British defence engineering company Babcock upgraded its medium-term guidance on Wednesday, expecting to benefit from the UK's plan to spend more on defence and energy security to counter the rising geopolitical instability.
The UK's deeply unpopular Prime Minister Keir Starmer on Tuesday pledged to boost overall defence and security spending to five per cent of economic output by 2035, citing volatility, as war rages in the Middle East and Ukraine, and amid tensions with China.
Babcock, which maintains Britain's naval fleet, builds new warships and provides weapons systems and nuclear engineering services, said it was now expecting an underlying operating margin of at least nine per cent in the medium term, up from at least eight per cent previously.
"This is a new era for defence. There is increasing recognition of the need to invest in defence capability and energy security, both to safeguard populations and to drive economic growth," Babcock Chief Executive David Lockwood said in a statement.
For the current financial year, Babcock said it expected an underlying operating margin of eight per cent, up from the 7.5 per cent it recorded for the 12 months to the end of March 2025. The company also announced a 200 million pound ($272.46 million) share buyback.
Babcock's shares have more than doubled in the year to date, boosted by Britain's initial commitment in February to spend more on defence, outperforming Britain's bluechip index which is up eight per cent.
(Reporting by Sarah Young; Editing by Kate Holton)