Annual Financial Report

About this update from Babcock International Group Plc

[{"type":"text","content":"\n \n 11 July 2025 \n Babcock International Group PLC ('the Company') - Annual Report and Financial Statements \n   \n In accordance with Listing Rule 9.6.1, a copy of the Annual Report and Financial Statements for the year ended 31 March 2025 has been made available to shareholders and a copy submitted to the Financial Conduct Authority and will shortly be available for inspection at the National Storage Mechanism:   https://data.fca.org.uk/#/nsm/nationalstoragemechanism \n A copy of the Annual Report and Financial Statements is available on the Company's website,  www.babcockinternational.com  and will in due course be posted to Shareholders who have elected to receive hard copies, together with the Notice of Annual General Meeting, to be held on Thursday, 25 September 2025. \n A condensed set of the Company's audited financial statements for the year ended 31 March 2025 are set out as an appendix to this announcement along with certain information as required under DTR6.3.5 extracted from the Company's Annual Report and Accounts 2025. \n   \n   \n Jack Borrett \n Group Company Secretary and General Counsel \n Babcock International Group PLC  \n 11 July 2025 \n   \n \n   \n APPENDIX \n   \n CEO review \n Introduction \n FY25 was a pivotal year for Babcock, demonstrating the strength of the business we have built over recent years. Financial performance was particularly strong with full year results ahead of our upgraded guidance, while a complex and rapidly changing global context for defence has highlighted the increasing relevance of our specialist capabilities. \n Babcock is in a position of financial strength, with operational momentum across the business. We have a clear capital allocation framework which, in combination with our robust balance sheet, enables us to address both the growing international opportunity set to deliver sustained good growth, and to deliver improved returns for shareholders over the coming years. Our increased confidence in the potential for future value creation is underlined by today's upgrade to our medium-term guidance, in addition to a 30% increase in full year ordinary dividend and the announcement of the launch of a £200 million share buyback programme to be completed in FY26. \n We are building a track record of growth, margin expansion, cash generation and investment that will sustain attractive growth and create shareholder value over the long term. \n Strong results \n Performance in FY25 was strong, with growth in revenue and underlying operating profit 1 above our expectations at the beginning of the year, and overall cash generation better than forecast. \n Revenue grew organically 1 by 11% to £4.8 billion, with particularly strong growth in Nuclear and Marine. \n Underlying operating profit of £363 million is an increase of 17%, excluding the one-off items in FY24. On the same basis, underlying operating margin 1 of 7.5% represents a 50-basis points improvement, demonstrating significant progress towards our previous medium-term guidance of at least 8%. At the sector level, margins increased in Nuclear, Land and Aviation, while Marine declined as expected due to high margin AH140 licence sales in FY24. \n Strong underlying operating cash conversion 1 of 82% despite ongoing investment in the business (capex to depreciation ratio 1.6x), resulted in underlying free cash flow 1 of £153.4 million (FY24: £160.4 million), which included an additional pension deficit repair payment of £40 million (FY24: £35 million). We completed a long-term funding arrangement (LTFA) for the Rosyth Royal Dockyard Pension Scheme (discussed below). This is the last of three main schemes to reach an LTFA and demonstrates a significant de-risking of our pension liabilities over the last three years. \n As a result, the balance sheet has further strengthened. Net debt excluding leases 1 reduced to £101.2 million (FY24: £210.9 million), resulting in a gearing ratio (net debt to EBITDA) 1 of 0.3x (FY24: 0.8x). \n On a statutory basis, we delivered operating profit of £364 million, and generated cash from operations of £357 million. \n Given the Group's strong performance, the Board has recommended a final dividend of 4.5 pence per share, taking the full year dividend to 6.5 pence per share, an increase of 30% compared to FY24. \n Our contract backlog increased slightly to £10.4 billion (FY24: £10.3 billion), reflecting firm orders related to the five-year DSG contract extension (now called 'Reframe') and Mentor 2 contract in France, offset by revenue traded on the existing long-term contract portfolio. The Group's largest programme, Future Maritime Support Programme (FMSP), enters its final year of trading in FY26 with Heads of Terms agreed and commercial discussions under way for the follow-on multi-year programme. \n Continuing to prioritise delivery \n We continue to make good operational progress and to deliver for our customers. Through the year we achieved several important milestones that position us well for future growth. \n Following a significant upgrade to 9 Dock in our Devonport facility, the dry dock critical to the support of the Vanguard Class of nuclear deterrent submarine, HMS Victorious docked in January and was removed from the water. This is a key step in the multi-year £560 million HMS Victorious life extension programme and for the future support of the UK's deterrent fleet. We also achieved the first docking of an Astute Class nuclear attack submarine, HMS Audacious, in February, paving the way to deliver the significant support requirement for the Astute fleet over the coming decades. \n The five-ship UK Type 31 frigate programme made good progress through the year, with work starting on the third ship, HMS Formidable, using an enhanced build strategy to drive production efficiencies that will be realised through the rest of the build programme. After the year end, the first-in-class ship, HMS Venturer, marked the significant execution milestone of leaving the assembly hall and entering the water, before returning, as planned, to dry dock to continue work. Ship 2 is expected to float off in H2 FY26. Separately, we secured a £65 million Capability Insertion Period (CIP) contract for the Type 31 fleet to deliver additional military capability for the vessels beyond the initial design and build contract. This contract, awarded on a sole-source basis, recognises that our differentiated capabilities will deliver enhanced value to this key Royal Navy programme.  \n In March, we finalised negotiations for 'Reframe', a five-year extension to the British Army land equipment support contract following successful execution and completion of the original contract, DSG. Worth around £1 billion, and awarded on a sole source basis, Reframe supports delivery of the UK Government's Defence Industrial Strategy and is a model for addressing complex equipment support opportunities, focused on delivering improved readiness, regeneration and asset management services. It will maximise the availability of critical army equipment whilst delivering increased value for money and better outcomes for both partners. \n Our Cavendish Nuclear business is successfully delivering a significant ramp up in activity at Hinkley Point C, as the construction phase of the large gigawatt nuclear power plant project progresses. As a key partner in the Mechanical, Electrical and HVAC (MEH) Alliance, we have increased resources from 250 to over 600 people in the last year; we anticipate our team continuing to grow significantly in support of the overall project requirement.  \n We continue to invest in systems and processes to improve operational efficiency. We made good progress on our ERP upgrade and consolidation strategy, with successful implementation of SAP in Devonport, our largest SAP investment in our largest trading entity, and in Land, to enable and support of the DSG contract extension negotiation. Design and rollout of our next-generation digital platform (Athena) is on track, which will give us a more agile, secure and efficient foundation from which to deliver our customer solutions, increasing standardisation and process automation, and improving business control. \n Increasing global market opportunity in defence and nuclear \n 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. There is clear recognition of the need for increased investment in defence capabilities and energy security, in particular nuclear power generation. Nations are increasingly focused on securing national sovereignty and industrial resilience, prioritising equipment and infrastructure modernisation, evolving technologies and the need to work in partnership with industry. These trends are likely to drive significant defence spending and increased investment in the civil nuclear sector for the foreseeable future. \n Positioned to deliver the UK's near and long-term goals \n The dynamic in the UK has shifted significantly over the last six months. In its 2025 Spending Review, the new Government confirmed it will increase its commitment to defence spending to 2.6% of GDP by 2027 (from 2.3%) with cross-party support for an ambition for this to rise to 3% of GDP in the next Parliament. This will include £6 billion to upgrade nuclear submarine production and £4.5 billion spent on munitions. The Prime Minister also announced at the Nato Summit in June 2025, a commitment to spend 5% of GDP on national security with a target date of 2035. \n In addition, the UK Government set out its defence and security priorities in the Strategic Defence Review (SDR), announced on 2 June, which is strongly aligned with our capabilities (discussed below). At the meeting of NATO defence ministers, the UK committed to an ambitious new set of capability targets which will form the basis for a new defence investment plan. \n With UK defence representing 62% of Group revenue in FY25, this backdrop provides a significant opportunity for sustained growth. \n The SDR emphasised the contribution of defence to broader economic prosperity, the need to drive a new partnership with industry and to radically reform the current procurement system. As the second-largest supplier to the UK Ministry of Defence, contributing £4.3 billion of value to the country's GDP in FY24 (Oxford Economics report - March 2025), Babcock is a key part of delivering the UK Government's ambitions. \n The SDR sets out five key principles: \n •  NATO first : Babcock supports several key NATO forces as well as working directly with NATO \n •  Move to warfighting readiness : Babcock supports all three UK Armed Forces, providing submarine design, systems and support, warship build, integration and support, advanced manufacturing, mission systems autonomy, mission systems and digital, land defence build and support, and technical training. \n •  Engine for growth : Babcock is a critical UK-based supplier to the MOD, driving jobs and prosperity across the country, including a UK-first supply chain approach, and creating further growth through exports from the UK \n •  UK innovation driven by lessons from Ukraine : Babcock plays a significant role in Ukraine, supporting the UK MOD-gifted equipment and training \n •  Whole of society approach : In addition to its financial contribution to UK GDP, Babcock is a leading member of the National Nuclear Skills Taskforce, is investing in skills and training, and is the UK's largest employer of veterans. \n The priorities outlined in the SDR align strongly with our capabilities and expertise, including our naval and civil nuclear capability, advanced manufacturing and mission systems expertise, and exports of warships, equipment, vehicles, autonomy and specialist training. \n In particular, the UK Government has signalled it is focused on nuclear, both defence and civil. Nuclear is our biggest sector in revenue and profit terms and Babcock is the largest civil and defence nuclear services provider in the UK. We are the only company with the capability and critical assets to support the UK's nuclear-powered submarine fleet. The Government's commitment to the nuclear deterrent, with the new fleet of Dreadnought Class submarines, and to increase in the nuclear attack submarine fleet from 7 to 12 through the AUKUS programme, will drive activity in our submarine support business for decades. \n We are also involved in the intergovernmental AUKUS programme, both in the UK and Australia. We recently announced the first Australian AUKUS contract for H&B Defence, our joint venture with HII in Australia, to enhance Australia's supply chain capabilities in preparation for delivery of the first three nuclear-powered submarines under the AUKUS trilateral partnership. The SDR also outlined a £15 billion investment in a new sovereign nuclear warhead, supporting our role with the Atomic Weapons Establishment (AWE).  \n With the Government having set out its priorities in the SDR, it will take time for the practical aspects of implementation to be determined and fiscal constraints will likely remain a key determining factor. We expect further clarity with publication of the Defence Industrial Strategy expected Summer 2025. Nevertheless, the importance of UK defence has undoubtedly increased significantly, and we are encouraged by the Government's strong intention to increase industrial collaboration. We are confident that significant opportunities will emerge, including investment, driving growth in both our UK and international businesses over the medium and long-term. \n Positioned for UK civil nuclear renaissance \n In civil nuclear, commitments by the UK Government earlier this month to a £14 billion investment in the Sizewell-C large gigawatt nuclear plant project and to develop the first three small modular reactor (SMR) power stations, represent significant opportunities for our Cavendish Nuclear business. Cavendish is also involved in the design of assets required for nuclear fuel manufacture, conversion and enrichment in support of developing a sovereign nuclear fuel capability. \n Disciplined capital allocation \n Our clear and consistent capital allocation framework is designed to be flexible and thereby allow us to maximise value creation. In FY25, supported by our strong balance sheet, we delivered on our capital allocation priorities with further investment in the business (capex to depreciation 1.6x (FY24: 1.7x)), accelerated pension deficit payments by \n£40 million as part of the strategy to materially de-risk the Group's pension liabilities and proposed a 30% increase in full year dividend. \n With net cash generation of £105.3 million and our gearing ratio (net debt to EBITDA) down to 0.3x, we have the financial capacity to invest in the growing opportunity set and also return surplus capital to shareholders. Therefore today, we have announced our intention to launch a £200 million share buyback programme, to be executed over FY26. This demonstrates responsible capital allocation whilst retaining balance sheet strength for investment opportunities. \n Investment for growth : In addition to ongoing capex, we see growing opportunity to invest for growth. It is too early to identify specific opportunities as governments determine their priorities and overall intended growth in spending. However, our investment considerations include, in Rosyth, advanced manufacturing capability and expansion of production capacity to address opportunities in domestic and international marine and nuclear markets, as well as SMR large scale modular manufacturing. \n In addition, we will be investing in new growth contracts such as Mentor 2, which has an initial capital phase of aircraft acquisition. \n To further enhance our ability to grow, both in the UK and internationally, and to attract the talent required to support that growth, we continue to focus on embedding our Purpose-led culture across the Group. To support this, in June 2025 we introduced a brand refresh, which will enable us to more clearly articulate our value to all of our stakeholders. \n Our people are the foundation of Babcock's success and are critical to delivering sustained growth. We remain committed to investing in their development and to creating opportunities to support their long-term career goals. Our people strategy includes developing highly skilled jobs, training, and investment in early careers. In the UK, this fully aligns Babcock with the Government's aim to deliver the 'Defence Dividend'; namely for increased investment in the industry to generate growth and prosperity for the nation as a whole.   \n We continue to break down barriers to employment. In FY25 we delivered our third Skills-based Work Academy Programme at our Vehicle Engineering site in Walsall, building on successful initiatives at our Devonport site. Developed in partnership with local councils and the Department for Work and Pensions, this provides unemployed individuals with qualifications and skills. Earlier in the year, we welcomed our fifth intake of Production Support Operatives (PSOs) at our Rosyth facility. \n As a key industrial partner on the UK's Nuclear Skills Taskforce, we are playing a leading role in securing the critical skills needed across the defence and civil nuclear sectors. In September, the UK Minister for Defence Procurement, Maria Eagle, officially opened the Babcock Engineering & Nuclear Skills building at City College Plymouth. This facility will support the development of complex submarine maintenance capabilities and marks the next phase of our Babcock Skills Academy - focused on building a pipeline of talent and upskilling our workforce to meet future nuclear programme demands. After the year end, we opened a new apprenticeship welding school in Bristol. \n FY25 saw us welcome our largest-ever early careers intake in the UK, hiring apprentices and graduates across a wide range of high-demand disciplines, including space systems engineering. We expect to increase this programme in FY26. \n As part of our commitment to retaining and rewarding our people, we are launching a free share award programme for all employees globally. This initiative allows eligible employees to share directly in Babcock's success, recognising their contributions and strengthening their connection to the Company's future. \n Investing in partnerships : We continue to develop strategic partnerships with leading global players where we share investment and risk to influence, disrupt and shape a market. \n In the Land domain, we are building our equipment production business through an increasing number of partnerships. During the year we received a contract for the manufacture of 53 Jackal 'Extenda' variants of the High Mobility Transporter for the British Army, in partnership with Supacat. The initial order for 70 Jackal 3 vehicles began production within the Devonport Freeport earlier this year. \n We have also partnered with ST Engineering to offer the UK an integrated, end-to-end solution to enhance British mortar capability, as part of the MOD's 120mm mortar procurement. In line with the priorities set out in the UK SDR, we will deliver a sovereign solution that boosts British capability whilst driving economic and social benefit. \n In January 2025, Babcock signed a memorandum of understanding with Finnish company Patria to offer the Patria 6x6 Armoured Personnel Carrier to meet the operational requirements of the British Army, in line with the UK's Defence Land Industrial Strategy. Under the agreement, Patria will lead on design and development of the system, while Babcock will lead on the manufacture, assembly, integration and testing. \n We are exploring export potential through all of these partnerships. \n In the marine and naval nuclear sectors, Babcock and HII launched an Australian joint venture, H&B Defence, to accelerate the development of critical sovereign capability for the AUKUS conventionally armed, nuclear-powered submarine programme. In May 2025, the joint venture secured its first contract to deliver a two-year Australian Submarine Supplier Qualification Pilot Program which will accelerate the identification of Australian suppliers with the requisite skills and products to enable them to access the US Virginia Class submarine supply chain.  \n We continue to work in partnership with Saab, currently supporting design deliverables on the Swedish Navy's next generation Luleå Class surface combatant programme. We are working together to identify export markets for the Luleå Class. \n In FY25, we built on our strategic partnerships in the Republic of Korea with two new agreements to support the growth of global opportunities: a Strategic Cooperation Agreement with Hanwha Ocean, to jointly address solutions for major global naval procurement projects, and a Memorandum of Understanding with Korea Aerospace Industries to jointly explore military flying training, air base support and engineering opportunities in Central, Eastern and Southern Europe. \n After the year end, we signed an MOU with Safran, the world's second largest aircraft equipment manufacturer, to jointly pursue opportunities across multi-domain mission systems, aircraft engines, space systems, tactical and strategic communications and uncrewed airborne vehicles. \n Inorganic investment : Our bolt-on M&A strategy is an important component of our capital allocation framework and supporting the Group's future growth potential and expansion of capability. We have a disciplined and structured approach to assessing opportunities, focusing on their fit with our core capabilities and our confidence that they will create shareholder value. \n Whilst we have been active in reviewing opportunities through FY25, including two low triple-digit million targets, we ultimately decided against proceeding in each case, having determined through detailed due diligence that the balance of risk and value potential did not reach our value creation thresholds. We will continue to assess potential acquisition opportunities which meet our criteria. \n \n \n   \n Upgraded medium term guidance \n Two years ago, having reset our financial baseline, we provided medium term guidance of average revenue growth in the mid-single digits, underlying margin of at least 8% and operating cash conversion of at least 80%. This reflected our confidence in the growth, profitability and cash generation potential of the business. \n To date, we have met or exceeded guidance for both revenue growth and cash conversion and delivered a trajectory of margin improvement each year towards the earlier end of the guidance period. We now expect to meet our target underlying operating margin in FY26, at least one year earlier than we anticipated. \n We are now refreshing our guidance and over the next medium-term period we expect to deliver: \n •  Average revenue growth of mid-single digit \n •  Underlying operating margin of at least 9% \n •  Average underlying operating cash conversion of at least 80% \n Our new medium-term guidance is underpinned by the current outlook for our businesses and nearer-term pipeline. \n The strengthening stance on defence and security by governments, and the clear recognition of the need for increased investment in defence capabilities and energy security, provides a positive backdrop for many of our addressable markets. Babcock is well-positioned for future opportunities that may arise in the longer-term. \n   \n David Lockwood \n Chief Executive \n   \n \n   \n Other information \n Dividend \n A dividend of 4.5 pence per ordinary share (FY24: 3.3 pence) is payable on Tuesday 30 September 2025 to shareholders whose names appear on the register at the close of business on Friday 22 August 2025. If approved by the Shareholders at the AGM on 25 September 2025 this will give a total dividend for the year of 6.5 pence (FY24: \n5.0 pence). Shareholders may participate in the dividend re-investment plan and elections must be made by Tuesday 9 September 2025 . Details of the dividend re-investment plan can be found, and shareholders can make elections, at www.babcock-shares.com . \n   \n Notes to CEO Stateme nt \n \n \n   \n 1.  