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Major Telford employer Babcock cuts full-year revenue growth target due to slowdown in defence work

By James Pugh | Aldridge | Business | Published:

Engineering contractor Babcock, which employs hundreds of people in Shropshire, has cut its full-year revenue growth target due to delays in UK defence activity.

An armoured vehicle at DSG in Donnington

Government spending on submarines hit its marine division, sending its shares down more than 10 per cent.

Babcock, which provides specialist support and services to groups including Britain's defence ministry and governments around the world, also said it would sell two low-margin businesses and make further disposals through the year.

It had previously forecast "low mid-single digit" growth.

The company includes the Defence Support Group operation at MoD Donnington, in Telford, and the former Macneillie specialist vehicle conversions business at Aldridge, now renamed Babcock Vehicle Engineering.

Shares in the group fell 10 per cent in early trading yesterday and were down eight per cent at 742 pence by 7.25am despite it reiterating its underlying earnings guidance.

A provider of aerial emergency services, nuclear support and fleet management, Babcock said it had clarity on the year ahead, with 83 per cent of revenue now in place. Its order book of signed contracts remained stable and its pipeline of bids in progress increased.

The slowdown in its marine division came as its naval business suffered from a temporary slowdown of revenue as the government's new Submarine Delivery Agency reviews the timing of its planned spending.

That, combined with an expected decline in revenue from the Queen Elizabeth Carrier project is set to result in a year-on-year reduction in marine revenues in the first half of the year. New order wins should help soften the blow for the full year however.

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Babcock is in the final stages of work on the Queen Elizabeth Class Aircraft Carrier programme. HMS Queen Elizabeth was officially handed over to the Royal Navy this year. Its sister ship HMS Prince of Wales has been formally named and floated out of the build dock.

Analysts at Stifel welcomed the strength of the bid pipeline and the plan to tidy the portfolio.

"We see any weakness as a good buying opportunity," they said. "Fundamentally, Babcock is a business underpinned by some attractive characteristics, operating in broadly defensive markets and with significant opportunities to grow overseas."

James Pugh

By James Pugh
@JamesP_Star

Shropshire Star Business and Farming Editor.

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