Babcock International Group shares soared to a five-year high after the defence company lifted annual guidance on strong demand its in nuclear and marine segments. The group's nuclear arm enjoyed double-digit organic sales growth thanks to higher submarine support activity, civil nuclear new build and decommissioning work, and better-than-expected infrastructure revenues. Babcock said it had continued to trade well during the third quarter of the financial year, while the 'preliminary view' of its performance last month was 'encouraging'.
The FTSE 250 business now anticipates making turnover of around £4.9billion in the year ending March, compared to analysts' average forecasts of just under £4.7billion. It also expects to post underlying operating profits of more than £339.7million, which is the top end of the range of analyst predictions. Shares in the London-based firm jumped by 11.6 per cent to 605.5p by 10am following the trading update, surpassing their levels in early 2020.
Climbing: Babcock International Group shares soared to a five-year high on Thursday after the defence company hiked its annual guidance. Babcock has also been boosted by a contract to operate Skynet, the Ministry of Defence's military satellite communications system, and rising volumes of liquefied gas cargo handling. The company's LGE division won a massive contract in December to deliver six cargo handling and fuel gas supply systems for new ultra-large ethane carriers in China.
David Lockwood, chief executive of Babcock, said: 'Today's announcement demonstrates that successful execution of our strategy is continuing to deliver value for all our stakeholders. 'Our engineering skills and know-how are in ever greater demand, and with significant opportunities before us, I look forward to further profitable growth.'. Defence firms like Babcock are strongly benefiting from governments raising military expenditure in response to the Ukraine war, heightened tensions in the Middle East, and fears over Chinese claims on Taiwan.
Global military spending rose by 7 per cent to almost £2trillion in 2023, according to the Stockholm International Peace Research Institute. Babcock is building three ships as part of the Royal Navy's Type 31 Inspiration Class frigate programme, with the first of them, HMS Venturer, set to float off later this calendar year. It is also refitting the HMS Victorious submarine at its Devonport dockyard in Plymouth and recently won a 17-year €800million contract to provide air training for the French Navy, and French Air and Space Force.
Russ Mould, investment director at AJ Bell, said: 'It has been an up and down decade for Babcock beset by financial problems and uneven financial and operational performance, but...the past couple of years have seen a revival in fortunes.'. Affiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.
