TIDMBAB
RNS Number : 9803D
Babcock International Group PLC
06 February 2018
6 February 2018
Babcock International Group PLC (Babcock or the Group)
Trading Update
Babcock, the engineering services company, is issuing the
following trading update for the period to 31 January 2018.
Financial Highlights
The Group has continued to make steady progress in the second
half of the year and is on track to achieve another record year in
terms of revenue and underlying earnings.
-- Full year underlying earnings are expected to be in line with guidance.
-- Cash conversion for the full year is expected to be in line with guidance.
-- Net debt to EBITDA is forecast to reduce to 1.7 times
(inclusive of the temporary FOMEDEC working capital outflows
highlighted previously).
-- Group margin is expected to be higher than previously
forecast, due to a combination of more favourable margin mix and a
continued management focus on efficiency improvements.
-- Revenue for the year is now forecast to be slightly lower
than previously expected, at between GBP5.3 billion and GBP5.4
billion for the year, representing growth of between 2% and 3%,
with the reduction due to:
o Continuing tough trading conditions and short cycle order
placement delay in the Offshore and Oil & Gas sector.
o A slowdown in the volume of defence sector commodity and
spares procurement revenue, passing through our Equipment
Management Operating Centres.
o Slower mobilisation on the MSSP equipment and engineering
management contract for MoD although operational since 1
December.
-- Strong bidding activity continued into the second half of the
year and the short-term pipeline of bids in process has increased
to around GBP12.5 billion, maintaining the combined order book and
near term opportunity pipeline at GBP31 billion, supporting our
continued confidence of future growth.
-- Following a detailed review of all material contracts, on 11
December 2017 Babcock confirmed in an RNS that, in line with its
conservative contract accounting approach, the adoption of
International Financial Reporting Standard (IFRS) 15 will not
require a change in future contract revenue or profit
recognition.
Operational Highlights
Across the Group we continue to deliver complex engineering
services in support of our customers' critical operations. Military
assets and infrastructure, including nuclear submarines, complex
warships, land armoured vehicles, aircraft training infrastructure,
naval, army and air force bases and naval dockyards continue to
operate at high tempo driving steady demand for our services.
Across Europe and in Australia we continue to provide essential
aerial emergency services including air ambulances, firefighting
and search and rescue, flying record numbers of missions, and we
continue to provide critical engineering support services across
the many civil nuclear facilities located around the UK.
Operational highlights across the Group's four reporting sectors
for the four months ending 31 January 2018 included:
Marine
-- A further five year agreement to provide sustainment support
services for the Royal Australian Navy's eight ANZAC Class frigates
as part of the long-term Warship Asset Management Agreement.
-- The Maritime System Support Partner (MSSP) contract went live
on 1 December 2017. This contract requires us to provide
engineering and equipment management support to the Queen Elizabeth
Class aircraft carriers and the Type 45 Class air warfare
destroyers and will be a major workstream for us as it builds up
over the next few years.
Land
-- A new AU$33 million contract to support the Australian
Defence Force's fleet of Ground Support Equipment, which is due to
begin in June 2018.
-- Our South African Equipment business has maintained the high
level of activity experienced in the first half. This includes one
GBP15 million order scheduled for delivery in April 2018.
Aviation
-- The sector retained its flagship aerial firefighting contract
for the Italian Government at improved returns following a
competitive tender. The contract, worth up to GBP160 million for
the first four years, will see the continued delivery of services
across the country and includes options for a further four years,
which we expect to secure.
-- A new contract to provide Air Ambulance services to the City of Gothenburg, Sweden.
-- A four-year renewal of the aerial search and rescue contract
in Galicia, Spain, with the introduction of a number of new
innovative technology solutions
Cavendish Nuclear
-- A 10-year contract worth up to GBP95 million over the first
three years to supply Sellafield Ltd with specialist handling and
containment systems to process nuclear material.
-- New project work was secured from EDF and we successfully
provided scheduled outage support at one of its AGR sites.
-- In nuclear new build, we continue to progress design
programmes at Hinkley Point C and see a range of opportunities for
engineering and design support at Horizon Nuclear Power's Wylfa
Newydd project. We are currently bidding on a number of significant
opportunities, including the Programme and Project Partners
contract for Sellafield decommissioning.
Outlook
The Board confirms its view that underlying earnings for the
financial year will be in line with its expectations. Cash
conversion for the full year is also expected to be in line with
guidance, as is the reduction of net debt to EBITDA to 1.7 times,
inclusive of the FOMEDEC working capital outflow which will reverse
in the next financial year. Supported by a strong order book and
bid pipeline, the Board remains confident of making good progress
in the future, with an increasing proportion of international
business.
Enquiries
Babcock International
Group PLC 020 7355 5300
Archie Bethel
Franco Martinelli
Kate Hill
FTI Consulting 020 3727 1340
Andrew Lorenz
Nick Hasell
Conference call
A conference call for analysts and investors will be held at
08:00 GMT this morning, access details below:
Dial in number +44 (0) 20 3936 2999
Participant code 100907
A live audio webcast and replay the call will be available at
www.babcockinternational.com/investors
This information is provided by RNS
The company news service from the London Stock Exchange
END
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