“Following the full-year 2020 restatement, GBP2bn impairment, accounting policy changes, and forthcoming disposal proceeds to mitigate balance sheet risk, we think Babcock is set to generate meaningful cash flow from 2024, returning as an attractive income play (2023 dividend reinstatement expected),” the bank said in a note to clients.
Barclays also pointed out the shares may also be the beneficiary of a redeployment of investment capital following the take-outs of Cobham, Ultra Electronics and Meggitt.
Upgrading its investment call to ‘overweight’, its number crunchers raised its price target to 424p. Mid-afternoon, the shares were trading sideways at 375p.
Defence contractor Babcock built Queen Elizabeth, the Royal Navy’s biggest vessel.
With operations in France, Canada, Australasia and South Africa, as well as the UK, it employs 30,000 people.