Key financials and performance
Babcock International reported earnings per share of 16.9 pence for fiscal year 2025, above the consensus estimate of 16.4 pence by roughly 3%. Group revenues were reported at £4.9 billion, in line with analyst expectations, with organic revenue growth of 1% for the year.
Adjusted EBITA for the period reached £272 million, narrowly beating the company guidance of £270 million and exceeding the consensus estimate of £267 million. The adjusted EBITA margin was 5.6%, compared with the consensus margin of 5.5%.
Reported EBITA was £246 million, a 3% increase year over year, reflecting a clear improvement in operating performance on a reported basis.
Drivers of the results
The earnings outperformance reflected a slightly higher adjusted EBITA and lower net interest costs than guided. Net interest costs were £45 million, below the guided £48 million. The statutory tax rate for the year was 23%, in line with company guidance.
Order intake for the fiscal year totaled £5.5 billion, up from £4.9 billion in FY24, producing a book-to-bill ratio of 114%. The company reported that its order book grew 9% year over year to £14.5 billion, with around two-thirds of awards coming from the defence sector.
Cash flow, balance sheet and capital returns
Free cash flow was reported at £219 million, substantially ahead of the consensus estimate of £153 million. Adjusted net debt stood at £206 million, below the consensus expectation of £232 million, and delivering leverage of 0.7 times. That leverage level remains under the company target range of 1 to 2 times.
The net debt figure noted above incorporates £245 million related to the MT&S acquisition and the newly announced £75 million share buyback programme.
Guidance for fiscal 2026
Babcock reiterated previously provided guidance for FY26. The company expects adjusted EBITA of £300 million, slightly ahead of the consensus estimate of £291 million, representing 10% year-over-year growth and implying a margin of about 6% at the top end of its medium-term 5% to 6% range. Management said this guidance is supported by the strong 2025 order intake, full-year contributions from the MT&S acquisition, and planned productivity improvements.
Revenue for FY26 is expected to be roughly £5 billion with organic revenue growth of 3%. The tax rate guidance remains at around 25%, and free cash flow is expected to be approximately £160 million, consistent with the company medium-term targets.
To reflect the buyback, the company updated its year-end net debt guidance to £165 million from a prior £150 million, and adjusted expected net finance costs to £52 million from £50 million.
Takeaway
Babcock delivered a modest operational beat in FY25, particularly on adjusted EBITA and cash generation. The business entered FY26 with an enlarged order book and a confirmed share buyback that has influenced near-term financing metrics. Management is relying on the MT&S acquisition and productivity gains to reach its FY26 targets.