REG - Babcock Intnl Group - Results for the six months ended 30 September 2025
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RNS Number : 4732I Babcock International Group PLC 21 November 2025
Babcock International Group PLC
Half year results for the six months ended 30 September 2025
This announcement contains inside information
21 November 2025
Consistent delivery underpins growth and margin expansion
Statutory results 30 September 30 September
2025
2024
Revenue £2,538.6m £2,408.9m
Operating profit £234.3m £183.8m
Basic earnings per share 33.7p 25.7p
Interim dividend per share 2.5p 2.0p
Cash generated from operations £226.9m £181.3m
Underlying results(1) 30 September 30 September
2025
2024
Contract backlog £9.9bn £9.5bn
Underlying operating profit £201.1m £168.8m
Underlying operating margin 7.9% 7.0%
Underlying basic earnings per share 28.5p 23.5p
Underlying free cash flow £140.6m £94.7m
Net debt £(351.1)m £(385.6)m
Net debt excluding leases £(55.8)m £(145.8)m
Net debt/EBITDA (covenant basis) 0.2x 0.6x
David Lockwood, Chief Executive Officer, said:
"Thanks to the skills and dedication of our people, Babcock continued its
track record of profitable growth with a strong performance in the first half.
Good momentum was underpinned by consistent delivery for our customers against
a background of supportive market dynamics.
"We are on track to achieve our expectations for the full year and are
pursuing exciting opportunities for sustainable growth and margin expansion,
both in the UK and internationally."
Good performance in first half, full year expectations unchanged
• Contract backlog: £9.9 billion, reflecting significant Land and
Aviation orders in 2H25 (FY25: £10.4 billion)
• Revenue: 7% organic growth driven by Nuclear, with lower volumes
in Land Civil businesses
• Statutory operating profit: up 27%, including derivative
revaluation and recovery of loan granted on disposal
• Underlying operating profit: up 19%, driven by strong
performance in Nuclear and Marine
• Underlying operating margin: up 90 basis points to 7.9%, with
increases in all sectors
• Underlying EPS: up 21% to 28.5p, reflecting higher underling
operating profit and lower interest charge
• Underlying free cash flow: £141 million, with underlying
operating cash conversion of 83%
• Net debt excluding leases reduced by £90 million to £56
million, a gearing ratio of 0.2x (FY25: 0.3x)
• Interim dividend: up 25% to 2.5 pence per share (HY25: 2.0
pence)
Consistent delivery driving growth and margin expansion
• On track to deliver FY26 target margin of 8% and medium-term
target of >9%
• The first of five Type 31 frigates completed float-off, while
the third ship commenced its assembly phase
• Re-opened Devonport's 15 Dock facility, marking the return of
twin streaming submarine maintenance capability
• Successfully mobilised DSG, the follow-on £1.0 billion,
five-year British Army vehicle support contract
• Mobilisation of 17-year Mentor 2 military air training contract
in France progressing to plan
Market dynamics supporting growth in UK and Internationally across defence and nuclear
• Secured £114 million three-year contract to prepare for the
first nuclear defueling of a decommissioned Trafalgar Class submarine in over
20 years
• Signed a teaming agreement with Patria to offer its 6x6 armoured
personnel carrier to the UK Armed Forces
• Over £50 million in new orders secured for Skynet services
• Agreement with Hanwha Ocean to be In-Service Support partner on
the Canadian Patrol Submarine Project
• MOU with HII to deliver autonomous launch and recovery of
unmanned underwater vehicles
• Secured a first ever defence contract in South Africa, for
submarine support
• Awarded new 10-year contract alongside Airbus Helicopters to
deliver in-service support to 46 new H145 helicopters for the French
Government
Strong balance sheet and consistent cash generation underpins disciplined capital allocation with active pipeline of organic and inorganic opportunities
• Ongoing buyback of £200 million in train - £49 million
completed in the first half
• Organic investment opportunities including further investment in
our advanced manufacturing capabilities and shipbuilding capacity at our
Rosyth facility
• Assessing pipeline of inorganic investment opportunities in line
with our disciplined M&A strategy
FY26 outlook
• Our expectations for FY26 are unchanged. We expect to achieve an
underlying operating margin of 8%, with good progress to towards the
medium-term guidance we set in June 2025: average revenue growth of mid-single
digit, underlying margin of at least 9%, and average underlying operating cash
conversion of at least 80%.
See page 14 for segmental analysis
Notes to statutory and underlying results on page 1
1. Alternative Performance Measures (APMs):
The Group provides alternative performance measures (APMs), including
underlying operating profit, underlying margin, underlying earnings per share,
underlying operating cash flow, underlying free cash flow, net debt, net debt
excluding leases and contract backlog, to enable users to have a more
consistent view of the performance and earnings trends of the Group. These
measures are considered to provide a consistent measure of business
performance from year to year. They are used by management to assess operating
performance and as a basis for forecasting and decision-making, as well as the
planning and allocation of capital resources. They are also understood to be
used by investors in analysing business performance.
The Group's APMs are not defined by IFRS and are therefore considered to be
non-GAAP measures. The measures may not be comparable to similar measures used
by other companies, and they are not intended to be a substitute for, or
superior to, measures defined under IFRS. The Group's APMs are consistent with
those for the year ended 31 March 2025. The Group has defined and outlined the
purpose of its APMs in the Financial Glossary on page 25.
The person responsible for arranging for the release of this announcement on
behalf of the Company is Jack Borrett, the Corporate Secretary, Babcock
International
Results presentation:
A presentation for investors and analysts will be held on 21 November at 09:00
am (BST). The presentation will be webcast live and will be available on
demand at www.babcockinternational.com/investors/results-and-presentations
(http://www.babcockinternational.com/investors/results-and-presentations) . A
transcript of the presentation and Q&A will also be made available on our
website.
For further information:
Andrew Gollan, Director of Investor Relations +44 (0)7850 978 741
Kate Hill, Group Head of Financial Communications +44 (0)20 7355 5312
Harry Cameron/Camilla Cunningham, Teneo +44 (0)20 7353 4200
CEO review
Introduction
The first half of FY26 saw good growth, higher margins and strong cash
generation, with the Group on track to meet full year expectations. This was
driven by successful delivery for our customers through the period, against a
background of significant developments in our core defence and security
markets.
Our specialist capabilities continue to be highly relevant in the current
uncertain geopolitical environment. With a clear strategy and a disciplined
approach to capital allocation, we are positioning for opportunities that will
sustain profitable growth over the long term.
Good performance in HY26 underpins FY expectations
Babcock delivered another good performance in HY26 in line with expectations,
with year-on-year increases across our key financial measures, including
organic revenue, margin and cash generation.
Group revenue increased organically(1) 7% with Nuclear, our largest division,
the standout contributor. Underlying operating profit(1) increased 19%,
resulting in a 90 basis points increase in underlying operating margin(1) to
7.9% with all sectors contributing to the increase: good progress towards our
FY26 target of 8% and medium-term target of at least 9%.
Cash conversion(1) of 83% remained in line with our medium-term target. This,
together with lower pension deficit payments following the long-term funding
arrangements reached in FY25, drove a 48% increase in underlying free cash
flow(1) to £141 million. We executed £49 million of the £200 million share
buyback programme by 30 September.
We have maintained a strong balance sheet, ending the period with net debt
including leases(1) of £351 million (FY25: £373 million) and a gearing ratio
(net debt to EBITDA(1)) of 0.2x (FY25: 0.3x) on a covenant basis.
Consistent delivery driving growth and margin expansion
Consistent delivery for our customers is central to our strategic ambitions.
The period saw organic revenue growth in line with our guidance, and margin
improvement in all four divisions.
In Marine, 6% organic revenue growth(1) was driven by our LGE business
following record order wins in FY25 and further growth in the Skynet contract.
As a result, divisional margin improved 160 basis points to 6.7%.
We achieved high output levels in our advanced manufacturing operations at our
facilities in Bristol and Rosyth with the commencement of continuous
production of integrated missile tube assemblies and handling systems for the
US Columbia Class and the UK Dreadnought Class submarine programmes.
Nuclear's performance was particularly strong, delivering 14% organic revenue
growth(1), continuing the positive trends across the sector. In defence
nuclear, growth from higher submarine support volumes more than offset the
anticipated decline in major infrastructure programme (MIP) revenue. In civil
nuclear, our higher margin Cavendish Nuclear business grew 25%, benefitting
from further strong growth in clean energy, primarily from the ramp up of
major project work at Hinkley Point C. Through this combination of growth, mix
and execution, Nuclear is the first division to reach our medium-term Group
margin target of at least 9%.
We continue to execute the UK Government's multi-year, multi-billion
investment in upgrading nuclear submarine infrastructure through the MIP. This
investment programme, which will improve submarine availability, has enabled
us to make good progress on the first Astute Class Base Maintenance Period and
the Deep Maintenance Period contract to life-extend the second nuclear
deterrent submarine HMS Victorious.
Our Land underlying operating margin(1) increased 20 basis points to 7.9%
despite lower revenues in our Rail and Africa civil businesses. We mobilised
the follow-on £1.0 billion, five-year DSG vehicle support contract in the
period, cementing our position as a Strategic Partner to the British Army. We
also completed the first tranche of the Jackal 3 High Mobility Transporter
programme and commenced production of tranche 2, comprising 53 six-wheeled
'Extenda' variants.
Finally, Aviation delivered 26% organic revenue growth(1). This was driven by
the rapid ramp up of major new international contracts - Mentor 2 and MCO
145-C2 in France and BC HEMS in Canada - as well as scope growth in existing
UK military aviation contracts. These drove a 240 basis point improvement in
underlying operating margin, to 7.2%.
Overall, we have made considerable progress towards our full year underlying
operating margin(1) target of 8.0%. We remain focused on driving margin to at
least 9% over the medium term, through growth from higher quality business and
continued efficiencies from ongoing productivity and investment initiatives.
Market dynamics supporting growth
Governments across our markets continue to focus on defence and security as
geopolitical uncertainty continues. There is a clear recognition of the need
for investment in defence capabilities, energy security, increased sovereignty
and industrial resilience. However, this commitment to defence is against a
backdrop of fiscal strain, which increases the relevance of Babcock's focus on
affordability, availability and capability. As a long-standing, strategic
partner to the UK and other governments, and with growing partnerships and
relationships across the supply chain, Babcock is well positioned to deliver
not only sovereign defence solutions but to contribute to wider economic
growth.
After setting out its defence and security priorities in the Strategic Defence
Review in June 2025, the UK Government published its Defence Industrial
Strategy (DIS) in September. Babcock welcomed initiatives including:
publication of five-year procurement pipelines which offer greater visibility
and predictability of upcoming MOD capability needs, an increase in funding
for skills, and the announcement of a Defence Growth Deal for Plymouth, where
Babcock plays a key anchoring role in the local economy through our Devonport
dockyard.
Our work at Devonport is an example of where we are critical to both national
security and regional prosperity. Focused activity has culminated in the
creation of 'Team Plymouth', a partnership between defence, industry, academia
and local and national government, with Plymouth set to benefit from a share
of £250 million to support regeneration as one of five key growth areas
identified in the strategy. In June, we published a blueprint for regional
regeneration which included our plan to relocate 2,000 employees from
Devonport support functions to create a new capability hub in Plymouth city
centre.
By reinforcing sovereign capability and fostering strategic
industry-government alignment, the DIS creates a more stable and attractive
environment for UK's defence industry to invest for the long-term, creating
significant opportunities for growth.
Strategic progress and longer-term growth
Our contract backlog stood at £9.9 billion at 30 September, slightly down
compared to the start of the year (FY25: £10.4 billion), reflecting the large
order intake in the 2H25 - DSG and Mentor 2. We continue to address an
expanding longer-term opportunity set, and to secure partnerships and
collaborations with leading global industry players across our portfolio, to
drive future growth in both our domestic and international markets.
In Marine, we signed an agreement with South Korea's Hanwha Ocean to be its
exclusive in-service support partner for the new Canadian Patrol Submarine
Project (CPSP). This follows Hanwha Ocean's selection as one of two qualified
suppliers by the Government of Canada. We also signed a partnership agreement
with US defence prime HII to deliver autonomous launch and recovery of
Unmanned Underwater Vehicles via our leading submarine weapons launch handling
system.
We are bidding for several new multi-billion-pound international shipbuilding
opportunities, as well as working with existing Government customers such as
Indonesia and Poland, and strategic partners on additional naval programme and
marine support opportunities.
In Nuclear, we progressed our nuclear submarine disposal work following award
of a £114 million, three-year contract to support the first defueling of a
decommissioned British nuclear submarine in over 20 years. Under the contract
we will work collaboratively with the UK Defence Nuclear Enterprise and
industry partners to prepare for the defuel of four decommissioned submarines
at our Devonport facility from 2026.
We continue to make good progress on commercial discussions on the follow-on
to our largest contract, Future Maritime Support Programme (FMSP) to support
the UK nuclear submarine fleet, which completes at the end of FY26. In
Australia, our joint venture with HII signed an MOU with the Victorian
Government to build a skilled workforce and strengthen the supply chain for
the AUKUS programme.
In the civil nuclear market, notable developments in the first half, including
the UK Government's commitment to full funding for the new nuclear Sizewell C
power station, should lead to opportunities across our Cavendish Nuclear
business. In the small modular reactor (SMR) sector, Great British
Energy-Nuclear (GBE-N) has launched its wider procurement programme, and we
are now tendering to provide engineering services. In addition, following the
announcement of X-energy and Centrica's Joint Development Agreement to deploy
X-energy's Xe-100 Advanced Modular Reactors (AMRs) in the UK, we are in
dialogue concerning further support building on our work co-funded by the UK
Government's Future Nuclear Enabling Fund. In fuels, our support to the UK
front-end nuclear fuel cycle continues to grow through engineering design
projects with Westinghouse and Urenco.
In Land, our product strategy is gaining momentum. We signed a teaming
agreement with Finnish company Patria to be the build partner for its armoured
personnel carrier in the UK. Now that the UK MOD has joined the European
Common Armoured Vehicle System (CAVS) programme, this paves the way for us to
expand our footprint within the Plymouth and South Devon Freeport to satisfy
the full UK build requirement for the 6×6 vehicle and support the British
Army's export ambitions as part of the Land Industrial Strategy.
After the period end, we secured our first ever defence contract in South
Africa, in submarine support. While small in the context of the Group, it is
an important development, with defence now a strategic focus for our
long-established South African business. This success was achieved through the
combination of our strong local presence and specialist capabilities in the
support of complex naval vessels.
Disciplined capital allocation - delivering both growth and returns
We have a clear and consistent capital allocation framework that is focused on
maximising shareholder value. With a strong balance sheet, we have the
financial capacity to invest in the growing opportunity set and make returns
to shareholders.
Investment for growth: organic investment remains our first capital allocation
priority, and we see a significant number of attractive opportunities to
sustain long-term shareholder value creation. In addition to ongoing
investment in the business to further improve overall quality and delivery, we
are assessing several material capex opportunities across the portfolio.
These include further investment in our advanced manufacturing capabilities
and increased shipbuilding capacity at our Rosyth facility to address emerging
naval programme opportunities. We are also investigating a number of
innovative proposals that would see us investing alongside our government
customers, for example in infrastructure or 'build and operate' models, to
drive their defence agendas and deliver the capabilities they require at an
acceptable value. We will update the market at the appropriate time as and
when such opportunities mature.
Inorganic investment: We continue to be active in assessing inorganic
investment opportunities in line with our disciplined M&A strategy,
targeting bolt-on complementary businesses to support future organic growth
potential.
Shareholder returns: Paying a regular and progressive dividend to our
shareholders remains a capital allocation priority. The Board has recommended
an interim dividend of 2.5 pence per share, a 25% increase on HY25. We expect
to complete the £200 million share buyback programme by the year end, having
repurchased approximately c.£49 million shares as at 30 September. We
continually assess our capital allocation requirements and will consider
additional shareholder returns should we determine that we have surplus
capital, after considering our investment priorities.
Outlook
Our expectations for FY26 are unchanged. We expect to achieve an underlying
operating margin of 8%, with good progress to towards the medium-term guidance
we set in June 2025: average revenue growth of mid-single digit, underlying
margin of at least 9%, and average underlying operating cash conversion of at
least 80%.
David Lockwood
Chief Executive
Other information
Dividend
An interim dividend of 2.5 pence per ordinary share (HY25: 2.0 pence per
share) is payable on 16 January 2026 to shareholders whose names appear on the
register at the close of business on 5 December 2025. Shareholders may
participate in the dividend re-investment plan and elections must be made by
23 December 2025. Details of the dividend re-investment plan can be found, and
shareholders can make elections, at www.babcock-shares.com.
Notes to CEO Statement
1. A defined Alternative Performance Measure (APM) as set out on page 2
and in the Financial Glossary on page 25.
Financial review
The Group provides alternative performance measures (APMs), including
underlying operating profit, underlying margin, underlying earnings per share,
underlying operating cash flow, underlying free cash flow, net debt and net
debt excluding leases, to enable users to have a more consistent view of the
performance and earnings trends of the Group. These measures are considered to
provide a consistent measure of business performance from year to year. They
are used by management to assess operating performance and as a basis for
forecasting and decision-making, as well as the planning and allocation of
capital resources. They are also understood to be used by investors in
analysing business performance.
The Group's APMs are not defined by IFRS and are therefore considered to be
non-GAAP measures. The measures may not be comparable to similar measures used
by other companies, and they are not intended to be a substitute for, or
superior to, measures defined under IFRS. The Group's APMs are consistent with
the year ended 31 March 2025. The Group has defined and outlined the purpose
of its APMs in the Financial Glossary on page 25.
The reconciliation from the IFRS statutory income statement to the underlying
income statement is shown below.
Income statement
30 September 2025 30 September 2024
Underlying Specific adjusting items Statutory Underlying Specific adjusting items Statutory
£m
£m
£m
£m
£m
£m
Revenue 2,538.6 - 2,538.6 2,408.9 - 2,408.9
Operating profit 201.1 33.2 234.3 168.8 15.0 183.8
Operating margin 7.9% 9.2% 7.0% 7.6%
Share of results of joint ventures and associates 4.2 - 4.2 5.1 - 5.1
Net finance costs (13.5) 1.3 (12.2) (16.8) (0.1) (16.9)
Profit before tax 191.8 34.5 226.3 157.1 14.9 172.0
Income tax (expense) (49.3) (8.5) (57.8) (38.4) (3.6) (42.0)
Profit after tax 142.5 26.0 168.5 118.7 11.3 130.0
Non-controlling interest (0.8) - (0.8) 0.7 - 0.7
Profit attributable to the owners of the parent 143.3 26.0 169.3 118.0 11.3 129.3
Basic EPS 28.5p 5.2p 33.7p 23.5p 2.2p 25.7p
Diluted EPS 28.0p 5.0p 33.0p 23.0p 2.2p 25.2p
A full statutory income statement can be found on page 35.
As described on page 2, statutory operating profit includes specific adjusting
items (SAIs) that are not included in underlying operating profit, which is a
key APM for the Group. A reconciliation of statutory operating profit to
underlying operating profit is shown in the table below and in note 2 of the
interim financial statements.
Revenue of £2,539 million grew 7% organically offset by a (1)% currency
translation effect. The increase was driven by strong growth in Nuclear
followed by Aviation and Marine, while Land was down year on year due to our
Civil businesses. See segmental tables on page 14:
• Marine revenue increased 6% (at constant FX) to £823 million
due to higher volumes in our LGE business and growth of the Skynet programme,
offset by lower ship support volumes in the UK.
