Defence giant Babcock International has hailed a “new era for defence” with rising global threats prompting governments around the world to strengthen spending, especially on the burgeoning nuclear sector.
Shares in the London-listed company surged after it reported higher profits and raised its financial outlook.
It generated an operating profit of £364 million in the year to the end of March, 51% higher than the previous year.
Revenues grew by 11% to £4.8 billion, with particularly strong growth in the nuclear and marine sectors.
It also said it was now expecting to meet its target underlying operating margin in the next financial year – one year earlier than it previously thought.
Babcock maintains the UK’s fleet of submarines, and also provides engineering support across the marine, nuclear, land and aviation sectors.
UK defence spending made up nearly two-thirds of the group’s sales last year, but it also operates in countries including Australia, Canada, France, and Ukraine.
The company told investors that rising global threats and ongoing insecurity had contributed to governments across all its markets strengthening their stance on defence and security.
This was set to drive significant spending and investment, particularly in the civil nuclear sector for the foreseeable future.
It also highlighted the UK Government’s renewed commitment to defence spending, with the Prime Minister earlier this month committing to spend 5% of gross domestic product (GDP) on national security.
On Wednesday, it was announced that the UK is set to buy a fleet of new fighter jets capable of carrying nuclear weapons, with Sir Keir Starmer saying the country can “no longer take peace for granted”.
“This is a new era for defence,” Babcock’s chief executive David Lockwood said on Wednesday.
“There is increasing recognition of the need to invest in defence capability and energy security, both to safeguard populations and to drive economic growth.”
Babcock also announced the launch of a £200 million share buyback programme, which will take place over the course of the 2026 financial year.
Shares in Babcock jumped by more than a 10th shortly after stock markets opened on Wednesday.
Mark Crouch, market analyst for investment platform eToro, said the firm was “finally benefiting from a seismic shift in global priorities”.
“While the geopolitical backdrop remains tense, investors are cautiously optimistic,” he said.
“Ongoing global conflicts are understandably unsettling, but the resulting boost in defence budgets has, from a markets perspective, provided a more stable long-term outlook for companies like Babcock.
“Though driven by circumstances, the reality is that national security is once again a fiscal priority, and Babcock is a key beneficiary.”
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