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Investing.com -- Babcock reported a strong first-half performance, with EBITA of £201.1 million, up 19% year-on-year. The figure is 7% ahead of the consensus estimate, according to Jefferies. The beat was driven by stronger organic revenue growth and margin expansion across all divisions.
Revenue grew 7% to £2.54bn, while the EBITA margin rose 90bps to 7.9%.
Jefferies analyst David Farrell highlighted that financial metrics were ahead of expectations across EBITA, EPS and free cash flow, with underlying EPS up 21% to 28.5p and underlying free cash flow rising 48% to £141 million.
But despite the broad beat, Babcock shares were over 4% lower in early London trading.
Cash conversion reached 83%, and net debt excluding leases fell to £55.8 million, compared with £101 million in fiscal 2025 (FY25).
Nuclear remained the standout segment, with revenue up 14% and EBITA rising 18% to £89.7 million. Margins reached 9.1%, making it the first division to achieve the group’s medium-term margin target.
Marine delivered 6% revenue growth and a 160bps margin increase to 6.7%, supported by strong execution in LGE.
Aviation revenue jumped 26% with margins up 240bps to 7.2%, while Land improved margins by 20bps despite a 10% revenue decline.
Backlog levels were broadly stable year-on-year, and the group completed £49 million of its £200m buyback during the period.
"This is a strong set of results, with EBITA 7% ahead of consensus, driven by both better organic revenue growth and margin," Farrel comented in a post-earnings note.
"Nuclear was the standout area, but encouragingly for the equity story, there is margin progression across the board. Mgmt is upbeat about future opportunities, both UK and International, and while there is no change to FY26F expectations, the company is, in our view, tracking better than hoped," he added.
The analyst said he expects the stock to outperform today.