British engineering giant Babcock stuck to annual guidance for growth on Tuesday as the global threat environment continues to drive demand for defence equipment and maintenance work.
Babcock posted underlying operating profit up 27 per cent to £154m for the six months to the end of September, helped by income from its contract to build frigates for Poland, and after it won contracts in France and Australia.
In early trading, Babcock’s shares rose by more than four per cent on the news.
A turnaround plan for the company, which designs and manufactures naval ships and weapons handling systems as well as supporting Britain’s nuclear submarines, has coincided with a pick-up in demand for military kit due to the war in Ukraine.
Babcock had said in July it would reinstate its dividend after a four year hiatus and on Tuesday announced it would pay out 1.7 pence per share, expected to be around a third of the full-year sum.
For the full-year, Babcock said it was on track to meet its target for organic revenue growth and underlying operating margin expansion. Shares in Babcock have risen 45% in the year to date.
“We have made a strong start to the year, as we continue to build on the exciting momentum we see across the Group. We are delivering for our customers, reducing risk and positioning for growth through a number of significant new global teaming agreements”, said David Lockwood, its chief executive.
“We have a clear capital allocation policy, which is providing the Group with the flexibility it needs to capture the growing number of value creation opportunities we see ahead. We are reinstating our dividend following a four-year hiatus, reflecting our confidence in the future, and our expectations for the full year remain unchanged.”
Sarah Young – Reuters