A defined Alternative Performance Measure (APM) as set out on page 3 and in the Financial Glossary on page 30 . \n Financial review \n The Group provides alternative performance measures (APMs), including underlying operating profit, underlying margin, underlying earnings per share, underlying operating cash flow, underlying free cash flow, net debt and net debt excluding leases to enable users to have a more consistent view of the performance and earnings trends of the Group. These measures are considered to provide a consistent measure of business performance from year to year. They are used by management to assess operating performance and as a basis for forecasting and decision-making, as well as the planning and allocation of capital resources. They are also understood to be used by investors in analysing business performance. \n The Group's APMs are not defined by IFRS and are therefore considered to be non-GAAP measures. The measures may not be comparable to similar measures used by other companies, and they are not intended to be a substitute for, or superior to, measures defined under IFRS. The Group's APMs are consistent with those for the year ended 31 March 2024. The Group has defined and outlined the purpose of its APMs in the Financial Glossary on page 30. \n The reconciliation from the IFRS statutory income statement to the underlying income statement is shown below. \n Income statement \n \n \n \n \n   \n \n \n 31 March 2025 \n \n \n 31 March 2024 \n \n \n \n \n Underlying \n£m \n \n \n Specific adjusting items \n£m \n \n \n Statutory \n£m \n \n \n Underlying \n£m \n \n \n Specific adjusting items \n£m \n \n \n Statutory \n£m \n \n \n \n \n Revenue \n \n \n 4,831.3 \n \n \n - \n \n \n 4,831.3 \n \n \n 4,390.1 \n \n \n - \n \n \n 4,390.1 \n \n \n \n \n Operating profit \n \n \n 362.9 \n \n \n 1.0 \n \n \n 363.9 \n \n \n 237.8 \n \n \n 3.8 \n \n \n 241.6 \n \n \n \n \n Operating margin \n \n \n 7.5% \n \n \n \n \n \n 7.5% \n \n \n 5.4% \n \n \n \n \n \n 5.5% \n \n \n \n \n Share of results of joint ventures and associates \n \n \n 8.4 \n \n \n (11.1) \n \n \n (2.7) \n \n \n 9.2 \n \n \n - \n \n \n 9.2 \n \n \n \n \n Net finance costs \n \n \n (31.9) \n \n \n (0.2) \n \n \n (32.1) \n \n \n (35.9) \n \n \n 1.8 \n \n \n (34.1) \n \n \n \n \n Profit before tax \n \n \n 339.4 \n \n \n (10.3) \n \n \n 329.1 \n \n \n 211.1 \n \n \n 5.6 \n \n \n 216.7 \n \n \n \n \n Income tax (expense)/benefit \n \n \n (84.1) \n \n \n 3.9 \n \n \n (80.2) \n \n \n (53.5) \n \n \n 5.0 \n \n \n (48.5) \n \n \n \n \n Profit/(loss) after tax \n \n \n 255.3 \n \n \n (6.4) \n \n \n 248.9 \n \n \n 157.6 \n \n \n 10.6 \n \n \n 168.2 \n \n \n \n \n Non-controlling interest \n \n \n (1.8) \n \n \n - \n \n \n (1.8) \n \n \n (2.5) \n \n \n - \n \n \n (2.5) \n \n \n \n \n Profit/(loss) attributable to the owners of the parent \n \n \n 253.5 \n \n \n (6.4) \n \n \n 247.1 \n \n \n 155.1 \n \n \n 10.6 \n \n \n 165.7 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Basic EPS \n \n \n 50.3p \n \n \n \n \n \n 49.1p \n \n \n 30.8p \n \n \n   \n \n \n 32.9p \n \n \n \n \n Diluted EPS \n \n \n 49.3p \n \n \n \n \n \n 48.0p \n \n \n 30.1p \n \n \n   \n \n \n 32.2p \n \n \n \n \n A full statutory income statement can be found on page 38. \n As described on page 3, statutory operating profit includes specific adjusting items (SAIs) that are not included in underlying operating profit, which is a key APM for the Group. A reconciliation of statutory operating profit to underlying operating profit is shown in the table below and in note 2 of the financial statements. \n Revenue of £ 4,831.3 million was 11% higher than FY24 on an organic basis, driven by strong growth in Nuclear and Marine. \n See segmental tables on page 18: \n •  Marine revenue increased 12% (at constant FX) to £1,576.4 million. Growth was led by a full year of trading on the Skynet programme and higher volumes in LGE, as well as increased naval support activity on our New Zealand and Canada programmes and ramp up of new contracts in Ukraine and Sweden. This was partly offset by the FY24 license sales in Poland not repeated in FY25 and lower support volumes in Australia. \n •  Nuclear revenue increased 19% (at constant FX) to £1,816.0 million led by strong growth in our Cavendish Nuclear business (+28%) driven by the expansion of new civil nuclear projects. In addition, submarine support activity grew strongly under the Future Maritime Support Programme (FMSP) and ramp up of the HMS Victorious Deep Maintenance Programme, in addition to further growth in Major Infrastructure Programme (MIP) revenue to \n£504 million (FY24: £459 million). \n •  Land revenue increased 2% (at constant FX) to £1,116.6 million comprising growth from a broad range of defence activities in both the UK and international markets, including DSG, Jackal production and Ukraine support, and an increase in our South Africa business. This was substantially offset by a reduction in our Rail business. \n •  Aviation revenue declined 4% as expected (at constant FX) to £322.3 million primarily due to completion of the aircraft delivery phase in the H160 French defence programme. \n Underlying operating profit was up 53% to £363 million, in line with our post-close trading update. The prior year included two non-recurring items, a £90 million contract loss and a one-off £17 million profit on disposal of property. Excluding these, underlying operating profit increased 17%, driven by strong performance in Nuclear and Land. \n Underlying operating margin increased to 7.5% (FY24: 5.4%). FY24 includes (2.0)% from the Type 31 loss and 0.4% from the profit on property disposal. Excluding these, underlying operating margin improved 50 basis points reflecting good performance in Nuclear, Land and Aviation, which more than offset the reduction in Marine margin due to the AH140 frigate licence income in FY24. \n See segmental tables on page 18: \n •  Marine underlying operating profit increased to £96.5 million (FY24: £13.1 million), primarily reflecting non-repeat of the £90.0 million contract loss in FY24 as well as revenue growth outlined above, offset by the impact of licence contribution in FY24. As a result, underlying operating margin was 6.1% (FY24: 0.9%; FY24 excluding contract loss 6.9%). \n •  Nuclear underlying operating profit increased to £160.3 million (FY24: £109.2 million), driven by revenue growth in civil nuclear, submarine support and infrastructure, and project delivery improvements as well as some contract changes . As a result, underlying operating margin increased to 8.8% (FY24: 7.2%). \n •  Land underlying operating profit decreased 10% to £86.2 million (FY24: £96.3 million) as FY24 included a one-off £17.0 million profit on disposal of property. Excluding this, underlying operating profit increased 9% reflecting revenue growth outlined above net of the decrease in Rail, improvement in training margins and the final year of trading of the DSG contract. As a result, underlying operating margin was 7.7% (FY24: 8.8%; FY24 excluding property profit 7.2%). \n •  Aviation underlying operating profit increased 4% to £19.9 million (FY24: £19.2 million), despite lower revenue, reflecting improved project profitability, programme timing and contract renegotiations, including price. As a result, underlying operating margin increased to 6.2% . (FY24: 5.6%). \n Further analysis of financial performance is included in each sector's operational review starting on page 19. \n Statutory operating profit increased to £363.9 million (FY24: £241.6 million). FY24 was impacted by the two non-recurring items, the £90.0 million contract provision and the £17.0 million profit on disposal of property. Excluding these, the drivers of profit growth are the same as outlined above. The specific adjusting items between statutory and underlying operating profit are set out in the table below. \n Statutory operating margin increased to 7.5% (FY24: 5.5%), reflecting the same drivers as for underlying operating margin. \n Reconciliation of statutory to underlying operating profit \n \n \n \n \n   \n \n \n 31 March 2025 \n£m \n \n \n 31 March 2024 \n£m \n \n \n \n \n Statutory operating profit \n \n \n 363.9 \n \n \n 241.6 \n \n \n \n \n Amortisation of acquired intangibles \n \n \n 8.2 \n \n \n 10.8 \n \n \n \n \n Business acquisition, merger and divestment related items \n \n \n (1.5) \n \n \n (8.2) \n \n \n \n \n Curtailment gain on pension scheme closure \n \n \n (1.2) \n \n \n - \n \n \n \n \n Fair value movement on derivatives \n \n \n (6.5) \n \n \n (6.4) \n \n \n \n \n Specific adjusting items impacting operating profit \n \n \n (1.0) \n \n \n (3.8) \n \n \n \n \n Underlying operating profit \n \n \n 362.9 \n \n \n 237.8 \n \n \n \n \n Share of joint ventures and associates on a statutory basis was a £2.7 million loss including an £11.1m charge following a review by our Ascent flight training joint venture to align its accounting to IFRS principles. This resulted in a c.1% lower overall measure of contract completion than the revenue estimate previously applied under IFRS. This adjustment has no impact on dividends received within our underlying free cash flow and has been treated as a specific adjusting item to profit before tax. The underlying share of results from joint ventures and associates was £8.4 million (FY24: \n£9.2 million). \n Net finance costs \n •  Underlying net finance costs decreased to £31.9 million (FY24: £35.9 million), reflecting reduced finance costs following termination of the £300 million RCF in October 2023 and higher interest income on surplus cash balances. This was partly offset by higher lease interest charges on aircraft in Australia and in Canada to support new Aviation programmes and a higher IAS 19 retirement benefit interest charge of £4.5 million (FY24: charge of £0.8 million). \n • Statutory net finance costs decreased to £32.1 million (FY24: £34.1 million), reflecting the £4.0 million decrease in underlying net finance costs and a £2.0 million difference in fair value movement on derivative and related items. \n Income tax expense \n •  Underlying income tax expense increased to £84.1 million (FY24: £53.5 million) reflecting higher underlying operating profits and geographical mix. This represents an effective underlying tax rate of 25.4% (FY24: 26.5%), calculated using underlying profit before tax excluding the share of income from joint ventures and associates (which is a post-tax number). The Group's effective underlying tax rate is expected to remain broadly stable over the medium term depending on country profit mix. \n •  Statutory income tax expense increased to £80.2 million (FY24: £48.5 million), lower than the underlying income tax expense due to the tax impact of the specific adjusting items outlined above and in note 2 of the financial statements. \n Basic earnings per share \n •  Underlying basic earnings per share of 50.3 pence (FY24: 30.8 pence) increased due to higher underlying operating profit for the year and lower underlying net finance costs. In FY24, excluding the impacts on earnings per share of the contract loss and the profit on disposal of property, underlying earnings per share was 40.8p. The increase on this basis was 23%. \n •  Basic earnings per share on a statutory basis increased to 49.1 pence (FY24: 32.9 pence) reflecting the improvement in underlying earnings per share and the post tax impact of the specific adjusting items outlined above. \n   \n Reconciliation of statutory profit and basic EPS to underlying profit and basic EPS \n \n \n \n \n   \n \n \n 31 March 2025 \n \n \n 31 March 2024 \n \n \n \n \n   \n \n \n £m \n \n \n Basic EPS \n \n \n £m \n \n \n Basic EPS \n \n \n \n \n Statutory profit after tax for the year \n \n \n 248.9 \n \n \n 49.1p \n \n \n 168.2 \n \n \n 32.9p \n \n \n \n \n Specific adjusting items, net of tax \n \n \n 6.4 \n \n \n 1.2p \n \n \n (10.6) \n \n \n (2.1)p \n \n \n \n \n Underlying profit after tax for the year \n \n \n 255.3 \n \n \n 50.3p \n \n \n 157.6 \n \n \n 30.8p \n \n \n \n \n   \n Dividend per share \n \n \n \n \n   \n \n \n 31 March 2025 \n \n \n 31 March 2024 \n \n \n \n \n   \n \n \n pence \n \n \n pence \n \n \n \n \n Interim \n \n \n 2.0 \n \n \n 1.7 \n \n \n \n \n Final \n \n \n 4.5 \n \n \n 3.3 \n \n \n \n \n Total \n \n \n 6.5 \n \n \n 5.0 \n \n \n \n \n The Board has recommended a final dividend of 4.5 pence per ordinary share for approval by shareholders at the 2025 Annual General Meeting, which will take the total dividend for FY25 to 6.5 pence (FY24: 5.0 pence), a 30% increase. \n Exchange rates \n The translation impact of foreign currency movements resulted in a decrease in