I hear investors lament missed market opportunities. Right now, some top-quality UK shares are down over 30%! Here are two companies I am watching closely to make an investment in the coming months. 

Reduce your bills

B&M European Value Retail (LSE:BME) is one UK share that has been on my watchlist for a few years. With inflation projected to hit 22% next year, I expect discount retail stores to see a spike in revenue. And B&M has quickly become a big player in this sector. 

While many grocers felt the brunt of rising raw material costs, B&M managed to maintain stable revenue and sales in the financial year (FY) 2022. The group recorded a pre-tax profit of £525m, exactly the same as in FY21. Two-year sales growth (compared to FY20) was at 13%, showing that the business managed to retain a large chunk of its customers gained during the pandemic. 

By focusing on in-demand products and avoiding overstuffing store stock, the company has managed to keep costs low and generate a profit. In fact, overall gross margins went up to 37.4% from 36.9% in FY21. 

Supply chain issues are a big concern for supermarkets right now and B&M is no different. Disruptions in Asia could affect operations in the coming months. Also, rising energy costs mean higher transportation costs that the company will have to deal with.

However, I am impressed by B&M’s frugal business model and its commitment to its dividend policy. Its yield stands at 4.3% and the board is confident about maintaining current levels.

Its shares are down 39.7% in 2022 and are trading at a price-to-earnings ratio of 8.9 times. Given the market share and business model, I think B&M is the best bargain option for my portfolio right now. 

Cheap UK defence share

The world is reeling from the war in Ukraine and defence budgets across the globe are shooting up. I think investing in the sector could be a good growth option moving forward. One UK share that has caught my eye is Babcock International Group (LSE:BAB). 

The firm specialises in electric systems for combat vehicles across land, air, and water. Along with engineering, the company also provides training, assistance, and data management services for militaries. 

In FY22, group revenue jumped 3% to £4.1bn with an underlying operating profit of £238m. The company recently signed defence contracts with Australia, France, Indonesia, and the UK. This has boosted its order book significantly.

There is always an underlying threat of trade restrictions when it comes to defence shares. A ban on sales could vastly impact Babcock’s revenue. The company is also dealing with rising metal prices, which is crucial to an engineering firm’s margins.

But I am still bullish on Babcock shares for my growth portfolio. It has fallen nearly 4% in the last month after a 50% rise since January 2021. I think this presents an attractive entry point at 328p. Currently, this UK share looks like a bargain to me given the high interest in defence, the company’s quality, and momentum. 

Pledge loans are loans that are secured against a customer’s high-worth possessions. And H&T saw its pledge loan book rocket to a record £84.2m as of June, up 74% year-on-year as the cost-of-living crisis worsened

Pawnbrokers face competition from financial services businesses like banks and doorstep lenders. But this business is thriving, and lending is now 40% above pre-pandemic levels.

Splendid all-round value

H&T’s share price has slumped in spite of its proven strength in tough times. As a keen dip-buyer, I think this represents a terrific buying opportunity.

In fact this AIM business offers exceptional bang for my buck at the current price around 330p. City forecasters think earnings at the firm will soar 109% in 2022 and rise an extra 27% next year.

Some large dividend increases are predicted as a result. Payouts of 14p and 18p are anticipated for 2022 and 2023, respectively, which produce fat yields of 4.4% and 5.5%.

Finally H&T trades on a forward price-to-earnings (P/E) ratio of just 10 times.

Another top dividend stock

I think buying some solid defence shares is a good idea for investors too. This isn’t just because government spending on weapons remains solid during all points of the economic cycle.

It’s also because arms expenditure is picking up as the geopolitical landscape deteriorates. Prime Minister Boris Johnson’s announcement on Friday that Britain’s defence spending will reach 2.5% of GDP by 2030 illustrates this line of thinking.

I’d buy Babcock International Group (LSE: BAB) shares right now to capitalise on these themes. The FTSE 250 firm sells a broad range of products and services over land, air and sea. These include everything from providing refuelling services for jets to manufacturing electrical systems for boats.

Payouts to return

I’d buy Babcock today, despite the threat of prolonged supply chain problems denting profits, and particularly because of the excellent value it offers at current prices around 318p per share.

City analysts think the firm’s earnings will soar 19% year-on-year the financial year to March 2023. And they believe annual profits will improve 20% next year as well.

