Babcock Yard Shed

Babcock participates in the Light Up Red campaign, with a visible show of support to our Armed Forces. Illuminated red at Babcock's Rosyth site is HMS Venturer, under construction for Royal Navy. Image via Babcock

‘Volatile World’ Boosts Warship Demand Says UK Shipbuilder

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November 24, 2022

By Christopher Jasper (Bloomberg) London based Babcock International Group said it’s in discussions with five countries on three continents regarding orders for its latest frigate warship design as global tensions stoke spending on naval defense.

Talks are at various stages though don’t yet amount to formal negotiations, and other naval contractors are also chasing the potential deals, according to Chief Executive Officer David Lockwood, who said Russia’s invasion of Ukraine and China’s expansionism in southeast Asia are spurring demand.

“Governments in the South China Sea and Europe, in particular, are assessing their needs,” Lockwood said in an interview Tuesday. “It’s a very volatile world. Our job is to take advantage of the upside.”

Babcock’s Type 31 frigate is a general-purpose design that’s less costly than the most sophisticated vessels in the class. Britain has ordered five of the ships to operate alongside eight Type 26 submarine hunters being built by BAE Systems Plc which could cost up to three times more, according to Lockwood.

Babcock markets its ship under the name Arrowhead 140 for export purposes and so far has orders for two units from Poland and three from Indonesia, with follow-on deals likely.

The London-based firm, which gets 20% of sales from manufacturing and 80% from support activities, said it’s on track to meet consensus earnings estimates for the full year after underlying operating profit rose 10% organically to £122 million ($144 million) in the first half through September.

Ukraine Contracts

Babcock’s support contracts require it to refurbish military equipment being supplied by Britain to the armed forces of Ukraine. Measures include making items that have been in storage combat-ready and removing references to NATO while stripping out sensitive systems, as well as providing training.

Babcock shares rose as much as 4.8% in London, paring their decline this year to 5%.

© 2022 Bloomberg L.P.

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