Babcock in confident mood

25th Jan 2011 07:53

The final quarter of 2010 saw more of the same for engineering support services group Babcock International, with trading in line with expectations.The order book remains stable at around £12bn, while, as expected, the pipeline of bids at pre-qualification questionnaire and invitation to tender stage has increased, and stands at £6bn, giving the board confidence for the future.With a nod to the recent comprehensive spending review (CSR), the company said it remains involved in "positive dialogue" with its key customers at the Ministry of Defence and with the Cabinet Office. Discussions with the Cabinet Office to be concluded by the end of the financial year.The board's view is that the CSR and the Strategic Defence and Security Review (SDSR) will lead to significant new outsourcing opportunities. "Following on from the SDSR, we have identified a comprehensive list of cost saving initiatives for our customer where our experience of working with all three armed services will enable us to provide them with more cost-efficient, long-term solutions," the company said.The integration VT Group, acquired last year, is progressing swiftly and the delivery of merger benefits is on track. The company is confident of achieving £50m of benefits at the pre-tax level in total and as scheduled, achieving a run rate of £11m by 31 March 2011, with annualised financial efficiencies of £8m already generated. On the financial side, the group's net debt to ebitda (earnings before interest, tax, depreciation and amortisation) ratio at the year end is expected to be substantially better than anticipated at the time it launched the VT bid."The strength of our order book and bid pipeline along with our involvement in long-term programmes gives us excellent visibility of future revenue streams. We are confident of achieving our expectations for this financial year and expect to make further good progress thereafter," the statement concluded.