Babcock cuts payout after slide in profits

BABCOCK International, the engineering contractor, has cut its interim dividend by 20 per cent to 1p after a severe fall in profits.

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.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Day In a Page

War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn
Yvette Cooper: We can't lose the election. There's too much on the line

Yvette Cooper: We can't lose the election. There's too much on the line

The shadow Home Secretary on fighting radical Islam, protecting children, and why anyone in Labour who's thinking beyond May must 'sort themselves out'
A bad week for the Greens: Leader Natalie Bennett's 'car crash' radio interview is followed by Brighton council's failure to set a budget due to infighting

It's not easy being Green

After a bad week in which its leader had a public meltdown and its only city council couldn't agree on a budget vote, what next for the alternative party? It's over to Caroline Lucas to find out
Gorillas nearly missed: BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter

Gorillas nearly missed

BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
Downton Abbey effect sees impoverished Italian nobles inspired to open their doors to paying guests for up to €650 a night

The Downton Abbey effect

Impoverished Italian nobles are opening their doors to paying guests, inspired by the TV drama
China's wild panda numbers have increased by 17% since 2003, new census reveals

China's wild panda numbers on the up

New census reveals 17% since 2003
Barbara Woodward: Britain's first female ambassador to China intends to forge strong links with the growing economic superpower

Our woman in Beijing builds a new relationship

Britain's first female ambassador to China intends to forge strong links with growing economic power
Courage is rare. True humility is even rarer. But the only British soldier to be awarded the Victoria Cross in Afghanistan has both

Courage is rare. True humility is even rarer

Beware of imitations, but the words of the soldier awarded the Victoria Cross were the real thing, says DJ Taylor
Alexander McQueen: The catwalk was a stage for the designer's astonishing and troubling vision

Alexander McQueen's astonishing vision

Ahead of a major retrospective, Alexander Fury talks to the collaborators who helped create the late designer's notorious spectacle
New BBC series savours half a century of food in Britain, from Vesta curries to nouvelle cuisine

Dinner through the decades

A new BBC series challenged Brandon Robshaw and his family to eat their way from the 1950s to the 1990s
Philippa Perry interview: The psychotherapist on McDonald's, fancy specs and meeting Grayson Perry on an evening course

Philippa Perry interview

The psychotherapist on McDonald's, fancy specs and meeting Grayson Perry on an evening course
Bill Granger recipes: Our chef recreates the exoticism of the Indonesian stir-fry

Bill Granger's Indonesian stir-fry recipes

Our chef was inspired by the south-east Asian cuisine he encountered as a teenager
Chelsea vs Tottenham: Harry Kane was at Wembley to see Spurs beat the Blues and win the Capital One Cup - now he's their great hope

Harry Kane interview

The striker was at Wembley to see Spurs beat the Blues and win the Capital One Cup - now he's their great hope
The Last Word: For the good of the game: why on earth don’t we leave Fifa?

Michael Calvin's Last Word

For the good of the game: why on earth don’t we leave Fifa?
HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?