds 1.5m loss at Zia Technology in Texas, and more than pounds 1.5m of redundancy costs led to the fall.
Babcock decided to bring forward its results announcement from 24 November after a wave of rumours and analysts' downgradings swept the market and undermined the share price.
The shares have more than halved since their 1992 high of 69p. Yesterday they fell 0.5p to 29.5p.
Oliver Whitehead, chief executive, said the board had cut the dividend because it did not believe the heavy goods sector would see an improvement in trading during 1992 or 1993.
A fall in earnings per share to 2.02p from 3.32p made the cut almost inevitable because Babcock has a policy of keeping the dividend twice covered.
Mr Whitehead said he thought the results for the second half would, at best, be only marginally better than the first half.
The cost overrun at Killingholme caused operating profits at the energy and manufacturing division to fall to pounds 4.9m from pounds 7.8m. Capacity has been reduced at the factory at Renfrew, Strathclyde, with 200 redundancies.
A shortfall in orders has been exacerbated by deferment of the pounds 100m Hampshire waste-to- energy plant due to difficulties in obtaining planning permission.
Operating profits in the construction and process-plant contracting division fell to pounds 3.9m from pounds 5.1m after the loss at Zia. The facilities management division saw operating profits fall to pounds 3.2m from pounds 4.2m. Babcock is leading a consortium offering to underwrite a pounds 267m project to complete work on new submarine docks at Rosyth, Fife, in an attempt to save the dockyard. Babcock owns 70 per cent of the consortium that manages it.
The materials handling division, where operating profits increased to pounds 4.7m from pounds 2.9m, was the only bright spot. But on a like-for-like basis, without the Swedish company Consilium, which was bought last February, profits would have been virtually flat, according to Erik Porter, finance director.
Smith New Court forecast pre- tax profits of pounds 35m for both 1992 and 1993.