revenue of £ 22.4 million and a decrease in underlying operating profit of £ 1.9 million. The main currencies that have impacted our results are the Australian Dollar, Canadian Dollar, Euro, New Zealand Dollar and South African Rand. The currencies with the greatest potential to impact results are the South African Rand, the Australian Dollar, the Euro and the Canadian Dollar: \n •  A 10% movement in the South African Rand against Sterling would affect revenue by around £34 million and underlying operating profit by around £3 million per annum \n •  A 10% movement in the Australian Dollar against Sterling would affect revenue by around £25 million and underlying operating profit by around £1 million per annum \n •  A 10% movement in the Euro against Sterling would affect revenue by around £11 million and underlying operating profit by around £1 million per annum \n •  A 10% movement in the Canadian Dollar against Sterling would affect revenue by around £8 million and underlying operating profit by around £1 million per annum \n \n \n Cash flow and net debt \n Underlying cash flow and net debt \n Underlying cash flows are used by the Group to measure operating performance as they provide a more consistent measure of business performance from year to year. \n \n \n \n \n   \n \n \n 31 March 2025 \n \n \n 31 March 2024 \n \n \n \n \n   \n \n \n £m \n \n \n £m \n \n \n \n \n Statutory operating profit \n \n \n 363.9 \n \n \n 241.6 \n \n \n \n \n Add back: specific adjusting items (see table on page 10) \n \n \n (1.0) \n \n \n (3.8) \n \n \n \n \n Underlying operating profit \n \n \n 362.9 \n \n \n 237.8 \n \n \n \n \n Right of use asset depreciation & impairment \n \n \n 33.0 \n \n \n 39.8 \n \n \n \n \n Other depreciation & amortisation \n \n \n 78.3 \n \n \n 67.3 \n \n \n \n \n Non-cash items \n \n \n 11.0 \n \n \n (8.7) \n \n \n \n \n Working capital movements \n \n \n 2.1 \n \n \n 127.5 \n \n \n \n \n Provisions \n \n \n (23.5) \n \n \n 20.4 \n \n \n \n \n Net capital expenditure \n \n \n (122.2) \n \n \n (111.8) \n \n \n \n \n Lease principal payments \n \n \n (45.4) \n \n \n (49.6) \n \n \n \n \n Underlying operating cash flow \n \n \n 296.2 \n \n \n 322.7 \n \n \n \n \n Underlying operating cash conversion (%) \n \n \n 82% \n \n \n 136% \n \n \n \n \n Pension contributions in excess of income statement \n \n \n (89.1) \n \n \n (107.6) \n \n \n \n \n Interest paid (net) \n \n \n (26.8) \n \n \n (32.2) \n \n \n \n \n Tax paid \n \n \n (39.1) \n \n \n (27.4) \n \n \n \n \n Dividends from joint ventures and associates \n \n \n 12.2 \n \n \n 7.1 \n \n \n \n \n Cash flows related to specific adjusting items \n \n \n - \n \n \n (2.2) \n \n \n \n \n Underlying free cash flow \n \n \n 153.4 \n \n \n 160.4 \n \n \n \n \n Net acquisitions and disposals of subsidiaries \n \n \n (1.1) \n \n \n (1.3) \n \n \n \n \n Dividends paid (including non-controlling interests) \n \n \n (28.0) \n \n \n (10.3) \n \n \n \n \n Purchase of own shares \n \n \n (18.8) \n \n \n (12.5) \n \n \n \n \n Lease principal payments \n \n \n 45.4 \n \n \n 49.6 \n \n \n \n \n Net new lease arrangements \n \n \n (87.2) \n \n \n (54.8) \n \n \n \n \n Leases disposed of/(acquired) with subsidiaries \n \n \n 1.1 \n \n \n - \n \n \n \n \n Other non-cash debt movements \n \n \n (2.1) \n \n \n (3.2) \n \n \n \n \n Fair value movement in debt and related derivatives \n \n \n 0.5 \n \n \n 0.5 \n \n \n \n \n Exchange movements \n \n \n (1.1) \n \n \n 0.6 \n \n \n \n \n Movement in net debt \n \n \n 62.1 \n \n \n 129.0 \n \n \n \n \n Opening net debt \n \n \n (435.4) \n \n \n (564.4) \n \n \n \n \n Closing net debt \n \n \n (373.3) \n \n \n (435.4) \n \n \n \n \n Add back: leases \n \n \n 272.1 \n \n \n 224.5 \n \n \n \n \n Closing net debt excluding leases \n \n \n (101.2) \n \n \n (210.9) \n \n \n \n \n A full statutory cash flow statement can be found on page 42 and a reconciliation to net debt on page 14. \n \n \n   \n Underlying operating cash flow decreased to £296.2 million (FY24: £322.7 million), which was slightly higher than expected due to working capital performance, predominantly the timing of contract milestones and customer advanced payments at the year end. Gross capex of £128.3 million (FY24 £142.4 million) remains well ahead of depreciation as we continue to invest across the portfolio, in our operations and systems, including the roll-out of SAP. Capital expenditure is reconciled in the financial glossary on page 30). Overall, the conversion ratio of operating cash to underlying operating profit was 82% (FY24: 136%). \n Underlying free cash flow of £153.4 million (FY24: £160.4 million) includes an additional £40 million (FY24: £35 million) pension deficit repair contribution as part of finalising long-term funding arrangements for two of our three main schemes. As a result, we expect annual deficit repair payments to reduce from around £40 million per annum to around £20 million per annum for the next six years. \n Acquisitions and disposals \n The £1.1 million outflow arose from deconsolidation of cash relating to disposals in Oman. The outflow of £1.3 million in FY24 represents the final settlement in relation to the disposal of the European AES business in FY23. \n New lease arrangements \n In addition to net capital expenditure, and not included in underlying free cash flow, £87.2 million (FY24: £54.8 million) of net additional lease liabilities were entered into in the year. The increase includes aircraft leases to support new contracts in Australia and Canada. These are new lease obligations and are therefore included in net debt, but do not involve any cash outflows at inception. \n   \n Reconciliation of underlying operating cash flow to statutory net cash flows from operating activities \n \n \n \n \n   \n \n \n 31 March 2025 \n£m \n \n \n 31 March 2024 \n£m \n \n \n \n \n Underlying operating cash flow \n \n \n 296.2 \n \n \n 322.7 \n \n \n \n \n Add: net capital expenditure \n \n \n 122.2 \n \n \n 111.8 \n \n \n \n \n Add: lease principal payments \n \n \n 45.4 \n \n \n 49.6 \n \n \n \n \n Less: pension contributions in excess of income statement \n \n \n (89.1) \n \n \n (107.6) \n \n \n \n \n Less: Non-operating cash items (excluded from underlying cash flow) \n \n \n (17.3) \n \n \n (2.2) \n \n \n \n \n Cash generated from operations \n \n \n 357.4 \n \n \n 374.3 \n \n \n \n \n Tax paid \n \n \n (21.8) \n \n \n (27.4) \n \n \n \n \n Net interest paid \n \n \n (26.8) \n \n \n (32.2) \n \n \n \n \n Net cash flows from operating activities \n \n \n 308.8 \n \n \n 314.7 \n \n \n \n \n   \n Statutory cash flow summary \n \n \n \n \n   \n \n \n 31 March 2025 \n£m \n \n \n 31 March 2024 \n£m \n \n \n \n \n Net cash flow from operating activities \n \n \n 308.8 \n \n \n 314.7 \n \n \n \n \n Net cash flow from investing activities \n \n \n (110.8) \n \n \n (100.6) \n \n \n \n \n Net cash flow from financing activities \n \n \n (92.7) \n \n \n (85.5) \n \n \n \n \n Net increase in cash, cash equivalents and bank overdrafts \n \n \n 105.3 \n \n \n 128.6 \n \n \n \n \n Net cash flow from operating activities was £308.8 million (FY24: £314.7). This reflects higher operating profit and lower pension deficit payments, offset by the working capital inflow in FY24. \n Net cash flow from investing activities was an outflow of £110.8 million (FY24: outflow of £100.6 million), reflecting higher net capex. \n Net cash flow from financing activities was an outflow of £92.7 million (FY24: outflow of £85.5 million), including \n£45.4 million lease payments (FY24: £49.6 million), £28.0 million dividends paid (FY24: £10.3 million) and £18.8 million purchase of own shares (FY24: £12.5 million). \n \n \n   \n Movement in net debt - reconciliation of statutory cash flows to net debt \n \n \n \n \n   \n \n \n 31 March 2025 \n£m \n \n \n 31 March 2024 \n£m \n \n \n \n \n Net increase in cash, cash equivalents and bank overdrafts \n \n \n 105.3 \n \n \n 128.6 \n \n \n \n \n Cash flow from the decrease in debt \n \n \n 29.9 \n \n \n 25.3 \n \n \n \n \n Change in net funds resulting from cash flows \n \n \n 135.2 \n \n \n 153.9 \n \n \n \n \n Additional lease obligations \n \n \n (96.2) \n \n \n (55.2) \n \n \n \n \n New lease receivables granted \n \n \n 24.7 \n \n \n 32.4 \n \n \n \n \n Debt held by disposed subsidiaries \n \n \n 1.1 \n \n \n - \n \n \n \n \n Other non-cash movements and changes in fair value \n \n \n (1.6) \n \n \n (2.7) \n \n \n \n \n Foreign currency translation differences \n \n \n (1.1) \n \n \n 0.6 \n \n \n \n \n Movement in net debt in the year \n \n \n 62.1 \n \n \n 129.0 \n \n \n \n \n Opening net debt \n \n \n (435.4) \n \n \n (564.4) \n \n \n \n \n Closing net debt \n \n \n (373.3) \n \n \n (435.4) \n \n \n \n \n   \n Net debt \n Net debt at 31 March 2025 was £373.3 million, a reduction of £62.1 million driven by underlying free cash flow, offset by dividend payments of £28.0 million, £18.8 million to purchase own shares and net new leases (£87.2 million) in excess of lease principal payments (£45.4 million). Net debt excluding leases was £101.2 million, representing a reduction of £109.6 million. \n   \n Cash components of net debt \n \n \n \n \n   \n \n \n 31 March 2025 \n£m \n \n \n 31 March 2024 \n£m \n \n \n \n \n Cash and cash equivalents \n \n \n 646.5 \n \n \n 552.6 \n \n \n \n \n Current liabilities - bank debt and other loans \n \n \n (0.5) \n \n \n (2.4) \n \n \n \n \n Non-current liabilities - bank debt and other loans \n \n \n (750.7) \n \n \n (747.1) \n \n \n \n \n Other debt instruments (includes loans to JVs) \n \n \n (38.6) \n \n \n (43.5) \n \n \n \n \n Net finance leases \n \n \n 42.1 \n \n \n 29.5 \n \n \n \n \n Closing net debt excluding leases \n \n \n (101.2) \n \n \n (210.9) \n \n \n \n \n Include leases \n \n \n (272.1) \n \n \n (224.5) \n \n \n \n \n Closing net debt \n \n \n (373.3) \n \n \n (435.4) \n \n \n \n \n   \n \n \n   \n Summarised balance sheet \n \n \n \n \n   \n \n \n 31 March 2025 \n£m \n \n \n 31 March 2024 \n£m \n \n \n \n \n Intangible assets \n \n \n 920.6 \n \n \n 928.9 \n \n \n \n \n Property, plant and equipment and right of use assets \n \n \n 787.7 \n \n \n 692.7 \n \n \n \n \n Investment in joint ventures and associates \n \n \n 43.5 \n \n \n 59.7 \n \n \n \n \n Working capital \n \n \n (694.2) \n \n \n (691.4) \n \n \n \n \n Provisions \n \n \n (138.3) \n \n \n (158.2) \n \n \n \n \n Net retirement benefit deficits \n \n \n (8.4) \n \n \n (109.7) \n \n \n \n \n Net tax assets \n \n \n 76.1 \n \n \n 119.9 \n \n \n \n \n Net other financial assets and liabilities \n \n \n 8.1 \n \n \n (0.4) \n \n \n \n \n Leases \n \n \n (272.1) \n \n \n (224.5) \n \n \n \n \n Net debt excluding leases \n \n \n (101.2) \n \n \n (210.9) \n \n \n \n \n Net assets \n \n \n 621.8 \n \n \n 406.1 \n \n \n \n \n Property, plant and equipment (PP&E) and right of use assets were £787.7 million, an increase of £95.0 million. PP&E increased by £41.8 million to £558.9 million reflecting gross capital expenditure of £105.3 million less depreciation of £59.0 million and currency adjustments. Right of use assets increased by £53.2 million to £228.8 million including new leases less disposals of £94.5 million less depreciation and impairment of £33.0 million and currency adjustments. \n Working capital was £(694.2) million, broadly unchanged over the year. Working capital performance was slightly better than expected due to the timing of contract milestones and lower reversals of customer advance payments. \n Funding and liquidity \n As of 31 March 2025, the Group had access to a total of £1.6 billion of borrowings and facilities. These comprised: \n •  £775 million RCF, with £45 million maturing on 28 August 2025 and £730 million on 28 August 2026 \n •  £300 million bond maturing on 5 October 2026 \n •  €550 million bond, hedged at £493 million, maturing on 13 September 2027 \n •  An overdraft facility of £50 million \n At 31 March 2025, the Group's net cash (cash and cash equivalents less overdrafts) balance was £ 646.5 million. This, combined with the undrawn amounts under our committed RCFs and overdraft facilities, gave us liquidity of around £1.4 billion. \n Net debt to EBITDA (covenant basis) \n While there are several facets to balance sheet strength, a primary measurement relevant to Babcock is the net debt/EBITDA gearing ratio within our debt covenant of a maximum 3.5x. This measure is used in the covenant in our RCF and includes several adjustments from reported net debt and EBITDA. The net debt/EBITDA gearing ratio (covenant basis) at 31 March 2025 reduced to 0.3x (FY24: 0.8x) due to strong underlying free cash flow and higher underlying operating profit. \n \n \n \n \n   \n \n \n 31 March 2025 \n£m \n \n \n 31 March 2024 \n£m \n \n \n \n \n Underlying operating profit \n \n \n 362.9 \n \n \n 237.8 \n \n \n \n \n Depreciation and amortisation \n \n \n 78.3 \n \n \n 67.3 \n \n \n \n \n Covenant adjustments 1 \n \n \n (2.6) \n \n \n (6.3) \n \n \n \n \n EBITDA \n \n \n 438.6 \n \n \n 298.8 \n \n \n \n \n JV and associate dividends \n \n \n 12.2 \n \n \n 7.1 \n \n \n \n \n EBITDA + JV and associate dividends (covenant basis) \n \n \n 450.8 \n \n \n 305.9 \n \n \n \n \n Net debt excluding lease liabilities \n \n \n (101.2) \n \n \n (210.9) \n \n \n \n \n Covenant adjustments 2 \n \n \n (51.9) \n \n \n (41.8) \n \n \n \n \n Net debt (covenant basis) \n \n \n (153.1) \n \n \n (252.7) \n \n \n \n \n Net debt/EBITDA \n \n \n 0.3x \n \n \n 0.8x \n \n \n \n \n 1.  