Major Fife employer Babcock International has said it will not pay a final dividend after its latest trading update revealed underlying operating profit for the first quarter was 40% lower than last year.
Underlying revenue for the first quarter was 11% lower than last year, although group revenue from the core business grew slightly.
The international aerospace and defence giant, which has a key base at Rosyth, pointed to the “significant impact” the Covid-19 pandemic had on the firm’s financial results over the period.
The firm said necessary safety constraints on close proximity working have had a significant impact on costs and efficiency, directly impacting the margins and profitability of the group.
Measures include restricted access to customer sites, complex safety measures, reduced numbers of staff on site, changed shift patterns and additional costs, with changes leading to slower progress on some projects.
The company said given the continued uncertainty over the impacts of the pandemic, it is not giving detailed financial guidance for the year at this stage.
Ruth Cairnie, chair said: “The Board has decided not to pay the final dividend for the 2020 financial year in order to prioritise strengthening our balance sheet and reducing net debt.
“Our experience of the pandemic so far has demonstrated that the foundations of our business – long term programmes in critical and non-discretionary areas – provide a solid platform for delivery in the medium term.”
Order intake in the quarter was £0.7 bn and in July the firm secured around £500 million of new contracts in its aviation business, helped by the delays in bid decisions beginning to clear.
The firm said it recognises the mportance of dividends to its shareholders and will resume payments “at the earliest opportunity.”