Babcock International Group (LSE:BAB) has reported continued strong financial and operational momentum for the nine months ended 31 December 2025, supported by solid organic revenue growth, improving underlying operating margins and high revenue visibility, with the majority of full-year revenue already secured under contract. The performance underpins management’s confidence in delivering its targeted 8% operating margin in FY26.
Growth was led by robust activity across the Nuclear, Aviation and Marine divisions, including clean energy projects, submarine support work, increased volumes within the LGE and Skynet programmes, and the ramp-up of France’s Mentor 2 aviation contract. These gains more than offset weaker performance in the Land segment, where activity was impacted by lower rail-related volumes.
Operationally, Babcock highlighted a series of strategic contract wins and milestones. These included its selection as prime industrial partner for Indonesia’s £4 billion Maritime Partnership Programme, the signing of a letter of intent for two additional Arrowhead 140 licence agreements, continued progress on the Type 31 frigate build at Rosyth, and an expanded partnership with HII to manufacture assemblies for US Virginia-class submarines under the AUKUS framework. The group is also advancing initiatives to support the Royal Navy’s transition toward autonomous and hybrid naval operations.
Elsewhere, Babcock continues to ramp up delivery under its £1 billion DSG Land contract, has begun supplying Jackal 3 vehicles to the British Army, and remains in discussions regarding a potential extension to its Future Maritime Support Programme. Capital returns remain a priority, with £90 million already returned as part of a £200 million share buyback programme. The company also confirmed a planned leadership transition, with chief executive David Lockwood set to retire by the end of 2026 and Nuclear division head Harry Holt named as his successor, signalling a focus on continuity.
From an outlook perspective, Babcock is supported by strengthening financial performance, solid cash conversion and a confidence-boosting earnings update that reaffirmed margin targets. Technical indicators point to an established upward trend, although overbought conditions suggest elevated near-term risk. Valuation remains the primary constraint, reflecting a higher price-to-earnings ratio and a relatively low dividend yield.
More about Babcock International
Babcock International Group is a UK-based engineering services company operating across the defence, nuclear, aviation and critical infrastructure sectors. The group provides complex asset management, support and training services, with particular strength in naval shipbuilding and support, nuclear submarine maintenance, military vehicle programmes and aviation support for government and commercial clients worldwide.
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