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Babcock - Share price strength puts off bidders

June 2006

Investing in shares may lose you all or some of your money. Past performance is no indication of future performance. Some of the shares recommended here may be small company shares, which can be relatively illiquid and hard to trade and this makes such shares more risky than other investments.

Although bid talks have been called off, Babcock has made very good progress with both strong results and an earnings enhancing acquisition to report. As telegraphed last month, results came in ahead of expectations with underlying pretax profit increasing 25% to £44.6m and turnover rising 15% to £837m. Earnings rose 19% to 17.2p. The conversion of operating profit into cash was very strong at 119% and this reduced net debt sharply from £62.9m to £38.2m. Babcock’s most profitable area was again Defence Support Services (building and managing accommodation blocks to pilot training and maintaining aircraft), which saw operating profit rise 30% to £21.8m. Although its legacy Technical Services s ...

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With small companies there is an above average degree of risk compared to buying blue chips. Please be aware that we have not assessed the suitability of any of these investments for you. The newsletter simply states a personal view and diarises the editor’s investment decisions. Please speak to your stockbroker or other qualified individual to ascertain whether any of these companies mentioned would form useful additions to your own portfolios. Past performance is no indication of future success.

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Babcock - Share price strength puts off bidders

June 2006

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