Babcock International Group (BAB.L), a British aerospace company, on Wednesday reported lower underlying earnings for fiscal 2026, held back by a non-recurring charge on the Type 31 frigate contract, while underlying revenue increased driven by Nuclear and Aviation performance.
Looking ahead to fiscal 2027, the company maintained expectations, supported by good revenue visibility. Around 70% revenue was under contract as of April 1, 2026, a similar percentage to the prior year.
Further, Babcock reiterated medium-term targets of average mid-single digit revenue growth, and at least 9 percent underlying operating margin.
For the financial year 2026, underlying basic earnings per share were 39.6 pence, compared with 50.3 pence in the previous year.
The latest result was hit by a Type 31 charge of 140 million pounds related to its 1.25 billion pounds MoD contract, to design and build five Arrowhead 140 frigates for the Royal Navy at Rosyth.
In fiscal 2026, Babcock floated off the first two ships, laid the keel of ship three and cut steel on ship four. The company noted that design changes and out-of-sequence build work have driven higher rework costs, leading to the charge, which includes a revenue reversal of about 100 million pounds.
Excluding the Type 31 charge, underlying basic earnings per share was 60.5 pence in fiscal 2026.
Underlying operating profit declined to 293 million pounds from 363 million pounds last year. Excluding the Type 31 charge, underlying operating profit rose 19 percent at constant FX to 433 million pounds.
Annual revenue grew to 5.273 billion pounds from 4.831 billion pounds a year earlier. Organic revenue growth at constant FX was 10%, driven by the growth in Nuclear and Aviation with 14 percent and 34 percent, respectively.
Contract backlog, meanwhile, dropped to 9.6 billion pounds from prior year's 10.4 billion pounds.
Babcock confirmed that the leadership transition announced in January is progressing, with Harry Holt now Deputy CEO, who will join the Board in the month of June.
On the LSE, shares of Babcock were gaining 0.89 percent, changing hands at 1,016.00 pence.
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