This was the first set of figures from support services group Babcock following its acquisition of rival VT in July. The integration of the two businesses is going to plan, with management reiterating prior guidance that the deal will create £50m of savings and £8m of financial efficiencies by 2013, with £11m of these to start coming through by March 2011. Stripping out £17m of exceptional costs and £30.6m of amortisation charges, underlying pre-tax profits increased 27 per cent to £90.9m, including £27m from previous VT businesses.
The group has now split into four divisions, with defence receiving the largest revenue contribution from VT in the first half, and marine the smallest. The support services division's training contracts performed strongly, while the international division benefited from a recovery in South African mining. Boasting a total order book of £12bn, no contracts were cancelled in the six-month period and the bid pipeline sits at £5bn. Management is confident about government talks on contracts for next year, while visibility of sealed deals is high for the remainder of this financial year.
But, most encouragingly, impressive cash conversion meant net debt of £796m was significantly below analysts' expectations of £861m, helped by strong working capital management and lower capital expenditure.
Broker KBC Peel Hunt forecasts adjusted pre-tax profits of £223m and EPS of 53p (from £145m and 51.2p in 2009).
Babcock (BAB) | ||||
|---|---|---|---|---|
| ORD PRICE: | 579p | MARKET VALUE: | £2.08bn | |
| TOUCH: | 578-580p | 12-MONTH HIGH: | 661p | LOW: 489p |
| DIVIDEND YIELD: | 3.1% | PE RATIO: | 17 | |
| NET ASSET VALUE: | 247p* | NET DEBT: | 89% | |
| Half-year to 30 Sept | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 0.92 | 66.1 | 23.2 | 4.8 |
| 2010 | 1.18 | 41.4 | 11.5 | 5.2 |
| % change | +30 | -37 | -50 | +8 |
Ex-div: 15 Dec Payment: 14 Jan *Includes intangible assets of £2.12bn, or 593p a share. | ||||
