Investment case
Our compelling investment case
Babcock is a long-duration, high-visibility business with structural tailwinds in defence, nuclear and critical infrastructure. Following a strategic refocus on core markets, we have built a track record of stronger growth, improved profitability and growing shareholder returns. With a clear strategy, a disciplined operating model and a defined capital allocation framework, we are positioned to deliver long-term value for all our stakeholders.
01
Mission-critical defence and strategic resilience
Mission-critical engineering expertise across defence and nuclear markets
Own and operate critical infrastructure supporting national capabilities
Largest UK-owned nuclear services company with a nuclear workforce of around 11,100 and specialist capabilities in a highly regulated market
Why it matters
Defence and energy resilience are national priorities; programmes are strategic, regulated and high barrier, underpinning long-term demand and incumbency.
See our new nuclear spread on page 16 and Market review on page 18 of the Annual Report.
02
Differentiated capability in complex, lifetime engineering
Lifetime engineering: decades of accumulated technical and engineering know-how from long-term through-life support and operational asset knowledge feeds into multi domain capabilities embedded across the asset life-cycle
Specialist capability in mission-critical and safety-critical infrastructure
Why it matters
Deep engineering capability supports repeat work and scope expansion. Provides: high barriers to entry, long term visibility and resilience against short-term volatility.
03
Deep customer embed and long-term relationships
Trusted partner with a unique understanding of customer requirements shaped, by long-term delivery
A know-how business: complex engineering and delivery experience that reduces execution risk for customers
Proven ability to shape solutions across requirements, delivery and sustainment
Why it matters
In regulated, high-consequence environments, pedigree wins – driving high risk of change, high visibility and durable competitive advantage
04
Partnership-led model with supply-chain integration strength
Strategic partnerships with leading global industry (eg, HII, Saab, PGZ)
A critical integrator of complex supply chains – technology and supplier agnostic
Increasingly positioned as a global government delivery partner across programmes
Why it matters
Partnerships expand addressable opportunity (e.g. AUKUS/AMR/SMR-type ecosystems), accelerate capability access and enhance participation in evolving defence and nuclear programmes.
05
Clear growth runway with improving returns
Strong track record of revenue growth and underlying margin expansion
Supportive market trends: defence modernisation, energy transition, and critical infrastructure investment
£9.8 billion backlog supporting multi-year revenue visibility
Further margin upside from mix improvement, delivery performance and efficiency (medium-term guidance: underlying operating margin ≥9%)
Why it matters
A growing pipeline plus execution discipline supports sustained growth, and margin expansion at attractive returns
See our track record of growth and returns in our KPIs on page 32
06
Cash generative with disciplined capital allocation
Low capital intensity model with strong free cash flow potential
Medium-term underlying cash conversion guidance ≥80% supported by operating discipline
Capital allocated to highest-return priorities: capability investment, selective M&A where value-accretive, and shareholder returns within clear balance sheet guardrails
Why it matters
Strong cash generation enables self-funded growth and consistent shareholder value creation, while preserving flexibility through the cycle.
See our track record of cash generation in our KPIs on page 32 and cash commentary on page 39
Our capital allocation framework creating value for shareholders
Priorities
1. Organic investment
Investment to support business operations and enhance growth potential
FY26 organic revenue growth
8%
2. Financial strength
Maintain strong balance sheet and investment-grade rating
Net debt/EBITDA (covenant basis)
0.2x
3. Ordinary dividend
Pay ordinary dividend
Full-year dividend per share
+15% 7.5p
Further Capital Options
Mergers and Acquisitions
Tracking an active pipeline
Underlying free cash flow
£262m
Pensions
Technical provisions position has decreased by around £600 million over five years
Technical provision
c.£100m
Shareholder returns
Completed £200 million share buyback in April 2026