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Babcock International - Large reduction in net debt from £629m to £288m

February 2024

Investing in shares may lose you all or some of your money. Past performance is no indication of future performance. Some of the shares recommended here may be small company shares, which can be relatively illiquid and hard to trade and this makes such shares more risky than other investments.

  • Epic Code:
  • BAB
  • Price:
  • 442p
Babcock’s H1 results beat expectations with EBIT profit up 27% (5% above forecast) to £154m on sales that rose 13% to £2,177m. The beat was put down to new infrastructure work on new facilities to accommodate the UK’s growing fleet of nuclear-powered submarines. The contract backlog stood at £9.3bn but doesn’t include a little over £3bn future work through framework agreements. Clearly, CEO David Lockwood’s root and branch restructuring and disposal program has had the desired effect as aided by a licence fee from Poland for three frigates (estimated to be £10m-£15m), net debt impressively fell from £629m to £288m with net debt / EBITDA now just 1.1x. Also encouraging was a reduction in the actuarial pension deficit from £400m to c. £300 ...

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