Outsourcing company Xchanging said it is making progress with its cost-cutting drive and stood to benefit from companies looking to save cash in the economic downturn, sending its shares up 12 percent.

Xchanging, which runs back-office activities such as invoice processing, paying staff and procuring office supplies, said on Monday its operating cashflow was ahead of its expectations after implementing a series of cost-cutting measures since March in what it has described as a year of transition.

"In our view, steady progress continues to be made by management simplifying and de-risking the business," Espirito Santo Investment Bank analyst David Brockton said in a note.