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Babcock says cash cost of shoring up balance sheet not material

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EDINBURGH (Reuters) – British engineering firm Babcock <BAB.L> said on Monday the net cash cost of strengthening its business would not be material as it sought to allay doubts about its financial health which have hit its shares and management reputation.

Shares in Babcock, whose biggest client is Britain’s Ministry of Defence, have fallen around four percent in the past week and by around one fifth in the past six months.

Sky reported on Friday that an exceptional and partly non-cash charge of up to 100 million pounds ($128.53 million) was possible as part of half year results, and that the company was in the process of quantifying the amount.

The Sunday Times also reported that Babcock, which has faced delays in UK government spending, had considered breaking up the business for sale, but decided against it.

On Monday Babcock made its second statement in a week ahead of first half results due on Wednesday.

“Babcock is currently undertaking a programme to strengthen the group by exiting a number of small, low-margin businesses, including the Appledore shipyard (in southwestern England), and is reshaping its oil and gas business,” it said.

“Whilst the exact impact of these actions has yet to be determined by the Board, we do not expect the net cash costs to be material,” Babcock said.

(Reporting by Elisabeth O’Leary; editing by Kate Holton)

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