Babcock sees strong 2012 as orders pick up

City A.M. Reporter
BRITISH defence services group Babcock said yesterday it traded well in its fourth quarter and that it was confident on its prospects for 2012 and beyond after winning new contracts and growing its order book.

Babcock, which maintains Royal Navy submarines, yesterday said it had secured preferred bidder status on a number of new long-term contracts as well as extensions to existing contractual arrangements, totalling around £2bn in the second half of its fiscal year.

New contracts include the refit of Britain’s Vanguard class submarines at its Devonport dockyard and a vehicle replacement deal with the ministry of defence.

“As a result of these successes, after remaining stable at around £12bn for the past 18 months, the order book has increased to around £12.5bn,” the company said.

“In addition to increases in both the order book and bid pipeline, the group continues to track a number of significant opportunities which are expected to come to market over the next financial year.”

Governments around the world have cut defence spending as they look to reduce budget deficits, but Babcock believes its focus on services and maintenance puts it in a strong position as its clients look to cut costs by outsourcing.

Espirito Santo analyst David Brockton said after the firm’s update: “We continue to see opportunity for double-digit growth, underpinned by robust organic delivery, operational improvements and further financial de-leveraging of the balance sheet.”