28th Sep 2006 07:01
Babcock International Group PLC28 September 2006 28 September 2006 BABCOCK INTERNATIONAL GROUP PLC TRADING UPDATE In accordance with its normal practice, Babcock International Group PLC ("Babcock" or "the Group") makes the following trading statement in advance of itsinterim results for the six months ending 30 September 2006. Babcock has had another strong six months and trading continues in line with theGroup's expectations at the time of the AGM Statement in July 2006. Operations With the Regional Prime East contract for Defence Estates successfully mobilisedand operating well and the Prime South West contract in its third year, growthin Defence Services has been good. All contracts in this division continue toperform well. We continue to make good progress on RSME and Ministry of Defence(MoD) approval is scheduled for the first quarter of next year. If approvedthis contract would add approximately £30 million per annum to Defence Services'turnover. The announcement of preferred bidder for Defence TrainingReview, package 2 is expected in November this year. In Engineering and Plant Services our South African operations continue to enjoystrong demand in all their markets, particularly the equipment market, wherecurrently growth is constrained only by availability of plant. The increase inexpenditure on infrastructure programmes in South Africa will continue tosupport growth in both the equipment business and the engineering servicesbusiness, where major bids are being prepared for new power generation capacityfor Eskom, the South African power utility. Some weakening of the Rand duringthe first half will dilute the full impact of this strong underlying performanceon translation into the Group's consolidated interim result. Activity levels in Rail have continued to improve and the business wassuccessful in September in securing preferred bidder status on two out of thesix signalling strategic framework contracts recently tendered by Network Rail.These contracts are expected to be worth approximately £100 million over 5years. We are delighted to be working in partnership with Network Rail to renewtheir assets. As reported at the full year, a programme of rationalisation hasstarted in Rail to improve operating margins and bring them within a rangeacceptable to the Group. Some further costs associated with this programme willbe incurred in the first half-year with the final tranche charged during thesecond half. Whilst margins in the first half-year remain below expectations,the full benefits of the rationalisation should be seen in the financial year2007/08 and beyond. Activity levels in Networks on high-voltage transmission line refurbishment forNational Grid plc have been high and we are optimistic of securing significantcontracts for execution during the normally quiet winter period. Our jointtender with Amec PLC and Mott McDonald for the National Grid alliancingcontracts for the future support of the transmission network is in the course ofadjudication and we expect the announcement of preferred bidder next month. Inthe mobile telecoms business, slow release of infrastructure work by the majorservice providers has temporarily delayed progress but we anticipate a return tonormal levels of activity during the course of next year. In Technical Services, the warship refit operations at Rosyth have, as expected,reached historically low levels of activity. However, with an ongoing programmeof cost reductions in place and the prospect of a stable and sustainableworkload under the MoD Maritime Industrial Strategy, the outlook is brighter for2007 and beyond. In this regard, the MoD has recently confirmed to industry thestart of the refit periods for five warships during the second half of thecurrent financial year together with the regeneration of three vessels prior todisposal in FY 2007. We continue to explore ways of delivering further value tothe MoD in Naval surface ship and submarine support. Progress towards main-gate approval by the MoD at the end of this calendar yearfor the construction phase of the new aircraft carriers (CVF) is on track.Demand for design services, including our work on the CVF project, has remainedstrong throughout the period. In nuclear, we have been short-listed to manageand operate the low-level waste repository at Drigg for the NuclearDecommissioning Authority; an announcement of preferred bidder is expected inmid-2007. This encouraging news is a clear indicator that the strategy ofexpanding our nuclear services into the civil market through the acquisition ofAlstec will allow Babcock access to this rapidly growing area. Acquisitions Both our recent acquisitions, Alstec and Powerlines, continue to perform aheadof planning assumptions and we believe significant new opportunities exist forboth businesses. Alstec, acquired in May, has made an encouraging start. The acquisition bringsnew opportunities in two major growth markets - nuclear decommissioning andairport management - and strengthens Babcock's existing position in themaintenance of submarines and surface ships as well as on the new aircraftcarrier programme. The South African Powerlines business acquired in June has seen high levels ofdemand from its principal customer Eskom in the first few months under Babcock'sownership. We are confident that given the significant capital investmentrequired in the high voltage infrastructure in South Africa over the comingyears, growth will remain strong in this business. Summary The trading environment for Babcock's businesses remains excellent. Our orderbook continues to be strong and is currently in excess of £2.3 billion. Webelieve Babcock's markets offer significant organic growth opportunities and wecontinue to look to acquire businesses in the technically sophisticated area ofsupport services in which we operate. Babcock will announce its interim results on 14 November 2006. - Ends - Enquiries: Babcock International Group PLC 020 7291 5000Peter Rogers (Chief Executive)Bill Tame (Finance Director) Financial Dynamics 020 7269 7121Andrew Lorenz / Susanne Walker Notes to editors: About Babcock International Group PLC Babcock International Group PLC is an asset management business. We managefixed infrastructure and mobile assets for a range of blue chip customers.Babcock integrates labour, technical capabilities, systems and supply chainpartners to meet the outsourcing needs of customers for 'mission-critical'capabilities. In the year to 31 March 2006 sales from continuing business were £837 million. The Group operates across five core business segments: Defence Services, supplying facilities management, equipment support andtraining services to the armed forces. Technical Services, providing engineering and logistical support to both thedefence and civil sectors in the UK. Engineering and Plant Services, supplying design, installation and maintenancesupport to the energy sector in Africa and the US. It also holds the Volvofranchise for construction equipment in Southern Africa. Rail, providing design, renewal and installation services for the UK railinfrastructure. Networks, supporting the design, maintenance and renewal of power transmissionand cellular telecommunications networks in the UK. Babcock's head office is in London and the Company's shares are quoted on theLondon Stock Exchange in the support services sector (EPIC: BAB). For furtherinformation, please visit Babcock's website at www.Babcock.co.uk. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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