Business opportunities picking up at Babcock

29th Mar 2011 07:28

Engineering support services company Babcock International is sitting on a strong order book and a growing bid pipeline, giving it confidence for the next financial year.Having seen a slowdown in the first half of the year in the number of new contracts coming up for tender this trend has reversed in the second half of the financial year. The pipeline of bids at pre-qualification questionnaire or invitation to tender stage currently stands at around £7bn, up from £6bn at the time of the company's interim management statement in January 2011. Since the award of the five year, €200m British Forces Germany facilities management contract announced in February, Babcock has also been down-selected by the Ministry of Defence as the sole industry bidder for the 10 year, circa £300m Maritime Equipment Transformation (MET) programme.Cash generation throughout the financial year so far has been strong and has enabled the company to pay down debt. Net debt at the end of March is expected to be less than £750m, and the resulting net debt to earnings before interest, tax, depreciation and amortisation (EBITDA) ratio is expected to be well below the 2.8 reported at the halfway stage (end-September) of the company's financial year.Since the completion of the VT acquisition in July, the order book for the combined group has been stable at around £12 billion, reflecting a steady inflow of new contracts, rebids and contract extensions from the bid pipeline. The structural reorganisation of the VT Group has been completed, and the group is confident of achieving the merger benefits of £50m at the pre-tax level.- - -jh