Babcock International reported organic revenue growth and stronger cash generation for fiscal 2026 (FY26), even as a large charge on its Type 31 frigate contract reduced reported underlying profit.
Revenue for the year ended 31 March 2026 was £5.18bn ($6.85bn), up 8% on an organic basis, driven by strong performances in the group’s Nuclear and Aviation businesses.
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Underlying operating profit was £293m, reflecting what the company described as strong underlying performance but offset by a £140m charge related to the Type 31 contract.
Excluding that charge, underlying operating profit rose 19% to £433m.
The company’s underlying operating margin was 5.7% on the reported basis. On an adjusted basis excluding the Type 31 charge, margin was 8.2%, which the company said exceeded its 8.0% target.
Its underlying earnings per share increased 20% to 60.5p excluding the Type 31 charge.
Babcock’s net debt fell to £329m, resulting in a gearing ratio of 0.2x.
Contract backlog stood at £9.8bn, down from £10.4bn in FY25, which the company said reflected FY25 awards and ongoing contract execution.
Operationally, Babcock reported progress across several major programmes. It delivered the final year of the submarine Future Maritime Support Programme into a six-month extension and re-opened Devonport’s 15 Dock facility to increase submarine maintenance capability.
The group also reported further ramp-up at Hinkley Point C under the MEH alliance, completion of float-off for the first two Type 31 frigates, and production underway on ships three and four.
Babcock chief executive David Lockwood said the company had made “continued strategic and operational progress” amid geopolitical uncertainty and remained on track to deliver its medium-term guidance.
“We achieved strong underlying growth, improved margins and robust cash generation, while securing important contract wins that further strengthen our position in defence and nuclear markets, where long-term demand is increasingly structural,” David Lockwood said.
Looking ahead, the company expects further progress, underpinned by strong revenue visibility, with about 70% of revenue already under contract as of 1 April 2026.
Beyond FY27, it reiterated its medium-term targets including average mid-single-digit organic revenue growth and underlying operating margin of at least 9%.
The company also anticipates average underlying operating cash conversion of at least 80%.
David Lockwood added: “We remain on track to deliver our medium-term guidance. With our core capabilities aligned to our customers’ evolving priorities, we are building a high-quality pipeline of long-term growth opportunities. Babcock is a more resilient business today, with clear momentum and strong visibility.”