• Nuclear revenue increased 14% (at constant FX) to £989 million
as submarine support activity grew strongly under the Future Maritime Support
Programme (FMSP) programme and Civil Nuclear grew 25% as new projects ramped
up, more than offsetting a reduction from the timing of Major Infrastructure
Programme (MIP) revenue across the year.
• Land revenue decreased 10% (at constant FX) to £526 million due
to lower volumes in our Civil businesses, particularly Rail following the
completion of a number of delivery projects, and Africa where mining equipment
sales have reduced.
• Aviation revenue increased 26% (at constant FX) to £201 million
due to scope increases in UK military support contracts, the ramp up of the
Mentor 2 programme in France and the start of the British Colombia HEMS
contract in Canada.
Underlying operating profit increased by 19% to £201.1 million driven by
strong performance in Nuclear and Marine. As a result, underlying operating
margin increased to 7.9% (HY25: 7.0%). See segmental tables on page 14:
• Marine underlying operating profit increased 38% to £55.3
million due to growth in LGE and Skynet and the completion of certain support
activities. As a result, underlying operating margin increased to 6.7% (HY25:
5.1%).
• Nuclear underlying operating profit increased 18% to £89.7
million due to the revenue growth as well as some contract changes and risk
retirement on project milestones. As a result, underlying operating margin
increased to 9.1% (HY25: 8.7%).
• Land underlying operating profit decreased 8% to £41.6 million
due to the lower volumes in Rail and Africa and some contract recoveries in
the prior period. Despite this, underlying operating margin increased slightly
to 7.9% (HY25: 7.7%).
• Aviation underlying operating profit increased 88% to £14.5
million, reflecting mix, improved project profitability, programme timing and
contract renegotiations, including price. As a result, underlying operating
margin increased to 7.2% (HY25: 4.8%).
Further analysis of financial performance is included in each sector's
operational review starting on page 15.
Statutory operating profit increased to £234.3 million (HY25: £183.8
million) due to the increase in underlying operating profit, the revaluation
of derivatives and the final recovery of loan receivables originating from the
disposal of the Civil Training business in FY23. As a result, statutory
operating margin increased to 9.2% (HY25: 7.6%).
Reconciliation of statutory to underlying operating profit
30 September 2025 30 September 2024
£m
£m
Statutory operating profit 234.3 183.8
Amortisation of acquired intangibles 5.7 4.4
Business acquisition, merger and divestment related items (8.5) -
Curtailment gain on pension scheme closure - (0.3)
Exceptional items (2.1) -
Fair value movement on derivatives (28.3) (19.1)
Specific adjusting items impacting operating profit (33.2) (15.0)
Underlying operating profit 201.1 168.8
Share of joint ventures and associates on a statutory basis was a profit of
£4.2 million (HY25: profit of £5.1 million).
Net finance costs
• Underlying net finance costs decreased to £13.5 million (HY25:
£16.8 million) due to higher interest earned on surplus cash balances and
lower interest cost on pension liabilities, offset by the additional interest
charge on new lease liabilities.
• Statutory net finance costs decreased to £12.2 million (HY25:
£16.9 million), reflecting the items above and the fair value movement of
derivatives which hedge interest cost.
Income tax expense
• Underlying income tax expense increased to £49.3 million (HY25:
£38.4 million) due to higher underlying operating profit and lower underlying
net finance costs. This represents an effective underlying tax rate of 26.3%
(HY25: 25.3%), calculated using underlying profit before tax excluding the
share of income from joint ventures and associates (which is a post-tax
number). The Group's effective underlying tax rate is expected to remain
broadly stable over the medium term depending on country profit mix.
• Statutory income tax expense increased to £57.8 million (HY25:
£42.0 million), higher than underlying income tax expense due to the tax
impact of the specific adjusting items outlined above.
Basic earnings per share
• Underlying basic earnings per share increased 21% to 28.5 pence
(HY25: 23.5 pence), reflecting higher underlying operating profit and lower
underlying net finance costs.
• Basic earnings per share on a statutory basis increased 31% to
33.7 pence (HY25: 25.7 pence) due to the improvement in underlying earnings
per share and the post tax impact of the specific adjusting items outlined
above.
Reconciliation of statutory profit and basic EPS to underlying profit and basic EPS
30 September 2025 30 September 2024
£m Basic EPS £m Basic EPS
Statutory profit after tax for the year 168.5 33.7p 130.0 25.7p
Specific adjusting items, net of tax (26.0) (5.2)p (11.3) (2.2)p
Underlying profit after tax for the year 142.5 28.5p 118.7 23.5p
Dividend per share
The Board has recommended an interim dividend of 2.5 pence per ordinary share
(HY25: 2.0 pence), a 25% increase.
Exchange rates
The translation impact of foreign currency movements resulted in a decrease in
revenue of £23 million and a decrease in underlying operating profit of £1
million. The main currencies that have impacted our results are the Australian
Dollar, Canadian Dollar, Euro, New Zealand Dollar and South African Rand. The
currencies with the greatest potential to impact results are the South African
Rand, the Australian Dollar, the Euro and the Canadian Dollar:
• A 10% movement in the South African Rand against Sterling would
affect revenue by around £34 million and underlying operating profit by
around £3 million per annum
• A 10% movement in the Australian Dollar against Sterling would
affect revenue by around £29 million and underlying operating profit by
around £1 million per annum
• A 10% movement in the Euro against Sterling would affect revenue
by around £16 million and underlying operating profit by around £1 million
per annum
• A 10% movement in the Canadian Dollar against Sterling would
affect revenue by around £18 million and underlying operating profit by
around £2 million per annum
Cash flow and net debt
Underlying cash flow and net debt
Underlying cash flows are used by the Group to measure operating performance
as they provide a more consistent measure of business performance from year to
year.
30 September 2025 30 September 2024
£m £m
Statutory operating profit 234.3 183.8
Add back: specific adjusting items (see table on page 6) (33.2) (15.0)
Underlying operating profit 201.1 168.8
Right of use asset depreciation & impairment 25.0 19.3
Other depreciation & amortisation 39.2 34.8
Non-cash items 6.3 10.0
Working capital movements (31.8) (13.4)
Provisions (5.4) (14.3)
Net capital expenditure (45.5) (47.5)
Lease principal payments (22.8) (22.8)
Underlying operating cash flow 166.1 134.9
Underlying operating cash conversion (%) 83% 80%
Pension contributions in excess of income statement (7.4) (23.9)
Interest paid (net) (12.8) (11.9)
Tax paid (12.4) (16.2)
Dividends from joint ventures and associates 7.1 11.8
Underlying free cash flow 140.6 94.7
Net acquisitions and disposals of subsidiaries 8.5 -
Dividends paid (including non-controlling interests) (23.0) (16.6)
Purchase of own shares (65.1) (13.3)
Purchase of other investments (2.1) -
Lease principal payments 22.8 22.8
Net new lease arrangements (55.4) (38.2)
Other non-cash debt movements (2.4) (1.2)
Fair value movement in debt and related derivatives 5.6 (5.9)
Exchange movements (7.3) 7.5
Movement in net debt 22.2 49.8
Opening net debt (373.3) (435.4)
Closing net debt (351.1) (385.6)
Add back: leases 295.3 239.8
Closing net debt excluding leases (55.8) (145.8)
A full statutory cash flow statement can be found on page 38 and a
reconciliation to net debt on page 11.
Underlying operating cash flow increased 23% to £166.1 million (HY25: £134.9
million) largely due to the increase in underlying operating profit. The
conversion ratio of underlying operating cash to underlying operating profit
was 83% (HY25: 80%), reflecting an increase in working capital due to slightly
increased inventory and the timing of indirect tax payment cycles. Gross capex
of £71.1 million (HY25: £50.6 million) represents continued investment in
our operations and systems, particularly in Devonport, and c.£20 million of
payments for aircraft which were offset by a broadly similar amount of
aircraft disposal proceeds. Net capex of £45.5 million (HY25: £47.5 million)
was slightly ahead of depreciation. Capital expenditure is reconciled in the
financial glossary on page 25.
Underlying free cash flow increased to £140.6 million (HY25: £94.7 million),
reflecting higher underlying operating cash flow and lower pension deficit
repair contributions following the agreement of long-term funding arrangements
for our three main schemes. Most of our pension, interest and tax payments are
made in the second half of the year.
Acquisitions and disposals
Cash receipts and related fair value gains of £8.5 million arose on the final
settlement of loan receivables originating from the disposal of the Civil
Training business in FY23. These are not included within underlying operating
profit or underlying free cash flow.
New lease arrangements
In addition to net capital expenditure, and not included in underlying free
cash flow, £55.4 million (HY25: £38.2 million) of net new lease arrangements
were entered into in the period, primarily relating to aircraft to support new
contracts in Canada and Australia. These new lease arrangements are therefore
included in net debt, but do not involve any cash outflows at inception.
Reconciliation of underlying operating cash flow to statutory net cash flows from operating activities
30 September 2025 30 September 2024
£m
£m
Underlying operating cash flow 166.1 134.9
Add: net capital expenditure 45.5 47.5
Add: lease principal payments 22.8 22.8
Less: pension contributions in excess of income statement (7.4) (23.9)
Less: Non-operating cash items (excluded from underlying cash flow) (0.1) -
Cash generated from operations 226.9 181.3
Tax paid (12.3) (16.2)
Net interest paid (12.8) (11.9)
Net cash flows from operating activities 201.8 153.2
Statutory cash flow summary
30 September 2025 30 September 2024
£m
£m
Net cash flow from operating activities 201.8 153.2
Net cash flow from investing activities (31.7) (35.6)
Net cash flow from financing activities (113.6) (53.0)
Net increase in cash, cash equivalents and bank overdrafts 56.5 64.6
Net cash flow from operating activities increased to £201.8 million (HY25:
£153.2 million) due to higher underlying operating cash flow and lower
pension deficit payments.
Net cash flow from investing activities was an outflow of £31.7 million
(HY25: outflow of £35.6 million). The decrease relates to the final
settlement of loan receivables originating from the disposal of the Civil
Training business, offset by higher net capex.
Net cash flow from financing activities was an outflow of £113.6 million
(HY25: outflow of £53.0 million), including £22.8 million lease principal
payments (HY25: £22.8 million), £23.0 million dividends paid (HY25: £16.6
million) and £65.1 million purchase of own shares (HY25: £13.3 million).
Movement in net debt - reconciliation of statutory cash flows to net debt
30 September 2025 30 September 2024
£m
£m
Net increase in cash, cash equivalents and bank overdrafts 56.5 64.6
Cash flow from the decrease in debt (3.8) 15.4
Change in net funds resulting from cash flows 52.7 80.0
Additional lease obligations (45.7) (39.5)
New lease receivables granted 19.3 8.9
Other non-cash movements and changes in fair value 3.2 (7.1)
Foreign currency translation differences (7.3) 7.5
Movement in net debt in the period 22.2 49.8
Opening net debt (373.3) (435.4)
Closing net debt (351.1) (385.6)
Net debt
Net debt at 30 September 2025 was £351.1 million, a reduction of £22.2
million from the position at the start of the year driven by underlying free
cash flow offset by dividend payments of £23.0 million, £65.1 million to
purchase own shares and net new leases of £26.4 million. Net debt excluding
leases was £55.8 million.
Components of net debt
30 September 2025 31 March 2025
£m
£m
Cash and cash equivalents 704.7 646.5
Current liabilities - bank debt and other loans (299.4) (0.5)
Non-current liabilities - bank debt and other loans (473.7) (750.7)
Other debt instruments (includes loans to JVs) (21.1) (38.6)
Net finance leases 33.7 42.1
Closing net debt excluding leases (55.8) (101.2)
Include leases (295.3) (272.1)
Closing net debt (351.1) (373.3)
Summarised balance sheet
30 September 2025 31 March 2025
£m
£m
Intangible assets 916.4 920.6
Property, plant and equipment and right of use assets 826.3 787.7
Investment in joint ventures, associates and other investments 43.2 43.5
Assets held for sale 3.0 -
Working capital (657.3) (694.2)
Provisions (134.4) (138.3)
Net retirement benefit surplus/(deficit) 31.5 (8.4)
Net tax assets 29.9 76.1
Net other financial assets and liabilities 33.1 8.1
Leases (295.3) (272.1)
Net debt excluding leases (55.8) (101.2)
Net assets 740.6 621.8
Property, plant and equipment (PP&E) and right of use assets were £826.3
million, an increase of £38.6 million from the position at the start of the
year. PP&E increased by £16.6 million to £575.5 million, including gross
capital expenditure of £73.4 million, disposals of net book value of £24.0
million and depreciation of £30.2 million. Right of use assets increased by
£22.0 million to £250.8 million including net new leases of £47.9 million
and depreciation and impairment of £25.0 million.
Working capital increased by £36.9 million from the position at the start of
the year to £(657.3) million due to an increase in inventory and the timing
of indirect tax payment cycles.
Funding and liquidity
As of 30 September 2025, the Group had access to a total of £1.4 billion of
borrowings and facilities. These comprised:
• £600 million RCF, refinanced on 17 July 2025, maturing on 17
July 2030 with two option years and accordion expansion facility for a further
uncommitted £200 million for the duration of the agreement.
• £300 million bond maturing on 5 October 2026
• €550 million bond, hedged at £493 million, maturing on 13
September 2027
• An overdraft facility of £50 million
At 30 September 2025, the Group's net cash (cash and cash equivalents less
overdrafts) balance was £704.7 million. This, combined with the undrawn
amounts under our committed RCFs and overdraft facilities, gave us liquidity
of around £1.4 billion.
Pensions
The Group has a number of defined benefit pension schemes. The principal
defined benefit pension schemes in the UK are the Devonport Royal Dockyard
Pension Scheme (DRDPS), the Babcock International Group Pension Scheme (BIGPS)
and the Royal Dockyard Pension Scheme (RRDPS) - the principal schemes.
IAS 19
At 30 September 2025, the IAS 19 valuation for accounting purposes was a net
surplus of £31.5 million (FY25: net deficit of £8.4 million). The change in
net accounting position is driven by change in actuarial financial assumptions
and the deficit recovery contributions paid by the Group. The fair value of
plan assets (including longevity swap value) of £2,815.7 million decreased by
£15.3 million, driven by the impact of IFRIC 14 asset ceilings and asset
returns being lower than the IAS 19 expected return on plan assets. The
present value of pension benefit obligations of £2,784.2 million decreased by
£55.2 million driven by a slight increase in the discount rate and a fall in
market implied inflation expectations. The fair value of the assets and
liabilities of the Group pension schemes at 30 September 2025 and the key
assumptions used in the IAS 19 valuation of our schemes are set out in note 13
on page 54.
30 September 2025 31 March 2025
£m
£m
Fair value of plan assets (note 13) 2,815.7 2,831.0
Present value of benefit obligations (note 13) (2,784.2) (2,839.4)
Net surplus / (deficit) at period end 31.5 (8.4)
Income statement charge
The charge included within underlying operating profit in HY26 for defined
benefit pension schemes was £4.2 million (HY25: £10.5 million), of which
£1.7 million related to service costs (HY25: £7.1 million), £2.5 million
related to expenses (HY25: £3.4 million). In addition to this, there was a
net interest charge of £nil (HY25: charge of £2.0 million). The reduction
follows the closure of defined benefit schemes to future accrual and is
broadly offset by an increase in the charge for defined contribution schemes.
Technical provision
An estimate of the aggregate actuarial deficits of the Group's defined benefit
pension schemes (excluding those in surplus), including all longevity swap
funding gaps, calculated using each scheme's technical provisions basis, as at
HY26 was approximately £95 million (FY25: c.£125 million, HY25: c.£160m).
Such valuations use discount rates based on UK gilts - which differs from the
corporate bond approach of IAS 19. This technical provision estimate reflects
the assumptions used within the latest agreed valuation prior to 30 September
2025 for each of the principal schemes.
Actuarial valuations are carried out every three years to determine the
Group's cash contributions to the schemes. The valuation of the three largest
schemes is set so only one scheme is undertaking its valuation in any one
year, to spread the financial impact of market conditions. The valuation of
the DRDPS as at 31 March 2023 was completed in FY24, the valuation of the
RRDPS as at 31 March 2024 was finalised in April 2025, and work is currently
ongoing on the valuation of the BIGPS at 31 March 2025.
We expect annual deficit repair payments to be c.£20 million per annum for
the next five years.
Cash contributions
Group cash contributions made into the defined benefit pension schemes,
excluding expenses and salary sacrifice contributions were as follows:
30 September 2025 30 September 2024
£m
£m
Current service contributions 2.5 8.7
Deficit recovery 5.1 13.2
Longevity swap 0.9 5.8
Total cash contributions - employer 8.5 27.7
Segmental analysis
The Group reports its performance through four reporting sectors.
30 September 2025 Marine Nuclear Land Aviation Total
£m
£m
£m
£m
£m
Contract backlog 2,820 1,762 3,321 2,015 9,918
Revenue 822.5 989.1 525.6 201.4 2,538.6
Statutory operating profit 77.0 89.7 50.1 17.5 234.3
Statutory operating margin 9.4% 9.1% 9.5% 8.7% 9.2%
Underlying operating profit 55.3 89.7 41.6 14.5 201.1
Underlying operating margin 6.7% 9.1% 7.9% 7.2% 7.9%
30 September 2024 Marine Nuclear Land Aviation Total
£m
£m
£m
£m
£m
Contract backlog 2,991 2,461 2,410 1,655 9,517
Revenue 789.8 865.7 591.3 162.1 2,408.9
Statutory operating profit 56.5 75.8 45.5 6.0 183.8
Statutory operating profit margin 7.2% 8.8% 7.7% 3.7% 7.6%
Underlying operating profit 40.0 75.7 45.4 7.7 168.8
Underlying operating margin 5.1% 8.7% 7.7% 4.8% 7.0%
Operational reviews
Marine
Our c.7,500 employees design, develop, build, manufacture and integrate
specialist systems, and deliver technical through-life support for complex
platforms in the marine sector. Over 75% of Marine's revenue is derived from
defence, with the remainder largely comprising our Liquid Gas Equipment (LGE)
business.
Operational highlights
• In June 2025, HMS Venturer, the first of five Type 31 frigates
completed float-off and returned to dry dock for fit-out and commissioning,
while the third frigate, HMS Formidable, commenced its assembly phase
• Over £50 million in new orders secured for Skynet services
• Expanded scope of work delivered in Australia in our Regional
Maintenance Provider - West contract
• Secured initial LGE contracts for ammonia-based fuel gas supply
systems using Babcock IP technology
Financial review
30 September 2025 30 September 2024
£m
£m
Contract backlog* 2,820 2,991
Revenue 822.5 789.8
Underlying operating profit* 55.3 40.0
Underlying operating margin* 6.7% 5.1%
* Alternative Performance Measures are defined in the Financial Glossary
on page 25.
Contract backlog reduced to £2,820 million, reflecting delivery of the record
LGE order intake in FY25 and revenue recognised on the Type 31 contract,
partially offset by orders for the manufacturing of missile tubes and the RMP
West support contract in Australia.
Revenue increased 6% (at constant FX) to £823 million due to higher volumes
in our LGE business and growth of the Skynet programme, offset by lower ship
support volumes in the UK.
Underlying operating profit increased 38% to £55.3 million due to growth in
LGE and Skynet and the completion of certain support activities. As a result,
underlying operating margin increased to 6.7% (HY25: 5.1%).
