South Africa

Babcock axes 1,000 jobs in restructuring plan under new CEO

London — Babcock International jumped the most in 28 years on Tuesday as CEO David Lockwood detailed plans to reshape the engineering firm around defence activities while ruling out a share sale.

The stock rose by more than a third on Tuesday after Babcock said in a statement it will sell businesses valued at about £400m, with restructuring measures set to trim about 1,000 posts.

Lockwood announced plans to sell Babcock’s offshore helicopter operations to rival CHC Group in March after launching a strategy overhaul in November, weeks after taking charge. The CEO said in an interview he’s had approaches for all remaining parts of the Avincis helicopter unit and is sure the group can avoid an equity raise, even if disposals take more than a year.

“We wouldn’t say it unless we were confident,” he said. “Those assets we’ve identified as not fitting our go-forward strategy are good businesses. We believe from feedback from banks and others that there will be good interest.”

While a contract and balance sheet review will lead to mainly non-cash writedowns of £1.7bn, the hit to ongoing earnings will be more than offset by annual savings of £40m from simplifying the company.

Babcock rose by as much as 36% in London, where it is based, the most since February 11 1993, and was trading 35% higher as of 12.37pm. Analysts at Jefferies said the stock would be buoyed by management’s moves to revive the balance sheet without raising equity.

JPMorgan analyst David Perry said Lockwood had “initiated a credible plan to ‘fix’ Babcock after many difficult years”, including some poor decisions on acquisitions that had led to the writedowns.

The company, best known for assembling Britain’s two new aircraft carriers, will provide more detail on the assets it plans to sell with its next trading update.

The group’s SA operation remains a core business, while nuclear has improving prospects, according to Lockwood, who previously ran defence firm Cobham.

Revenue at Babcock slid 3.7% to £4.69bn in the year through March, with operating profit dropping 41% to £307m, based on preliminary results and excluding the contract review.

Bloomberg

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