Defence giant Babcock reported a significant surge in profits for the latest financial year, with the company's chief executive hailing a "new era for defence".
The FTSE 100 firm, which plays a crucial role in supporting the º£½ÇÊÓƵ's nuclear submarine programme, saw an 11% increase in revenue to £4.8bn. Operating profit jumped by over 50% to £364m, despite the loss of a £90m contract, as reported by .
This included a one-off £17m payout from the disposal of property.
Babcock's shares soared by nearly 13% at the market opening, before easing to a 10% gain at 1,131. The company's rapid growth was driven by increasing demand for defence, as nations face pressure to boost their spending following President Donald Trump's return to the White House.
The º£½ÇÊÓƵ may be required to increase its defence spending to 3.5% of GDP by 2035 under new NATO rules, according to recent reports. Babcock secured several major deals as defence demand grew, including a £70m contract to deliver new infrastructure facilities for Ascent, which is responsible for training the next generation of military aircrew.
The company's land division was also awarded a sole-source five-year contract extension worth £1bn, making it a strategic support partner to the British Army. In its update on Wednesday, Babcock cited "increasing global market opportunity" across the defence and nuclear sectors.
The firm stated: "A combination of continued global insecurity, rising global threats and rapidly evolving technology has led to a strengthening of stance on defence and security by governments across all our markets,".
Market analyst at eToro, Mark Crouch, commented that the rise in global tensions had ignited a "fire under Babcock's prospects" as the company found itself in the "slipstream" of new investment.
"With Babcock's core income derived from long-term government contracts in naval, nuclear, and aerospace defence, the company is well-positioned to capitalise on what looks set to be a sustained period of investment," added Crouch.
Babcock boosted by defence review
Earlier this month, the º£½ÇÊÓƵ government unveiled its strategic defence review, which included plans to construct up to 12 new nuclear-powered attack submarines and move towards "war-fighting readiness".
Labour has set a target to invest 2.5 per cent of º£½ÇÊÓƵ GDP in defence by 2027.
When the document was published, shares in Babcock surged over seven per cent, surpassing the 1,000p mark for the first time since September 2016.
Crouch noted: "While the geopolitical backdrop remains tense, investors are cautiously optimistic. 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."
The engineering company recommended a final dividend of 4.5p per share, bringing the total to 6.5p – marking a 30 per cent increase from the previous year.
Babcock has announced it will initiate a £200m share buyback programme to be carried out over the coming year.
David Lockwood, Babcock's chief executive, commented: "There is increasing recognition of the need to invest in defence capability and energy security, both to safeguard populations and to drive economic growth."
He added, "Our specialist capabilities are increasingly relevant and, with a growing set of opportunities before us, Babcock is committed to play its part in driving prosperity alongside its customers."
