Tomorrow's Business Today
The (hopefully) boring business of defence
Babcock is one of those underappreciated companies that mostly fly under the public radar.
It has two big – and historically important – sites.
The Naval Dockyard at Devonport – our main warship and submarine maintenance and refit yard. This has a big role to play if our boats go into danger zones, which looks increasingly likely.
And the Rosyth shipyard in Scotland where they did the final assembly on our two aircraft carriers and which are currently building Type 31 frigates.
(That’s a really big warship, built for speed.)
Babcock is also doing a lot of the nuclear power stations decommissioning, one of those things you hope is a lot more boring, a lot less dangerous, than it sounds.
Perhaps the way to think of it is as the younger brother of BAE Systems. (Babcock don’t make any actual munitions.)
Under CEO David Lockwood Babcock has had a good run – the shares are up fivefold since 2020.
And the increased commitment to defence spending means investors still like the look of them.
Tomorrow it will report year-end figures, with the City expecting a smart rise in revenues to about £4.8 billion, profit of around £365 million and a fall in net debt.
It might be clearer tomorrow whether the shares are still worth buying or if the best days are past.
One issue they may not want to discuss is how much they are losing on the Type 31 frigates.
The first, HMS Venturer, was launched recently. The good news so far: it floats.
(People who know about these things say that’s not as straightforward as you might think.)
Whether Babcock makes any money from it probably depends how long the government contract runs and how exports are going – the City would like to know, and the defence press might be asking tomorrow.
If a Type 31 crashes or sinks or is shot at, then the ships become seriously newsy in ways that might make us all nervy.
Perhaps that’s the secret to doing comms for Babcock. If coverage is limited to the business pages, at least nothing too bad happened.
Outside of the defence world, this business is not-that-interesting until suddenly far-too-interesting.
Predictions of the end of the world are rife and overdone. If Babcock becomes a household name, maybe that means we are a step closer.
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Press release of the day
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