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Very good news for shareholders https://www.gov.uk/government/news/polish-armaments-group-agrees-defence-agreements-with-uk-firms
numis upgrades bab**** to ‘buy’, cites brighter outlook
https://www.sharecast.com/news/broker-recommendations/numis-upgrades-bab****-to-buy-cites-brighter-outlook--15808104.html
bab**** international group plc (bckiy) is a great choice for 'trend' investors, here's why
https://finance.yahoo.com/news/bab****-international-group-plc-bckiy-135006062.html
Goodness, didn't realise the price was over 1000p years ago. Having traded profitably a wee bit initially, my current holding is at 400p so over 600p would be very welcome in the next 12 to 18 months. War and more war looks very likely, not that I wish for the human suffering, but War is and has always been a part of Humanity.
a £750mn contract awarded to the company by the mod’s submarine delivery agency in november suggests this is true.
the company is also losing money on other contracts, and management said that 11 per cent of last year’s revenue was linked to work on which it earned a “low- to zero-margin”.
the elimination of these legacy contracts will take time – they only start to meaningfully fall away in 2026 and stretch until 2028. as they do, though, and as the company both delivers projects more efficiently and only bids for work that meets risk and margin thresholds, bab**** is confident of sustainably maintaining an operating margin above 8 per cent.
a less leaky vessel
bab****’s underlying operating margin rose above 7 per cent in the six months to september, from 5.7 per cent a year earlier. even more encouragingly, net debt fell below £480mn, from £1.5bn three years earlier. if a £400mn reversal of “historic balance sheet window dressing” and the inroads made into reducing its pension deficit are included, then debt and debt-like liabilities have reduced from £2.8bn to just £800mn, lockwood argued.
bab****’s improved performance, and its decision to re-introduce a dividend for the first time in four years, are behind a 35 per cent uplift in its share price over the past year. investor sentiment has clearly picked up.
however, with its shares priced at under 10 times forecast earnings, bab****’s valuation multiple is a third cheaper than domestic peers chemring (chg) and bae systems (ba.). is this comparison fair? joe brent, an analyst at liberum, recently argued that, although bab****’s shares look cheap, “a high and growing exposure to the low-growth uk market” means uk outsourcers mitie (mto) and serco (srp) – with which it trades in line – are closer peers.
the company has been earning more abroad by licensing designs for its arrowhead frigate in indonesia and poland, though, and lockwood recently said there were “a number of opportunities for arrowhead in additional export markets”.
more important is the fact that its focus on cash is delivering results. operating cash conversion in the first half jumped from 63 per cent to 82 per cent on the back of one-off licence payments from the polish navy. on a rolling 12-month basis to the end of september, the company generated more than £356mn in underlying operating cash flow. shore capital analyst robin speakman argues that the company can now “comfortably” meet liabilities including almost £800mn-worth of bonds due in late 2026 and 2027, all from its own cash.
and as debt is paid down, this gives management more options to boost returns, either through growth capex, bolt-on m&a or simply returning spare cash to shareholders. the result is a company with reasonably priced growth prospects, and a balance sheet that no longer bears the battle scars of 2020 and 2021.
when david lockwood first faced investors, just 10 weeks after being drafted in to run bab**** international (bab), he highlighted the need to focus on free cash flow.
tip style
speculative
risk rating
high
timescale
medium term
bull points
massive cut in debt
growing export opportunities
strong cash generation
cheap share rating
bear points
margin-denting legacy contracts
low-growth uk exposure
“our balance sheet is in a resilient shape, but it could be better,” he said at the defence contractor’s interim results in november 2020. although the company had a lot of opportunities, “strong, sustained free cash flow” was needed to deliver them, he said.
yet by the time its full-year numbers were presented eight months later, that resilience had buckled. shortly after taking charge, lockwood brought in david mellors, who had been his finance chief at defence group cobham until its sale in january 2020. between them, the pair conducted a detailed review of the value of the company's contracts and its financial position, and when they reported full-year numbers, 140 adjustments were made, sparking £2bn of charges and writedowns.
