25th May 2016 13:09
LONDON (Alliance News) - Babcock International Group PLC on Wednesday said it remains bullish on future demand for its services and said its order book and sales pipeline underpin that confidence as pretax profit and revenue for the year to the end of March grew.
The defence and engineering support services group said its order book at the end of March stood at GBP20.0 billion, flat year-on-year. This includes GBP4.8 billion worth of contracts won over the course of the financial year, which replenished the company's order book.
The group said it has secured 78% of its projected revenue for the 2017 financial year and said its current pipeline of opportunities is valued at GBP10.5 billion.
"We end the year well positioned for future growth in our key markets both in the UK and internationally, where we have had some early successes in securing new opportunities through leveraging the platform provided by the Avincis acquisition," said Pete Rogers, Babcock's chief executive who will step down in September and be replaced by Archie Bethel, currently the chief executive of the company's Marine & Technology division.
"Our confidence is underpinned by the clear visibility provided by our impressive order book and bidding pipeline. As a result, we expect to make further progress this year and beyond," Rogers added.
Babcock shares were up 0.5% to 1,019.00 pence Wednesday.
Pretax profit for the financial year to March 31 was GBP330.1 million, up 5.0% on the GBP313.1 million the group made a year earlier. Revenue grew to GBP4.16 billion, up 4.0% year-on-year from GBP4.0 billion.
Babcock said underlying pretax profit, which includes contributions from joint ventures and excludes exceptional items, grew 10% to GBP459.7 million from GBP417.7 million. This is slightly ahead of the GBP456.4 million expected by analysts, according to Morningstar-compiled estimates.
The group will pay a final dividend of 19.75p for financial 2016, up from 18.1p, meaning its total payout rises to 25.8p from 23.6p.
The main contributor to revenue growth was Babcock's Support Services division, which was boosted by a full-year contribution from the civil nuclear decommissioning contract for the Magnox sites, handled by Babcock's Cavendish Nuclear unit. Marine & Technology delivered good revenue growth too, helped by increased volumes in the company's naval marine and technology units.
Revenue in the Defence Support Group grew, helped by winning the Aviation & Engineering Support & Airfield Services contract, where Babcock provides maintenance and engineering services on Merlin, Sea King, Lynx and Wildcat helicopters. The unit was boosted by the start of its UK Military Flying Training System fixed-wing deal, which trains UK armed forces pilots to fly.
Babcock said the market dynamics for outsourcing remain positive in the UK and internationally and said its performance had been boosted by its Mission Critical Services arm, which comprises the Avincis helicopter business acquired in 2014.
The company noted the UK government's five-year Strategic Defence & Security Review was published during the financial year. This included a commitment to increase defence spending over the next five years and for further defence equipment and equipment support over the next decade, providing opportunities for companies such as Babcock to win more work.
Babcock said it has continued to make good progress on contracts already on its books, including the first full year of activity on the GBP2.6 billion Maritime Support Delivery Framework, on which Babcock provides services at the Clyde and Devonport naval bases in the UK, and the first full life extension programmes for the Vanguard Class of submarines and Type 23 frigates.
The group also benefited from growth on existing contracts. The integration of the Defence Support Group, the formerly UK government-owned maintenance and support business Babcock bought in 2015, has progressed well and Babcock said the scope of its work on procuring spares and repairs has been increased earlier than expected.
The group's decommissioning contract for the Dounreay nuclear site also expanded, with around GBP250.0 million worth of new work over the period.
New contracts secured by Babcock over the year included a GBP120.0 million work programme for a Canadian submarine, a deal to contract an offshore substation for the Rampion wind farm, and an oil and gas crew-change services contract in Ghana and Mozambique.
By Sam Unsted; [email protected]; @SamUAtAlliance
Copyright 2016 Alliance News Limited. All Rights Reserved.
Related Shares:
Babcock