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1. Company Snapshot

1.a. Company Description

Babcock International Group PLC, together with its subsidiaries, provides value-add services for aerospace, defense, and security in the United Kingdom, rest of Europe, Africa, North America, Australasia, and internationally.The company operates through four segments: Marine, Nuclear, Land, and Aviation.It designs, procures, operates, and manages critical utility and process equipment; offers asset management, defense and maritime training, information and intelligence, equipment and system, and facilities and infrastructure services, as well as naval platforms; and designs, manufactures, and provides through-life support for mechanical and electrical systems and equipment.


The company also offers naval architecture, engineering, and project management services; submarines and complex engineering services in support of various decommissioning programs and projects, training and operation support, new build program management, and design and installation; critical vehicle fleet management, and equipment support and training services for military and civil customers; and designs, assesses, manufactures, installs, maintains, and decommissions vehicles for police, fire and ambulance, civil service, military, and other security-focused organizations.In addition, it provides plain line track renewal services; and engineering services for track projects, signaling, telecommunications, and on-track plants.Further, the company offers critical engineering services to defense and civil customers, including pilot training, equipment support, and airbase management, as well as operates aviation fleets that provide delivering emergency services.


Babcock International Group PLC was founded in 1891 and is headquartered in London, the United Kingdom.

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1.b. Last Insights on BAB

Babcock International Group PLC's recent performance was driven by strong full-year 2025 earnings, with revenue up 10% year-over-year to £4.83 billion. The company's raised financial outlook and higher profits, attributed to increased global defence spending, have boosted investor confidence. Additionally, its estimated fair value is £12.90, suggesting potential upside. The company's strong position in the defence sector, where it is experiencing a "new era of defence" with increased spending, is expected to continue driving growth.

1.c. Company Highlights

2. Babcock's Strong H1 Results Set Stage for Continued Growth

Babcock's half-year results for the period ending September 30, 2025, were robust, with year-on-year increases across all key metrics. Organic revenue growth came in at 7%, while operating profit margin expanded to 7.9%, up 90 basis points. Underlying operating profit reached GBP 201 million, a 19% increase, and earnings per share rose 21% to 0.285, beating analyst estimates of 0.2595. The company also announced a 25% increase in dividend, underscoring its commitment to returning value to shareholders. Cash conversion was 83%, and free cash flow was GBP 141 million.

Publication Date: Nov -24

📋 Highlights
  • Strong Financial Performance:: Underlying operating profit surged 19% to GBP 201 million, driven by 7% organic revenue growth and a 7.9% operating margin (up 90 bps).
  • Sector Growth Highlights:: Aviation led with 26% organic growth, supported by Mentor 2 mobilization, outperforming the 6% Marine revenue growth and 38% profit increase.
  • Cash Distribution & Buybacks:: Dividend increased 25%, alongside a GBP 200 million share buyback, reflecting disciplined capital allocation and confidence in free cash flow (GBP 141 million).
  • Strategic Contract Wins:: Secured GBP 300 million SMR-related contract, aligning with long-term nuclear growth targets and doubling the civil nuclear business by 2030.
  • Economic Impact:: Babcock contributes GBP 4.3 billion to the UK economy annually, with GBP 550 million spent on SMEs, reinforcing its industrial resilience and supply chain strength.

Segmental Performance

The company's growth was driven by strong performances in three of its four sectors: Nuclear, Marine, and Aviation. Nuclear revenue growth was fueled by Cavendish and submarine support activity, while Marine's revenue grew 6% and profit increased 38%. Aviation achieved 26% organic growth, driven by the mobilization of Mentor 2 in France and increasing aircraft support contracts. These results demonstrate Babcock's diversified business model's resilience and ability to drive growth across various segments.

Outlook and Capital Allocation

Babcock has reaffirmed its medium-term guidance and expressed confidence in its outlook for 2026. The company has made progress on its capital allocation priorities, including a GBP 200 million share buyback and investments in strategic growth initiatives. Management noted that they will prioritize investments that provide superior returns to the buyback, given the company's cash position. With a strong order book and focus on people and growth opportunities, Babcock is well-positioned for sustained growth.

Valuation and Dividend Yield

Using the current P/E Ratio of 23.66 and EV/EBITDA of 12.96, it appears that the market has priced in a certain level of growth. However, with a Dividend Yield of 0.57% and Free Cash Flow Yield of 3.55%, the stock offers a relatively attractive return profile. Additionally, the company's ROIC of 14.6% and ROE of 43.89% indicate a strong ability to generate returns on capital. As Babcock continues to execute on its growth initiatives, investors will be watching to see if the company can maintain its momentum and deliver on its medium-term guidance.

