(Adds CEO interview, details)

LONDON, May 23 (Reuters) – Babcock said a number of
major contract wins in Britain and abroad had increased its
confidence that the British engineer would deliver steady
organic revenue growth in the year ahead, helping to lift its
shares on Wednesday.

Babcock, which provides specialist support and services to
groups including Britain’s Defence Ministry, reported a 2.8
percent rise in underlying revenue to 5.4 billion pounds ($7.2
billion), in line with forecasts and which it described as a
record performance.

That was despite an expected fall in revenue from a major
aircraft carrier programme that is nearing completion.
Underlying profit before tax rose 3.6 percent to 513 million
pounds and the full-year dividend rose 4.8 percent.

“The biggest factor that is holding us back is the headwinds
of the aircraft carrier step down which was significant,” Chief
Executive Archie Bethel told Reuters.

“If you ignore the aircraft carrier we grew at about 5.5
percent this year so the underlying is still very healthy.”

Babcock is in the final stages of work on the Queen
Elizabeth Class Aircraft Carrier programme. HMS Queen Elizabeth
was officially handed over to the Royal Navy this year. Its
sister ship HMS Prince of Wales was formally named and floated
out of the build dock.

For 2018/19, the group said it expected to again deliver low
mid-single digit organic revenue growth with broadly stable
margins.

Bethel also said he did not expect an ongoing British
defence review to lead to lower budgets for Babcock, an issue
that has unnerved investors in the past.

“We are treating it, in terms of forecasting, as neutral,”
he said. “We’re certainly not expecting any reductions or cuts
to budgets. Will we get a bigger budget and more spend? I don’t
know.”

Shares in the group rose 5 percent at the market open and
were trading 3 percent higher at 0730 GMT, giving it a market
value of 4 billion pounds.

Babcock’s stock has been steadily rising since the wider
outsourcing sector was rocked by the collapse of construction
and support services group Carillion in January. It trimmed its
revenue forecast in February due to slower demand in the oil,
gas and defence sectors.

Babcock says its focus on large public contracts which
provide essential services protect it to a large extent from
uncertainty, and mean it is more dependent on maintenance work
with current contract-holders than additional new spending.

In the year to the end of March, it added contracts worth
more than 4.5 billion pounds to its order book, including work
to provide technical support at 17 airforce bases, naval support
and contracts in Italy, Spain and Australia.

($1 = 0.7461 pounds)
(Reporting by Kate Holton
Editing by Sarah Young and Edmund Blair)