- £400m of disposals agreed in first half
- Net debt set to fall to 1.6-times cash profit
Defence and engineering group Babcock (BAB) agreed to offload its UK power business on Christmas Eve for £50m.
The division, which provides engineering services to electrical transmission and distribution businesses like National Grid and Scottish Power Energy Networks, made a profit before interest and tax of £7m in the year to March 31, on revenue of £70m. It has been bought by M Group Services and will become part of its Morrison Energy Services arm.
Earlier this month, Babcock said it had finalised the £400m worth of disposals it intended to make as part of a restructuring process aimed at shoring up its balance sheet, adding it would look to complete any further deals to offload business units by its financial year-end next March.
Broker Panmure Gordon raised its target price on the company’s shares to 415p, forecasting that the latest deal will help to bring Babcock’s full-year net debt for 2022 down to 1.6-times cash profit, which is a considerable improvement on the 2.5-times it was sitting at in March this year.
The company still has some restructuring to do, though, and after posting years of heavy losses we would like to see improvements in the core defence business before changing our sell recommendation.
