Babcock shares up 10 per cent after reinstating dividend
British engineering company Babcock said it was confident on further growth this year and would reinstate its dividend, encouraged by the boost to defence spending since the war in Ukraine.
The company, which designs and manufactures naval ships and weapons handling systems as well as supporting Britain’s nuclear submarines, said it expected to deliver average annual revenue growth in the mid-single digits in the medium term.
Shares in Babcock had risen just over 10 per cent by midday to top the FTSE-250, after the company posted a 17 per cent rise in annual operating profit on Thursday.
The war in Ukraine means countries are keen to ensure existing military platforms are battle-ready and enhanced with improved features, and that meant more business for Babcock, said chief executive David Lockwood.
Growth this year would come from accelerating refits on Royal Navy type 23 ships for the UK, adding more capability on frigates it is building for Poland, and providing operational support for armoured vehicles provided to Ukraine, such as Challenger 2 tanks, he said.
For the 12 months to the end of March, Babcock said it took a 100 million pound hit from a contract to build Type 31 frigates for the Royal Navy over a dispute about costs, and a dispute resolution process was ongoing.
Away from the issue with the UK contract, the Type 31 design is reaping benefits for the company. It is already building them for Poland and Indonesia, and Lockwood said orders from other countries could follow.
“There are several confidential, active discussions running about other programmes at the moment, which I’d like to think would advance in the next 12 months,” he said in an interview.
Excluding the hit from the Type 31 frigate, Babcock reported underlying operating profit of 278 million pounds.
Reuters – by Sarah Young