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(Alliance News) - Babcock International Group PLC on Tuesday said it swung back to profit and revenue grew in its first half, but it remains cautious looking ahead given inflationary headwinds and Covid uncertainty.
For the six months ended September 30, the London-based aerospace, defence and nuclear engineering services company swung to a pretax profit of GBP58.5 million from a loss of of GBP811.6 million in the same period the previous year.
This was driven by a restatement of goodwill of GBP760.5 million in respect of the first half of its previous financial year, a charge which did not repeat in the recent six-month period.
Babcock also swung to an operating profit of GBP74.4 million from a loss of GBP785.3 million a year before. Its underlying operating profit jumped to GBP115.3 million from GBP84.5 million.
Revenue was up by 8.2% to GBP2.22 billion from GBP2.05 billion.
Recent contract wins have further aided Babcock's recovery with its contract backlog increasing to GBP10.9 billion at the end of September from GBP9.4 billion a year ago.
Deals include a GBP3.5 billion five-year deal UK Royal Navy, a GBP500 million defence aviation contact with France and a 10-year deal with the Australian government to oversee its defence communications for its land and sea forces.
Babcock highlighted its GBP400 million disposal plan to help it pay down debt, which saw the sale of its oil and gas aviation business in August for GBP10 million and its Frazer-Nash consultancy business for a GBP290 million in October. Babcock's sale of its stake in AirTanker Holdings Ltd for GBP95 million is expected to be completed in the second half.
Looking forward, Babcock continues to expect GBP40 million in annualised cost savings, with a benefit of around GBP20 million in the current financial year. Babcock said the changes include more streamlined processes, strengthened controls, and more standardisation.
Chief Executive David Lockwood said: "We are on-track with our turnaround strategy with around GBP400 million of disposals to bolster our balance sheet announced to date. We will continue to align our portfolio to best support the group's capital allocation priorities and future growth. The ongoing implementation of our new operating model means Babcock will be a simplified, more focused group.
"While our half year results show some recovery from the financial impact of Covid-19, we remain cautious as we are early on in our transformation and as we manage inflationary and supply chain pressures across the business and potential interruptions from Covid-19. However, the board believes the actions we are taking will enable the group to take advantage of the many opportunities ahead of us, leading to improved cash generation and profitability in the medium term."
Shares in Babcock were up 1.9% at 312.70 pence on Tuesday morning in London.
By Heather Rydings; heatherrydings@alliancenews.com
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