Operational review
Defence
UK defence (50% of Marine revenue)
The Type 31 Inspiration Class five-frigate programme being built for the Royal
Navy at Babcock's facility in Rosyth has made steady progress. HMS Venturer,
left the assembly hall in June and is now docked, creating space in the
Venturer build hall facility for the third frigate. Ship 2, HMS Active,
continues to progress towards float-off in 2026 and ship 3, HMS Formidable,
moved to the Venturer build hall to commence the assembly phase. Ship 3 is
benefitting from an enhanced build strategy, accelerating early outfitting.
Thales successfully completed all factory acceptance testing on equipment and
software for the Mission System.
Advanced manufacturing operations have maintained high output levels, notably
with the delivery of nine missile tubes over nine months to General Dynamics
Electric Boat for the US Columbia Class submarine programme. Continuous
production of integrated tube handling has started at our facilities in
Bristol and Rosyth, streamlining and automating the management of missile tube
manufacture and assembly within the Common Mission Compartment for both UK
Dreadnought and US Columbia Class submarines. Babcock continues to engage with
US partners to secure further opportunities.
Innovation remains integral to Babcock's manufacturing strategy. Developments
include the use of automated painting systems on the frigates, virtual reality
for facility design, drone training for site operations, and the
implementation of Automated Welding Equipment System Inspection and Monitoring
(AWESIM) in collaboration with the University of Strathclyde. AWESIM enables
real-time, non-destructive testing for missile tube applications.
Babcock met all contractual key performance indicators under the surface ship
element of the Future Maritime Support Programme (FMSP) for the Royal Navy.
This included the completion of upgrade and maintenance activities for Type 23
vessels HMS Kent, planning for HMS Portland and preparation for works on other
vessels, as well as the provision of fleet time support to operational
platforms both domestically and internationally. Deployed support was
delivered for HMS Richmond in South Korea, in collaboration with Hanwha Ocean,
ensuring high availability for the Carrier Strike Group. We have completed
preparations for the docking of HMS Iron Duke in November.
Aircraft carrier HMS Queen Elizabeth successfully docked in Rosyth, with work
progressing in line with expectations.
As the Type 23 fleet is phased out, Babcock is transitioning its support focus
to the new Type 26 platforms, with lessons learned from current programmes
informing future support strategies. Our Class Output Management team is
expanding to manage capability insertion and fleet time engineering for Type
26, delivered from Devonport. The management of class managed equipment will
become increasingly critical as these vessels enter service.
Progress continues on securing an extension for FMSP and the follow-on
long-term Naval Support Integrated Global Network (NSIGN) contract for future
surface ship support. A key development during the period was the UK Ministry
of Defence's decision to contract directly with Babcock for elements of NSIGN.
In our Mission Systems business, delivery of Skynet communication services
remains stable across all UK Ministry of Defence and Government users. The
business secured over £50 million in new orders during the period, with scope
increases including a major contract for the Maritime Network Evolution
project. Additional international customers have also been onboarded for Space
services.
August saw a significant milestone with the delivery of the Dreadnought Class
- Boat 1 Weapon Stowage Module, enabling the customer to integrate into the
first vessel of the UK's future Continuous At Sea Deterrent nuclear submarine.
In September, Babcock launched NOMAD™- its first fully AI-powered product
designed to clean, transcribe, translate, and analyse voice and text data in
real time, including in communications-denied environments. NOMAD™
exemplifies Babcock's commitment to rapid innovation and mission-focused
capability, combining advanced technologies with deep customer insight to
deliver operational advantage.
International defence (28% of Marine revenue)
In Australia, we continue to play a critical role as the Royal Australian
Navy's surface ship sustainment provider in Western Australia. Babcock
strengthened its operational scope as Regional Maintenance Provider - West
(RMP-West), expanding its sustainment portfolio to include Arafura Class
offshore patrol vessels and the Supply Class auxiliary oiler replenishment
ship HMAS Stalwart, servicing four ship classes in parallel.
Our contract as alliance partner in the Warship Asset Management Agreement
(WAMA) is beginning to wind down, as the sustainment of the ANZAC Class ships
transitions to RMP-West by 2026. Babcock acted as principal contractor on a
six-month project to recover critical military equipment from decommissioned
frigate ex-HMAS Anzac, reintegrating these assets into navy inventory to
support the operational readiness of the class.
Under the contract with BAE Systems, Babcock has completed the Critical Design
Review for the Hunter Class frigate Air Weapons Handing System (AWHS). Babcock
is tasked with designing, assembling, testing and overseeing the installation
of the AWHS on the frigates, based on our modified design for the UK's Type 26
frigates.
Babcock submitted a bid for the future sustainment of the Anzac Class Design
Support contract, responsible for the design function once vessels transition
from acquisition to in-service and disposal. Contract award is expected in
2026.
In New Zealand, our engagement with local suppliers and service providers
continues to be a critical part of our role as the Strategic Maritime Partner
to the New Zealand Defence Force. Under the seven-year Maritime Fleet
Sustainment Services (MFSS) contract, Babcock engaged over 120 local suppliers
to support the successful delivery of scheduled maintenance of HMNZS Te Mana.
Partnering with Seatrium, Babcock supported the completion of deployed
critical maintenance work on the Royal New Zealand Navy ship HMNZS Aotearoa in
Singapore and commenced the delivery of critical rejuvenation and maintenance
work on HMNZS Otago.
In Canada, our team continues to deliver HMCS Victoria's Extended Docking Work
Period (EDWP) as part of the Victoria In-Service Support Contract (VISSC) for
support of the Victoria Class submarine fleet. We also received a contract
amendment aligning HMCS Victoria's EDWP with the current VISSC contract end
date in 2027. We continue to support Fleet Maintenance Facility Cape Scott
with HMCS Windsor's EDWP in Halifax, Nova Scotia.
As Canada continues its programme to acquire the next generation of
conventionally powered submarines, Babcock Canada signed a teaming agreement
with Hanwha Ocean, one of two short-listed suppliers for the Canadian Patrol
Submarine Project. Through this agreement, Babcock becomes the exclusive
in-service support partner for Hanwha Ocean on the programme.
In Sweden, we continue our extensive engagement with the Luleå Class surface
combatant programme, with a decision expected in 2026. Working closely with
Saab, we have successfully completed all preliminary design review
deliverables and are now focused on the critical design review due in early
2026.
In Denmark, we continue to engage on potential opportunities as we maintain
our collaboration with OMT to support the basic design phase for the Danish
Arctic Patrol Ships through the DFS consortium, reinforcing our presence in
Northern European markets.
In Ukraine, having completed the regeneration of UK Sandown Class Mine Counter
Measure Vessels (MCMVs) prior to their sale to the Ukrainian Navy, we were
awarded a three-year contract for maintenance and support. We have successful
delivered the first two support periods for the vessels, with the next due in
December, and assisted with repairs as requested by the UK Royal Navy.
In Romania, we facilitated the transfer of title for the former MCMV, HMS
Pembroke, to Romania. The Romanian vessel has now departed the UK and is on
passage back to Romania.
In Poland, Babcock signed a strategic cooperation agreement with PGZ SA to
strengthen collaboration across the maritime and aerospace domains. The
agreement supports joint initiatives in the design, construction, maintenance,
and servicing of naval assets, as well as the sustainment of military aircraft
and the co-development of strategic asset management solutions for the Polish
armed forces.
Additionally, the third Arrowhead User Group Conference was held in Gdansk,
bringing together stakeholders involved in the Arrowhead frigate design.
In Brazil, we are extending our current support contract on NAM Atlantico
(formerly UK landing platform dock, HMS Ocean), which ends in March 2026. We
are looking to establish a similar support contract for HMS Bulwark, soon to
operate as 'NDM Oiapoque', once she departs the UK in Summer 2026.
In Indonesia, we continue to work closely with the Government, with our
maritime partnership programme exploring ways in which the UK can support
Indonesia in areas of maritime defence, maritime security and maritime
modernisation.
Civil (22% of Marine revenue)
Our LGE business performed well in the period, successfully delivering sixteen
projects featuring its cargo handling systems for LPG, LNG, and Ethane
liquefied gas carriers, including its first project with Samsung Heavy
Industries for a European shipowner. To enhance service delivery, LGE
established a new entity in Singapore dedicated to drydock operations for
ecoSMRT® systems. The business completed nine drydock service operations
globally to support its patented ecoSMRT® LNG reliquefaction systems.
The company also secured its first contracts for the design and supply of
Ammonia Fuel Gas Supply Systems using its ecoFGSS-FLEX® technology,
supporting the transition to ammonia as a zero-carbon marine fuel. Babcock was
recognised by HD Hyundai Heavy Industries as Partner of the Year 2025.
The National Environmental Research Council requested the extension of our
current contract for the remaining two scientific research vessels, RRS
Discovery and RRS James Cook, by one year to enable both ships to dock at
Rosyth in 2026.
Nuclear
Our c.11,100 employees provide complex through-life engineering support to the
entirety of the UK's nuclear submarine fleet. We own and manage critical
national infrastructure and provide engineering integration support to AWE. We
operate across UK civil nuclear, including new build, generation support and
decommissioning.
Operational highlights
• Re-opened Devonport's 15 Dock facility, marking the return of
twin streaming submarine maintenance capability
• Secured £114 million three-year contract to prepare for the
first nuclear defueling of a decommissioned Trafalgar Class submarine in over
20 years
• Fin removal marked a milestone for the Swiftsure Submarine
Dismantling Demonstrator Project in Rosyth
• Announced transformative plans to locate more than 2,000 workers
from Devonport into Plymouth city centre
• Cavendish Nuclear and Amentum awarded next phase of contract to
support Japan's Monju Reactor Decommissioning involving construction of sodium
treatment facility
Financial review
30 September 2025 30 September 2024
£m
£m
Contract backlog* 1,762 2,461
Revenue 989.1 865.7
Underlying operating profit* 89.7 75.7
Underlying operating margin* 9.1% 8.7%
* Alternative Performance Measures are defined in the Financial Glossary
on page 25.
Contract backlog decreased to £1,762 million, primarily reflecting trading on
our multi-year FMSP submarine support contract which is in its final year
(expected to be replaced by a new contract by the end of FY26) and the HMS
Victorious Deep Maintenance Programme (£560 million recognised in backlog
FY24), as well as MIP contract maturity (£750 million recognised in backlog
in FY24).
Revenue increased 14% (at constant FX) to £989 million as submarine support
activity grew strongly under the Future Maritime Support Programme (FMSP)
programme and Civil Nuclear grew 25% as new projects ramped up, more than
offsetting a reduction from the timing of Major Infrastructure Programme (MIP)
revenue across the year.
Underlying operating profit increased 18% to £89.7 million due to the revenue
growth as well as some contract changes and risk retirement on project
milestones. As a result, underlying operating margin increased to 9.1% (HY25:
8.7%).
Operational review
Defence
UK defence (86% of Nuclear revenue)
In May, we marked the return of the capability to maintain two nuclear-powered
submarines at Devonport with the formal opening of 15 Dock, following the
completion of major infrastructure upgrades. We continue to make good progress
on the first Astute Class Base Maintenance Period in 15 Dock, with around
three-quarters of the project scope now complete.
Following the reopening of 9 Dock in September 2024, HMS Victorious'
maintenance programme is progressing as planned and to schedule, while
opportunities for acceleration are being explored.
Our Major Nuclear Capital Programmes business (managing the Major
Infrastructure Programme (MIP)) continues to focus on delivering the
modernisation of facilities and substantial upgrades to existing critical
infrastructure required to meet the evolving needs of the Royal Navy. We are
focused on enabling a faster, more efficient return of platforms to sea
through world-class infrastructure delivery.
As part of this programme, the ongoing redevelopment of Devonport's 10 Dock
has achieved several major milestones in the period. In April 2025, the
project achieved more than three million hours without a Lost Time Incident,
reflecting the highest standards of safety and delivery performance. Once
complete, 10 Dock will provide a new dock, berth, logistics and production
support facilities, critical for Astute Class Deep Maintenance Periods and
future submarine capability.
We have commenced mobilisation of key preparatory activities to support the
first defuel of a decommissioned Trafalgar Class submarine in more than two
decades, following the award of a £114 million contract in June 2025. The
work, under a three-year programme delivered in partnership with the wider
Defence Nuclear Enterprise, will enable the eventual defueling of four
submarines.
We continue to progress commercial discussions with the MOD on an extension to
FMSP along with a longer-term partnering arrangement to sustain our support
for the Royal Navy nuclear submarine fleet, ahead of the conclusion of the
FMSP contract on 31 March 2026.
Our work at Devonport is critical to both national security and the region's
prosperity. Focused activity and partnerships in Plymouth and the wider region
have culminated in the announcement of 'Team Plymouth', a partnership between
defence, industry, academia, and local and national government. As one of
five key growth areas identified in the UK Defence Industrial Strategy,
Plymouth is set to benefit from a share of £250 million Government defence
fund to support regeneration.
In June 2025, as part of the programme of regeneration, we published Babcock
Delivering Defence Dividend: Blueprint for Regional Regeneration, which
included our plan to relocate 2,000 support functions employees from Devonport
to create a new central capability hub in Plymouth city centre.
At HMNB Clyde in Scotland, we continue to play a vital role in supporting the
sustainment of the Royal Navy's operational submarine capability and the
site's role in delivering the UK's Continuous at Sea Deterrent (CASD).
In the period, the UK Government announced an initial £250 million investment
under the Clyde 2070 programme, the first phase of a multi decade,
multi-billion-pound plan to transform the site. As a key industry partner, we
are ideally positioned to support plans to modernise facilities, enhance
sustainability, and secure HMNB Clyde's role in the UK's submarine enterprise
for generations to come.
This period also saw the introduction of an Alternative Working Week within
our operations at HMNB Clyde. By consolidating the traditional five-day week
into four days, we have been able to deliver better flexibility and surge
capacity outside of a core working week, whilst enabling a better work-life
balance for our workforce.
Our Rosyth facility marked a milestone in June 2025 with the completion of
work to remove the fin from the decommissioned submarine Swiftsure. Using a
world-first dismantling methodology, the project will enable approximately 90%
of materials to be reused or recycled, setting a new standard for sustainable
submarine recycling. The programme is due to be completed by the end of 2026.
Additionally, Rosyth Dockyard has been designated by the MOD to host a
contingent docking facility (CDF) supporting sea trials for the future HMS
Dreadnought Cass submarines in the early 2030s. This is part of wider UK
Government investment in infrastructure upgrades at Rosyth which will also
support submarine dismantling activity.
At AWE Aldermaston, work continues on the design, installation and
commissioning of complex plant and engineering equipment in support of CASD.
International defence
In Australia, our joint venture with HII, H&B Defence, secured its first
contract to enhance supply chain capabilities for the global AUKUS enterprise
through the Australian Submarine Supplier Qualification pilot programme
(AUSSQ), Australia's gateway into the US submarine supply chain. In August,
the first Australian supplier received an RFQ for the US Virginia submarine
programme following successful qualification through AUSSQ. H&B Defence is
developing a syllabus to advance nuclear knowledge amongst Western Australian
businesses after securing a state government grant to deliver a series of new
defence industry training courses.
Civil
UK Civil (14% of Nuclear revenue)
In Clean Energy, Cavendish Nuclear's contribution to the MEH Alliance at
Hinkley Point C has grown to 800 people, with further growth anticipated as
MEH activity increases. Building on this success, the MEH Alliance approach is
being evolved for Sizewell C, with intelligent replication of proven Hinkley
strategies to drive efficiency and productivity.
During the period, the UK Government announced full funding for Sizewell C to
be Britain's next nuclear power station. As part of the Sizewell C consortium
and alliance partnership, we are coordinating the supply of materials and
equipment to enhance installation efficiency, creating jobs and
apprenticeships, and support our role in delivering a nationally significant
project and clean energy future for the UK.
In the small modular reactor (SMR) sector, we are actively developing
manufacturing opportunities, following our preparatory design work to build
the UK's first SMRs. This follows a milestone announcement by Great British
Energy-Nuclear (GBE-N), in selecting a preferred bidder to build SMRs.
Subsequently GBE-N have now launched their wider SMR procurement programme,
with a series contracts totalling over £1.5 billion being placed over the
next two years. Cavendish Nuclear has recently submitted a tender as part of
this wider programme to provide owner's engineering services, valued at £300
million, with the result expected in early 2026.
Building on detailed assessments with the US company, X-energy, co-funded by
the UK Government's Future Nuclear Enabling fund, we continue to support
supply chain development for future UK nuclear projects. Alongside the
announcement of the Atlantic Partnership for Advanced Nuclear Energy and the
joint development agreement to deploy X-energy's Xe-100 reactors, with a
preferred first project at Hartlepool, we are in active dialogue regarding our
future role. The partnership marks a once-in-a-generation opportunity to
strengthen UK energy security and build on the nation's advanced gas reactor
heritage.
Our support to the UK front-end nuclear fuel cycle continues to grow through
projects with Westinghouse and Urenco. We are supporting Westinghouse in the
design and build of a facility to process reprocessed uranium to enable its
future enrichment and use as a nuclear fuel. We are also supporting Urenco in
the design of an expansion to the tails management facility, which will
convert depleted uranium hexafluoride to the lower hazard uranium oxide
material for long term storage. Urenco achieved their governance approval to
enter the next phase of the project, and we have now started the front-end
engineering design which will complete in 2027.
In Decommissioning, we are currently bidding for several major frameworks to
support Sellafield. In October 2025, our joint venture, Nuclear
Decommissioning Solutions (NDS), was awarded a contract under the £4.6
billion Sellafield Ltd Decommissioning and Nuclear Waste Partnership framework
to support retrievals work, as part of the site's high hazard risk reduction
programmes.
We have also signed contracts for the provision of radiometric and
environmental analysis support which secures our position as a critical
service supplier to Sellafield over the next four years.
International Civil
In the USA, Cavendish Nuclear, as part of the Southern Ohio Cleanup Company
(SOCCo) joint venture, has transitioned into the site management and
operations phase of the decommissioning and dismantling contract with the US
Department of Energy to lead the environmental cleanup at the former
Portsmouth Gaseous Diffusion Plant in Piketon, Ohio.
This long-term 10-year contract, with a potential five-year extension,
represents a major step forward in the safe and sustainable decommissioning of
a complex and legacy nuclear power plant facility. SOCCo will leverage decades
of UK and global nuclear decommissioning experience to safely demolish ageing
facilities and deploy innovative technologies to support water treatment and
soil improvement works.
In Japan, we were awarded the next phase of work by the Japan Atomic Energy
Agency to support the decommissioning of the Monju Prototype Fast Reactor, in
Fukui Prefecture.
Alkali Metal Processing Limited, a joint venture between Cavendish Nuclear and
Amentum, will construct, commission, and secure regulatory permissions for a
new facility in the UK which will treat the sodium coolant removed from the
Japanese reactor to be safely converted into sodium hydroxide for general
industrial reuse. The joint venture will now move forward with construction,
installation of process equipment and preparations for operation, working
closely with locally based supply chain partners.
We also signed an MOU with Lucideon to address complex decommissioning
challenges and advance nuclear waste management. The partnership will bring
together our engineering and project delivery expertise and with Lucideon's
MIDAR(®) geopolymer technology, providing a framework to jointly explore
global decommissioning challenges, with an initial focus on the Japanese
market.
In Sweden, Cavendish Nuclear is exploring opportunities to support the
roll-out and deployment of SMRs. Vattenfall is in the final stage of its
technology selection process, having down selected Rolls Royce SMR or General
Electric Vernova to build three SMRs adjacent to the existing nuclear power
plant. Cavendish Nuclear has supported both suppliers in the UK and is well
positioned to support their deployment in Sweden, and across Europe.
