Babcock International profits as outsourcing demand remains strong

Babcock International posted a strong set of final results, with the FTSE 100 engineering outsourcer's all-organic profits rising steadily and emitted optimistic sounds about future growth in the UK and internationally.

Underlying revenue of £4.84bn for the 12 months to March was up 8% on the previous year, while underlying pre-tax profit, which excludes amortisation of acquired intangibles and exceptional items, rose 10% to £459.7m.

The Support Services division was a key driver, with organic revenue growth of 13% and operating profit up 7%. This was primarily due to a full year contribution from the Magnox civil nuclear decommissioning contract.

Defence and Security revenues grew 4% and operating profit 2%, helped by the integration of the Defence Support Group (DSG) Aviation and Engineering Support and Airfield Services (AESAS) contract and the start of the UK Military Flying Training System (UKMFTS) fixed wing contract.

At the Marine and Technology division, organic revenue grew 9% and operating profit increased by 14%.

Underlying basic earnings per share climbed 8% to 74.2p, helped in part by tax, while healthy cash conversion saw the full year dividend happily hiked 9% to 25.8p per share.

A 114% rate of cash conversion also meant debt was trimmed 7% to £1.23bn.

The engineering outsourcing specialist said that, with no acquisitions during the year, the organic growth demonstrated the strength and stability of the portfolio, with "market dynamics [remaining] positive for outsourcing" at home and abraod, with many customers seeking increased operational and cost efficiencies in the delivery of critical services.

Maintaining the order book at £20bn thanks to around £4.8bn of contracts awarded during the period, revenue visibility was enhanced with 78% of revenue already secured for 2016/17 and 53% for 2017/18.

Chief executive Peter Rogers, who will retire in September after a 13-year tenure and be replaced by marine chief Archie Bethel, said: "We end the year well positioned for future growth in our key markets both in the UK and internationally, where we have had some early successes in securing new opportunities through leveraging the platform provided by the Avincis acquisition.

"Our confidence is underpinned by the clear visibility provided by our impressive order book and bidding pipeline. As a result, we expect to make further progress this year and beyond."