Babcock sells power business for £50m as it continues to streamline group

Devonport Dockyard operator Babcock International Group Plc has sold its power division to an infrastructure services provider for £50m as it continues to streamline the business.

The defence and aerospace giant has offloaded its power business, a leading provider of engineering services in the UK overhead line electric transmission and distribution industry, to Stevenage-based M Group Services, which works in the water, energy, transport and telecommunications sectors.

The power business delivers high quality work for clients including National Grid, Scottish Power Energy Networks and Western Power Distribution.

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A part of Babcock’s Land sector, for the year ended March 31, 2021, it reported total revenues of £70m and profit before interest and tax of about £7m before allocated overheads

Following the sale, the business will form part of Morrison Energy Services, a division of M Group Services.

The disposal is the latest made by Babcock as it continues to work on a “turnaround plan” to tackle financial losses made during the Covid period.

It has already sold marine division business Frazer-Nash Consultancy to KBR, an American engineering giant, for £293m, shortly followed by offloading its stake in aviation services company AirTanker Holdings Ltd for £126m.

Meanwhile, the UK’s competition watchdog has been probing Babcock’s £10m sale of its oil and gas aviation business. The Competition and Markets Authority (CMA) is assessing whether the deal, which would see helicopter services specialist CHC Group LLC acquire a business that ferries crew to offshore oil platforms by helicopter, might cause a substantial lessening of competition in the UK.

David Lockwood, Babcock chief executive, said: “I’m delighted that we continue to make real strides in delivering our plan of streamlining the group. The business is a great fit for M Group Services, and I wish them every success as they continue to grow their operations.”

Babcock has jumped back into profit after recovering from the effects of the Covid pandemic – with its £2bn Devonport rebuild helping the turnaround.

The group’s half-year results for the six months to September 30, 2021, showed it made a statutory operating profit of £75.4m compared to a £785.3m loss in the prior year.

Revenue jumped to £2.223bn from £2.054bn in the same period in 2020. This 8% hike in earnings was helped by a six percentage point growth driven by the Marine division’s work on the new Type 31 frigates, being built in Rosyth, and its Nuclear division, particular its “infrastructure ramp up”, with Babcock currently embarking on a £2bn rebuild of facilities in Plymouth.

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Revenue growth from fewer Covid interruptions was also highlighted in a report to investors, and it led to an underlying operating profit of £115.3m, with the improved Covid situation giving an estimated £25m year-on-year benefit.

The group now has a contract backlog of £10.9bn, which includes the Future Maritime Support Programme (FMSP), a.£3.5bn contract signed in September that runs to March 2026 and which replaces the previous MSDF contract and continues support work for the UK Royal Navy across ships, submarines and naval bases.

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William TelfordBusiness Editor, Plymouth Live