Submariners receive hardship payments. There are no such incentives to stay on board for investors in Babcock, many of whom are equally under water. Best known for keeping Britain’s nuclear subs operational, the defence services outsourcer has warned of rough seas, sending the stock down by up to a fifth.

Babcock’s earnings and shares rose sharply until the start of 2014. They have fallen sharply ever since on a litany of setbacks. The whole outsourcing sector has de-rated amid contract disasters and profits warnings

At Babcock, operating profits are already down by a third this financial year. They will fall further in years to come as contracts are reviewed. The group’s snap announcement was otherwise light on detail. Call it range finding by skipper David Lockwood. He joined in September after selling venerable UK defence group Cobham — and some irreplaceable military technology — to US private equity.

Babcock shares are trading at levels last seen in 2006. That is where they should stay until the business can regain its reputation for earnings reliability.

Poor trading because of the pandemic has compounded problems. The balance sheet is carrying hefty goodwill from past acquisitions. Shadowy short-seller Boatman Capital launched its own skirmish against Babcock in 2018 with claims it had overpaid for acquisitions. Goodwill has fallen from a high £2.7bn in 2017 to £2.2bn. Further reductions will be needed.

Accounting losses should not affect covenants that require net debt to stay below 3.5 times ebitda. These may still come under pressure with denominator and numerator both travelling in the wrong directions. Net debt ticked up to £1.2bn at the end of last year, or 2.3 times expected full-year ebitda.

Short interest is dissipating as critics crystallise gains, halving from the end of last year to 4 per cent at present. Confidence in the stock should return among braver investors after problem contracts are dealt with. But the troubled, opaque UK outsourcing sector needs a few years of steady performance to dispel the doubts surrounding it.

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