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(Sharecast News) - Babcock backed its FY27 expectations on Monday as it posted a rise in annual revenue but a dip in underlying operating profit as it took a hit from a charge on a contract.
In the year to the end of March, revenue grew 8% to 5.18bn, with particularly strong growth in Nuclear and Aviation. Underlying operating profit fell to 293m from 363m a year earlier, however, due to a 140m charge on the Type 31 contract with the Royal Navy. Excluding the charge, operating profit increased 19%.
Babcock said the charge reflects higher-than-expected rework during the outfitting of ship one and an updated estimate of the cost to complete the programme.
Revenue from the nuclear segment - Babcock's largest - rose 14% to 2.07bn amid strong growth in the Cavendish Nuclear business and higher submarine support activity, which more than offset an expected decline in Major Infrastructure Programme revenue.
The marine division saw revenue tick up 2% to 1.59bn, while the land business saw revenue dip 3% to 1.08bn. Revenue from the aviation arm grew 34% to 431.4m.
The company declared a full-year dividend of 7.5p per share, up 15% on the prior year. It also hailed a "robust" cash performance, with free cash flow rising to 262m from 153m, while net debt fell to 329m from 373m.
Chief executive David Lockwood said: "Against an increasingly uncertain geopolitical backdrop, Babcock has delivered continued strategic and operational progress. 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.
"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."
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