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Babcock profit jumps after £1.25bn MoD contract boost

Engineering contractor Babcock has reported a hike in profits for the first half of its financial year, although revenues slipped.

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The company, which employs 35,000 people and is a major contractor to the MoD, Royal Navy, Army and RAF, said a strong performance from its marine business offset weakness in its aviation division.

Babcock 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.

It turned over £2.19 billion in the six months to September 30 2019, down from £2.25 billion 12 months earlier.

However, gross profit climbed to £305.5 million from £239.8 million and pre-tax profits rocketed to £152.5 million from £65.1 million for the same period in 2018.

The company said it expects underlying revenue for the year to be about £4.9 billion, and underlying operating profit to be between £540 million and £560 million.

Babcock's vehicle engineering business at Aldridge carries out conversion work for the emergency services

It was boosted by winning a £1.25 billion contract with the MoD to build five new Frigate. Work will start on the ships, at Rosyth in Scotland, later this year.

Overall, the company secured about £3.5 billion worth of contracts in the first half, and said its combined order book and pipeline grew 10 per cent between March and September, hitting a record £34 billion.

The defence firm also announced a new £300 million contract to provide training to the Metropolitan Police.

Babcock chief executive Archie Bethel said: "The results show we are doing what we said we would do. Our delivery in the first half is in line with our expectations, with good performance across most of the group.

“Our strategy is delivering. We have continued to expand our international footprint, with new aviation operations in Norway and Canada and the start of our support of the Australian Navy’s amphibious assault ships. And our pipeline of opportunities has increased to £16 billion as a result of increased bidding activity across our markets. Our combined order book and pipeline of over £34 billion is at its highest level ever.

“I am pleased with the progress we’ve made so far this year and we look forward to continuing to deliver our strategy through this year and over the medium term."

Babcock is headquartered in London and has UK bases in Bristol, Dorset, Plymouth, Telford, Leicester, Warrington and Scotland.