Babcock lays out plans to boost earnings growth
Defence group Babcock International has outlined plans to boost earnings growth by up to four per cent over the next five years as it looks to turn around its fortunes.
The group – which last month revealed a 40 per cent slump in annual profits and warned over the next year's result – set out a raft of medium-term targets, including earnings growth of three to four per cent.
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.
As part of its target, it said it would look to increase total revenues from its three key markets – defence, emergency services and civil nuclear – to more than 85 per cent from around 75 per cent currently.
The firm – which is the Ministry of Defence's second largest contractor – also plans to increase revenue from overseas from 30 per cent of group turnover currently, to more than 40 per cent.
Babcock – which is holding a capital markets day event for investors – added it had made changes to its naval nuclear business, combining it with Cavendish Nuclear to create a new nuclear sector, under a single management team led by Simon Bowen.
Shares in Babcock lifted four per cent on the growth plans, which come after a testing time for the group.
Shares in the defence and engineering contractor reached their lowest level in a decade last week after its profit warning.
Babcock shares have also been sent tumbling in recent months after coming under fire from a mystery analyst called Boatman Capital.
But Liberum analysts said Babcock's new medium term targets and plans are "very positive".
"Although after a number of small warnings, it will take time for Babcock to re-build its credibility," they added.
Babcock recently named former Royal Dutch Shell executive Ruth Cairnie as its first chairwoman.
She will succeed outgoing chairman Mike Turner on his retirement at Babcock's annual shareholder meeting on July 18 after 11 years in the role.