Land
Our c.5,800 employees provide essential services to our customers through
three core capabilities: build, support and train. We do this through the
delivery of through-life engineering support and systems integration for
military vehicles and equipment. We provide individual and collective training
for customers with critical missions and deliver engineering services in power
generation and transport networks and through-life support of mining
equipment.
Operational highlights
• Successfully mobilised the £1 billion five-year British Army
strategic support partner DSG follow-on
• Completed first tranche of the High Mobility Transporter Jackal
3 programme for the British Army
• Signed a teaming agreement with Patria to offer its 6x6 armoured
personnel carrier to the UK Armed Forces
• Demonstrated a new application integrating light mortars with
in-service UK tactical communications systems
• Unveiled new Australian facility to support the Defence High
Frequency Communications System programme
Financial review
30 September 2025 30 September 2024
£m
£m
Contract backlog* 3,321 2,410
Revenue 525.6 591.3
Underlying operating profit* 41.6 45.4
Underlying operating margin* 7.9% 7.7%
* Alternative Performance Measures are defined in the Financial Glossary
on page 25.
Contract backlog increased to £3,321 million due to the award of the new DSG
vehicle support contract (announced as 'Reframe') in FY25 worth c.£1 billion
with remaining order intake offset by delivery on long-term contracts.
Revenue decreased 10% (at constant FX) to £526 million due to lower volumes
in our Civil businesses, particularly Rail following the completion of a
number of key delivery projects, and Africa where mining equipment sales have
reduced.
Underlying operating profit decreased 8% to £41.6 million due to the lower
volumes in Rail and Africa and some contract recoveries in the prior period.
Despite this, underlying operating margin increased slightly to 7.9% (HY25:
7.7%).
Operational review
Defence
UK defence (40% of Land revenue)
Mobilisation of the £1 billion five-year DSG follow-on contract extension for
the maintenance, repair and asset management of British Army vehicles and
equipment is well underway. This will see Babcock maximise the availability of
critical equipment through improved readiness, regeneration and asset
management services, cementing our position as a strategic partner to the
British Army.
METIS, our strategic asset management platform developed in partnership with
Palantir Technologies, was formally unveiled in September 2025 and is
currently being introduced across the business. The platform uses the
equipment support enterprises digital footprint to derive the optimal balance
of cost, risk and performance for assets throughout their lifecycle.
Working with Supacat and the UK MOD, we completed the first tranche of the
High Mobility Transporter Jackal 3 programme for the British Army. Production
of tranche two, which consists of 53 six-wheeled 'Extenda' variants, known as
the Jackal 3 (E), is now underway.
In a UK first, in September 2025, we successfully demonstrated a new
application which seamlessly integrates the light 120mm mortar with in-service
UK tactical communications systems, providing a 'ready-now' digital capability
for the British Army. Developed in collaboration with General Dynamics -
Mission Systems UK, the Babcock Advanced Ballistic Engagement Layer allows the
mortar system to communicate with the Bowman ComBAT Infrastructure and
Platform Battlefield Information System Application, enabling
first-of-its-kind networked firepower from sensor to effector. We have
partnered with ST Engineering to offer the UK an integrated, end-to-end
solution to enhance British mortar capability, as part of the MOD's 120mm
mortar procurement.
In September 2025, we signed a teaming agreement with Patria to be the build
partner for its armoured personnel carrier in the UK. The agreement coincided
with confirmation that the UK had signed a technical arrangement to join the
Common Armoured Vehicles (CAVs) programme which encompasses a growing number
of nations across the Joint Expeditionary Force.
We signed a MOU with Ultra PCS, a company providing electronics for military
platforms, to develop a generic vehicle architecture solution for the British
Army based on the mature UltraEAK (Electronic Architecture Kit) product which
implements mission systems on new and legacy military land vehicles. This
collaboration will deliver a modular and scalable software solution that
supports current customer requirements while enabling affordable capability
developments to meet future needs.
We continue to support the UK Government in providing critical support to
Ukraine's Armed Forces, delivering personnel training and the refurbishment
and renewal of equipment through our Project HECTOR contract. In addition, we
continue to support Operation Interflex, the British-led multinational
military operation to train and support the Armed Forces of Ukraine. Following
contract award by the UK MOD in March 2025, we have commenced a
proof-of-concept which will enable Ukraine's armed forces to use innovative
technology to 3D print military equipment, demonstrating our ability to
deliver defence support capability whenever and wherever it is required
Our defence training business was awarded a one-year extension to deliver
individual electromechanical training to the British Armed Forces at MOD
Lyneham, worth £22 million.
In September, we launched a new Marine variant of the Babcock Immersive
Training Experience (BITE) to international navies. BITE uses innovative and
future-proof technology to replicate the physical, sensory and cognitive
challenges of operating in a high stress environment, reducing the need to
rely on platform availability for training. In May 2025 we launched the Land
variant in Canada.
International defence (11% of Land revenue)
In Australia, we unveiled the expansion of our new warehousing assembly hall,
further expanding our footprint in South Australia. The expanded production
and test facility will support Babcock's upgrade and enhancement of
Australia's Defence High Frequency Communications System (JP9101) programme.
In April, we highlighted the growth of the asset portfolio and workforce for
the Australian Defence Force's Ground Support Equipment contract where managed
assets have increased from 4,000 to 11,000 assets across 250 fleet types since
the start of the contract in 2017.
Babcock's C-CBRNE programme won Land Programme of the Year at the 2025
Australian Defence Industry Awards, recognising our integration of
cutting-edge counter-chemical, biological, radiological, nuclear and explosive
(C-CBNRE) technologies for the ADF.
We finalised our bid for the Land 4140 contract which is seeking a programme
integration partner to deliver an evolving Land Command, Control,
Communications and Computer (LC4) System to build and maintain the Australian
Army's new battlefield communications network. This contract also includes the
development of a panel of technology and service providers known as the LC4
Enterprise. Contract award is expected mid-2026.
In New Zealand, we continue to work closely with the New Zealand Ministry of
Defence on the Fixed High Frequency Radio Refresh programme. In October we
successfully completed the first system acceptance testing milestone.
In France, we continue to progress airbase equipment support contracts, with a
number of activities expanding scope.
Work on dedicated facilities at the Lanvéoc and Lann-Bihoué naval bases is
underway, with delivery expected in the first half of 2026. The completion of
these two infrastructure projects will mark key milestones in the
strengthening our operational presence in France.
In Poland, in June our training business signed an MOU with the Polish Air
Force University to conduct joint research and development for the armed
forces that will provide experiential aviation scenarios within BITE, our
state-of-the-art product for speeding up mission readiness. The agreement
leverages our expertise in training needs analysis and experience in
delivering military training.
Civil
UK Civil (14% of Land revenue)
Our Rail business experienced lower volumes year on year, driven by our
Translink frameworks with the flagship Belfast Grand Central Station project
having completed last year. Volumes in the Rail Systems Alliance Scotland
(Babcock, in partnership with Network Rail and Arcadis) were delivered as
expected in Year 2 of Control Period 7, with a seamless transition to the new
Network Rail National Plant Framework which commenced in April 2025.
International Civil (35% of Land revenue)
In Africa, the Equipment business which supplies mining industry vehicles, was
impacted by the lower coal prices affecting activity levels. Volumes are
expected to increase in the second half of FY26, driven by increased commodity
demands. In addition, some power projects shifted to H2 FY26 in the Power
Generation business. We also successfully completed both the Lethabo ESP and
Sasol low Nox contracts, and are one of seven bidders down-selected for the
commercial phase of the Eskom Boiler contract, which is expected to be awarded
in 2026.
Aviation
Our c.2,600 employees deliver military pilot training support for the two
largest Air Forces in Europe (France and UK), through-life support to
operational military flying assets and critical air operations for government
customers.
Operational highlights
• Mobilisation of 17-year Mentor 2 military air training contract in
France progressing to plan
• Awarded new 10-year contract alongside Airbus Helicopters to deliver
in-service support to 46 new H145-D3 helicopters for the French Government
• Secured £70 million contract to deliver new infrastructure
facilities for Ascent UK Military Flying.
• Signed contract with Uplift360 to explore repurposing composite
materials from Typhoon class aircraft
• Awarded new 8-year A$250 million contract with Australian Border
Force for helicopter services
Financial review
30 September 2025 30 September 2024
£m
£m
Contract backlog* 2,015 1,655
Revenue 201.4 162.1
Underlying operating profit* 14.5 7.7
Underlying operating margin* 7.2% 4.8%
* Alternative Performance Measures are defined in the Financial Glossary
on page 25.
Contract backlog increased to £2,015 million with the award of the Mentor 2
contract (c.£300 million order intake in 2H 25) and the A$250 million
Australian Border Force contract, offset by delivery on long-term contracts.
Revenue increased 26% (at constant FX) to £201 million due to scope increases
in UK military support contracts, the ramp up of the Mentor 2 programme and
growth in helicopter support activity in France and the start of the British
Colombia HEMS contract in Canada.
Underlying operating profit increased 89% to £14.5 million, reflecting
improved project profitability, programme timing and contract renegotiations,
including price. As a result, underlying operating margin increased to 7.2%
(HY25: 4.8%).
Operational review
Defence
UK defence (38% of Aviation revenue)
Performance remains strong on the HADES contract to deliver essential critical
services to the RAF, Joint Aviation Command and Strategic Command at 16
stations across the UK.
In May, we were awarded a £70 million contract to deliver new infrastructure
facilities as part of a £300 million Military Flying Training System contract
secured by Ascent, our 50/50 joint venture with Lockheed Martin. Ascent will
deliver the Future ISTAR (Intelligence, Surveillance, Target Acquisition and
Reconnaissance) and Rear Crew Training System (FIRCTS) programmes.
Our operations on the RAF Light Aircraft Flying Task (LAFT) continue to
deliver high levels of aircraft availability, recently completing 750,000
flying hours. Support also continues for fast jet lead-in training for the
Ukrainian Pilot Force as pilots prepare to fly F-16s.
Our contract to support the RAF fleet of 28 Hawk T2 jets continues to perform
well. We welcomed our 10th cohort of aerospace apprentices to RAF Valley in
the period, bringing the total number of apprentices who've been through the
scheme to over 60. The scheme continues to strengthen technical capability and
workforce resilience, while supporting regional economic growth.
Additionally, we have signed a MOU with Uplift360 to explore how composite
materials from Typhoon aircraft can be broken down and repurposed, and how
this process could be applied more widely across additional defence
platforms.
International defence (27% of Aviation revenue)
In France, we have begun the ramp up phase of our 17-year contract to deliver
military air training solutions for the French Air and Space Force, and Navy
(Mentor 2). Recruitment and infrastructure expansion are underway, and our
teams are already fully operational at the Salon-de-Provence Air Base, working
in close collaboration with the École de l'Air to ensure a smooth and
coordinated implementation of the program's initial components.
We continue to deliver the Mentor 1 and FOMEDEC contracts, with activity
levels reaching over 7,400 flight hours and around 4,500 synthetic training
hours over the period. We are proud to have achieved 70,000 flight hours on
our PC-21 aircraft, alongside 45,000 hours of synthetic training. We supported
airspace surveillance during both the Bastille Day military parade and the
Paris Air Show, mobilizing 14 engineers to ensure seamless operational
execution.
As part of our contract with the French MOD, the H160 helicopter fleet has now
successfully completed over 300 rescue missions. In addition, we have carried
out the world's first 900-hour periodic maintenance on an H160 helicopter at
our dedicated facility in France.
In May, we were awarded a new 10-year contract to support the French
Government's fleet of Airbus H145-D3 helicopters by the French Ministry of
Armed Forces's Directorate of Aeronautical Maintenance. In parallel, under our
existing 12-year contract with the Sécurité Civile and the French
Gendarmerie Nationale, we have delivered major maintenance to four EC145-C2
helicopters, with three other maintenance visits underway. Babcock France is
now supporting over 85 French Government helicopters every day.
In the period, we marked another milestone with the rental of a L-39 fighter
jet to support the training of test pilots for the French Direction Générale
de l'Armement
(https://en.wikipedia.org/wiki/Direction_g%C3%A9n%C3%A9rale_de_l%27armement) ,
reinforcing our position in the pilot training market.
We have signed an MOU with French aircraft manufacturer AURA AERO, to jointly
offer and promote INTEGRAL, the new-generation electric training aircraft with
aerobatic capabilities, along with a complete packaged service.
In Australia, Babcock and US-based autonomous aircraft pioneer PteroDynamics
Inc, delivered a demonstration to the Australian Defence Force of their
vertical take-off and landing (VTOL) unmanned aerial system technology
following a signed MOU in support of the military's growing pursuit of
autonomous platforms.
In Poland, we signed a MOU with Airbus and CAE to offer a comprehensive
package of military helicopters and associated training services to the Polish
Air Force. The partnership of three world-class service providers will
leverage their unique combined expertise on a proposal to provide Poland with
powerful new defence capabilities as part of the ongoing modernisation of
Polish helicopter aviation.
Civil
UK Civil (8% of Aviation revenue)
In September, we secured a four-year contract extension with Hampshire and
Isle of Wight Air Ambulance, reinforcing our long-standing partnership and
commitment to delivering life-saving services across the region.
We delivered Scotland's most advanced air ambulance as part of our 10-year
contract with Scotland's Charity Air Ambulance in the period. The helicopter
is equipped with state-of-the-art technology, including night vision imaging
systems enabling the extension of flying hours.
We enabled Police Scotland's air support unit to be the first police force in
the UK to operate with drop-in sustainable aviation fuel.
International Civil (27% of Aviation revenue)
In France, as part of the Helicopter Emergency Medical Services (HEMS)
project, we expanded our Angers base to pilot a full 24/7 operational cycle
and enhanced annual activity at La Roche-sur-Yon with a mixed fleet of H135
and EC145 helicopters. We continue to seek to integrate night vision imaging
system capability into the Babcock fleet.
In Australia, we were awarded a new A$250 million 8-year contract with the
Australian Border Force, continuing a 30-year partnership. The service
provides multi-agency capability for a range of maritime security threats. As
part of the contract Babcock has delivered two cutting-edge Airbus H145-D3
helicopters.
In April, we welcomed the second 'dragonfly' emergency helicopter for the new
Lagaw Kuyup Rescue Service. We introduced three upgraded static winch trainers
into our Victorian aviation operations to allow aircrew and paramedics to
refine their winch rescue skills. This upgrade forms part of our five-year
A$370 million contract extension with Ambulance Victoria.
In Canada, we continue to support delivery of rotary-wing air ambulance
services in British Columbia as part of our 10-year contract with Ascent
Helicopters Ltd. All five operating bases in British Columbia are now
operational, as are all seven Leonardo AW169s provisioned by Babcock.
2025 saw Canada's second worst wildfire season on record. As a result, our
teams logged over 850 flying hours in May, a 263% increase on the anticipated
hours. Throughout this demanding season, we continued to successfully deliver
aerial wildfire suppression services for the Government of Manitoba, achieving
a consistent aircraft availability rate of 98%. We also completed an
out-of-province deployment in Halifax, Nova Scotia.
Financial glossary - Alternative Performance Measures (APMs)
The Group provides alternative performance measures (APMs), including
underlying operating profit, underlying margin, underlying earnings per share,
underlying operating cash flow, underlying free cash flow, net debt and net
debt excluding leases to enable users to have a more consistent view of the
performance and earnings trends of the Group. These measures are considered to
provide a consistent measure of business performance from year to year. They
are used by management to assess operating performance and as a basis for
forecasting and decision-making, as well as the planning and allocation of
capital resources. They are also understood to be used by investors in
analysing business performance.
The Group's APMs are not defined by IFRS and are therefore considered to be
non-GAAP measures. The measures may not be comparable to similar measures used
by other companies, and they are not intended to be a substitute for, or
superior to, measures defined under IFRS. The Group's APMs are consistent with
the year ended 31 March 2025. Measures, definitions and reconciliations to
relevant IFRS measures are included below, where appropriate.
Organic revenue growth - Group KPI
Closest equivalent IFRS measure: Revenue growth year on year
Definition: Growth excluding the impact of foreign exchange (FX) and
contribution from acquisitions and disposals in the year of, and following,
completion.
Purpose: A good indicator of business growth.
30 September 2025 30 September 2024
£m
£m
Prior period revenue 2,408.9 2,177.0
FX (23.2) (8.4)
(Disposals) (2.5) -
Prior year revenue adjusted for FX and disposals (b) 2,383.2 2,168.6
Revenue growth (a) 155.4 240.3
Current year revenue 2,538.6 2,408.9
Organic revenue growth (a)/(b) 7% 11%
Contract backlog
Closest equivalent IFRS measure: No direct equivalent
Definition: The remaining transaction price on contracts with customers that
has been allocated to unsatisfied or partially satisfied performance
obligations, excluding the impact of termination for convenience clauses and
excluding orders not yet secured on framework agreements.
Purpose: Contract backlog is used to support future years' sales performance.
30 September 2025 30 September 2024
£m
£m
Contract backlog 9,918 9,517
Underlying operating profit
Closest equivalent IFRS measure: Operating profit
Definition: Operating profit before the impact of specific adjusting items
(see below).
Purpose: Underlying operating profit is a key measure of the Group's
performance.
30 September 2025 30 September 2024
£m
£m
Underlying operating profit 201.1 168.8
Specific adjusting items 33.2 15.0
Operating profit (note 2) 234.3 183.8
Specific adjusting items (note 2)
30 September 2025 30 September 2024
£m
£m
Amortisation of acquired intangibles (5.7) (4.4)
Business acquisition, merger and divestment related items 8.5 -
Profit or loss from amendment, curtailment, settlement or equalisation of - 0.3
Group pension schemes
Fair value movement on derivatives 28.3 19.1
Exceptional items 2.1 -
Specific adjusting items impacting operating profit 33.2 15.0
Fair value movement on derivatives and related items 1.3 (0.1)
Specific adjusting items impacting profit before tax 34.5 14.9
Income tax expense
Amortisation of acquired intangibles 1.7 1.3
Business acquisition, merger and divestment related items (2.7)
Profit/(loss) from amendment, curtailment, settlement or equalisation of Group - (0.1)
pension schemes
Fair value movement on derivatives and related items (7.5) (4.8)
Specific adjusting items impacting income tax expense (8.5) (3.6)
Underlying operating margin - Group KPI
Closest equivalent IFRS measure: Operating margin
Definition: Underlying operating profit as a percentage of revenue.
Purpose: Provides a measure of operating profitability, excluding specific
adjusting items and is an important indicator of operating efficiency across
the Group.
30 September 2025 30 September 2024
£m
£m
Revenue 2,538.6 2,408.9
Underlying operating profit 201.1 168.8
Underlying operating margin 7.9% 7.0%
Underlying net finance costs
Closest equivalent IFRS measure: Net finance costs
Definition: Net finance costs excluding specific adjusting items.
Purpose: To provide an alternative measure of finance costs excluding items
such as fair value re-measurement of derivatives which are economically
hedged.
30 September 2025 30 September 2024
£m
£m
Underlying net finance costs (13.5) (16.8)
Add: specific adjusting items impacting finance costs (note 2) 1.3 (0.1)
Net finance costs (note 4) (12.2) (16.9)
Underlying profit before tax
Closest equivalent IFRS measure: Profit before tax
Definition: Profit before tax excluding all specific adjusting items.
Purpose: Provides a measure of profitability which includes finance costs.
