Interim Management Statement

RNS Number : 3734V

Babcock International Group PLC

09 July 2009

 



9 July 2009                                      

Babcock International Group PLC

Interim Management Statement

Prior to today's Annual General Meeting, Babcock International Group PLC (Babcock or the Group), the engineering support services Company, is issuing the following Interim Management Statement for the period since 31 March 2009.  

Trading performance

The 2009/10 financial year has started well. Market conditions for the Group as a whole remain resilient and trading is consistent with our expectations at the time of our preliminary results announcement on 12 May 2009.

All our major, long-term contracts and framework agreements, where we are providing essential engineering support for our customers' critical assets and infrastructures, are performing as planned in terms of expected work loads and their anticipated financial returns.  We remain confident that our ability to deliver cost efficient solutions for our customers will provide opportunities for the Group as pressure on public spending increases.

The Marine division has started the year strongly. There has been increased demand for design work within the Integrated Technologies business unit, particularly on the new aircraft carrier programme and also in Canada, where the submarine support contract continues to perform very well. The warship support business has made a good start to the year benefiting from the Royal Navy's continuous programme of refit and upgrade projects.  

The Nuclear division continues to receive a steady flow of contracts, supporting our confidence in the long-term market opportunities and reflecting the strength of our business model and market positioning. 

In the Rail division we continue to focus on delivering an improved financial performance and creating a more efficient business.  Restructuring is ongoing as the division withdraws from the unprofitable, multi-disciplinary project work. We expect this process, together with the attendant costs, to be substantially complete by the end of the first half.  

The power engineering business in South Africa continues to see a robust market both for outage support and overhead line development. Although the equipment market remains weak with orders approximately 50% lower than this time last year, the business is benefiting from an increasing demand for after-market service. The prompt action taken to reduce costs is providing support for operating margins.  

Financial performance

Cash generation has remained strong during the first quarter and net debt continued to reduce. This, combined with lower interest rates than last year, has delivered a reduction in finance costs and further enhanced the strength of the Group's balance sheet.  

As recently announced, the trustees of the Devonport Royal Dockyard defined benefit pension scheme have announced signature of a contract with Credit Suisse to cap exposure to increasing life expectancy. This is the first of three transactions to be completed and relates to c £300 million of pensions in payment liability.  The final transactions for £450 million are expected to be concluded by the end of September 2009. 

We continue to review the investment portfolios for all schemes to ensure effective hedges are in place against inflation and interest rate risk.  

Outlook 

The major markets in which we operate remain resilient and we remain confident they will continue to provide significant opportunities for growth.  

Our order book has increased to stand at around £6 billion as a result of further new contract wins.  The strength of our order book combined with a robust bid pipeline provides us with excellent long-term visibility and security of future revenues.  

Trading for the Group as a whole is consistent with our expectations at the time of our preliminary results announcement on 12 May 2009 and we look forward to another year of excellent progress for Babcock.  

Enquiries:

Babcock International Group PLC		020 7355 5300
Peter Rogers	Chief Executive
Bill Tame	Finance Director
Terri Wright	Head of Investor Relations
Financial Dynamics		020 7269 7291
Jon Simmons
Sophie Kernon

 

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