Under-fire defence giant Babcock slides after fresh blow to helicopter division

TROUBLED Government contracting giant Babcock on Wednesday suffered another major blow to its credibility after a shock downgrade on profits.

The shares tumbled 5% after the latest in a run of warnings from the business that has damaged its reputation.

After a devastating profit alert last May due to a drying-up of Government orders, today it admitted to problems in its business flying workers by helicopter to North Sea oil rigs.

The firm, founded in 1891, supplies the Royal Navy and is a key plank of Britain’s defence capabilities. It has been battling to rebuild its image amid murmurings of Government discontent over how it operates contracts.

Boris Johnson’s powerful adviser Dominic Cummings last week reportedly attacked the company for “ripping off taxpayers” over Government contracts ahead of a pivotal defence spending review this year.

Babcock insists it helps reduce costs for the Government.

Last year it won a key £1.25 billion contract from the Government for the Type 31 frigate and has a £34 billion order book.

A boardroom reshuffle last week has also raised question marks over the future direction of the firm, which is still reeling from an attack by a hedge fund called Boatman Capital last year.

Boatman claimed the Ministry of Defence was unhappy with how the company was running its contracts.

On Wednesday Babcock warned of a big writedown on leases for its fleet of North Sea helicopters.

The £85 million charge will hit profits, dumping more bad news on the business and chief executive Archie Bethel who is due to leave this year.

Bethel said it was a “frustrating quarter”. Analysts at Royal Bank of Canada said whoever takes over from the 67-year-old must rebuild credibility in the City. It

said today’s update was “another typical Babcock statement with further pressure on forecasts and exceptionals, that will likely impact cashflow”.