30 September 2025 30 September 2024
£m
£m
Underlying profit before tax 191.8 157.1
Specific adjusting items impacting profit before tax (note 2) 34.5 14.9
Profit before tax (note 2) 226.3 172.0
Underlying effective tax rate
Closest equivalent IFRS measure: Effective tax rate
Definition: Tax expense excluding the impact of specific adjusting items, as a
percentage of underlying profit before tax excluding the share of post-tax
income from joint ventures and associates.
Purpose: This provides an indication of the ongoing tax rate across the Group,
excluding one-off items.
Six months ended 30 September 2025 Six months ended 30 September 2024
Underlying Specific adjusting items Statutory Underlying Specific adjusting items Statutory
£m
£m
£m
£m
£m
£m
Profit before tax (note 2) 191.8 34.5 226.3 157.1 14.9 172.0
Share of (profit) from JVs and associates* (4.2) - (4.2) (5.1) - (5.1)
Profit before tax excluding profit from joint ventures and associates (a) 187.6 34.5 222.1 152.0 14.9 166.9
Income tax expense (b) (49.3) (8.5) (57.8) (38.4) (3.6) (42.0)
Effective tax rate (b)/(a) 26.3% 26.0% 25.3% 25.2%
Underlying basic and diluted earnings per share
Closest equivalent IFRS measure: Basic earnings per share
Definition: The Group's underlying profit after tax less items attributable to
non-controlling interest, being underlying net income attributable to
shareholders, divided by the weighted average number of shares.
Purpose: A measure of the Group's underlying performance.
Six months ended 30 September 2025 Six months ended 30 September 2024
Underlying Specific adjusting items Statutory Underlying Specific adjusting items Statutory
£m
£m
£m
£m
£m
£m
Profit before tax (note 2) 191.8 34.5 226.3 157.1 14.9 172.0
Income tax (expense) (note 2) (49.3) (8.5) (57.8) (38.4) (3.6) (42.0)
Profit after tax for the year 142.5 26.0 168.5 118.7 11.3 130.0
Amount attributable to owners of the parent 143.3 26.0 169.3 118.0 11.3 129.3
Amount attributable to non-controlling interests (0.8) - (0.8) 0.7 - 0.7
Weighted average number of shares (m) 503.0 503.0 502.4 502.4
Effect of dilutive securities (m) 9.6 9.6 10.9 10.9
Diluted weighted average number of shares (m) 512.6 512.6 513.3 513.3
Basic EPS 28.5p 5.2p 33.7p 23.5p 2.2p 25.7p
Diluted EPS 28.0p 5.0p 33.0p 23.0p 2.2p 25.2p
Net debt
Closest equivalent IFRS measure: No direct equivalent
Definition: Cash and cash equivalents, bank overdrafts, loans, including the
interest rate and foreign exchange derivatives which hedge the loans, lease
liabilities, lease receivables and loans to joint ventures and associates.
Purpose: Used as a measure of the Group's cash position and balance sheet
strength.
30 September 2025 30 September 2024
£m
£m
Cash and bank balances 704.8 618.3
Bank overdrafts (0.1) (4.4)
Cash, cash equivalents and bank overdrafts 704.7 613.9
Debt (773.1) (745.3)
Derivatives hedging debt (4.7) (15.4)
Lease liabilities (297.0) (243.6)
Liabilities from financing arrangements (1,074.8) (1,004.3)
Lease receivables 35.4 38.1
Loans to joint ventures and associates 3.3 3.7
Derivatives hedging interest on debt (19.7) (37.0)
Net debt (351.1) (385.6)
Net debt (excluding leases)
Closest equivalent IFRS measure: No direct equivalent
Definition: Net debt (defined above) excluding lease liabilities recognised
under IFRS 16.
Purpose: Used by credit agencies as a measure of the Group's net cash position
and balance sheet strength.
30 September 2025 30 September 2024
£m
£m
Net debt (351.1) (385.6)
Leases 295.3 239.8
Net debt (excluding leases) (55.8) (145.8)
Net debt / EBITDA (covenant basis) - Group KPI
Closest equivalent IFRS measure: No direct equivalents
Definition: Net debt (excluding leases), before loans to joint ventures and
associates and finance lease receivables, divided by EBITDA (as defined in our
banking covenants - being underlying operating profit, defined on page 25,
excluding depreciation and amortisation and including certain covenant
adjustments) plus JV and associate dividends.
Purpose: A key measure of balance sheet strength used by analysts and credit
agencies, and the basis of our debt covenant over the RCF (3.5x).
Commentary: The net debt/EBITDA gearing ratio (covenant basis) at 30 September
2025 reduced to 0.2x (HY25: 0.6x) due to positive net cash flow and higher
underlying operating profit.
30 September 2025 30 September 2024
£m
£m
Underlying operating profit 395.3 252.2
Depreciation and amortisation 82.8 71.9
Covenant adjustments(1) 0.6 (1.3)
EBITDA 478.7 322.8
JV and associate dividends 7.6 12.1
EBITDA + JV and associate dividends (covenant basis) 486.3 334.9
Net debt excluding lease liabilities (55.8) (145.8)
Covenant adjustments(2) (42.9) (44.7)
Net debt (covenant basis) (98.7) (190.5)
Net debt/EBITDA 0.2x 0.6x
1. Various adjustments made to EBITDA to reflect accounting standards at the
time of inception of the original RCF agreement. The main adjustments are to
the treatment of leases within operating profit and pension costs.
2. Removing loans to JVs, finance lease receivables and non-recourse debt.
Interest cover (covenant basis)
Closest equivalent IFRS measure: No direct equivalent
Definition: EBITDA (on a covenant basis), divided by net finance costs and
various covenant adjustments made to reflect accounting standards at the time
of inception of the RCF agreement, including lease and retirement benefit
interest.
Purpose: Used in the covenant over our RCF facility with a covenant ratio of
4.0x.
30 September 2025 30 September 2024
£m
£m
EBITDA + JV and associate dividends (covenant basis) 486.3 334.9
Net finance costs (27.3) (37.0)
Covenant adjustments(1) 18.4 12.8
Net finance costs (covenant basis) (8.9) (24.2)
Interest cover 54.6x 13.8x
1. Various adjustments made to reflect accounting standards at the time of
inception of the original RCF agreement, including lease and retirement
benefit interest.
Return on invested capital (pre-tax) (ROIC) - Group KPI
Closest equivalent IFRS measure: No direct equivalent
Definition: Underlying operating profit plus share of JV profit after tax,
divided by the sum of net debt (excluding leases), shareholders' funds and
retirement benefit deficit/(surplus).
Purpose: Used as a measure of profit earned by the Group generated by the debt
and equity capital invested, to indicate the efficiency of allocated capital.
30 September 2025 30 September 2024
£m
£m
Underlying operating profit 395.3 252.2
Underlying share of results of joint ventures and associates 7.5 9.3
Underlying operating profit plus results of JVs and associates 402.8 261.5
Net debt excluding leases 55.8 145.8
Leases 295.3 239.8
Shareholder funds - see balance sheet on page 37 740.6 540.0
Retirement (surplus)/deficit - note 13 (31.5) 52.6
Invested capital 1,060.2 978.2
ROIC 38.0% 26.7%
Net capital expenditure
Closest equivalent IFRS measure: Property, plant and equipment and intangible
additions
Definition: Property, plant and equipment and intangible additions less
proceeds on disposal of property, plant and equipment and intangible assets.
Purpose: To understand net capital investment included in underlying operating
cash flow.
30 September 2025 30 September 2024
£m
£m
Purchases of property, plant and equipment (PP&E) (73.4) (45.1)
Purchases of intangible assets (5.4) (8.6)
Movements in unpaid capital expenditure 7.7 3.1
Gross capital expenditure (71.1) (50.6)
Proceeds on disposal of PP&E and intangible assets (statement of cash 25.6 3.1
flows)
Net capital expenditure (45.5) (47.5)
Underlying operating cash flow
Closest equivalent IFRS measure: Net cash flow from operating activities
Definition: Cash flow from operating activities excluding net income tax, net
interest paid, pension contributions in excess of the income statement charge
and cash flows related to specific adjusting items and including net capital
expenditure and lease principal payments.
Purpose: Provides a measure of operating cash generation on an equivalent
basis to underlying operating profit.
30 September 2025 30 September 2024
£m
£m
Underlying operating cash flow 166.1 134.9
Add: net capex 45.5 47.5
Add: capital element of lease payments 22.8 22.8
Less: pension contributions in excess of income statement (7.4) (23.9)
Non-operating cash items (excluded from underlying cash flow) (0.1) -
Cash generated from operations 226.9 181.3
Tax (paid) (12.3) (16.2)
Less: net interest paid (12.8) (11.9)
Net cash flow from operating activities 201.8 153.2
Underlying operating cash conversion - Group KPI
Closest equivalent IFRS measure: No direct equivalent
Definition: Underlying operating cash flow as a percentage of underlying
operating profit.
Purpose: Used as a measure of the Group's efficiency in converting profits
into cash.
30 September 2025 30 September 2024
£m
£m
Underlying operating profit 201.1 168.8
Underlying operating cash flow 166.1 134.9
Operating cash conversion 83% 80%
Underlying free cash flow
Closest equivalent IFRS measure: No direct equivalent
Definition: Underlying free cash flow includes cash flows from pension deficit
payments, interest, tax, JV dividends, specific adjusting items, in addition
to underlying operating cash flow. See page 10.
Purpose: Provides a measure of cash generated which is available for use in
line with the Group's capital allocation policy.
Going concern statement
The Directors consider it appropriate to adopt the going concern basis of
accounting in preparing the condensed consolidated half year financial
statements.
In assessing the appropriateness of the going concern basis of accounting, the
Directors have considered whether the Group has adequate resources to continue
in operational existence for at least 12 months from the date of approval of
these consolidated half year financial statements. The Directors reviewed the
resources available to the Group in the form of cash and committed facilities.
As of 30 September 2025, the Group's committed facilities and bonds totalling
£1.4 billion were the £600 million five-year multi-currency RCF, two
tranches of bonds (£300 million 1.875% notes and €550 million 1.375% notes)
and an overdraft facility of £50 million.
The £600 million RCF is the only facility containing financial covenants,
which are applicable if the Group's Credit Rating is below BBB. If applicable,
the key covenant ratios are (i) net debt to EBITDA (gearing ratio) and (ii)
EBITDA to net interest (interest cover) with tests set to less than 3.5x and
greater than 4.0x respectively and would be measured twice per year, on 30
September and 31 March. To assess the level of headroom within the available
facilities, a reverse stress test was performed to assess the level of
performance deterioration against the base case budget (in both EBITDA and net
debt) required to challenge covenant levels. Of the remaining measurement
points within the five-year period approved by the Board, the smallest
required reduction in forecast EBITDA to hit the covenant level was 87% and
the smallest net debt increase was 647%. Given the mitigating actions that are
available and within management's control, such adverse movements are not
considered plausible. There have been no breaches of debt covenants during the
reporting period.
The Directors have also considered the Group's forecasts when assessing going
concern, having considered the 18-month period from the date of signing the
Group's condensed consolidated financial statements for the six months ended
30 September 2025.
On an annual basis, budgets are prepared using a bottom-up approach,
aggregating the budgets for the individual business units into Sector budgets.
The Sector budgets and the consolidated Group budget is then reviewed by the
Board and used to monitor business performance. This annual process comprises
the budget for the coming financial year and a 5-year plan.
Between annual budget cycles, the Group prepares rolling forecasts on a
monthly basis covering an updated assessment of the remainder of the current
financial year.
The impacts of current economic conditions, including inflation, are
incorporated into the annual budget process and the rolling forecasts. Where
changes in economic conditions are significant, these would also be
incorporated into the 5-year plan for purposes of the going concern
assessment.
The Directors have performed sensitivity analyses on the latest Group rolling
forecast for the duration of the assessment period. These involve a range of
downside events both individually and in combination under a range of severe,
but plausible downside scenarios. Such sensitivities include a reduction in
bid pipeline closure (business winning), a deterioration in large programme
performance across the Group (including further inflation cost increases, or
related failures in supplier resilience, as per our principal risks), a
deterioration in the Group's working capital position and a regulatory risk
relating to a reduction in access to R&D tax incentive credits.
If such a severe downturn were to occur in the Group's performance, the Board
would take mitigation measures to protect the Group in the short term as
described in the going concern assessment on page 125 of the annual report and
financial statements for the year ended 31 March 2025. Despite the severity of
the combined severe, but plausible scenarios, these sensitivities did not give
rise to any material uncertainties in relation to the Group's ability to
continue as a going concern. Based on our review, the Directors have a
reasonable expectation that the Group has adequate resources to continue as a
going concern for at least 12 months from the date of these condensed
consolidated half year financial statements. As such, these financial
statements have been prepared on the going concern basis. The Directors do not
believe there are any material uncertainties to disclose in relation to the
Group's ability to continue as a going concern.
Risks and uncertainties
The principal risks and uncertainties affecting the Group are listed below and
are set out in more detail in the Company's Annual Report and Financial
Statements 2025, which should be read in conjunction with this announcement.
This list is not a substitute for reading the Company's Annual Report and
Financial Statements 2025 in full. The Group's principal risks and
uncertainties are:
Contract and project performance: The Group executes large contracts and
complex programmes, which often require us to price for the long term and for
risk transfer. The Group's contracts can include fixed prices. Risk appetite:
Medium. Contract and project performance risk appetite is classified as
'medium' due to the intricate nature of our work in defence and emergency
services sectors. As a company, we are in the business of strategically
accepting and managing risks that are in our control to mitigate effectively.
While the Group's aim is to minimise risks to a manageable level, it is
important to acknowledge that uncertainties are inherent in project delivery.
The Group prioritises robust risk management to mitigate these uncertainties,
where possible, and ensure successful outcomes. It is important to make clear
that despite our vast efforts, some level of risk remains unavoidable. The key
is to understand and accept risks which are the Group's to manage.
Market: The Group relies on winning and retaining large contracts in both
existing and new markets often characterised by a relatively small number of
major customers, which are owned or controlled by local or national
governments. Risk appetite: Medium. This reflects that the successful pursuit
and maintenance of a secure and assured pipeline is essential for continued
growth, and the Group may therefore choose to accept the challenge of market
risks that we can confidently and securely manage.
Cyber and information security: A key factor for the Group's customers is our
ability to deliver secure IT and other information assurance systems to
maintain the confidentiality of sensitive information. Risk appetite: Low. IT
and information security are fundamental components in the Group's operations;
we continually review the emergence of cyber threats, in an effort to
eradicate and mitigate the risk as far as possible.
Defined benefit pensions: The Group has significant defined benefit pension
schemes in the UK, which provide for a specified level of pension benefits to
scheme members. Risk appetite: Low. The Group utilises engagement with the
pension schemes' trustees and a balanced pension management approach that
looks to mitigate and reduce the risks associated with pensions over the
journey to settling the pension obligations.
Supply chain management: Supply chains today face a variety of risks that can
disrupt operations. The global financial market has been marked by persistent
inflation, economic uncertainty and shifting global tariff policies, leading
to the risk of increased costs and operational challenges for suppliers.
Geopolitical tensions, including conflicts and trade tensions, can disrupt
supply chains by affecting trade routes, increasing transportation costs, and
causing delays in the movement of goods. Extreme weather events can impact
logistics and manufacturing processes.
Operational resilience and business interruption: The Group provides critical
support to governments and commercial customers, requiring a high level of
resilience in operational systems and processes. The Group operates in an
increasingly volatile, uncertain and complex environment, where a diverse
range of internal and external threats could disrupt our business, affecting
our ability to operate safely, effectively and to the high standards expected
by our customers, regulators and partners. To address these challenges, the
Group continues to enhance its Operational Resilience programme, ensuring it
remains capable, adaptable, and aligned to mitigate multiple forms of business
interruption. Risk appetite: Low. Ineffective operational resilience
arrangements can undermine safety, financial stability and regulatory
compliance, as well as damage our reputation. Given the critical nature of our
operations, Babcock seeks to eliminate risks where possible and applies
stringent controls to mitigate remaining risks to as low as reasonably
practicable (ALARP). Over the past year, the Group has made significant
progress in strengthening its Operational Resilience programme. A new
Operational Resilience Strategy and Framework has been developed to provide
greater consistency, adaptability and capability across the organisation. This
is supported by the launch of a new Operational Resilience Policy, ensuring a
clear governance structure and accountability, as well as a Requirements and
Guidance Manual to support Sectors/DRCs in implementing Operational Resilience
elements within their respective areas and drive standardisation.
Additionally, Key Control Indicators (KCIs) for Operational Resilience have
been identified, enabling more effective monitoring and risk mitigation. To
further drive these improvements, a dedicated Operational Resilience Working
Group has been formed, supported by Operational Resilience Leads across
Sectors and DRCs, ensuring a coordinated approach to resilience across the
Group.
Financial resilience of the Group: The Group is exposed to a number of
financial risks, some of which are of a macroeconomic nature (for example,
foreign currency, interest rates) and some of which are more specific to the
Group (for example, liquidity and credit risks). Risk appetite: Low. The Group
recognises the adverse effects of the financial resilience risk on the balance
sheet and actively manages the risk via its capital allocation policy,
substantial committed debt facilities and maintaining an investment grade
credit rating allowing access to debt capital markets. However, this risk
cannot be eliminated and will aways require management.
Safety, health and environmental protection: The Group's operations entail the
potential risk of significant harm to people and the planet, wherever we
operate across the world. Risk appetite: Low. For moral, financial and
reputational reasons we should keep the risk exposure as low as reasonably
practicable.
Climate and environmental sustainability: Climate change is impacting every
corner of the earth and poses an existential threat to global stability.
Sustainability is an integral part of the Group's corporate strategy, and we
are working hard to address the climate crisis and minimise the impacts of our
operations. Risk appetite: Low. Across the Group's global operations, we are
looking to continually improve our understanding of climate and environmental
risks, and we are committed to mitigating risks, unlocking opportunities and
reducing our environmental impacts.
Legacy IT and data architecture: Failure to modernise IT infrastructure and
capabilities poses significant strategic, operational and compliance risks.
Proactive investment and governance are essential to safeguard the Group's
resilience, competitiveness and regulatory standing. Risk appetite: Low. Given
the materially adverse nature of digital and data risks, the Group looks to
recognise and eradicate the emergence of risks to operations where possible,
hence risk appetite being set at low.
Resourcing, retention and skills: The Group operates in many specialised
engineering and technical domains, which require appropriate skills and
experience. Risk appetite: Medium. Avoidance of the risk would increase costs
through significant wage inflation, which would have an industry-wide impact,
and require over-resourcing and potential negative workforce engagement and
retention. Some risk is accepted given the high cost of avoidance and the
potential mitigations within the Group's control, such as sharing capability
across our global business and compensating for skills shortages in particular
areas through investment in training and early careers.
Compliance with legislation or other regulatory requirements: The Group's
businesses are subject to the laws, regulations and restrictions of the many
jurisdictions in which we operate. Risk appetite: Low. As a diverse global
organisation, the Group operates in multiple highly regulated industries for
customers with specialist requirements. The compliance landscape is vast and
complex with many regulations, legal obligations, contractual and
certification requirements in each area including export controls, data
protection and site licences. The laws and regulations that the Group are
subject to include anti-bribery laws, import and export controls, tax,
procurement rules, human rights laws, and data protection regulations.
