More project delays hit Babcock shares

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The Independent Online
Babcock International's shares slipped 4p to 71p yesterday after the engineering to dockyard group said work on a big Australian project for Hanson's SCM chemicals operation had been deferred well into 1998. The news comes just two months after the contract, announced in July, was put back to next year.

The group, which last month paid pounds 20.5m for the privatised Rosyth naval dockyard in Fife, said the latest delay would not have any significant impact on this year's results, but would reduce revenues for the year to March 1998 by around pounds 8m. Some of this will be offset by a pounds 10m contract with British Chrome and Chemical, an offshoot of Harrisons & Crosfield, to build a new chromic acid plant on Teesside, which was also announced yesterday.

Graham Webster, a Babcock follower at Merrill Lynch, said the impact on profits was not huge but he was shaving his forecast for next year by pounds 2m, having cut the figure for the current year by the same amount in November. He is now looking for profits to rise from pounds 3.1m to pounds 7m in the year to March, and to still more than double to pounds 15m in the following 12 months.

He said the latest news was less important than the Rosyth deal. Given that it contributed pounds 11m or pounds 12m to annual profits, management had picked up the yard on "very, very good terms", he said. "Compared to Rosyth, this is just a niggle. It is not dramatic, but it is a nuisance."

Babcock, chaired by John Parker, has a large engineering services role in the Hanson-SCM Kemerton project, which involves the construction of a titanium dioxide plant in Australia. Mr Webster said the work on the Teesside plant, claimed to be the largest of its type in the world, would be at lower margins than the business deferred, although he expected Babcock to pick up further replacement work over the next six to nine months.