Babcock slams 'misleading' Sunday Times article

Engineering services company Babcock updated the market on Monday over what it called a “misleading article” published by the Sunday Times at the weekend.

In the article, now removed from the Times’ website, it was reported that the Ministry of Defence told Babcock in recent weeks that it would not proceed with a deal to maintain about 2,300 armoured vehicles, including the Mastiff and Jackal.

The FTSE 250 firm said the article confused its existing DSG contract, which runs until 2025, with an “entirely separate tender” for Protected Mobility Strategic Support Supplier (PM SSS) which initially came to market in 2015 but which did not proceed to competition following a decision to halt the procurement process in December 2016.

“DSG is a long term service provision and transformation contract for a wide range of equipment, maintenance, spares supply and platform overhaul with the UK Ministry of Defence,” Babcock said on Monday.

“As part of this long term partnership contract Babcock is able to make further proposals for transformation and performance improvement to the customer.”

The company said one such recent proposal related to putting a number of different vehicle types onto an availability service, which was designated ‘Strategic Support Supplier’ (SSS).

“Following discussion, the MOD has decided instead to focus on deepening the transformation and the relationship with Babcock on the core contract, which continues to offer the Army significant flexibility.

“The existing contract offers Babcock significant exclusivity over the various service categories.”

With regards to its trading, Babcock said its trading statement of 19 July reiterated its underlying earnings guidance for the 2019, despite forecasting slightly lower underlying revenue growth than had initially been expected.

It noted that the statement also reported that the bid pipeline had increased by £1bn to around £14bn.

“There has been no change to the company's expectations for underlying revenue and underlying earnings as detailed in its recent trading statement, and no change to the bid pipeline,” Babcock added.

“The impact of slower than anticipated spares procurement activity relating to DSG was included in the guidance issued at the time.

“We look forward to continuing to work closely with the Army and MOD to deliver the transformation in vehicle availability and performance which is at the core of our long term Babcock DSG transformation contract.”