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Defence giant Babcock axes 1,000 jobs in drastic overhaul

Defence giant Babcock axes 1,000 jobs in drastic overhaul after racking up a loss of more than £1bn

Defence giant Babcock International is slashing 1,000 jobs and writing off £1.7billion from the value of the business as part of a drastic overhaul.

The UK’s second-largest defence company is expected to rack up a loss of more than £1billion on the back of the plan.

But the shares soared by 32 per cent, or 77.4p, to 319.4p on the restructuring announcement. 

Choppy waters: The firm, which maintains the UK’s nuclear submarines and is led by David Lockwood, is set to rack up a loss of more than £1billion

This is because chief executive David Lockwood said the shake-up would be so extensive that it would not need to raise money from shareholders, which the City had expected.

The majority of the job losses – 850 – will be in the UK and will mostly target middle management. The cuts will save £40million a year but also result in a one-off charge of the same amount.

Babcock has a workforce of 34,000 people worldwide. The FTSE 250-listed firm is a key contractor for the Ministry of Defence.

It maintains the UK’s nuclear submarines, operates the Devonport dock at Plymouth and trains Royal Air Force pilots.

Babcock chief exec David Lockwood said the shake-up would be so extensive that it would not need to raise money from shareholders

Babcock chief exec David Lockwood said the shake-up would be so extensive that it would not need to raise money from shareholders

The one-off charges of £1.7billion will come from writedowns after a review of how profitable contracts and acquisitions were. It warned annual profits are likely to be £30million lower than previously thought.

Babcock will also attempt to raise £400million by selling various parts of the business as it focuses on being a defence, aerospace and security company with a leading naval business in the UK, France, Canada, Australia and South Africa.

Lockwood said the move would create a ‘more effective and efficient company’.

He added: ‘Through self-help actions, we aim to return Babcock to strength without the need for an equity issue.’ Lockwood joined last September, replacing boss Archie Bethel. 

He was previously at Cobham and has brought his former finance director at that firm, David Mellors, over to Babcock. 

He was praised for overhauling Cobham but criticised for presiding over its sale to US private equity giant Advent International in a £4billion deal last year.

The extensive restructuring will raise questions about accusations levied at Babcock by a mysterious short-seller that called itself Boatman Capital.

In 2018 and 2019 it published claims against the company, which included that Babcock was too complex and could face ‘potentially massive exceptional costs’.

Although former management vigorously denied the claims, they wiped millions of pounds off the value of the company’s stock.

Liberum analyst Joe Brent said the £1.7billion write-offs were ‘larger than expected but management is right to clean up the balance sheet once and for all’.

Read more at DailyMail.co.uk