Babcock International Group PLC

Regulatory Filings • Dec 11, 2017

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RNS Number : 8912Y

Babcock International Group PLC

11 December 2017

11 December 2017

Babcock International Group PLC (Babcock or the Group)

Babcock confirms no changes required in preparation for the adoption of IFRS 15

Babcock confirms that it believes the adoption of International Financial Reporting Standard (IFRS) 15 will not require a change in contract revenue or profit recognition. This demonstrates that the Group continues to maintain a conservative contract accounting approach.

In preparation for the adoption of IFRS 15, our auditors have reviewed our existing contracts and we are able to make the following statement:

"IFRS 15, 'Revenue from Contracts with Customers', effective from 1 January 2018 and endorsed by the EU identifies performance obligations in contracts with customers, allocates the transaction price to the performance obligations and recognises revenue as performance obligations are satisfied. The standard requires revenue recognition either "over time" or at a "point in time" and additionally requires more detailed disclosures. 

"We have completed a detailed review of all material contracts, including consideration of all types of contracts undertaken by the Group and the results of our review confirm that IFRS 15 will not result in a material change to the timing of revenue or profit recognition on service provision contracts or long-term service contracts.  This assessment reflects that the Group's contracting arrangements, which are predominantly long term service contracts, result in the continual transfer of the benefits of the Group's performance to customers over time. 

"The review also indicates that the new standard is not expected to introduce any material change to the Group's revenue recognition policy in relation to revenue from the sale of goods not under service provision contracts or long-term service contracts.  Point in time recognition of revenue will continue to apply to such contracts." 

Babcock has always adopted a prudent approach to contract accounting with an emphasis on identifying and managing risk throughout the life of the contract. Transparent financial control processes ensure that recognition of profits and cash flow are aligned closely with the delivery of our products and services within both our Group and Joint Venture contracts.

The Group's review also confirmed that our processes for managing working capital flows were being implemented consistently and effectively across all contracts. This underpins our long track record of delivering complex projects whilst producing superior returns and cash flow, and we are content that the adoption of accounting standard IFRS 15 will not require any changes to our tried and proven contract management processes.

Ends

Enquiries

Babcock International Group PLC	020 7355 5300
Franco Martinelli
Kate Hill
FTI Consulting	020 3727 1340
Andrew Lorenz
Nick Hasell

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