- Babcock’s full-year underlying revenue grew by 10% to £5.2bn, ignoring exchange rates.
- Underlying operating profits rose 19% to £433mn.
- Underlying free cash flows jumped 71% higher to £262mn.
Aarin Chiekrie, equity analyst, Hargreaves Lansdown:
“Babcock’s full-year results contained few surprises as it delivered double-digit underlying revenue and profit growth, driven by strong performances in its nuclear and aviation divisions in the current geopolitical climate. Governments around the globe are becoming more focussed on improving their defensive capabilities, and Babcock looks well-placed to benefit from this long tailwind and capture some of this extra spending. While underlying profitability improved sharply, this figure excludes a one-off £140mn charge tied to its Type-31 frigate programme. The charge stems from a design change that led to complex late-stage rework on the first two ships. Further costs can’t be ruled out, but any additional charges should be much smaller, as the remaining vessels are still at much earlier stages of production.
Looking ahead, Babcock remains on track to progress towards its mid-term targets, which include underlying operating margins widening from 8.2% to over 9.0%, excluding the Type-31 charges. The balance sheet remains in great shape, with its small net debt pile trending lower. Alongside healthy free cash flows and a strong demand outlook, that’s given Babcock the confidence to raise its full-year dividend by 15% and plough ahead with another £200mn of share buybacks.”