Acquisitions and divestments: The Group has built our core strengths
organically and through acquisition. Decisions to acquire companies, as well
as the process of their acquisition and integration, are complex,
time-consuming, and expensive. If the Group believe that a business is not
'core,' we may decide to sell that business. Risk appetite: Medium. The Group
will continue to review potential opportunities within the market in a
considered and measured way; M&A activity continues to be inherently high
risk. Future M&A activity will be undertaken only where it is possible to
reduce inherent risk to an acceptable level when balanced against potential
rewards and opportunity.
Engineering integrity, product technology disruption and product safety: The
Group has a corporate and legal responsibility to ensure the technical
products and services we develop and/or deliver to our customers and end-users
are legally and contractually safe, compliant, secure and high quality. Risk
appetite: Low. As a complex systems developer, integrator and provider of
critical operations, in-service support and training across all defence
sectors and civil emergency operations, the Group's customers and end-users
must have confidence in the integrity of our technical products and services.
The Group's technical risk management frameworks must be rigorous as well as
adaptable. The Group work to develop our technical capabilities and secure
access to advanced technologies, to position ourselves and our customers well
for the future. The Group also actively identifies, understands and manages
the risks and opportunities as a responsible developer and adopter of rapidly
emerging advanced technologies.
The risks listed above, together with their potential impacts and mitigating
actions taken in respect of them, are explained and described in detail in the
2025 Annual Report, available at www.babcockinternational.com.
Unaudited condensed consolidated financial statements
Group income statement
Unaudited condensed consolidated financial statements
Group income statement
or the six months ended 30 September Note 2025 2024
£m
£m
Revenue 2,3 2,538.6 2,408.9
Operating costs (2,304.3) (2,225.1)
Operating profit 234.3 183.8
Share of results of joint ventures and associates 2,3 4.2 5.1
Finance income 4 15.2 14.9
Finance costs 4 (27.4) (31.8)
Profit before tax 226.3 172.0
Income tax expense 5 (57.8) (42.0)
Profit for the year 168.5 130.0
Attributable to:
Owners of the parent 169.3 129.3
Non-controlling interest (0.8) 0.7
168.5 130.0
Earnings per share
Basic 2 33.7p 25.7p
Diluted 2 33.0p 25.2p
Group statement of comprehensive income
For the six months ended 30 September Note 2025 2024
£m
£m
Profit for the year 168.5 130.0
Other comprehensive income
Items that may be subsequently reclassified to income statement
Currency translation differences 3.3 1.1
Fair value adjustment of interest rate and foreign exchange hedges 8.1 (3.9)
Hedging (losses)/gains reclassified to profit or loss (9.8) 6.1
Reclassification of cumulative currency translation reserve on de-designation (2.1) -
of quasi-equity items
Share of other comprehensive income/(loss) of joint ventures and associates - (1.1)
Tax on items that may be subsequently reclassified to income statement 1.5 (0.6)
Items that will not be reclassified to income statement
Remeasurement of retirement benefit obligations 13 32.5 34.9
Tax on remeasurement of retirement benefit obligations (8.2) (8.8)
Other comprehensive loss, net of tax 25.3 27.7
Total comprehensive income 193.8 157.7
Total comprehensive income attributable to:
Owners of the parent 194.3 156.5
Non-controlling interest (0.5) 1.2
Total comprehensive income 193.8 157.7
Group statement of changes in equity
Note Share Share Other Capital Retained Hedging Translation Total equity attributable to owners Non- Total
capital
premium
reserve
redemption
earnings
reserve
reserve
of the
controlling
equity
£m
£m
£m
£m
£m
£m
£m
Company
interest
£m
£m
£m
At 1 April 2024 303.4 873.0 768.8 30.6 (1,523.9) 5.3 (68.3) 388.9 17.2 406.1
Profit for the year 2 - - - - 129.3 - - 129.3 0.7 130.0
Other comprehensive income - - - - 26.1 0.5 0.6 27.2 0.5 27.7
Total comprehensive income - - - - 155.4 0.5 0.6 156.5 1.2 157.7
Dividends - - - - (16.6) - - (16.6) - (16.6)
Purchase of own shares - - - - (13.3) - - (13.3) - (13.3)
Share-based payments - - - - 7.5 - - 7.5 - 7.5
Tax on share-based payments - - - - (1.4) - - (1.4) - (1.4)
Net movement in equity - - - - 131.6 0.5 0.6 132.7 1.2 133.9
At 30 September 2024 303.4 873.0 768.8 30.6 (1,392.3) 5.8 (67.7) 521.6 18.4 540.0
At 1 April 2025 303.4 873.0 768.8 30.6 (1,292.3) 6.3 (85.4) 604.4 17.4 621.8
Profit for the year 2 - - - - 169.3 - - 169.3 (0.8) 168.5
Other comprehensive (loss)/income - - - - 24.3 (1.3) 2.0 25.0 0.3 25.3
Total comprehensive income - - - - 193.6 (1.3) 2.0 194.3 (0.5) 193.8
Dividends - - - - (22.7) - - (22.7) (0.3) (23.0)
Purchase of own shares - - - - (66.2) - - (66.2) - (66.2)
Share-based payments - - - - 7.8 - - 7.8 - 7.8
Tax on share-based payments - - - - 6.4 - - 6.4 - 6.4
Net movement in equity - - - - 118.9 (1.3) 2.0 119.6 (0.8) 118.8
At 30 September 2025 303.4 873.0 768.8 30.6 (1,173.4) 5.0 (83.4) 724.0 16.6 740.6
The other reserve relates to the rights issue of new ordinary shares on 7 May
2014 and the capital redemption reserve relates to the issue and redemption of
redeemable 'B' preference shares in 2001.
Group statement of financial position
Note 30 September 2025 31 March 2025
£m
£m
Assets
Non-current assets
Goodwill 6 778.5 778.2
Other intangible assets 137.9 142.4
Property, plant and equipment 575.5 558.9
Right of use assets 250.8 228.8
Investment in joint ventures and associates 41.1 43.5
Other investments 2.1 -
Loan to joint ventures and associates 3.3 3.6
Retirement benefits surpluses 13 106.0 98.8
Other financial assets 3.6 4.2
Lease receivables 18.6 26.2
Derivatives 14.5 5.1
Deferred tax asset 76.9 102.8
Trade and other receivables 8 15.6 18.1
2,024.4 2,010.6
Current assets
Inventories 179.7 162.2
Trade and other receivables 8 560.3 507.4
Contract assets 8 347.0 329.7
Income tax recoverable 7.5 4.8
Lease receivables 16.8 18.4
Other financial assets 1.1 1.2
Derivatives 17.3 9.3
Assets held for sale 3.0 -
Cash and cash equivalents 12 704.8 646.6
1,837.5 1,679.6
Total assets 3,861.9 3,690.2
Equity and liabilities
Equity attributable to owners of the parent
Share capital 303.4 303.4
Share premium 873.0 873.0
Capital redemption and other reserves 721.0 720.3
Retained earnings (1,173.4) (1,292.3)
724.0 604.4
Non-controlling interest 16.6 17.4
Total equity 740.6 621.8
Non-current liabilities
Bank and other borrowings 12 473.7 750.7
Lease liabilities 247.4 227.4
Trade and other payables 9 5.1 4.2
Deferred tax liabilities 6.6 5.9
Derivatives 25.2 44.8
Retirement benefit deficits 13 74.5 107.2
Provisions for other liabilities, including other employee benefits 11 58.8 58.1
891.3 1,198.3
Current liabilities
Bank and other borrowings 12 299.5 0.6
Lease liabilities 49.6 47.2
Trade and other payables 9 1,001.6 948.0
Contract liabilities 9 753.2 759.4
Income tax payable 47.9 25.6
Derivatives 2.6 9.1
Provisions for other liabilities, including other employee benefits 11 75.6 80.2
2,230.0 1,870.1
Total liabilities 3,121.3 3,068.4
Total equity and liabilities 3,861.9 3,690.2
Group cash flow statement
For the six months ended 30 September Note 2025 2024
£m
£m
Cash flows from operating activities
Profit for the year 168.5 130.0
Results from joint ventures and associates (4.2) (5.1)
Income tax expense 5 57.8 42.0
Finance income 4 (15.2) (14.9)
Finance costs 4 27.4 31.8
Depreciation and impairment of property, plant and equipment 30.2 29.9
Depreciation and impairment of right of use assets 25.0 19.3
Amortisation and impairment of intangible assets 14.7 9.3
Equity share-based payments 7.8 7.5
Net derivative fair value and currency movement through profit or loss (31.1) (17.3)
Fair value movement on assets held at fair value through profit or loss (8.5) -
(Profit)/loss on disposal of property, plant and equipment (1.6) 0.4
Loss on disposal of right of use assets 0.7 0.3
Loss on disposal of intangible assets 0.1 -
Cash generated from operations before movement in working capital and 271.6 233.2
retirement benefit payments
(Increase)/decrease in inventories (13.6) 28.9
Increase in receivables (36.9) (35.0)
Increase in contract assets (15.2) (6.8)
Increase/(decrease) in payables 43.4 (26.0)
(Decrease)/increase in contract liabilities (9.6) 25.5
Decrease in provisions (5.4) (14.3)
Retirement benefit contributions in excess of current period expense (7.4) (24.2)
Cash generated from operations 226.9 181.3
Income tax paid (12.3) (16.2)
Interest paid (27.7) (26.5)
Interest received 14.9 14.6
Net cash flows from operating activities 201.8 153.2
Cash flows from investing activities
Proceeds from business acquisition, merger and divestment related items 8.5 -
Dividends received from joint ventures and associates 7.1 11.8
Proceeds on disposal of property, plant and equipment 25.6 3.1
Purchases of other investments (2.1) -
Purchases of property, plant and equipment (65.0) (41.8)
Purchases of intangible assets (6.1) (8.8)
Loans repaid by joint ventures and associates 0.3 0.1
Net cash flows from investing activities (31.7) (35.6)
Cash flows from financing activities
Lease principal payments (22.8) (22.8)
Bank loans repaid 12 (2.7) (8.3)
Loans raised and facilities drawn down 12 - 8.0
Purchase of own shares (65.1) (13.3)
Dividends paid (23.0) (16.6)
Net cash flows from financing activities (113.6) (53.0)
Net increase in cash, cash equivalents and bank overdrafts 56.5 64.6
Cash, cash equivalents and bank overdrafts at beginning of year 12 646.5 552.6
Effects of exchange rate fluctuations 12 1.7 (3.3)
Cash, cash equivalents and bank overdrafts at end of year 12 704.7 613.9
1. Basis of preparation and significant accounting policies
Basis of preparation
These condensed consolidated half year financial statements have been prepared
in accordance with IAS 34, Interim Financial Reporting and the Disclosures and
Transparency Rules of the Financial Services Authority, the Listing Rules and
UK adopted International Financial Reporting Standards (IFRS). They should be
read in conjunction with the annual report and financial statements for the
year ended 31 March 2025, which were prepared in accordance with IFRS and the
applicable legal requirements of the Companies Act 2006. These condensed
consolidated half year financial statements do not comprise statutory accounts
within the meaning of Section 435 of the Companies Act 2006. The annual report
and financial statements for the year ended 31 March 2025 were reported upon
by the Group's auditor and delivered to the registrar of companies. The report
of the auditor on the annual report and financial statements for the year
ended 31 March 2025 was unqualified, did not include a reference to any
matters to which the auditor drew attention by way of emphasis of matter
without qualifying their report and did not contain statements under Section
498 (2) or (3) of the Companies Act 2006. The accounting policies used and
presentation of these condensed consolidated half year financial statements
are consistent with the accounting policies applied by the Group in its
consolidated annual report and financial statements as at, and for the year
ended, 31 March 2025, and comply with amendments to IFRS effective since that
date.
The half year report for the six months ended 30 September 2025 was approved
by the directors on 20 November 2025.
New and amended standards adopted by the Group
There are no new standards, amendments or interpretations that are not yet
effective that are expected to have a material impact on the Group's
operations.
Basis of preparation
The Directors consider it appropriate to adopt the going concern basis of
accounting in preparing the condensed consolidated half year financial
statements.
In assessing the appropriateness of the going concern basis of accounting, the
Directors have considered whether the Group has adequate resources to continue
in operational existence for at least 12 months from the date of approval of
these consolidated half year financial statements. The Directors reviewed the
resources available to the Group in the form of cash and committed facilities.
As of 30 September 2025, the Group's committed facilities and bonds totalling
£1.4 billion were the £600 million five-year multi-currency RCF, two
tranches of bonds (£300 million maturing 5 October 2026 and €550 million
maturing 13 September 2027) and one overdraft facility totalling £50 million.
The £600 million RCF is the only facility containing financial covenants,
which are applicable if the Group's Credit Rating is below BBB. If applicable,
the key covenant ratios are (i) net debt to EBITDA (gearing ratio) and (ii)
EBITDA to net interest (interest cover) with tests set to less than 3.5x and
greater than 4.0x respectively and would be measured twice per year, on 30
September and 31 March. To assess the level of headroom within the available
facilities, a reverse stress test was performed to assess the level of
performance deterioration against the base case budget (in both EBITDA and net
debt) required to challenge covenant levels. Of the remaining measurement
points within the five-year period approved by the Board, the smallest
required reduction in forecast EBITDA to hit the covenant level was 87% and
the smallest net debt increase was 647%. Given the mitigating actions that are
available and within management's control, such adverse movements are not
considered plausible. There have been no breaches of debt covenants during the
reporting period.
The Directors have also considered the Group's forecasts when assessing going
concern, having considered the 18-month period from the date of signing the
Group's condensed consolidated financial statements for the six months ended
30 September 2025.
On an annual basis, budgets are prepared using a bottom-up approach,
aggregating the budgets for the individual business units into Sector budgets.
The Sector budgets and the consolidated Group budget is then reviewed by the
Board and used to monitor business performance. This annual process comprises
the budget for the coming financial year and a 5-year plan.
Between annual budget cycles, the Group prepares rolling forecasts on a
monthly basis covering an updated assessment of the remainder of the current
financial year.
The impacts of current economic conditions, including inflation, are
incorporated into the annual budget process and the rolling forecasts. Where
changes in economic conditions are significant, these would also be
incorporated into the 5-year plan for purposes of the going concern
assessment.
The Directors have performed sensitivity analyses on the latest Group rolling
forecast for the duration of the assessment period. These involve a range of
downside events both individually and in combination under a range of severe,
but plausible downside scenarios. Such sensitivities include a reduction in
bid pipeline closure (business winning), a deterioration in large programme
performance across the Group (including further inflation cost increases, or
related failures in supplier resilience, as per our principal risks), a
deterioration in the Group's working capital position and a regulatory risk
relating to a reduction in access to R&D tax incentive credits.
If such a severe downturn were to occur in the Group's performance, the Board
would take mitigation measures to protect the Group in the short term as
described in the going concern assessment on page 125 of the annual report and
financial statements for the year ended 31 March 2025. Despite the severity of
the combined severe, but plausible scenarios, these sensitivities did not give
rise to any material uncertainties in relation to the Group's ability to
continue as a going concern.
Based on our review, the Directors have a reasonable expectation that the
Group has adequate resources to continue as a going concern for at least 12
months from the date of these condensed consolidated half year financial
statements. As such, these financial statements have been prepared on the
going concern basis. The Directors do not believe there are any material
uncertainties to disclose in relation to the Group's ability to continue as a
going concern.
Critical accounting estimates and judgements
In the course of preparation of the financial statements, judgements and
estimates have been made in applying the Group's accounting policies that have
had a material effect on the amounts recognised in the financial statements.
The application of the Group's accounting policies requires the use of
estimates and the inherent uncertainty in certain forward-looking estimates
may result in a material adjustment to the carrying amounts of assets and
liabilities in future financial periods. Critical accounting estimates are
subject to continuing evaluation and are based on historical experience and
other factors, including expectations of future events that are believed to be
reasonable in light of known circumstances. Critical accounting estimates and
judgements in relation to these half year financial statements are considered
below:
(a) Critical accounting judgements
Critical accounting judgements, apart from those involving estimations, that
are applied in the preparation of the consolidated financial statements are
discussed below. Detail of the Group's key judgements involving estimates are
included in the Key sources of estimation uncertainty section.
(i) Acting as principal or agent
A number of the Group's contracts include promises in relation to procurement
activity undertaken on behalf of customers at low or nil margin,
sub-contractor arrangements, and other pass-through costs. Management is
required to exercise judgement on these revenue streams in considering whether
the Group is acting as principal or agent. This is based on an assessment as
to whether the Group controls the relevant goods or services under the
performance obligations prior to transfer to customers. Factors that influence
this judgement include the level of responsibility the Group has under the
contract for the provision of the goods or services, the extent to which the
Group is incentivised to fulfil orders on time and within budget, either
through gain share arrangements or KPI deductions in relation to the other
performance obligations within the contract, and the extent to which the Group
exercises responsibility in determining the selling price of the goods and
services. Taking all factors into consideration, the Group then comes to a
judgement as to whether it acts as principal or agent on a performance
obligation-by-performance obligation basis with both principal and agent
conclusions being reached across the Group's portfolio of revenue
arrangements. Any changes in this judgement would not have a material impact
on profit, although there may be a material impact to revenue and operating
costs.
(ii) Determining the groups of cash generating units to which goodwill is
allocated
IFRS 8 requires that, for the purpose of subsequent impairment testing,
goodwill acquired in business combinations be allocated to cash generating
units ('CGUs') or groups of CGUs expected to benefit from the synergies of the
combination. Such CGUs or groups of CGUs shall represent the lowest level at
which goodwill is monitored for internal management purposes and shall not be
larger than an operating segment.
This determination is generally straightforward and factual, however in some
cases judgement is required.
The Group has identified four operating segments - Aviation, Land, Marine and
Nuclear - and in the case of Aviation, Marine and Nuclear, goodwill is
allocated and monitored at the operating segment level (with these three
operating segments each also comprising a group of CGUs).
Although Land is considered a single operating segment, goodwill is separately
allocated and monitored between the Africa business (as one group of CGUs) and
the remainder of Land (as a second group of CGUs). This distinction exists due
to historic assessments of the Group's operating segments and the fact that
previous Africa business combinations were only anticipated to provide
synergies and benefits across the Africa CGUs.
Other territories may represent separate CGUs or groups of CGUs but are
neither separate operating segments nor is goodwill separately allocated or
monitored at these territory levels.
Over time management reviews the basis upon which goodwill is allocated to
ensure it remains appropriate as businesses are acquired and divested and
reporting structures change, including how information is reported to the
Chief Operating Decision Maker. If there was a change in this judgement this
could result in a material adjustment to goodwill.
(iii) Additional work expected under the Type 31 contract
There is judgement in determining whether the Type 31 onerous contract
provision should reflect the benefit of the expected continuation of the
programme. IAS 37.10 states that "a contract is onerous when the unavoidable
costs of meeting the obligations under the contract exceed the economic
benefits expected to be received under it." Judgement is required in
determining whether additional work is treated as a benefit expected to be
received under the Type 31 contract, reducing the onerous contract provision.
The key factors considered in making this judgement are the additional work
expected at contract inception and the economic linkage with the pricing and
other terms of the Type 31 contract. Having carefully considered the available
evidence against the evidential bar required to recognise future benefits, it
was concluded that the expected continuation of the programme should not be
treated as a benefit expected under the Type 31 contract.
