Shares in Babcock, Britain’s second-biggest defence contractor, sank this morning amid warnings that its new boss would soon slash the value of the company’s assets.
Babcock, which among other things, builds Royal Navy warships, fell back in January when it told the market that it was carrying out a “detailed review of [its] balance sheet” at the request of David Lockwood, its new chief executive who joined last September.
In that January update, the company cautioned that the early findings of its review had suggested that there may be “negative impacts” on the value of its contracts and future income.
The final writedown could be as high as £700 million, according to the Financial Times, which added that a statement addressing Babcock’s balance sheet and contract profitability could be made “as early as the coming days”. Babcock shares, which had already lost a fifth of their value so far this year, slipped another 17½p, or 7.3 per cent, to 219½p this morning.
The wider London market also fell, perhaps unsurprising given the stellar run this week. The FTSE 100 eased 15.44 points, or 0.2 per cent, down to 6,926.78, while the more UK-focused FTSE 250 inched 10.19 points, or 0.1 per cent, down to 22,237.35 having closed at another record high yesterday evening.
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Both indices remain on course to register good gains over the week.
Tui, the world’s biggest holiday group, found itself at the bottom of the leaderboard along with Babcock, after it tapped the bond market for another €350 million (£304 million). Analysts at Jefferies said the extra money was an “insufficient liquidity fix,” while Stifel predicted that Tui needed another €2.6 billion (£2.3 billion) to really sort out its finances.
PageGroup, the recruiter, jumped 43½p, or 8.7 per cent, to 544p as it predicted that it would turn an operating profit of between £90 million and £100 million this year — comfortably ahead of the consensus forecast of £70 million — following a surprisingly good start to the year.
Investors tucked into Hilton Food Group, the meat packer, after the stock was lifted to “outperform” by analysts at RBC, who played down the likely impact of plant-based meats on the company. Shares rose 36p, or 3.0 per cent, to £12.32.