28th Sep 2007 07:05
QinetiQ Group plc28 September 2007 QinetiQ Group plc28 September 2007 Pre Close Trading Update QinetiQ Group plc ('QinetiQ' or 'the Group'), the international defence and security technology company, today issues the following trading statement inrespect of the six months ending 30 September 2007. The Group's interim resultswill be announced on 28 November 2007. The Board confirms that the trading outlook for the year remains in line withthat described in the Interim Management Statement issued to coincide with theGroup's Annual General Meeting on 26 July 2007. A key element of the Group's stated strategy is to build its footprint in theNorth American market and the Board is pleased to confirm that this business hascontinued to grow through very strong organic trading performance in the periodsupplemented by further acquisitions. The EMEA (Europe, Middle East andAustralasia) sector continues to reposition itself to exploit its core UKdefence technology platform in relevant defence markets globally. QNAQNA (QinetiQ North America) has seen continued strong order levels across allparts of the business driving a very strong trading performance, notwithstandingthe adverse translation impact of a 7% weakening of the US dollar compared tosterling from the previous half year. The Systems Engineering & Technical Assistance business has successfullyretained in competition several important five year contracts worth in excess of$120m over the contract lives and the Technology business has received over$100m of further funding for Talon robots and spares, together with the firstsales of a small number of SWORDS robots, the armed variant of the platform.Talon robot shipments have continued at the strong levels that were achieved inthe second half of last year supplemented by strong spares sales. Additionally QNA was awarded the right to participate in the Alliant contract,the US's largest government-wide acquisition contract. The Alliant contract is a10-year indefinite delivery, indefinite quantity contract with a ceiling of $50billion which enables US government agencies and military services to purchaseinnovative IT solutions. Integration of the North American acquisitions is progressing well and the Groupcontinues to see a healthy pipeline of further acquisition opportunities inNorth America. Additionally, the Group has successfully completed fouracquisitions in North America this financial year, together with the acquisitionof Analex at the end of the prior year, and the initial trading from thesebusinesses is positive. EMEAOverall, the EMEA business has traded in line with the comparative period in theprevious year, with good progress being made on repositioning the business atthe sub-sector level. In prior years, a significantly greater proportion of UKprofit has been earned in the second half and this trend will be repeated in thecurrent year. As part of the ongoing process to shape the EMEA sector the Groupis looking to grow its capabilities and expand its geographic footprint beyondthe UK into other international defence markets outside North America, initiallyin Australia and selected Middle and Far East markets. Negotiations with the MOD on Package 1 of the Defence Training RationalisationProgramme continue to make good progress and the target remains to agree thefinal scope in 2007, with financial close expected 12 to 18 months thereafter. Discussions continue with the MOD over the affordability of Package 2. The Board is also pleased to confirm that the Group and the trade unions havereached agreement to put to members of the defined benefit section proposedfuture changes to the core terms of the QinetiQ Group pension scheme as detailedbelow. VenturesThe creation of a new technology venture fund with Coller Capital (QinetiQVentures LP) to accelerate the development and realisation of seven of its moremature venture investments was successfully completed on 3 August 2007. One ofthe fund's investments, Metalysis, a leading technology business for the globalspecialty metals industry, has completed a £13m funding round to support it intaking three product lines to commercial production using its patentedtechnologies. Among the retained ventures businesses we continue to receive positive feedbackon the trial installations of Tarsier at London Heathrow and Providence, RhodeIsland airports and the development of the day and night vision camera tosupplement the existing system is progressing with an expected demonstrationsystem due to be installed at London Heathrow in the third quarter of thefinancial year. As previously indicated, the level of QinetiQ revenue investmentin the retained ventures is expected to be at a higher level than in the prioryear. Cash flow, tax rates and pensionUnderlying cash conversion in the business remains strong and has beensupplemented in the first half by the unwind of the unusually high MOD relatedworking capital at the end of the prior year. During the period the company hasprovided some £12m of funding to the trustees of its employee share scheme trustto allow them to purchase shares in the company to hedge outstanding shareoptions and other share based awards that have been made since IPO. Following the changes to UK tax rates in the 2007 budget and further progress onthe Group's tax filings, the underlying effective tax rate for the year isexpected to be below that in the prior year. Core changes to the defined benefit section include raising the normal pensionage from 60 to 65 and a range of options that allow the employee to maintainfuture benefit accrual at their current levels, based on a higher rate ofemployee contribution, or to move to a lower accrual rate and capped pensionincreases, based on current employee contribution levels. The changes do notaffect past service obligations and the Group is not making any additional cashfunding to the scheme as part of these arrangements. Future cost increases willbe dealt with through a risk sharing agreement. OutlookWe believe that the execution of the Group's stated strategy is bearing fruitand we continue to look forward to the remainder of the current year withconfidence. Notes to EditorsAbout QinetiQ:QinetiQ (pronounced ki net ik as in 'kinetic energy') is a leading internationaldefence and security technology business that was formed in July 2001 from theUK Government's Defence Evaluation & Research Agency (DERA). QinetiQ has approximately 13,500 employees, who deliver technology-based services andexploit QinetiQ's strengths in technology research by selling systems solutions,products and licences to government and commercial customers in a spectrum of defence, security and related commercial markets. In February 2006, QinetiQ Group plc was listed on the London Stock Exchange(main market) and joined the FTSE250 in June 2006. In the year to 31 March 2007,QinetiQ delivered a 17.4 per cent rise in underlying operating profit before tax to £106.0m on turnover which rose by 9.3 per cent to £1,149.5m. For further information see www.QinetiQ.com Contacts:QinetiQ Media Relations: Nicky Louth-Davies +44 (0)7795 290593QinetiQ Investor Relations: Adrian Colman +44 (0)7740 432699 DisclaimerAll statements other than statements of historical fact included in thisdocument, including, without limitation, those regarding the financialcondition, results, operations and businesses of QinetiQ and its strategy, plansand objectives and the markets and economies in which it operates, areforward-looking statements. Such forward-looking statements, which reflectmanagement's assumptions made on the basis of information available to it atthis time, involve known and unknown risks, uncertainties and other importantfactors which could cause the actual results, performance or achievements ofQinetiQ or the markets and economies in which QinetiQ operates to be materiallydifferent from future results, performance or achievements expressed or impliedby such forward-looking statements. Nothing in this document should be regardedas a profit forecast. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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