3. NewsRoom

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Ukraine peace, robotaxis and pharma: what's moving stocks

Nov -24

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Babcock International Group PLC (BCKIF) Half Year 2026 Earnings Call Highlights: Strong Growth ...

Nov -21

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Trending tickers: SoftBank, Babcock International, Asos, Tullow Oil

Nov -21

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How Recent Developments Are Shaping the Babcock Investment Story

Nov -21

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Babcock Earnings Jump on Defense Demand, Nuclear Projects

Nov -21

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Are Construction Stocks Lagging Arcosa (ACA) This Year?

Nov -04

Source: zacks.com

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Critical Infrastructure Technologies Provides Nexus Production Update

Nov -04

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Quest Global Expands Strategic Engagement with Babcock International to Support its Naval Nuclear Operations

Oct -27

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (1.98%)

6. Segments

Marine

Expected Growth: 1.8%

Babcock International Group PLC's Marine segment growth of 1.8% is driven by increasing demand for naval shipbuilding and repair services, supported by government investments in naval defense. Additionally, the company's focus on digitalization and technology integration in marine engineering, as well as its strategic partnerships, contribute to the segment's growth.

Nuclear

Expected Growth: 2.2%

Nuclear segment growth driven by increasing demand for nuclear decommissioning and waste management services, supported by UK government's commitment to nuclear energy. Babcock's expertise in nuclear engineering and project management, coupled with its strong relationships with key clients, positions it for continued growth in this segment.

Land

Expected Growth: 1.9%

Babcock International Group PLC's Land segment growth of 1.9% is driven by increasing demand for military vehicle support services, expansion of existing contracts, and strategic acquisitions. Additionally, the company's focus on digital transformation and investment in technology are expected to enhance operational efficiency and drive growth.

Aviation

Expected Growth: 2.1%

Babcock International Group PLC's Aviation segment growth of 2.1% is driven by increasing demand for military and civil aviation services, expansion of existing contracts, and strategic acquisitions. Additionally, growth in unmanned aerial vehicle (UAV) services and digital aviation solutions also contribute to the segment's growth.

7. Detailed Products

Marine Services

Babcock International Group PLC provides a range of marine services, including ship repair, maintenance, and conversion, as well as naval architecture and engineering design.

Land Defence

The company offers a range of land defence solutions, including vehicle engineering, weapon systems, and ammunition supply.

Aviation Services

Babcock International Group PLC provides aviation services, including aircraft maintenance, repair, and overhaul, as well as pilot training and aviation consultancy.

Nuclear Services

The company offers a range of nuclear services, including nuclear decommissioning, waste management, and nuclear engineering.

Training and Education

Babcock International Group PLC provides training and education services, including defence training, apprenticeships, and vocational training.

8. Babcock International Group PLC's Porter Forces

Forces Ranking

Threat Of Substitutes

Babcock International Group PLC operates in a niche market with high barriers to entry, reducing the threat of substitutes. However, the company's reliance on government contracts and the increasing competition from private companies may pose a moderate threat.

Bargaining Power Of Customers

Babcock International Group PLC's customers are primarily government agencies, which have limited bargaining power due to the specialized nature of the company's services. This reduces the bargaining power of customers.

Bargaining Power Of Suppliers

Babcock International Group PLC relies on a diverse range of suppliers, reducing the bargaining power of individual suppliers. However, the company's dependence on a few key suppliers for critical components may pose a moderate threat.

Threat Of New Entrants

The high barriers to entry in the defense and aerospace industry, combined with the specialized nature of Babcock International Group PLC's services, reduce the threat of new entrants.

Intensity Of Rivalry

The defense and aerospace industry is highly competitive, with several established players competing for a limited number of contracts. This intense rivalry may pose a significant threat to Babcock International Group PLC's market share and profitability.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 70.31%
Debt Cost 3.95%
Equity Weight 29.69%
Equity Cost 10.31%
WACC 5.84%
Leverage 236.76%

11. Quality Control: Babcock International Group PLC passed 2 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Babcock International

A-Score: 4.4/10

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Growth: 4.7

Quality: 4.8

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Volatility: 3.7

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

11.46$

Current Price

11.46$

Potential

-0.00%

Expected Cash-Flows