Defence giant Babcock saw its shares plunge 11.6 per cent this morning as it posted a whopping £1.6bn loss on the back of £2bn in impairment charges after a review of its contracts.
The FTSE blue chip said that it would now focus solely on being an international aerospace, defence and security company.
Over the next 12 months, it will look to dispose of £400m worth of contracts, while looking for annual savings of £40m.
Babcock, which is one of the Ministry of Defence’s biggest suppliers, said that it was working on a number of export opportunities, including selling its new Type 31 frigate to Greece, Indonesia, and Poland.
It will also be the main beneficiary of a memorandum of implementation with UK and Ukraine to be the prime contractor on programme of naval defence projects.
However, with continued uncertainty about Covid-19 restrictions, the firm said it did not expect a profit boost for the next financial year.
Chief executive David Lockwood said: “We have now completed the series of reviews announced in January. These have reinforced our confidence in the underlying strength of the Babcock business and at the same time helped identify the necessary strategic changes to improve our performance. We have a plan in place to strengthen the Group without the need for an equity issue.
“Looking forward, Babcock will be a simplified and more focussed group with a renewed emphasis on the exceptional engineering skills of its people.
“We will be well placed to take advantage of the many opportunities we see in both UK and international markets, leading to improved cash generation and profitability in the medium term.”
Analysts at Jefferies welcomed the new strategy, saying it provided a “clearer path to profitability and cash conversion” in the future.
As part of its turnaround, Babcock plans to sell its oil and gas aviation business which transports workers to rigs and is reviewing parts of its aerial emergency business, which provides search and rescue, firefighting and medical services.