British engineering and defence giant Babcock International (BAB.L) reported a strong 19% increase in first-half profit, while signaling progress on its bids to build frigates for Sweden, Denmark, and Indonesia. CEO David Lockwood described the bids as moving “in the right direction,” highlighting the company’s strategic positioning in a market benefiting from rising global defence spending.

Babcock Leads Major Frigate and Maritime Projects

Babcock has been at the forefront of several high-profile naval projects, providing maintenance for Britain’s naval fleet, weapons systems, and supporting nuclear power initiatives. Its latest ambitions involve frigate construction contracts for European and Southeast Asian nations, including a recently announced £4 billion ($5.24 billion) deal with Indonesia. This partnership will jointly develop maritime capabilities for Indonesia’s navy and expand its fishing fleet by more than 1,000 vessels.

The contract, set to be officially announced by UK Prime Minister Keir Starmer during a call with Indonesian President Prabowo Subianto, demonstrates Babcock’s growing influence in global naval engineering and defence sectors.

Half-Year Results Reflect Strong Financial Momentum

For the six months ending September 30, Babcock posted an underlying operating profit of £201.1 million ($263 million), up from £168.8 million the previous year. This robust performance underpinned the company’s decision to raise its interim dividend by 25% to 2.5 pence per share, reflecting confidence in continued growth.

Babcock also reaffirmed its guidance for annual profit growth of 11% and an underlying operating margin of 8%, in line with consensus forecasts. Analysts at Panmure Liberum described the full-year targets as “comfortably achievable,” given the company’s solid project pipeline and increasing defence budgets.

Geopolitical Factors Driving Defence Investment

Global geopolitical instability, including Russia’s ongoing conflict in Ukraine and U.S. pressure on allies for higher defence spending, has prompted European countries to bolster military capabilities. Babcock is strategically positioned to benefit from this trend, with upgraded medium-term forecasts reflecting increased government defence contracts.

The company is also actively supporting Saab’s bid to build submarines for Poland, with the UK government backing the initiative due to the significant British content in the submarines, according to CEO David Lockwood.

Market Response and Share Performance

Babcock’s stock recovered from early session losses to close 1.8% higher, continuing a remarkable year-to-date gain of over 120%. Investors are closely watching the company’s progress on the frigate bids, which will require decisions from Indonesia, Denmark, and Sweden within the next 12 months to meet planned in-service dates.

Outlook for Babcock and Naval Engineering

With strong profit growth, strategic international contracts, and an increased dividend, Babcock is well-positioned to capitalize on the expanding global defence and naval shipbuilding market. The combination of geopolitical demand, high UK content in defence projects, and robust financial performance makes Babcock a key player in defence engineering and military procurement moving forward.