Babcock has announced it would cut 1,000 jobs this year, around 850 of them the UK. Under a review of the business, Babcock is also set to divest sections of the business estimated to be worth £400m.
Babcock said it was changing its operating model ‘to create a business that is more efficient and effective’ and would reduce layers of management to form a ‘simpler, flatter structure’. The company said its cost-saving measures would result in £40m of one-off costs but also deliver annual savings of around £40m.
“The changes will result in approximately 1,000 employees leaving the group within the next twelve months with an approximate restructuring cost of £40m, most of which are cash costs,” Babcock said in a business update.
“This will reduce our overall operating cost base. Some of the savings will be recognised across long term projects, for example where they form part of existing contract efficiency assumptions, and some savings will benefit our customers via the contract structure.”
Babcock CEO David Lockwood said: “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. “Today we give you an update on all of these areas. The early results from our reviews show significant write-offs and a smaller ongoing reduction in the profitability of the group.”
Babcock’s share price jumped at the announcement as investors had feared the company was in worse financial shape.
The company said it would focus on being ‘an international aerospace, defence and security company with a leading naval business’.
Under the contract profitability and balance sheet review, Babcock expects group profits to fall by around £30m a year.
// Image: Artist rendering of a Type 31 at the assembly hall. Credit: Babcock
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