Babcock International has recorded a surge in profits and said it will resume dividend payouts after a four-year hiatus as the defence heavyweight hailed the benefits of the shake up completed under chief executive David Lockwood.

The company, which is a significant employer in Scotland, grew core profits by £33 million, to £154.4 million in the six months to September 30, from £121.7m in the same period last year. The second half has started well.

Mr Lockwood said Babcock had in recent months secured multiple new contract awards and agreements that will help drive future growth. The wins have been made against the backdrop of mounting concern about the potential fallout from Russia’s war on Ukraine and tensions between the US and China. The outlook has darkened since the crisis in Gaza erupted last month.

“The global threat environment and geopolitical situation remains unstable, meaning that the services and products we provide across our diverse international footprint have never been more important, as reflected by the good operating and financial momentum across the Group,” said Mr Lockwood.

READ MORE: Scottish shipbuilding operations help defence heavyweight post £33m increase in profits

Babcock has won defence-related contracts in a wide range of countries, stretching from the UK to Australia.

This month the company won a £750m four-year contract to support a major infrastructure upgrade at Devonport Dockyard in Devon, where “deep maintenance” and life extension work is completed on submarines.

The company noted that in July it was awarded an initial 12-month contract from the Ministry of Defence to support UK-gifted platforms to Ukraine. This covers the provision of operational support to armoured vehicles, training of Ukrainian personnel and management of vital equipment, supply chains and spares.

“After the period end, we opened an office in-country where a dedicated team will focus on supporting Ukraine and our industry partners,” added the company.

First half revenues were boosted by payments received in respect of a design supplied by Babcock for frigates that are being built in Poland for the country’s navy. Babcock said these showed the attractiveness to international markets of the company’s modular Arrowhead 140 frigate design. Indonesia’s navy is also using the design.

Babcock’s operations in Scotland have benefited from long-term contracts awarded in past years. The company is building five Type 31 frigates at Rosyth dockyard in Fife under a programme that will provide work for the facility until 2028.

READ MORE: Defence giant hails major Scottish shipbuilding milestone

Submarine maintenance activity has increased at the Faslane base (HMNB Clyde) north-west of Glasgow.

Babcock employs over 3,100 people at Faslane and Rosyth.

Directors are confident enough about Babcock’s prospects to have decided the company should declare its first dividend since 2019.

 Mr Lockwood said the return to the dividend payers' list was an important milestone in the turnaround of Babcock, which he launched after taking charge of the group in September 2020.

This included selling off businesses that Mr Lockwood deemed non-core.

In March this year Babcock said it had completed its portfolio alignment process after generating total proceeds of £570m from the sale of businesses in areas such as aerial emergency services.

Mr Lockwood said then: “We’ve done what we said we’d do … strengthened the balance sheet and reduced complexity. Around two-thirds of the Group is now focused on defence.”

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Babcock also supports civil nuclear power facilities and provides systems used on large gas carriers.

The company grew first half revenues by 2% to £2.18bn from £2.14bn.

The order backlog fell to £9.6bn at September 30, from £9.9bn at the same point last year. The company said the fall reflected the impact of disposals. The value of the backlog has increased since the period end.

The company plans to pay a 1.7p per share interim dividend.

Shares in Babcock International closed up 4%, 15.8p, at 425.4p. They sold for 270p in July.

AJ Bell investment director Russ Mould noted that Babcock had become the latest defence-orientated business to report strong orders amid global instability and conflict. 

On Monday BAE Systems said it had secured £10bn orders since the end of June. The company is developing a huge shipbuilding hall in Glasgow.