Interim Management Statement

RNS Number : 6515M

Babcock International Group PLC

03 February 2009

 



3 February 2009                                  

Babcock International Group PLC

Interim Management Statement 

Babcock International Group PLC ('Babcock' or 'the Group'), the engineering support services company, today provides an Interim Management Statement for the period from 1 October 2008.  

Trading performance 

Overall, trading conditions continue to be strong and Group performance remains in line with our expectations outlined at the time of our half year results on 11 November 2008.  

The markets in which our Marine, Nuclear, Defence and Networks divisions operate remain resilient and activity levels remain high, with the performance of all major contracts proceeding as planned. Key events since the announcement of the half year results include:  

• Construction of the bow section for the first of the new aircraft carriers has started at our Appledore facilities in Devon.  

• The contract to provide training, training support and facilities management at the Royal School of Military Engineering became fully operational at the beginning of January.  

• The scheduled programme of work for HMS Vigilant's Long Overhaul Period (refuel) has started in Devonport as planned. 

• In Canada, the Victoria In-Service Support Contract is fully operational and a steady flow of emergent work is starting to come through. 

• Decommissioning activities at Sellafield, Dounreay and AWE have increased significantly as has outage support to British Energy. 

• We continue to be involved in ongoing discussions relating to the UK's programme of new build nuclear facilities.

We are confident that these divisions will continue to experience robust market conditions and benefit from the scale and the depth of their technical expertise.  The bid pipeline remains healthy with a number of significant contracts to be signed in the near future.

In Rail, volumes for Track Renewals and Signalling have remained robust and both businesses continue to trade profitably. Following our withdrawal from multi-disciplinary project work, action is being taken to restructure the division to focus on the more profitable areas of the business. The related costs are slightly higher than expected and will leave the division at or around break even for the second half of the year.  We are in discussion with Network Rail following their recent announcement stating that they are seeking to achieve better value for their track renewal activity.  A review of the implications of this announcement for our Track Renewals business is underway, however we do not expect these to be material.    

In South Africa, outage support for Eskom's power stations remains very strong, as does the ongoing refurbishment and new build of the power transmission network. We expect the strength of this market to continue throughout the next financial year. Demand for Volvo equipment weakened significantly during December and this market is expected to remain subdued for much of 2009. We have taken action to reduce inventory levels and overheads in line with the lower level of activity and we remain confident that the results for the division in this financial year will show progress on last year.  

Financial performance 

The Group's cash flow performance remains strong and net debt has continued to reduce in line with our expectations. Funding lines remain secure with committed five year revolving credit facilities of £600 million running through to 2012.  

As announced at the time of our preliminary results in May 2008, we are working on a number of projects to reduce volatility in the Group's earnings and cash flows generated by our pension schemes. These projects are all progressing well and we hope to have the majority concluded by the time of our preliminary results announcement in May 2009.  

Outlook 

The major markets in which we operate remain attractive with good growth prospects and overall trading conditions across the Group continue to be resilient. Our performance remains in line with our expectations at the time of our half year results on 11 November 2008, with weakness in the Rail projects business and the South African equipment business more than offset by a strong performance across the rest of the Group.

The strength of our order book gives us excellent visibility for the remainder of this financial year and beyond.  We remain confident that this will be another year of excellent progress for the Group.  

Enquiries:

Babcock International Group PLC                    020 7355 5300

Peter Rogers

Bill Tame

Terri Wright

Financial Dynamics                                              020 7269 7121

Andrew Lorenz

Sophie Kernon

A conference call for analysts and investors will be held at 8 am this morning. For dial in details please contact Financial Dynamics on 020 7269 7121.  

 

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