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Babcock boosted by new contracts as FTSE 250 aerospace group posts revenue growth across all segments
- Half-year organic sales at the defense contractor grew 5% to £2.14 billion
- Babcock won some major contracts from the Royal Air Force during that period
- The group has undergone a turnaround under CEO David Lockwood
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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 revenues rose 5 percent to £2.14 billion in the six months ended September, compared to the same period last year, driven by solid performance from its nuclear and aviation weapons.
Both segments benefited from an acceleration of infrastructure programs, with the former aided by submarine work at Plymouth’s Devonport Royal Dockyard and larger civil nuclear activities.
Big deals: Babcock International’s nuclear division benefited from an increase in submarine-related work at Plymouth’s Devonport Royal Dockyard (pictured)
Aviation activities were supported by Italy’s Air Emergency Services (AES) activities and the ‘ramp-up’ of contracts to supply aircraft to the French Air Force and Navy.
It also secured a host of contract wins or extensions, including an 11-year deal to support the Royal Air Force’s Hawk fleet at RAF Valley, Anglesey, and a new contract to assist the Red Arrows team.
Babcock ended September with a contract backlog of just under £10bn, slightly less than last year due to long-term contract trading and the sale of subsidiaries.
However, the group said that with more than 90 percent of sales contracted for this fiscal year, it had “good revenue visibility” and expected to deliver positive free cash flow in the second half of the period.
Chief executive David Lockwood praised the company’s “strong progress” and added that “the significant contracts won this year underline our confidence in our potential to deliver sustainable growth and profit over the medium term.”
Under Lockwood’s tenure, Babcock has seen a turnaround in performance after issuing a succession of profit warnings in 2019 and 2020 following a slump in government contracts and troubles within its airline business.
An assessment of the profitability of the contract and balance sheet resulted in the FTSE 250 company taking significant write-downs, resulting in an annual loss of £1.8 billion.
In response, the group relieved several companies, such as the Frazer-Nash Consultancy, the UK Power and oil and gas divisions, and the loss-making rescue helicopters.
It has also won a significant number of contracts, including the Royal Navy’s Future Maritime Support Program worth around £3.5bn to service the UK’s three main naval bases.
These factors helped the group bounce back to a profit of £167.9m last year. For this fiscal year, it said annual profit was on track to rise 10 percent, in line with consensus forecasts.
Babcock International Group Shares were up 6.55 per cent at £3.09 during late morning Tuesday, though their value has still fallen by nearly half over the past three years.