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Babcock sees strong trading

City A.M. Reporter
ENGINEER Babcock International said yesterday third-quarter trade had been strong, driven by robust performances at its marine and defence units, and that it was confident on its full-year prospects.

Babcock, which operates ship-building and nuclear power programmes, said it expected to take advantage of further outsourcing opportunities in 2010 as pressure on public spending continues to increase.

The company said it had won a further substantial order for Jackal 2 vehicles from the Ministry of Defence and that it continued to win work on other defence programmes.

Babcock, which last year failed to secure the renewal of a contract with Network Rail, said it would restructure the division to reflect the reduced scale of its operations, incurring costs of £4m in the full-year.

Shares in Babcock International gained 4.6 per cent to 592p after the trading update, with Seymour Pierce initiating coverage on the stock with a “buy” rating and 670p target price.

Seymour Pierce said in a note that recent underperformance has resulted in Babcock’s relative price earnings ratio returning to pre-2003 levels, despite the improvement in quality of earnings.