UK's Babcock posts 34% jump in annual profit
Rewrites throughout to add details on results, adds analysts' estimates in paragraph 3
July 17 (Reuters) -British engineering company Babcock BAB.L on Wednesday said its annual profit took a cash hit of 90 million pounds ($117.1 million) related to a contract with the Royal Navy, sending shares down over 4%.
Excluding the one-off charge and a property disposal profit, underlying operating profit came in at 311 million pounds for the year ended March 31.
Analysts on average had expected the firm to log an operating profit of 292.8 million pounds, according to LSEG data based on 11 analysts.
Early on Wednesday, shares fell as much as 4.4% to 515 pence.
"Some investors might be troubled by a second charge on the Type 31 (contract) in two years," JP Morgan analysts said in a note.
Babcock signed the fixed price contract to deliver five Type 31 frigates - a type of warship - to the Royal Navy in 2019. In fiscal 2023, the company took a 100 million pound charge on the programme, as inflation resulted in higher costs which it could not pass on to the customer.
The fiscal 2024 charge of 90 million pounds relates to increase in labour and engineering costs, and the cash impact of the loss is expected to be realised over the remaining five years of the contract.
Babcock, which designs and manufactures naval ships, weapons handling systems, added that it expects a further year of progress in fiscal 2025 and reiterated its medium-term guidance.
($1 = 0.7689 pounds)
Reporting by Chandini Monnappa and Aby Jose Koilparambil in Bengaluru; Editing by Rashmi Aich
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