Broker snap: QinetiQ a 'buy' after in-line first half results, says Investec

21st Nov 2013 09:32

QinetiQ reported broadly in-line first half figures, with revenues down 13 per cent to 599.6m pounds as a result of constrained US military spending. Underlying operating profit for the six months through September fell to £59.2m from £59.3m the previous year and underlying pre-tax profit dropped to £52.3m from £85.8m.The company said market conditions in the US remain challenging with the Federal Government failing to agree a budget for its 2014 fiscal year. However, the group is working to address the issue through its 'Organic-Plus' programme and has kept its full-year 2014 guidance unchanged."Qinetiq's interims were well signposted and the outturn is largely as expected. In summary - EMEA was solid, the US weak, but gently improving on restructuring, and Global Products was down heavily on a strong comparator," Investec said."Net cash was higher than expected and the pension is being de-risked. We leave our FY14E profit forecasts largely unchanged, but there are risks involved. Our SoTP-based price target remains 220p. 'Buy' retained."However, the broker cautioned that in order for the company to meet its guidance for fiscal year 2014, it will need a stronger second half. The issues are more about the timing of deliveries and potential problems in January around the US government budget. RD