Babcock International had a strong 2025 underpinned by sustained demand amid rising global tensions, even as a charge on the Type 31 frigate programme weighed on headline numbers.
Strip out the £140m Type 31 hit, and Babcock is in rude health.
Underlying operating profit rose 19% at constant currency to £433m on revenue up 10% organically to £5,273m, with the underlying operating margin reaching 8.2%. This is comfortably ahead of the FY26 target of 8.0% and meaningfully closer to the medium-term 9% goal.
Including the charge, operating profit came in at £293m, with a 5.7% margin. These should be seen as solid results by the market.
Nuclear revenue rose 14% to £2.07bn, with underlying operating profit up 23% and the margin reaching 9.5% while Aviation revenue rose 34% on the ramp-up of the Mentor 2 programme in France and British Columbia helicopter contract in Canada. Marine grew 8% on an underlying basis, before the Type 31 reversal. Land returned to growth in H2.
The pipeline is also looking healthy. A Letter of Intent has been signed in Indonesia for two more Arrowhead 140 frigate licences under the £4bn Maritime Partnerships Programme.
In the US, the strategic tie-up with HII has been expanded, with Babcock now authorised to manufacture complex submarine assemblies at Rosyth for Virginia Class Block VI subs. Post year-end, the Cavendish Nuclear / Amentum JV ‘Litmus Nuclear’ was selected as Owner’s Engineer for the UK’s first SMR project at Wylfa. This contract is worth up to £300m over 14 years.
The Type 31 charge reflects higher-than-expected rework on outfitting and commissioning of ship one, with knock-on impacts on ship two. The hit is fully recognised in FY26, though cash costs will spread across the rest of the programme.
On outlook, FY27 expectations are unchanged, with around 70% of revenue already under contract heading into the year.