Defence and engineering giant Babcock International Group Plc has completed the sale of its stake in an aviation services company netting it £95m.
Babcock, which operates the huge dockyards at Devonport in Plymouth and Rosyth in Scotland, has offloaded its 15.4% stake in AirTanker Holdings Ltd to global investor and fund manager Equitix Investment Management Ltd.
The deal brought in a total of £126m but Babcock has had to repay £31.1m of shareholder loans, which were included in the company’s net debt.
The sale is part of Babcock's ongoing targeted disposal programme - a turnaround plan to streamline the group and tackle losses made during the Covid pandemic.
This is the fourth disposal completed, and the £95m raised brings gross proceeds generated to date to £448m, surpassing the minimum £400m the group had been aiming to collect from various sell-offs..
AirTanker Holdings is an asset joint venture with Airbus, Thales and Rolls-Royce, owning 14 A330 Voyager aircraft to support air-to-air refuelling, air transport and ancillary services for the Ministry of Defence. Babcock retains its 23.5% shareholding in AirTanker Services Limited, which operates these aircraft.
AirTanker Holdings is part of Babcock's Aviation sector and is accounted for by Babcock as an associate. For the year ended March 31, 2021, Babcock's share of associate income was £2.8m on an underlying basis, and interest income of £2.1m was included within the group's net finance costs. At March 31, 2021 AirTanker Holdings had gross assets of 2.7bn.
In December 2021, Babcock sold its power division to infrastructure services provider M Group Services for £50m as part of its streamlining plan. It had already sold marine division business Frazer-Nash Consultancy to KBR, an American engineering giant, for £293m.
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.
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.
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.
