Babcock International PLC (LSE:BAB) published delayed full-year results on Monday, with outgoing chief executive David Lockwood saying he was leaving the defence contractor with "clear momentum and strong visibility", with strong cash generation reported and guidance reiterated.
Statutory operating profit for the defence and nuclear engineering group fell to £305.1 million for the year to 31 March, down 16% from a year earlier, on revenue up 8% to £5.2 billion. Underlying operating profit fell 19% to £293.3 million.
The results confirmed the impact of the previously disclosed £140 million charge on the Type 31 frigate programme, which was the principal cause of the fall in profits. At the time, the group said around £100 million of the £140 million charge would be recognised as a revenue reversal in the 2026 financial year, with the balance added to contract loss provisions.
Today's results see the full charge recognised in operating profit, with related cash costs expected over the remainder of the contract.
Excluding the charge, underlying operating profit increased 19% to £433.3 million, while the underlying operating margin improved to 8.2% from 7.5%.
Underlying free cash flow rose 71% to £261.8 million and net debt fell to £329 million from £373.3 million.
Lockwood said Babcock had delivered "continued strategic and operational progress" against an uncertain geopolitical backdrop, citing growth across its defence and nuclear operations and a pipeline of long-term opportunities.
The company highlighted progress on submarine support work at Devonport, activity at Hinkley Point C and a series of international defence agreements, including a maritime partnership framework with Indonesia worth up to £4 billion.
Babcock recommended a full-year dividend of 7.5p per share, up 15% from 6.5p a year earlier, and reconfirmed the new £200 million buyback first announced in May.
The company said expectations for the 2027 financial year were unchanged, with around 70% of forecast revenue under contract at the start of April, and reiterated its medium-term targets for revenue growth, margins and cash generation.
"I leave with confidence that the group is well positioned for its next phase of delivery, growth and value creation," said Lockwood.
Babcock announced in January that Harry Holt, chief of its nuclear division, will become deputy CEO in June and replace Lockwood when he retires towards the end of the year.
