VT buy adds firepower at Babcock

Defence services group Babcock International yesterday said its acquisition of rival VT Group drove a 57 per cent rise in annual profit and it expects outsourcing contracts to power growth this year.

The group, which maintains Royal Navy submarines and has major Scottish operations at Rosyth and Faslane, reported an underlying pre-tax profit of 228.2 million for the year to the end of March, driven by strong growth at its support services and international businesses.

Chief executive Peter Rogers said: "Clearly the major effect is the acquisition of VT Group."

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Babcock acquired rival VT last year to boost its support services business. The deal helped cement Babcock's position in UK defence outsourcing, adding some important Royal Air Force maintenance contracts to its naval and army portfolio.

"The old Babcock business had around 5 per cent organic profit growth, so the difference is VT and support services is the area which has seen the greatest impact from the acquisition," added Rogers.

Britain cut its defence budget by 8 per cent last year to help lower a budget deficit, which slowed down contract awards. But Babcock, which raised the full-year dividend by 10 per cent to 19.4p, is confident of winning more contracts as they come up for tender this year.

l BAE Systems has agreed to pay a fine of up to $79m (49m) to settle an export case with the US state department. Last year, the firm agreed to pay a fine of $400m to settle a US justice department investigation and another of 30m to settle a parallel investigation in the UK.