Babcock sees bright future in defence services

Babcock International, a contractor to the Ministry of Defence for work on warships and nuclear submarines, saw its shares close up 13 per cent yesterday after the group said it had implemented much of its strategy to become a dedicated support services business.

Reporting full-year results, the company said it had the building blocks in place to grow both turnover and earnings in the core businesses.

The integration of the defence services business from Hunting, the confirmation of the partnering contract for facilities management at Faslane, and the disposal of the majority of the engineering businesses resulted in a substantially changed business. In the process, exceptional items hit earnings and yesterday's numbers, for the year ended 31 March, reported a loss before tax of £13.9m, after exceptional charges and goodwill amortisation of £27.3m. Operating profit came in at £14.9m, an improvement on last year's £9.7m.

In anticipation of a positive future, the board raised the total dividend by 7.5 per cent to 2.85p from 2.65p.

Turnover for continuing businesses increased by 17 per cent to £359m. The changes in turnover reflect the disposal of the engineering businesses and the growth of the support services businesses.

Confirmation was also received of the contract to manage the naval base on the Clyde (Faslane and Coulport), valued at £350m over the next five years. The chairman, Gordon Campbell, said: "Babcock is now clearly a supplier of support services and facilities management, mainly to the Ministry of Defence. This will provide a secure base-load to take the business forward, and Babcock will seek to grow the business by securing further contracts."