REG - Babcock Intnl Group - FY25 Post-close Trading Update

Babcock InternationalAnnouncement

23/04/2025 07:00

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RNS Number : 7539F  Babcock International Group PLC  23 April 2025

23 April 2025

 

 

FY25 Post-close Trading Update

 

Strong underlying operating profit and cash flow performance

 

Babcock International Group PLC ("Babcock" or "the Group") provides a positive
update on trading for the financial year ending 31 March 2025.

 

FY25 financial performance

Full year performance was strong, driven by the continuation of the positive
trends seen in the third quarter across the Group. Based on unaudited, draft
management accounts for FY25, subject to detailed review by the Audit
Committee and the external audit process, we expect the FY25 results to be:

 

·      Revenue of £4.83 billion, driven by organic growth at constant
currency of 11%, with a continuation of the strong growth noted at the third
quarter update in February, particularly in Nuclear and Marine

·      Underlying operating profit of £363 million, a 17% increase yoy
(1)

·      Underlying operating margin of 7.5% (FY24: 7.0% (2)), with all four
sectors performing well in the fourth quarter, including a c.£5 million
one-off benefit in Marine

·      Underlying operating cash conversion of c.80%, boosted by working
capital timing

·      Underlying free cash flow of £153 million, despite an additional
accelerated pension deficit repair contribution of £40 million (see below)

·      Net debt including leases reduced to £373 million at 31 March 2025
(FY24: £435 million), or £101 million excluding leases (FY24: £211 million)

 

Continued strong business momentum

The Group's contracted backlog was £10.1 billion as at 31 March 2025, up from
£9.5 billion at HY25, providing a strong platform for sustained growth.
During the fourth quarter, we announced two key multi-year contracts:

 

In January, we were awarded a new contract (Mentor 2) for the provision and
support of military air training solutions for the French Air and Space Force
and the French Navy, worth up to c.€800 million (3). This represents a
significant expansion of our military activity in France.

 

In March, we secured a sole-source five-year extension to our military land
equipment support contract worth around £1.0 billion, on terms that will
result in better outcomes for all stakeholders. Through the course of the
extension we will deliver improved readiness, regeneration and asset
management services underpinned by extensive engineering and supply chain
expertise, to maximise the availability of critical army equipment. This
contract cements our position as strategic partner to the British Army,
thereby setting the foundation for the army modernisation programme in the
coming decades.

 

Pensions further de-risked

We continue to strengthen the Group's balance sheet. In the second half of the
year we further de-risked the Group's pension schemes. Following completion of
the triennial valuation of the Rosyth Royal Dockyard Pension Scheme (RRDPS),
one of the Group's three principal schemes, the Company and trustees have
jointly agreed a long-term funding arrangement (LTFA) for the scheme. Within
the last 12 months, the Company has finalised LTFA's with all the three main
pension schemes and, as part of this has contributed an additional £40
million deficit repair lump sum in FY25. As a result, we expect annual deficit
repair payments to reduce from around £40 million per annum to around £20
million per annum for the next six years.

 

Babcock Chief Executive David Lockwood said: "In an uncertain world, we
continue to see momentum across the business. This has driven strong
performance in all four of our divisions in the fourth quarter, resulting in
full year underlying operating profit ahead of expectations. Our experience,
know-how and application of technology play a critical role in ensuring that
our customers are ready to respond to ever-changing global threats."

 

FY25 reporting date

Further details and the outlook for FY26 will be provided on publication of
our FY25 preliminary results, which we expect will be on 25 June 2025.

Civil nuclear teach-in event

We will be hosting a teach-in for analysts and investors on our civil nuclear
business on 20 May at the London Stock Exchange. The event will also be
webcast and available on the Investor Relations website. Registration details
to follow.

 

 

(1)       Compared to FY24 underlying operating profit of £311 million,
which excludes the loss on Type 31 of £90 million and a profit on property
disposal of £17 million.

(2)       FY24 underlying operating margin was 7.0% excluding the loss on
Type 31 and profit on property disposal.

(3)       Approximately £310 million has been recorded in the contract
backlog for the Mentor 2 contract.

 

 

ENDS

 

 

For further information:

 Andrew Gollan, Director of Investor Relations      +44 (0)7936 039004
 Kate Hill, Group Head of Financial Communications  +44 (0)20 7355 5312
 Harry Cameron/Camilla Cunningham, Teneo            +44 (0)20 7353 4200

 

Forward-looking statements

 

Certain statements in this announcement are forward-looking statements. Such
statements may relate to Babcock's business, strategy and plans. Statements
that are not historical facts, including statements about Babcock's or its
management's beliefs and expectations, are forward-looking statements. Words
such as 'believe', 'anticipate', 'estimates', 'expects', 'intends', 'aims',
'potential', 'will', 'would', 'could', 'considered', 'likely', and variations
of these words and similar future or conditional expressions are intended to
identify forward-looking statements but are not the exclusive means of doing
so. By their nature, forward-looking statements involve a number of risks,
uncertainties or assumptions, some known and some unknown, many of which are
beyond Babcock's control that could cause actual results or events to differ
materially from those expressed or implied by the forward-looking statements.
These risks, uncertainties or assumptions could adversely affect the outcome
and financial effects of the plans and events described herein.
Forward-looking statements contained in this announcement regarding past
trends or activities should not be taken as a representation that such trends
or activities will continue in the future. Nor are they indicative of future
performance and Babcock's actual results of operations and financial condition
and the development of the industry and markets in which Babcock operates may
differ materially from those made in or suggested by the forward-looking
statements. You should not place undue reliance on forward-looking statements
because such statements relate to events and depend on circumstances that may
or may not occur in the future. Except as required by law, Babcock is under no
obligation to update (and will not) or keep current the forward-looking
statements contained herein or to correct any inaccuracies which may become
apparent in such forward-looking statements.

 

Forward-looking statements reflect Babcock's judgement at the time of
preparation of this announcement and are not intended to give any assurance as
to future results.

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