Babcock trading in line with expectations

The company, which employs about 35,000 people and is a major contractor to the MoD, Royal Navy, Army and RAF, has been boosted by strong orders and increased activity across its UK warship support business.

Meanwhile, its nuclear unit has experienced "increased" activity levels in defence but markets remain challenging for civil nuclear.

Babcock has a strong presence in the region, including the Defence Support Group operation at MoD Donnington, in Telford, and the former Macneillie specialist vehicle conversions business at Aldridge, now renamed Babcock Vehicle Engineering.

The FTSE 250-listed firm reiterated its guidance given in May for the financial year ending March 2020.

It expects underlying revenue to be about £4.9 billion with underlying operating profit between £515 million and £535 million.

Babcock also expects free cash flow of "over" £250 million and net debt is forecast to continue to fall.

For the year that ended March 2019, Babcock generated £588.4 million underlying operating profit on underlying revenue of £5.16 billion.

In its trading update the firm said: "The group continued to win work across all sectors in the period, with win rates in line with our targets.

"The highlight in the period was our selection as the preferred bidder for the Type 31 general-purpose frigate programme, which will provide the UK with a fleet of five new warships for £1.25 billion.

"The ships will be assembled at Babcock's Rosyth facility, and involve supply chains throughout the UK. Work will begin immediately following formal contract award later this financial year, with detailed design work to start now and manufacture commencing in 2021 and concluding in 2027.

"We confirm our full year guidance for revenue, operating profit and free cash flow as set out in May 2019, including the phasing between the first and second halves of the year, especially for cash generation."