Babcock takes a £140m profits hit as costs from late changes to Royal Navy frigates
Defence giant Babcock took a £140million profits hit as it counted the cost of late changes to warships it is building for the Royal Navy.
It is the latest setback for the FTSE 100 firm’s 2019 contract for five frigates from its shipyard in Rosyth, Scotland, at £250million each.
They will intercept rogue vessels, gather intelligence and provide humanitarian support.
The first Type-31 frigate was expected to be delivered in 2023 but the programme has suffered delays.
Babcock flagged up charges of £100million in 2023 and £90million in 2024, taking losses on the value of the deal to £330million so far.
And ‘higher than expected levels of rework as a result of changes to the design’ have affected the first ship.
Delays: Royal Navy frigate HMS Venturer emerging from Babcock’s facility at Rosyth in Fife, in May last year. The company has a contract to build five frigates at £250m each
It added: ‘Whilst the number of such rework events is not entirely unexpected, the work is being performed in the later stages of completion and therefore is more complex and costly.’
It said the charge is likely to reduce profits for the full year to the end of March to £293million, down from £363million a year ago.
Final results have now been delayed until the end of June.
But revenues passed £5billion as Babcock, like other defence firms, benefits from growing demand amid rising global threats, and enjoyed a strong performance from its nuclear and aviation divisions.
Its shares climbed 0.8 per cent, or 8p, to 1015p as it announced a £200million share buyback.
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