Update on Coronavirus (COVID-19)

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Babcock is providing an update on the impact of Coronavirus (COVID-19).

Our focus remains firmly on the health, safety and wellbeing of our employees and those we work alongside – our customers and our supply chain partners.

Ensuring the safety of our employees
The majority of our service delivery is critical to our customers’ operations. All employees who can work from home are doing so. Across our sites, we continue to implement additional safety measures in line with evolving government guidance and are working closely on this with our customers, governments, trade unions and regulators.

Continuing to deliver for our customers
We are working with our customers to understand their requirements, operational priorities and the support they need from us to deliver critical services.

All of our major sites remain open, with key workers continuing to deliver critical support to our customers. Our Defence businesses provide crucial support to the national defence of the countries we operate in and work on key programmes will continue during these challenging times. Our Emergency Services businesses are on the front line of the response to this crisis with all bases open. Our Nuclear businesses continue to support the safe operation of nuclear power stations and decommissioned sites and in South Africa, we continue to provide the maintenance and engineering support that keeps the power stations running.

Across many parts of Europe, as well as Australia and the UK, our aerial emergency medical services teams are playing a courageous role helping governments and health services fight the spread of COVID-19 and we are proud of the contribution our teams are making.

We responded quickly to the UK Prime Minister’s UK Ventilator Challenge and we are proud to have been awarded a contract by the Cabinet Office to manufacture 10,000 Zephyr Plus ventilators, subject to regulatory approvals; a product being developed in collaboration with an established major international supplier of critical care ventilators.

Business impact
Excluding the impact of COVID-19, trading for the final quarter of the financial year ended 31 March 2020 was in line with our expectations.

COVID-19 had a small impact on trading in the final quarter. While the vast majority of our services continue, some areas of the business are running at reduced levels, including short cycle work and some training and transportation activities. Where services continue, priority is being given to critical programmes.

In the early stages of the pandemic in Europe, we experienced lower primary flying hours in our Aviation business in Italy and Spain as population lockdowns led to fewer emergency missions. This was partly offset by an increase in secondary flying hours as we transferred patients between hospitals to alleviate congestion as the pandemic spread.

Home working has introduced some slowing of customer payments and this has created limited timing differences on working capital and asset disposals.

While we have a strong short and long term order book, the impact of COVID-19 for the next financial year is uncertain. We continue to model a range of scenarios and stress tests as circumstances evolve, and more information on the impact of COVID-19 becomes available, and will provide an update with our full year results.

We are taking actions to mitigate the financial impact of COVID-19 including reducing and deferring non-essential operating and capital expenditure where possible, without impacting customer delivery. We will consider the use of government programmes to help manage areas of inactivity where they exist and we have postponed the annual pay increase for the senior management team.

The Board will consider the final ordinary dividend for this financial year ahead of our full year results announcement taking into account developments over the next two months.

Balance sheet strength and liquidity
Our primary financial focus is on ensuring the strength of the group’s cash flows and balance sheet during these times. Our net debt to EBITDA ratio is well within our covenant levels of 3.5 times.

In total, the Group has access to around £2.4 billion of borrowing facilities of mostly long-term maturities. This includes our revolving credit facility of up to £775 million which expires in August 2024. In light of the current uncertainty, the Group has drawn down all of this facility. As such, the Group had a significant cash balance at 31 March 2020 and has substantial liquidity for the next financial year.

We are continuing to monitor the COVID-19 situation and will keep all stakeholders updated on developments as appropriate. We expect to announce full year results on 27 May 2020.