26th Sep 2007 07:02
Babcock International Group PLC26 September 2007 26 September 2007 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 2007. Overall trading continues in line with the Group's expectations at the time ofthe Annual General Meeting and Interim Management Statement in July 2007. Operational review With the publication of the 2007/08 interim results, Babcock will be amendingits segmental reporting structure to reflect the creation of a new MarineServices division. This reflects the programme underway to integrate thecapabilities of Babcock Engineering Services at Rosyth, Babcock Naval Servicesat HM Naval Base Clyde and the recently acquired Devonport Management Limited ("DML") at Plymouth. Comparative financial results reflecting the new structurewill be provided with the interim results. Contract wins The Babcock order book currently stands at £3.2 billion, up from £2.3 billion inJuly. Across the Group there have been a number of successes in winning newbusiness since our previous statement in July, of which the highlights include: • Marine Services: - The start of the Future Nuclear Facilities project at Devonport to upgradefuel handling facilities to enable the de-fuelling of Swiftsure and Trafalgarclass submarines when they are taken out of service. The development andconstruction activity is valued at a minimum of £150 million and will take placebetween 2007 and 2011. - An extension to the Warship Support Modernisation Initiative ("WSMI") contractfor HM Naval Base Devonport valued at £170 million over the next eighteenmonths. - A refit package for the amphibious carrier HMS Ocean. - A £30 million award to produce MWMIK (Mobility Weapons Mounted InstallationKit) vehicles for the Ministry of Defence to support operations by Britishforces in Iraq and Afghanistan. • Defence Services: An agreement with Defence Estates to integrate the Bristol Bath Total FacilitiesManagement project into the Regional Prime Contract South West. This increasein scope of the Regional Prime contract will be worth at least an additional £10million per annum for a minimum period of three years. • Engineering & Plant Services: As part of a local consortium, Babcock has been awarded a contract to supportthe integration of OEM equipment into the first of three new power stations aspart of the South African government's investment in its power generationinfrastructure. The first such project will be worth at least £20 million perannum to Babcock, over a six to eight year period. • Rail: Babcock's Rail business has been selected as one of four main contractors tocontinue the provision of future track related support services and Babcockanticipates that this development will contribute an increase of £30 million inincremental track related revenues per annum over the current level. In addition to recent contract successes, the pipeline of potential new businessremains healthy and we are optimistic that a number of opportunities will beconverted to contract or preferred bidder status within the next two months,worth an estimated £270 million; Defence Services: Facilities Management for the London Borough of Hackney underthe Building Schools for the Future programme in a Babcock joint venture withMouchel Parkman (estimated value £75 million in the first five years). Babcock Marine: The refit of the Vanguard class nuclear submarine, HMS Vigilant(estimated value £180 - 200 million). Babcock Marine: Design and construction of specialist equipment to support thedecommissioning of the nuclear waste storage vaults at the Berkeley powerstation (estimated value £13 million). Further progress in the future aircraft carrier ("CVF") programme was announcedin July. Babcock anticipates that the contract for CVF being worth some£500-600 million to Babcock through 2015. Good progress is being made on the Royal School of Military Engineering (RSME)PPP and financial close is anticipated in May 2008 with service commencement inNovember. On approval this contract would add some £40 million per annumrevenues to Defence Services. Segmental review All contracts in the Defence Services business continue to perform well. The newly created Marine Services division is focused on delivery of operationalsupport to the nuclear submarine flotilla and surface warships of the RoyalNavy. Negotiations continue with the Ministry of Defence to establish acommercial framework for Marine Services which, once concluded, will be in placefor a number of years. Further progress in the future aircraft carrier ("CVF") programme was announcedin July. Babcock anticipates the contract for CVF being worth some£500-600million to Babcock through the length of the programme to 2015 and looksforward to participating with its Alliance partners to deliver the two largestever warships constructed in the United Kingdom which will be integrated atBabcock's facilities at Rosyth in Scotland. Babcock's business at Rosyth has also won new business leveraging itswide-ranging skills and engineering capabilities. Babcock is engaged in modularconstruction for utility systems for the new Birmingham General Hospital anddesigning ship conversions for mining on behalf of DeBeer's via an enablingagreement. Our nuclear business is very busy and over the next six months we will bebringing together the various components into a single, focused business. The weakness in the Rail business noted in the July Interim Management Statementhas continued and the Division's operating results for the first half will notmeet our original expectations. In part, this is due to the cost and extraresource required to respond to Network Rail's plan to reduce the number ofsuppliers for track renewals and in part due to internal operating difficultieswhich are being addressed. The hiatus in the commissioning of signallingprojects appears to have ended, and combined with the additional track renewalwork referred to previously, offers a much improved outlook for the second halfof the year. Engineering & Plant Services in southern Africa continues to enjoy strong growthin both the equipment and engineering divisions, assisted by a robust economyand continued government investment in infrastructure In the Networks business, activity has been dominated in transmission by theNational Grid Alliance (in conjunction with AMEC and Mott MacDonald) togetherwith the contract with EDF Energy Solutions, and in telecommunications, byactivity in support of the digital switch-over for television broadcasting. Strategic developments The acquisition of DML was completed in June and endorsed by the Office of FairTrading. Babcock announced on 31 August that its offer to acquire the ordinary sharecapital of International Nuclear Solutions plc ("INS") at 63 pence per share hadclosed. At this time the Babcock shareholding in INS stood at 64%. Summary The overall trading environment in Babcock's market sectors remains excellentand continues to offer significant organic growth opportunities throughout ourbusiness portfolio. Babcock will announce its interim results on 13 November2007. -Ends- Enquiries: Babcock International Group PLC +44 (0)20 7291 5000Peter Rogers (Chief Executive)Bill Tame (Finance Director)Investor Relations Financial Dynamics +44 (0)20 7269 7121Andrew LorenzSusanne Yule This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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