DEFENCE and infrastructure giant Babcock International has hailed a £1 billion rail track renewal programme contract for Scotland in a set of final results that swung to loss after a massive hit to its aviation arm.

The group, which owns and operates marine engineering infrastructure at Rosyth in Fife and also manages the Clyde naval base at Faslane, said it has deferred a decision on whether shareholders will receive a final dividend amid coronavirus uncertainty.

Shares in the London-listed firm dipped lower after it swung to a £178.2 million pre-tax loss in the year to March, after posting a £235.2m profit in the previous year.

The company said this was particularly driven by over £503m worth of impairment charges, as it suffered “weakness” in its aviation unit.

READ MORE: Babcock International books one-off costs of £85m amid 'tough' market conditions

However, Babcock said it is now in a strong position to deal with the impact of coronavirus after reporting “good” growth in its defence division.

It said it has a record combined order book and pipeline of around £35bn, against £31bn, last year.

It reported an underlying operating profit of £524m including a “small impact of Covid-19’.

The exceptional items totalling £503m include an aviation goodwill impairment of £395m, and it had other aviation charges of £143m including oil and gas write downs.

The group, which is one of the Ministry of Defence’s largest contractors, cited new wins including a £1.3bn contract to build the Type 31 warship for the Royal Navy at Rosyth announced last autumn.

READ MORE: Babcock's MoD Rosyth contract boosts £18bn order book

It also said it is set to begin a new rail track works programme contract that would span the next decade, as well as undertaking further infrastructure work with Network Rail.

Babcock said: “In rail, work has now started on the new 10-year contract for track works in Scotland, a contract worth up to £1bn over its life. We were also awarded a signals and telecoms framework contract by Network Rail worth £65m over the next five years.”

It also reported on progress with the Queen Elizabeth class building programme which has reached the stage where HMS Prince of Wales left the Rosyth facility in September last year for sea trials.

It said staff who could are working from home, but that the bulk of its service delivery is non-discretionary and critical to customer operations with major sites including the Clyde naval base and Rosyth dockyard remaining operational.

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Babcock said it has made “limited use” of furloughing staff in a number of areas such as airports and civil training businesses, and senior executive management have taken a temporary 20 per cent reduction in basic salary and the annual bonus and pay rise for the new financial year have been deferred.

Its aviation sector operates in the defence, emergency services and oil and gas markets, and while the defence market has remained robust, and the emergency services market remains attractive in the medium term, the oil and gas market deteriorated significantly during the year, it said.

Archie Bethel, Babcock chief executive, who is set to retire, said: “We end a busy year in a strong position to deal with the current coronavirus uncertainty.”

He said the group has “taken action to address weaknesses in aviation, including writing down goodwill to reflect our updated expectations of the oil and gas market.

“The early impact of the global Covid-19 pandemic had a limited impact on the group in the last financial year but is creating uncertainty as we head into this new financial year.”

Shares closed at 376.6p, down 7.7%.