Babcock dives after a £10m Brexit restructuring hit

Babcock shares fell on Tuesday after revealing a £10 million-plus Brexit hit from restructuring its continental air-rescue business.

The under-fire defence contractor, hit by aggressive short-seller Boatman Capital last year, will take the one-off tax charge in 2019 after setting up separate subsidiaries across Europe to carry on aerial firefighting and search-and-rescue missions.

The shares fell 6% to 540.4p.

Costs to maintain the set-up are also likely to be £10 million from 2020. Chief executive Archie Bethel said the restructure was necessary to remain compliant with aviation regulations “post-Brexit, even in a no-deal scenario”.

Babcock has 400 aircraft operating across eight European territories under air-operating certificates. Once Britain exits Europe, Babcock can only access the certificates by setting up European subsidiaries in each of the eight countries, including Spain.

“We’d like to move to a much stronger, harder structure so our business has a complete restructuring of the European business... By the time we get to results we may get more clarity on Brexit.”

Results are due in May. Underlying sales for 2019 are set to fall £160 million to £5.2 billion due to slower activity in the rail business and a power station outage in South Africa.