These projections mean Babcock trades on a forward P/E multiple of just 9 times. They also mean the defence giant is tipped to grow the yearly dividend rapidly over the period.

Brokers think the business will pay a 9.8p per share dividend this year after stopping payments due to Covid-19. And they think the annual dividend will reach 14.7p next year. Consequently the yield leaps from a handy 3.1% to an impressive 4.6%.

Babcock share price recently

As a quick reminder, Babcock is an international aerospace, defence, and security business. It operates across many divisions, offering it the advantage of diversification, which can boost performance. Some of these divisions include marine, naval, land, and aviation. It has a global footprint too, with operations throughout the world.

So what’s the current state of play with the Babcock share price? Well, as I write, the shares are trading for 320p. At this time last year, the shares were trading for 290p, which is a 10% increase over a 12-month period.

It is worth noting that Babcock shares have come under pressure in recent months due to macroeconomic issues (but more on that later).

To buy or not to buy?

So what are the pros and cons of me buying Babcock shares?

FOR: Aviation and particularly defence spending is a highly lucrative market. In fact, in 2021, defence spending surpassed the $2trn mark for the first time. Babcock has a good profile and presence throughout the world to capitalise on this. In addition to this, it has a diversified business model that should see it benefit from the current burgeoning marketplace. Furthermore, Babcock regularly completes acquisitions to enhance its offering and grow its business.

AGAINST: The Babcock share price is up across the past 12 months but the current economic picture could have a real impact on results and its share price moving forward. Macroeconomic headwinds such as a soaring inflation, the rising cost of materials, and supply chain issues are a real risk to Babcock’s progress.

FOR: At current levels, Babcock shares look good value for money on a price-to-earnings ratio of eight. With its current profile, presence, position in the marketplace, and growth appetite, the shares could be a steal right now.

AGAINST: Although the past is not a guarantee of the future, Babcock has unfortunately experienced accounting issues and had to restate incorrect results in the past. This is particularly worrying to me as a potential investor as this could have a direct impact on any returns I hope to make. A recent change in leadership coupled with a new streamlined business model with a renewed focus could mean this is a thing of the past.

What I’m doing now

At current levels, the Babcock share price looks attractive to me. In addition to this, the current marketplace for defence and aviation, Babcock’s profile, presence, and its growth prospects help me make my decision. I would add the shares to my holdings and hold them for the long term.

I believe the shares could continue on an upward trajectory. It is worth noting I am expecting some bumps in the road due to current macroeconomic issues. My investment strategy has always been to buy and hold for the long term, which should negate these issues as I believe they are shorter-term headwinds.

Centamin

Price: 77.3p per share
P/E ratio: 9.8 times

Gold prices are caught in a crosswind right now. On the one hand, fears of sustained high inflation and broader concerns over the economy is supporting demand for safe-haven gold. However, the threat of further severe interest rate hikes is pulling precious metals prices in the other direction.

I still think buying gold mining stocks is a good idea today though. And I think investing in Centamin (LSE: CEY) specifically is an attractive way for me to do this. This FTSE 250 share offers excellent all-round value with its sub-10 P/E ratio and giant 6.1% dividend yield.

It’s my opinion that central banks aren’t effectively taming the problem of runaway inflation. And I believe this could remain the case as the war in Ukraine rolls on and Covid-19 cases spike again in key regions.

The Federal Reserve, for instance, has continued aggressively hiking rates in recent weeks. Yet the rate of inflation continues to handsomely beat economist expectations. Indeed, consumer prices in May rose at fresh 40-year highs of 8.6%.

I’m also not convinced central banks worldwide will be able to keep tightening policy as economic growth cools. This could give gold prices licence to soar to new record peaks.

I’d prefer to buy a gold mining stock rather than the metal itself, or a metal-backed financial product like an ETF. This way I can also receive dividends like the large ones Centamin is predicted to pay out. I’d buy the business despite the ever-present threat of mine production issues that could damage company earnings.

Babcock International Group

Price: 349p per share
P/E ratio: 9.8 times

Cost inflation is a problem that could plague profits growth at Babcock International Group (LSE: BAB). But I’d still buy the FTSE 250 firm as global defence spending accelerates.

This business provides a wide range of products and services across air, land and sea. Its expertise includes servicing army vehicles, providing flying training, and building ships for the Royal Navy. In my opinion, it can expect to get much busier as the geopolitical landscape becomes frostier.

