Nuclear and National Grid work boosts Babcock

Aaron Morby 11 years ago
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Surging nuclear decommissioning and National Grid upgrade work helped engineering giant Babcock to more than double profits at it support services contracting arm.

Chief executive Peter Rogers said significant orders were now starting to materialise after years of investment in building Babcock’s capability in the engineering power sector.

Operating margins rose to 8.4% at the support services arm as profits more than doubled to £80m on turnover up 37% at £947m in the year to March.

Rogers said: “After some years of financial constraint, the UK nuclear decommissioning market is now starting to ease with a good pipeline of opportunities becoming visible.”

The Nuclear Decommissioning Authority achieved a positive outcome from the Government’s recent Spending Review and secured an average of £3bn funding for the next 4 years.

The contractor has won a £120m decommissioning contract at Sellafield with Bechtel running through to March 2017.

Rogers added: “The nuclear business is heavily committed to securing the Dounreay PBO contract to deliver the decommissioning of a site that we have been involved with since its original commissioning.”

Babcock said it also had high hopes for strong orders from its power transmission business, which along with Balfour Beatty dominate the sector.

Current projections indicate investment of up to £3.2bn will be required to upgrade and renew the current ageing infrastructure and provide connections for renewable generation and smarter grids to ensure that the demand for electricity can be met.

Rogers added: “National Grid, is leading this investment programme and during 2010/11 completed a rights issue, raising £3.2 billion to fund its UK capital programme which will total £22 billion over five years.

As a key partner in the National Grid’s Energy Alliance West, this increased investment will create good opportunities for the division.”

The firm’s MoD Regional Prime contracts continued to perform in line with expectations with additional works only starting to come through in the second half of the year.

Both the South West and East Prime Contracts have now been formally extended through to 2014 as the Defence Infrastructure Organisation develops the replacement Next Generation Estates contracts.

In February, Babcock won the £170m, 5 year contract to provide services to the British Forces’ establishments in Germany.

Pre-tax profits across the multi-service group slipped 11% to £115m on revenue up 50% at £2.9bn.

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