Rosyth shipbuilder cites naval growth and steady earnings

Babcock International has reported a positive start to the financial year, with trading across its businesses described as “encouraging” in a trading update released ahead of its Annual General Meeting.

The company said organic revenue growth and operating margin progress were both in line with expectations for the five months to 31 August 2025. Strong performance in civil nuclear projects, submarine support, and aviation, driven by the ramp-up of France’s Mentor 2 contract, was partly offset by weaker activity in the land division, particularly in rail.

The Group said full-year expectations remain unchanged and reaffirmed guidance upgraded in June: average revenue growth of mid-single digits, underlying operating margin of at least 9%, and operating cash conversion above 80%.

The update highlighted a series of developments across Babcock’s portfolio. In naval construction, the Type 31 frigate programme reached a milestone in June with the float-off of HMS Venturer, while HMS Active remains on track to follow before the end of FY26. In April, the firm secured a £65 million sole-source Capability Insertion Programme contract for the class.

In nuclear work, Babcock won a £114 million deal to support the first defuelling of a decommissioned Royal Navy submarine in over two decades, with preparations under way at Devonport for four vessels to begin in 2026.

Internationally, its joint venture with HII in Australia secured its first AUKUS-related contract to develop supply chain capacity for the country’s future nuclear-powered submarines. In September, Babcock also signed an AU$250 million, eight-year follow-on contract with the Australian Border Force covering helicopters, crews, and maintenance for maritime security operations in the Torres Strait.

The firm has also expanded into AI systems, launching its Nomad product in September. The platform uses AI to provide front-line military and security services with real-time communications intelligence.

Industry collaborations have been stepped up. Agreements were announced with BAE Systems Bofors to support the Type 31’s multi-purpose guns, with Patria to act as UK build partner under the Common Armoured Vehicle System programme, with Hanwha Ocean to provide in-service support for Canada’s Patrol Submarine Project, and with HII to develop submarine-launched recovery of unmanned underwater vehicles. Babcock also signed an MoU with KNL to provide high-frequency communications support across land, sea and air domains.

Financial measures included progress on its £200 million share buyback, around a quarter of which has been completed, and the refinancing of its revolving credit facility. The new £600 million facility, agreed in July with ten banks, has a five-year term with extension options and the ability to expand by £200 million.

Investor engagement has also increased, with two recent events showcasing the growth potential of the Marine Design and Build and Cavendish Nuclear divisions, both of which the company believes could double revenues by 2030.

The group will publish its half-year results for FY26 on 20 November 2025.