Defence engineering giant Babcock International Group has reported “excellent progress” despite a Government contract dispute denting its profits.
The group, which runs Plymouth’s Devonport Dockyard and employs more than 5,000 people in the port city, posted revenue of £4.4bn during the year to March - up 8% on the previous 12 months.
Bosses said cash generation of £348.9m during the period - up from £41.8m in the previous financial year - had exceeded expectations. The company has concluded a disposal programme which included a 100m euro sale of its European Aerial Emergency Services business.
However, statutory operating profit plummeted to £45.5m from £226.8m a year earlier. The firm said this was partly down to
The company said in a trading update in April that costs to deliver five ships - which are being designed in Plymouth and built at Rosyth in Scotland - had risen since it was originally awarded the contract by the Ministry of Defence in 2019.
Babcock has said it has been unable to reach agreement with the MoD over who is responsible for the additional costs. A dispute resolution process has commenced, which may lead to an arbitration. The company had said in April the additional costs of the project would need to be reflected in its year-end results.
Babcock has said it has recognised more than £600m of revenue but no profit on the programme. The first of the five ships for the Royal Navy is due to be structurally complete in December, while construction started on the second ship in January.
The board said that when excluding the forecasted loss on the programme, the group made an underlying operating profit of up to £278m during its latest financial year.
Chief executive David Lockwood said: "We've made excellent progress this year, with better-than-expected cash generation, margin expansion and double-digit revenue growth. When we started our transformation, my first goal was to stabilise and strengthen the balance sheet and I'm delighted to say that work is complete. Babcock is now a higher-quality, lower-risk and more predictable business, with a clear focus on execution.
"In a world of significant instability, national security has never been more important. With defence making up two-thirds of the Group, the combination of capability, availability and affordability we offer is increasingly relevant. I'm excited by the momentum building across the business, and that confidence is reflected in our expectation of continuing cash-backed profitable growth, and reintroducing a dividend in FY24."
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