Babcock International has reported a robust set of results for the financial year ended 31 March 2025, marking what the company’s leadership has described as a “pivotal year” for the UK-based defence contractor.
Bolstered by growing geopolitical tensions and rising demand for sovereign defence capabilities, the group delivered double-digit revenue growth and announced significant shareholder returns.
Financial growth and operational momentum
Group revenue rose 10.7% on an organic basis to £4.83bn, up from £4.39bn the previous year. Underlying operating profit increased by 17% to £363m, with improved margins across three of the company’s four sectors. Statutory operating profit stood at £364m, while underlying free cash flow reached £153m, reflecting strong cash generation despite ongoing investment.
The company ended the year with net debt excluding leases reduced to £101m—down from £211m in FY24—resulting in a gearing ratio of just 0.3x EBITDA.
Return to FTSE 100
Reflecting investor confidence, Babcock rejoined the FTSE 100 index in March 2025 for the first time in over seven years. The board declared a 30% increase in the annual dividend to 6.5 pence per share and announced plans for a £200m share buyback programme to be completed in FY26.
CEO David Lockwood said the company’s specialist capabilities had become increasingly relevant in a rapidly evolving global defence environment, and that Babcock is committed to playing its part in supporting prosperity alongside its customers.
Contract wins and strategic milestones
The year saw Babcock achieve several high-profile operational milestones. Notable among them:
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HMS Venturer, the first of five Type 31 frigates, entered the water in June 2025.
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A major milestone was achieved at Devonport with the docking of HMS Victorious in the upgraded 9 Dock facility.
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The group secured a five-year, £1 billion sole-source contract extension from the British Army under the ‘Reframe’ programme.
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In France, Babcock was awarded the long-term Mentor 2 contract for military air training, potentially lasting up to 17 years.
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The company also launched the H&B Defence joint venture with HII in Australia to support AUKUS submarine programmes.
Contract backlog increased slightly to £10.4 billion, and the company expects strong pipeline momentum to continue, supported by rising global defence budgets.
Investing in people, technology and sustainability
Babcock welcomed over 400 apprentices and 285 graduates—the largest early careers intake in its history—as it continues to address engineering skills shortages. Investments in digital infrastructure (notably its new Athena platform), sustainability initiatives, and supplier risk governance were also a focus throughout FY25.
The company introduced new apprenticeships in space systems and cyber security and opened a new engineering facility in Adelaide to support its Australian operations. It also published its first Supplier Assurance Handbook to enhance transparency and strengthen its sustainable supply chain.
Outlook: positioned for growth
The company’s leadership expressed confidence in Babcock’s ability to capitalise on future growth opportunities. Chair Dame Ruth Cairnie highlighted the importance of enhanced internal controls, operational discipline and long-term strategic positioning as key factors in the Group’s transformation. She noted that the evolving geopolitical landscape had underscored the value that Babcock delivers to stakeholders.
Looking ahead, Babcock has upgraded its medium-term financial guidance, now targeting an underlying operating margin of at least 9% and average annual organic revenue growth in the mid-single digits.
Government spending priorities—such as the UK’s commitment to raise defence spending to 2.6% of GDP by 2027 and a renewed focus on civil nuclear—are expected to present further growth opportunities. As the UK’s largest civil and defence nuclear services provider, Babcock is well positioned to support the Dreadnought submarine programme and future investments in nuclear power generation.
Download the full Babcock Annual Report and Financial Statement 2025 for more information.
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