QinetiQ Group PLC (LSE:QQ.) shares rolled 4% higher on Thursday morning as the defence contractor said it has "taken decisive action" to restructure the business for growth.
It also announced a five-year extension to its long-term partnering agreement (LTPA) with the UK's Ministry of Defence worth £1.54 billion, which increases its total order backlog to roughly £5 billion.
As flagged in a year-end profit warning, underlying operating profits fell to £185.4 million in the year to 31 March from £215.2 million last time.
On a statutory basis, QinetiQ swung to a pre-tax loss of £185.7 million from a profit of £139.6 million. The loss includes £305.9 million of goodwill, restructuring costs and other impacts related to 'legacy' US operations and a sale and leaseback transaction.
Chief executive Steve Wadey said it had been a difficult year for the company as "tough near-term external trading conditions and geopolitical uncertainty weighed on our performance in two specific areas": affecting short cycle work in the UK Intelligence and US sectors, resulting in delays to a number of contract awards.
Higher margin product sales from the US were impacted in particular.
"In response, we have taken decisive action and are focused on reshaping the business for growth, with a clear restructuring plan to strengthen and capture the increasing opportunities within our key markets," he said.
The restructuring is designed to "drive improved effectiveness and cost efficiency, including refining the US strategy to align with current national security and defence priorities", he said. It includes resizing the US cost base, in particular labour rates and inventory management.
Wadey also hailed a record level of order intake and said there continued to be "strong demand for our mission-critical capabilities" as the LTPA extension showed.
For the new financial year he guided to revenue growth of around 3%, with margin expected to be circa 11% due to phasing of restructuring, up from 9.6% in the past year and 11.3% the year before.
Earnings per share growth of 15-20% is expected.