Babcock is boosting its exposure to so-called focus markets to capitalise on rising military budgets too. In March, it spent £32m to acquire the remaining interest of its Naval Ship Management joint venture that provides support to Australia’s maritime force.

Worldwide defence spending broke the $2trn barrier for the first time in 2021, according to the Stockholm International Peace Research Institute.

Events since then, including Russia’s invasion of Ukraine and Chinese military exercises in the Taiwan Strait, have boosted the argument that arms spending will continue to grow. In this environment, owning Babcock shares could be a good investment idea for me.

What are defence stocks?

A defence stock is simply a share of a company that provides some form of security product or service to military or law enforcement.

Often, the first thing that comes to mind when thinking about defence companies is design and manufacturing. Whether it’s weapons, vehicles or materials, cutting-edge products are often at the forefront of thinking about military businesses from an investment perspective.

But defence companies in the UK are much broader than just manufacturing. Weapons, vehicles and materials are certainly part of the story, but UK defence companies also provide other important services.

Some provide intelligence services that help make operators more efficient and more effective. Others provide training services to equip military personnel with the skills they need to stay up with the latest technological advances. And some are involved in cybersecurity, which are an increasingly important part of national security.

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Top defence stocks in the UK

Here are the top five UK defence stocks in order of highest market cap:

BAE Systems

BAE Systems is the UK’s largest defence contractor by market cap. The majority of the company’s revenue comes from its exposure to fighter jet programmes—most notably the F-35 Lightning and the Eurofighter Typhoon. BAE’s customers include governments in the US, UK, Australia and Saudi Arabia.

Rolls-Royce Group

Rolls-Royce Group manufactures jet engines. While the majority of the company’s revenue comes from its civil aerospace division, it also has a strong business focusing on defence contracts. Its engines are used in naval vessels, military transport and aircraft.

QinetiQ

QinetiQ is a military tech company. Its offerings to customers include products and services. Its products include advanced materials, human protection systems, and military robots. Its services include testing, evaluation and training. QinetiQ has both civilian and military exposure.

Babcock International

Babcock International specialises in the construction and decommission of nuclear power plants and submarines. It also offers fleet management services for military vehicles, provides technical training, and maintenance support for military infrastructure. Babcock’s client base is diversified across the UK, Europe, Africa, North America and Australia.

Serco Group

Serco Group provides base and operations management for the armed forces. It also undertakes projects in ship modernisation and aircraft maintenance. Serco also analyses cyber activity, and delivers training, strategy and leadership programmes.

How to invest in defence stocks

Here are five things to think about before investing in defence shares:

The outlook for defence spending

Defence companies sell their products and services to governments. As a result, the available market for defence companies depends on the size of military budgets.

So investors should think about what the future looks like for national spending in this area—whether governments are likely to ramp up military spending, or whether they’re likely to be looking to cut back.

One thing worth noting is that countries in the NATO alliance—including the UK and the USA—have commitments to spend at least 2% of GDP on defence. So military budgets for NATO countries are likely to expand and contract in line with GDP.

Contracts

The primary advantage a defence company has over the competition comes from contracts. These can typically last for decades and they can be nearly impossible for a competitor to disrupt. Whether it’s a contract to supply fighter jets, to maintain ships or to provide training to military personnel, contracts are an extremely important part of a defence company’s competitive advantage.

When thinking about buying defence shares, it’s important to know what contracts a company has, how much they’re worth and when they expire. It’s also worth thinking about how difficult it might be for a government to switch to a different provider once the current contract expires.

Risks

Even if a company has a contract in place, it can still run into difficulties. For a manufacturing company, this can come from an increase in the cost of raw materials or disruption to its supply chain. Service companies are somewhat better protected against the threat of raw material increases, but they need to be innovative enough to stay at the leading edge of technological advancements.

Capital structure

As with several companies, investors in defence stocks need to be aware of how efficiently the company generates cash. Two good metrics to use for this are Return on Equity (ROE) and Return on Invested Capital (ROIC).

ROE is the company’s net income divided by its shareholder equity and multiplied by 100 to give a percentage. In general, a ROE >20 is good and >30 is very good.

ROIC is the company’s net income as a percentage of the assets that it uses in its operations. A ROIC >10 is generally good and >20 is very good.

Defence companies often benefit from customers contributing to R&D costs, allowing them to make stronger returns on equity and invested capital.

