Babcock maintains guidance despite "uncertainty" in oil business
UK engineering group Babcock expects to hit forecasts for the full year after strong trading momentum continued into the third quarter, despite the collapse in oil prices causing “uncertainty” in some divisions.
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The company, which serves markets such as defence, energy, telecommunications and transport, said it “continues to experience strong demand for its services through existing contracts and bidding and business development activities remain buoyant”.
The integration of helicopter firm Avincis, bought for £1.6bn last May, is progressing “smoothly”, Babcock said.
The division, now renamed Mission Critical Services (MCS), has continued to perform in-line with expectations since the half-year with a stronger emergency services business offsetting reductions in oil and gas activities.
The company said: “Since the half-year results announcement in November, the fall in the oil price has caused some uncertainty for the oil and gas businesses (c30% of MCS), however, the vast majority of this business continues to benefit from long-term contracts in the North Sea and Australia.”
Just 3% of the MCS business is is exposure to discretionary spend by oil and gas customers and is at risk from the recent fall in oil, it said.
Meanwhile, Babcock’s order book stands at £20bn, up from £18.5bn at the half-year stage in September, while its bid pipeline of around £13bn provides visibility of over 70% of anticipated revenues for the following financial year.
“The group's strong order book provides excellent visibility and we continue to see significant prospects for growth as we progress bids in the pipeline and opportunities being tracked that have yet to come to market.”