Babcock shares rise on £2.3bn nuclear sales

Babcock shares soared on Wednesday as the advocacy group revealed double-digit revenue growth thanks to a global boom in military spending.

The FTSE 250 group’s sales rose 11 per cent to more than £2.3bn during the first six months of its financial year, boosted by 22 per cent growth in its nuclear division, while underlying operating profits rose 10 per cent. cent to £169 million.

Babcock, which increased its interim dividend by 18 per cent to 2p, told shareholders that the “complex geopolitical context” has reinforced demand for its “specialist capabilities”, “driving greater, higher quality growth opportunities”.

The results echo those of rival BAE Systems, which on Tuesday reported orders worth £25bn this financial year, up from £15bn just six months earlier.

Babcock’s order book declined slightly year-on-year to £9.5bn, but the firm expects performance to pick up in the second half.

Boss David Lockwood said: ‘A backdrop of geopolitical instability means demand for what we do continues to increase, resulting in an attractive and expanding long-term opportunity set.

“We are selecting the right opportunities and are being disciplined in how we use capital to generate growth that maximizes shareholder value.”

babcock actions They rose 6 per cent to 529 pence as midday approached, having added almost 30 per cent in the last 12 months.

While the group said it was on track to meet full-year guidance, analysts at Shore Capital warned of the potential impact of the Autumn Budget.

They said: ‘We believe there may be a need to moderate our figures following the NIC increase following the October budget.

“That said, we remain positive about the story and believe the valuation is attractive.”

Babcock sees ‘time mismatch’ and nuclear upgrade in UK

The firm said a “time lag between current threats facing governments and new product development programs” leaves it well positioned as countries around the world increase their defense spending.

He added: ‘The pace and scope of budget growth is insufficient to match the growth in demand for military spending, making Babcock’s ability to add value affordably essential.

“Babcock’s ability to deliver increased availability and capacity from existing assets has become vitally important, further reinforcing our value to customers.”

The group is also keeping an eye on the Government’s current Strategic Defense Review “to determine how UK defense will meet the challenges, threats and opportunities of the 21st century, whilst taking into account the commitment to increase defense spending”.

In the autumn budget, Labor reiterated its commitment to a defense budget of 2.5 per cent of GDP and a £2.9bn increase in defense spending by 2026, as well as an additional £3bn annually to support Ukraine.

The group said: ‘Babcock is critical to the delivery of the UK’s nuclear deterrent, which has been confirmed as a national security priority.

‘The Government has committed to building four new Dreadnought Class submarines to replace the Vanguard Class and ensure Continuous At Sea Deterrence (CASD), with one submarine always at sea.

“Together with the Government as our customer, we continue to invest in the nuclear submarine infrastructure necessary for the transition to the Dreadnought class and next generation AUKUS attack submarines and the delivery of support and lifetime availability of the entire fleet of UK nuclear submarines in the future.”