Babcock International Group PLC (LON:BAB) said its new financial year has "started well" and the engineering services firm is confident in its outlook having already locked in large portions of anticipated revenue for this year and next.
In a trading update ahead of today’s annual general meeting, the FTSE 100-listed firm said trading has been in line with expectations in the new financial year, which started on April 1, and said visibility has continued to improve.
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The company said it has 82% of expected revenue for the current year to the end of March 2018 locked in, as well as around 55% of anticipated revenue for the 2019 financial year.
Babcock said: "The order book and bid pipeline of opportunities have remained stable at around £19.00bn and £10.50bn respectively following contract wins, and the tracking pipeline remains buoyant, providing confidence in our ability to grow in line with our expectations this year and over the medium term.”
The group added that a contract worth a total of £500mln have been secured since the start of the current financial year after securing work to operate a fleet of specialist fixed-wing aircraft for the Norwegian Health Service from summer 2019.
It was also awarded a contract with the Royal Navy that will be worth around £360mln over a seven-year period.
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Babcock said as well that its joint venture with the Oman Drydock Co has formally begun with the provision of support to vessels including US Navy ships.
The group reiterated its plans to reduce debt in the second half of the current financial year to bring net debt down to around 1.6 times higher than annual underlying earnings (EBITDA) by the end of March 2018.
Babcock’s full-year results for the 12 months to the end of March, released in May, beat expectations with a 7.6% rise in adjusted pretax profit and a 9.1% hike to the annual dividend.
In early trading, Babcock shares were 3.7%, or 32p higher at 901.5p.
"Significant opportunities overseas"
In a note to clients, analysts at Liberum Capital reiterated a ‘buy’ rating and 1,100p price target on Babcock.
They said: “There are significant opportunities overseas and on Type 31 at Marine. Technology should be a growth driver.
“We expect further outsourcing opportunities at Land but a weaker Rail and South Africa. Despite concerns over Hinkley, works are continuing and we see a large addressable market at Nuclear. Near term opportunities from Gateway and Hades at Aviation.”