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Babcock says trading is in line with expectations, outlook unchanged

Published: 08:23 19 Sep 2018 BST

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The engineering group still expects “low single digit” underlying organic revenue growth for the year

Babcock International Group PLC (LON:BAB) said trading has been in line with its expectations and that its outlook for underlying revenue growth and underlying earnings is unchanged.

The group, part of the FTSE 250 index, said its engineering order book and pipeline “remain strong” with a combined value unchanged at around £32 billion, with about £18bln for the order book and roughly £14bln for the pipeline.

In the trading update for the period from April 1, Babcock said about 87% of revenue is in place for 2018/19, and about 57% is in line for 2019/20. 

READ: Babcock says expectations unchanged after it missed out on MoD contract

The company’s outlook for the full year is unchanged as it still expects “low single digit” underlying organic revenue growth with stable margins. Guidance for underlying earnings is also unchanged, and Babcock said its revenue and cash flow performance will be weighted toward the second half of the year.

Debt should be reduced during the year, with net debt to earnings before interest, taxes, depreciation and amortization ratio to be around 1.4 times by the end of the year.

As part of its restructuring efforts, Babcock expects to leave its powerlines business in South Africa in the second half of the year and to reshape its oil and gas crew change business to improve performance.

Restructuring “has intensified our concentration on core higher-margin strategic businesses and is increasing our focus on three core markets: defence, emergency services and nuclear. These markets already account for around three-quarters of our revenue and offer sustainable growth opportunities, particularly internationally,” said Babcock.

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