Babcock International Group (LSE:BAB), the UK defence and nuclear services group, said it delivered strong underlying operational and financial performance in the year to 31 March but that a revised estimate for the Type 31 contract has produced a £140 million charge fully recognised in FY26.
The Group reported revenue of £5,273 million (before c.£100 million revenue reversal from Type 31), underlying operating profit of £433 million excluding the Type 31 charge (£293 million including the charge), an underlying operating margin of 8.2% excluding the charge (5.7% including), underlying free cash flow of £262 million and net debt reduced to £329 million giving gearing of 0.2x, with a contract backlog of £9.6 billion.
Nuclear revenue rose 14% to £2,070 million with underlying operating profit of £197 million and a 9.5% margin, Marine revenue rose 8% to £1,687 million before the c.£100 million reversal with an underlying operating profit of £110 million excluding the Type 31 charge (an underlying operating loss of £30 million including it), Aviation revenue rose 34% to £431 million with operating profit of £31 million, and Land revenue fell 3% to £1,084 million with operating profit of £95 million.
The Type 31 charge follows higher‑than‑expected rework from design changes and earlier out‑of‑sequence build activity, an engineering maturity review and re‑estimates of costs to complete, with c.£100 million recognised as a revenue reversal in FY26 and the balance increasing the contract loss provision while cash costs are expected over the remainder of the programme.
FY27 expectations are unchanged, supported by around 70% revenue under contract at 01 April, and the Group reiterated medium‑term guidance of average revenue growth of mid‑single digit, an underlying operating margin of at least 9% and average underlying operating cash conversion of at least 80%.
The audited preliminary results are now expected in late June (previously end‑May) and management is holding a conference call for investors and analysts today, 13 May - and, it noted, the published consensus analyst forecasts, marked at £5,112 million of revenue, and £411 million of underlying operating profit.
