Babcock International has seen its share price fall by over 5% after it reiterated its medium-term guidance in its full-year results.

The FTSE 100 aerospace, defence and nuclear engineering services company reported that in the year to 31 March, its revenue jumped by 8% to £5.17bn, following a strong performance in nuclear and aviation.

However, in this period, its underlying operating profit dropped by almost 20% to £293.3m, which it said reflected a "strong underlying performance offset by a £140m charge on the Type 31 contract".

Babcock’s underlying earnings per share also dropped by 21% to 39.6 pence, which it said was also affected by the Type 31 contract.

CEO at Babcock, David Lockwood, stated: "Against an increasingly uncertain geopolitical backdrop, Babcock has delivered continued strategic and operational progress. We achieved strong underlying growth, improved margins and robust cash generation, while securing important contract wins that further strengthen our position in defence and nuclear markets, where long-term demand is increasingly structural.”

In its outlook, the firm said that it remains on track to deliver its medium-term guidance of average mid-single digit organic revenue growth, underlying operating margin of at least 9% and average underlying operating cash conversion of at least 80%.

In the current financial year, Babcock expects "another year of good progress", supported by strong revenue visibility with around 70% revenue under contract at 1 April 2026, which is a similar percentage to the prior year.

It has also announced that it will start a £200m share buyback scheme in the current financial year, after completing a £200m scheme in April 2026.

Equity analyst at Hargreaves Lansdown, Aarin Chiekrie, concluded: "Governments around the globe are becoming more focussed on improving their defensive capabilities, and Babcock looks well-placed to benefit from this long tailwind and capture some of this extra spending. While underlying profitability improved sharply, this figure excludes a one-off £140m charge tied to its Type-31 frigate programme.

"The charge stems from a design change that led to complex late-stage rework on the first two ships. Further costs can’t be ruled out, but any additional charges should be much smaller, as the remaining vessels are still at much earlier stages of production.

"Looking ahead, Babcock remains on track to progress towards its mid-term targets, which include underlying operating margins widening from 8.2% to over 9%, excluding the Type-31 charges. The balance sheet remains in great shape, with its small net debt pile trending lower. Alongside healthy free cash flows and a strong demand outlook, that’s given Babcock the confidence to raise its full-year dividend by 15% and plough ahead with another £200m of share buybacks."

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