Babcock International bucked the market yesterday as first-half profits rose by 30%, suggesting the defence and nuclear conglomerate is well placed to defy the recession.

Babcock International bucked the market yesterday as first-half profits rose by 30%, suggesting the defence and nuclear conglomerate is well placed to defy the recession.

The like-for-like rises were 10% in operating profit and 15% in revenue, as the Devonport dockyard and INS acquisitions were fully included for the first time.

Babcock Marine, which runs the Rosyth and Devonport yards and accounts for 46% of the group, reported revenue up 83% at £432m and operating profit up 45% at £42m. The dividend is increased by 21%.

Peter Rogers, chief executive, said: "Governments are very reliable customers to work with and we're pretty confident in the durability of our contracts with them as you can see by the increase in the dividend."

As flagged last month, the group incurred an exceptional charge of £13.3m in a settlement with Tesco over faulty tunnelling work carried out by the Peterhouse group later acquired by Babcock.

The group said: "Our order book stands at £5.2bn and the pipeline of opportunities available to our divisions remains extensive. Our funding position is good, and there are no refinancing requirements until 2012."

The rail business, centred on First Engineering in Glasgow, again disappointed with a widening of the operating loss from £2.7m a year ago to £4.7m, despite turnover rising 15% to £114m. Babcock has said it will wind up its rail projects business and expects to reverse the losses in the second half.

Howard Wheeldon, strategist at BCG Partners, commented: "Babcock is one of just a small handful of UK specialist companies that should actually do very well through what increasingly looks like a protracted period of recession."

He added: "With the bulk of activities in marine, defence and rail, owning both Rosyth and Devonport naval dockyards plus the Faslane nuclear submarine facility, it seems to me that if Prime Minister Brown really is as good as his word in hastening capital and project spend aimed at boosting potential for a quick UK economic recovery, and to retain if not create jobs, then companies like Babcock really should be seen as prime beneficiaries."

The shares, which bottomed at 348p in last month's gloom, rose 14.25p to 418.25p.