Babcock International Group PLC Trading Update (2206R)
September 20 2017 - 2:00AM
UK Regulatory
TIDMBAB
RNS Number : 2206R
Babcock International Group PLC
20 September 2017
20 September 2017
Babcock International Group PLC (Babcock or the Group)
Trading Update
Babcock, the engineering services company, is issuing the
following trading update for the period from 1 April 2017.
Overview
The Group is trading in line with our expectations and the
outlook for the year is unchanged. Revenue visibility has continued
to improve, with 89% of revenue now in place for 2017/18 and around
57% for 2018/19. The order book and bid pipeline of opportunities
have remained stable, and continue to provide confidence in our
ability to grow revenue as expected over the medium term.
Operational Review
The Group continues to make progress across all four sectors of
the business, and has been awarded a number of contracts since the
start of the financial year.
In our Marine sector we have begun to work on the cGBP360
million contract to be the technical authority and support partner
for the Royal Navy's new aircraft carriers, HMS Queen Elizabeth and
HMS Prince of Wales, and Type 45 destroyers. We also welcomed the
publication earlier this month of the UK Government's National
Shipbuilding Strategy which builds on the lessons from the
successful carrier programme and which creates potential
opportunities for Babcock and the wider UK supply chain.
We were pleased to secure a new seven-year contract for the
design, production and delivery of weapons handling and launch
equipment for the South Korean Jangbogo III submarine, which is the
third in a potential multi-boat programme. Our joint venture with
Oman Drydock Company to provide a sustainment at reach, repair and
maintenance hub for warships at Duqm, a key location in the region,
continues to make good progress with the award of contracts by the
US Navy's Military Sealift Command to undertake maintenance on two
of its fleet. Trading in our LPG business was slow in the early
part of the financial year, although we have now been awarded a
contract for the design and supply of our market leading cargo
handling system for two LPG carriers to be delivered at Jiangnan
Shipyard in Shanghai, China.
Our Aviation sector has enjoyed good momentum internationally
and we have now begun to mobilise to deliver the new cGBP500
million emergency medical services (EMS) contract in Norway which
sees Babcock leveraging its global experience to operate in the
country for the first time. Babcock will operate 11 fixed-wing
aircraft providing patients with access to specialist healthcare
centres across the country from summer 2019. Other awards in the
period include a contract to upgrade helicopters for the
Netherlands Police, a number of aerial fire-fighting contracts in
Spain and the renewal of two EMS contracts in Australia.
In France we have begun work on our cEUR500 million FOMEDEC
military air training contract for the French Air Force, and
completed the first test flight of the fleet of 17 Pilatus PC-21
aircraft. Under the terms of the agreement, we are procuring these
dedicated training aircraft and assets for the customer, who
expects to purchase the assets over the first four years of the 11
year contract. Following changes made by the customer to the
programme schedule, we anticipate formal acceptance of these assets
in the next financial year. We therefore anticipate a temporary
increase in the Group's working capital of around GBP70 million in
2017/18 (cGBP50 million at the half year), which will reverse out
in 2018/19 upon the signing of finance leases with the French
government.
In our Land sector, we continue to progress our vehicle asset
support contracts with customers such as the UK MOD, emergency
services and airlines. We continue to deliver on our long term
training contracts, and since the start of the year we have renewed
three civil training contracts in the UK. Whilst we have
experienced a slowdown in our Rail business since the start of the
financial year, this has been offset by growth in other business
units within the sector.
In our Nuclear sector, the Group has now agreed the terms under
which we will take the Magnox estate to the end of the first phase
of decommissioning at the beginning of September 2019. We are
participating in the tender process for Lot 2 (Engineering &
Design) for the Sellafield decommissioning opportunity. Our work on
the next tranche of the design for the Wylfa Newydd radioactive
waste facilities, for Japan's JGC Corporation, is currently
underway. Additionally, we are using our innovative asset
responsibility transfer process to work on the plan for the
decommissioning of Centrica Storage Limited's Rough 47/8A platforms
and infrastructure in the North Sea, under an initial 12 month
contract to provide all aspects of governance and compliance prior
to the start of decommissioning.
Outlook
The Group continues to maintain a healthy financial position,
with growth in line with its expectations for 2017/18. Revenue in
the Marine sector is expected to be slightly lower than in the
previous financial year, due to the stepdown in the volumes from
the Queen Elizabeth Class aircraft carrier programme and the phased
introduction of contracts, but this is expected to be offset by
growth in the other sectors.
The introduction of accounting standard IFRS15 in 2018/19 is not
expected to have a significant impact on earnings, given the nature
of the contracts the Group delivers. Detailed work on the standard
continues, and the Group will provide a view of the anticipated
impact at the full year results in May 2018, prior to its adoption
in financial year 2018/19.
Ends
Enquiries
Babcock International
Group PLC 020 7355 5300
Franco Martinelli
Kate Hill
FTI Consulting 020 3727 1340
Andrew Lorenz
Nick Hasell
Conference call
A conference call for analysts and investors will be held at
09:00 GMT this morning, access details below:
Dial in number +44 (0)20 3059 8125
Please state you wish to join the Babcock
International Group Trading Update call.
An audio-cast and replay details of the call will be available
at www.babcockinternational.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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