Babcock trading in line, reiterates outlook for the year
Engineering services company Babcock International said on Wednesday that it is trading in line with its expectations, the order book and pipeline are strong and its outlook for the year is unchanged.
Babcock International Group
490.60p
16:30 10/01/25
FTSE 250
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FTSE 350
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Support Services
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In an update for the period from 1 April, the company said its order book and pipeline have a combined unchanged value of £32bn, with around 87% of revenue now in place for 2018/19 and around 57% for 2019/20.
Babcock, which cut its full-year revenue targets back in July, said it continues to expect low single digit underlying organic revenue growth at constant currency for the full year, with stable margins.
Underlying earnings guidance was also unchanged and the group said revenue and cash flow performance will be weighted to the second half as has been the case for several years. In addition, it said net debt should continue reducing during the year, with an expected net debt to EBITDA ratio of around 1.4x by the end of the year.
Babcock has now exited its North American mining and construction support business and agreed the sale of its media services business for around £30m, which is expected to complete in the coming months. In the second half of the year, it expects to exit its powerlines business in South Africa and plans to reshape its oil and gas crew change business to improve performance.
"We continue to make significant progress in expanding our international businesses, including the progress on FOMEDEC. We have won contracts for fire services in Australia and aerial emergency services in Finland and we are opening offices in South Korea and Japan to support ongoing contracts and to develop new business opportunities."
RBC Capital Markets said: "The shares have done very little of late and this remains one of the cheapest stocks in our coverage universe. Whilst we are cognisant of some of the perceived concerns (long-term contract accounting, lack of external board hires, cash conversion), we continue to believe Babcock is well placed in terms of its value-add service offering in its core UK businesses and also the emerging opportunities overseas. Credibility will take time to restore - but if it can dispel concerns on its cash and margin, then this should ultimately get reflected in the rating."