Babcock completes £50m sale of power division to 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 year to 31 March. 

Its sale forms part of a massive reorganisation undertaken this year, which included plans to slash Babcock’s large debt pile, reduce bureaucracy and cut around 1,000 jobs.

Contract gains: Babcock also recently won an estimated €500 million contract for defence aviation training activities in France and two agreements with the UK military worth £260m 

The largest divestment saw the group offload Frazer-Nash Consultancy, which offered services for nuclear submarines and Royal Navy warships, to American engineering giant KBR for £293million.

An oil and gas 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 last year.

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 0.4 per cent to 320.1p at around 11am on Friday.

This post first appeared on Dailymail.co.uk