Babcock International Group Plc (LON:BAB) has announced its half year results for the six months ended 30 September 2024.
Successfully delivering performance and growth
| Statutory results | 30 September 2024 | 30 September 2023 |
| Revenue | £2,408.9m | £2,177.0m |
| Operating profit | £183.8m | £144.2m |
| Basic earnings per share | 25.7p | 20.4p |
| Cash generated from operations | £181.3m | £163.2m |
| Underlying results 1 | 30 September 2024 | 30 September 2023 |
| Contract backlog | £9.5bn | £9.6bn |
| Underlying operating profit | £168.8m | £154.4m |
| Underlying operating margin | 7.0% | 7.1% |
| Underlying basic earnings per share | 23.5p | 20.6p |
| Interim dividend per share | 2.0p | 1.7p |
| Underlying free cash flow | £94.7m | £67.2m |
| Net debt | £(385.6)m | £(492.5)m |
| Net debt excluding leases | £(145.8)m | £(287.8)m |
| Net debt/EBITDA (covenant basis) | 0.6x | 1.1x |
David Lockwood, Babcock International Group Chief Executive Officer, said:
“This is another strong set of results, with continued positive momentum across the Group. Our operational and financial performance in the first half of the year underpins my confidence that we will deliver our expectations for the full year, as we progress towards our medium-term guidance.
We continue to focus on driving performance and sustainable growth. Working closely with our customers, we are consistently delivering key programmes and contracts, with enhanced standards of execution. Meanwhile, a backdrop of geopolitical instability means demand for what we do continues to increase, resulting in an expanding and attractive long-term opportunity set. We are selecting the right opportunities and are being disciplined in how we deploy capital to deliver growth which maximises shareholder value.”
Financial highlights
| – | Contract backlog £9.5 billion flat vs HY24, or down 8% vs FY24 driven by execution on long-term contracts. Key contracts expected in H2 |
| – | Revenue of £2,409 million increased 11% on an organic basis, driven by strong growth in Nuclear and Land |
| – | Underlying operating profit up 10% (at constant FX) to £169 million, driven by growth and margin improvement in Nuclear and Land |
| – | Underlying operating margin was 7.0% (HY24: 7.1%). The prior period included high margin AH140 frigate license sales |
| – | Underlying EPS up 14% to 23.5 pence |
| – | Underlying operating cash conversion was 80% (HY24: 82%) |
| – | Underlying free cash flow increased 41% to £95 million reflecting the profit performance and working capital timing |
| – | Net debt to EBITDA reduced to 0.6x on a covenant basis. Net debt excluding leases reduced to £146 million |
| – | Interim dividend of 2.0 pence per share (HY24: 1.7 pence) |
Outlook
| – | Our expectations for FY25 remain unchanged, noting that full year underlying free cash flow will be significantly H1 weighted. |
| – | With around 90% of FY25 expected revenue under contract at 1 October 2024, we commence the second half with good momentum and are confident of making further progress against our medium-term guidance: to deliver mid-single digit average annual revenue growth and achieve underlying operating margins of at least 8% and underlying operating cash conversion of at least 80%. |
Strategic highlights
| – | Launched H&B Defence, a JV with HII to support AUKUS focusing on building Australia’s sovereign nuclear capabilities |
| – | Opened a new Engineering and Nuclear Skills building at City College Plymouth to enhance our workforce’s nuclear capabilities |
| – | Partnered with ST Engineering to launch a 120mm Ground Deployed Advanced Mortar System |
| – | Launched the General Logistics Vehicle (GLV) medium wheelbase variant targeted at UK and international opportunities |
| – | DSG contract extension under negotiation following notification of UK MOD of its intention to exercise up to five option years |
Operational highlights
Marine
| – | Awarded contract extension in Poland to support Miecznik frigate programme for three ships to 2031 |
| – | Type 31 – good progress with ship 1 superstructure largely complete, ship 2 progressing, ship 3 steel cut |
| – | First six months of in-service delivery of the Skynet contract to manage the UK’s military satellite and space operations |
| – | LGE record intake of more than £300 million |
| – | Completed successful docking period for the HMS Queen Elizabeth aircraft carrier |
Nuclear
| – | Reopened our Devonport 9-Dock, following a significant regeneration project, critical for the future support of the UK’s CASD |
| – | Significant ramp up at Hinkley Point C as we begin to install mechanical and electrical services |
Land
| – | Strong operational performance on DSG contract |
| – | Awarded an additional contract to build 53 High Mobility Transporter Jackal 3 six-wheeled ‘Extendas’ for the British Army |
| – | Awarded several UK military training contract extensions during the period |
| – | Launched the new Babcock Immersive Training Experience (BITE) to support individual and collective training |
| – | Successfully delivered the transition phases of two new French military land contracts |
Aviation
| – | Preferred bidder on MENTOR2, a c.€800 million 15-year contract to provide initial pilot training to the French Air Force, Navy and Army |
| – | Commenced the 12-year contract to deliver the in-service support of 48 Sécurité Civile and police EC145C2 helicopters |
| – | RAF Hades contract extended by two years to provide technical airbase support services across the Armed Forces |
| – | Partnered with the RAF to deliver Elementary Flying Training to the Ukrainian Pilot Force as it prepares to fly F-16 jets |
| – | Awarded a 10-year renewal with UK Midlands Air Ambulance Charity |
1. Alternative Performance Measures (APMs) – notes to statutory and underlying results on page 1:
The Group provides APMs, including underlying operating profit, underlying margin, underlying earnings per share, underlying operating cash flow, underlying free cash flow, net debt, net debt excluding leases and contract backlog to enable users to have a more consistent view of the performance and earnings trends of the Group. These measures are considered to provide a consistent measure of business performance from year to year. They are used by management to assess operating performance and as a basis for forecasting and decision-making, as well as the planning and allocation of capital resources. They are also understood to be used by investors in analysing business performance.
The Group’s APMs are not defined by IFRS and are therefore considered to be non-GAAP measures. The measures may not be comparable to similar measures used by other companies, and they are not intended to be a substitute for, or superior to, measures defined under IFRS. The Group’s APMs are consistent with the year ended 31 March 2024. The Group has defined and outlined the purpose of its APMs in the Financial Glossary on page 25.
Results presentation:
A presentation for investors and analysts will be held on 13 November 2024 at 09:00 am (GMT). The presentation will be webcast live and available on demand on our website babcockinternational.com/investors/results-and-presentations.
