Categories: Economy

Babcock aerospace firm boosted by new contracts

Babcock buoyed by new contracts as FTSE 250 aerospace group posts revenue growth across all segments

  • Defense contractor half-year organic revenue grew 5% to £2.14bn
  • Babcock won some major Royal Air Force contracts during the period
  • The group has undergone a change under the leadership of chief executive David Lockwood.

Babcock International has maintained its annual guidance following a succession of contract wins and sales growth across all business divisions.

The defense contractor’s organic revenue grew 5 per cent to £2.14bn in the six months to September, compared with the same period last year, boosted by strong results from its nuclear weapons and from aviation.

Both segments benefited from an acceleration of infrastructure programmes, with the former helped by subsea work at Devonport Royal Dockyard in Plymouth and increased levels of civilian nuclear activity.

Major deals: Babcock International’s nuclear division benefited from an increase in submarine-related work at Devonport Royal Dockyard in Plymouth (pictured)

The aviation business was supported by its Italian Air Emergency Services (AES) business and the ‘surge’ of contracts to provide aircraft to the French Air Force and Navy.

He also scored a large set of wins or contract extensions, including an 11-year deal to support the Royal Air Force’s Hawk fleet at RAF Valley, Anglesey, and a new contract to support the Red Arrows team.

Babcock ended September with a contract book just shy of £10bn, which was moderately lower than the previous year due to the trading of long-term contracts and the sale of subsidiaries.

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However, the group said that with more than 90 percent of revenue contracted for this fiscal year, it had “good top-line visibility” and expected to achieve positive free cash flow in the second half of the period.

Chief Executive David Lockwood hailed the company’s “great progress”, adding that “the significant contracts won this year support our confidence in our potential to deliver sustained growth and capture margin upside over the medium term.”

Under Lockwood, Babcock saw a turnaround in performance after issuing a succession of profit advisories in 2019 and 2020 following a drop in government orders and problems within its aviation division.

A review of its contract and balance sheet performance led the FTSE 250 company to incur substantial impairment charges, resulting in an annual loss of £1.8bn.

In response, the group divested several businesses, including Frazer-Nash Consultancy, its UK oil and gas and power divisions, and its loss-making emergency rescue helicopter business.

It has also secured a significant volume of contracts, including the Royal Navy’s around £3.5bn Future Maritime Support Program to maintain the UK’s three main naval bases.

These factors helped the group recover to a £167.9m profit last year. For this fiscal year, he said annual earnings were on track to rise 10 percent, in line with consensus forecasts.

Babcock International Group Shares they were 6.55 per cent higher at £3.09 during Tuesday morning, though they have nearly halved in value in the last three years.

Jacky

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