Babcock International Group PLC FY23 post close update and Type 31 contract update (8278W)
20 Abril 2023 - 1:00AM
UK Regulatory
TIDMBAB
RNS Number : 8278W
Babcock International Group PLC
20 April 2023
20 April 2023
This announcement contains inside information
FY23 post close update and Type 31 contract update
Babcock International Group PLC ("Babcock" or "the Group")
provides an update on FY23 and the Type 31 contract.
FY23 post close update
Based on draft management accounts, before detailed management
review and subject to audit, the Group can disclose its early view
of its results for FY23.
Group cash flow for FY23 was significantly ahead of
expectations. This reflects strong operational performance and the
conclusion of the disposal programme, including receipt of c.EUR100
million of completion adjustments on the disposal of the European
Aerial Emergency Services businesses.
Net debt as at 31 March 2023 was c.GBP350 million before
operating leases.
Group underlying profitability for FY23 is in line with
expectations, excluding the potential one-off impact of the Type 31
contract as outlined below.
Given the stronger than expected cash performance and further
de-gearing of the balance sheet, the Board expects to reinstate a
dividend in FY24.
Type 31 contract update
In November 2019, Babcock was awarded the Type 31 contract by
the UK Ministry of Defence to deliver five Inspiration Class
frigates for the Royal Navy, based on Babcock's Arrowhead 140 hull
design, at an average production cost of GBP250 million per
ship.
To date, we have recognised over GBP600 million of revenue but
no profit on the programme. Expected to conclude in 2028, the
programme remains on schedule against a demanding production plan,
despite the restrictions imposed by COVID-19. HMS Venturer, the
First in Class ship is due to be structurally complete in December
2023 and construction commenced on the second ship, HMS Active, in
January 2023.
Throughout FY23, we have been in dialogue with the customer
about the contractual position regarding additional forecast costs
resulting from certain material macroeconomic changes that were not
foreseen at contract inception. These have led to an increase in
the actual and projected programme costs to deliver the programme
as planned.
We have been unable to reach agreement with our customer as to
who is responsible for the additional costs under the contract. As
a result, a dispute resolution process (DRP) under the contract has
commenced. The DRP may lead to an arbitration.
If the contractual position remains unresolved, the lack of
recovery of these additional costs would need to be reflected in
the Group's FY23 year end results. Without recovery of the
additional costs, the contract would be loss-making and our
preliminary assessment, subject to finalisation and audit, is that
a one-off provision of between GBP50 million and GBP100 million
would be required to cover the duration of the contract. The
related cash impact would be of a similar amount, realised over the
remainder of the programme. Any settlement or arbitral award would
reverse the provision in part or in full.
The position in relation to the Type 31 contract does not affect
progress or profitability of the Group's existing Arrowhead 140
export contracts and we continue to be in active discussions with a
number of prospective customers.
The person responsible for arranging the release of this
announcement on behalf of the company is Jack Borrett as Company
Secretary.
ENDS
For further information:
Andrew Gollan, Director of Investor
Relations +44 (0)7936 039004
Kate Hill, Group Director of Communications +44 (0)20 7355 5312
Tulchan Communications
Olivia Peters / Harry Cameron +44 (0)20 7353 4200
Forward-looking statements
Certain statements in this announcement are forward-looking
statements. Such statements may relate to Babcock's business,
strategy and plans. Statements that are not historical facts,
including statements about Babcock's or its management's beliefs
and expectations, are forward-looking statements. Words such as
'believe', 'anticipate', 'estimates', 'expects', 'intends', 'aims',
'potential', 'will', 'would', 'could', 'considered', 'likely', and
variations of these words and similar future or conditional
expressions are intended to identify forward-looking statements but
are not the exclusive means of doing so. By their nature,
forward-looking statements involve a number of risks, uncertainties
or assumptions, some known and some unknown, many of which are
beyond Babcock's control that could cause actual results or events
to differ materially from those expressed or implied by the
forward-looking statements. These risks, uncertainties or
assumptions could adversely affect the outcome and financial
effects of the plans and events described herein. Forward-looking
statements contained in this announcement regarding past trends or
activities should not be taken as a representation that such trends
or activities will continue in the future. Nor are they indicative
of future performance and Babcock's actual results of operations
and financial condition and the development of the industry and
markets in which Babcock operates may differ materially from those
made in or suggested by the forward-looking statements. You should
not place undue reliance on forward-looking statements because such
statements relate to events and depend on circumstances that may or
may not occur in the future. Except as required by law, Babcock is
under no obligation to update (and will not) or keep current the
forward-looking statements contained herein or to correct any
inaccuracies which may become apparent in such forward-looking
statements.
Forward-looking statements reflect Babcock's judgement at the
time of preparation of this announcement and are not intended to
give any assurance as to future results.
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END
MSCEANLNFEADEFA
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April 20, 2023 02:00 ET (06:00 GMT)
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