Babcock confident despite pressures on spending

29th Sep 2010 07:42

Engineering support services company Babcock International said current pressures on spending will slow short-term revenue growth but its order book and bid pipeline remain strong.In the first half of the current financial year trading has been strong and in line with management expectations. The group's order book now stands at around £12bn with the pipeline of opportunities that are currently being bid valued at around £5bn. The majority of this year's revenue, and a high proportion of next year's revenue, has already been contracted. All of the group's contracts continue to perform in line with expectations.The company is a major supplier of critical support services to the UK government and said it has been, and still is, involved in talks with government ministers about the need to make short and medium term savings."Although the outcome of these discussions will not be known until the Comprehensive Spending Review and Strategic Defence and Security Review are published, we are confident that in this environment the need for more efficient delivery of technical and support services will lead to an increased demand for outsourcing," the company said.Since the completion of the acquisition of VT Group cash performance has been excellent and net debt at 30 September is likely to be better than the board's planning assumptions."Whilst current pressures on spending will have some short-term impact on revenue growth, during this period earnings growth will benefit from both synergy savings and improving contract margins in the Support Services and International divisions," the company said.