Babcock strikes Australian navy deal

Engineering group Babcock has struck a joint venture deal worth 1.5 billion Australian dollars (£864 million) to provide services to Australia’s navy.

Naval Ship Management (NSM), a 50/50 joint venture between Babcock and UGL, has been awarded a 15-year contract by the Australian Defence Force.

The entity will provide support services to the largest vessels in the Australian navy – two flagship Canberra Class Landing Helicopter Docks and their 12 associated amphibious landing craft.

Babcock chief executive Archie Bethel said: “Through NSM we will apply Babcock’s digitally enabled asset management capabilities to support this strategically important capability over the next decade and beyond.”

It comes after Babcock also recently won a £100 million aerial firefighting services contract in Canada, the first such deal the firm has struck outside Europe.

The FTSE 250 company was awarded the Wildfire Suppression Services contract by the government of Manitoba.

The deals come at a sensitive time for the firm, which last month revealed a 64% plunge in half-year profits after charges linked to its overhaul.

Shares tanked after the group – the Ministry of Defence’s second largest contractor – reported pre-tax profits falling to £65.1 million in the six months to September 30, down from £181.9 million a year earlier.

Profits were pushed lower by a £120 million charge related to the restructuring of its oil and gas business and also including costs such as its decision to sell the Appledore shipyard in Devon.

Babcock also worried investors as it cut its 2019-20 guidance for revenue from its joint venture for decommissioning of Magnox nuclear sites in the UK.

The contract is due to end in August 2019 and Babcock does not now expect any additional revenue after that date.

The results followed a torrid time for Babcock shares, which have been sent tumbling after a highly critical research paper posted last month by a mystery analyst called Boatman Capital.