Babcock International said it was trading in line with expectations and was on course to deliver “low single digit” underlying revenue growth as the engineer sought to reassure investors after cutting its full-year targets in July.
The FTSE-250 company on Wednesday also said its order book and pipeline remained strong with a combined value unchanged at around £32bn for the period from 1 April. Around 87 per cent of revenue is now in place for 2018/19 and around 57 per cent for the year 2019/20, Babcock said.
The trading update came after the company unnerved investors in July when it cut its full-year revenue targets. Shares in Babcock dropped by 10 per cent on the day to 720p at one stage after the marine division, which provides specialist support to Britain’s defence ministry and other governments, was hit by delays in government spending on submarines. The company’s shares closed at 692p on Tuesday.
Babcock on Wednesday also said its underlying earnings guidance remained unchanged, with both revenue and cash flow performance weighted towards the second half of the year. It expects its net debt to earnings before interest, tax, depreciation and amortisation ratio to be around 1.4 times by the end of the year.
The company confirmed it had exited two small, low-margin business, including the sale of a business which provides services to broadcasters and content owners for around £30m. It expects to exit its powerlines business in South Africa in the second half of the year and said it would “reshape” its oil and gas crew change business. A further update will be made at the company’s half year results in November.
Babcock last year refocused the group into four sectors - marine, land, aviation and Cavendish nuclear – a move which it said intensified its concentration on “core higher-margin businesses”. It said on Wednesday it had secured a number of new defence orders in the period, including additional contracts worth around £120m with the Ministry of Defence to maintain equipment.
Get alerts on Babcock International Group PLC when a new story is published