contracts were deemed to be less valuable than previously estimated and the goodwill attached to some of its business units could no longer be justified.
helicopter money
most notably, the avincis helicopter business, for which bab**** had paid private equity firm kkr £1.6bn in 2014, had not met some of the lofty expectations set by the deal’s 14 times cash profit multiple. bab**** had also been too optimistic in other projections, leading to “a pattern of underperformance we are determined to address”, lockwood said.
other adjustments, such as properly recognising supply chain financing as debt, cleaned up its balance sheet but placed short-term pressure on liquidity. lockwood bought time by securing an additional £300mn funding lin and agreements from lenders to temporarily ease debt covenants, and pledged to raise £400mn through disposals within 12 months.
and by the time it reported 2022 numbers, bab**** had exceeded this target, allowing it to pay down debt, make inroads into its pension deficit and spend money on improvements at its devonport shipyard. yet when full-year results for 2023 rolled around in july, it reported a further £100mn hit taken on a long-running contract for the ministry of defence.
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the company signed a fixed-price contract to deliver five type 31 frigates to the mod in november 2019 at an assumed cost of £250mn per ship. however, materials and other costs have since ballooned and efforts to renegotiate the deal have so far fallen on deaf ears. the two sides are in a dispute resolution process, but lockwood has been keen to stress that this hasn’t affected their rel
It's on a paywall any chance of posting the text? Thanks!
This FTSE Frigate is turning around.
https://www.investorschronicle.co.uk/ideas/2024/01/04/this-ftse-frigate-is-turning-around/
Had a look on ( X ) these the only two buys which match the holding still there between them 55% down.
But only shows last 10 years .
Bought BAB.L
04/03/2015
02/03/2015
Must ring to see what "in Jan 15 paid 1021p !!! ( X )… must of had spare cash." might refer too.
No idea what I paid for the first shares sold today as transfer in from SVS close down process .
Found this among some notes ( bar )
Ripley94 14th November 2017
Had a little review of holding here can see a buy July 2010 @ 600p
Looks like a rights 12 May 14 @ 790p… well below that now.
in Jan 15 paid 1021p !!! ( X )… must of had spare cash.
Have no record of ever slicing .
Only share I ever want to stay low ,so I get get more for my bucks with share saving scheme .
Sold again on return home ( D ) set 440p limit above the then day high ( 1.5% above morning sale )
Sold the whole holding on W for 433.46p live trade mistake not to have set higher limit . ( over 3 x share deal size )
Transferd in 2021.
Target set months ago 410p then increased to 425p share went above that early today so decided to stick with set target .
Some Brokers have been upgrading 500p mentioned.
Only 28 post since 9th August 2023 , less then 5 per month on average .
Buying these bigger company's on dip better then the AIM shares I bought on dips .
£5 in coming .......
Yes, it was most welcome and seems to be based upon the broker upgrades over the hols.
Surprised there aren't multiple postings today given BAB's 6.33% price rise ?
JPMorgan price target upped to 610p and Overweight today !!
bab**** seem to have pretty much sorted out their contractual issues from a few years ago. they ought now to be heading in the right direction, profit this year was paltry but should vastly improve going forward.
another good to see !!
bank of america cuts bab**** international price target to 565 (585) pence - 'buy'
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Its good to see...although I wonder sometimes if brokers know anything. However in this case its probably justified
barclays raises bab**** international to 'overweight' (equal weight) - price target 529 (325) pence
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Very odd large drop in sp today ? Malfunctioning bots ?
https://www.proactiveinvestors.co.uk/companies/news/1033216/bab****-upgraded-to-buy-peel-hunt-1033216.html
Yes, and their Debt Reduction is impressive - £540m down in a year !!
Finally making hay! Long may it last.
Good set of figures and good to see the dividend reinstated