Dame Ruth Cairnie
It has been another year shaped by an evolving geopolitical backdrop, with defence and security assuming a level of importance not seen since the Cold War. This is reflected in the United Kingdom’s reinforced commitment to both NATO and the Joint Expeditionary Force, and more broadly in the growing global demand for investment in national defence capabilities.
Babcock’s strategic relevance is apparent, with our mission-critical capabilities and expertise that underpin sovereign security delivering clear value to all our stakeholders. At the same time, advances in warfare technologies are reshaping the defence and energy security landscape, further highlighting the importance of resilient, sovereign capabilities in an increasingly complex and uncertain world.
Last year I mentioned how energy transition is also driving demand, in this case for our specialist capabilities across the full lifecycle of nuclear power generation, including new build, operations and decommissioning. This trend has continued with our Cavendish Nuclear business delivering 18% growth in FY26 and being selected by Great British Energy – Nuclear (GBE – N), in a joint venture with Amentum, as Owner’s Engineer for the UK’s flagship small modular reactor (SMR) project. This highly technical contract, of up to 14 years, could position Babcock for significant future activity as the SMR market evolves, both in the UK and internationally.
The context of these strong fundamentals positions Babcock well for future growth. Our multi-year contract backlog of £9.8 billion provides current visibility of this, while a strong pipeline of further significant opportunities across the Group supports our long-term growth ambitions.
Excluding the increase in estimated programme costs of our legacy Type 31 contract, FY26 has been a strong year which saw growth in revenue and underlying operating profit across the Group. This has resulted in further operating margin expansion, as we consistently make progress towards our medium-term margin target of at least 9%. While the charge on the Type 31 contract is disappointing, it does not detract from the world-class shipbuilding capability we are building which positions us strongly for significant growth opportunities.
The Board has maintained a disciplined approach to capital allocation throughout the year, underpinning sustainable growth while delivering strong and consistent returns to shareholders.
These factors have given the Board the confidence to increase the full year dividend to 7.5 pence per share, a 15% increase on FY25. Furthermore, in April 2026, we successfully completed the £200 million share buyback programme started in July 2025. Considering the Group’s balance sheet strength and continued strong underlying performance and cash generation, we announced a further £200 million share buyback programme which is expected to be completed in the current financial year.