Babcock International Group (BAB) H2 2026 earnings summary

Executive summary

• Delivered strong FY 2026 results, reaffirming medium-term guidance and highlighting differentiated defense and nuclear capabilities, with 80% of revenue from these sectors.

• Leadership transition underway, with Harry Holt set to succeed David Lockwood as CEO, ensuring continuity and strategic momentum.

• Strategic momentum supported by disciplined capital allocation and targeted investment, increasing shareholder returns.

Financial highlights

• Organic revenue grew 8% year-over-year to £5.2bn, with underlying operating profit up 19% to £433m and EPS up 20%.

• Operating profit margin improved by 70bps to 8.2% (excluding Type 31 charge); cash conversion at 84%, delivering £262m in free cash flow.

• Dividend increased by 15% to 7.5p; £200m share buyback completed post year-end, with another £200m announced for FY27.

• Net debt reduced to £23m, leverage at 0.2x, and BBB+ credit rating retained.

• Type 31 program incurred a £140m charge due to higher-than-expected rectification costs, absorbed within medium-term guidance.

Outlook and guidance

• Reaffirmed medium-term guidance: mid-single digit organic revenue growth, 9%+ margins, and 80%+ operating cash conversion.

• FY 2027 revenue visibility at 70% as of April 1, with expectation to reach 90% under contract by half-year.

• Strong medium and long-term opportunity set, aligned to structural growth in defense and nuclear markets.

• Strategic priorities include operational performance, talent management, and disciplined capital allocation.