Financial health

Lastly, investors thinking about buying shares in defence companies need to be aware of the company’s financial health. Two important metrics to consider here are Interest Coverage and Debt to EBITDA.

Interest Coverage measures the amount of interest that a company pays on its debt (found on the ‘interest expense’ line of the income statement) as a proportion of its operating income.

Net Debt to EBITDA measures the company’s short-term and long-term debt with cash subtracted as a proportion of the company’s earnings before non-cash charges (depreciation and amortization).

As a rule, it’s better for both numbers to be low. But more significant is how these numbers compare (a) to the company in previous years and (b) to the company’s competitors.

In general, it’s better to see a company reducing the amount of its operating earnings it spends on interest payments and the amount of debt it has relative to its cash earnings. And it’s also good to see that a company is in a strong position relative to its competitors in both cases.

Are defence shares right for you?

Investing in defence stocks can get pretty technical pretty quickly, and it can be easy to get blinded by the science. Naturally, military-grade technology is often at the cutting edge of innovation and can be inherently complicated and difficult to understand. The economics of businesses, however, can be fairly straightforward.

Defence companies that enjoy strong relationships with customers that have huge budgets can be an attractive proposition from an investment perspective. And there are plenty of accessible features for investors to fasten on to. Thinking about how long a company’s contract lasts, how strong its balance sheet is, and what sort of things might threaten its business can give investors a great way into investing in defence shares.

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As I write, shares are trading for 309p. A year ago shares were trading 1% higher at 314p. The shares did rally earlier this morning to 321p after its report was released.

Aerospace, defence, and security

Babcock is an UK-based international aerospace, defence, and security business and operates marine, naval, land, and aviation divisions. It has a footprint in Canada, Australasia, and South Africa, as well as other key markets.

Aviation and defence spending is a lucrative market. Many governments can often continue spending on such things even in times of austerity. Babcock shares have unfortunately fallen out of favour with investors recently. Accounting problems and leadership issues have led to a loss of investor confidence. Since these challenges arose, a change in leadership and a thorough accounting review could mean a recovery is underway. 

Recent performance and outlook ahead

Babcock’s strategy has refocused the business under new leadership. This has resulted in the sale of some of its business to streamline operations as well as the accounting review mentioned, which saw some past results restated. 

So has this change in tack benefitted Babcock? Based on HY results announced today, it seems to be the case so far. It reported revenue had increased from £2054m in the same period last year (although these figures were restated after the accounting review) to £2,223m. Losses reported last year turned into an underlying profit of £115.3m this year. Net debt had also decreased, which is always positive.

Babcock pointed to a strong contract backlog worth over £10bn, especially linked to its maritime division. It recently signed an agreement with the UK’s Ministry of Defence worth £3.5bn. In addition, the ongoing sale of smaller businesses will continue to help it save money and streamline operations. Additional positives from the report were further contract wins worth over £700m in the half-year period.

Babcock shares have risks

Babcock’s results are positive but there are still credible risks worth noting before I invest. Firstly, it notes supply chain issues and rising inflation as potential threats to achieving forecasted full-year results. These are common macroeconomic pressures a lot of firms are experiencing issues with right now. Furthermore, Babcock seems to be on the right track once more but there is still lots of work to do to streamline operations and continue growth and winning new business. History teaches me this can be a long and tedious task, which could affect performance as well as investor sentiment and returns.

I think Babcock shares remain a risky prospect, so I would not buy shares for my portfolio at the moment. It seems the new leadership team has got its house in order but there is a long way to go and macroeconomic issues to contend with too. Right now, I will sit on the sidelines and keep an eye on developments.

High growth focus

Let’s start with a company that clearly looks like a growth share: S4 Capital. The company works in an area which is seeing rapid growth: digital advertising. Add to that S4’s own ambitious agenda to double revenues and profits organically within three  years and it’s easy to see the growth theme here.

But do growing revenues and profits mean a growing share price? The S4 Capital share price hit a new high today and has more than doubled in the past year. That pace is hard to sustain. But the company has an aggressive growth strategy, talented team and digital only business model which makes it more scalable.

Such aggressive growth targets brings risks as well as potential rewards. If the company’s rapid expansion dilutes its quality of output, that could hurt revenues.

Recovery play among UK shares

A company I also think could double in the next few years, for very different reasons to S4, is defence contractor Babcock (LSE: BAB). Here the story is not so much about growth as recovery.

