Babcock International Group plc (LSE:BAB) reported fiscal year 2025 earnings per share of 16.9 pence, exceeding the consensus forecast of 16.4 pence by about 3%.
The group generated revenue of £4.9bn for the year, in line with analyst expectations, with organic growth of 1%.
Adjusted EBITA reached £272m, slightly above the company’s guidance of £270m and ahead of the £267m consensus estimate. The adjusted EBITA margin came in at 5.6%, marginally higher than the 5.5% analysts had projected.
The earnings outperformance was driven by slightly stronger EBITA as well as lower net interest costs, which totalled £45m compared with guidance of £48m. The effective tax rate of 23% was consistent with the company’s expectations.
On a reported basis, EBITA was £246m, representing a 3% increase and showing a solid improvement compared with the prior year.
During the year, Babcock secured order intake of £5.5bn, up from £4.9bn in FY24, resulting in a book-to-bill ratio of 114%. The order book expanded 9% year on year to £14.5bn, with roughly two-thirds of contract awards linked to the defence sector.
Free cash flow totalled £219m, comfortably exceeding the analyst consensus of £153m. Adjusted net debt stood at £206m, below the consensus estimate of £232m, giving a leverage ratio of 0.7 times—beneath the company’s target range of 1 to 2 times.
The net debt figure reflects £245m spent on acquisitions, including the purchase of MT&S, as well as a newly announced £75m share buyback programme.
Looking ahead to fiscal year 2026, Babcock reaffirmed the outlook outlined in its December trading update. The company expects EBITA of around £300m, slightly above the consensus estimate of £291m. This would represent roughly 10% year-on-year growth and imply a margin of about 6% at the upper end of the group’s medium-term target range of 5% to 6%.
The outlook is supported by strong order intake during 2025, a full-year contribution from the MT&S acquisition and ongoing productivity improvements.
Revenue for FY26 is expected to reach approximately £5bn, with organic growth of around 3%. Tax rate guidance remains unchanged at roughly 25%, while free cash flow is forecast at about £160m, consistent with the company’s medium-term objectives.
Babcock also updated its year-end net debt forecast to £165m from £150m and increased projected net finance costs to £52m from £50m to account for the newly announced share buyback programme.
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