Babcock International, the engineering support services company, expects earnings in the current year to be ahead of previous expectations, thanks to its bulging order book.
"Our key markets remain strong and the current economic climate is favourable to the further growth of our business. We have excellent forward visibility with our long-term contracts, strong order book and bid pipeline. Therefore, the board expects the group to make further strong progress in 2012/13 and for earnings to be ahead of its previous expectations," Babcock's Chief Executive Peter Rogers revealed.
The group knocked out record results for the year to the end of March 2012, although the headline figures were a shade below what the market had been expecting.
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Underlying revenue rose 14% to £3.07bn from £2.70bn the year before; the market had pencilled in a figure of £3.37bn for revenue.
Underlying profit before tax jumped 26% to £274.1m from £216.7m in the previous year, but failed to meet market expectations of £276.4m.
Underlying earnings per share (EPS) of 61.47p, up 17% from 52.50p the year before, also came in short of expectations, with the investment analyst community having been expecting EPS of 62.09p.
The order book for continuing operations currently stands at £13bn, up from £12bn a year earlier. Babcock currently has over 70% of anticipated revenue contracted for 2012/13 and over 45% for 2013/14.
The bid pipeline for continuing operations has also increased to £9.5bn from £7bn 12 months earlier, and consists of opportunities in the UK and overseas as well as in both our civil and defence markets. The group said 69% of the pipeline comprises bids with a value in excess of £100m, only three of which are rebids where current contracts will not run out until 2014.
In addition to formal competitions currently in the bid pipeline Babcock is tracking and is discussing with customers a number of significant future outsourcing programmes, particularly in the defence training and equipment support markets.
Net debt was reduced from £729.0m at the beginning of the financial year to £641.1m, a better performance than had been predicted by broker Panmure Gordon, which had forecast net debt would be around £649.6m.
"We increased our double-digit operating margin while achieving good organic top-line growth and further improving our strong financial position. As a result of these successes and our confidence in the future, we have maintained our record of increasing returns to our shareholders," Rogers said.
A final dividend of 17.0p has been recommended. This will give a total dividend for the year of 22.7p (consensus forecast: 21.46p), an increase of 17% on the 19.4p paid the year before.
JH
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