Babcock is a key contractor to the Royal Navy, among other business activities. It has gone through a challenging several years, changing its accounting policies and replacing its leadership. That has led to the Babcock share price falling dramatically. However, the current management has started to rebuild investor confidence with a thorough accounting review. The company is strategically refocussing, selling off some businesses in the process. At the heart of Babcock lies a relatively stable maritime business with strong customer demand. If management is able to focus the organisation on that, I think the company could improve its performance in coming years. That could be good news for the Babcock share price, which has increased 16% over the past year.

Babcock remains a risky prospect though. There are a lot of moving parts here as the company remains in flux. That could easily distract management from the hard work needed to grow the business.

UK shares for high street recovery

My third pick among UK shares I think could grow strongly in coming years simply rests on a company doing the basics well.

The discount retailer B&M European Value Retail might not be an obvious candidate for share price growth. It competes in the financially competitive retail sector. However, B&M’s strong brand, retail expertise and appealing prices have helped it grow at speed. In the past four years, revenue increased at a compound annual growth rate of 19%. Post-tax profit in the same period grew at a compound annual rate of 31%.

I think B&M can keep growing, by opening new branches in the UK and expanding its French operations. The company’s strong performance in recent years has inspired my confidence in the management. But risks include increased competition from the expansion of other discount retailers. That could damage profit margins.

The collapsing Babcock share price

I’ve previously explored the historical volatility within the share price. But as a quick reminder, the engineering firm suffered through years of mismanagement and aggressive accounting. This is why the stock has been on a downward trajectory since 2014.

While the original leadership is now gone, it seems they left quite a big mess for the new managers. Last week the company released its full-year results for FY21. And given that the Babcock share price dropped like a stone, I think it’s fair to say that investors were not impressed.

The company is undergoing a substantial restructuring that has caused quite a lot of pain. With managerial layers being eliminated and operations being streamlined, 1,000 employees are losing their jobs. Meanwhile, £1.3bn of goodwill and acquired intangible assets are being written off the books. Consequently, the firm reported a staggering £1.7bn loss for the year. So, I’m not surprised to see Babcock’s share price take a hit.

A potential comeback?

Seeing a record-breaking loss on the income statement is never a good sign. But in the case of Babcock, the underlying cause was predominantly due to a write-down of inflated asset values by the previous management team. Ignoring the effects of these expenses, the firm still reported a significant underlying loss of £363m. Taking a closer look, this negative impact stems from a sharp reduction in the gross profit margin, combined with a 5.5% drop in revenue.

That’s certainly not a healthy-looking business. But the worst might now be over. Asset impairments are a one-time expense, so losses should be significantly smaller moving forward. And the previously mentioned company restructuring, while unpleasant, is expected to tackle declining profit margins. Assuming margins rise again, the Babcock share price might do the same.

Like all unprofitable businesses, liquidity is a concern. However, after negotiating with creditors, Babcock secured a new £300m revolving credit facility for the next three years. Using debt to tackle debt is obviously not a sustainable long-term strategy. But it does offer some breathing space. In the meantime, the business plans to dispose of an additional £400m of non-core assets. These decisions should flood the balance sheet with sufficient cash to meet near-term obligations. That should allow the management team to focus on bringing Babcock, and its share price, back to its former glory.

The bottom line

From what I can tell, Babcock looks primed to start making a comeback. However, whether that plan will succeed has yet to be seen. Personally, I think there is currently not enough information about the firm’s future potential. So even though the recent drop in Babcock’s share price might be a bargain, I’m keeping the stock on my watchlist for now.

Here are two I would consider for my portfolio. With £1,000, I’d reduce my risk by putting £500 into each.

Defence recovery play

The defence contractor Babcock (LSE: BAB) is more used to refitting battleships than its own business model. But it has been a difficult couple of years for the company, which operates at dockyards including Devonport and Rosyth. That has led it to reassess its business. It has jettisoned some parts which it deems surplus to requirements.

Will moves such as disposing of its offshore helicopter division be enough to restore the company’s former financial health? That remains to be seen. Management is taking a cautious approach to an ongoing financial review, emphasising quality over speed. That seems prudent but meanwhile City enthusiasm remains lukewarm. The Babcock share price is exactly where it was a year ago, meaning it has missed out on the broader market recovery to date.

