Babcock International Group PLC (LON:BAB) investors evidently cheered plans from new management which aim to boost profitability, and create £1.7bn of non-cash impairments in upcoming financial results.
In London, the share rallied some 55.26p or 22% to trade at 297.1p each.
It comes as the company’s new plans seek to avoid a rights issue or equity cash call which had been anticipated by analysts.
“Through self-help actions, we aim to return Babcock to strength without the need for an equity issue,” said chief executive David Lockwood.
“We are creating a more effective and efficient company through our new operating model and, in line with our new strategic direction, will rationalise the Group's portfolio to help strengthen our balance sheet.”
The defence contractor previously kicked off a strategic review focussing on the profitability of its contracts and ahead of results for 2020 it today updated on some of the findings.
Along with the £1.7mln of impairments the company is expecting business divestments, potentially worth some £400mln of proceeds, which are targeted in the next twelve months. Underlying group profit is expected to take a £30mln hit.
The restructuring, predicted to trigger up to 1,000 job cuts, is predicted to see £40mln of one-off costs and generate annual savings of around £40mln too – with the benefits beginning to come through during 2022.
Babcock said its business model will be simplified with fewer layers. It is to focus on international aerospace, defence and security with a leading naval business along with value-add services in the UK, France, Canada, Australia and South Africa.
"We announced a series of reviews in January and promised to report back on our strategic direction, a new operating model and a new financial baseline at our full year results,” Lockwood said.
“The early results from our reviews show significant write offs and a smaller ongoing reduction in the profitability of the group.”
He added: “Through our new operating model, the future Babcock will be a better place to work, a better partner to our customers and will be well placed to capture the many opportunities ahead of us."