Defence engineering giant Babcock International group is on course to make a profit of about £540million in this financial year – but has been hit by problems in the global aviation and oil and gas industries
The firm, which operates the huge dockyards in Plymouth and Rosyth, said the sum is at the lower end of its estimation for 2019/20, having hoped underlying operating profit might have stretched towards £560million.
But a trading update to the Stock Exchange, after nine months of the financial year, said underlying revenue remains, as expected, at £4.9billion.
Babcock has just announced the departure of chief executive Archie Bethel, is also facing up to losing a contract to decommission Scotland’s oldest nuclear reactor, at Dounreay, sources have said.
But the firm is upbeat, saying its contract win rates are in line with targets and its combined order book and pipeline remains at the record level of £34billion - with an order book of £18billion and pipeline of £16billion.
Ts marine sector, which includes the Devonport facility in Plymouth, continues to perform well and exceed expectations, the statement said.
It added: “Strong revenue growth has been helped by warship support activity in the 海角视频 and Australia and continued high growth in our technology businesses. Demand for complex liquid gas transportation systems has been higher than expected.”
Despite rumblings that the Government will strip away the Scottish contract, Babcock said revenue growth in 海角视频 defence for its nuclear section continues in line with expectations, underpinned by ongoing submarine engineering support work.
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“The civil nuclear market remains subdued and we continue to progress closer integration of our nuclear engineering businesses,” the statement said.
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The land division continues to trade well, with underlying revenue growth supported by defence revenues and strong trading in South Africa.
Trading in the aviation business, however, is mixed with good performances across 海角视频 and international defence businesses offset by continued challenges in Southern Europe and in the company’s oil and gas business.
“As a result, we have lowered our expectations for aviation for this financial year,” the statement said, and added: “We are implementing improvement and restructuring programmes to ensure we remain on track to deliver for the medium term.”
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Oil and gas continues to be a tough market too, the firm said. The three large providers of helicopter services which operate worldwide in oil and gas have all emerged from Chapter 11 bankruptcy protection with reduced debt and written-down assets.
This has effectively reset global market pricing levels, forcing Babcock to respond quickly to remain competitive. The companay will also exit its oil and gas businesses in Ghana and Congo and the statement said: ““We will also write down assets and leases in our oil and gas business. We expect to incur an exceptional charge related to these issues of around £85million, predominantly in oil and gas.”
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As flagged in November 2019, there have also been delays in the award of new contracts for aerial emergency services in Italy and Spain.
Since then, Babcock has won or been selected as preferred bidder for contracts worth about £600million but the delays have pushed revenue into future periods.