Defence group QinetiQ's US unit hurt by tight government spending

27th Sep 2013 07:34

Defence security and aerospace company QinetiQ Group said market conditions in the US remain challenging under a tight government budget and weak demand. The firm is working on controlling its costs to maintain competitive rates as the impact of sequestration on US government budgets for the fiscal year beginning on October 1st remains unclear. The government needs to agree on a budget by October 1st or face a shutdown."The group is conducting a strategic review to determine the best way to maximise the value of this division, which possesses some strong capabilities and market positions," the company said in a trading update for the full-year to March 31st 2014.Global Products, which has shorter order cycles, continues to be affected by US budgetary pressures and the drawdown of overseas US military forces. The timing of significant orders remains limited, with key programmes experiencing slippage in order placement. The US Products business is holding back expenditure in all areas as a result. Talon orders worth $28m from Iraq and Pakistan, originally expected earlier in the year, have now been received and will largely be delivered in the second half of the year. Despite weak US results, the Europe, the Middle East and Africa Services division continues to perform well. The unit was recently chosen to provide data security services to the UK government's smart meter programme under an £8m contract with CGI.The division is also supporting the Libyan border security programme and is pursuing a strong pipeline of international opportunities which can leverage its core strengths.QinetiQ said cash generation remains strong, improving the group's net cash position."While the range of possible outcomes is wider than usual at this stage in the year, particularly in Global Products, and the full impact of sequestration remains unclear, the board is maintaining its expectations for overall group performance in the current year absent any material changes in customer requirements."RD