Babcock restructure pays off

Babcock International reaped rewards from its wide-ranging restructuring exercise last week, reporting a 50% increase in advance orders on the back of a huge reduction in full-year losses. The company last week reported pre-tax losses of just £4.5m, compared with £22.7m the previous year. It made an operating profit of £19.6m compared with a restated […]

Babcock International reaped rewards from its wide-ranging restructuring exercise last week, reporting a 50% increase in advance orders on the back of a huge reduction in full-year losses.

The company last week reported pre-tax losses of just £4.5m, compared with £22.7m the previous year. It made an operating profit of £19.6m compared with a restated £14.6m last time.

Chairman Dr John Parker said the group had substantially reduced losses and cleared the decks to focus on higher margin businesses.

Babcock has now either pulled out of, or refocused, its underperforming process, environmental and African operations.

The restructuring means the firm is now much less exposed to heavy contracting. Instead it is concentrating on facilities management, through the first full year of ownership of the Rosyth Royal Dockyard, and materials handling.

Parker said the dockyard had performed well on the core refit programmes for the Ministry of Defence. All nuclear submarines and surface ships were delivered on or ahead of schedule and within budget.

Materials handling boosted profits despite continuing losses in the wood technology operations, and the division was affected by the strong pound, incurring a currency translation hit of £700,000.

Restructuring included several disposals. Babcock Environmental was closed down in the US during the first half of the year and the process division was sold to Amec.

Babcock also sold its South African subsidiary Delta Controls, as well as its loss-making wood technology business in Atlanta, Georgia.

Attention is now focusing on potential acquisitions.

Parker said the group was considering a number of small technology-based deals, adding that with no gearing it was well placed to deliver substantial growth through acquisition.