Equity Analysis /
United Kingdom

GB : Babcock - £1.7bn of impairments and downgrades but no rights issue

    James Allen
    James Allen

    Analyst - Support Services & Special Situations

    Contributors
    Joe Brent
    Alex O’Hanlon
    CGS-CIMB
    13 April 2021
    Published by

    FY 21 EBIT slightly ahead of our estimates. Net debt much better than expected, we expect through working capital discipline and crucially management guides to no rights issue. £1.7bn of impairments and charges – mostly non-cash, unlike Serco’s review where there was a significant cash drag from the OCP. The review of contract profitability has reduced the long term margin take and profits by c. £30m p.a. We reduce FY 22 EBIT by 7% from £340m to £315m, lower than feared. Buy, TP 350p