Aerospace and defence giant Babcock completes sale of power division to M Group Services for £50m
- Babcock said the power division made revenues of £70m in the year to 31 March
- The firm’s divestments in 2021 have included its Frazer-Nash Consultancy arm
- Babcock CEO David Lockwood: ‘The business is a great fit for M Group Services’
Defence contractor Babcock International has finalised the £50million sale of its power business to M Group Services.
The division, which counts National Grid and Scottish Power Energy Networks among its customers, made revenues of £70million and pre-tax profits of £7million in the 12 months to 31 March.
Its sale forms part of a massive reorganisation undertaken by Babcock this year, which has included plans to slash its large debt pile, reduce bureaucracy and cut around 1,000 jobs.
Restructuring: Babcock’s sale of its power business forms part of a massive reorganisation undertaken this year, which included plans to slash its debt pile and cut around 1,000 jobs
The largest divestment saw the group offload Frazer-Nash, a consultancy that offered services for nuclear submarines and Royal Navy warships, to American engineering giant KBR for £293million.
An energy division that provided offshore oil and gas crew services was also sold for £10million, and private equity house Equitix Investment Management agreed to buy its stake in military refuelling jet owner AirTanker Holdings in September.
Babcock said it hoped to raise at least £400million from the sale of these various assets back in April when it announced a strategic review of its operations.
‘I’m delighted that we continue to make real strides in delivering our plan of streamlining the group,’ remarked chief executive David Lockwood today.
‘The business is a great fit for M Group Services, and I wish them every success as they continue to grow their operations.’
Babcock’s announcement comes about a fortnight after it reported earning a £54.2million profit in the six months to the end of September, compared to a huge £832.5million loss during the same time in 2020.
Though its turnaround strategy may have led to a stronger performance, the results also reflected the company’s nuclear and marine division revenues growing, as well as huge new contracts.
The biggest contract won by the group was a £3.5billion deal from the Ministry of Defence to support the Royal Navy’s Future Maritime Support Programme that runs until March 2026 and involves work on naval bases in Clyde and Devonport.
In addition, it won a €500million contract for defence aviation training activities in France, deals with the UK military to provide tactical communications, and work supporting the Defence High-Frequency Communications Service.
Babcock ended the half-year period with a record contract backlog of £10.9billion, but since then, it has secured further contracts with the Australian Government, the MoD’s Defence College of Technical Training, among others.
Shares in the firm were up just 0.6 per cent to 320.7p just before midday today, but their value has risen by about a fifth in 2021.