UK defence major Babcock (BAB.L) has announced plans to cut 1,000 jobs as it looks to streamline the business and turn around performance.
Shares in the defence company surged 25% on Tuesday as the business announced tough self-help measures aimed at reversing underperformance and putting the business back on a more sustainable footing.
Babcock said it would focus on aerospace and defence in the UK, France, Canada, Australia, and South Africa, hiving off other parts of the business that weren't central to its new identity. Babcock said it hopes to raise £400m ($550m) selling off non-core parts of the business. Divisions on the block include its oil and gas aviation business.
The company also promised to slash layers of management from the business, saving an estimated £40m a year in costs.
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Taken together, the changes will reduce Babcock's headcount by around 1,000 over the next 12 months.
"We announced a series of reviews in January and promised to report back on our strategic direction, a new operating model and a new financial baseline at our full year results," chief executive David Lockwood said. "Today we give you an update on all of these areas."
Babcock works closely with British armed forces and helps to maintain the UK's fleet of submarines, among other contracts.
The company published unaudited financial results alongside the turnaround plans. Babcock said a reassessment of its contracts and assets would lead to a one-off £1.7bn write down. Ongoing underlying profitability will be £30m lower than previously expected.
Underlying revenue was down 2% to £4.7bn and underlying profits were down 36% to £307m.
Despite the write-offs, sinking profits, and slipping revenues, shareholders breathed a sigh of relief that the debt-ladened company had not been forced to ask investors for more money.
Shares rallied 25% in London to hit a four-month high.
"Through self-help actions, we aim to return Babcock to strength without the need for an equity issue," Lockwood said. "We are creating a more effective and efficient company through our new operating model and, in line with our new strategic direction, will rationalise the Group's portfolio to help strengthen our balance sheet.
"Through our new operating model, the future Babcock will be a better place to work, a better partner to our customers and will be well placed to capture the many opportunities ahead of us."
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