The bank’s positive view of the FTSE 100 is based on what it sees as a material change under the current management team.
“Since Andy Reynolds Smith took over as CEO in 2015 we have seen a return to active management of the portfolio, an operational improvement seen through much improved cash dynamics and a much greater focus on organic growth,” BarCap said.
The bank has crunched the numbers and reckons it now has a higher free cash flow margin than its peers for the first time since 2010.
The pension deficit, which has been a millstone around the company’s neck for many years, is diminishing; in the last financial two years Smiths has reported an accounting surplus and as a result, the group is putting less into the pension pot.
READ: Smiths Group posts solid growth in reported profits, revenue, but underlying growth more constrained
Management has been a lot more active of late in reshaping the portfolio, getting shot of six businesses and acquiring two new units since 2015.
“Conglomerate businesses of this nature need to remain proactive and this had slowed under the previous CEO,” opined BarCap.
The bank has a price target of 1,800p, some 260p above the current share price.