-British engineering firm Babcock International on Friday reported a bigger annual loss after taking charges and impairments of 2 billion pounds ($2.8 billion) following a review of its contracts and balance sheet.
Its operating loss widened to 1.64 billion pounds in the year ended March 31 from 75.6 million a year earlier, as the company said the impairments were mainly a result of reduced cash flow expectations from its land and aviation businesses.
“We have a plan in place to strengthen the group without the need for an equity issue,” said Chief Executive David Lockwood.
Plans include at least 400 million pounds in asset sales over the next year and what it called a new operating model, involving a reduction in layers of management. It has already announced about 1,000 job losses.
Babcock also this year began a review of its balance sheet and contract profitability as it hired Lockwood and financial chief David Mellors from defence peer Cobham, after the Dorset-based company was bought out by U.S. private equity firm Advent at the start of 2020.
The company, which counts Britain’s Ministry of Defence as its biggest customer, said higher COVID-19 costs and uncertainty over new variants mean it did not expect easing restrictions to boost its profitability.
COVID-19 has hurt its business due to weakness in civil aviation, while social distancing rules have hit productivity and margins as much of its jobs involve working in close proximity such as in ships and submarines.
Babcock, whose net debt stood at 772 million pounds at the end of March, said it expects free cash flow in fiscal 2022 to be significantly negative.
($1 = 0.7173 pounds)