Various adjustments made to EBITDA to reflect accounting standards at the time of inception of the original RCF agreement. The main adjustments are to the treatment of leases within operating profit and pension costs. \n 2.  Removing loans to JVs, finance lease receivables and non-recourse debt. \n Interest cover (covenant basis) \n This measure is also used in the covenant in our RCF facility, with a minimum covenant level of 4.0x. \n \n \n \n \n   \n \n \n 31 March 2025 \n£m \n \n \n 31 March 2024 \n£m \n \n \n \n \n EBITDA + JV and associate dividends (covenant basis) \n \n \n 450.8 \n \n \n 305.9 \n \n \n \n \n Net finance costs \n \n \n (32.1) \n \n \n (34.1) \n \n \n \n \n Covenant adjustments 1 \n \n \n 18.0 \n \n \n 9.6 \n \n \n \n \n Net finance costs (covenant basis) \n \n \n (14.1) \n \n \n (24.5) \n \n \n \n \n Interest cover \n \n \n 31.9x \n \n \n 12.5x \n \n \n \n \n 1.  Various adjustments made to reflect accounting standards at the time of inception of the original RCF agreement, including lease and retirement benefit interest. \n Return on invested capital, pre-tax (ROIC) \n This measure is one of the Group's key performance indicators. \n \n \n \n \n   \n \n \n 31 March 2025 \n£m \n \n \n 31 March 2024 \n£m \n \n \n \n \n Underlying operating profit \n \n \n 362.9 \n \n \n 237.8 \n \n \n \n \n Underlying share of results of joint ventures and associates \n \n \n 8.4 \n \n \n 9.2 \n \n \n \n \n Underlying operating profit plus results of JVs and associates \n \n \n 371.3 \n \n \n 247.0 \n \n \n \n \n Net debt excluding leases \n \n \n 101.2 \n \n \n 210.9 \n \n \n \n \n Leases - note 10, 15 \n \n \n 272.1 \n \n \n 224.5 \n \n \n \n \n Shareholder funds - see balance sheet on page 41 \n \n \n 621.8 \n \n \n 406.1 \n \n \n \n \n Retirement deficit - note 25 \n \n \n 8.4 \n \n \n 109.7 \n \n \n \n \n Invested capital \n \n \n 1,003.5 \n \n \n 951.2 \n \n \n \n \n ROIC \n \n \n 37.0% \n \n \n 26.0% \n \n \n \n \n   \n Pensions \n The Group has a number of defined benefit pension schemes. The principal defined benefit pension schemes in the UK are the Devonport Royal Dockyard Pension Scheme (DRDPS), the Babcock International Group Pension Scheme (BIGPS) and the Royal Dockyard Pension Scheme (RRDPS) - the principal schemes. \n IAS 19 \n At 31 March 2025, the IAS 19 valuation for accounting purposes was a net deficit of £8.4 million (FY24: net deficit of £109.7 million). The reduction in net accounting deficit is driven by employer contributions in excess of the income statement charge (£89.1 million). The fair value of plan assets of £2,831.0 million decreased by £253.3 million, driven by negative asset returns less contributions. The present value of pension benefit obligations of £2,839.4 million decreased by £354.6 million driven by an increase in the discount rate. The fair value of the assets and liabilities of the Group pension schemes at 31 March 2025 and the key assumptions used in the IAS 19 valuation of our schemes are set out in note 17 on page 64. \n \n \n \n \n   \n \n \n 31 March 2025 \n£m \n \n \n 31 March 2024 \n£m \n \n \n \n \n Fair value of plan assets (note 17) \n \n \n 2,831.0 \n \n \n 3,084.3 \n \n \n \n \n Present value of benefit obligations (note 17) \n \n \n (2,839.4) \n \n \n (3,194.0) \n \n \n \n \n Net (deficit) at 31 March \n \n \n (8.4) \n \n \n (109.7) \n \n \n \n \n Income statement charge \n The charge included within underlying operating profit in FY25 was £17.9 million (FY24: £23.9 million), of which £11.1 million (FY24: £15.4 million) related to service costs and £6.8 million (FY24: £8.5 million) related to expenses. In addition to this, there was an interest charge of £4.5 million (FY24: charge of £0.8 million). \n Technical provision \n An estimate of the aggregate actuarial deficits of the Group's defined benefit pension schemes (excluding those in surplus), including all longevity swap funding gaps, calculated using each scheme's technical provisions basis, as at FY25 was approximately £125 million (FY24: c.£200 million). Such valuations use discount rates based on UK gilts - which differs from the corporate bond approach of IAS 19. This technical provision estimate reflects the assumptions used within the latest agreed valuation prior to 31 March 2025 for each of the Principal schemes. \n Actuarial valuations are carried out every three years to determine the Group's cash contributions to the schemes. The valuation of the three largest schemes is set so only one scheme is undertaking its valuation in any one year, to spread the financial impact of market conditions. The valuation of the DRDPS as at 31 March 2023 was completed in FY24, the valuation of the RRDPS as at 31 March 2024 has been agreed in FY25, and work has commenced on the valuation of the BIGPS at 31 March 2025. \n There has been significant progress in reducing the risk of pension scheme deficits during the year. We made additional pension deficit repair payments of c.£40 million. The BIGPS has around £840 million of pension liabilities (c.30% of the total Group pension liabilities) on a technical provisions basis. The BIGPS has now reached self-sufficiency and is not expected to require further deficit repair contributions from the Group ahead of reaching either buy-in or buy-out, expected by FY29. The BIGPS severed the link to salary and closed to future service accruals on 30 September 2024. \n A long-term funding arrangement (LFTA) is now in place for DRDPS following completion of the 2023 triennial valuation. In addition, the DRDPS closed to future service accruals on 30 November 2024. In respect of their accrued benefits active members in DRDPS were given an option to either retain their salary link or break the salary link for a cash lump sum. The DRDPS has around £1,250 million of pension liabilities on a technical provisions basis (c.40% of the total Group pension liabilities). \n The Group has also agreed a LFTA for RRDPS following completion of the 2024 triennial valuation. The RRDPS has around £665 million of pension liabilities on a technical provisions basis (c.20% of the total Group pension liabilities). Within the last 12 months, the Company has finalised LTFA's with all three main pension schemes with additional deficit repair lump sums. As a result, we expect annual deficit repair payments to reduce from c.£40 million to c.£20 million per annum for the next six years. \n Cash contributions \n Group cash contributions made into the defined benefit pension schemes, excluding expenses and salary sacrifice contributions were as follows: \n \n \n \n \n   \n \n \n   \n \n \n 31 March 2025 \n£m \n \n \n 31 March 2024 \n£m \n \n \n \n \n Future service contributions \n \n \n \n \n \n 14.6 \n \n \n 17.2 \n \n \n \n \n Deficit recovery \n \n \n \n \n \n 52.7 \n \n \n 82.8 \n \n \n \n \n Longevity swap \n \n \n \n \n \n 27.2 \n \n \n 15.2 \n \n \n \n \n Total cash contributions - employer \n \n \n \n \n \n 94.5 \n \n \n 115.2 \n \n \n \n \n   \n \n \n   \n Segmental analysis \n The Group reports its performance through four reporting sectors. \n \n \n \n \n 31 March 2025 \n \n \n  Marine \n£m \n \n \n  Nuclear \n£m \n \n \n  Land \n£m \n \n \n  Aviation \n£m \n \n \n  Total \n£m \n \n \n \n \n Contract backlog \n \n \n 3,026.5 \n \n \n 1,983.9 \n \n \n 3,466.1 \n \n \n 1,939.7 \n \n \n 10,416.2 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Revenue \n \n \n 1,576.4 \n \n \n 1,816.0 \n \n \n 1,116.6 \n \n \n 322.3 \n \n \n 4,831.3 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Statutory operating profit \n \n \n 99.3 \n \n \n 161.4 \n \n \n 86.3 \n \n \n 16.9 \n \n \n 363.9 \n \n \n \n \n Statutory operating margin \n \n \n 6.3% \n \n \n 8.9% \n \n \n 7.7% \n \n \n 5.2.% \n \n \n 7.5% \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Underlying operating profit \n \n \n 96.5 \n \n \n 160.3 \n \n \n 86.2 \n \n \n 19.9 \n \n \n 362.9 \n \n \n \n \n Underlying operating margin \n \n \n 6.1% \n \n \n 8.8% \n \n \n 7.7% \n \n \n 6.2% \n \n \n 7.5% \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n 31 March 2024 \n \n \n  Marine \n£m \n \n \n  Nuclear \n£m \n \n \n  Land \n£m \n \n \n  Aviation \n£m \n \n \n  Total \n£m \n \n \n \n \n Contract backlog \n \n \n 2,992.7 \n \n \n 3,104.8 \n \n \n 2,593.7 \n \n \n 1,641.4 \n \n \n 10,332.6 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Revenue \n \n \n 1,429.1 \n \n \n 1,520.9 \n \n \n 1,098.6 \n \n \n 341.5 \n \n \n 4,390.1 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Statutory operating profit \n \n \n 11.0 \n \n \n 109.2 \n \n \n 96.1 \n \n \n 25.3 \n \n \n 241.6 \n \n \n \n \n Statutory operating profit margin \n \n \n 0.8% \n \n \n 7.2% \n \n \n 8.7% \n \n \n 7.4% \n \n \n 5.5% \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Underlying operating profit \n \n \n 13.1 \n \n \n 109.2 \n \n \n 96.3 \n \n \n 19.2 \n \n \n 237.8 \n \n \n \n \n Underlying operating margin \n \n \n 0.9% \n \n \n 7.2% \n \n \n 8.8% \n \n \n 5.6% \n \n \n 5.4% \n \n \n \n \n   \n FY24 excluding non-recurring items \n \n \n \n \n Revenue (£m) \n \n \n Marine \n \n \n Nuclear \n \n \n Land \n \n \n Aviation \n \n \n Group \n \n \n \n \n Revenue \n \n \n 1,429.1 \n \n \n 1,520.9 \n \n \n 1,098.6 \n \n \n 341.5 \n \n \n 4,390.1 \n \n \n \n \n Add: reversal of Type 31 revenue \n \n \n 66.3 \n \n \n - \n \n \n - \n \n \n - \n \n \n 66.3 \n \n \n \n \n Revenue excl. Type 31 loss \n \n \n 1,495.4 \n \n \n 1,520.9 \n \n \n 1,098.6 \n \n \n 341.5 \n \n \n 4,456.4 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Underlying operating profit (£m) \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n \n \n Underlying operating profit (UOP) \n \n \n 13.1 \n \n \n 109.2 \n \n \n 96.3 \n \n \n 19.2 \n \n \n 237.8 \n \n \n \n \n Add: Type 31 loss \n \n \n 90.0 \n \n \n - \n \n \n - \n \n \n - \n \n \n 90.0 \n \n \n \n \n UOP excluding Type 31 loss \n \n \n 103.1 \n \n \n 109.2 \n \n \n 96.3 \n \n \n 19.2 \n \n \n 327.8 \n \n \n \n \n Less: non-trading credits \n \n \n - \n \n \n - \n \n \n (17.0) \n \n \n - \n \n \n (17.0) \n \n \n \n \n UOP excl. Type 31 loss and non-trading credits \n \n \n 103.1 \n \n \n 109.2 \n \n \n 79.3 \n \n \n 19.2 \n \n \n 310.8 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Underlying operating margin \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n \n \n Underlying operating margin (UOM) \n \n \n 0.9% \n \n \n 7.2% \n \n \n 8.8% \n \n \n 5.6% \n \n \n 5.4% \n \n \n \n \n UOM excl. Type 31 loss and non-trading credits \n \n \n 6.9% \n \n \n 7.2% \n \n \n 7.2% \n \n \n 5.6% \n \n \n 7.0% \n \n \n \n \n   \n \n \n   \n Operational reviews \n Marine \n Our c.7,300 employees design, develop, build, manufacture and integrate specialist systems, and deliver technical through-life support for complex platforms in the marine sector. Over 80% of Marine's revenue is derived from defence, with the remainder primarily comprising our Liquid Gas Equipment (LGE) business. \n Operational highlights \n •  In June 2025, we achieved a major milestone, as the first of five Type 31 Frigates, HMS Venturer, left the assembly hall and entered the water and returned to dry dock for fit out in Rosyth \n •  Awarded an additional c.