Cash generation remains strong at Babcock

31st Jan 2012 07:03

There is little sign of orders drying up at Babcock International, with the engineering and support services firm saying it is in discussions with its major customers about their plans for future outsourcing initiatives.The group said it traded in line with expectations in the final quarter of 2011 with the order book and bid pipeline remaining stable at around £12bn and £10bn, respectively.Since the group released its interim results in November 2011 it has closed a number of new deals with aggregate expected total revenue of around £2bn, and this amount will move over from the pipeline amount to the order book over the next few months as the projects become operational.Cash generation across the business remains strong and, as previously indicated, net debt at 31 March 2012 should represent less than two times earnings before interest, tax, depreciation and amortisation (EBITDA). The review of the performance of the different parts of the business painted an upbeat picture, such that it was the occasional bit of bad news which caught the eye, and these were mainly to be found in the International division. The South African Eskom power generation business has seen some slippage as outages are deferred, while in the US the group's defence support operations are experiencing some delays in the award of task orders under "indefinite duration indefinite quantity" contracts. The group said it is continuing to explore options for its US defence operations, but has nothing new to report as yet.Notwithstanding the odd fly in the ointment, the group said it continues to benefit from excellent visibility through its long-term contracts, strong order book and bid pipeline and therefore remains confident of delivering good progress this year, in line with its expectations.jh