bnb: jobs axed in babcock rescue plan

Jobs axed in Babcock rescue plan
Danny John
August 22, 2008

BABCOCK & Brown is to cut a quarter of its 1600 staff, slash its $3.7 billion of debt in half and abandon its flamboyant style of deal making in a desperate effort to persuade investors it has a sharemarket future.

In a damning self-indictment of the group's fall from grace, the newly-appointed B&B chairman, Elizabeth Nosworthy, yesterday admitted that the specialist fund and asset manager's aggressive approach to doing business was over and that it had to undergo radical change to survive.

B&B had lost the faith of investors, she said, after the company failed to adapt to the conditions imposed on its business by the global credit crisis.

Its share price has plummeted more than 90 per cent in less than a year. The result has been a culling of its sharemarket capitalisation from an all-time high of more than $11 billion to just $740 million as of yesterday.

Regaining investor confidence was a "matter of trust" and would take time to restore, said Mrs Nosworthy, and B&B's culture would have to change dramatically if it were to achieve that goal.

"We can't win it [trust] back overnight but we have to make a start and we have to deliver consistently on what we say," she said after the announcement of a management and operational overhaul that also encompassed a 30 per cent decline in half year profits to $175 million.

However, the immense size of the task ahead of the revamped company was underlined by another sharp sell-off of its stock yesterday.

Stunned by its unexpected decision to abandon any dividend this year after the 2007 54.4c a share payout, the market punished B&B by lopping a further $1.23 off its price.

It closed at just $2.22 - $2.78 below its listing price in 2004 and almost $32 adrift of its highest level recorded midway through last year.

The latest vote of no-confidence came as the much-anticipated departure of B&B's chief executive, Phil Green, and his replacement by the finance director, Michael Larkin, was confirmed by the group

Mr Larkin immediately announced a reshuffled executive team that will see the group focus more on running its existing infrastructure, real estate and leasing assets, as opposed to the buying and selling of businesses.

Mrs Nosworthy, who was deputy chairman, has taken the top board post from the group founder, Jim Babcock.

He and Mr Green, will however stay on the board as non-executive directors and be eventually joined by new independent faces as B&B cuts the number of executive members to just one in a bid to boost its corporate governance standing.

In the meantime, Mr Larkin will completely overhaul its business, operational and financial practices aiming to:

â- Cut worldwide staff numbers by 400 to 1200 with a significant number coming from the deal-creating corporate finance division.

â- Close some international offices and merge others.

â- Reduce debt to about $1.8 billion by 2011 to drop gearing to between 20-30 per cent from the present 50-55 per cent.

â- Sell off all unwanted assets to relieve the pressure on the stressed balance sheet.

â- Take 20 per cent out of the group's cost base.

â- Repair B&B's relationship with its badly-hit sharemarket funds.

â- Change staff rewards from paying millions of dollars in bonuses based on churning assets, to a system which reflects what assets might produce in the longer term.

http://business.smh.com.au/business/jobs-axed-in-babcock-rescue-plan-20080821-3zkf.html