DEFENCE giant Babcock took a £140million hit for late-stage reworks to its newest Royal Navy warships, it said yesterday.
The firm, a major Ministry of Defence contractor, said the cost dented its operating profit which fell from £363million last year to £293million.
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Defence giant Babcock took a £140million hit for late-stage reworks to its newest Royal Navy warships, above CEO David Lockwood Credit: Alamy
The Royal Navy’s new frigates required ‘complex and costly’ work in the later stages of completion Credit: Royal Navy
It blamed “higher than expected levels of rework as a result of changes to the design” of the first two of five Type 31 frigates ordered by the MoD.
Babcock added that the work was done in the later stages of completion and was “therefore more complex and more costly”.
The two ships took to the water over the past year after four years of construction. The third and fourth are still in early construction stages so will not be as affected by reworks.
London-listed Babcock said the £140million hit reflected the revised costs and included an estimated £100million of revenue reversal.
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The frigates, set to patrol for a decade, will be used for intelligence gathering and defence.
Despite the financial hit, Babcock said revenues increased in the year to the end of March after a stronger performance for its nuclear and aviation divisions.
The company said its defence and nuclear capabilities “remain highly relevant” to its customers in an “increasingly complex and rapidly changing” world.
It added that it plans to return a further £200million to shareholders through buybacks after completing its previous programme.
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