£65 million Capability Insertion Period contract for Type 31 programme \n •  Secured a further c.£240 million contract for Missile Tube Assembly for US Columbia Class submarines programme \n •  Achieved record order intake in LGE of c.£430 million (up 43%), with more than 70 international contracts \n •  Successful first year of in-service delivery of the Skynet contract to manage the UK's military satellite and space operations \n Financial review \n \n \n \n \n   \n \n \n 31 March 2025 \n£m \n \n \n 31 March 2024 \n£m \n \n \n \n \n Contract backlog* \n \n \n 3,026.5 \n \n \n 2,992.7 \n \n \n \n \n Revenue \n \n \n 1,576.4 \n \n \n 1,429.1 \n \n \n \n \n Underlying operating profit* \n \n \n 96.5 \n \n \n 13.1 \n \n \n \n \n Underlying operating margin* \n \n \n 6.1% \n \n \n 0.9% \n \n \n \n \n *    Alternative Performance Measures are defined in the Financial Glossary on page 30. \n Revenue increased 12% (at constant FX) to £1,576.4 million. Growth was led by a full year of trading on the Skynet programme and higher volumes in LGE, as well as increased naval support activity on our New Zealand and Canada programmes and ramp up of new contracts in Ukraine and Sweden. This was partly offset by the FY24 license sales in Poland not repeated in FY25 and lower support volumes in Australia . \n Underlying operating profit increased to £96.5 million (FY24: £13.1 million), primarily reflecting non-repeat of the \n£90.0 million contract loss in FY24, as well as revenue growth outlined above, offset by the impact of licence contribution in FY24 and lower initial margin recognised on Skynet. As a result, underlying operating margin was 6.1% (FY24: 0.9%; FY24 excluding contract loss: 6.9%). \n Contract backlog of £3,027 million (FY24: £2,993 million) was in line with the prior year. Record LGE order intake, the Type 31 Capability Insertion Programme and scope expansion of the Skynet contract was offset by revenue traded on long-term contracts. \n Operational review \n Defence \n UK defence \n The Type 31 Inspiration Class five-frigate programme being built for the Royal Navy at our facility in Rosyth has made significant progress. We cut steel on the third ship in the programme, HMS Formidable, in October 2024, and in June 2025 the first ship, HMS Venturer, left the assembly hall and entered the water (float-off), marking a major execution milestone. The ship has since returned, as planned, to dry dock to continue fit out. This has created space in our Venturer Hall facility for work on HMS Formidable, which has commenced using an enhanced build strategy. The superstructure and outfitting of the second ship, HMS Active, is progressing towards float-off in H2 FY26. \n In April 2025, Babcock was awarded a c.£65 million, five-ship contract to deliver the Capability Insertion Period (CIP) for the frigates. The CIP adds further capabilities that will support the ships throughout their life and includes the insertion, testing and enhancement of upgrades that will enhance the Type 31's military capability. \n We continue to deliver further missile tube assemblies for both the UK Dreadnought and US Columbia submarine Classes, in support of the common missile compartment programme. Our leading position in advanced manufacture of missile tube assemblies led to a further contract award of 36 missile tubes by General Dynamics Electric Boat, who is responsible for the design and the construction of the U.S. Naval Columbia submarines programme. \n Similarly, we continue our work with the Royal Navy and industry partners to support requirements on both the Future Air Dominance Systems (FADS) and Multi-Role Strike Ship (MRSS) programmes. \n During the period, Babcock successfully completed docking support periods for the aircraft carrier HMS Queen Elizabeth at our Rosyth dockyard, delivering the aircraft carrier back into service three weeks ahead of schedule. In the first half of the year, we achieved a major milestone for the UK Royal Navy with HMS Sutherland's crew now able to live and work on board during the upgrade and modernisation programme. The ship is now preparing to undergo sea trials before returning to active service. The period also saw the start of maintenance work on HMS Kent, which will deliver significant capability updates and sustainment support, and the successful undocking of HMS Bulwark from Devonport after an extensive four-year maintenance programme. \n Our Mission Systems business was awarded two significant contracts in FY25. These included a contract for Long Lead Items for the Astute replacement, Submersible Ship Nuclear AUKUS (SSNA), enabling us to place orders for the first elements of the Weapon Handling and Launch System, and an additional contract to supply Integrated Tube Hulls in support of the US Columbia Class programme. We also secured a contract to provide technical support to the in-service TLAM Tomahawk missile. \n Delivery of the UK Royal Navy's next-generation Maritime Electronic Warfare Systems Integrated Capability (MEWSIC) continues to make progress, with testing of the next generation system commenced. The capabilities will be installed on current and future warships including the Queen Elizabeth Class aircraft carriers, Type 45 destroyers and the Type 26 and Type 31 frigates currently in build. We also celebrated our first full year of managing and operating Skynet, the UK MOD's military communication system, with contract growth to meet customer operational requirements. \n Work to support the UK Royal Marines and Navy continues, with the delivery of the first two Maritime Interdiction Craft under our Hurracan contract, with 24 vessels expected to be delivered over the next two years, and the contract extension of the Gun System Automation to enable continued support to the Type 45 destroyers including electro-optical controls, sensor platforms and other onboard systems. \n International defence \n In Australia , we completed the first major maintenance period on ANZAC Class frigate, HMAS Stuart, through our new Regional Maintenance Provider West contract. This included replacement of the propulsion diesel engine which required removal of the vertical launch system. \n We were awarded a $30 million lift and hoists contract to enhance operational capabilities on board the Royal Australian Navy's first three Hunter Class frigates. The three-ship agreement will see Babcock procure, modify and set to work separate lift and hoist systems as part of its partnership with BAE Systems Maritime Australia. \n Our new contract to support the Amphibious Combat and Sealift Capability Life Cycle Management successfully began operations in July 2024, providing support to maintenance activities in Sydney's Garden Island facility as a part of the new Maritime Sustainment Model. \n Babcock also joined the Australian Government's Global Supply Chain Program which is designed to develop a sustainable and resilient sovereign defence capability by integrating Australian solutions into international markets. \n In New Zealand , we continue to provide support to the country's entire naval fleet via the New Zealand Maritime Fleet Sustainment Services (MFSS) contract. Following the grounding and sinking of HMNZS Manawanui in Samoan waters in October 2024, we have worked closely with the New Zealand Navy both in the immediate recovery efforts and in preparing for the regeneration of HMNZS Otago into the operational fleet. We continue to work closely with the Government and Ministry of Defence on its Fixed High Frequency Radio Refresh programme. \n In Canada , our Victoria In-Service Support Contract (VISSC) sustainment work underwent significant customer budgetary fluctuations that resulted in workforce adjustments with additional funding made available late in 2024. We submitted an updated bid for HMCS Victoria's Extended Docking Work Period and have significantly improved on our industrial offset obligations. We continue to position for the VISSC I follow-on contract. \n Canada continues its process to acquire the next generation of conventionally powered submarines. A contract to build up to twelve submarines is expected to be awarded by 2028, with the first platform delivered in 2035. Our focus is on provision of equipment solutions and long-term submarine sustainment, and we continue to build on partnerships with multiple OEMs. \n In Poland , we signed a long-term contract extension with PGZ, the Polish Armaments Groups, to continue our support to Poland's Miecznik frigate programme until the completion of three ships, providing engineering services, supply chain support, transfer of knowledge and project management through the Programme Management Office. In May 2025, first steel was cut for ORTP Burza, (Ship 2) in Gdynia. Babcock continues to work closely with Polish stakeholders to grow opportunities in maintenance, repair and operations (MRO). The strength of the partnership was seen in the signing of an MOU with the Polish Naval Academy for a new programme of professional internships. \n \n \n   \n In Sweden , we continue to work in partnership with Saab, successfully supporting design deliverables on the Swedish Navy's next generation Luleå Class surface combatant programme. Babcock is providing front-end engineering, design and project management support during the initial design phase. We have successfully delivered Phase 1 of the Luleå  contract to schedule and cost and are progressing towards the next key design milestones, as well as working together to identify export markets for the Luleå Class. \n In Ukraine , having completed the regeneration of UK Sandown Class Mine Counter Measure Vessels (MCMVs) before their sale to the Ukrainian Navy, we were awarded a three-year contract to maintain and support the vessels and have successful delivered the first support period. \n In South Korea , Babcock signed a Strategic Cooperation Agreement with Hanwha Ocean in November 2024. The agreement outlines the joint aim to deepen the companies' cooperation in major global naval procurement projects including the Polish Orka submarine programme and the Canadian Patrol Submarine Project, with each organisation leveraging their respective strengths to provide tailored solutions for naval platforms from acquisition to operation. Babcock also signed an MOU with LIG Nex1, to grow opportunities in maintenance, repair and operations, training centre management and weapons systems technology markets. Our work on the Jangbogo submarines continues to meet all milestones, with delivery of Boat 3 in the first half of the period, and all the deliverables for Boat 4 completed on schedule. \n In Indonesia , we entered into an MOU with PT Len Industri during the Indonesia presidential visit to the UK in November 2024. The MOU further formalises the commitment to provide the technologies and capabilities that Indonesia's Maritime Defence Capability will require. \n Civil \n Our LGE business saw record order intake of approximately £430 million over the year, with more than 70 international contracts driven by growing demand in China and South Korea. Sales continue to be strong through the period across our portfolio of products including the ecoSMRT® for LNG reliquefaction, ecoETHN® for Ethane Cargo Handling Systems and Ammonia Cargo Handling Systems. This is reflected in a robust end of year orderbook of 150 projects. \n In December, we secured a contract to deliver six cargo handling and fuel gas supply systems for the world's largest Ultra Large Ethane Carriers. Achievements like this are supported by ongoing technology development which has seen the successful applications for three technology patents, with seven more pending, and 10 trademarks granted. Innovation in our LGE business was recognised with a King's Award for Enterprise this year, which follows previous  awards for Innovation and International Trade. \n We welcomed two of the UK's fleet of National Environmental Research Council (NERC) scientific research vessels for planned maintenance at Rosyth in the period and subsequently, marking the end of the initial contract, and delivered an engineering programme to support the future decarbonisation of NERCs fleet. All three vessels in the NERC fleet will have returned to Rosyth by the end of 2025. \n \n \n   \n Nuclear \n Our c.10,000 employees provide complex through-life engineering support to the entirety of the UK's nuclear submarine fleet. We own and manage critical national infrastructure and provide engineering integration support to AWE. We operate across UK civil nuclear, including new build, generation support and decommissioning. \n Operational highlights \n •  Reopened Devonport's 9 Dock following significant regeneration work and successfully docked down HMS Victorious \n •  Docked down an Astute Class submarine for the first time in Devonport's 15 Dock facility \n •  Awarded first AUKUS contract through the H&B joint venture to strengthen AUKUS supply chain capabilities post year end \n •  Awarded £114 million three-year contract to support first nuclear submarine defueling operations in 20 years post year end \n •  Continued significant ramp up at Hinkley Point C to install mechanical and electrical services \n Financial review \n \n \n \n \n   \n \n \n 31 March 2025 \n£m \n \n \n 31 March 2024 \n£m \n \n \n \n \n Contract backlog* \n \n \n 1,983.9 \n \n \n 3,104.8 \n \n \n \n \n Revenue \n \n \n 1,816.0 \n \n \n 1,520.9 \n \n \n \n \n Underlying operating profit* \n \n \n 160.3 \n \n \n 109.2 \n \n \n \n \n Underlying operating margin* \n \n \n 8.8% \n \n \n 7.2% \n \n \n \n \n *    Alternative Performance Measures are defined in the Financial Glossary on page 30. \n Revenue increased 19% to £1,816.0 million, with growth across the portfolio. Our Cavendish nuclear business grew 28% driven by the ramp up of new civil nuclear projects, while submarine support activity also grew strongly under the Future Maritime Support Programme (FMSP) and ramp up of the HMS Victorious deep maintenance contract. In addition, Major Infrastructure Programme (MIP) revenue increased to £504 million (FY24: £459 million ). \n Underlying operating profit increased by 47% to £160.3 million (FY24: £109.2 million), driven by revenue growth in civil nuclear, submarine support and infrastructure, and project delivery improvements, as well as some contract changes. As a result, underlying operating margin improved 160 basis points to 8.8%. \n Contract backlog decreased to £1,984 million (FY24: £3,105 million), primarily reflecting trading on our multi-year FMSP submarine support contract which has entered its final year (expected to be replaced by a new contract by the end of FY26) and the HMS Victorious Deep Maintenance Programme (£560 million recognised in backlog FY24), as well as MIP contract maturity (£750 million recognised in backlog in FY24). \n Operational review \n Defence \n UK defence \n The UK is going through a phase of Class transition for nuclear submarines with the Astute Class currently replacing the Trafalgar Class, and the future Dreadnought Class to replace the Vanguard Class. \n To ensure we continue to meet the current and future requirements of the UK MOD and Royal Navy, we have instituted a new Major Nuclear Capital Programmes (MNCP) business unit to expand our capability. MNCP will utilise our expertise to apply engineering know-how and the latest technology to deliver capable infrastructure in the most challenging environments. This will provide our customers with highly capable facilities that support the critical and complex work our people undertake and maximise the through-life availability of assets, enabling us to deliver platforms back to sea faster and more efficiently. \n In our Devonport facility, our long-term Major Infrastructure Projects (MIP) portfolio is delivering substantial upgrades to existing critical infrastructure and developing state-of-the-art facilities to meet the Royal Navy's evolving needs, including increased capacity for submarine support over the long-term. \n In September 2024, while work is ongoing, we reopened 9 Dock following one of the most significant packages of infrastructure works in 20 years. The maintenance, life extension and facility improvements support the UK's Vanguard Class submarines, which are critical in supporting the UK's Continuous at Sea Deterrent which secures the long-term defence of the nation. Having successfully docked down this year in the upgraded facility, HMS Victorious will continue the next phase of the current £560 million programme to extend its operational life well into the 2030s. \n The completion of extensive upgrades to 15 Dock have enabled an Astute Class submarine to successfully dock down in the facility for the first time, to continue the next phase of her base maintenance period. The modernisation of the dock will further support Astute Class submarines' maintenance cycles in the coming years and marks a critical step towards our commitment to increase the availability of attack submarines. We have a strong commitment to sustainability and environmental protection, and works have been completed with an impeccable safety and environmental record, with no recorded RIDDOR or environmental incidents throughout the project. Collaboration, innovation, and engineering know-how has driven the progress for this critical work package, which supports national security and a more resilient UK. \n 10 Dock continues its transformative journey to be able to deliver future submarine capability at Devonport. Following the signing of a £750 million contract with the UK's Submarine Delivery Agency (SDA) in FY24, with further scope growth in FY25, the redevelopment of 10 Dock is progressing well, and this year has seen a number of significant milestones reached, including completion of demolition of legacy facilities. In April 2025 we passed the landmark of 3 million hours without a 'Lost Time Incident'. The work will deliver a new dock, berth, logistics and production support facilities, primarily for the Deep Maintenance Period (DMP) for Astute Class submarines. \n The installation of the first construction tower crane at Devonport for over two decades has also taken place. This new feature to Devonport's skyline is critical in supporting the construction of the new reinforced concrete caisson and marks a significant advancement in our construction capabilities. \n Work is underway to provide a safe, environmentally responsible, secure, and cost-effective solution for fleet end-of-life support at Devonport, where we are readying 14 Dock as part of the ongoing development of defuel capability. In June 2025, we were awarded a three-year contract to carry out enabling works in preparation for the first nuclear defueling of a decommissioned Trafalgar Class submarine in over 20 years. The £114 million contract will see Babcock working collaboratively with the UK's Defence Nuclear Enterprise (DNE) and leading industry partners to prepare for the defuel of four decommissioned submarines. Defueling is a requirement for nuclear submarines to be safely dismantled and is a key enabler for the wider UK submarine dismantling programme, freeing up critical space on site to support in-service and future Royal Navy assets. \n In parallel, we have reached the next significant milestone to fully dismantle a nuclear-powered submarine, Swiftsure, at our facility in Rosyth. As part of the UK's demonstrator project, we awarded the recycling contract to KDC Veolia Decommissioning Services UK Ltd in the first half of the year. This milestone builds on work already completed by our highly skilled teams to remove the submarine's reactor systems and low-level radioactive waste.  \n With safety and environmental protection at the centre of our operations, and using a specially designed in-dock facility, the waste has been processed for removal from site through Rosyth's state-of-the-art active waste management facility. The physical dismantling of the submarine, using a world's first methodology, is expected to be completed by the end of 2026. The innovative programme will enable around 90% of the structure and components to be reused or recycled, providing a proven approach for the recycling of the current UK decommissioned fleet of submarines. \n Additionally, Rosyth Dockyard has been chosen by the MOD as a contingent docking facility to support the new HMS Dreadnought submarine, should a docking-dependant defect repair be required at the start of her time at sea. \n This year, alongside the SDA and Navy Command, we opened a collaborative Submarine Availability Support Hub in Bristol. Our investment in the hub represents our commitment to supporting the UK MoD to improve Submarine Availability. The bespoke facility brings together partners from across the DNE including Babcock, the SDA and the UK's Royal Navy, and demonstrates how collaboration between industry and government is strengthening Britain's submarine enterprise as part of a critical national endeavour. The facility is also creating more than 100 jobs, as we further invest in supporting the development of nuclear skills and defence infrastructure in the South West of England. \n Work continues on the design and early manufacture of complex plant and engineering equipment for AWE Aldermaston, as well as on further developing our partnership with AWE. We are strongly developing supply chain capability and capacity to meet future manufacturing demand in line with requirements. \n In FY25 we formally marked the launch of the South West Regional Hub at an event in Exeter, bringing together industry across nuclear civil and defence, key economic stakeholders and learning and educational providers, to maximise the impact of key activities to address the region's specific skills challenges. We are a key industrial partner on the UK's Nuclear Skills Taskforce and lead the UK's South West Regional Hub for Nuclear Skills, which seeks to help secure the critical nuclear skills needed across the defence and civil nuclear enterprise. The UK Minister for Defence Procurement and Industry, Maria Eagle officially opened the Babcock Engineering & Nuclear Skills building at City College Plymouth in September 2024. The modern facility will enhance our growing workforce's capabilities by continuing to build a new pipeline of talent, while upskilling the existing workforce on the complex skills required to perform deep submarine maintenance. \n International defence \n In FY25 Babcock and HII launched a joint venture, H&B Defence to accelerate the development of critical sovereign capability for the once-in-a-generation AUKUS conventionally armed, nuclear-powered submarine program. H&B Defence will support all steps of Australia's optimal pathway to sovereign nuclear-powered submarines, including workforce, nuclear infrastructure design and build, submarine defueling and decommissioning, nuclear waste and future sustainment. \n In May 2025, the joint venture secured its first contract to deliver a two-year Australian Submarine Supplier Qualification Pilot Program which will accelerate the identification and qualification of Australian suppliers and products who can access the US Virginia Class submarine supply chain. \n Civil \n UK Civil \n We continue to support Sellafield with its decommissioning programme, and in FY25 we signed contracts for the provision of radiometric and environmental analysis support which secures our position as a critical service supplier to Sellafield over the next four years. We have also submitted proposals for two key lots of the 15-year Decommissioning and Nuclear Waste Partners (DNWP) programme. \n We have diversified our customer portfolio in the UK, securing opportunities with both Westinghouse and Urenco in support of the Government's focus on security of the front-end fuel cycle. We have implemented a baseline programme for Westinghouse for the design and build of a facility to process uranium to enable its future enrichment and use as a nuclear fuel and have completed a multi-discipline design review of the tails management facility for Urenco which will convert depleted uranium hexafluoride to the lower hazard uranium oxide material for long term storage. \n Following last year's £2.4 million funding award from the UK Government's Future Nuclear Enabling Fund (FNEF), we have now delivered our FNEF programme for our partner X-Energy's Advanced Modular Reactor (AMR). The funding award, which was matched by X-energy, has been used to develop UK-specific deployment plans, including an assessment of domestic