Babcock mulls US defence sale

City A.M. Reporter
British defence services group Babcock International said it had traded well in its first-quarter, helped by continued outsourcing activity from military customers eager to cut costs, and said it was considering selling some of its US defence operations.

Babcock, which maintains Royal Navy submarines, on Thursday said its markets had remained robust in the last three months and that it sees significant opportunities for growth both in the UK and overseas.

"The order book and bid pipeline remain strong, reflecting the momentum of our ongoing operations as well as the new opportunities that have come to market since the beginning of this calendar year," the company said in a statement ahead of its annual general meeting.

"Bidding activity levels remain good across the businesses and progress has been made as a number of contracts move closer to final award."

Babcock said its defence customers were keen to achieve greater efficiencies, following the British government's move to slash its defence budget by 8 percent last year to help lower a huge budget deficit.

The company, which last year acquired rival VT Group for $2.1bn to boost its support services business, said it was considering selling the former VT US defence business after a review of the group.

"The former VT U.S. defence operations do not meet the group's strategic objectives and therefore, as currently structured, are not considered a core part of the group," the company said.

"A range of options, including divestment, is currently being considered."

Babcock said it was confident that the current economic climate would continue to drive an increase in new outsourcing opportunities in its markets.