Shares of Babcock International Group fell sharply on Friday after the company announced that chief executive David Lockwood will retire by the end of 2026, marking the start of a leadership transition at one of Britain’s largest defence contractors.
The stock dropped more than 3.8%, making Babcock the worst performer on the FTSE 100 during the session, even as the company reaffirmed confidence in its medium-term growth outlook.
Later in the session, it recovered some of the losses.
Leadership transition unsettles investors
Babcock said Lockwood will be succeeded by Harry Holt, the current head of its nuclear division and a former Rolls-Royce executive.
Holt was selected following what the company described as an extensive internal and external search.
The announcement appeared to weigh on sentiment despite the long handover period, with investors cautious about changes at the top after a prolonged period of strong execution under Lockwood.
Lockwood has led Babcock for five years, overseeing a major turnaround that strengthened operations and restored profitability.
His tenure spanned the Covid-19 pandemic, rising geopolitical tensions, and a renewed focus by governments on defence and security.
“It has been my privilege to lead Babcock through a period of unprecedented challenge and change,” Lockwood said in a statement.
Nuclear unit performance underpins succession choice
Babcock said Holt’s appointment reflected the improved performance of its nuclear division, which supports the UK’s submarine fleet and works on decommissioning nuclear facilities.
Before joining Babcock, Holt held senior roles at Rolls-Royce and previously served as an officer in the British Army.
The company said his background and existing relationships with key customers, including the UK Ministry of Defence, positioned him well to take on the top job.
Defence contracts account for a significant portion of Babcock’s revenues, making continuity in customer relationships a priority for investors.
Strong long-term share performance
Despite Friday’s decline, Babcock’s shares have delivered strong gains over longer periods.
The stock is down more than 5% over the past five days but remains up over 12% in the last month and around 181% over the past year.
Over the last five years, the shares have risen nearly 600%, a rally that coincided with Lockwood’s turnaround strategy and a sharp increase in global defence spending following Russia’s invasion of Ukraine.
The company said it remained confident of meeting its growth targets for the 2026 financial year, adding that there could be upside depending on the timing of an Indonesian contract.
Defence sector volatility
In November, Britain agreed to a £4 billion deal with Indonesia, led by Babcock, to jointly develop maritime capabilities for the Southeast Asian country’s navy and fishing fleets.
Babcock’s recent moves come amid broader volatility across European defence stocks.
On Thursday, shares across the sector fell after US President Donald Trump said he had reached a framework agreement with NATO Secretary General Mark Rutte on Greenland and Arctic security.
Italy’s Fincantieri fell 3%, Sweden’s Saab lost 2.7%, while Germany’s Rheinmetall, Norway’s Kongsberg Gruppen, and Italy’s Leonardo each declined more than 2%.
Outlook shaped by defence spending
Despite short-term swings, defence stocks have broadly benefited from expectations of higher military budgets.
Trump recently said the US could lift defence spending from nearly $1 trillion to more than $1.5 trillion.
UK peers have also posted strong gains over the past year, with BAE Systems up 59% and Rolls-Royce Holdings rising more than 105%, underlining continued investor appetite for the sector.
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