Outsourcing boost for Babcock

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ENGINEERING services group Babcock International received a boost from the global austerity measures in the first half of its financial year, as governments farmed out more work to the private sector.

Babcock, which maintains British navy submarines, said its focus on services and maintenance had put it in a strong position as clients looked to cut costs by outsourcing.

Peter Rogers, chief executive, said: “In terms of government outsourcing, the contracts have started to come through now and resources seem to have been firmly focused on saving cash for governments. The outlook for defence outsourcing in Canada, Australia, Brazil and the Middle East is also positive.”

Babcock reported a better than expected 13 per cent rise in underlying pre-tax profit to £143m ($228m) in the six months to the end of September. The support services unit was the star performer, delivering an organic growth rate of 18 per cent. Analysts had been expecting the pre-tax profit to come in slightly lower at around £140m. Revenue rose six per cent to £1.55bn.

Babcock, whose order book has jumped four per cent to £12.5bn in the past year, said it had secured preferred bidder status on a number of new long-term contracts as well as extensions to existing deals. It said its bid pipeline stood at more than £13bn – up from £9bn a year ago.

“All of the divisions marginally exceeded our forecasts,” said Panmure analyst Mike Allen.