The Babcock share price (LON: BAB) (BAB.L) has risen by 26% over the past month. That compares to a 2% rise for the FTSE 250 Index (INDEXFTSE: MCX) to which the firm belongs.
In terms of company updates in that time, Babcock released a business update on 13 April. It was released ahead of the firm’s full year results in order to provide investors with early transparency on key issues, according to the company.
The update stated that Babcock plans to focus on being an international aerospace, defence and security company that also has a leading naval business. It plans to provide value add services across markets including the UK, France, Canada, South Africa and Australia. It is also changing its operating model to try and simplify its business.
Restructuring costs to achieve this are expected to be in the range of £40 million, with the benefit from these changes in financial year 2022 due to be around half that figure. It will rationalise its portfolio via the divestment of certain businesses. According to the company, this will generate proceeds of at least £400 million over the next year.
Babcock’s contract profitability and balance sheet review (CPBS) identified impairments and charges of £1.7 billion. The vast majority of them are one-off and non-cash charges. The CPBS is set to mean a reduction in the firm’s ongoing operating profit of approximately £30 million per annum.
For the 2021 financial year, the company’s unaudited draft management accounts show revenue of just under £4.7 billion, with underlying operating profit of £307 million prior to CPBS impacts. Net debt at 31 March was £750 million, while the company’s management is aiming to return it to strength without the need for an equity issue.
Looking ahead, the firm announced it will be revising its forecasts for profitability in future years. It is cautious about financial year 2022 due to the aforementioned structural changes.
In the past month there have been no director dealings announced by the company. The Babcock share price has fallen by 26% in the past year. It is down 68% in the past five years. Over the same time periods, the FTSE 250 index is up 39% and 25% respectively.
The company’s stock price is currently 291p. Its annual results are due to be released in the near future, although there is no set date in its financial calendar.