26th May 2016 12:15
LONDON (Alliance News) - Defence and security services company QinetiQ Group PLC on Thursday affirmed its expectations for the current financial year despite acknowledging some uncertainty will continue to exist around order timings and potential delays.
The FTSE 250 constituent said its pretax profit for the year to March 31 fell to GBP90.2 million from GBP105.4 million the year earlier, primarily due to higher one-off charges being booked.
However, revenue also slipped to GBP755.7 million from GBP763.8 million. While orders increased 8.0%, the defence industry remains constrained by budget cuts and project delays, QinetiQ said.
The group will pay a 3.8 pence final dividend, up from 3.6p, meaning its total payout rises 5.6% to 5.7p from 5.4p.
QinetiQ said it has secured 74% of its projected revenue for the 2017 financial year, its current year, slightly lower than the 77% secured at the same time a year earlier, and it maintained its expectations for the year.
The company said the UK government's Strategic Defence & Security Review, published in 2015 and setting out defence spending plans through to 2020, has "brought clarity" to key defence programmes but will require more savings to be made on defence procurement.
This will provide opportunities for QinetiQ's business to win new contracts, but it said the short term is likely to be constrained by uncertainty and the potential for interruptions to order flows.
QinetiQ is heavily reliant on the health of defence spending in the UK, with around two-thirds of total revenue in the 2016 financial year generated from the Ministry of Defence. This compares to 6.0% generated from the US Department of Defense, with the balance coming from the group's businesses in Australia, Sweden, Turkey and the Middle East. QinetiQ was owned by the UK government before being privatised in 2001.
"Last year we delivered a solid operating performance in challenging markets. The expertise of our scientists and engineers is well matched to emerging themes in global markets. We are capable of more. I have set out our vision and strategy, reorganised the company and launched a transformation programme. These changes are creating the conditions for growth," said Chief Executive Steve Wadey.
Shares in QinetiQ were up 0.7% to 241.10p on Thursday.
QinetiQ said revenue dipped in its EMEA Services business, hit by budgetary pressures and uncertainty ahead of the release of the UK's SDSR.
The group won two single-source contract renewals with the UK MoD in the year, covering technical services for fast jets and heavy lift aircraft, plus a deal to assist the MoD on bringing the Delta Test variant of the Airbus A400M Atlas military transport plan.
QinetiQ also won contracts with the UK MoD on trials, testing and analysis in cyber and electronic warfare, a five-year deal advising on military batteries and a four-year contract to advise NATO. The group also secured a contract working on acceptance trials for four new MARS-class tankers for the Royal Navy and provided a container-based combat system for close-in defence against fast inshore attack craft, small and agile warships equipped with anti-ship missiles.
QinetiQ added it was confident the group's cyber division will benefit from increased budgets for C4ISR and cyber security, particularly as defence spending increasingly focuses on counter-terrorism. During the financial year, the group won work with US defence contractor Northrop Grumman on a seven-year cyber security support framework with the UK government.
Beyond the UK, the EMEA Services unit won a five-year extension to its contract managing and assisting with training at the Swedish Flight Physiological Centre and is working on developing gridded ion engine electric propulsion systems for the flight module to be used on the European Space Agency's BepiColombo mission to Mercury.
The cyber business has also secured training and simulation services deals in the US, the Middle East and Europe, and QinetiQ said it is providing secure receiver processing for the encrypted public regulated service on the Galileo satellite constellation, the European Union incarnation of GPS which will go live in 2017.
QinetiQ's Global Products business, meanwhile, secured a contract with US-based General Atomics for control hardware and software on the next US Navy aircraft carrier, while the group's North American business is the global leader in military robot provision.
By Sam Unsted; [email protected]; @SamUAtAlliance
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