Shropshire Star

Babcock back in the black for latest half year

Defence contractor Babcock International returned to an operating profit in the six months to the end of September.

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Revenue was also up eight per cent from £2.05 billion a year before to £2.22bn.

The group, which includes the Defence Support Group operation at MoD Donnington in Telford and the former Macneillie specialist vehicle conversions business at Aldridge, now renamed Babcock Vehicle Engineering, went from a £785.3m loss to a £75.4 million profit.

There was lower Covid-19 business interruption than the same period in 2020.

The group made three disposals in the first half of its financial year with around £400 million of proceeds expected to pay down debt

Babcock's contract backlog at September 30 was £10.9 billion. This includes the Future Maritime Support Programme, a £3.5bn contract signed in September that runs to March 2026. It replaces the previous MSDF contract and continues support work for the UK Royal Navy across ships, submarines and naval bases.

The group's new operating model is on track to deliver savings of approximately £20m in the current financial year.

Babcock is cautious about its ability to maintain activity levels and recover all costs in the remainder of this financial year given the uncertainty from new Covid-19 variants and varied government responses,

Chief executive David Lockwood said: "We are on-track with our turnaround strategy with around £400 million of disposals to bolster our balance sheet announced to date.

"We will continue to align our portfolio to best support the group's capital allocation priorities and future growth. The ongoing implementation of our new operating model means Babcock will be a simplified, more focused group.

"We are pursuing a number of important growth opportunities, with significant contract wins in military communications, our first order for an export licence for our Arrowhead 140 frigate as part of the Type 31 programme, and an agreement for potentially significant work in Ukraine, supported by both the UK and the Ukrainian governments.

"While our half year results show some recovery from the financial impact of Covid-19, we remain cautious as we are early on in our transformation and as we manage inflationary and supply chain pressures across the business and potential interruptions from Covid-19. However, the board believes the actions we are taking will enable the group to take advantage of the many opportunities ahead of us, leading to improved cash generation and profitability in the medium term."

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