Citi cuts rating on Babcock to 'neutral'

Citi has downgraded Babcock International Group to 'neutral' on concerns about legacy issues.

In a note published on Thursday, the bank argued that while the investment case for Babcock was a turnaround story, "risk remains". Its target price is 370p.

It said: "The new management team have a demonstrable track record of bringing greater cohesion and focus to defence companies.

"However, managing out legacy is still a source of concern for us."

Citi added that it would review its position following the full-year results, "with a particular focus on the auditor’s report".

Babcock’s year end is 31 March. At the interim results in November, the firm - which helps maintain military equipment and provides training - said profits were on course to grow by 10% this year, in line with forecasts, boosted by turnaround plans and the geopolitical environment.