Where next for the Babcock share price

So why do I include Babcock among my stocks to buy? In short, I think its entrenched position in the defence industry gives it a strong competitive advantage. Very few competitors are able to offer what it does, which gives it pricing power and long-term prospects. The navy will need to keep servicing its fleet, for example, and Babcock is bound to win at least some of that work.

As with any recovery play, investing in Babcock involves risks. These include possible writedowns from the financial review, which is set to reduce reported earnings. The company said in its last trading statement that it had identified impairments and charges of around £1.7bn. That is a significant amount. Perhaps there is more to come in future. For now, a lot of investors are wary of Babcock’s prospects – but I see a buying opportunity. I rate Babcock among stocks to buy for my portfolio today.

Smoking hot yield

Another company I would buy for my portfolio today is tobacco manufacturer Imperial Brands (LSE: IMB). The Bristol-based company has global reach, selling a portfolio of brands including West and John Player Special.

While it is cheap to make cigarettes, they can be sold at a high price. That helps sustain large cash flows. Last year, for example, Imperial generated £4bn in net cash from operating activities. Compared to a market cap of £14.9bn, that is a massive amount. However, cash flowed out for investment activities and also for finance needs. In fact, the company’s finance activities alone saw £4.3bn of net cash go out the door.

Stocks to buy today: Imperial Brands

Partly that net cash outflow reflects the former dividend. A cut last year has saved money, and serves as a reminder of the perennial risk of a dividend cut. But the net cash outflow is also a reminder of the company’s debt pile. Imperial spent over £3bn last year repaying borrowings. The cost of servicing debt eating into profits remains a risk.

Still, if it can manage its balance sheet, the huge operating cash flow should be able to fund an attractive dividend. I remain a buyer of Imperial.

Could these outsourcers be in the foothills of a big recovery? And should I buy shares in them today?

When Kier and Babcock shares were overpriced

I turned bearish on the outsourcing sector in 2016/17. Having analysed a number of companies’ accounts, I concluded that with debt and worrying signs of aggressive accounting, their balance sheets were likely a lot more fragile than they appeared on the surface.

A few other analysts had reached the same conclusion. But more were to follow. Disclosable short positions in outsourcers began to rise steeply. Hedge funds were increasingly betting that Kier and Babcock shares (among others) were overpriced and set to collapse. At peak, almost 9% of Babcock’s shares and 14% of Kier’s were being shorted.

Aggressive accounting and weak balance sheets were ultimately exposed. However, much has changed at the two firms. These changes are why I’m considering whether to buy the stocks today.

Boardroom clear-outs and accounting clean-ups

Kier and Babcock have new management teams and I think these changes bode well for their share prices. The clear-outs of the old executives alone wouldn’t be sufficient for me to consider investing. But there have been other important changes.

Both companies have taken steps to improve what were previously opaque financial statements. Kier has implemented recommendations, on things like revenue recognition, made following an enquiry by the Financial Reporting Council’s Corporate Reporting Review Team. Management has also made other changes. These include the presentation of non-statutory profit “to improve the transparency and clarity of the group’s financial performance.”

At Babcock, new management has conducted a “contract profitability and balance sheet review.” This has identified impairments and charges totalling around £1.7bn. The company’s preliminary results for its financial year ended 31 March are currently delayed. This is in part because of “the large number of potential adjustments under consideration.”

Would I buy Kier at the current share price?

In addition to the management changes and accounting clean-up, Kier has substantially strengthened its balance sheet recently. It has raised £241m of new equity and sold its house-building business for £110m. The CEO has said this represents “the final milestone” in reshaping the group.

Kier trades at 4.6 times forecast earnings at a current share price of 129p. I think the stock looks very buyable on this valuation. However, I do have to accept the risk the shares may not perform well, if ‘new’ Kier’s strategy falters and it fails to meet its medium-term financial targets.

Would I buy Babcock at the current share price?

“We aim to return Babcock to strength without the need for an equity issue,” the company’s CEO has said. This will depend on the success of its self-help measures. These seem to include disposing of assets of at least £400m by next April.

Babcock is rated at 8.9 times forecast earnings at a current share price of 295p. This enough to put the stock on my watchlist. I await further details on the company’s financials and plans when those delayed preliminary results are published

Finally, its perhaps worth noting there are no longer any disclosable short positions in Kier and only one (0.59% of the shares) in Babcock.