Babcock raises payout after first-half profit grows on defence deals

(Alliance News) - Babcock International Group PLC on Friday boosted its interim dividend and backed full-year targets, after trading improved first half.

The London-based aerospace and defence engineering firm posted GBP226.3 million in pretax profit for the six months ended September 30 - a 32% jump from GBP172.0 million the year prior.

Revenue rose 5.4% to GBP2.54 billion from GBP2.41 billion, with Babcock pointing to 7% organic sales growth in the Nuclear division, offset by lower volumes in Land Civil.

Babcock declared a first-half dividend of 2.5 pence per share, up 25% from 2.0p.

Its shares traded 1.3% lower at 1,115.00 pence in London on Friday morning.

The firm's underlying operating margin improved to 7.9% from 7.0%, and Babcock has backed its full-year aim of 8%, which would be an improvement from 7.5% the previous year. Average revenue growth is targeted at a mid-single digit, underlying margin of at least 9% in financial 2026

Average underlying operating cash conversion, an internal metric which Babcock noted has no direct IFRS equivalent, was 83% in the first half and is forecast to be at least 80% for the full year.

Net debt amounted to GBP351.1 million at the end of September, reduced slightly from GBP385.6 million on-year. This left net debt 0.2 times earnings before interest, tax, depreciation and amortisation, compared to a ratio of 0.6x a year earlier.

The company also noted a slightly higher order backlog by the end of the first half, with the measure rising to GBP9.9 billion from GBP9.5 billion as of September 30. This reflects a "significant" contribution from the Land and Aviation business in the second half of financial 2025, which ended on March 31.

According to Babcock, the current market favours nuclear and defence trading. It has a GBP114 contract "to prepare for the first nuclear defueling" of a British submarine, a ten-year deal with the French government to for helicopter support services and has won its first South African defence contract on submarine support.

"Thanks to the skills and dedication of our people, Babcock continued its track record of profitable growth with a strong performance in the first half. Good momentum was underpinned by consistent delivery for our customers against a background of supportive market dynamics," Chief Executive Officer David Lockwood says.

"We are on track to achieve our expectations for the full year and are pursuing exciting opportunities for sustainable growth and margin expansion, both in the UK and internationally."

By Holly Munks, Alliance News reporter

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