- Revenues up 11% to £4.8 billion
- Shares jump 12%, and are up 131% in 2025
- First £200 million share buyback programme
Shares in Babcock International (BAB) surged 12% to £11.53 in morning trading as the aerospace and defence contractor reported a 11% rise in revenue to £4.8 billion for the year ending 31 March 2025 driven by strong growth in its nuclear and marine divisions.
The FTSE 100 company’s shares have been on a roll this year, soaring 131% year-to-date, much to the joy of shareholders. The mood will have been further lifted by the 30% increase in full year dividend to 6.5p year-on-year, announced today, on top of the firm’s £200 million share buyback programme, the first in its history.
In addition to this slew of good news, the engineering business raised medium-term guidance on the back of attractive market growth trends, which have been bolstered by the recent UK Government commitment to higher military spending.
David Lockwood said: ‘This is a new era for defence. There is increasing recognition of the need to invest in defence capability and energy security, both to safeguard populations and to drive economic growth. Our specialist capabilities are increasingly relevant and, with a growing set of opportunities before us, Babcock is committed to play its part in driving prosperity alongside its customers.
HEALTHY PIPELINE
Shore Capital analysts said: ‘The pipeline remains healthy and underpins growing confidence in delivery. Forecasts are set to rise driven by continuing solid revenue growth, but also by margin delivery.
‘For full year 2026 our EBIT (earnings before interest and tax) margin is set to rise by 50 basis points to 8% (suggesting a circa 7% upgrade to EBIT) and for full year 2027 likely by 70 basis points to 8.5% - with stronger margin assumptions returning for outer years – a direct positive impact on cash generation is to be noted. We continue to see healthy revenue growth opportunities soundly financed by the balance sheet into the long-term.’
Russ Mould, investment director at AJ Bell said: ‘Shares in defence and engineering contractor Babcock have more than doubled year to date so a positive set of results was needed for investors to sustain their enthusiasm.
‘Largely that’s what they got – the numbers themselves were strong but so too was the accompanying rhetoric as the company talked about a ‘new era for defence’. A meaningful increase in medium-term guidance won’t have hurt either.
‘The company looks set to be a beneficiary of an increased push on nuclear power given its expertise, amid a hunt for reliable energy sources which can also help reduce carbon emissions.
‘The shift in foreign policy under the Trump administration is pushing European countries to up their military spending, although much of this will be yet to come through, so the fact Babcock is already seeing improved trading is encouraging.
‘Some eyebrows may be raised at the decision to launch the company’s debut share buyback when its share price is at its highest level in more than a decade and not a million miles off its all-time high from 2014, although in fairness, this is merely following the recent trend.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Sabuhi Gard) and the editor (Martin Gamble) own shares in AJ Bell.
