Subs keep Babcock well above water

Babcock International, the support services group which maintains Royal Navy submarines, has posted a 26 per cent jump in full-year profits to a record and raised its forecast for this year as it rode the wave of public and private outsourcing.

Shares in Babcock jumped nearly 9 per cent to 868.5p as it reported pre-tax profits of £274m and a 17 per cent rise in the dividend for the year to the end of March, as military and engineering clients outsourced more work to cut costs. Sales rose 14 per cent to £3.07bn, while the full-year dividend came in at 22.7p.

Babcock's chief executive, Peter Rogers, said: "Our key markets remain strong and the current economic climate is favourable to the further growth of our business. The board expects the group to make further strong progress in 2012-13 and for earnings to be ahead of its previous expectations."

Babcock also said it had sold its US defence business, VT Services, for £61m to a vehicle backed by the Resolute Fund, a private investment group. The company said it was selling VT because it was not central to the group's business.