Babcock reveals £115m half-year revenue because it sells engineering consultancy
Defense and engineering giant Babcock International Group Plc has completed a £ 293 million sale of a marine division consultancy with Plymouth offices, announcing a profit of £ 115 million for the past six months.
The company, which operates the Devonport shipyards in Plymouth and Rosyth, Scotland, sold Frazer-Nash advice to KBR, an American engineering giant, as part of a “turnaround plan” to deal with financial losses.
It marks the end of a 14-year partnership between Babcock and the Surrey-based engineering and technology consultancy that emerged from the classic car manufacturer Frazer-Nash.
The consultancy, which works on submarine design and naval weapons, among other things, was part of Babcock’s naval sector, which is based in Devonport and has nine UK locations including Millfields in Plymouth.
The sale is part of a plan to deal with Covid-related losses and debts and also includes Babcock divesting its stake in aviation services company AirTanker Holdings Ltd for £ 126 million.
Meanwhile, in an update to investors, Babcock announced that its finances are healthier and that it had an underlying operating profit of 115 million for the six months ended September 30, 2021.
In a statement from Babcock to investors prior to the full half-year results being released on December 7th, it said: “Trading for the Group in the first half was in line with our expectations and our full-year outlook remains unchanged.”
The draft bills also show net debt of £ 1.347 billion, up from 1.354 billion reported at the end of March 2021. The Group’s net debt to EBITDA (earnings before interest, taxes, depreciation and amortization) ratio is now 2.8 times , up from a multiplier of 2.5 on March 31.
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And the company now wants to reduce this mountain of debt with its sell-offs. The company confirmed the sale of Frazer-Nash for £ 293 million before adjustments and transaction costs, saying, “This sale is part of our portfolio realignment aimed at generating revenues of at least £ 400 million, the majority of which will be used for reduction is the Group’s net debt. The consultancy was part of Babcock’s marine sector and had FY21 sales of £ 101m (FY20: £ 102m), with earnings before interest and taxes of £ 14m (FY20: £ 17m). “
UK competition watchdogs are currently reviewing another Babcock sale, the sale of its £ 10 million oil and gas aviation business to helicopter service specialist CHC Group LLC. The Competition and Markets Authority (CMA) said it would look into whether the deal could lead to a significant reduction in competition in the UK and whether it may have violated merger law.
