Babcock International has reported that it exceeded full-year 2025 profit forecast on strong fourth quarter across all divisions, sustained by the continuation of favourable developments observed in the third quarter throughout the group.
Based on preliminary, unaudited management accounts for FY25, which are still subject to a comprehensive review by the Audit Committee and pending the external audit process, it is anticipated that the revenue will stand at £4.83bn ($6.43bn).
This growth persists from the strong expansion reported in the third-quarter update in February, with notable contributions from the Nuclear and Marine sectors.
The underlying operating profit is projected to reach £363m, which would represent a year-over-year increase of 17%.
Additionally, the underlying operating margin is expected to improve to 7.5%, up from 7% in FY24. This improvement is attributed to strong performances across all four sectors during the fourth quarter, bolstered by a one-off benefit of around £5m that was realised in the Marine sector.
The company has also achieved an underlying operating cash conversion of around 80%, claimed to be bolstered by favourable working capital timing.
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By GlobalDataDespite an accelerated pension deficit repair contribution of £40m, Babcock International has generated an underlying free cash flow of £153m.
Net debt, inclusive of leases, has been reduced to £373m as of 31 March 2025, down from £435m in the previous fiscal year. Excluding leases, the net debt stands at £101m, a reduction from £211m.
As of 31 March 2025, the group’s contracted backlog has increased to £10.1bn, up from £9.5bn at half-year, providing a solid foundation for continued growth.
Babcock chief executive David Lockwood said: “In an uncertain world, we continue to see momentum across the business. This has driven strong performance in all four of our divisions in the fourth quarter, resulting in full year underlying operating profit ahead of expectations.
“Our experience, know-how and application of technology play a critical role in ensuring that our customers are ready to respond to ever-changing global threats.”
During the fourth quarter, Babcock secured two multi-year contracts.
In January, a contract potentially worth up to €800m ($908.6m) was awarded for military air training solutions for the French Air and Space Force and Navy, expanding the company’s military activities in France.
In March, a sole-source five-year extension to a military land equipment support contract was secured, valued at approximately £1.0bn.
This contract will see Babcock delivering enhanced readiness, regeneration, and asset management services to ensure the availability of critical army equipment.
The company has also made strides in de-risking its pension schemes.
Following the triennial valuation of the Rosyth Royal Dockyard Pension Scheme, a long-term funding arrangement has been agreed upon with the trustees.
This financial update follows a report by Oxford Economics, which highlighted Babcock International Group’s contribution of approximately £4.3bn to the UK’s gross domestic product in FY24, a £1bn increase from FY22.
