The Investment column: Babcock
Friday 18 June 1999
Sorting out the one-time boilermaker-to-dockyard management group defeated the combined might of City legends such as Lord King, Jeff Whalley and Tony Gartland. When Dr Parker took the helm in 1993, Babcock was a confused mish-mash of seven separate divisions. The share price was volatile as most of its turnover came from high-risk contracts with power stations and construction companies.
Now Babcock has become a lean machine with just two divisions - engineering services and materials handling. It is winning low-risk, higher margin contracts such as refitting the Ark Royal and the navy's submarines.
The company made a breakthrough by buying Rosyth naval shipyard, a risky punt on the yard's ability to benefit from the Government's strategic defence review. Babcock's bet paid off and Rosyth now has guaranteed refitting orders until 2007.
The disposal of a 50 per cent stake in a water treatment venture has reduced turnover, but profits still leapt last year to pounds 25.3m, 10 per cent ahead of forecasts. Earnings per share doubled to 11.44p from 5.93p.
Prospects are good. Babcock is in consortiums bidding for forthcoming weapons and decontamination contracts. The shares tipped up just 2p to 121p yesterday, giving Babcock a forward p/e of 11. That's higher than its peers, but it undervalues the turnaround. Buy.
- 1 Forget 'The Dress': Here are five of the biggest news stories you might have missed
- 2 The black and blue dress: Makers considering a white and gold version
- 3 PornHub turns masturbation into energy in bid to save the planet
- 4 The remarkable archaeological underwater discovery that could open up a new chapter in the study of European and British prehistory
- 5 Saudi Muslim cleric claims the Earth is 'stationary' and the sun rotates around it
Boris Nemtsov shot dead: Outspoken Putin critic who had expressed fears for his life is killed near the Kremlin
PornHub turns masturbation into energy in bid to save the planet
Ukraine crisis: Top Chinese diplomat backs Putin and says West should 'abandon zero-sum mentality'
White and gold or blue and black – what colour is the dress? An eyewitness gives a definitive answer
Saudi Muslim cleric claims the Earth is 'stationary' and the sun rotates around it
New theory could prove how life began and disprove God
Half of Ukip voters say they are prejudiced against people of other races
This is what it's like to be dead, according to a guy who died for a bit
'Cash for access' scandal: Sir Malcolm Rifkind says 'unrealistic' for MPs to live on £67,000 salary
'Jihadi John': CAGE representative storms off Sky News accusing Kay Burley of Islamophobia
Ukip would cut billions from Scottish budget to fund English tax cuts
iJobs Money & Business
£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...
£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...
£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...
£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...