(Alliance News) - Babcock International Group PLC on Wednesday announced a new share buyback as it reported a charge on its type 31 frigate contract amid strong sales growth.

The London-based aerospace, defence and nuclear engineering services company said revenue rose 9.1% to GBP5.27 billion in the financial year ending March 31 from GBP4.83 billion a year earlier, or by 10% at constant currency.

Babcock said this reflected "strong underlying operational and financial performance" and "continued momentum and particularly strong performances in Nuclear and Aviation."

Shares in Babcock International were 3.6% higher at 1,043.14 pence each in London on Wednesday.

But underlying operating profit fell 19% to GBP293 million from GBP363 million and underlying basic earnings per share declined 21% to 39.6p from 50.3p, reflecting a GBP140 million non-recurring charge related to its Type 31 frigate contract.

Excluding the charge, underlying operating profit increased 19% to GBP433 million, operating margin improved to 8.2% from 7.5% and underlying basic EPS climbed to 60.5p from 50.3p.

The FTSE 100-listing said underlying free cash flow grew to GBP262 million from GBP153 million and net debt narrowed to GBP329 million from GBP373 million.

Babcock put consensus for full-year revenue at GBP5.11 billion, underlying operating profit of GBP411 million and free cash flow of GBP215 million.

The GBP140 million charge reflects revised costs to complete delivery of the Type 31 design and build contract, which is fully recognised in financial 2026, with the cash costs incurred over the remainder of the programme.

Babcock said it has experienced "higher than expected levels of rework as a result of changes to the design and the long-term impacts of out-of-sequence build activity earlier in the programme."

"Whilst the number of such rework events is not entirely unexpected, the work is being performed in the later stages of completion and therefore is more complex and more costly," it added.

Babcock estimates GBP100 million of the GBP140 million will be recognised as a revenue reversal in financial 2026 with the balance increasing the contract loss provision.

At constant currency, Nuclear revenue increased 14%, driven by strong growth in the Cavendish Nuclear business and higher submarine support activity, more than offsetting the expected decline in Major Infrastructure Programme revenue.

Marine revenue grew 8%, before a GBP100 million revenue reversal as a result of the Type 31 charge.

Land revenue returned to growth in the second half of the financial year, but declined 3% overall, as growth in defence was offset by weaker civil volumes in Rail and South Africa.

Aviation revenue climbed 34% due to the ramp up of the Mentor 2 programme in France and the British Columbia helicopter emergency services contract in Canada, and increased scope in UK military support contracts.

In addition, Babcock announced a new GBP200 million share buyback programme after completing a previous GBP200 million buyback in April.

Expectations for financial 2027 are unchanged, supported by around 70% of expected revenue already under contract.

By Jeremy Cutler, Alliance News reporter

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