Though public spending reviews and private sector retrenchment provided the backdrop for much of the past year, a subsequent rise in outsourcing opportunities and the successful integration of VT Group provide grounds for optimism for Babcock International.
During a period of 'tight financial constraints', the acquisition of VT has broadened the range of engineering support services that Babcock can offer its existing and prospective customer base. So, while the group order book has remained stable at around £12bn since the acquisition, Babcock experienced an encouraging 70 per cent rise in its bid pipeline during the second half to £8.5bn.
At constant exchange rates and adjusting for disposals and the £856m nine-month contribution from VT Group, full-year underlying revenues rose 5 per cent. Operating margins rose 1.3 percentage points to 9.9 per cent, reflecting £11.6m of cost savings in the period and growth of higher margin business in support services, defence and security. Cost savings are expected to rise to £50m by 2013.
Investec Securities anticipates current year adjusted pre-tax profits of £280m and EPS of 61p (£228m and 55p in 2011).
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| BABCOCK INTERNATIONAL (BAB) | ||||
|---|---|---|---|---|
| ORD PRICE: | 689p | MARKET VALUE: | £2.5bn | |
| TOUCH: | 688.5-691p | 12-MONTH HIGH: | 693p | LOW: 489p |
| DIVIDEND YIELD: | 2.8% | PE RATIO: | 22 | |
| NET ASSET VALUE: | 282p* | NET DEBT: | 71% | |
| Year to 31 Mar | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2007 | 0.99 | 57 | 21.5 | 8.10 |
| 2008 | 1.56 | 85 | 30.0 | 11.5 |
| 2009 | 1.90 | 107 | 37.4 | 14.4 |
| 2010 | 1.90 | 129 | 46.3 | 17.6 |
| 2011 | 2.76 | 115 | 31.3 | 19.4 |
| % change | +45 | -11 | -32 | +10 |
Ex-div: 8 Jul Payment: 9 Aug *Includes intangible assets of £2.09bn, or 582p a share | ||||
