Babcock preferred bidder for £360m Royal Navy contract
Babcock has emerged as the preferred bidder for a key Royal Navy contract worth £360 million, just a week after the firm scrapped a £6.1 billion Government nuclear decommissioning deal.
The contract would see the engineering services firm become a Marine Services Support Partner under the Ministry of Defence programme, providing technical and mechanical support for both Queen Elizabeth Class aircraft carriers and Type 45 Destroyers over seven years.
If successful, the contract is expected to start in June.
Babcock also announced it has secured a separate £70 million contract from the Ministry of Defence, working on managing supplies of spare parts for Royal Navy ships and submarines.
Chief executive Archie Bethel said the new deals represent "a real vote of confidence in our capabilities and performance as the Royal Navy's key support partner".
"This has been a highly successful year for our EMOC (Equipment Management Operations Centre) team and we look forward to supporting the iconic Queen Elizabeth Class aircraft carriers as they are delivered into service," he added.
Babcock shares were up more than 1% following the news.
The news comes just a week after Babcock announced it was terminating a major Government contract to decommission and manage 12 UK nuclear sites - as part of the Cavendish Fluor Partnership (CFP) - just five years into the 14-year contract.
Babcock said that the amount of work required was "materially different" than initially specified when it bid for the contract, which a High Court judge ruled was wrongly awarded to Babcock in the first place and is now facing a Government inquiry.
The company is expected to take an £800 million hit after scrapping the deal - forecasting a £100 million drop in annual revenues for eight consecutive financial years from 2020/21.
But Babcock said last week that the loss to its order book would only account for a 2% drop in annual revenue, which it expects to replace in the "normal course of business" by 2028, and that the scrapped contract would not impact finances for the next three years.
The company has not changed its guidance for its full-year results due out in May.