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Major Telford employer Babcock defies economy concerns to report strong sales

By Thom Kennedy | Donnington | Business | Published:

Defence contractor Babcock, which employs hundreds of people in Shropshire, has played down economic concerns after revealing improved sales.

An armoured vehicle at DSG in Donnington

The company boosted sales by 6.6 per cent to £2.3 billion in the six months to September 30, while operating profits were four per cent up at £172.2 million.

Babcock owns the Defence Support Group operation at MoD Donnington in Telford, where it employs about 850 people working on Army vehicle contracts.

Chief executive Archie Bethel said Babcock made "good progress" over the period, adding that the company was performing well in spite of economic uncertainty caused by Brexit and the effect of defence spending cuts.

He said: "The increasing number and value of our opportunities both in the UK and internationally, where we continue to gain traction, highlights Babcock's long-proven ability to grow despite uncertain market conditions.

"Our focus on technology-intensive critical services where barriers to entry are high has consistently enabled us to generate sustainable growth regardless of any decline in spending on original equipment."

The company added that its work is "critical and therefore not discretionary", meaning that its work in the defence and emergency services sectors are insulated from outside pressures.

Defence Support Group itself won a number of new contracts during the year, meaning Babcock's Land Division saw its revenues rise 12.9 per cent to £892.3 million.

However, the level of procurement for DSG is expected to tail off in the second half of the year.

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The company also acknowledged that upgrades to the Warrior and Challenger II armoured vehicle fleets, which are carried out by DSG, are now likely to be delayed until 2019-20.

That will push back the point at which it could win the contract for that work, but also means it expects additional fleet maintenance business before that contract is awarded.

Operating profits within the land division fell, meanwhile, because DSG picked up some lower-margin contracts during the period.

Mr Bethel added: "We have excellent revenue visibility with 92 per cent of budgeted revenue now in place for FY18, and we expect a slight improvement in overall group margin during the second half.

"We therefore remain confident that full year results will be in line with our expectations and that we will make further good progress beyond this year."

Thom Kennedy

By Thom Kennedy
Business Editor - @tkennedy_star

Shropshire Star Business Editor

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