(b) Key sources of estimation uncertainty
The key sources of estimation uncertainty at the reporting period end that may
result in significant risk of material adjustment to the carrying amount of
assets and liabilities within the next financial year are set out below:
(i) Revenue and profit recognition
The following represent the notable assumptions impacting upon revenue and
profit recognition as a result of the Group's contracts with customers:
• Stage of completion & costs to complete - The Group's revenue
recognition policies require management to make an estimate of the cost to
complete for long-term contracts. Management estimates outturn costs on a
contract-by-contract basis and estimates are carried out by suitably qualified
and experienced personnel. Estimates of cost to complete include assessment of
contract contingencies arising out of technical, commercial, operational and
other risks. The assessments of all significant contract outturns are subject
to review and challenge, and judgements and estimates are reviewed regularly
throughout the contract life based on latest available information with
adjustments made where necessary. As contracts near completion, often less
judgement is required to determine the expected outturn. The most significant
estimate of contract outturn relates to the Type 31 programme as outlined
below.
• Variable consideration - the Group's contracts are often subject to
variable consideration including performance-based penalties and incentives,
gain/pain share arrangements and other items. Variable consideration is added
to the transaction price only to the extent that it is highly probable that
there will not be a significant reversal in the amount of cumulative revenue
recognised once the underlying uncertainty is resolved.
• Inflation - The level to which the Group's revenue and cost for each
contract will be impacted by inflation is a key accounting estimate, as this
could cause the revenue and cost of contract delivery to be greater than was
expected at the time of contracting. The Group's contracts are exposed to
inflation due to rising employment costs, as well as increased costs of raw
materials. The Group endeavours to include cost recovery mechanisms or
index-linked pricing within its contracts with customers in order to mitigate
any inflation risk arising from increasing employment and raw material costs.
Type 31 contract estimates
The contract to produce 5 Type 31 frigates was won under competitive tender in
2019, based on Babcock's Arrowhead 140 design. The contract is important in
providing access to an expected pipeline of Type 31 work and developing our
Arrowhead 140 design for opportunities overseas. Although the contract
contained certain escalation clauses, it provided limited protection from the
macroeconomic changes of recent years relating to Brexit, Covid, raw material
prices and UK labour shortages, which have significantly increased our costs.
This has resulted in the contract being loss-making, together with increases
in estimated costs due to the maturing of the design and the forecast cost of
labour.
Determining the contract outturn, and therefore revenue and onerous contract
provision recognised, requires assumptions and complex judgements to be made
about the future performance of the contract. The level of uncertainty in the
estimates made in assessing the outturn is linked to the complexity of the
underlying contract.
The estimates made in assessing the outturn are set out below, along with the
related estimation methods, data sources and management actions to offset the
increases in the year.
a) The number of production hours - which requires estimation of
a standard level of hours for manufacturing, structural and outfitting
activities, determined with reference to previous experience of comparable
programmes and industry data where available. The estimation of the time taken
to improve to this standard level is also relevant, based on a detailed
enablement plan which is a key output of the operational improvement
programme. The volume of activities is based on a detailed assessment of the
Bill of Materials, supported by dedicated engineering software
b) The ability to improve operational performance through
process efficiencies, quality and engineering improvements over the five ships
- which requires actions to reduce re-work, optimise the location in which
outfitting is performed, deliver specific productivity initiatives and make
engineering changes to reduce the cost of manufacture, structural assembly and
outfitting
c) The cost of labour - which is dependent on our ability to
recruit, the mix of the workforce between permanent and contingent workers
from the UK and overseas, the utilisation of semi-skilled and apprentice
workers and shift patterns and premiums. A detailed resourcing plan is used to
support this estimate with actions required to achieve an efficient labour mix
d) The cost of bought-in parts and services through suppliers
and sub-contractors - which includes the outcome of procurement tenders,
finalisation of other areas of unagreed pricing and the agreement of discounts
and incentive arrangements
e) The number of hours required by support functions - primarily
in engineering which requires effective management of production support and
change requests. A detailed engineering scope review has been performed to
support this estimate
f) The determination of non-incremental costs which relate
directly to fulfilling the contract and are therefore partially allocated to
the contract to determine the loss provision - including facility and overhead
costs
g) The impact of inflation on the contract price and costs to
fulfil the contract - particularly in relation to labour which may be impacted
by changes in the local, UK and overseas labour markets, competitor activity
and government policy
h) The achievement of the build schedule to completion and final
acceptance - including the satisfaction of all contractual performance
criteria. The schedule analysis is based on detailed modelling and the
performance of multiple scenario analysis
The cost estimation process has involved a number of key elements:
· Regular governance at the Group level to monitor progress and
enable support as required
· Bottom-up costing at the activity level performed by individual
business areas
· Reassessment of risk based on the updated cost estimates,
considering ranges of outcomes and probabilities
· Input from functional specialists from across the Group
· Development of financial models based on cost drivers, using
actual data and other evidence to inform the forecast outturn
· Detailed documentation of estimates made, including process
followed, sources of evidence and basis for conclusions
· Review and challenge at the Programme, Sector and Group levels,
culminating in a number of dedicated reviews with the Audit Committee
The range of possible future outcomes in respect of assumptions made to
determine the contract outturn could result in a material increase or decrease
in revenue and the value of the onerous contract provision, and hence on the
Group's profitability, in the next financial year. The estimates described
above are by their nature inter-related for this programme and are unlikely to
change with everything else constant. However, for illustrative purposes, we
have provided sensitivities to certain isolated changes in key estimates on
the basis that all other factors remain constant:
· Production hours - which are impacted by production norms, rate of
improvement, process efficiencies and quality/engineering improvements (see a)
and b) above). A 10% increase/decrease in production hours would
increase/decrease the loss by £29 million
· Labour rate - which is impacted by our ability to recruit permanent
staff, the mix of the workforce, ancillary costs and inflation (see c) and g)
above). A 10% increase/decrease in the average labour rate would
increase/decrease the loss by £33 million
· Supply chain costs (see c) above) - which are impacted by the
agreement of remaining pricing, discounts and incentive arrangements. A 10%
increase/decrease in supply chain costs would increase/decrease the loss by
£20 million
· Schedule (see e), f) and h) above) - which are impacted by the
build schedule. A 6-month delay beyond the current planning assumption would
increase the loss by £22 million
Overall, with c.£700bn of estimated costs to go over the life of the
contract, if actual costs were to differ from those assumed by 10%, the
potential impact on the contract outturn could be c.£70 million. Any increase
in loss would cause a commensurate deterioration in the balance sheet through
a combination of an increase to the onerous loss provision (note 11),
reductions in contract assets (note 8) or increases in contract liabilities
(note 9).
To mitigate this, comparisons of actual contract performance and previous
forecasts used to assess the contract outturn are performed regularly, with
consideration given to whether any revisions to assumptions are required. The
uncertainty over the contract outturn will reduce in the next financial year
but there will be substantial activity and risk over the remaining years. In a
major ship build programme of this nature, it is inherently possible that
there may be changes in circumstances which cannot reasonably be foreseen at
the present time.
(ii) Defined benefit pension schemes obligations
The Group's defined benefit pension schemes are assessed each half year in
accordance with IAS 19 and the valuation of the defined benefit pension
obligations is sensitive to the inflation, discount rate, actuarial and life
expectancy assumptions used. There is a range of possible values for the
assumptions and small changes to the assumptions may have a significant impact
on the valuation of the defined benefit pension obligations. In addition to
the inflation, discount rate and life expectancy estimates, management is
required to make an accounting judgement relating to the expected availability
of future accounting surpluses under IFRIC 14. Further information on the key
assumptions, sensitivities and judgements is included in note 13.
2. Adjustments between statutory and underlying information
Definition of underlying measures and specific adjusting items
The Group provides alternative performance measures, including underlying
operating profit, underlying earnings per share and net debt, to enable users
to have a more consistent view of the performance and earnings trends of the
Group. These measures are considered to provide a consistent measure of
business performance from year to year. They are used by management to assess
operating performance and as a basis for forecasting and decision-making, as
well as the planning and allocation of capital resources. They are also
understood to be used by investors in analysing business performance.
The Group's alternative performance measures are not defined by IFRS and are
therefore considered to be non-GAAP measures. The measures may not be
comparable to similar measures used by other companies, and they are not
intended to be a substitute for, or superior to, measures defined under IFRS.
The Group's alternative performance measures are consistent with those used
for the year ended 31 March 2025.
Underlying operating profit
In any given period the statutory measure of operating profit includes a
number of items which the Group considers to either be one-off in nature or
otherwise not reflective of underlying performance. Underlying operating
profit therefore adjusts statutory operating profit to provide readers with a
measure of business performance which the Group considers more consistently
analyses the underlying performance of the Group by removing these one-off and
other items not reflective of underlying performance that otherwise add
volatility to performance.
Underlying operating profit eliminates potential differences in performance
caused by purchase price allocations on business combinations in prior periods
(amortisation of acquired intangibles), business acquisition, merger and
divestment related items, large, infrequent restructuring programmes and fair
value movements on derivatives. Transactions such as these may happen
regularly and could significantly impact the statutory result in any given
period. Adjustments to underlying operating profit may include both income and
expenditure items.
Specific adjusting items include:
• Amortisation of acquired intangibles;
• Business acquisition, merger and divestment related items
(being amounts related to corporate transactions and gains or losses on
disposal of assets or businesses);
• Gains, losses and costs directly arising from the Group's
withdrawal from a specific market or geography, including closure costs,
severance costs, the disposal of assets and termination of leases;
• The costs of large restructuring programmes that
significantly exceed the minor restructuring which occurs in most years as
part of normal operations. Restructuring costs incurred as a result of normal
operations are included in operating costs and are not excluded from
underlying operating profit;
• Profit or loss from amendment, curtailment, settlement or
equalisation of Group pension schemes;
• Fair value gain/(loss) on forward rate contracts that are
open during the period; and
• Exceptional items that are significant, non-recurring and
outside of the normal operating practice. These items are described as
exceptional in order to appropriately represent the Group's underlying
business performance.
Income statement including underlying results
Note Six months ended 30 September 2025 Six months ended 30 September 2024
Underlying Specific adjusting items Statutory Underlying Specific adjusting items Statutory
£m
£m
£m
£m
£m
£m
Revenue 3 2,538.6 - 2,538.6 2,408.9 - 2,408.9
Operating profit 3 201.1 33.2 234.3 168.8 15.0 183.8
Operating margin % 7.9% 9.2% 7.0% 7.6%
Results from joint ventures and associates 4.2 - 4.2 5.1 - 5.1
Net finance costs 4 (13.5) 1.3 (12.2) (16.8) (0.1) (16.9)
Profit before tax 191.8 34.5 226.3 157.1 14.9 172.0
Income tax expense 5 (49.3) (8.5) (57.8) (38.4) (3.6) (42.0)
Profit after tax for the period 142.5 26.0 168.5 118.7 11.3 130.0
Earnings per share including underlying measures
Six months ended 30 September 2025 Six months ended 30 September 2024
Underlying Specific adjusting items Statutory Underlying Specific adjusting items Statutory
£m
£m
£m
£m
£m
£m
Profit after tax for the period 142.5 26.0 168.5 118.7 11.3 130.0
Amount attributable to owners of the parent 143.3 26.0 169.3 118.0 11.3 129.3
Amount attributable to non-controlling interests (0.8) - (0.8) 0.7 - 0.7
Weighted average number of shares (m) 503.0 503.0 502.4 502.4
Effect of dilutive securities (m) 9.6 9.6 10.9 10.9
Diluted weighted average number of shares (m) 512.6 512.6 513.3 513.3
Basic EPS 28.5p 5.2p 33.7p 23.5p 2.2p 25.7p
Diluted EPS 28.0p 5.0p 33.0p 23.0p 2.2p 25.2p
Details of specific adjusting items
The impact of specific adjusting items is set out below:
Six months ended Six months ended
30 September 2025
30 September 2024
£m
£m
Amortisation of acquired intangibles (5.7) (4.4)
Business acquisition, merger and divestment related items 8.5 -
Amendment, curtailment, settlement or equalisation of Group pension schemes - 0.3
Fair value movement on derivatives and related items 28.3 19.1
Exceptional items 2.1 -
Adjusting items impacting operating profit 33.2 15.0
Fair value movement on derivatives and related items 1.3 (0.1)
Adjusting items impacting profit before tax 34.5 14.9
Specific Adjusting items impacting income tax expense
Amortisation of acquired intangibles 1.7 1.3
Amendment, curtailment, settlement or equalisation of Group pension schemes - (0.1)
Business acquisition, merger and divestment related items (2.7) -
Fair value movement on derivatives and related items (7.5) (4.8)
Income tax effect of adjusting items impacting profit before tax (8.5) (3.6)
Specific Adjusting items impacting profit after tax 26.0 11.3
Explanation of specific adjusting items
Amortisation of acquired intangibles
Underlying operating profit excludes the amortisation of acquired intangibles.
This item is excluded from underlying results as it arises as a result of
purchase price allocations on business combinations and is a non-cash item
which does not change each year dependent on the performance of the business.
It is therefore not considered to represent the underlying activity of the
Group and is removed to aid comparability with peers who have grown
organically as opposed to through acquisition. Intangible assets arising as a
result of the purchase price allocation on business combinations include
customer lists, technology-based assets, order book and trade names.
Amortisation of internally generated intangible assets is included within
underlying operating profit.
Business acquisition, merger and divestment related items
Transaction related costs and gains or losses on acquisitions, mergers and
divestments of businesses are excluded from underlying operating profit as
business combinations and divestments are not considered to result from
underlying business performance.
The total net profit relating to business acquisition, merger and divestment
related items for the period was £8.5 million (2024: £nil). The profit for
the period relates to fair value gains on final settlement of loans originally
arising on the disposal of the Civil Training business in February 2023.
Fair value movement on derivatives and related items
These are open forward currency contracts, taken out in the ordinary course of
business to manage foreign currency exposures, where the transaction will
occur in future periods. Hedge accounting under IFRS is not applied, however
these do represent economic hedges. On maturity the currency contract will be
closed and recognised in full within underlying operating profit at the same
time as the hedged sale or purchase. The net result, at that time, will then
more appropriately reflect the related sales price or supplier cost being
hedged (which is fixed to ensure ultimately profitable outcomes).
Hedge ineffectiveness on debt and debt-related derivatives that are designated
in a hedge relationship are also presented as a specific adjusting item in
finance costs. This is presented as a specific adjusting item as this
ineffectiveness is caused by a historic off-market designation, the
transactions are considered by the Group to represent an economic hedge.
The fair value movement on lease-related derivatives and foreign exchange
movements on lease liabilities are also presented as a specific adjusting item
in finance costs, as hedge accounting under IFRS is also not applied to these
transactions but are also considered by the Group to represent an economic
hedge.
Amendment, curtailment, settlement or equalisation of Group pension schemes
Relates to amendments made to the Babcock International Group Pension Scheme
('BIGPS') following finalisation of the planned closure of the scheme to
future accrual from 30 September 2024.
Exceptional items
Relates to foreign exchange gains recognised on the de-designation of
quasi-equity inter-company balances further to group reorganisation activity
in the period.
Tax
There are no specific adjusting items in respect of tax during the period
(HY25: £nil). The tax impact of other specific adjusting items is outlined in
the table above.
3. Segmental information
The Group has four reportable segments, determined by reference to the goods
and services they provide and the markets they serve.
Marine - through-life support of naval ships, equipment and marine
infrastructure in the UK and internationally.
Nuclear - through-life support of submarines and complex engineering services
in support of major decommissioning programmes and projects, training and
operation support, new build programme management and design and installation
in the UK.
Land - large-scale critical vehicle fleet management, equipment support and
training for military and civil customers.
Aviation - critical engineering services to defence and civil customers
worldwide, including pilot training, equipment support, airbase management and
operation of aviation fleets delivering emergency services.
The executive members of the Board, the chief operating decision maker as
defined by IFRS 8, monitor the results of these reportable segments and makes
decisions about the allocation of resources. The Group's business in Africa
meets the definition of an operating segment, as defined by IFRS 8. In
accordance with IFRS 8, the Africa operating segment is included in the Land
reportable segment.
The table below presents the underlying results for each reportable segment in
accordance with the definition of underlying operating profit, as set out in
note 2, and reconciles the underlying operating profit/(loss) to the statutory
profit/(loss) before tax.
Six months ended 30 September 2025 Marine Nuclear Land Aviation Unallocated Total
£m
£m
£m
£m
£m
£m
Revenue 822.5 989.1 525.6 201.4 - 2,538.6
Underlying operating profit 55.3 89.7 41.6 14.5 - 201.1
Specific Adjusting Items (note 2)
Amortisation of acquired intangibles (4.6) - - (1.1) - (5.7)
Business acquisition, merger and divestment related items - - 8.5 - - 8.5
Fair value gain/(loss) on forward rate contracts to be settled in future 26.3 - - 2.0 - 28.3
periods
Exceptional items - - - 2.1 - 2.1
Operating profit 77.0 89.7 50.1 17.5 - 234.3
Results from joint ventures and associates (0.1) (0.1) - 4.4 - 4.2
IFRIC 12 investment income - - 0.2 - - 0.2
Other net finance costs* - - - - (12.4) (12.4)
Profit/(loss) before tax 76.9 89.6 50.3 21.9 (12.4) 226.3
Six months ended 30 September 2024 Marine Nuclear Land Aviation Unallocated Total
£m
£m
£m
£m
£m
£m(( i (#_edn1) ))
Revenue 789.8 865.7 591.3 162.1 - 2,408.9
Underlying operating profit 40.0 75.7 45.4 7.7 - 168.8
Specific Adjusting Items (note 2)
Amortisation of acquired intangibles (3.1) - - (1.3) - (4.4)
Business acquisition, merger and divestment related items 0.1 0.1 0.1 - - 0.3
Fair value gain/(loss) on forward rate contracts to be settled in future 19.5 - - (0.4) - 19.1
periods
Operating profit 56.5 75.8 45.5 6.0 - 183.8
Results from joint ventures and associates (0.2) 0.2 - 5.1 - 5.1
IFRIC 12 investment income - - 0.2 - - 0.2
Other net finance costs* - - - - (17.1) (17.1)
Profit/(loss) before tax 56.3 76.0 45.7 11.1 (17.1) 172.0
* Other net finance costs are not allocated to a specific sector.
Revenues of £1.5 billion (2024: £1.4 billion) are derived from a single
external customer. These revenues are attributable across all reportable
segments.
Geographic analysis of revenue
The geographic analysis of revenue by origin of customer for the periods ended
30 September 2025 and 30 September 2024 is as follows:
Geographic analysis Revenue
Six months ended Six months ended
30 September 2025
30 September 2024
£m
£m
United Kingdom 1,777.2 1,704.9
Rest of Europe 94.3 81.3
Africa 176.5 188.1
North America 115.2 101.5
Australasia 192.6 203.8
Rest of World 182.8 129.3
Group total 2,538.6 2,408.9
4. Net finance costs
Six months ended Six months ended
30 September 2025
30 September 2024
£m
£m
Finance costs
Loans, overdrafts and associated interest rate hedges 18.2 20.5
Lease interest and foreign exchange movements on lease liabilities 7.3 5.8
Amortisation of issue costs of bank loan 2.4 1.1
Other 2.3 4.7
Retirement benefit interest expenses - 2.0
Capitalised borrowing costs (2.8) (2.3)
Total finance costs 27.4 31.8
Finance income
Bank deposits, loans and leases 15.0 14.7
IFRIC 12 Investment income 0.2 0.2
Total finance income 15.2 14.9
Net finance costs 12.2 16.9
5. Taxation
Income tax expense
Six months ended Six months ended
30 September 2025
30 September 2024
£m
£m
Income tax expense (57.8) (42.0)
Calculation of underlying effective tax rate
Profit before tax 226.3 172.0
Deduct: Share of results of joint ventures and associates (note 2) (4.2) (5.1)
Add back specific adjusting items (note 2) (34.5) (14.9)
Adjusted profit before tax 187.6 152.0
Tax charge 57.8 42.0
Exclude specific adjusting items impacting income tax (note 2) (8.5) (3.6)
Adjusted tax charge 49.3 38.4
Underlying effective tax rate 26.3% 25.3%
The tax charge has been calculated by applying the effective rate of tax which
the Group expects to incur for the year to 31 March 2026 to the half-year
pre-tax profit in each jurisdiction in which it operates.
