21st Nov 2013 09:11
LONDON (Alliance News) - QinetiQ Group PLC Thursday reported lower profits and revenues for the first half of its current financial year, hit by the slowdown in US defence spending, but it raised its dividend, saying the US services market is stabilising and it's seen an encouraging pickup in services orders in Europe, Middle East and Africa.
The aerospace, security and defence company reported a pretax profit of GBP72.6 million for the six months to end-September, down from GBP80.0 million a year earlier, while excluding financial items and items like restructuring costs and gains on disposals, the figure was GBP52.3 million, down from GBP85.8 million. Revenues fell to GBP599.6 million, from GBP685.5 million.
Like peers in the defence industry, QinetiQ is being hit by a sharp slowdown in US defence spending, caused both by the end of recent major conflicts and by a slowdown in overall US government spending amid failure to agree a federal budget for 2014.
Still, the company said its services unit, which provides things like safety testing, aerospace engineering and cyber operations, was stabilising in the US after recent restructuring and was seeing a pickup in orders in Europe, Middle East and Africa as well as growing elsewhere internationally.
As a consequence, the company said it is maintaining its guidance for the full-year and raised its interim dividend to 1.4 pence, from 1.1p.
"Although the short-term range of possible outcomes remains wider than usual, particularly in Global Products, the board is maintaining its expectations for overall group performance in the current year absent any material changes in customer requirements," Chief Executive Leo Quinn said in a statement.
"Over the medium term, our confidence that our 'Core' businesses and newer growth opportunities will drive an increase in sustainable earnings is reflected in the increased interim dividend," he added.
The company said it's continuing to evaluate the future prospects for its US services business, and is talking with its advisers about getting the best value out of the unit, including testing market interest for a possible sale.
Liberum said the results were weak but had met its expectations. It is already predicting a 22% decline in earnings per share this year so is keeping its forecast unchanged following the interim results.
However, it noted that QinetiQ again generated a lot of cash and had cut the deficit on its pension plan.
"There is plenty of food for the bears: multiple headwinds, a problematic US business and a full valuation. However, there is the tantalising prospect of increased shareholder returns once the US strategic review is complete and always the potential for a large order," Liberum said in a note to clients.
The company reported net cash of GBP120.5 million at the end of the first half, up from GBP21.5 million a year earlier. It said its pension liability was GBP20.3 million, down from GBP40.4 million at the end of March, after it closed its defined benefit scheme.
QinetiQ shares were up 8% at 212.50 pence Thursday morning, the top gainer on the FTSE 250.
By Steve McGrath; [email protected]; @stevemcgrath1
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