Babcock profits fired up by global military spending boom

Babcock expects to report a significant increase in annual profits thanks to ongoing surge in global military spending.

The defence firm, which manages the Royal Navy’s Devonport dockyard in Plymouth, forecasts underlying operating profits for the financial year ending March will be 17 per cent higher year-on-year at £363million.

It also projects turnover rising by over £400million to £4.83billion, driven by organic sales growth at constant currency rates of 11 per cent.

Babcock said all four of its divisions performed well during the fourth quarter, led by its nuclear and marine businesses, with the latter enjoying an estimated £5million one-off benefit.

In January, the FTSE 100 group won a 17-year contract worth €795million to provide military air training for the French navy, and air and space force.

Two months later, it won a £1.6billion contract extension from the Ministry of Defence to look after British Army equipment, including tanks and armoured vehicles.

David Lockwood, chief executive of Babcock, said: ‘In an uncertain world, we continue to see momentum across the business.

‘This has driven strong performance in all four of our divisions in the fourth quarter, resulting in full-year underlying operating profit ahead of expectations.

‘Our experience, know-how and application of technology play a critical role in ensuring that our customers are ready to respond to ever-changing global threats.’

Western nations are ramping up defence expenditure in response to Russia’s full-scale invasion of Ukraine and concerns that China could invade Taiwan.

NATO member states in Europe are also under pressure from US President Donald Trump to assume more of the security burden.

Prime Minister Sir Keir Starmer promised in February to hike the UK’s share of GDP spent on defence to 2.5 per cent from April 2027 and announced his ambition to raise this to 3 per cent in the next parliament.

According to the International Institute for Strategic Studies think tank, global military spending soared to a record $2.46trillion last year.

Shares in British defence and aerospace companies like Babcock and BAE Systems have consequently climbed considerably over the past few years.

Babcock International Group shares were 2.7 per cent up at 768.5p on Wednesday morning, meaning they have risen by approximately 52 per cent this year.