Babcock returns to the black

Restructuring in its German materials handling business has helped push Babcock back into the black, but the famous engineering group surprised analysts by halving its interim dividend just a year after restoring the payment.

Profits before exceptional items came in at pounds 2.7m in the six months to September, replacing a loss of pounds 17.1m in the immediately preceding period. The interim dividend is being cut from 1.25p to 0.625p, which the company says reflects the fall in earnings following the pounds 26m exceptional profit gained last time from the sale of the Renfrew-based boiler making business.

John Parker, chairman, said: "The rehabilitation programme has been tougher and more demanding than was envisaged at the outset. However, in the last six months we have achieved a number of positive developments."

The turnaround has seen the material handling division replace a loss of pounds 14m in the last full year, mainly in Germany, with pounds 985,000 profits in the latest period. Mr Parker said they had cut 40 per cent of the German workforce and appointed Dr Gernot Schafer as its managing director.