British support services group Babcock on Tuesday reported a 30% increase in first-half profit and forecast further growth as businesses look to cut costs by outsourcing more.
"We've seen no slackening off in the pace of demand and those customers that want to cut costs – particularly government bodies – will come to people like us," chief executive Peter Rogers told Reuters in an interview.
Babcock, which is involved in the shipbuilding, defence, rail and nuclear sectors, reported pretax profit for the six months to 30 September of £50.9m ($80.4m) on revenue 40% higher at £940.6m.
The biggest supplier of services to Britain's Royal Navy increased its interim dividend by 21% to 4p and said it expected to win more contracts as the economic downturn worsened with companies and especially governments looking to farm out more work to keep costs low.
"Governments are very reliable customers to work with and we're pretty confident in the durability of our contracts with them as you can see by the increase in the dividend," said Rogers.
Shares in Babcock, which have outperformed the FTSE All Share support services index by 5% this year, were 1.8% up at 411p by 08.45 GMT.
Despite its solid group-wide performance Babcock incurred an exceptional charge of £13.3m following a settlement it agreed with Tesco after a dispute relating to the construction of tunnelling works for a store in Buckinghamshire, England. With this taken into account profit for the period was £28.6m against £32.5m last year.
Babcock's marine division, which represents just under half of the group, delivered a 45% increase in profit due to a full contribution from acquisitions and cost saving initiatives, while its nuclear division saw first-half profit rise 103% as it benefited from the integration of recently purchased civil nuclear businesses.
Defence, networks and engineering all performed solidly but the group's rail division struggled due to a number of underperforming contracts, which will see Babcock wind-up its rail projects business.
Rogers said "trading conditions across the group remain strong" and that the group's £5bn order book offered "good long=term visibility".
By Rhys Jones, Reuters.
