Work on UK aircraft carriers and Canadian submarines has enabledBabcock International to make a bullish trading statement.
“Market conditions for the group as a whole remain resilient,” Babcock said, adding that trading was “consistent with our expectations at our preliminary results”.
The engineering group said its marine division was trading strongly. The division has benefited from increased demand for design work from the UK’s new aircraft carrier programme, as well as its existing submarine support contract in Canada, Babcock said.
Marine also drew business from the Royal Navy’s programme of warship refit and upgrade projects.
Babcock also said its nuclear division was getting “a steady flow of contracts” underlining “the long-term market opportunities”.
A 50 per cent drop in orders over the past year from its construction equipment business was partially offset by “increasing demand for after-market service”, the company said. The market for outage support and overhead line development in South Africa was “robust”, Babcock said.
Babcock said it expected to complete its restructuring of its rail division through the “withdrawal from unprofitable, mutli-disciplinary project work” by the end of the first half.
It had further reduced net debt in the first quarter as cash generation remained strong, and said it had benefited from lower costs from reduced interest rates.
The resilience of its main markets and new contracts had helped the company to increase its order book to about £6bn.
Graham Webster, Arden Partners analyst, said the apparent £300m increase in orders since the March year-end showed that the company was expanding and described Babcock’s comments on its marine division as “particularly good”.
“My synopsis is that the current financial year is OK. There might be scope for an upgrade later in the year,” Mr Webster said.
Babcock shares closed up 11¼p at 470p.
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