manufacturing and supply chain opportunities, constructability, modularisation studies, and spent fuel management. We continue to position for deployment support for Small Modular Reactors (SMRs) and remain engaged with Great British Nuclear (GBN) for the next phases of the UK SMR competition. \n We continue to support EDF with Large Gigawatt Reactor delivery at Hinkley Point C (HPC) and Sizewell C through the MEH Alliance, an unincorporated JV which works across the site. At HPC our team continues to grow, with over 600 people now working on the installation of mechanical and electrical services. \n International Civil \n In Japan, work is progressing well to deliver a 10-year contract with Japan Atomic Energy Agency (JAEA), providing specialist capability in support of decommissioning and sodium treatment of the Monju Prototype Fast Reactor in Fukui Prefecture, Japan. The first phase of this project is due to complete in September 2025 and will be immediately followed by a second phase through to 2027 to construct and commission the facility in preparations for the start of operations in 2028. \n In the US, we have begun transition work on our Portsmouth Decommissioning and Dismantling (D&D) Tier 1 contract, and we will receive the notice to proceed and move into formal contract later in 2025. We are positioning for other Tier 1 clean-up opportunities and site operation contracts, the next of which will be for management and operations of the Savannah River site which is expected to come to market in the first half of FY26. \n \n \n   \n Land \n Our c.6,300 employees provide essential services to our customers through three core capabilities: build, support and train. We do this through the delivery of through-life engineering support and systems integration for military vehicles and equipment. We provide individual and collective training for customers with critical missions and deliver engineering services in power generation and transport networks and through-life support of mining equipment. \n Operational highlights \n •  Awarded five-year British Army strategic support partner contract extension ('Reframe', formerly DSG) worth £1 billion \n •  Awarded additional contract to build 53 High Mobility Transporter Jackal 3 six-wheeled 'Extendas' for the British Army \n •  Signed an MOU with Patria to offer its 6x6 Armoured Personnel Carrier to the UK Armed Forces \n •  Launched 120mm Ground Deployed Advance Mortar System with ST Engineering with live firing demo for the UK \n •  Awarded first NATO training contract and several key UK training contract extensions \n •  Continued to provide critical support to Ukraine delivering defence support capability \n Financial review \n \n \n \n \n   \n \n \n 31 March 2025 \n£m \n \n \n 31 March 2024 \n£m \n \n \n \n \n Contract backlog* \n \n \n 3,466.1 \n \n \n 2,593.7 \n \n \n \n \n Revenue \n \n \n 1,116.6 \n \n \n 1,098.6 \n \n \n \n \n Underlying operating profit* \n \n \n 86.2 \n \n \n 96.3 \n \n \n \n \n Underlying operating margin* \n \n \n 7.7% \n \n \n 8.8% \n \n \n \n \n *    Alternative Performance Measures are defined in the Financial Glossary on page 30. \n Revenue increased 2% to £1,116.6 million comprising growth from a broad range of defence activities in both the UK and international markets, including DSG, Jackal production and Ukraine support, and an increase in our South Africa business. This was largely offset by a reduction our Rail business. \n Underlying operating profit decreased 10% to £86.2 million as FY24 included a one-off £17.0 million profit on disposal of property. Excluding this, underlying operating profit increased 10% (at constant FX) reflecting revenue growth outlined above net of the decrease in Rail, improvement in training margins and the final year of trading of the DSG contract. As a result, underlying operating margin was 7.7% (FY24: 8.8%; FY24 excluding property profit 7.2%). \n Contract backlog increased 34% to £3,466 million (FY24: £2,594 million) driven by a five-year extension, 'Reframe', (formerly DSG) worth c.£1 billion, defence contract extensions including UK training and Australia. \n Operational review \n Defence \n UK defence \n Following a period of strong operational performance on our contract for the maintenance, repair and asset management of the British Army vehicles and equipment (DSG), we were awarded a sole-source five-year extension worth around £1 billion, (now called 'Reframe') on terms that will result in better outcomes for all stakeholders. We have commenced mobilisation of the contract extension which will deliver improved readiness, regeneration and asset management services underpinned by extensive engineering and supply chain expertise to maximise the availability of critical army equipment. This contract cements our position as strategic partner to the British Army, thereby setting the foundation for the army modernisation programme in the coming decades. \n To enhance delivery of the contract extension, we launched our strategic asset management platform, Metis in partnership with Palantir Technologies. This capability includes the equipment support enterprise's digital footprint, from which the optimal balance of cost, risk and performance is derived to maximise the value of assets throughout their lifecycle. \n We continue to support the UK in providing critical support to Ukraine's Armed Forces, delivering personnel training and refurbishment and renewal of equipment through our Project HECTOR contract. In January 2025, we secured a 15-month contract extension from the UK MOD to continue to support urgent operational requirements for Ukraine's military land assets. In addition, Babcock secured a multi-million-pound contract with the UK MOD to undertake in-country maintenance and repair of the Ukrainian owned Combat Vehicle Reconnaissance (Tracked) (CVR(T)) fleet, in collaboration with Ukrainian industry, and continue to support Operation Interflex, the British-led multinational military operation to train and support the Armed Forces of Ukraine. Finally, in March 2025, we won a proof-of-concept contract from the UK MOD which will enable Ukraine's armed forces to use innovative technology to 3D print military equipment, demonstrating our ability to deliver defence support capability whenever and wherever it is required. \n We successfully delivered the first package of work for Project TAMPA, the MOD's accelerator programme focused on the use of additive manufacturing to increase material availability and tackle obsolescence. The project aims to reduce cost and improve the performance and availability of defence capabilities and critical assets. \n Babcock, in partnership with Supacat, was awarded an additional contract to manufacture 53 Jackal 3 'Extenda' variants of the High Mobility Transporter for the British Army. The initial contract awarded for 70 Jackal 3 (HMT 400 series) vehicles which began production in our new production facility within the Devonport Freeport earlier this year. \n We launched a new medium wheelbase variant of our General Logistics Vehicle in June 2024 and plan to unveil a six-wheeled variant at DSEi in September 2025. Initial focus has been on the British Army Land Rover fleet replacement, with c.7,000 vehicles required. With the military Land Rover no longer in production, we are pursuing a number of international opportunities. \n We have partnered with ST Engineering, to offer the UK an integrated, end-to-end solution to enhance British mortar capability, as part of the MOD's 120mm mortar procurement. By bringing ST Engineering's Ground Deployed Advanced Mortar System (GDAMS) technology to the UK, we will deliver a sovereign solution that boosts British capability whilst driving economic and social benefit. In November 2024, we facilitated a successful live firing demonstration in South Africa with UK MOD, showcasing the breadth and depth of GDAMS' power and potential for UK and future export. \n In January 2025, Babcock signed a MOU with Patria to offer the 6x6 Armoured Personnel Carrier to meet the operational requirements of the British Army. Under the agreement, Patria will lead on design and development of the system, while Babcock will lead on the manufacture, assembly, integration and testing. \n Our Defence Training business has been awarded its first training contracts by NATO. These strategically important contract awards include a five-year contract to support military exercises by providing subject matter experts to fulfil play functions, and a one-year contract for the delivery of wargaming expertise to the Alliance's Joint Warfare Centre. The business was also awarded several key UK contract extensions, including the continuing delivery of training for Falcon, the battlefield communications system used by the British Army and Royal Air Force, and a one-year extension to the Electro-Mechanical Training contract for the British Army at MOD Lyneham. In April 2024, we successfully mobilised a new seven-year ARMCEN support contract, which will provide technical training for the British Army. \n The Babcock Immersive Training Experience (BITE) was launched in the UK, Europe, USA and Canada. BITE is a best-in-class training capability solution for the defence and emergency services markets. It uses innovative and future-proof technology to replicate the physical, sensory and cognitive challenges of operating in a high stress environment. \n Following a comprehensive evaluation of commercial terms, Babcock and its partners in Team Crucible made the decision to exit the bid to become the Strategic Training Partner for the Army Collective Training System. \n International defence \n In Australasia , we have embedded the first cohort of maintenance technicians at Royal Australian Air Force base Amberley to conduct maintenance of ground support equipment for the ADF. We delivered a A$14 million fleet of Squad Packable Utility Robots to the ADF which will be utilised across tri-service applications for intelligence, surveillance and reconnaissance activities to mitigate and deny the use of improvised explosive devices. \n In Melbourne we opened a new A$3.5 million International Engineering and Technology Hub. The hub will support Babcock's global operations and provide a local base for key programmes. \n In New Zealand , we continue to work closely with the NZ Ministry of Defence on the Fixed High Frequency Radio Refresh programme. Factory acceptance testing of the system was delivered in November 2024 and installation of the system in country began in 2025. \n In France , we continued to strengthen our relationship with the French MOD as we successfully delivered the transition phases on our two Land contracts. Our Land military team in France continues to grow and we have recently opened a new central office in Bordeaux overseeing our in-country service delivery. \n Civil \n UK Civil \n Our Emergency Services businesses performed well through the year however London Fire Brigade training and fleet support performance was offset by the end of the Metropolitan Police Service fleet support contract in FY24. \n Our Rail business was down significantly year on year driven by reduced volumes across our Translink and Network rail Scotland alliance contracts due to phasing. \n International Civil \n In Africa , the Equipment business, which supplies mining industry vehicles, delivered strong growth. High machine demand was supported by a leading product offering, outstanding customer support and trusted relationships. \n Aviation \n Our c.2,600 employees deliver military pilot training support for the two largest Air Forces in Europe (France and UK), through-life support to operational military flying assets and critical air operations for government customers. \n Operational highlights \n •  Awarded Mentor 2. A contract for 15 years (plus two option years) to deliver military air training solutions for the French Air and Space Force, and Navy \n •  Awarded two-year HADES contract extension to provide technical airbase support services across the UK tri-forces \n •  Secured 12-year contract with Airbus to support 48 French defence and security EC145s across France and overseas \n •  Secured a £70 million contract to deliver new i...

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