UPDATE 1-Babcock benefits from austerity as profit jumps 13 pct

Tue Nov 6, 2012 2:37am EST

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LONDON Nov 6 (Reuters) - British defence services group Babcock International posted a 13 percent rise in first half profit, helped by a continued drive by governments around the world to farm out work to the private sector and strong growth overseas.

Babcock, which maintains British navy submarines, on Tuesday reported an underlying pretax profit of 142.7 million pounds ($227.94 million) in the six months to the end of September, on revenue 6 percent higher at 1.55 billion pounds.

Governments around the world have been cutting spending as they look to slash budget deficits. Babcock said its focus on services and maintenance puts it in a strong position as clients look to cut costs by outsourcing.

Babcock, whose order book has jumped 4 percent to to 12.5 billion pounds in the last year, said it had secured preferred bidder status on a number of new long-term contracts as well as extensions to existing deals.

It said its bid pipeline stood at more than 13 billion pounds - up from 9 billion a year ago. The company added that its support services unit had seen strong growth in South Africa and across the Middle East during the period.

Recent new contracts include the refit of Britain's Vanguard submarines at its Devonport dockyard and a deal to maintain the estate and infrastructure owned by Britain's defence ministry for a further three years.

It said it also sees significant opportunities in defence training and equipment support markets. Contracts in British nuclear, training, defence and infrastructure markets were expected to be awarded later this year, it said.

The company, which sold its U.S. defence services unit earlier this year, increased the interim dividend by 10.5 percent to 6.30 pence per share.

Shares in Babcock, which have risen by a third in 2012, closed at 989 pence on Monday, valuing the business at around 3.6 billion pounds.

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