Babcock profits jump on global instability, govt defence demand

UK weapons maker Babcock reported a sharp jump in half-year profits and held annual guidance as geopolitical tensions increased demands from governments for military hardware.

The company on Wednesday posted pre-tax profit of £172m in the six months to September 30, up from £136m a year earlier. Operating profit rose to £183.8m from £144.2m, beating the company-compiled consensus of £161m

Babcock said around 90% of full-year expected revenue was under contract at the start of October.

“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%,” the company said.

"Geopolitical instability is driving growth in defence budgets. However, the pace and extent of budget growth is insufficient to match the growth in demand for military spend, making Babcock's ability to affordably add value, essential."

The company also noted a commitment from the new UK Labour government to increasing defence spending to 2.5% of gross domestic product.

Reporting by Frank Prenesti for Sharecast.com