Babcock posts solid profit growth as nuclear revenues jump

(Sharecast News) - Babcock International delivered a big jump in profits over the first half ended 30 September, driven by double-digit organic growth in its nuclear division and an improvement in group margins. The company, which provides engineering support to defence markets along with products like naval ship and weapons handling systems, said it remains on track to hit its targets for the full year.

Group revenues totalled £2.54bn over the half, up 5% over the year before but 7% higher on an organic basis, helped by £989m of revenues in its largest division, Nuclear, which grew 14% organically. This was driven by strong growth in submarine support activity and in civil nuclear where new projects ramped up.

Meanwhile, marine organic revenues increased 6% to £823m and aviation organic revenues jumped 26% to £201m. This helped to offset a 10% decline in the land division to £526m due to the completion of a number of delivery projects in rail, and falling mining equipment sales in Africa.

Underlying operating profit was up 19% at £201.1m, driven by solid revenue growth and a 90-basis point improvement in underlying operating margins to 7.9%, with increases reported across all sectors.

Cash generated from operations jumped to £226.9m from £181.3m the year before, while net debt reduced to £351.1m from £385.6m.

Looking ahead, the company had a contract backlog of £9.9bn by the end of the half, up from £9.5bn the year before, with significant orders in the land and aviation markets booked for the second half.

"We are on track to achieve our expectations for the full year and are pursuing exciting opportunities for sustainable growth and margin expansion, both in the UK and internationally," said chief executive David Lockwood.