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When David Lockwood first faced investors, just 10 weeks after being drafted in to run Babcock 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.