"Boringly predictable" was how Babcock (BAB) chief executive Peter Rogers described the outsourcing giant's first-half results. But predictable can be a good thing, indeed, when it means reliable earnings, dividend growth and visible revenues. Underlying profit before tax (as opposed to statutory in our table) rose 17 per cent on year to £142m with EPS up 13 per cent to 31.6p. On the same basis, analysts at Investec expect full-year pre-tax profit of £309m and EPS of 68.5p.
In the six-month period, both Babcock's key businesses - marine and technology, and defence and security - posted double-digit rises in operating profit. The group's support services division also saw good revenue growth, but margins were hit by a ramp up in new contracts as margins tend to be lower in the early stage of a contract. Nevertheless, it was reassuring to see the overall group operating margin stable at 10.2 per cent.
Equally reassuring was an unchanged order book of £12bn at the end of the first half - that's almost four times last year's reported revenues - while the bid pipeline stood at £15.5bn. Big potential contract wins coming up include the huge Magnox nuclear decommissioning contract and the Ministry of Defence Next Generation Estates contracts, with preferred bidders expected to be announced in March and sometime next summer, respectively.
BABCOCK INTERNATIONAL (BAB) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,286p | MARKET VALUE: | £4,656.2m | |
| TOUCH: | 1,285p-1,286p | 12-MONTH HIGH: | 1,319p | LOW: 954p |
| DIVIDEND YIELD: | 2.1% | PE RATIO: | 22 | |
| NET ASSET VALUE: | 242p* | NET DEBT: | 64% | |
| Half-year to 30 Sep | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 1.56 | 80 | 20.2 | 6.3 |
| 2013 | 1.70 | 106 | 25.6 | 6.9 |
| % change | +9 | +32 | +27 | +10 |
Ex-div: 11 Dec Payment: 10 Jan *Includes intangible assets of £1.86bn, or 514p a share | ||||
