Babcock’s Share Price Rose 3.89% on Half-Year Earnings Results

The Babcock International Group PLC (LON: BAB) share price rose 3.89% after releasing its earnings results for the six months to 30 September 2023. The company noted that its contract backlog currently stands at £9.6 billion, reflecting a year-on-year decrease primarily attributed to the impact of disposals, but it has shown a slight increase since the year ended.

Revenue has experienced a 2% uptick, reaching £2,177 million. This growth includes organic expansion of 18%, which encompasses the growth in major infrastructure programs, effectively offsetting the disposals made in FY23.

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The company’s underlying operating profit has surged by an impressive 27%, reaching £154 million. This performance has exceeded expectations, driven in large part by the earlier-than-anticipated receipt of license income from the Polish frigate program.

The underlying operating margin has expanded significantly by 140 basis points, now standing at 7.1%. This boost can be attributed to the license income received. Underlying basic earnings per share have increased by a substantial 30%, totalling 20.6 pence.

The company has demonstrated robust underlying free cash flow of £67 million, primarily resulting from an impressive 82% underlying operating cash conversion rate. Net debt to EBITDA has seen a reduction to 1.1x on a covenant basis, down from the FY23 figure of 1.5x. Notably, net debt has been reduced by £72 million, bringing it to £493 million.

After a hiatus of four years, Babcock has reinstated dividends. The interim dividend of 1.7 pence per share is expected to constitute approximately one-third of the full-year dividend. 

The Board maintains its consistent outlook, anticipating another year of organic revenue growth, an expansion in underlying operating margin, and the generation of positive cash flow.

David Lockwood, Babcock’s Chief Executive Officer, said: “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. 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.” 

Babcock share price. 

The Babcock share price rose 3.89% to trade at 425.95p from Monday’s closing price of 410.00p.