Defence contractor Babcock has spoken out in an effort to calm investors' fears about its performance, following a dramatic slump in its share price.
The company – which is responsible for the maintenance of Britain’s nuclear submarines – dropped out of the FTSE 100 last year and has seen its value halve in the past five years to around £3 billion. Its stock has fallen more than 30 per cent since June.
And earlier this month it revealed that it would be shutting its Appledore shipyard in Devon in March 2019, after contracts dried up.
“We are currently undertaking a programme to strengthen the group by exiting a number of small, low-margin businesses – including the Appledore shipyard – and reshaping our oil and gas business,” said a company statement.
However, according to a report in The Financial Times, the relationship between Babcock and the MoD has become “strained”. It adds that the MoD has put Babcock "on watch" over its handling of submarine maintenance.
Babcock, though, insists that its relationship with the UK government remains “as strong as ever”.
However, Francis Tusa, the editor of Defence Analysis, believes that the situation is now worrying.
“There are suspicions that Babcock is having problems, and a lot of concern that the MoD is worried about its performance,” he told Radio 4 Today programme.
“It maintains the nuclear attack submarine fleet and ensures that the nuclear deterrent keeps going to sea 365 days a year.
“If Babcock were to fail, then the Royal Navy and British defence would basically fail as well.”