Babcock confident of second-half improvement, says ShoreCap

Babcock International has seen a slower performance in the first half but still expects to grow revenues 6% in the full year, broker Shore Capital revealed as it reiterated a 'buy' recommendation on the engineering services outsourcer.

With Babcock's shares feeling some effect of the sector turmoil around fellow outsourcer Capita's profit warning on Wednesday, ShoreCap's note after a catch-up with the company's finance director Franco Martinelli was timely, with the company having not issued a trading update since July.

Babcock, "in the round", has performed in line with expectations, retaining organic revenue growth guidance in the 6% range for the full year but expecting performance to be slightly weighted to the second half.

"This is principally due to slower than anticipated conditions in South Africa operations and with oil services related contracts in MCS (helicopters) due to commence in H2. South Africa operations (those mainly in power related activities) are expected to improve in H2," explained analyst Robin Speakman.

"We sense that Babcock remain broadly positive on the environment and the medium to long term outlook," he added, with the company’s order book remaining stable and indicated to remain at a similar level to the circa-£20bn last reported at the final results in May.

The pipeline was reported to have remained stable, with contract opportunities expected by Speakman "to begin to lift the pipeline early next year", with no further news on the award of the Defence Fire Risk Management Organisation contract with the Ministry of Defence for fire services management - also being bid by Serco and Capita.