Babcock to take £10m hit from Brexit restructuring

Infrastructure giant Babcock is to take an additional £10 million tax hit due to Brexit, the company has said.

Restructuring of the group’s aerial emergency services business will create the additional cost. The company expects costs relating to the new structures to be around £10 million per year.

The firm also said underlying earnings expectations for 2019 remain unchanged, with slightly higher margins offsetting slower revenue growth.

Total revenue is expected to drop to £5.2 billion, compared with £5.36 billion in the previous year, due to lower activity in its rail business.

Chief executive Archie Bethel said: “We continue to make good operational and strategic progress and won some great new contracts in the period including an expansion into the aerial emergency services market in North America, a significant win in Australia and securing the next 10 years for our rail business.

“Whilst preparing for the UK exiting the EU and for our QEC and Magnox contracts coming to an end, we continue to grow our business across our three key markets of defence, aerial emergency services and nuclear.”

Shares in the company dropped as much as 7.6% in early trading on Tuesday.

Analysts at Shore Capital said: “The short-term performance of Babcock remains frustrating for investors, in our view, with additional charges and some revenue weakness from changing structure impacting operations.

“The long-term positioning still remains sound, in our view. We expect stronger growth to resume in due course.”