Process and environmental set to go, and Africa business could join disposal list

Babcock is to shed its process and environmental divisions, and looks set to do the same with its African business.

Dr John Parker, Babcock chairman, said this week: `We want to focus on businesses which are strong either globally or regionally – and those are in our facilities management and materials handling divisions.

`These include businesses which have leading positions in many of their markets. This gives us a real chance to take Babcock away from heavy contracting and its problems.’

Parker is in talks with two suitors for the sale of the process division which employs around 1,150 people. Last year it lost £4.2m on sales of nearly £50m. `It lacks the scale to compete in its fast-consolidating sector and needs to be part of a bigger group,’ Parker said.

BWL, a joint venture the division has with Yorkshire Water, is not included in the disposal. Babcock is providing £27.3m in write-offs and provisions against the closure of its Caldwell plant in Texas, US, where it has been developing new technology for `waste free’ recycling of toxic dust since 1990.

Technically, the venture has succeeded, but it has failed to win business at profitable prices. High level losses are on the cards for another two years and the business will be closed, with the plant and the technology up for sale.

Babcock is to `monitor options’ for the African division, which lost £5.1m last year. Mitsui has an exclusive option until September this year to buy the business.

Babcock’s results for the year to March, showed profits before exceptionals of £3.6m against a loss the year before of £19.3m.

Materials handling and facilities management, now the two core businesses, accounted for 80% of turnover (down 10% at £646m) and together contributed £17.3m of profits.

Facilities management made £14.1m last year on sales of £24m and is set to benefit from the acquisition of the Rosyth Royal dockyard.

Materials handling returned to profit last year – £3.2m on sales of £200m – despite big losses in its wood technology arm which is back to profit. The division started the current year with £103m of orders.

* Babcock is still seeking a chief executive to succeed Nick Salmon who has joined GEC Alsthom. New finance director, Nigel Young from First Technology, joins in July.