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CORRECTED-UPDATE 2-Babcock sees strong end to full year
January 31, 2013 / 10:06 AM / 5 years ago

CORRECTED-UPDATE 2-Babcock sees strong end to full year

(Corrects title in third paragraph to finance firector, from chief executive.)

* Bid pipeline 14 bln pounds, vs 13 bln in November

* Order book 12 bln pounds, vs 12.5 bln on Nov. 6

* MoD contract worth 1.5-2.0 bln pounds

* In discussions with Japan over Fukushima work

* Shares up 0.2 percent, hit record high

By Brenda Goh

LONDON, Jan 31 (Reuters) - British engineering services group Babcock International should meet full-year expectations because the tough economic climate has continued to throw up outsourcing contracts.

Babcock, which maintains British navy submarines, said on Thursday its bid pipeline had grown 1 billion pounds ($1.6 billion) to 14 billion since a Nov. 6 update, which should give a lift to its order book by its March 31 financial year end.

“We remain certainly positive on our outlook for this year and next. There are plenty of bidding opportunities around and the pipeline continues to increase,” finance director Bill Tame told analysts on Thursday.

Babcock has been profiting from outsourcing by military and engineering clients under pressure from tighter budgets to cut costs. Its order book is now 12 billion pounds, down from around 12.5 billion when first-half results were published on Nov. 6.

It won or was selected as preferred bidder for contracts totalling 600 million pounds in the October-December period - its third quarter - and is awaiting decisions on deals totalling around 800 million by end-March.

The Maritime Support Delivery Framework, a warship and submarine contract it has been renegotiating with Britain’s Ministry of Defence, would add up to 2 billion pounds to the order book once signed, Tame said. The contract was expected to take effect early in Babcock’s 2013/14 year.

“Babcock remains a core holding for us due to the longevity of existing business and the prospect of strong organic growth as the pipeline converts,” Numis analyst Mike Murphy said.

“However, we do not see outperformance in the share price in the short term given its high rating relative to peers.”

Babcock shares, which have risen over 40 percent during the past year, were 0.2 percent up at 1,034 pence at 0927 GMT, after touching a record 1,041 pence.

Babcock said it was in talks with Japanese authorities over nuclear decommissioning work following the Fukushima nuclear plant meltdown in March 2011.

Tame said Babcock’s tie-up with Hitachi, where it has been helping the Japanese group build nuclear plants in Britain, had given it a helpful “direct line”.

The company said its four divisions were performing well and in line with expectations although rand weakness could hit its International unit’s full-year results in sterling terms. ($1 = 0.6332 pound) (Editing by Dan Lalor)

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