Key points:
- Babcock shares fell despite winning a multi-million 10-year contract.
- The firm will deliver a high-frequency communication system for Australia.
- This is the third contract for Babcock, after New Zealand and the UK.
The Babcock International Group PLC (LON: BAB) share price today fell 1.15% despite the company announcing that it had been awarded a significant multi-year contract to upgrade the Australian Defence Force’s Defence High Frequency (HF) Communications System.
Investors barely reacted to the news as Babcock shares opened lower, spiked higher, and then settled to trade in negative territory when going to press. The market’s muted reaction initiated that overall investor sentiment towards Babcock shares remains negative as it has been since June this year.
Also read: The Top Defense Stocks To Buy In 2022.
The British multinational aerospace, defence, and nuclear engineering services contractor revealed that the 10-year contract was worth AU$877 million (c£492 million) and would lead the operation and support of the defence forces’ existing HF capability while performing a comprehensive technology upgrade.
The Enhanced Defence High-Frequency Communications System program will allow Australian and allied armed forces to communicate securely using voice and other data from almost any location globally. The program is set to kick off in October 2023.
The contract marks Australia Babcock’s third military client after the United Kingdom and New Zealand also selected the company as their primary partner in the engineering, operation and support of long-range, resilient strategic HF communications.
Babcock will execute the contract in collaboration with Lockheed Martin Australia, its principal partner for the project. Lockheed Martin will provide support during the delivery of mission system elements. In addition, it will be tasked with growing a sovereign industrial capability solution to provide support throughout the project and beyond.
David Lockwood, Babcock CEO, said: “Our selection demonstrates our ability to bring together complex and critical digital defence capability in an area of increasing importance to our customers around the world. In a modern threat environment, access to local communication infrastructure or satellite communication cannot be assured.”
Babcock shares are trading at a crucial support level, and I would be interested in buying the shares if the level holds over the coming days and weeks.
*This is not investment advice.
Babcock share price.
The Babcock share price has fallen 25.24% from its August high of 367.6p to its current low of 274.8p.