6. Goodwill
30 September 2025 31 March 2025
£m
£m
Cost
At 1 April 1,820.1 1,822.0
On disposal of business - (0.5)
Exchange adjustments 0.3 (1.4)
At 31 March 1,820.4 1,820.1
Accumulated impairment
At opening and closing dates 1,041.9 1,041.9
Net book value at 30 September / 31 March 778.5 778.2
Goodwill is allocated to groups of cash generating units ('CGUs') as set out
in the table below:
30 September 2025 31 March 2025
£m
£m
Marine 293.9 293.6
Nuclear 233.1 233.1
Land (excluding Africa) 217.8 217.8
Aviation 32.0 32.0
Africa 1.7 1.7
778.5 778.2
Goodwill is stated at cost less any provision for impairment. The recoverable
value of each CGU was assessed at 31 March 2025 by reference to value-in-use
calculations. The value-in-use calculations were derived from risk-adjusted
cash flows from the Group's five-year plan and an estimated long-term,
country-specific growth rate between 2.0% and 4.6%. There have been no changes
to the Group's key assumptions in the six months ended 30 September 2025 since
the published annual report and financial statements for the year ending 31
March 2025. The key assumptions can be found in note 10 of that report. The
process by which the Group's budget is prepared, reviewed and approved
benefits from historical experience, visibility of long-term work programmes
in relation to work undertaken for the UK Government, available government
spending information (both UK and overseas), the Group's contract backlog, bid
pipeline and the Group's tracking pipeline which monitors opportunities prior
to release of tenders. The budget process includes consideration of risks and
opportunities at contract and business level and considered matters such as
climate change and inflation.
Goodwill is required to be tested for impairment at least once every financial
year, irrespective of whether there is any indication of impairment. The
Group's annual impairment review typically occurs at year end. However, if
indicators of impairment are present, an earlier review is also required. The
Group has assessed the goodwill balance for both internal and external
impairment indicators and no impairment indicators were identified. Management
will prepare a full goodwill impairment assessment at the year end.
7. Non-current assets
In the six months ended 30 September 2025 the Group made the following
significant additions to non-current assets:
• £73.4 million of additions to property, plant and equipment,
including £27.0 million of site improvements at Devonport Royal Dockyard;
• £5.4 million of additions to intangible assets; and
• £47.9 million of additions to right of use assets, including new
aircraft of £18.7 million, and property lease arrangements of £19.1 million
8. Trade and other receivables and contract assets
30 September 2025 31 March 2025
£m
£m
Non-current assets
Costs to obtain a contract 0.1 0.1
Costs to fulfil a contract 7.6 8.6
Other debtors 7.9 9.4
Non-current trade and other receivables 15.6 18.1
Current assets
Trade receivables 311.0 303.4
Less: provision for impairment of receivables (8.7) (8.4)
Trade receivables - net 302.3 295.0
Retentions 6.0 8.8
Amounts due from related parties (note 14) 1.7 3.3
Other debtors(1) 18.9 22.1
Other taxes and social security receivables 96.0 63.2
Prepayments 115.0 96.8
Costs to obtain a contract - 0.1
Costs to fulfil a contract 20.4 18.1
Current trade and other receivables 560.3 507.4
Contract assets 347.0 329.7
Current trade and other receivables and contract assets 907.3 837.1
(1) Included in other debtors are rebates receivable and other sundry
receivables. No individual balance within other debtors is material.
Trade and other receivables are stated at amortised cost.
The Group recognises that there is an inherent element of estimation
uncertainty and judgement involved in assessing contract profitability, as
disclosed in note 1. Management has taken a best estimate view of contract
outcomes based on the information currently available, after allowing for
contingencies, and have applied a constraint to the variable consideration
within revenue resulting in a revenue estimate that is suitably cautious under
IFRS 15.
9. Trade and other payables and contract liabilities
30 September 2025 31 March 2025
£m
£m
Current liabilities
Contract liabilities 753.2 759.4
Trade creditors 279.1 229.2
Amounts due to related parties (note 14) - 3.3
Other creditors 17.4 12.2
Defined contribution pension creditor 5.8 8.2
Other taxes and social security 107.6 84.6
Accruals 591.7 610.5
Trade and other payables 1,001.6 948.0
Trade and other payables and contract liabilities 1,754.8 1,707.4
Non-current liabilities
Non-current accruals 4.8 3.8
Other creditors 0.3 0.4
5.1 4.2
Included in creditors is £18.1 million (March 2025: £10.4 million) relating
to capital expenditure which has therefore not been included in working
capital movements within the cash flow statement.
10. Financial Instruments
The following table presents the Group's assets and liabilities:
30 September 2025 (£m) Financial assets at fair value Financial assets at amortised cost Financial liabilities at fair value Financial liabilities at amortised cost Total carrying amount Fair value
Non-current financial assets
Loans to joint ventures and associates - 3.3 - - 3.3 3.3
Trade and other receivables * - 6.2 - - 6.2 6.2
Other financial assets - 3.6 - - 3.6 3.6
Derivatives 14.5 - - - 14.5 14.5
Lease receivables - 18.6 - - 18.6 18.6
Current financial assets
Trade and other receivables * - 319.6 - - 319.6 319.6
Other financial assets - 1.1 - - 1.1 1.1
Derivatives 17.3 - - - 17.3 17.3
Lease receivables - 16.8 - - 16.8 16.8
Cash and cash equivalents - 704.8 - - 704.8 704.8
Non-current financial liabilities
Bank and other borrowings - - - (473.7) (473.7) (462.8)
Trade and other payables * - - - (0.3) (0.3) (0.3)
Derivatives - - (25.2) - (25.2) (25.2)
Current financial liabilities
Bank and other borrowings - - - (299.5) (299.5) (291.7)
Trade and other payables * - - - (864.4) (864.4) (864.4)
Derivatives - - (2.6) - (2.6) (2.6)
Net financial assets / (financial liabilities) 31.8 1,074.0 (27.8) (1,637.9) (559.9) (541.2)
31 March 2025 (£m) Financial assets at fair value Financial assets at amortised cost Financial liabilities at fair value Financial liabilities at amortised cost Total carrying amount Fair value
Non-current financial assets
Loans to joint ventures and associates - 3.6 - - 3.6 3.6
Trade and other receivables * 2.4 5.7 - - 8.1 8.1
Other financial assets - 4.2 - - 4.2 4.2
Derivatives 5.1 - - - 5.1 5.1
Lease receivables - 26.2 - - 26.2 26.2
Current financial assets
Trade and other receivables * - 317.1 - - 317.1 317.1
Other financial assets - 1.2 - - 1.2 1.2
Lease receivables - 18.4 - - 18.4 18.4
Derivatives 9.3 - - - 9.3 9.3
Cash and cash equivalents - 646.6 - - 646.6 646.6
Non-current financial liabilities
Bank and other borrowings - - - (750.7) (750.7) (721.8)
Trade and other payables * - - - (4.8) (4.8) (4.8)
Derivatives - - (44.8) - (44.8) (44.8)
Current financial liabilities
Bank and other borrowings - - - (0.6) (0.6) (0.6)
Trade and other payables * - - - (830.6) (830.6) (830.6)
Derivatives - - (9.1) - (9.1) (9.1)
Net financial assets / (financial liabilities) 16.8 1,023.0 (53.9) (1,586.7) (600.8) (571.9)
* Trade and other receivables and trade and other payables only include
balances which meet the definition of a financial instrument.
The fair values of financial instruments held at fair value have been
determined based on available market information at the period end date, and
the valuation methodologies listed below:
• The fair values of forward foreign exchange contracts are
calculated by discounting the contracted forward values and translating at the
appropriate period end rates; and
• The fair values of cross-currency interest rate swaps are
calculated by discounting expected future principal and interest cash flows
and translating at the appropriate period end rates.
11. Provisions for other liabilities
Contract/ Employee related and business reorganisation Property Other Total
warranty
costs
(c)
(d)
provisions
(a)
(b)
£m
£m
£m
£m
£m
At 1 April 2025 97.0 15.2 17.6 8.5 138.3
Charge to income statement 11.0 1.7 2.3 2.1 17.1
Release to the income statement (6.4) (2.2) (1.8) (0.2) (10.6)
Utilised in year (7.9) (2.9) (0.3) (0.8) (11.9)
Unwinding of discount 1.0 0.1 - - 1.1
Foreign exchange 0.3 - 0.1 - 0.4
At 30 September 2025 95.0 11.9 17.9 9.6 134.4
Current 75.6
Non-current 58.8
At 1 April 2024 117.8 12.4 23.5 4.5 158.2
Charge to income statement 12.4 2.2 0.7 0.1 15.4
Release to the income statement (5.1) (1.1) (2.9) (0.7) (9.8)
Utilised in year (17.3) (1.8) (0.5) (0.3) (19.9)
Unwinding of discount 1.4 - - - 1.4
At 30 September 2024 109.2 11.7 20.8 3.6 145.3
Current 74.8
Non-current 70.5
a) Contract/warranty provisions relate to onerous contracts and
warranty obligations on completed contracts and disposals. Warranty provisions
are provided in the normal course of business and recognised when the
underlying products and services are sold. The provision is based on an
assessment of future claims with reference to historical warranty data and a
weighting of possible outcomes. Onerous contracts relate to expected future
losses on contracts with customers - notably Type 31 as outlined in note 1.
b) Employee related and business reorganisation costs relate to
business restructuring activities including announced redundancies in addition
to employee related provisions other than employee benefits.
c) Property and other provisions primarily relate to dilapidation
costs and contractual obligations in respect of infrastructure.
d) Other provisions include provisions for insurance claims arising
within the Group's captive insurance company, Chepstow Insurance Limited. They
relate to specific claims assessed in accordance with the advice of
independent actuaries.
Included within provisions is £6.9 million (March 2025: £7.0 million)
expected to be utilised over approximately 10 years. Other than these
provisions the Group's non-current provisions are expected to be utilised
within two to five years.
12. Changes in net debt including loans to joint ventures and associates and
lease receivables
31 March Cash flow Additional Other Changes in fair value Exchange 30 September
2025
£m
leases
non-cash movement (1)
£m
movement
2025
£m
£m
£m
£m
£m
Cash and bank balances 646.6 56.5 - - - 1.7 704.8
Bank overdrafts (0.1) - - - - - (0.1)
Cash, cash equivalents and bank overdrafts 646.5 56.5 - - - 1.7 704.7
Debt (751.2) 2.7 - (2.4) (12.2) (10.0) (773.1)
Derivatives hedging Group debt (10.8) - - - 6.1 - (4.7)
Lease liabilities (274.6) 22.8 (45.7) - - 0.5 (297.0)
Changes in liabilities from financing arrangements (1,036.6) 25.5 (45.7) (2.4) (6.1) (9.5) (1,074.8)
Lease receivables 44.6 (29.0) 19.3 - - 0.5 35.4
Loans to joint ventures and associates 3.6 (0.3) - - - - 3.3
Derivatives hedging interest on Group debt (31.4) - - - 11.7 - (19.7)
Net debt (373.3) 52.7 (26.4) (2.4) 5.6 (7.3) (351.1)
13. Retirement benefits and liabilities
The fair value of the assets and the present value of the liabilities of the
Group pension schemes at 31 March were as follows:
30 September 2025 31 March 2025
£m
£m
Fair value of plan assets
Growth assets
Equities 173.3 93.1
Property funds 177.7 152.9
High yield bonds/emerging market debt 6.4 0.4
Absolute return and multi-strategy funds 161.3 143.1
Low-risk assets
Bonds 1,053.5 1,055.8
Matching assets* 1,475.8 1,630.4
Longevity swaps (227.7) (244.7)
Fair value of assets before impact of asset ceiling 2,820.3 2,831.0
Impact of IFRIC 14 asset ceiling (4.6) -
Fair value of assets 2,815.7 2,831.0
Percentage of assets quoted 84% 74%
Percentage of assets unquoted 16% 26%
Present value of defined benefit obligations
Active members 96.9 99.3
Deferred pensioners 872.0 903.9
Pensioners 1,815.3 1,836.2
Total defined benefit obligations 2,784.2 2,839.4
Net assets/(liabilities) recognised in the statement of financial position 31.5 (8.4)
* Matching assets primarily comprise a "Liability Driven Investment"
portfolio, which invests in gilts, Network Rail bonds, gilt repurchase
agreements, interest rate and inflation swaps, asset swaps and cash, on a
segregated basis. For certain schemes, there are also investments in
investment grade credit, via both segregated portfolios and pooled investment
vehicles. The various segregated portfolios and pooled investment vehicle each
utilise derivative contracts. The Trustee has authorised the use of
derivatives by the investment managers for efficient portfolio management
purposes including to reduce certain investment risks such as interest rate
risk and inflation risk. The principal investment in derivatives is gilt
repurchase agreements, interest rate and inflation swaps in the matching
portfolios and total return swaps in the return seeking portfolios. These
derivatives are included within the matching assets and equities
classifications. Repurchase agreements are entered into with counterparties to
better offset the scheme's exposures to interest and inflation rates, whilst
remaining invested in assets of a similar risk profile.
An analysis of the movement in the Group statement of financial position is
set out below.
30 September 2025 31 March 2025
£m
£m
Fair value of plan assets (including reimbursement rights)
At 1 April 2,831.0 3,084.3
Interest on assets 78.5 142.1
Actuarial loss on assets (5.5) (292.6)
Employer contributions 11.6 107.0
Benefits paid (99.9) (209.8)
As at period end 2,815.7 2,831.0
Present value of benefit obligations
At 1 April 2,839.4 3,194.0
Service cost 1.7 11.1
Incurred expenses 2.5 6.8
Past service cost - (1.2)
Interest cost 78.5 146.6
Experience losses/(gains) 11.6 11.8
Actuarial gain - demographics - (4.7)
Actuarial gain - financial (49.6) (315.2)
Benefits paid (99.9) (209.8)
As at period end 2,784.2 2,839.4
Net asset / (liability) at period end 31.5 (8.4)
The amounts recognised in the Group income statement are as follows:
30 September 2025 30 September 2024
£m
£m
Current service cost 1.7 7.1
Past service cost - plan amendments - (0.3)
Incurred expenses 2.5 3.4
Total included within operating profit 4.2 10.2
Net interest cost/(credit) - note 4 - 2.0
Total included within income statement 4.2 12.2
As at 30 September 2025 the key assumptions used in valuing pension
liabilities were:
Discount rate 5.7% - 6.05% (31 March 2025: 5.7%)
Inflation rate (RPI) 2.95% - 3.00% (31 March 2025: 3.1%)
Inflation rate (CPI) 2.45% - 2.7% (31 March 2025: 2.7%)
14. Related party transactions
30 September 2025 Revenue to (£m) Purchases from (£m) Period end receivables balance (£m) Period end payables balance (£m)
Alert Communications Limited 3.1 - 1.0 -
AirTanker Services Limited 7.0 - 0.2 -
Advanced Jet Training Limited 1.6 - 0.3 -
Rear Crew Training Limited 0.6 - - -
Ascent Flight Training (Management) Limited 2.3 - 0.2 -
Fixed Wing Training Limited 3.5 - - -
Rotary Wing Training Limited 3.3 - - -
Alkali Metal Processing Limited 0.3 3.2 - -
21.7 3.2 1.7 -
30 September 2024 Revenue to (£m) Purchases from (£m) Period end receivables balance (£m) Period end payables balance (£m)
Alert Communications Limited 3.1 - 1.1 -
AirTanker Services Limited 6.4 - 0.1 -
Advanced Jet Training Limited 1.4 - 0.2 -
Rear Crew Training Limited 0.6 - - -
Ascent Flight Training (Management) Limited 0.7 - - -
Fixed Wing Training Limited 3.2 - - -
Rotary Wing Training Limited 4.4 - - -
Alkali Metal Processing Limited 0.7 1.6 0.1 -
First Swietelsky Operation and Maintenance 5.1 - - (0.1)
25.6 1.6 1.5 (0.1)
15. Contingent liabilities
A contingent liability is a possible obligation arising from past events whose
existence will be confirmed only on the occurrence or non-occurrence of
uncertain future events outside the Group's control, or a present obligation
that is not recognised because it is not probable that an outflow of economic
benefits will occur, or the value of such outflow cannot be measured reliably.
The Group does not recognise contingent liabilities. There are a number of
contingent liabilities that arise in the normal course of business, including:
a) The nature of the Group's long-term contracts means that
there are reasonably frequent contractual issues, variations and
renegotiations that arise in the ordinary course of business, including
liabilities that arise on completion of contracts and on conclusion of
relationships with joint ventures and associates. The Group takes account of
the advice of experts, both internal and external, in making judgements on
contractual issues and whether the outcome of negotiations will result in an
obligation to the Group. The Directors do not believe that the outcome of
these matters will result in any material adverse change in the Group's
financial position.
b) As a large contracting organisation, the Group has a
significant number of contracts with customers to deliver services and
products, as well as with its supply chain, where the Group cannot deliver all
those services and products itself. The Group is involved in disputes and
litigation, which have arisen in the course of its normal trading in
connection with these contracts. Whilst the Directors do not believe that the
outcome of these matters will result in any material adverse change in the
Group's financial position, it is possible that, if any of these disputes come
to court, the court may take a different view to the Group.
c) The Group is subject to corporate and other tax rules in
the jurisdictions in which it operates. Changes in tax rates, tax reliefs and
tax laws, or interpretation of the law, by the relevant tax authorities may
result in financial and reputational damage to the Group. This may affect the
Group's financial condition and performance.
d) The Group has given certain indemnities and warranties in
the course of disposing of businesses and companies and in completing
contracts. The Group believes that any liability in respect of these is
unlikely to have a material effect on the Group's financial position.
e) Corporate rules in those jurisdictions may also extend to
compensatory trade agreements, or economic offset rules, where we may have to
commit to use local content in delivering programmes of work. Delivery of
offset is also subject to interpretations of law and agreement with local
authorities, which we monitor closely but may give rise to financial and
reputational damage to the Group if not undertaken appropriately.
Statement of Directors' responsibilities
This half year report is the responsibility of the Directors who each confirms
that, to the best of their knowledge:
· this condensed set of financial statements has been prepared in
accordance with United Kingdom adopted IAS 34 (Interim Financial Reporting);
and
· the interim management report herein includes a fair review of
the information required by:
· Rule 4.2.7 of the Disclosure & Transparency Rules
(indication of the important events during the first six months, and their
impact on the condensed set of financial statements, and a description of
principal risks and uncertainties for the remaining six months of the year);
and
· Rule 4.2.8. of the Disclosure & Transparency Rules
(disclosure of related parties' transactions that have taken place in the
first six months of the current financial year and that have materially
affected the financial position or the performance of the entity during that
period; and any changes in the related parties transactions described in the
last annual report that could have a material effect on the financial position
or performance of the enterprise in the first six months of the current
financial year).
Approved by the Board and signed on behalf of the Directors by:
David Lockwood
Chief Executive
David Mellors
Chief Financial Officer
20 November 2025
(#_ednref1)
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