Babcock International Group (BAB) H2 2024 earnings summary

Executive summary

• Achieved strong full-year results with double-digit organic revenue growth, significant profit improvement, and strengthened balance sheet.

• Contract backlog increased 9% to £10.3bn, with 74% of revenue from defence and 11% organic growth at constant FX.

• Underlying operating profit up 34% year-over-year to £237.8m; underlying margin rose to 7.0%.

• Dividend reinstated at 5.0p per share; net debt reduced by £129m to £211m.

• S&P credit rating upgraded to BBB+; ample liquidity headroom over £1.4bn.

Financial highlights

• Revenue £4,390.1m, down slightly from £4,438.6m, but 11% organic growth at constant FX.

• Underlying operating profit £237.8m (up from £177.9m); underlying EPS 30.8p (up from 17.7p).

• Free cash flow £160m, with cash conversion at 136% (98% excluding Type 31 loss).

• Net debt/EBITDA reduced to 0.8x from 1.5x; net debt at £211m.

• Type 31 programme loss of £90m recognised; underlying profit excluding Type 31 was £327.8m.

Outlook and guidance

• FY25 expectations unchanged; around 70% of FY25 revenue already under contract.

• Medium-term guidance: underlying operating margin ≥8%, cash conversion ≥80%, mid-single digit annual revenue growth.

• Margin progression anticipated, with revenue growth expected to be consistent, though infrastructure revenue will likely be flat.

• Cash flow may be weighted toward the second half due to timing effects.

• Pace of achieving guidance may be affected by mobilisation of large new programmes and revenue/margin phasing.